CITY OF MESA ARIZONA COMPREHENSIVE ANNUAL FINANCIAL REPORT 2015 JOHN GILES Mayor DAVE RICHINS Council Member District 1 CHRIS BRADY City Manager ALEX FINTER Council Member District 2 DENNIS KAVANAUGH Vice Mayor District 3 CHRISTOPHER GLOVER KARI KENT Deputy City Manager Council Member District 4 DAVID LUNA Council Member District 5 KEVIN THOMPSON Council Member District 6 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 Jim Smith City Auditor Jennifer Ruttman Advisory Boards and Committees Economic Development Bill Jabjiniak Assistant City Manager Kari Kent Development Services Christine Zielonka Energy Resources Frank McRae Engineering Beth Huning Parks, Recreation & Commercial Facilities Marc Heirshberg Transportation Lenny Hulme Water Resources Dan Cleavenger Assistant City Manager John Pombier Chief Innovation Officer Alex Deshuk Chief Financial Officer Michael Kennington Business Services Ed Quedens Office of Management and Budget Candace Cannistraro Communications Randy Thompson Information Technology Diane Gardner Library Heather Wolf Financial Services Irma Ashworth Enterprise Resource Planning (ERP) Valerie McBrien Deputy City Manager Scott J. Butler Deputy City Manager Natalie Lewis Police Department John Meza Falcon Field Corinne Nystrom Fire Department Harry Beck Mayor and City Council Support Arts & Culture Cindy Ornstein Facilities Maintenance Dennis Ray Mesa Counts on College Amy Trethaway Community Services Ruth Giese Grants Downtown Coordination, DMA Transit Jodi Sorrell Regional Communications Broadband Federal and State Affairs Business Technology Innovation U.S. Conference of Mayors/ National League of Cities Regional Initiatives, Maricopa Association of Governments Fleet Services Pete Scarafiotti Human Resources Gary Manning Public Information & Communications Steve Wright Environmental Management & Sustainability Scott Bouchie Introductory Section COMPREHENSIVE ANNUAL FINANCIAL REPORT 2015 TABLE OF CONTENTS Exhibit SECTION I – INTRODUCTORY SECTION Table of Contents Letter of Transmittal Page I V SECTION II - FINANCIAL SECTION 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 A-8 A-9 23 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) Exhibit Page 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 30 40 47 48 51 53 54 57 68 70 71 72 72 73 75 91 94 94 Required Supplementary Information Schedule of the City’s Proportionate Share of Net Pension Liability Cost-Sharing Pension Plans Schedule of Changes in the City’s Net Pension Liability and Related Ratios Agent Pension Plans Schedule of City Pension Contributions Notes to Pension Plan Schedules Schedule of Agent Other Post-Employment Benefits Plan’s Funding Progress Schedule of Other Post-Employment Benefits Plan’s Funding Progress Budgetary Comparison Schedule – General Fund Notes to Budgetary Comparison Schedules II B-1 95 B-2 B-3 96 98 100 B-4 B-5 B-6 101 102 103 104 TABLE OF CONTENTS (Continued) Exhibit Page C-1 105 C-2 110 C-3 C-4 C-5 115 117 119 C-6 121 D-1 D-2 D-3 D-4 D-5 122 123 124 125 126 I II 127 129 III 135 IV 137 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 Supplemental Information Budgetary Comparison Schedules – Other Non-major Special Revenue Funds Budgetary Comparison Schedule – Grants and Special Programs Budgetary Comparison Schedule – Highway User Revenue Fund Budgetary Comparison Schedule – Mesa Housing Authority Budgetary Comparison Schedule – Quality of Life Sales Tax Budgetary Comparison Schedule – Street Sales Tax 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) III TABLE OF CONTENTS (Concluded) Exhibit Page V VI 139 141 VII VIII IX X XI 142 144 145 146 148 XII XIII 150 151 XIV XV XVI 152 154 156 Revenue Capacity Sales Tax Collections by Category – Last Ten Fiscal Years Direct and Overlapping Sales Tax Rates – Last Ten Fiscal Years Debt Capacity Ratios of Outstanding Debt by Type – Last Ten Fiscal Years Ratios of General Bonded Debt Outstanding – Last Ten Fiscal Years Direct and Overlapping Governmental Activities Debt Legal Debt Margin Information – Last Ten Fiscal Years Pledged-Revenue Coverage – Last Ten Fiscal Years Demographic and Economic Information Demographic and Economic Statistics – Last Ten Fiscal Years Principal Employers – Current Year and Ten Years Ago Operating Information Full-Time Equivalent City Government Employees by Function/Program – Last Ten Fiscal Years Operating Indicators by Function/Program – Last Ten Fiscal Years Capital Asset Statistics by Function/Program – Last Ten Fiscal Years IV Financial Services Department December 31, 2015 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, 2015 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, 2015, 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, 2015, 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. V 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 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 462,376 compared with the 2010 decennial census count of 439,041, 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 3,545 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, and solid waste utilities, as well as an airport and a golf course. 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 in making important decisions about the direction of the City. VI 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. 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) 14/15 is up 24.0% from FY 13/14. Commercial construction increased 9.0% in FY 14/15 over the previous year. During FY 14/15 the City issued 1,446 permits for new residential construction. This is 34.0% more than the previous fiscal year. The corresponding dollar valuation associated with all FY 14/15 permits increased approximately $144.0 million from the prior fiscal year. Analysis of the recent data indicates a continued increase in construction activity in both the residential and commercial sectors. Activity levels have been increasing for the past five 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, 2015, overall sales tax revenues were up 3.4%. Tourism also increased as evidenced by a 12.4% increase in the transient lodging (bed) tax. Other financial resources followed the economy’s continuation of a slow and steady recovery. The City has incorporated this in the preparation of the FY 15/16 budget. Conservative budget practices and willingness to respond to economic indicators continue to allow the City to maintain unrestricted fund balance reserve levels as established in the City’s financial policies. The FY 15/16 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. VII Major Initiatives During the year, various major accomplishments were realized. Some of these were: • Light Rail Expansion – In August of 2015, the 3.1 mile Central Mesa extension expanded the Valley Metro Light Rail route from Sycamore to Mesa Drive along Main Street, adding four stations and a 500 space park-and-ride seven months ahead of schedule. Work on the project began in summer of 2012. The expansion is expected to add 5,000 new riders and attract more business to the downtown Mesa area. The light rail will continue to expand in the East Valley with two additional miles of service planned to Gilbert Road, with an anticipated opening in 2018. • Sheraton Mesa at Wrigleyville West – Starwood Hotels officially opened the Sheraton Mesa Hotel at Wrigleyville West in May of 2015. The hotel offers 180 rooms, 34,000 square feet of flexible meeting space, two pools, two hot tubs, a pool bar, a fitness facility, a full treatment spa, a bar and grill, and a full service Starbucks. • Courtyard by Marriott adjacent to Phoenix-Mesa Gateway Airport – A Courtyard by Marriott hotel opened in October 2015, next to the Phoenix-Mesa Gateway Airport. The hotel, located on Ray Road east of Power Road, is designed for business travelers, but will also accommodate families. Each of the 99 rooms includes a desk and hospitality cabinet with a microwave and refrigerator. The hotel also features a contemporary lobby space, conference center, business center, full-service restaurant, 24-hour “mini-mart,” and an outdoor pool and patio area. • Eastmark – In a report released by real estate advisory group RCLCO on July 7, 2015, Eastmark was ranked among the top 20 selling master-planned communities in the nation during the first half of 2015. Eastmark opened just over 2 years ago, and the 2015 season has seen strong interest from buyers wishing to live in this thriving Mesa-based community. Today, over 1,200 residents call Eastmark home, and the community is growing fast with continuous new phases such as an active adult neighborhood that premiered in March, and a new gated neighborhood coming soon. • Fiesta District – Mesa’s Fiesta District is in the midst of a redevelopment renaissance. o Centrica, a $20.0 million adaptive reuse office building, will act as a core project in the revitalization of the Fiesta District, a once vibrant and now growing center for commerce in Mesa. The location was once home to big-box retailers before closing and being purchased by Phoenix Rising Investments last year. The building was transformed into 100,000 square feet of Class A office space through adaptive reuse. The location was retrofitted with the necessary high tech infrastructure along with the 23-foot-high ceilings with exposed ductwork and wood accents. VIII o In March of 2015, it was announced that the former 158,000 square foot Macy’s department store located at Fiesta Mall would be redeveloped by Scott Jackson and Steven Johnson, into the Fiesta Corporate Campus, a $21.0 million two-story Class A corporate office complex with room to accommodate more than 2,000 employees. This project is expected to be completed in late 2016. o The 827 W. Grove Building has also undergone a major $2.3 million renovation and now features 70,000 square feet of Class A space, a new façade, a two-story lobby entrance, enhanced fiber capabilities, and a six or seven to 1,000 square feet parking ratio. As redevelopment continues, the City of Mesa is positive about the future of the Fiesta District and a shifting focus from retail to diverse employment. The City has committed heavily to the area as well, investing $12.0 million in streetscape improvements along Southern Avenue and constructing a $15.0 million police substation. Anchoring institutions like Mesa Community College, Banner Desert Medical Center, and Cardon Children’s Medical Center are also critical to the Fiesta District’s continuing success, both as major employers in the area and as hubs for higher education, research and healthcare. • New Falcon Field Airport Terminal – The City-owned Falcon Field Airport terminal was renovated at a cost of $2.0 million with construction completed in November of 2015. • Mesa Counts on College Access Center – In August, the City of Mesa, in partnership with Mesa Public Schools and Mesa Community College, opened the Mesa Counts on College Access Center which will be a free one-stop shop for all things post-secondary education. Students will be able to receive assistance with choosing a college and college applications, test preparation and vouchers, one-on-one counseling sessions and financialaid guidance. The center will also offer services such as GED classes, scholarship and internship help, and direction for students who have an interest in vocational training or another alternative to a four-year college. • Mesa Aquatic Complex Grand Opening – In May of 2015, Mesa celebrated the opening of the $6.6 million Mesa Aquatic Complex. The Aquatic Complex is Mesa’s ninth pool and includes a multi-use lap/dive pool and a leisure pool. The lap pool is comprised of eight lanes with a dive tank and can also accommodate a full-size water polo course. The leisure pool includes a zero-depth entry, aquatic play area and a lazy river. The building area accommodates a public entry, lockers, restrooms, offices and classrooms. Shade structures cover bleacher seating along the lap pool, and approximately 20,000 square feet of decking surrounds both pools for lounge chairs. • Hacienda HealthCare – Hacienda HealthCare held a ribbon cutting ceremony for the official grand opening of Hacienda Children’s Hospital in Mesa on July 1, 2015. The 20,900 square foot pediatric hospital will specialize in high-quality acute and sub-acute care for infants, children and teens. The new hospital offers 24/7 visitation, furniture to provide families and friends with comfortable overnight stays, and a playground for siblings and friends of the patients. IX 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, 2014. 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 COMPREHENSIVE ANNUAL FINANCIAL REPORT 2015 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, 2015, 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, 2015, 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 fiscal year ended June 30, 2015, the City of Mesa, Arizona, adopted GASB Statement No. 68, Accounting and Financial Reporting for Pensions and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date – an amendment of GASB Statement No. 68. As a result of the implementation of GASB Statements No. 68 and No. 71, the City reported a restatement for the change in accounting principle (see Note 18). Our auditors’ opinion was not modified with respect 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 Schedule of the City’s Proportionate Share of Net Pension Liability, Schedule of Changes in the City’s Net Pension Liability and Related Ratios, Schedule of City Pension Contributions, Schedule of Agent Other Post-Employment Benefits Plan’s Funding Progress, the Schedule of Other Post Employment Benefit Plan’s 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 31, 2015, 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. a Phoenix, Arizona December 31, 2015 (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, 2015. 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 $874 million. The City’s net position was adjusted due to a change in accounting principle, which resulted in a decrease in net position by $589.2 million.  The City’s total revenues increased by $55.4 million from $858.9 million to $914.3 million. The increase is primarily from Capital Grants and Contributions.  As of the end of fiscal year 2015, the City’s governmental funds reported a combined ending fund balance of $280.5 million, an $8.2 million decrease from the previous year. Approximately 37.2% of the total fund balance amount, or $104.3 million is designated by the City as committed, or unassigned. The remaining 62.8% or $176.1 million is designated as non-spendable or restricted.  The City’s total long-term liabilities increased by $52.8 million to $2.81 billion at June 30, 2015 due to the recording of net pension liabilities in accordance with GASB 68. 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 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. 4 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 course, 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. 68. This resulted in a decrease to beginning net position of $539.5 million and $49.7 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, 2015 and 2014. Condensed Statement of Net Position As of June 30 (In thousands of dollars) Cash and Other Assets Capital Assets Total Assets Deferred Amounts on Refunding Deferred Outflows on Pensions Total Deferred Amounts Non-Current Liabilities Outstanding Net Pension Liability Other Liabilities Total Liabilities Deferred Inflows on Pensions Net Investment in Capital Assets Restricted Net Position Unrestricted Net Position Total Net Position Governmental Activities 2015 2014 As Restated $ 614,770 $ 610,158 1,365,366 1,282,555 1,980,136 1,892,713 Business-Type Activities 2015 2014 As Restated $ 436,696 $ 456,593 1,421,645 1,428,825 1,858,341 1,885,418 Total Government 2015 2014 As Restated $ 1,051,466 $ 1,066,751 2,787,011 2,711,380 3,838,477 3,778,131 5,250 115,762 121,012 4,949 39,447 44,396 23,412 5,320 28,732 19,431 2,958 22,389 28,662 121,082 149,744 24,380 42,405 66,785 955,591 603,333 131,598 1,690,522 936,843 578,996 154,735 1,670,574 1,205,189 45,382 91,166 1,341,737 1,188,235 52,629 101,169 1,342,033 2,160,780 648,715 222,764 3,032,259 2,125,078 631,625 255,904 3,012,607 72,554 - 9,083 - 81,637 - 327,743 47,576 160,934 536,253 393,720 43,023 129,031 565,774 1,260,403 119,746 (505,824) $ 874,325 932,660 72,170 (666,758) $ 338,072 866,332 60,555 (660,352) $ 266,535 5 $ $ 1,260,052 103,578 (531,321) $ 832,309 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 $874.3 million at the end of fiscal year 2015. The largest portion of net position ($1.3 billion or 144.2%) 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 $16.2 million from $103.6 million in fiscal year 2014 to $119.8 million in fiscal year 2015 primarily due to increase in debt service and transportation program restrictions. The unrestricted net position may be used to meet the City’s ongoing obligations to citizens and creditors. Beginning unrestricted net position decreased $589.2 million due to the pension liability restatement, thus the restated unrestricted net position was ($531.3) million for fiscal year 2014. Unrestricted net position increased during fiscal year 2015 by $25.5 million to ($505.8) million primarily due to an increase in unrestricted revenues. Capital Assets – The following table provides a breakdown of the City’s capital assets at June 30, 2015 and 2014: Capital Assets (net of accumulated depreciation/amortization) As of June 30 (In thousands of dollars) Land Infrastructure - Nondepr Buildings Other Improvements Machinery & Equipment Intangibles Infrastructure Construction-in-Progress Total Governmental Activities 2015 2014 $ 348,421 $ 297,398 3,308 3,292 235,707 223,178 73,550 67,565 56,623 48,590 15,818 10,482 574,978 467,476 56,961 164,574 $ 1,365,366 $ 1,282,555 Business-Type Activities 2015 2014 $ 54,333 $ 54,167 17,666 17,666 62,471 64,255 100,203 80,670 37,156 35,113 7,798 9,042 1,043,965 932,917 98,052 234,995 $ 1,421,644 $ 1,428,825 Total Government 2015 2014 $ 402,754 $ 351,565 20,974 20,958 298,178 287,433 173,753 148,235 93,779 83,703 23,616 19,524 1,618,943 1,400,393 155,013 399,569 $ 2,787,010 $ 2,711,380 The City’s investment in capital assets for its governmental and business-type activities amounts to $2.8 billion (net of accumulated depreciation/amortization) as of June 30, 2015. 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. Some of the larger capital asset completed during the current fiscal year were the Oakland A’s – Hohokam Stadium & Fitch Park ($24.4 million), Power Road Street Improvements ($31 million), Mesa Drive Street Improvements ($25 million), Elliot and Signal Butte Improvements ($10.9 million), Pasadena Pump 6 Improvements ($17.7 million), Fiesta District Improvements ($12.7 million), Dobson Road and University Drive Improvements ($5 million), Mesa Aquatics Complex ($6.6 million), Mesa Center for Higher Education ($5.7 million), and Benedictine University ($11 million). 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, 2015 and 2014. 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 2015 2014 $ 336,716 $ 344,040 100,285 107,705 - $ 2,830 10,974 77,835 528,640 $ 3,574 5,897 72 77,835 539,123 Business-Type Activities 2015 2014 $ 474 $ 605 1,007,455 991,995 94,060 94,060 Total Government 2015 2014 $ 337,190 $ 344,645 1,007,455 991,995 100,285 107,705 94,060 94,060 2,116 $ 1,104,105 2,830 10,974 79,951 $ 1,632,745 2,244 $ 1,088,904 3,574 5,897 72 80,079 $ 1,628,027 At the end of the current fiscal year, the City had total outstanding debt of $1.6 billion. Of this amount, $431.3 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 $13.8 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) increased $4.7 million. The change in debt includes new borrowings during the fiscal year totaling $49.8 million, refundings of $120.5 million, principal payments of $50.2 million, and payments to refund bond escrow agent of $114.5 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, 2015 was $168 million in the 6% capacity and $220.9 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, 2015 and 2014. Changes in Net Position Year Ended June 30 (In thousands of dollars) Governmental Activities 2015 2014 As Restated 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 M iscellaneous 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 Interest on Long-Term Debt Total Expenses Increase (Decrease) in Net Position Before Transfers Transfers Change in Net Position Total Net Position - As Adjusted Net Position - Ending $ 73,398 26,418 75,907 $ 61,193 29,514 20,714 Business-Type Activities 2015 2014 As Restated $ 333,292 157 18,107 $ 304,554 9,056 17,331 Total Government 2015 2014 As Restated $ 406,690 26,575 94,014 $ 365,747 38,570 38,045 146,337 33,241 2,081 145,266 47,761 1,786 7,844 560,039 140,567 22,549 1,919 135,075 88,646 966 5,550 506,693 999 1,141 233 5,157 359,086 851 1,453 18,697 288 352,230 146,337 33,241 3,080 145,266 47,761 2,927 233 13,001 919,125 140,567 22,549 2,770 135,075 88,646 2,419 18,697 5,838 858,923 102,396 302,633 52,430 101,531 23,939 103,819 277,614 49,275 125,700 24,431 - - 102,396 302,633 52,430 101,531 23,939 103,819 277,614 49,275 125,700 24,431 582,929 580,839 28,495 32,104 101,863 71,161 36,979 2,863 2,210 3,715 1,200 8,581 885 4,124 294,180 30,044 35,020 93,871 65,637 32,908 4,343 2,555 3,060 2,879 6,201 1,153 277,671 28,495 32,104 101,863 71,161 36,979 2,863 2,210 3,715 1,200 8,581 885 4,124 877,109 30,044 35,020 93,871 65,637 32,908 4,343 2,555 3,060 2,879 6,201 1,153 858,510 (22,890) 94,427 (74,146) 109,520 64,906 (94,427) 74,559 (109,520) 42,016 - 413 - 71,537 35,374 (29,521) (34,961) 42,016 413 266,535 231,161 565,774 600,735 832,309 831,896 338,072 $ 266,535 9 $ 536,253 $ 565,774 $ 874,325 $ 832,309 Governmental Activities As presented in the following two graphs, the largest funding sources, including transfers, for the governmental activities are taxes (28%), Unrestricted Intergovernmental (22%), and Capital Grants & Contributions (12%). The largest users of resources for the governmental activities are Public Safety (52%), General Government (18%) and Community Environment (17%). Revenues by Source Including Transfers – Governmental Activities For the Fiscal Year Ended June 30, 2015 Taxes 28% Capital Grants & Contributions 12% Unrestricted Contributions 7% Operating Grants & Contributions 4% Other 2% Charges for Services 11% Unrestricted InterGovernmental 22% Transfers 14% Functional Expenses – Governmental Activities For the Fiscal Year Ended June 30, 2015 Public Safety 52% CulturalRecreational 9% General Government 18% Interest on Long-Term Debt 4% Community Environment 17% 10 Governmental Activities Revenues For Fiscal Years 2015 and 2014 (In thousands of dollars) $200,000 $180,000 $160,000 $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0 Miscellaneous Investment Contributions 2014 Unrestricted Intergovernmental Taxes Program Revenues 2015 Governmental Activities Functional Expenses For Fiscal Years 2015 and 2014 (In thousands of dollars) $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 Interest on Long-term Debt Community Environment Cultural-Recreational 2014 Public Safety General Government 2015 The graphs above compare governmental activities revenues and expenses from fiscal year 2015 to fiscal year 2014. Total governmental activities revenues increased $53.3 million from $506.7 million to $560 million. Total governmental expenses increased by $2.1 million from $580.8 million to $582.9 million. 11 Key factors in this change include:  Charges for services increased $12.2 million, property taxes increased $10.7 million and Unrestricted Intergovernmental revenues increased $10.2 million. These increases are due to the continuing improvement in the local economy.  Capital Grants and Contributions increased $55.2 million which is due to an increase in donated capital assets.  There was an increase in public safety expenditures of $25.0 million directly related with pension expense and the implementation of GASB Statement 68. Business-type Activities As presented in the following two graphs, the largest funding sources and users of resources for the business-type activities are Water, Wastewater, Solid Waste, Gas, and Electric. Revenues by Source – Business-type Activities Wastewater 23% Water 36% Gas 11% Electric 10% Other Programs 5% Solid Waste 15% Functional Expenses – Business-Type Activities Wastewater 24% Water 34% Solid Waste 13% Gas 11% Other Programs 8% Electric 10% 12 Total business-type activities program and general revenues increased by $6.9 million from $352.2 million to $359.1 million. The business-type activities total expenses increased by $16.5 million from $277.7 million to $294.2 million. The largest increase in expenses was primarily in the water fund, and related to capital related expenditures 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 governmentwide 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. 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 103. 13 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 near-term inflows, outflows and balances of spendable resources. Such information is useful in assessing the City’s financing requirements. Unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. The City’s governmental funds reported combined ending fund balance of $280.5 million, an $8.2 million decrease from the previous year. $172.5 million of this total amount is restricted and $30.2 million is committed, thus the balances are not available for spending in the coming year. Although the governmental funds balanced decreased by $8.2 million, the Net Change in Fund Balance was an improvement when compared to prior year’s decrease of $30.7 million. The governmental funds had an increase in revenues (primarily property tax) and a decrease in expenditures (primarily principal payments and capital outlay). 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 $77.9 million, while unassigned fund balance was $74.1 million. Total fund balance of the City’s General Fund increased by $634 thousand during the current fiscal year from $77.3 million to $77.9 million. This increase is less than the prior year’s increase in fund balance of $23.7 million. This is primarily due to other financing sources (uses) decreasing in current year. Proprietary Funds - The City’s Enterprise Fund provides the same type of information as the governmentwide financial statements, except in more detail. The total net position of the Enterprise Fund decreased by $29.5 million in fiscal year 2015 from $565.8 million (as restated) in fiscal year 2014 to $536.3 million. The unrestricted net position of the Enterprise Fund amounted to $160.9 million. The decrease in current year is primarily related to increase in depreciation, loss on disposal of assets, and loss from Joint Ventures. 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-6. 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 2015. General Fund revenues of $258.3 million, on a budgetary basis, were comparable to budgeted revenues of $256.4 million. Expenditures of $333.3 million were less than the budgeted expenditures of $366.4 million. Savings were primarily in Capital Outlay, with smaller savings in public safety and general government functional areas. 14 ECONOMIC FACTORS In June 2015, the City Council approved a $1.6 billion budget, which is an increase of $270 million compared to prior year’s budget. The fiscal year 2015–16 budget includes $1.4 billion for operations and $256.9 million for scheduled bond capital improvements. The adopted fiscal year 2015-16 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 the City of Mesa Finance Director, P.O. Box 1466, Mesa, Arizona, 85211-1466. 15 Basic Financial Section COMPREHENSIVE ANNUAL FINANCIAL REPORT 2015 CITY OF MESA, ARIZONA EXHIBIT A-1 STATEMENT OF NET POSITION JUNE 30, 2015 (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, Net Due from Other Governments Customer Deposits Joint Venture Construction Deposits Investment in Joint Ventures Capital Assets, Not Being Depreciated Capital Assets, Being Depreciated, Net Total Assets Primary Government Governmental Activities Business-Type Activities $ $ DEFERRED OUTFLOWS OF RESOURCES Debt Refunding Pensions Total Deferred Outflows of Resources LIABILITIES Accounts Payable and Accrued Liabilities Claims Payable Customer and Defendant Deposits Compensated Absences Liabilities Payable from Restricted Assets Net Pension Liability Noncurrent Liabilities, Due Within One Year Noncurrent Liabilities, Due in More Than One Year Total Liabilities DEFERRED INFLOWS OF RESOURCES Pensions Total Deferred Inflows of Resources NET POSITION Net Investment in Capital Assets Restricted For: Airport Golf Courses Hohokam Stadium/Fitch Complex Court Projects Debt Service Bond Indentures Public Safety Developer Impact Fees Grant Programs Quality of Life Programs Transportation Programs Water, Wastewater & Solid Waste Improvements Construction Miscellaneous Restrictions Unrestricted Total Net Position $ 258,766 21,666 546 22,202 5,992 2,626 194 72,241 30,402 411 4,360 1,376 45 Total $ 331,007 52,068 957 26,562 5,992 4,002 239 89,863 38,980 9,535 10,401 942 153,057 408,690 956,676 1,980,136 68,967 48,351 61 4,144 4,206 202,132 170,051 1,251,594 1,858,341 158,830 87,331 9,596 10,401 942 4,144 4,206 355,189 578,741 2,208,270 3,838,477 5,250 115,762 121,012 23,412 5,320 28,732 28,662 121,082 149,744 37,189 36,027 8,265 395 49,722 603,333 113,150 842,441 1,690,522 6,745 84,421 45,382 25,418 1,179,771 1,341,737 43,934 36,027 8,265 395 134,143 648,715 138,568 2,022,212 3,032,259 72,554 72,554 9,083 9,083 81,637 81,637 932,660 327,743 1,260,403 956 12,093 4,072 1,361 561 3,077 48,931 1,119 (666,758) 338,072 9,891 10 235 23,395 9,839 4,206 160,934 536,253 $ The accompanying notes are an integral part of the financial statements. 16 $ 9,891 10 235 956 12,093 23,395 4,072 1,361 561 3,077 48,931 9,839 4,206 1,119 (505,824) 874,325 CITY OF MESA, ARIZONA EXHIBIT A-2 STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED JUNE 30, 2015 (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 Interest on Long-Term Debt Total Business-type Activities Total Government Charges for Services 102,396 302,633 52,430 101,531 23,939 582,929 $ 28,495 32,104 101,863 71,161 36,979 2,863 2,210 3,715 1,200 8,581 885 4,124 294,180 $ 877,109 7,709 43,142 14,541 8,006 73,398 Program Revenues Operating Grants and Contributions $ 33,601 39,422 121,205 77,172 52,748 3,454 1,737 2,475 2 202 1,274 333,292 $ 406,690 331 7,434 153 18,500 26,418 Capital Grants and Contributions $ 157 157 $ 26,575 356 288 6,909 3,382 2,474 200 4,498 18,107 $ General Revenues: Sales Taxes Property Taxes Occupancy Taxes Unrestricted Intergovernmental Revenues Contributions Not Restricted to Specific Programs Investment Income Gain (loss) on Sale of Capital Assets Miscellaneous Transfers Total General Revenues and Transfers Change in Net Position Total Net Position - As Previously Reported Change in Accounting Principle Total Net Position - As Restated Net Position - Ending The notes to the financial statements are an integral part of this statement. 17 3,407 3,766 1 68,733 75,907 94,014 EXHIBIT A-2 (Continued) Net (Expense) Revenue and Changes in Net Position Primary Government Governmental Business-type Activities Activities Total * * $ (90,949) (248,291) (37,735) (6,292) (23,939) (407,206) $ - $ - $ 5,462 7,606 26,408 9,393 15,769 3,065 (473) (1,040) 3,300 (8,379) 389 (4,124) 57,376 (90,949) (248,291) (37,735) (6,292) (23,939) (407,206) 5,462 7,606 26,408 9,393 15,769 3,065 (473) (1,040) 3,300 (8,379) 389 (4,124) 57,376 (407,206) 57,376 (349,830) 146,337 33,241 2,081 145,266 47,761 1,786 7,844 94,427 478,743 999 1,141 233 5,157 (94,427) (86,897) 146,337 33,241 3,080 145,266 47,761 2,927 233 13,001 391,846 71,537 (29,521) 42,016 806,084 (539,549) 266,535 615,445 (49,671) 565,774 338,072 $ 536,253 1,421,529 (589,220) 832,309 $ 874,325 18 CITY OF MESA, ARIZONA EXHIBIT A-3 GOVERNMENTAL FUNDS BALANCE SHEET JUNE 30, 2015 (in thousands) General Fund ASSETS Pooled Cash and Investments Accounts Receivable (Net of Allowances) Accrued Interest Receivable Due from Other Governments 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 Accounts Payable and Accrued Liabilities 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 $ $ $ 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 68,074 17,051 334 6,354 1,788 1,702 194 95,497 13,991 1,805 395 Non-major Governmental Funds $ $ $ 89,863 38,980 9,535 10,401 942 290,628 19,739 1,788 6,460 - $ $ $ 188,630 21,292 466 22,194 1,788 1,840 194 89,863 38,980 9,535 10,401 942 386,125 33,730 1,788 8,265 395 579 16,770 11,507 10,085 27,551 77,130 11,507 10,664 27,551 93,900 782 782 10,983 10,983 11,765 11,765 138 172,316 30,092 (31) 202,515 3,628 172,500 30,218 74,114 280,460 3,490 184 126 74,145 77,945 $ 120,556 4,241 132 15,840 138 - Total Governmental Funds 95,497 $ The accompanying notes are an integral part of the financial statements. 19 290,628 $ 386,125 CITY OF MESA, ARIZONA EXHIBIT A-4 RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION JUNE 30, 2015 (in thousands) Fund Balances - total governmental funds $ 280,460 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. 1,363,241 Other assets used in governmental activities are not financial resources and therefore not reported in the governmental funds. 153,057 Deferred outflows related to deferred amounts on refunding and pensions are not financial resources and therefore not reported in the funds. 119,691 Long-term liabilities, including bonds payable and net pension liabilities are not due and payable in the current period and therefore not reported in the governmental funds. (1,537,427) Deferred inflows relating to pensions represent a future acquisition of net position that is not reported in the funds. Also, because the focus of governmental funds is on short term financing, some assets will not be available to pay for current period expenditures. Those assets are offset by unavailable revenue in the funds. (58,544) Internal service funds are used by management to charge the costs of certain activities to individual funds. 17,594 Net position of the governmental activities - statement of net position The accompanying notes are an integral part of the financial statements. 20 $ 338,072 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, 2015 (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 Service Charges Cost of Issuance Capital Outlay Total Expenditures 100,594 25 15,446 117,084 20,700 8,096 595 208 3,973 266,721 45,743 34,022 2,056 1,264 5,446 68,445 15,560 2,409 1,198 1,136 2,614 179,893 146,337 34,022 2,081 1,264 20,892 185,529 36,260 10,505 1,793 1,344 6,587 446,614 73,901 214,669 33,850 9,185 7,165 28,901 6,515 51,327 81,066 243,570 40,365 60,512 1,758 333,363 28,367 19,374 3 3,892 13 657 72,392 218,606 28,367 19,374 3 3,892 13 657 74,150 551,969 Excess (Deficiency) of Revenues Over (Under) Expenditures (66,642) (38,713) (105,355) OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Face Amount of Bonds Issued Premium on Issuance of Bonds (Net) Issuance of Refunding Bonds Payment to Refunded Bond Escrow Agent Total Other Financing Sources (Uses) 97,562 (30,286) 67,276 25,482 (15,038) 18,999 2,952 17,555 (20,058) 29,892 123,044 (45,324) 18,999 2,952 17,555 (20,058) 97,168 (8,821) (8,187) Net Change in Fund Balances 634 Fund Balance - Beginning Fund Balances - Ending 77,311 $ 77,945 211,336 $ The accompanying notes are an integral part of the financial statements. 21 202,515 288,647 $ 280,460 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, 2015 (in thousands) Net change in fund balances - total governmental funds $ (8,187) 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. 4,409 Some expenses reported in the statement of activities do not require the use of current financial resources and therefore not reported as expenditures in governmental funds. (91,635) Current-year pension contributions are reclassified to deferred outflows of resources and therefore not reported as expenditures in governmental funds. 41,904 Governmental funds report capital outlays as expenditures. However, in the statement of activities, the costs of those assets are allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlay ($74,150) exceeded depreciation ($71,913) in the current period. 2,237 The net effect of miscellaneous transactions involving capital assets (e.g., donations, transfers and disposals) is to decrease net position. 80,109 Change in equity in Joint Venture 27,481 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. 11,871 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. 502 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. 2,846 Change in net position of the governmental activities - statement of activities The accompanying notes are an integral part of the financial statements. 22 $ 71,537 CITY OF MESA, ARIZONA EXHIBIT A-7 STATEMENT OF NET POSITION PROPRIETARY FUNDS JUNE 30, 2015 (in thousands) Business-type Activities Enterprise Fund ASSETS Current Assets: Pooled Cash and Investments Accounts Receivable (Net of Allowances) Accrued Premiums Receivable 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: Investment in Joint Ventures Capital Assets, Not Being Depreciated Captial Assets, Being Depreciated, Net Total Noncurrent Assets Total Assets DEFERRED OUTFLOWS OF RESOURCES Deferred Amounts on Refundings Deferred Outflows Related to Pensions Total Deferred Outflows of Resources Total Assets and Deferred Outflows of Resources $ 72,241 30,402 411 4,360 1,376 45 $ 70,136 226 148 80 8 5,992 786 - 68,967 48,351 61 4,144 4,206 234,564 77,376 202,132 170,051 1,251,594 1,623,777 99 2,026 2,125 1,858,341 79,501 23,412 5,320 28,732 1,321 1,321 1,887,073 The accompanying notes are an integral part of the financial statements. 23 Governmental Activities Internal Service Funds $ 80,822 (Continued) CITY OF MESA, ARIZONA EXHIBIT A-7 (Continued) STATEMENT OF NET POSITION PROPRIETARY FUNDS JUNE 30, 2015 (in thousands) Business-type Activities Enterprise Fund LIABILITIES Current Liabilities-Payable From Current Assets: Accounts Payable Claims Payable Current Liabilities-Payable From Restricted Assets: Accounts Payable Interest Payable Unearned Revenue Matured Bonds Payable Customer Deposits and Prepayments Current Portion of Long-Term Liabilities: Current Portion of Bonds Payable Current Portion of Notes Payable Current Portion of Compensated Absences Total Current Liabilities $ Long-Term Liabilities: Bonds Payable Notes Payable Unamortized Bond Premium Compensated Absences Net Pension Liability Post Employment Benefits Total Long-Term Liabilities Total Liabilities 6,745 - $ 3,459 36,027 - 24,884 131 403 116,584 69 39,555 1,077,105 1,985 22,521 3,535 45,382 74,625 1,225,153 578 11,216 9,634 21,428 1,341,737 60,983 9,083 9,083 2,245 2,245 327,743 2,125 9,891 10 235 23,395 9,839 4,206 160,934 536,253 15,469 17,594 The accompanying notes are an integral part of the financial statements. 24 $ 7,506 26,359 122 21,991 28,443 DEFERRED INFLOWS OF RESOURCES Deferred Inflows Related to Pensions Total Deferred Inflows of Resources NET POSITION Net Investment in Capital Assets Restricted For: Airport Golf Course Hohokam Stadium\Fitch Complex Capital Projects Debt Service Bond Indentures Water, Wastewater & Solid Waste Improvements Construction Unrestricted Total Net Position Governmental Activities Internal Service Funds $ 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, 2015 (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 Economic Investment Charges Charges For Services Self-Insurance Contributions Other Revenue Total Operating Revenues Business-type Activities Enterprise Fund Governmental Activities Internal Service Funds $ $ 33,601 39,422 116,158 69,906 52,419 3,454 1,737 2,475 2 202 1,274 320,650 25,621 76,129 672 102,422 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 Other Operating Expenses Total Operating Expenses 23,412 23,219 45,462 24,027 35,333 1,498 1,743 3,480 1,083 4,352 416 164,025 26,400 72,760 99,160 Operating Income (Loss) Before Depreciation and Amortization 156,625 3,262 Depreciation and Amortization (67,422) Operating Income (Loss) 89,203 The accompanying notes are an integral part of the financial statements. 25 (417) 2,845 (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, 2015 (in thousands) Business-type Activities Enterprise Fund Governmental Activities Internal Service Funds 1,092 49 157 (7) - (45,568) (16) (43) (20,794) (16,261) 12,642 (845) 999 5,157 (63,431) 8 1 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 Gain/(Loss) on Disposal of Capital Assets 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 25,772 2,846 Capital Contributions Transfers In Transfers Out 22,427 19,515 (97,235) - Change in Net Position (29,521) 2,846 Total Net Position - As Previously Reported Change in Accounting Principle 615,445 (49,671) 27,025 (12,277) Total Net Position - As Restated 565,774 14,748 Total Net Position - Ending $ The accompanying notes are an integral part of the financial statements. 26 536,253 $ 17,594 CITY OF MESA, ARIZONA EXHIBIT A-9 STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 (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 Other Non-Operating Revenue $ 316,874 (110,683) (54,231) 5,157 Governmental Activities Internal Service Funds $ 104,150 (88,873) (10,167) - Net Cash Provided By Operating Activities 157,117 5,110 Cash Flows From Noncapital Financing Activities: Intergovernmental Transient Occupancy Tax Transfers In from Other Funds Transfers Out to Other Funds (1,211) 999 19,515 (97,235) - Net Cash Provided By (Used For) Noncapital Financing Activities (77,932) - Cash Flows From Capital and Related Financing Activities: Proceeds from Bond Sales Proceeds From Sale of Capital Assets Acquisition and Construction of Capital Assets Principal Paid on Bonds, Leases and Notes Maturities Interest Paid on Bonds, Leases and Notes Developer Contributions and Capital Grants 133,465 257 (72,882) (118,802) (53,112) 23,061 (876) - Net Cash Used For Capital and Related Financing Activities (88,013) (876) Cash Flows From Investing Activities: Interest Received on Investments 1,129 2 Net Cash Provided By Investing Activities 1,129 2 Net Change in Pooled Cash and Investments (7,699) Total Cash and Investments at Beginning of Year 4,236 197,319 Total Cash and Investments at End of Year $ The accompanying notes are an integral part of the financial statements. 27 189,620 65,900 $ 70,136 (Continued) CITY OF MESA, ARIZONA EXHIBIT A-9 (Continued) STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 (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 Miscellaneous Revenue Changes in Assets and Liabilities: (Increase)/Decrease in Receivables (Increase)/Decrease in Inventory (Increase)/Decrease in Deposits and Prepaid Costs Increase/(Decrease) in Accounts Payable Increase/(Decrease) in Unearned Revenue Increase/(Decrease) in Pension Liability Increase/(Decrease) in Other Accrued Expenses Total Adjustments Net Cash Provided By Operating Activities $ Noncash Transactions Affecting Financial Position: Contributions of Capital Assets Loss on Disposal of Capital Assets Amortization of Bond Premium Amortization of Deferred Amounts on Refunding 89,203 28 $ 2,845 67,422 5,157 417 - (1,146) (3,679) (1,459) 122 (526) 2,023 1,728 (151) (71) 607 (137) (128) 67,914 2,265 157,117 12,008 (21,051) (3,108) 3,981 The accompanying notes are an integral part of the financial statements. Governmental Activities Internal Service Funds $ 5,110 8 - CITY OF MESA, ARIZONA EXHIBIT A-10 STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES AGENCY FUNDS JUNE 30, 2015 (in thousands) Payroll Agency ASSETS Pooled Cash and Investments $ 14,269 Due from Others 2 Total Assets $ 14,271 LIABILITIES Accounts Payable Accrued Payroll Payable Total Liabilities $ $ 98 14,173 14,271 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, 2015 The City of Mesa, Arizona, (the City) was incorporated July 15, 1883 with an approximate population of 300 and an area of one square mile. Today, the City’s estimated population is 462,376 within an area of approximately 141 square miles. The City’s charter was adopted August 18, 1967 providing for a CouncilManager 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, and solid waste utilities, an airport, golf course, convention center, two stadiums and district cooling. 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) as applied to governmental units. The Governmental Accounting Standards Board (“GASB”) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The City’s other significant accounting policies are described below: a. Reporting Entity The accompanying financial statements include the City and its blended component unit, Community Facilities District, collectively referred to as “the financial reporting entity”. In accordance with GASB Statement No. 14, and as amended by GASB Statement No. 61, the component unit discussed below has been included in the City’s reporting entity because of the significance of its operational or financial relationship with the City. 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 can be obtained from the City’s Finance Department, through Accounting Services at 20 E. Main Street, 3rd Floor, Mesa, Arizona 85211. b. Jointly Governed Organizations Phoenix – Mesa Gateway Airport Authority (“PMGAA”) is a nonprofit corporation established and funded by the City, the City of Phoenix, the 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 of 1993 to become PMGAA. The Board of Directors consists of the mayors for the respective municipalities and the governor of the tribal community. The City contributed $1.7 million to the PMGAA operating and capital budget during this fiscal year. 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. 30 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 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. AMWUA performs certain accounting, administrative and support services for the cities who are jointly using a multi-city sanitary sewer system. 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 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. 31 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 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 of 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. 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 is interest on long-term debt which is recorded when due. 32 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 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 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 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 government-wide financial statements. e. Fund Accounting The financial transactions of the City are recorded in individual funds. Each fund is accounted for by providing a separate set of self-balancing accounts that comprises its assets, liabilities, reserves, fund equity, revenues and expenditures/expenses. The various funds are reported by generic classification within the fund financial statements. GASB Statement No. 34 sets forth minimum criteria for the determination of major funds. The non-major funds are combined in a column in the fund financial statements and detailed in the combining section. 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. 33 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Six non-major Capital Project Funds are used to account for the acquisition and construction of major capital facilities other than those financed by proprietary funds. 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. The City reports the following major proprietary fund: The Enterprise Fund has been established to account for all enterprise functions. This includes the City-owned electric, gas, water, wastewater and solid waste systems, as well as the City-owned airport, golf course, 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, 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 a proposed operating budget to the City Council for the fiscal year commencing the following July 1. The operating budget includes proposed expenditures and the means of financing them. Public hearings are conducted by the City to obtain citizen comments. Prior to June 30, the budget for the ensuing year is legally adopted through passage of an ordinance; these appropriations lapse at the end of each fiscal year. Legal control over the budget derives from State statutes that prohibit the City from exceeding its adopted budget in total and from the resolution itself that limits expenditures by fund and by departmental groupings. Transfers of sums within a specific fund or departmental group may be made upon City Manager approval. The legally adopted budget consists of all funds except the Agency Fund. Capital Projects 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. 34 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 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 197980 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. Budgeted amounts are as originally adopted by the City Council on May 19, 2014. 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, deferred outflows of resources, liabilities, deferred inflows of resources 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. Inventories 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. 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. 35 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 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. 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, longterm 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. 36 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 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. Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Arizona State Retirement System Defined Benefit Plan (ASRS), Elected Officials Retirement Plan (EORP), and Public Safety Personnel Retirement System (PSPRS) and additions to/deductions from ASRS, EORP, and PSPRS’s fiduciary net position have been determined on the same basis as they are reported by ASRS, EORP, and PSPRS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. o. 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) it is 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. p. 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. 37 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 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. q. 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, 2015 and are made in accordance with State Statutes. r. 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 2014-2015, current property tax collections were $32,748,767 or 98.02% 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, 2015 was $942,471 of which $474,811 was recorded as revenue and $467,660 as unavailable revenue. s. New Accounting Pronouncements 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 implemented this Statement in fiscal year 2015. See Note 15 and Note 18 for the current year effect of implementing GASB Statement No. 68. 38 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 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 has implemented this Statement in fiscal year 2015 with no impact. GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date, improves accounting and financial reporting by addressing an issue in Statement No. 68, Accounting and Financial Reporting for Pensions, concerning transition provisions related to certain pension contributions made to defined benefit pension plans prior to implementation of that Statement by employers and nonemployer contributing entities. The provisions of this Statement should be applied simultaneously with the provisions of GASB Statement 68. The City implemented this Statement in fiscal year 2015, see Note 15 and Note 18 for the current year effect of implementing GASB Statement 71. GASB Statement No. 72, Fair Value Measurement and Application, addresses accounting and financial reporting issues related to fair value measurements. The requirements of this Statement are effective for fiscal periods beginning after June 15, 2015. The City will implement this Statement in fiscal year 2016. GASB Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68, improves the usefulness of information about pensions included in the financial reports of governments for making decisions and assessing accountability. Portions of this Statement are effective for financial statements for fiscal years beginning after June 15, 2016. Other portions of this Statement are effective for fiscal years beginning after June 15, 2015. The City will implement this Statement with no impact to the Statements in fiscal year 2016. GASB Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, improves the usefulness of information about postemployment benefits other than pensions (other postemployment benefits or OPEB) included in the financial reports of governmental OPEB plans for making decisions and assessing accountability. This Statement replaces Statements No. 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, as amended, and No. 57, OPEB Measurements by Agent Employers and Agent Multiple-Employer Plans. It also includes requirements for defined contribution OPEB plans that replace the requirements for those OPEB plans in Statement No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans, as amended, Statement 43, and Statement No. 50, Pension Disclosures. This Statement is effective for financial statements for fiscal years beginning after June 15, 2016. The City will implement this Statement in fiscal year 2017. GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, improves accounting and financial reporting by governments for postemployment benefits other than pensions. It also improves information provided by governmental employers about financial support for OPEB that is provided by other entities. This Statement replaces the requirements of Statements No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, as amended, and No. 57, OPEB Measurements by Agent Employers and Agent Multiple-Employer Plans, for OPEB. This Statement is effective for fiscal years beginning after June 15, 2017. The City will implement this Statement in fiscal year 2018. 39 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 GASB Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments, identifies the hierarchy of generally accepted accounting principles and the framework for selecting those principles reducing the GAAP hierarchy to two categories of authoritative GAAP. This Statement supersedes Statement No. 55, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments. The City will implement this Statement in fiscal year 2016. GASB Statement No. 77, Tax Abatement Disclosures, requires disclosure of tax abatement information about a reporting government’s own tax abatement agreements and those that are entered into by other governments and that reduce the reporting government’s tax revenues. The requirements of this Statement are effective for financial statements for periods beginning after December 15, 2015. The City will implement this Statement in fiscal year 2017. Implementation Guide No. 2015-1, provides guidance that clarifies, explains, or elaborates on GASB Statements and Interpretations. This Implementation Guide supersedes all previously issued Implementation Guides, including the 2013-2014 Comprehensive Implementation Guide. The requirements of this Implementation Guide should be applied simultaneously with the requirements in Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments, which is effective for reporting periods beginning after June 15, 2015. The City will implement this Statement in fiscal year 2016. Although expected to be significant, the City has not fully determined the effects that implementation of Statements No. 74 and 75 will have on the City’s financial statements. The City has also not fully determined the effects that implementation of Statements No. 72, 76, 77 and the Implementation Guide No. 2015-1 will have on the City’s financial statements. 2. RECONCILIATION OF GOVERNMENTAL FUND FINANCIAL STATEMENTS TO GOVERNMENT-WIDE FINANCIAL STATEMENTS The governmental fund financial statements are presented on a current financial resources measurement focus and modified accrual accounting basis while the government-wide financial statements are prepared on a long-term economic resources measurement focus and accrual accounting basis. Reconciliations briefly explaining the adjustments necessary to transform the fund financial statements into the governmental activities column of the government-wide financial statements immediately follow each governmental fund financial statement. 40 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Reconciliation of the Governmental Funds Balance Sheet to the government-wide Statement of Net Position (in thousands): Total Governmental Funds Assets Pooled Cash and Investments Account and Misc Receivables, Net Accrued Interest Receivable Due from Other Governments Advances from Other Funds Inventory Prepaid Costs Deposits Restricted Assets: Pooled Cash and Investments Cash with Fiscal Agent Cash with Trustee Accounts Receivable Due from Other Governments Investment in Joint Ventures Capital Assets Total Assets $ Deferred Outflows of Resources Deferred Amounts on Refunding Pensions Total Deferred Outflows of Resources Total Assets and Deferred Outflows of Resources Liabilities Accounts Payable and Accrued Liabilities Claims Payable Advances to Other Funds Customer and Defendant Deposits Compensated Absences Restricted Bond Interest Payable Restricted Unearned Revenue Matured Bonds Payable Pension Long-term Liabilities Long-term Assets/ Liabilities (1) 188,630 21,292 466 22,194 1,788 1,840 194 $ Internal Service Funds (2) 89,863 38,980 9,535 10,401 942 386,125 153,057 1,363,241 1,516,298 - 5,250 114,441 119,691 $ 70,136 374 80 8 5,992 786 2,125 79,501 Reclassifications and Eliminations $ 1,321 1,321 Statement of Net Position Total (1,788) (1,788) $ 258,766 21,666 546 22,202 5,992 2,626 194 89,863 38,980 9,535 10,401 942 153,057 1,365,366 1,980,136 - 5,250 115,762 121,012 $ 386,125 $ 1,635,989 $ 80,822 $ (1,788) $ 2,101,148 $ 33,730 1,788 8,265 395 11,507 10,664 27,551 - $ - $ 3,459 36,027 - $ (1,788) - $ 37,189 36,027 8,265 395 11,507 10,664 27,551 603,333 955,591 592,117 945,310 11,216 10,281 93,900 1,537,427 60,983 Deferred Inflows of Resources Unavailable Revenue Pension 11,765 - (11,765) 70,309 2,245 - 72,554 Total Deferred Inflows of Resources 11,765 58,544 2,245 - 72,554 280,460 40,018 17,594 - 338,072 Total Liabilities (1,788) 1,690,522 Fund Balance/Net Position Total Fund Balance/Net Position Total Liabilities and Fund Balance/Net Position $ 386,125 $ 1,635,989 41 $ 80,822 $ (1,788) $ (Continued) 2,101,148 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 (1) 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 $ 153,057 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 Total $ 2,176,183 (812,942) $ 1,363,241 Deferred outflows consist of items that will consume net position in a future reporting period(s) and do not meet the definition of an asset. Deferred amounts on refunding result from the difference between the carrying value of refunded debt and its reacquisition price. The pension-related amounts result from differences between expected and actual experience, changes of assumptions or other inputs, the difference between projected and actual investment earnings, and contributions made to the pension plan from the employer subsequent to the measurement date of the net pension liability and before the end of the reporting period. Deferred charge on refunding Pensions Total $ 5,250 114,441 $119,691 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 Compensated absences Post-employment benefits Unamortized bond premiums Pension liability Total $ 450,805 77,835 25,928 372,366 18,376 592,117 $ 1,537,427 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 Receivables not yet collected Total 42 $ 468 10,364 933 $ 11,765 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Deferred inflows relating to pensions represent a future acquisition of net position that is not reported in the funds. Deferred Inflows – Pensions (2) $ 70,309 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, liabilities, deferred inflows and deferred outflows 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. Internal Service Funds total 43 $ 17,594 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balance to the Government-wide Statement of Activities (in thousands): Total Governmental Funds Revenues and Other Sources Revenues: Sales Taxes Property Taxes Occupancy Taxes Special Assessments Licenses and Permits Intergovernmental Charges for Services Fines and Forfeitures Investment Income Contributions Miscellaneous Other Sources: Transfers In Face Amount of Bonds Issued Premiums on Issuance of Bonds Total Revenue and Other Sources Expenditures/Expenses and Other Financing Uses Expenditures/Expenses: Current: General Government Public Safety Cultural-Recreational Community Environment Debt Service: Principal Interest on Bonds Interest on Leases Interest on Notes Service Charge Cost of Issuance Capital Outlay Other Financing Uses: Transfers Out Refunding Advance $ $ $ Total Expenditures\Expenses & Other Financing Uses Net Change for the Year $ 146,337 34,022 2,081 1,264 20,892 185,529 36,260 10,505 1,793 1,344 6,587 123,044 36,554 2,952 609,164 81,066 243,570 40,365 60,512 Long-term Revenues/ Expenses(1) $ $ 4,409 $ $ 21,027 110,570 $ 19,473 $ (36,554) (2,952) (39,506) $ (45,324) (45,324) $ 98,747 658,786 617,351 49,731 743 16,627 (51,879) (45,324) 587,249 44 $ 146,337 33,241 2,081 5,741 20,892 185,529 36,260 10,505 1,786 109,823 7,844 4,320 - 12,373 - $ (45,324) - $ $ - (20,058) 2,846 (3,454) (28,367) - $ - $ $ - 4,320 - 109,827 7,200 6,451 2,275 701 - $ - $ $ (7) 18,808 672 Statement of Activities Eliminations (5) 45,324 20,058 (45,322) 11,236 11,739 8,653 38,945 (74,150) $ Long-term Debt (4) 28,367 19,374 3 3,892 13 657 74,150 $ $ 89,543 - Internal Service Funds(3) 6,348 40,873 1,137 1,373 - (8,187) $ (781) 4,477 128 585 Capital Related Items(2) - $ - 102,396 302,633 52,430 101,531 19,374 3 3,892 13 657 - $ (Continued) 71,537 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 (1) Revenues in the statement of activities that do not provide current financial resources include unavailable revenues and State pension contributions. Revenues that are “unavailable” and do not provide current financial resources are not reported in the governmental funds. 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 State Pension Contributions Unavailable revenue Total $ (781) 4,477 128 585 $ 4,409 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 Pension Expense Total $ 465 28,208 62,962 $ 91,635 Current-year pension contributions are reclassified to deferred outflows of resources, and therefore are not reported as expenditures in governmental funds. Deferral of current year pension contribution (2) $ (41,904) 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 $ 74,150 (71,913) $ 2,237 The net effect of miscellaneous transactions involving capital assets (donations, transfers and disposals) and investment in joint venture activity is to increase net position. Change in equity interest for joint venture Donated capital and transfers Total 27,481 80,109 $ 107,590 45 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 (3) Internal service funds are used by management to charge the costs of certain activities, such as fleet support, materials and supplies, printing and graphics, and self-insurance, to the individual funds. The adjustments for internal service funds “close” those funds by charging the additional amounts to participating governmental activities to completely cover the internal service funds’ costs for the year. Revenue and other sources Expenditures and other uses Change in net position (4) $ 19,473 16,627 $ 2,846 Bond and note proceeds are reported as financing sources and the repayment of principal consumes financial resources in the governmental funds. Neither transaction has any effect on the statement of activities. New debt issued (including refunded debt): General Obligation bond proceeds Highway User Revenue bond proceeds Community Facilities District Bonds Principal repayments Payment to refunded bond escrow accounts Total $ (13,690) (17,555) (5,309) 28,367 20,058 $ 11,871 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 Deferred Amounts on refunding Total (5) $ 1,367 3,296 (2,952) (1,209) $ 502 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 $ ( 45,324) 45,324 $ - 46 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 3. FUND BALANCE As of June 30, 2015 the fund balance details by classification are listed below (in thousands): Fund Balances: Nonspendable: Prepaid Costs Advances to Other Funds Nonspendable Sub-total General Fund $ 1,702 1,788 3,490 Non-Major Governmental Funds $ 138 138 Total Governmental Funds $ 1,840 1,788 3,628 Restricted: Debt Service Capital Projects Quality of Life Projects Streets Projects Public Safety Cultural-Recreational Community Environment Court Vehicle Replacement Restricted Sub-total 184 184 80,457 33,328 3,077 48,931 4,072 209 561 956 725 172,316 80,457 33,328 3,077 48,931 4,072 393 561 956 725 172,500 Committed To: Debt Service Capital Projects Cultural-Recreational Public Safety Building Safety Community Environment Vehicle Replacement Committed To Sub-total 126 126 3,584 7,393 1,547 7,160 1,433 6,675 2,300 30,092 3,584 7,393 1,547 7,160 1,433 6,801 2,300 30,218 Unassigned Total Fund Balances 74,145 $ 77,945 (31) $ 202,515 74,114 $ 280,460 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, 2015 as reported in Exhibit B-6 is 11.8% of General Fund expenditures budgeted for fiscal year 2014-2015. 47 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 4. POOLED CASH AND INVESTMENTS Deposits At year-end, the City’s cash totaled $121,678,310 which included $260,665 of petty cash. The carrying amount of the City’s deposits was $121,417,645 and the bank balance was $119,001,895. The difference of $2,415,750 represents deposits in transit and other reconciling items. Custodial Risk Cash deposits are subject to custodial risk. Custodial risk is the risk that in the event of bank failure, the City’s deposits may not be returned. To mitigate this risk, on July 1, 2014 Arizona House Bill 2619 (35-1201 et. seq.) went into effect establishing a pooled collateral program for public deposits and creating a Statewide Collateral Pool Administrator (the Administrator) in the State Treasurer’s Office. The purpose of this Bill is to ensure that public deposits of governmental entities placed with participating banks are backed with collateral of 102% of the amount on deposit less applicable FDIC Deposit Insurance. The Administrator will monitor, audit and report on each bank’s compliance. Collateral under this program is pledged in the name of the Administrator and the City’s current bank is a participant in this program. The City’s cash balances on deposit as of June 30, 2015 are covered under House Bill 2619. Investments The City’s Investment 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, State Treasurer’s Investment Pool, and investment grade corporate bonds, debentures, notes and other evidence of indebtedness issued or guaranteed by solvent U.S. corporations which are not in default as to principal or interest. 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 five years or less. Credit Risk The City’s investment policy limits its purchase of investments to the top ratings issued by nationally recognized statistical ratings organizations such as Standard & Poor’s (S&P) and Moody’s Investors Service (Moody’s). The City’s portfolio is primarily invested in securities issued by the U.S. Treasury and by U.S. Government Agency; Securities which are rated Aaa by Moody’s and AA+ by S&P. The City’s portfolio also invests in Corporate Notes rated A or better by S&P. The City participates in the State Treasurer’s Investment Pool which is overseen according to Arizona State Statute by the State Board of Deposit. The City 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, 2015, Pool 7 had a Net Asset Value of $1 per share and Pool 700 had a Floating Net Asset Value of $1.008 per share. The Pools carried weighted average credit ratings of AAA. The City’s investment in their own Special Improvement District bonds have no credit rating. 48 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 The City’s investments at June 30, 2015 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 Agricultural Mortgage Corp. Tennessee Valley Authority Corporate Notes Apple, Inc. Bank of New York Mellon Inc. Cisco Systems Inc. General Electric Co. American Honda Finance Corp. Pepsico Inc. Texas Instruments Inc. Wells Fargo & Company City of Mesa Special Improvement District Bonds JP Morgan MMF Total $ Fair Value 140,230 Less Than 1 $ 6,585 1-2 $ More than 2 71,201 $ 62,444 41.39 % 31,681 *** - 16.21 18.68 9.53 2.88 0.80 54,908 63,291 32,293 9,753 2,698 16,773 9,753 - 54,908 14,837 32,293 2,698 4,949 4,997 2,810 4,900 5,001 986 4,940 4,625 - - 4,949 4,997 2,810 4,900 5,001 986 4,940 4,625 2,144 302 338,827 341 302 33,754 350 $ 176,287 1,453 128,786 $ ** * $ Concentration of Credit Risk % 1.46 1.47 0.82 1.45 1.48 0.29 1.46 1.37 0.62 0.09 100.00 % * $6,172 of these securities are callable on August 13, 2015 ** $2,173 of these securities are callable on August 27, 2015 ** $6,735 of these securities are callable on September 17, 2015 ** $6,738 of these securities are callable on March 24, 2016 *** $7,920 of these securities are callable on November 27, 2015 49 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 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 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 $ $ 261 121,418 43,600 9,596 87,331 338,827 601,033 (14,269) 586,764 (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, 2015 for debt service payments due to bondholders on July 1, 2015. Interest income from investments is recorded as revenue within the fund that made the investment, with the exception of the 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. 50 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 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 uncollectible accounts 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-Due from Other Governments Due from Other Governments Internal Service Funds Premiums Other Customers Due from Other Governments Total Governmental Activities Receivables $ $ Business-Type Activities: Utility Customers Other Customers Due from Other Governments Total Business-type Activities $ $ 51 12,034 5,084 4,994 Allowance $ Net (2,583) (2,478) $ 9,451 5,084 2,516 5,477 877 - 5,477 877 4,002 239 10,365 36 942 15,840 - 4,002 239 10,365 36 942 15,840 148 226 8 60,272 26,434 6,226 4,360 37,020 $ $ $ (5,061) (820) (1,438) (2,258) $ $ $ 148 226 8 55,211 25,614 4,788 4,360 34,762 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 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): Unearned Revenue Mesa Arts Center advanced ticket sales Grants received prior to meeting all eligibility requirements Amounts paid in advance General Fund $ 399 Non-Major Funds $ 36 180 579 1,813 8,236 10,085 $ General Fund $ 782 $ 782 Unavailable Revenue Receivables not yet collected Delinquent Property Taxes Special Assessments not yet due $ Non-Major Funds $ 151 468 10,364 $ 10,983 Unbilled Accounts Receivable Unbilled utility service receivables are recorded in the year in which the services are provided. At June 30, 2015, unbilled utility service receivables are recorded in the Enterprise Fund as follows (in thousands): Electric Gas Water Wastewater Solid Waste $ 946 918 4,583 2,478 1,872 $ 10,797 52 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 6. INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS The following advances are included in the fund financial statements at June 30, 2015 (in thousands): Fund General Fund Non-major Governmental Funds Total Governmental Funds Advances to Other Funds $ 1,788 $ 1,788 Advances from Other Funds $ 1,788 $ 1,788 The advances at June 30, 2015 are long-term loans to the Development Impact Fees fund to cover expenses which exceeded revenues received. The advances outstanding at June 30, 2015 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, 2015 (in thousands): Fund Governmental Funds: General Fund Non-major Governmental Funds Total Governmental Funds Proprietary Funds: Enterprise Fund Total Transfers Out Transfers In $ $ $ 30,286 15,038 45,324 97,235 142,559 $ 97,562 25,482 123,044 19,515 142,559 Transfers from business-type activities to governmental activities on the government-wide statement of activities include a $97,235,000 operational subsidy from the Enterprise Fund to the General Fund. In addition, there was a transfer from the governmental activities to the business-type activities related to sale of land proceeds. 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) to open new funds and/or close old funds. In addition to the cash transfers, the City had capital asset transfers out of the business-type activities to the governmental activities in the amount of $21,027,000 and capital asset transfers from the governmental activities to the business-type activities in the amount of $4,320,000. 53 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 7. CAPITAL ASSETS A summary of capital asset activity, for the government-wide financial statements, for the year ended June 30, 2015 follows (in thousands): 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 Balance July 1, 2014 Additions Retirements Transfers $ $ $ $ 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 51,023 16 88,280 139,319 (191,573) (191,573) (4,320) (4,320) 3,364 13,087 19,492 5,969 149,304 191,216 (95) (4,819) (236) (5,150) 15,670 1,588 3,769 21,027 (6,505) (8,690) (11,167) (4,402) (41,566) (72,330) 118,886 95 4,527 4,622 (528) 21,027 $ (192,101) $ 16,707 $ 258,205 Balance June 30, 2015 $ 348,421 3,308 56,961 408,690 325,289 171,521 182,070 23,249 1,075,277 1,777,406 (89,582) (97,971) (125,447) (7,431) (500,299) (820,730) 956,676 $ 1,365,366 Depreciation and Amortization expense was charged to governmental functions in the governmentwide 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 assets $ $ 54 10,994 12,052 8,884 39,983 417 72,330 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Balance July 1, 2014 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 54,167 17,560 106 234,995 306,828 $ 166 74,677 74,843 Retirements Transfers $ $ (190,593) (190,593) (21,027) (21,027) Balance June 30, 2015 $ 54,333 17,560 106 98,052 170,051 87,735 125,523 73,558 27,753 1,587,173 1,901,742 30 24,453 8,573 159,698 192,754 (4,721) (451) (5,172) 4,320 4,320 87,765 149,976 77,410 27,753 1,750,740 2,093,644 (23,480) (44,853) (38,445) (18,711) (654,256) (779,745) 1,121,997 (1,814) (4,920) (6,530) (1,244) (52,914) (67,422) 125,332 4,721 395 5,116 (56) 4,320 (25,294) (49,773) (40,254) (19,955) (706,775) (842,051) 1,251,593 $ 1,428,825 $ 200,175 $ (190,649) $ (16,707) $ 1,421,644 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 Stadium District Cooling $ $ 55 3,934 4,991 27,429 21,766 1,505 1,460 454 237 916 4,261 469 67,422 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 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 $ $ 507 6,020 2,475 47,860 99 56,961 Construction in Progress Business-type Activities Electric Gas Water Wastewater Solid Waste Airport Golf Course Convention Center Spring Training District Cooling Total $ $ 9,002 10,471 46,723 17,083 6,000 4,645 129 342 3,618 39 98,052 Commitments $ $ 40 12,081 12,121 Commitments $ $ 239 159 14,810 5,900 51 1,865 60 595 6 23,685 For the year ended June 30, 2015, the City capitalized net interest costs of $4,327,017. Total interest expense in the Business-type Activities Enterprise Fund before capitalization was $50,435,293. 56 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 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 Reductions $ 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 $ 344,040 107,705 $ 13,690 17,555 3,574 5,897 461,216 72 77,835 18,720 352,905 26,095 $ 936,843 5,309 36,554 2,952 43,913 22,712 $106,131 $ 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 $ 991,995 605 94,060 1,086,660 2,244 25,329 70,095 3,907 $1,188,235 $133,165 133,165 300 6,836 3,505 $143,806 Ending Balances Amounts Due Within One Year (21,014) (24,975) $ 336,716 100,285 $ (744) (232) (46,965) (72) (3,296) (14,818) (22,232) (87,383) 2,830 10,974 450,805 77,835 18,376 382,000 26,575 $ 955,591 745 235 32,226 77,835 3,089 $ 113,150 $ (117,705) (131) (117,836) (128) (3,108) (2,306) (3,474) $ (126,852) $1,007,455 474 94,060 1,101,989 2,116 22,521 74,625 3,938 $1,205,189 $ $ 23,856 7,390 24,800 84 24,884 131 403 25,418 Internal service funds predominantly serve the governmental funds. Accordingly, long-term liabilities for internal service funds are included as part of the above totals for governmental activities. At year-end, $10,281,000 of internal service funds post-employment benefits and compensated absences are included in the above amounts. For governmental activities, post-employment benefits and compensated absences are generally liquidated by the general fund. 57 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 b. Bonds Payable At June 30, 2015, long-term bonds payable consisted of: Classified in Governmental Activities on the government-wide financial statements: General Obligation Bonds Bonds Outstanding (In Thousands) $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. $ 45,918 $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. 1,000 $9,710,000 2006 general obligation serial bonds, due in annual installments ranging from $135,000 to $4,225,000, plus semi-annual interest ranging from 4.40 percent to 5.0 percent through July 1, 2025. 9,275 $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. 43,745 $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 $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. 25,075 $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. 24,725 $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. 15,803 58 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 $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. $ 8,855 $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. 56,425 $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. 31,975 $13,690,000 2015 general obligation serial bonds due in annual installments ranging from $250,000 to $6,700,000, plus semi-annual interest ranging from 2 percent to 5 percent through July 1, 2035. 13,690 Total General Obligation Bonds $ 336,716 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. $ 2,255 $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. 975 $17,760,000 2004 street and highway user revenue refunding bonds, due in annual installments ranging from $20,000 to $7,250,000, plus semiannual interest ranging from 3.5 percent to 5.0 percent through July 1, 2018. 15,320 $23,800,000 2005 street and highway user revenue refunding bonds, due in annual principal installments ranging from $25,000 to $8,000,000, plus semi-annual interest ranging from 2.75 percent to 5.0 percent through July 1, 2023. 23,750 $10,225,000 2005 street and highway user revenue bonds, due in annual principal installments ranging from $50,000 to $8,500,000, plus semiannual interest ranging from 4.0 percent to 5.0 percent through July 1, 2023. 1,075 59 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 $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, 2024. $ 1,825 $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 semiannual interest ranging from 4.25 percent to 5.0 percent through July 1, 2025. 3,000 $36,090,000 2012 street and highway user revenue refunding bonds, due in annual installments ranging from $665,000 to $9,700,000, plus semiannual interest ranging from 3.0 percent to 5.0 percent through July 1, 2022. 26,030 $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 $17,555,000 2015 street and highway user revenue refunding bonds, due in annual installments ranging from $15,000 to $9,880,000 plus semiannual interest of 3 to 5 percent through July 1, 2027. 17,555 Total Street and Highway User Revenue Bonds $ 100,285 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 2,010 820 $ 2,830 $ 2,567 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. 60 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 $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. $ 3,185 $3,367,000 2014 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) Assessment District No. 2 Special Assessment Revenue Bonds, due in annual principle installments ranging from $85,000 to $225,000, plus semi-annual interest ranging from 2 percent to 5.375 percent through July 1, 2039. 3,280 $1,942,000 2015 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) Assessment District No. 3 Special Assessment Revenue Bonds, due in annual principle installments ranging from $52,000 to $135,000, plus semi-annual interest ranging from 2.3 percent to 5.2 percent through July 1, 2039. 1,942 Total Community Facilities District Bonds $ 10,974 Total bonds payable recorded in governmental activities $ 450,805 Classified in Business-type Activities on the government-wide financial statements: General Obligation Bonds $214,700 2004 general obligation refunding serial bonds, due in annual principal installments ranging from $34,839 to $31,852,800, plus semiannual interest ranging from 2.4 percent to 5.0 percent through July 1, 2016. $ $516,840 2012 general obligation refunding serial bonds, due in annual principal installments ranging from $15,399 to $269,748, plus semiannual interest ranging from 2 percent to 4 percent through July 1, 2022. Total General Obligation Bonds 212 262 $ 474 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 semiannual interest ranging from 4.25 percent to 5.75 percent through July 1, 2017. 61 $ 2,000 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 $129,000,000 2002 utility systems revenue refunding serial bonds, (partially refunded by 2012 and 2012 taxable utility systems revenue refunding bonds) due in annual principal installments ranging from $65,000 to $29,550,000, plus semi-annual interest ranging from 3.40 percent to 5.25 percent through July 1, 2017. $ 20,465 $50,470,000 2003 utility systems revenue serial bonds, (partially refunded by 2006 (Series 2) and series 2012 utility systems revenue refunding bonds), due in annual principal installments ranging from $970,000 to $25,500,000, plus semi-annual interest ranging from 3.50 percent to 5.00 percent through July 1, 2019. 4,000 $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 semiannual interest ranging from 5.00 percent to 6.00 percent through July 1, 2022. 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. 40,280 $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, 2023. 13,500 $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. 51,180 $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 semi-annual interest ranging from 4.0 percent to 5.25 percent through July 1, 2028. 126,835 $65,550,000 2007 utility systems revenue serial bonds, due in annual principal installments ranging from $2,500,000 to $41,800,000, plus semiannual interest ranging from 4.25 percent to 6.25 percent through July 1, 2031. 65,550 62 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 $52,875,000 2008 utility systems revenue serial bonds, due in annual principal installments ranging from $700,000 to $44,675,000, plus semiannual 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. 6,325 $59,900,000 2009 utility systems revenue serial bonds, due in annual principal installments ranging from $900,000 to $48,250,000, plus semiannual 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 semi-annual 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 $102,945,000 2014 utility systems revenue refunding serial bonds, due in annual principal installments ranging from $475,000 to $22,955,000, plus semi-annual interest ranging from 2 percent to 4 percent through July 1, 2030. 102,945 63 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 $30,220,000 2015 utility systems revenue bonds, due in principal installments ranging from $1,000,000 to $2,375,000, plus semi-annual interest of 2 percent to 5 percent through July 1, 2039. $ 30,220 Total Utility Systems Revenue Bonds $ 1,007,455 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 $ 1,101,989 94,060 The following tables summarize the City’s debt service requirements to maturity for its long term bonds payable at June 30, 2015 (in thousands). The deferred amounts on refundings are not included. Governmental Activities General Obligation Bonds Fiscal Year 2016 2017 2018 2019 2020 2021-25 2026-30 2031-35 TOTALS $ $ Principal 23,856 18,173 42,039 13,681 14,222 81,205 95,200 48,340 336,716 $ $ Interest 13,607 12,725 11,961 10,054 9,550 38,745 20,330 3,099 120,071 $ Highway User Revenue Bonds Total 37,463 30,898 54,000 23,735 23,772 119,950 115,530 51,439 Fiscal Year 2016 2017 2018 2019 2020 2021-25 2026-30 2031-35 456,787 TOTALS $ $ $ Special Assessment Bonds Fiscal Year 2016 2017 2018 2019 2020 2021-25 2026-30 2031-35 2036-39 TOTALS Interest $ 138 98 68 48 29 10 - Total $ 883 843 403 383 364 345 - $ $ $ 391 100,285 $ $ Interest 4,844 4,473 4,080 3,663 3,243 9,020 500 29,823 $ Total 12,234 12,373 12,455 12,378 12,398 60,110 8,160 - $ 130,108 Community Facilities District Principal $ 745 745 335 335 335 335 2,830 Principal 7,390 7,900 8,375 8,715 9,155 51,090 7,660 - Fiscal Year 2016 2017 2018 2019 2020 2021-25 2026-30 2031-35 2036-39 3,221 TOTALS 64 Principal $ 235 291 299 309 324 1,820 2,280 2,914 2,502 Interest $ 542 514 506 497 486 2,219 1,756 1,123 303 $ $ 10,974 7,946 Total $ 777 805 805 806 810 4,039 4,036 4,037 2,805 $ 18,920 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Business-type Activities General Obligation Bonds Fiscal Year 2016 2017 2018 2019 2020 2021-25 2026-30 2031-35 2036-39 TOTALS Principal $ 84 67 181 34 33 75 - $ 474 $ Interest 18 16 13 5 4 5 - $ 61 $ Revenue Bonds Total 102 83 194 39 37 80 - $ Fiscal Year 2016 2017 2018 2019 2020 2021-25 2026-30 2031-35 2036-39 535 TOTALS $ Principal 24,800 26,070 32,355 35,535 31,810 183,615 229,385 286,115 157,770 $ 1,007,455 $ $ Interest 46,797 45,500 44,312 42,752 40,987 180,310 134,611 78,962 10,496 624,727 $ Total 71,597 71,570 76,667 78,287 72,797 363,925 363,996 365,077 168,266 $ 1,632,182 Excise Tax Revenue Obligations Fiscal Year 2016 2017 2018 2019 2020 2021-25 2026-30 2031-35 TOTALS Principal $ 28,535 44,470 21,055 $ 94,060 $ Interest 4,703 4,703 4,703 4,703 4,703 21,462 12,151 1,592 $ 58,720 $ $ Total 4,703 4,703 4,703 4,703 4,703 49,997 56,621 22,647 152,780 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, 2015, 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, 2015 are $2,830,000. 65 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 General Obligation Bonds The general obligation bonds are backed by the ultimate taxing power and general revenues of the City; however, $474,058 of these bonds at June 30, 2015 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, 2015 is (in thousands): 6% Bonds 20% Bonds Total Available $ 167,995 220,865 $ 388,860 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, 2015, the amount provided in the Replacement and Extension Funds equaled $23,394,647 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, 2015, $122,835,000 has been repaid to the City by ADOT, and the City has paid $45,000,000 of HPAN notes. The remaining $77,835,000 in HPAN notes were paid by the City subsequent to June 30, 2015. 66 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 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, 2015 (in thousands): Governmental Activities Fiscal Year 2016 2017 2018 2019 2020 2021-25 2026-30 TOTALS Principal 77,835 $ 77,835 $ Interest 324 $ 324 $ $ $ Total 78,159 78,159 Business-type Activities Interest Principal & Fees $ 131 $ 46 134 44 137 41 140 38 143 35 764 124 667 37 $ 2,116 $ 365 Total 177 178 178 178 178 888 704 $ 2,481 $ e. Short-term Debt The City had no short-term debt activity for the fiscal year ended June 30, 2015. f. 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 an aircraft maintenance repair and overhaul facility at Phoenix-Mesa Gateway Airport. In general, the MOU addresses PMGAA issuing Special Facility Revenue Bonds, constructing the facility and leasing the facility to the City. The City, in turn, will sublease the facility to Able Engineering. The City pledged a portion of its excise taxes as security for payment of the base rent. The pledge of such excise taxes will be a junior lien subordinate to certain outstanding senior obligations. The bonds are payable from the future revenues from the City through 2038. During that time frame total principal and interest to be paid on the bonds will be $35,216,300. The bonds are not considered the debt of the City. 67 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 g. Pledged Revenues I. Utility System Revenue Bonds The City has pledged future utility customer revenues, net of specified operating expenses, to repay approximately $2.0 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 35.6 percent of net revenues. The total principal and interest remaining to be paid on the bonds is $1.632 billion. Principal and interest paid for the current year and total customer net revenues were $67,555,817 and $161,457,000, respectively. 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 33.3 percent of eligible revenues. The total principal and interest remaining to be paid on the bonds is $130,107,688. Principal and interest paid for the current year and total highway user tax revenues were $11,287,851 and $33,902,652, 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 $3,220,740. Principal and interest paid for the current year and total assessments collected were $921,520, and $825,741, respectively 9. REFUNDED, REFINANCED AND DEFEASED OBLIGATIONS On October 15, 2014, the City issued $102,945,000 of utility revenue bonds with an original issue discount of $1,113,783 to advance refund $95,845,000 of outstanding utility revenue bonds. The refunding bonds were issued with an interest rate ranging from 2.0 to 4.0 percent. Net proceeds in the amount of $101,620,904 (after payment of $210,007 in underwriters’ fees and deposit of $306 to the City’s bond fund) were provided to a refunding escrow agent to pay issuance costs of $325,000 for insurance premiums, underwriting fees and other issuance costs with the remaining $101,295,904 used to provide cash and purchase United States Government securities. The cash and securities were deposited in an irrevocable trust to provide for all future debt service payments of the refunded bonds. As a result, the refunded bonds are considered to be defeased and the liability for those bonds has been removed from the debt of the City. 68 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 The advanced refunding resulted in a difference between the reacquisition price and the net carrying amount of the old debt of $6,564,993. This difference, reported in the accompanying financial statements as a deduction from general obligation bonds payable, is being charged to operations through the year 2030 using the effective interest method. The purpose of the refunding was to take advantage of lower interest rates and restructuring debt service payments to achieve a more level debt retirement schedule. The refunding will decrease debt service payments by $5,429,551 over the next 16 years producing an economic gain (difference between the present value of old and new debt service payments) of $5,309,149. On May 18, 2015, the City issued $17,555,000 of highway user revenue bonds with an original issue premium of $2,855,942 to advance refund $18,670,000 of outstanding highway user revenue bonds. The refunding bonds were issued with an interest rate ranging from 3.0 to 5.0 percent. Net proceeds of $20,232,622 (after payment of $60,110 in underwriters’ fees and a deposit of $178,321 to the City’s bond fund) were provided to a refunding escrow agent to pay issuance costs of $175,110 for insurance premiums, underwriting fees and other issuance costs with the remaining $20,057,512 used to provide cash and purchase United States Government securities. The cash and securities were deposited in an irrevocable trust to provide for all future debt service payments of the refunded bonds. As a result, the refunded bonds are considered to be defeased and the liability for those bonds has been removed from the debt of the City. The advanced refunding resulted in a difference between the reacquisition price and the net carrying amount of the old debt of $1,387,512. This difference, reported in the accompanying financial statements as a deduction from highway user revenue bonds payable, is being charged to operations through the year 2027 using the effective interest method. The purpose of the refunding was to take advantage of lower interest rates and restructuring debt service payments to achieve a more level debt retirement schedule. The refunding will decrease debt service payments by $1,619,686 over the next 12 years producing an economic gain (difference between the present value of old and new debt service payments) of $1,755,108. 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. 69 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 In accordance with GASB Statement No. 7, the refunded debt outstanding at June 30, 2015 as reflected below is not included in the City’s financial statements (in thousands). Utility System Revenue Bond Issue dated February 1, 2002 Street and Highway User Revenue Bond Issue dated February 1, 2003 Utility System Revenue Bond Issue dated June 1, 2006 $ 29,650 195 54,220 Street and Highway User Revenue Bond Issue dated June 1, 2006 9,850 Street and Highway User Revenue Bond Issue dated May 1, 2007 7,675 Total Refunded Bonds Outstanding $ 101,590 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 selfinsurance 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, 2015. Over the past three fiscal years the Fund has received settlements in excess of insurance coverage of $659,613 with $26,765 received this current fiscal year. The Property and Public Liability Fund does not have a stop loss receivable at June 30, 2015, 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, 2015. Over the past three fiscal years the Fund has received settlements in excess of insurance coverage of $2,496,330 with $457,365 received this current fiscal year. The various funds of the City include, as expenditures, amounts contributed to each of the selfinsurance 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 a third-party claims processing company. 70 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Changes in the balances of claims liabilities during the past two fiscal years are as follows (in thousands): Property & Public Workers' Employee Liability Compensation Benefits Total Unpaid Claims, 6/30/13 Adjustments to Reserves-FY 13-14 Claim Payments-FY 13-14 $ 13,366 (486) (3,299) $ 21,707 4,186 (3,086) $ 3,846 53,014 (52,191) $ 38,919 56,714 (58,576) Unpaid Claims, 6/30/14 $ 9,581 $ 22,807 $ 4,669 $ 37,057 Adjustments to Reserves-FY 14-15 Claim Payments-FY 14-15 $ $ 3,976 (3,118) $ 54,894 (56,825) $ 59,549 (60,579) Unpaid Claims, 6/30/15 $ $ 23,665 $ 2,738 $ 36,027 679 (636) 9,624 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. 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 leave payable 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, 2015, is $10,673,973. 71 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 12. NET POSITION a. Restricted Net Position The government-wide statement of net position reports $119.7 million of restricted net position, of which $52.0 million 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 Worker’s Compensation Self-Insurance Fund consists of prior years’ deficit where 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 and Property and Public Liability Fund were a result of other post-employment benefit charges and pension expense. 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, 2015 for these services are as follows (in thousands): Functions Electric Gas Water Wastewater Solid Waste Airport Golf Course Convention Center Hohokam /Fitch Complex Cubs Stadium District Cooling Total Operating Revenues $ 33,601 39,422 116,158 69,906 52,419 3,454 1,737 2,475 2 202 1,274 $ 320,650 Operating Expenses Depreciation and Other Amortization $ 3,934 $ 23,412 4,991 23,219 27,429 45,462 21,766 24,027 1,505 35,333 1,460 1,498 454 1,743 237 3,480 916 1,083 4,261 4,352 469 416 $ 67,422 $ 164,025 72 Operating Income (Loss) $ 6,255 11,212 43,267 24,113 15,581 496 (460) (1,242) (1,997) (8,411) 389 $ 89,203 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 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. The City's investment in these Joint Ventures as of June 30, 2015 is as follows (in thousands): Valley Metro Rail Inc. TOPAZ Regional Wireless Cooperative Subregional Operating Group Val Vista Water Treatment Plant Greenfield Water Reclamation Plant Joint Ventures Construction Deposits Total Investment in Joint Ventures Governmental Activities $ 150,600 2,457 $ 153,057 Business-Type Activities $ 89,959 52,947 59,226 4,206 $ 206,338 Total 150,600 2,457 89,959 52,947 59,226 4,206 $ 359,395 $ 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 $1,216,628,317 has been spent on this project through the fiscal year ended June 30, 2015, of which the City’s share and equity interest is $150,599,778. The City has received and accrued $58.8 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 opened on August 22, 2015. The total capital cost of $199.0 million was 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. 73 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 TOPAZ Regional Wireless Cooperative The City of Mesa currently participates with the City of Apache Junction, Superstition Fire and Medical, 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 (TOPAZ). 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 $2,457,466 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, 2015 is (in thousands): City of Mesa Town of Gilbert City of Apache Junction Superstition Fire and Medical Town of Queen Creek Rio Verde Fire District Total Joint Venture $ 2,457 543 196 36 21 6 $ 3,259 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 $89,959,452 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. 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. An expansion of the plant is expected to be completed in 2020. 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. 74 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Total investment in the joint venture as of June 30, 2015 is (in thousands): Mesa’s Share Gilbert’s Share Queen Creek’s Share Total Joint Venture $ 59,226 56,222 25,039 $ 140,487 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 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 $52,947,151 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. 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 and the Mayor and City Council Members, 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. The Mayor and City Council Members contribute to the State’s Elected Officials Retirement Plan that is also a multiple-employer cost-sharing pension plan. At June 30, 2015, the City reported the following aggregate amounts related to pensions for all plans to which it contributes (in thousands): Statement of Net Position and Statement of Activities Net Pension Liabilities Deferred Outflows of Resources Deferred Inflows of Resources Pension Expense Governmental Activities $ 603,333 115,762 72,554 62,962 Business-Type Activities $ 45,382 5,320 9,083 2,488 Total $ 648,715 121,082 81,637 65,450 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 (“A.R.S.”). ASRS provides for retirement, disability, and death and survivor benefits. ASRS issues a publicly available 75 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 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. b. Benefits Provided The ASRS provides retirement, health insurance premium supplement, long-term disability, and survivor benefits. State statute establishes benefit terms. Retirement benefits are calculated on the basis of age, average monthly compensation, and service credit as follows: Years of service and age required to receive benefit Final average salary is based on Benefit percentage per year of service Retirement Initial Membership Date: Before On or After July 1, 2011 July 1, 2011 Sum of years and age equals 80 30 years age 55 10 years age 62 25 years age 60 5 years age 50* 10 years age 62 any years age 65 5 years age 50* any years age 65 Highest 36 consecutive months of last 120 months Highest 60 consecutive months of last 120 months 2.1% to 2.3 % 2.1% to 2.3 % * With actuarially reduced benefits. Retirement benefits for members who joined the ASRS prior to September 13, 2013, are subject to automatic cost-of-living adjustments based on excess investment earnings. Members with a membership date on or after September 13, 2013, are not eligible for cost-of-living adjustments. Survivor benefits are payable upon a member’s death. For retired members, the survivor benefit is determined by the retirement benefit option chosen. For all other members, the beneficiary is entitled to the member’s account balance that includes the member’s contributions and employer’s contributions, plus interest earned. c. Contributions The 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. The combined active member and employer contribution rates are expected to finance the costs of benefits employees earn during the year, with an additional amount to finance any unfunded accrued liability. For the year ended June 30, 2015, covered employees were required by state statute to contribute at the actuarially determined rate of 11.60 percent (11.48 pension plus 0.12 long-term disability) of the members’ annual covered payroll, and the City was required by statute to contribute at the actuarially determined rate of 11.60 percent (10.89 percent for retirement, 0.59 percent for the health insurance premium benefit, and 0.12 percent for long-term disability) of the active members’ annual covered payroll. 76 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 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, 2015 was 9.57 percent. The City’s ACR contributions to the System for the year ending June 30, 2015 were $103,843. d. Pension Liability At June 30, 2015, the City reported a liability of $241,791,760 for its proportionate share of the ASRS’ net pension liability. The net pension liability was measured as of June 30, 2014. The total pension liability used to calculate the net pension liability was determined using update procedures to roll forward the total pension liability from an actuarial valuation as of June 30, 2013, to the measurement date of June 30, 2014. The City’s reported liability at June 30, 2015, decreased by $38,614,708 from the City’s prior year liability of $280,406,468 because of changes in the ASRS’ net pension liability and the City’s proportionate share of that liability. The ASRS’ publicly available financial report provides details on the change in the net pension liability. The City’s proportion of the net pension liability was based on the City’s fiscal year 2014 contributions. The City’s proportion measured as of June 30, 2014, was 1.634103 percent, which was a decrease of 0.052619 from its proportion measured as of June 30, 2013. e. Pension Expense and Deferred Outflows/Inflows of Resources For the year ended June 30, 2015, the City recognized pension expense for ASRS of $13,253,255. At June 30, 2015, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources (in thousands): Differences between expected and actual experience Net difference between projected and actual earnings on pension plan investments Changes in proportion and differences between City contributions and proportionate share of contributions City contributions subsequent to the measurement date Total 77 Deferred Outflows of Resources $ 12,289 $ Deferred Inflows of Resources $ - - 42,282 16,146 28,435 6,113 48,395 $ (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 The $16,146,572 reported as deferred outflows of resources related to ASRS pensions resulting from City contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2016. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to ASRS pensions will be recognized in pension expense as follows (in thousands): Year Ended June 30, 2016 $ (7,886) 2017 (7,886) 2018 (9,765) 2019 (10,569) 2020 Thereafter $ (36,106) f. Actuarial Assumptions The significant actuarial assumptions used to measure the total pension liability are as follows: Actuarial Valuation Date Actuarial Roll Forward Date Actuarial Cost Method Investment Rate of Return Projected Salary Increases Inflation Permanent Benefit Increase Mortality Rates June 30, 2013 June 30, 2014 Entry Age Normal 8% 3 - 6.75% 3% Included 1994 GAM Scale BB Actuarial assumptions used in the June 30, 2013 valuation were based on the results of an actuarial study for the 5-year period ended June 30, 2012. The long-term expected rate of return on ASRS pension plan investments was determined to be 8.79 percent using a building block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighing the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Asset Class Equity Fixed Income Real Estate Commodities Total Target Allocation 63% 25% 8% 4% 100% 78 Long-Term Expected Real Rate of Return 7.03% 3.20% 4.75% 4.50% (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 g. Discount Rate The discount rate used to measure the ASRS total pension liability was 8 percent, which is less than the long-term expected rate of return of 8.79 percent. The projection of cash flows used to determine the discount rate assumed that contributions from participating employers will be made based on the actuarially determined rates based on the ASRS Board’s funding policy, which establishes the contractually required rate under Arizona statutes. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. h. Sensitivity of the City’s Proportionate Share of the ASRS Net Pension Liability to Changes in the Discount Rate The following table presents the City’s proportionate share of the net pension liability calculated using the discount rate of 8 percent, as well as what the City’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower (7 percent) or 1 percentage point higher (9 percent) than the current rate (in thousands): City's proportionate share of the net pension liability i. 1% Decrease 7% Current Discount Rate 8% 1% Increase 9% $ 305,612 $ $ 207,166 241,792 Pension Plan Fiduciary Net Position Detailed information about the pension plan’s fiduciary net position is available in the separately issued ASRS financial report. Public Safety Personnel Retirement System: a. Plan Description The City contributes to the Public Safety Personnel Retirement System (“PSPRS”), an agent multiple-employer public safety employee retirement system that acts as a common investment and administrative agent for the various 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. 79 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 b. Benefits Provided The PSPRS provide retirement, health insurance premium supplement, disability, and survivor benefits. State statute establishes benefits terms. Retirement, disability, and survivor benefits are calculated on the basis of age, average monthly compensation, and service credit as follows: Initial Membership Date: Before January 1, 2012 Retirement and Disability Years of service and age required to receive benefit Final average salary is based on Benefit percentage Normal Retirement Accidental Disability Retirement On or after January 1, 2012 20 years any age 15 years age 62 25 years age of 52.5 Highest 36 consecutive months of last 20 years Highest 60 consecutive months of last 20 years 50% less 2.0% for each year of credited service less than 20 years OR plus 2.0% to 2.5% for each year of credited service, not to exceed 80% 2.5% for each year of credited service not to exceed 80% 50% or normal retirement, whichever is greater Catastrophic Disability Retirement 90% for the first 60 months then reduced to either 62.5% or normal retirement, whichever is greater Ordinary Disability Retirement Normal retirement calculated with actual years of credited service or 20 years of credited service, whichever is greater, multiplied by years of credited service (not to exceed 20 years) divided by 20 Survivor Benefit Retired Members Active Members 80% to 100% of retired member's pension benefit 80% to 100% of accidental disability retirement benefit or 100% of average monthly compensation if death was the result of injuries received on the job Retirement and survivor benefits are subject to automatic cost-of-living adjustments based on excess investment earning. PSPRS also provides temporary disability benefits of 50 percent of the member’s compensation for up to 12 months. 80 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 c. Employees Covered by Benefit Terms At June 30, 2015, the following employees were covered by the agent pension plans’ benefit terms: Inactive employees or beneficiaries currently receiving benefits Inactive employees entitled to but not yet receiving benefits Active employees Total PSPRS Firefighters 207 53 360 620 PSPRS Police 444 105 722 1,271 d. Contributions 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 11.05 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, 2015 were 32.59 percent (30.99 pension plus 1.60 health care), for fire personnel and 33.07 percent (31.26 pension plus 1.81 health care) for police members. e. Annual Pension Contributions Fire personnel contributed $3,567,975 ($3,492,231 regular members plus $75,744 DROP members) and police personnel contributed $7,095,849 ($6,926,574 regular members plus $169,275 DROP members) during fiscal year 2014-2015. For 2015, the City’s annual pension cost of $10,299,545 ($9,794,140 pension, $505,667 health care) for fire and $20,724,742 ($19,592,917 pension, $1,134,459 health care) for police was equal to the City’s required and actual contributions for the pension cost 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, 2015 was 19.65 percent for both fire and police. The City’s ACR contributions for the year ending June 30, 2015 were $32,681 for fire and $54,230 for police. 81 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 f. Pension Expense and Deferred Outflows/Inflows of Resources For the year ended June 30, 2015, the City recognized pension expense of $16,840,086 and $35,210,813 for fire and police, respectively. At June 30, 2015, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources (in thousands): Deferred Deferred Outflows of Inflows of Fire Resources Resources Differences between expected and actual experience $ $ 5,993 Changes in assumptions 19,885 Net difference between projected and actual earnings on pension plan investments 6,617 City contributions subsequent to the measurement date 9,827 Total $ 29,712 $ 12,610 Police Differences between expected and actual experience Changes in assumptions Net difference between projected and actual earnings on pension plan investments City contributions subsequent to the measurement date Total Deferred Outflows of Resources $ 42,851 Deferred Inflows of Resources $ 9,479 - 19,647 62,498 11,126 20,605 $ $ The amounts reported as deferred outflows of resources related to pensions resulting from City contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability (or an increase in the net pension asset) in the year ended June 30, 2016. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows (in thousands): Year Ending June 30, 2016 2017 2018 2019 2020 Thereafter $ $ Fire 590 590 590 590 2,244 2,671 7,275 Police $ 3,742 3,742 3,742 3,742 6,523 755 $ 22,246 82 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 g. Pension Liability At June 30, 2015, the City reported net pension liabilities of $137,717,311 and $267,799,828 for fire and police, respectively. The net pension liabilities were measured as of June 30, 2014, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. h. Pension Actuarial Methods and Assumptions The significant actuarial assumptions used to measure the total pension liability are as follows: Actuarial Valuation Date Actuarial Cost Method Investment Rate of Return Projected Salary Increases Inflation Permanent Benefit Increase Mortality Rates June 30, 2014 Entry Age Normal 7.85% 4% - 8% including inflation 3.0% - 4.0% Included RP-2000 mortality table (adjusted by 105% for both males and females) Actuarial assumptions used in the June 30, 2014, valuation were based on the results of an actuarial experience study for the 5-year period ended June 30, 2012. The long-term expected rate of return on pension plan investments was determined using a building-block method in which expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These real rates of return are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. For each major asset class that is included in the pension plan’s target asset allocation as of June 30, 2014, these best estimates are summarized in the following table: Asset Class Short Term Investments Absolute Return Risk Parity Fixed Income Real Assets GTAA Private Equity Real Estate Credit Opportunities Non-U.S. Equity U.S. Equity Total 83 Target Allocation 2% 4% 4% 7% 8% 10% 11% 11% 13% 14% 16% 100% Long-Term Expected Real Rate of Return 3.25% 6.75% 6.04% 4.75% 5.96% 5.73% 9.50% 6.50% 8.00% 8.63% 7.60% (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 i. Discount Rate A discount rate of 7.85% was used to measure the total pension liability. This discount rate was based on the expected rate of return on pension plan investments of 7.85%. The projection of cash flows used to determine this discount rate assumed that plan member contributions will be made at the current contribution rate and that employer contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on these assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. j. Changes in the Agent Plans Net Pension Liability The following tables present changes in the City’s net pension liability for the PSPRS – Fire and Police pension plans as follows (in thousands): Fire Balance at June 30, 2014 Changes for the Year: Service Cost Interest on the Total Pension Liability Changes of Benefit Terms Differences Between Expected and Actual Experience in the Measurement of the Liability Changes of Assumptions or Other Inputs Contributions - Employer Contributions - Employee Net Investment Income Benefit Payments, Including Refunds of Employee Contributions Administrative Expenses Other Changes Net Changes Balances as of June 30, 2015 84 Total Pension Liability $ 268,821 $ Plan Fiduciary Net Position $ 146,061 6,281 20,708 4,044 - (6,961) 23,097 - 9,157 3,488 19,840 (16,309) 30,860 299,681 (16,309) (160) (113) 15,903 161,964 $ Net Position Liability $ 122,760 6,281 20,708 4,044 (6,961) 23,097 (9,157) (3,488) (19,840) 160 113 14,957 $ 137,717 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Police Balance at June 30, 2014 Changes for the Year: Service Cost Interest on the Total Pension Liability Changes of Benefit Terms Differences Between Expected and Actual Experience in the Measurement of the Liability Changes of Assumptions or Other Inputs Contributions - Employer Contributions - Employee Net Investment Income Benefit Payments, Including Refunds of Employee Contributions Administrative Expenses Other Changes Net Changes Balances as of June 30, 2015 Total Pension Liability $ 472,691 $ Plan Fiduciary Net Position $ 244,906 12,481 36,514 8,728 - (11,331) 51,228 - 17,443 6,784 33,360 (27,566) 70,054 542,745 (27,566) (269) 288 30,040 274,946 $ Net Position Liability $ 227,785 12,481 36,514 8,728 (11,331) 51,228 (17,443) (6,784) (33,360) 269 (288) 40,014 $ 267,799 k. Sensitivity of the City’s Net Pension Liability to Changes in the Discount Rate The following table presents the City’s net pension liabilities calculated using the discount rates noted above, as well as what the City’s net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower or 1 percentage point higher than the current rate (in thousands): Current 1% Decrease Discount Rate 1% Increase 6.85% 7.85% 8.85% Fire Net Pension Liability $ 172,763 $ 137,717 $ 108,372 Police Net Pension Liability 335,983 267,800 211,242 l. Annual Other Post-Employment Benefits Cost (Health Insurance Subsidy) For 2015 the City’s annual Other Post-Employment Benefits (OPEB) cost of $541,790 for fire and $1,187,849 for police was equal to the City’s required contributions. 85 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Funded Status and Funding Progress The funded status of the Health Insurance Subsidy plans as of June 30, 2015 (Latest actuarial date available) is as follows (in thousands): 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 Fire 7,702 7,727 $ (25) 100% $ 31,661 0.00% $ Police 17,283 10,724 $ 6,559 62% $ 62,461 10.50% $ 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 2015 and the two preceding years were as follows (in thousands): Fire Fiscal Year Ending 2013 2014 2015 Police Fiscal Year Ending 2013 2014 2015 Annual OPEB Cost $ 490 495 542 Percentage of Annual OPEB Cost Contributed 100% 100 100 Net OPEB Obligation $ - Annual OPEB Cost $ 1,105 1,083 1,188 Percentage of Annual OPEB Cost Contributed 100% 100 100 Net OPEB Obligation $ - 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 86 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 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. Benefits Provided The EORP provides retirement as well as death and disability benefits. State statute establishes benefit terms. Retirement benefits are calculated on the basis of age, average monthly compensation, and service credit as follows: Years of service and age required to receive benefit Retirement Initial Membership Date: Before On or After January 1, 2012 January 1, 2012 20 + years any age 20 + years any age 10 years age 62 10 years age 62 5 year age 65 5 year age 65 Final average salary is based on Highest 36 consecutive months of last 120 months Highest 60 consecutive months of last 120 months Benefit percentage Normal Retirement 4% for each year of credited service, not to exceed 80% 3% for each year of credited service, not to exceed 75% Permanent Benefit Increase Was receiving benefits on/before July 31 of two previous years Age 55 on July 1 and receiving benefits Was age 55 on July 1 and receiving benefits on/before July 1 of previous year Under age 55 on July 1 and was receiving accidental disability and receiving benefits on/before July 1 of previous year Survivor under 55 on July1, and receiving benefits on/before July 1 of previous two years Retirement and survivor benefits are subject to an automatic cost of living adjustment. c. Contributions 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 rate for the fiscal year ending June 30, 2015 was 23.5 percent, including healthcare. The City’s contribution to EORP for the fiscal year ending 87 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 June 30, 2015 was $50,084, which was equal to the required contribution for the year. The City’s employees contributed $27,705 for the same time period. d. Pension Liability At June 30, 2015, the City reported a liability of $1,406,265 for its proportionate share of the EORP net pension liability that reflected a reduction for the City’s proportionate share of the State’s appropriation for EORP. The amount the City recognized as its proportionate share of the net pension liability, the related state support, and the total portion of the net pension liability that was associated with the City were as follows (in thousands): City's proportation share of EORP net pension liability State's proportionate share of net pension liability associated with the City Total $ 1,406 $ 431 1,837 The net pension liability was measured as of June 30, 2014. The total pension liability used to calculate the net pension liability was determined using update procedures to roll forward the total pension liability from an actuarial valuation as of June 30, 2013, to the measurement date of June 30, 2014. The City’s reported liability at June 30, 2015, increased by $732,235 from the City’s prior year liability of $674,030 because of changes in the EORP net pension liability and the City’s proportionate share of that liability. The EORP publicly available financial report provides details on the change in the net pension liability. The City’s proportion of the net pension liability was based on the City’s contributions for fiscal year. The City’s proportion as of June 30, 2014, was 0.2097112 percent. e. Pension Expense and Deferred Outflows/Inflows of Resources For the year ended June 30, 2015, the City recognized pension expense for EORP of $544,638. At June 30, 2015, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources (in thousands): Differences between expected and actual experience Net difference between projected and actual earnings on pension plan investments Changes of assumptions City contributions subsequent to the measurement date Total 88 Deferred Outflows of Resources $ 6 Deferred Inflows of Resources $ - 381 50 437 27 27 $ $ (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 The $50,084 reported as deferred outflows of resources related to EORP pensions resulting from City contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2016. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to EORP pensions will be recognized in pension expense as follows (in thousands): Year Ended June 30, 2016 $ 217 2017 157 2018 (7) 2019 (7) 2020 Thereafter $ 360 f. Actuarial Assumptions The significant actuarial assumptions used to measure the total pension liability are as follows: Actuarial Assumptions Actuarial Valuation Date Actuarial Cost Method Investment Rate of Return Projected Salary Increases Payroll Growth Permanent Benefit Increase (PBI) PBI after July, 1, 2011 Mortality Rates June 30, 2014 Entry Age Normal 7.85% 4.25% 4.00% 3% of benefit 0.5% of benefit RP-2000 mortality table projected to 2025 (adjusted males and females) The long-term expected rate of return on EORP pension plan investments was determined to be 7.85 percent using a building block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. The target allocation and best estimates of geometric real rates of return for each major asset class are summarized in the following table: 89 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Asset Class Short Term Investments Absolute Return Risk Parity Fixed Income Real Assets GTAA Private Equity Real Estate Credit Opportunities Non-U.S. Equity U.S. Equity Total Target Allocation 2% 4% 4% 7% 8% 10% 11% 11% 13% 14% 16% 100% Long-Term Expected Real Rate of Return 0.07% 0.27% 0.24% 0.33% 0.48% 0.57% 1.05% 0.72% 1.04% 1.21% 1.22% g. Discount Rate A single discount rate of 5.67% was used to measure the total pension liability. This single discount rate was based on an expected rate of return on pension plan investments of 7.85% and a municipal bond rate of 4.29% (20‐year Bond Buyer Index as published by the Federal Reserve, as of June 26, 2014). The projection of cash flows used to determine this single discount rate assumed that plan member contributions will be made at the current contribution rate and that employer contributions will be made at rates set by statute and non‐employer contributions. Based on these assumptions, the pension plan’s fiduciary net position and future contributions were sufficient to finance the benefit payments through the year 2030. As a result, the long‐term expected rate of return on pension plan investments was applied to projected benefit payments through the year 2030, and the municipal bond rate was applied to all benefit payments after that date. h. Sensitivity of the City’s Proportionate Share of the EORP Net Pension Liability to Changes in the Discount Rate The following table presents the City’s proportionate share of the net pension liability calculated using the discount rate of 5.67 percent, as well as what the City’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower (4.67 percent) or 1 percentage point higher (6.67 percent) than the current rate (in thousands): 1% Decrease 4.67% City's proportionate share of the net pension liability $ 1,642 i. Current Discount Rate 5.67% 1% Increase 6.67% $ $ 1,207 1,406 Pension Plan Fiduciary Net Position Detailed information about the pension plan’s fiduciary net position is available in the separately issued EORP financial report. 90 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 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, 2015, approximately 1,700 former employees were eligible for these benefits. 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 2014-2015 was $33,625,000. A liability of $4,528,899 is accrued in the business-type activities financial statements; the remaining $29,096,101 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, and 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 91 1,700 2,996 4,696 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 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 retiree’s 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, 2015, the City contributed $17,125,397 to the plan (approximately 70.6 percent of total premiums). Plan members receiving benefits contributed $7,137,541 or approximately 29.4 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, 2015 (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 18,295 (23,884) 50,750 (17,125) 33,625 423,000 456,625 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, 2013 through 2015 were as follows: Fiscal Annual Year OPEB Ended Cost 2013 $ 83,569 2014 49,962 2015 50,750 Actual Contributions $ 14,677 16,011 17,125 92 Percentage of OPEB Cost Contributed 17.6% 32.0% 33.8% Net OPEB Obligation $ 389,049 423,000 456,625 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 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% $ 380,860 170.9% 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 shortterm volatility in actuarial accrued liabilities and the actuarial value of assets. Significant methods and assumptions used for this fiscal year valuation were as follows: Valuation Date Actuarial Cost Method Amortization method Remaining amortization period Asset Valuation Method Actuarial Assumptions: Discount rate Health care cost trend rate: • Medical, Drugs • • Dental, Mental Health, Vision Retiree contribution increase July 1, 2013 Entry age normal, level dollar amount 30 year amortization open 30 years N/A, no assets in trust 4.50% 8.5% in 2013-2014, grading down by 0.5% each year to an ultimate rate of 5.0% 5% Same as medical trend 93 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 17. SUBSEQUENT EVENTS On September 10, 2015, the District issued 2015 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) General Obligation Bonds in the amount of $6,800,000. These bonds are due in annual principal installments ranging from $165,000 to $680,000, plus semi-annual interest ranging from 4.15 percent to 5.01 percent through July 15, 2039. On November 5, 2015, the District issued 2015 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) Special Assessment District 4 Special Assessment Bonds in the amount of $970,000. These bonds are due in annual principal installments ranging from $15,000 to $65,000, plus semi-annual interest ranging from 2.4% percent to 4.5% percent through July 1, 2040. On August 1, 2015 the City called for the option redemption of $77,835,000 of Arizona Highway Projects Anticipation Notes, Series 2011, plus accumulated interest of $324,313. 18. RESTATEMENT OF BEGINNING NET POSITION For the fiscal year ending June 30, 2015, GASB Statement No. 68 Accounting and Financial Reporting for Pensions and GASB Statement No. 71 Pension Transition for Contributions Made Subsequent to the Measurement Date (the Statements) were implemented. The implementation of the statements resulted in the City recording pension liabilities related to the City’s three pension plans. The City’s government-wide net position, proprietary fund net position, and internal service fund net position as of June 30, 2014, have been restated as follows (in thousands): Governmental Governmental Business-type Activities Activities Activities Internal Service Net Position at 06/30/14, as Previously Reported $ 806,084 $ 615,445 $ 27,025 GASB Statement No. 68 adjustment (578,996) (52,629) (13,008) GASB Statement No. 71 adjustment 39,447 2,958 731 Net Position at 07/01/14, as Restated $ 266,535 94 $ 565,774 $ 14,748 (Concluded) Required Supplementary Information COMPREHENSIVE ANNUAL FINANCIAL REPORT 2015 CITY OF MESA, ARIZONA EXHIBIT B-1 REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF THE CITY'S PROPORTIONATE SHARE OF NET PENSION LIABILITY COST-SHARING PENSION PLANS JUNE 30, 2015 (in thousands) Arizona State Retirement System City's Proportion of the Net Pension Liability City's Proportionate Share of the Net Pension Liability $ City's Covered-Employee Payroll City's Proportionate Share of the Net Pension Liability as a Percentage of its Covered-Employee Payroll Plan Fiduciary Net Position as a Percentage of the Total Pension Liability $ Reporting Fiscal Year (Measurement Date) 2015 2014 through (2014) 2006 Information 1.634103% 241,792 not available 147,402 164.04% 69.49% Elected Officials Retirement Plan Reporting Fiscal Year (Measurement Date) 2015 2014 through (2014) 2006 Information 0.2097112% $ 1,406 not available City's Proportion of the Net Pension Liability City's Proportionate Share of the Net Pension Liability State's Proportionate Share of the Net Pension Liability Associated with the City Total City's Covered-Employee Payroll City's Proportionate Share of the Net Pension Liability as a Percentage of its Covered-Employee Payroll Plan Fiduciary Net Position as a Percentage of the Total Pension Liability $ 431 1,837 $ 151 1216.56% 31.91% See accompanying notes to pension plan schedules. 95 CITY OF MESA, ARIZONA EXHIBIT B-2 REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES IN THE CITY'S NET PENSION LIABILITY AND RELATED RATIOS AGENT PENSION PLANS JUNE 30, 2015 (in thousands) Public Safety Personnel Retirement System - Fire Total Pension Liability Service Cost Interest on the Total Pension Liability Changes of Benefit Terms Differences Between Expected and Actual Experience in the Measurement of the Pension Liability Changes of Assumptions or Other Inputs Benefit Payments, Including Refunds of Employee Contributions Net Change in Total Pension Liability Total Pension Liability - Beginning Total Pension Liability - Ending (a) $ (6,961) 23,097 (16,309) 30,860 268,821 299,681 Plan Fiduciary Net Position Contributions - Employer Contributions - Employee Net Investment Income Benefit Payments, Including Refunds of Employee Contributions Administrative Expenses Other Changes Net Change in Plan Fiduciary Net Position Plan Fiduciary Net Position - Beginning Plan Fiduciary Net Position - Ending (b) City's Net Pension Liability - Ending (a) - (b) 9,157 3,488 19,840 (16,309) (160) (113) 15,903 146,061 161,964 $ Plan Fiduciary Net Position as a Percentage of the Total Pension Liability Covered-employee Payroll 137,717 54.05% $ City's Net Pension Liability as a Percentage of CoveredEmployee Payroll Reporting Fiscal Year (Measurement Date) 2015 2014 through (2014) 2006 Information 6,281 not available 20,708 4,044 30,782 447.39% See accompanying notes to pension plan schedules. 96 CITY OF MESA, ARIZONA EXHIBIT B-2 (concluded) REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES IN THE CITY'S NET PENSION LIABILITY AND RELATED RATIOS AGENT PENSION PLANS JUNE 30, 2015 (in thousands) Public Safety Personnel Retirement System - Police Total Pension Liability Service Cost Interest on the Total Pension Liability Changes of Benefit Terms Differences Between Expected and Actual Experience in the Measurement of the Pension Liability Changes of Assumptions or Other Inputs Benefit Payments, Including Refunds of Employee Contributions Net Change in Total Pension Liability Total Pension Liability - Beginning Total Pension Liability - Ending (a) $ (11,331) 51,228 (27,566) 70,054 472,691 542,745 Plan Fiduciary Net Position Contributions - Employer Contributions - Employee Net Investment Income Benefit Payments, Including Refunds of Employee Contributions Administrative Expense Other Changes Net Change in Plan Fiduciary Net Position Plan Fiduciary Net Position - Beginning Plan Fiduciary Net Position - Ending (b) City's Net Pension Liability - Ending (a) - (b) 17,443 6,784 33,360 (27,566) (269) 288 30,040 244,906 274,946 $ Plan Fiduciary Net Position as a Percentage of the Total Pension Liability Covered-employee Payroll 267,799 50.66% $ City's Net Pension Liability as a Percentage of CoveredEmployee Payroll Reporting Fiscal Year (Measurement Date) 2015 2014 through (2014) 2006 Information 12,481 not available 36,514 8,728 59,688 448.66% See accompanying notes to pension plan schedules. 97 CITY OF MESA, ARIZONA EXHIBIT B-3 REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CITY PENSION CONTRIBUTIONS JUNE 30, 2015 (in thousands) Arizona State Retirement System Reporting Fiscal Year Statutorily Required Contribution City's Contribution in Relation to the Statutorily Required Contribution City's Contribution Deficiency (Excess) $ 2015 16,146 $ 2014 15,750 $ 16,146 - $ 15,750 - City's Covered-Employee Payroll City's Contributions as a Percentage of CoveredEmployee Payroll 151,154 2013 through 2006 Information not available 147,402 10.68% 10.68% Elected Officials Retirement Plan Reporting Fiscal Year 2015 Satutorily Required Contribution City's Contribution in Relation to the Statutorily Required Contribution City's Contribution Deficiency (Excess) 2014 $ 50 $ 45 50 $ - City's Covered-Employee Payroll City's Contributions as a Percentage of CoveredEmployee Payroll 217 23.04% See accompanying notes to pension plan schedules. 98 45 $ 151 29.80% 2013 through 2006 Information not available CITY OF MESA, ARIZONA EXHIBIT B-3 (concluded) REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CITY PENSION CONTRIBUTIONS JUNE 30, 2015 (in thousands) Public Safety Personnel Retirement System - Fire Reporting Fiscal Year Actuarially Determined Contribution City's Contribution in Relation to the Actuarially Determined Contribution City's Contribution Deficiency (Excess) $ 2015 9,827 $ 2014 9,157 $ 9,827 - $ 9,157 - City's Covered-Employee Payroll City's Contributions as a Percentage of CoveredEmployee Payroll 31,771 30,782 30.93% 29.75% 2013 through 2006 Information not available Public Safety Personnel Retirement System - Police Reporting Fiscal Year Actuarially Determined Contribution City's Contribution in Relation to the Actuarially Determined Contribution City's Contribution Deficiency (Excess) $ 2015 19,647 $ 2014 17,443 $ 19,647 - $ 17,443 - City's Covered-Employee Payroll City's Contributions as a Percentage of CoveredEmployee Payroll See accompanying notes to pension plan schedules. 99 62,953 59,688 31.21% 29.22% 2013 through 2006 Information not available CITY OF MESA, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION NOTES TO PENSION PLAN SCHEDULES JUNE 30, 2015 (in thousands) Actuarial determined contribution rates for PSPRS are calculated as of June 30 two years prior to the end of the fiscal year in which contributions are made. The actuarial methods and assumptions used to establish the contribution requrements are as follows: Actuarial Cost Method Amortization Method Remaining Amortization Period as of the 2013 Actuarial Valuation Asset Valuation Method Actuarial Assumptions: Investment Rate of Return Projected Salary Increases Wage Growth Retirement Age Mortality Entry age normal Level percent closed for unfunded actuarial accrued liability, open for excess 23 years for unfunded actuarial accrued liability, 20 years for excess 7-year smoothed market value; 20% corridor In the 2013 actuarial valuation, the investment rate of return was decreased from 8.0% to 7.85% In the 2013 actuarial valuation, projected salary increases were decreased from 5.0%-9.0% to 4.5%-8.5% In the 2013 actuarial valuation, wage growth was decreased from 5.0% to 4.5% Experience-based table of rates that is specific to the type of eligibility condition. Last updated for the 2012 valuation pursuant to an experience study of the period July 1, 2006-June 30, 2011. RP-2000 mortality table (adjusted by 105% for both males and females) 100 CITY OF MESA, ARIZONA EXHIBIT B-4 REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF AGENT OTHER POST-EMPLOYMENT BENEFITS PLAN'S FUNDING PROGRESS JUNE 30, 2015 (in thousands) Health Insurance Premium Benefit Actuarial Valuation Date June 30, Actuarial Value of Assets (a) Actuarial Accrued Liability (AAL) (b) Unfunded AAL (UAAL) (b-a) $ 7,364 7,727 $ 7,331 7,578 7,702 $ $ 10,193 10,724 $ 15,823 16,585 17,283 Funded Ratio (a/b) Annual Covered Payroll (c) UAAL as a % of Covered Payroll (( b - a ) / c ) 0.0% 97.2% 100.3% $ 31,008 30,782 31,661 23.6% 0.7% -0.1% 0.0% 61.5% 62.0% $ 60,096 59,688 62,461 26.3% 10.7% 10.5% Fire 2013 2014 2015 Police 2013 2014 2015 Note: 7,331 214 (25) $ 15,823 6,392 6,559 Beginning in fiscal year 2014, PSPRS established separate funds for pension benefits and health insurance premium benefits. Previously, the plan recorded both pension and health insurance premium contributions in the same Pension Fund. During fiscal year 2014, the plan transferred prior-year health insurance premium benefit contributions that exceeded benefit payments from each plan's Pension Fund to the new Health Insurance Fund. 101 CITY OF MESA, ARIZONA EXHIBIT B-5 REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF OTHER POST-EMPLOYMENT BENEFITS PLAN'S FUNDING PROGRESS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 (in thousands) Actuarial Valuation Date July 1, 2009 2011 2013 Note: Actuarial Value of Assets (a) $ - Actuarial Accrued Liability (AAL) (b) $ 916,616 992,016 650,918 Percent Funded (b-a) 0.0% 0.0% 0.0% Unfunded AAL (a/b) $ 916,616 992,016 650,918 Annual Covered Payroll (c) $ 321,012 330,113 360,860 Unfunded AAL as a Percentage of Covered Payroll (( b - a ) / c ) 285.5% 300.5% 180.4% 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. 102 CITY OF MESA, ARIZONA EXHIBIT B-6 REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE GENERAL FUND FOR THE FISCAL YEAR ENDED JUNE 30, 2015 (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 $ Expenditures: Current: General Government Public Safety Cultural-Recreational Community Environment Capital Outlay Total Expenditures Actual Budgetary Basis Final 102,861 15,231 114,186 15,010 7,079 145 143 1,709 256,364 $ 102,861 15,231 114,186 15,010 7,079 145 143 1,709 256,364 $ 92,240 25 15,446 117,084 20,700 8,096 550 208 3,973 258,322 Variance with Final Budget $ (10,621) 25 215 2,898 5,690 1,017 405 65 2,264 1,958 80,586 220,681 35,069 11,745 15,354 363,435 80,097 221,764 37,463 11,111 15,992 366,427 73,789 214,669 33,850 9,185 1,758 333,251 6,308 7,095 3,613 1,926 14,234 33,176 (107,071) (110,063) (74,929) 35,134 Other Financing Sources (Uses): Transfers In Transfers Out Total Other Financing Sources (Uses) 111,296 (18,119) 93,177 96,757 (18,129) 78,628 97,562 (30,286) 67,276 805 (12,157) (11,352) Net Change in Fund Balances (13,894) (31,435) (7,653) 23,782 50,950 50,950 50,950 Excess (Deficiency) of Revenues Over (Under) Expenditures Fund Balances - Beginning Fund Balance - Ending $ 37,056 See accompanying note to budgetary comparison schedule. 103 $ 19,515 $ 43,297 $ 23,782 CITY OF MESA, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION NOTES TO BUDGETARY COMPARISON SCHEDULES JUNE 30, 2015 (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, 2015 on the “GAAP basis” to the “budget basis” as follows: Net Change in Fund Balance-Budget Basis Exhibit B-6 $ (7,653) Basis Differences: Compensated Absences Sales Tax Accrual Unrealized Gain on Investments Net Change in Fund Balance-GAAP Basis Exhibit A-5 (112) 8,354 45 $ 634 104 Combining Statements COMPREHENSIVE ANNUAL FINANCIAL REPORT 2015 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. 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, 2015 (in thousands) ASSETS Pooled Cash and Investments Accounts Receivable (Net of Allowances) Accrued Interest Receivable Due from Other Governments Prepaid Costs Restricted Assets: Pooled Cash and Investments Cash with Fiscal Agent Cash with Trustee Accounts Receivable Due from Other Governments Total Assets LIABILITIES Accounts Payable and Accrued Liabilities Advances From 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 $ 6,558 79 11 6,648 - $ $ 3,147 2 3,149 1,788 - $ $ 154 154 3 60 Environmental Compliance $ $ $ 7,924 2 5 7,931 771 - - 1,788 93 156 771 1 1 - - - 6,647 6,647 1,361 1,361 6,648 $ 105 3,149 (2) (2) $ 154 7,160 7,160 $ 7,931 EXHIBIT C-1 (Continued) Special Revenue Funds Grants and Special Programs Highway User Revenue Fund Mesa Arts Center Restoration Mesa Housing Authority $ 3,424 87 5,427 72 $ $ $ 9,010 $ 10,634 $ 1,447 - $ $ $ $ 552 - 1,269 2 1,271 36 - $ $ Street Sales Tax Total Special Revenue Funds 1,090 64 2,627 - $ 1,335 1,741 1 - $ 45,515 2,261 111 19 - $ 77,874 4,241 132 11,242 72 3,781 $ 3,077 $ 47,906 $ 93,561 1,830 - $ $ $ - 2,553 6,400 7,192 1,788 6,460 423 1,870 552 36 72 1,390 3,220 - 8,953 1,942 17,382 46 46 - - - - 104 104 151 151 10,082 10,082 1,199 1,199 561 561 3,077 3,077 38,849 38,849 3,781 $ 3,077 $ 47,906 72 5,237 1,809 (24) 7,094 $ 7,458 7 3,169 - Quality of Life Sales Tax 9,010 $ 10,634 $ 1,271 $ 106 72 59,167 16,815 (26) 76,028 $ 93,561 CITY OF MESA, ARIZONA EXHIBIT C-1 (Continued) NON-MAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET JUNE 30, 2015 (in thousands) ASSETS Pooled Cash and Investments Accounts Receivable (Net of Allowances) Accrued Interest Receivable Due from Other Governments Prepaid Costs Restricted Assets: Pooled Cash and Investments Cash with Fiscal Agent Cash with Trustee Accounts Receivable Due from Other Governments Total Assets LIABILITIES Accounts Payable and Accrued Liabilities Advances From 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 $ 42 - $ 8,375 39 66 42 $ 8,480 47 - $ 1,021 - 47 1,021 177 1,780 457 - - - - - 66 7,393 7,459 5,381 5,381 8,890 8,890 19,057 19,057 10,670 $ 19,514 $ $ 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 (5) (5) $ 42 $ 8,480 107 Law Enforcement Parks Bond Construction $ $ $ $ $ 5,558 5,558 177 - 5,558 $ $ $ Streets 10,670 - $ 14,955 4,559 - 10,670 $ 19,514 1,780 - $ 457 - Capital Projects Funds Vehicle Replacement $ $ $ Total Capital Projects Funds Capital Lease Redemption Eastmark Debt Service General Obligation Bond Redemption Highway Project Advancement Notes $ $ $ $ 3,082 - $ 42,682 4,598 66 3,082 $ 47,346 $ $ $ 57 - 3,539 - - - $ $ 662 449 7,790 8,901 - $ $ 3,109 27,869 942 31,920 - $ $ 86,033 1,946 9,535 97,514 9,008 - 57 3,539 - 238 232 470 6,854 21,014 27,868 1,946 8,143 19,097 - - - 7,789 7,789 468 468 - - 642 642 3,584 3,584 78,417 78,417 725 2,300 3,025 $ Debt Service Funds 3,082 66 34,053 9,693 (5) 43,807 $ 47,346 $ - $ 8,901 108 $ 31,920 $ 97,514 CITY OF MESA, ARIZONA EXHIBIT C-1 (Concluded) NON-MAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET JUNE 30, 2015 (in thousands) ASSETS Pooled Cash and Investments Accounts Receivable (Net of Allowances) Accrued Interest Receivable Due from Other Governments Prepaid Costs Restricted Assets: Pooled Cash and Investments Cash with Fiscal Agent Cash with Trustee Accounts Receivable Due from Other Governments Total Assets LIABILITIES Accounts Payable and Accrued Liabilities Advances From 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 Service Bond Redemption Redemption Funds Total Nonmajor 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 $ 1 8,695 36 8,732 - $ $ $ 58 21 2,575 2,654 - $ - 89,863 38,980 9,535 10,401 942 $ 149,721 $ $ $ 9,008 - 120,556 4,241 132 15,840 138 89,863 38,980 9,535 10,401 942 290,628 19,739 1,788 6,460 2,390 6,305 8,695 79 79 11,507 8,143 27,551 56,209 11,507 10,085 27,551 77,130 - 2,575 2,575 10,832 10,832 10,983 10,983 37 37 - 79,096 3,584 82,680 138 172,316 30,092 (31) 202,515 2,654 $ 149,721 8,732 109 $ $ 290,628 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, 2015 (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 $ $ $ Expenditures: Current: General Government Public Safety Cultural-Recreational Community Environment Debt Service: Principal Retirement Interest on Bonds Interest on Leases Interest on Notes Service Charges Cost of Issuance Capital Outlay Total Expenditures 93 55 148 77 - - - - Other Financing Sources (Uses): Transfers In Transfers Out Face Amount of Bonds Issued Premium on Issuance of Bonds (Net) Issuance of Refunding Bonds Payment to Refunded Bond Escrow Agent Total Other Financing Sources (Uses) - Net Change in Fund Balances 148 6,647 110 $ 14,929 52 2 14,983 829 1,355 5,257 2,973 3 80 4,848 (31) 3,764 (2,812) (2,812) 25 25 - (675) $ Environmental Compliance 805 11,219 2,036 6,499 $ 22 1 26 49 - 148 Fund Balances - Beginning 4,830 18 4,848 - Excess (Deficiency) of Revenues Over (Under) Expenditures Fund Balances - Ending Special Revenue Funds 1,361 $ (6) 3,764 4 3,396 (2) $ 7,160 EXHIBIT C-2 (Continued) Special Revenue Funds Grants and Special Programs Highway User Revenue Fund Mesa Arts Center Restoration Mesa Housing Authority $ $ $ $ $ 2,056 396 9,458 172 1,236 35 1,004 2,101 16,458 33,903 8 41 33,952 333 14 347 Quality of Life Sales Tax Street Sales Tax Total Special Revenue Funds 19,687 18 1 19,706 $ 20,799 72 13 20,884 $ 24,944 148 339 517 126 26,074 $ 45,743 22 2,056 5,446 63,048 15,541 1,569 764 1,030 2,230 137,449 2,509 5,453 963 208 13,585 284 - 259 18,868 21,511 - 3,750 323 11 15,693 7,165 28,901 6,515 51,327 5,839 14,972 1,385 14,970 185 469 1,187 20,314 21,511 8,665 28,442 3 18,066 111,977 1,486 18,982 (122) (2,368) 25,472 1,684 (321) 1,363 (11,113) (11,113) 2,849 7,869 4,245 2,213 7,094 $ 10,082 (608) - - (122) (608) 1,321 $ 1,199 $ (627) (627) (725) (725) 1,709 (14,971) (13,262) (3,093) 12,210 1,169 3,704 41,942 63,818 561 $ 3,077 $ 38,849 $ 76,028 111 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, 2015 Capital Projects Funds 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 Eastmark Capital Projects General Capital Projects Law Enforcement Parks Bond Construction Streets $ $ $ $ $ Expenditures: Current: General Government Public Safety Cultural-Recreational Community Environment Debt Service: Principal Retirement Interest on Bonds Interest on Leases Interest on Notes Service Charges Cost of Issuance Capital Outlay 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 (Net) Issuance of Refunding Bonds Payment to Refunded Bond Escrow Agent Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending 106 106 - 34 34 910 19 929 - - - - - 352 4,612 4,964 5,921 5,921 11,805 11,805 166 15,935 16,101 12,361 12,361 (4,858) (5,567) (11,805) (16,067) (11,432) (66) 4,922 (10) 4,846 6,386 6,386 - 13,690 106 13,796 - (12) 819 (11,805) (2,271) (11,432) 17,186 11,161 30,489 8,890 $ 19,057 7 $ 39 315 354 (5) 6,640 $ 7,459 112 $ 5,381 $ EXHIBIT C-2 (Continued) Capital Projects Funds Debt Service Funds Vehicle Replacement Total Capital Projects Funds Capital Lease Redemption Eastmark Debt Service General Obligation Bond Redemption Highway Project Advancement Notes $ $ $ $ $ $ 35 35 - - 3,692 3,692 - 230 438 4 672 33,770 556 840 14 35,180 3,892 415 4,307 - - 518 54,326 54,844 72 3 75 232 456 688 (3,657) (53,386) (75) (16) 3,225 3,225 9,611 (66) 18,612 96 28,253 75 75 66 387 453 2,812 2,812 - (25,133) - 437 3,214 415 3,457 68,940 - 205 370 78,002 3,025 $ 43,807 (432) $ 949 19 106 384 1,458 $ - $ 642 $ 113 - - 21,014 13,758 6 34,778 3,892 3,892 402 415 3,584 $ 78,417 CITY OF MESA, ARIZONA EXHIBIT C-2 (Concluded) NON-MAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Debt Service Funds Highway User Special Total Revenue Debt Assessment Bond Service Bond Redemption Redemption Funds Revenues: Sales Taxes $ $ $ Property Taxes 34,000 Occupancy Taxes Special Assessments 826 1,264 Licenses and Permits Intergovernmental 4,448 Charges for Services Fines and Forfeitures 840 Investment Income 1 434 Contributions Miscellaneous Revenues Total Revenues 827 40,986 Expenditures: Current: General Government Public Safety Cultural-Recreational Community Environment Debt Service: Principal Retirement Interest on Bonds Interest on Leases Interest on Notes Service Charges Cost of Issuance Capital Outlay Total Expenditures - - Total Nonmajor Governmental Funds $ 45,743 34,022 2,056 1,264 5,446 68,445 15,560 2,409 1,198 1,136 2,614 179,893 - 7,165 28,901 6,515 51,327 6,305 4,982 4 139 11,430 744 178 922 28,367 19,374 3 3,892 10 139 51,785 28,367 19,374 3 3,892 13 657 72,392 218,606 Excess (Deficiency) of Revenues Over (Under) Expenditures (11,430) (95) (10,799) (38,713) Other Financing Sources (Uses): Transfers In Transfers Out Face Amount of Bonds Issued Premium on Issuance of Bonds (Net) Issuance of Refunding Bonds Payment to Refunded Bond Escrow Agent Total Other Financing Sources (Uses) 11,113 2,856 17,555 (20,058) 11,466 96 (1) 95 14,162 (1) 387 2,856 17,555 (20,058) 14,901 25,482 (15,038) 18,999 2,952 17,555 (20,058) 29,892 (8,821) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending $ 36 - 4,102 1 - 78,578 - $ 82,680 37 114 $ 211,336 $ 202,515 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, 2015 (in thousands) ASSETS Current Assets: Pooled Cash and Investments Accounts Receivable Accrued Premiums Receivable Accrued Interest Receivable Due from Other Governments Inventory Prepaid Costs Total Current Assets Warehouse, Maintenance and Services Property and Public Liability Self Insurance $ $ Noncurrent Assets: Capital Assets, Not Being Depreciated Captial Assets, Being Depreciated, Net Total Noncurrent Assets Total Assets DEFERRED OUTFLOWS OF RESOURCES Deferred Outflows Related to Pensions Total Deferred Outflows of Resources Total Assets and Deferred Outflows of Resources LIABILITIES Current Liabilities Accounts Payable and Accrued Liabilities Estimated Claims Incurred-Not Reported Estimated Claims Incurred and Pending Current Portion of Compensated Absences Total Current Liabilities Long-Term Liabilities Compensated Absences Net Pension Liability Post Employment Benefits Total Long-Term Liabilities Total Liabilities DEFERRED INFLOWS OF RESOURCES Deferred Inflows Related to Pensions Total Deferred Inflows of Resources NET POSITION Net Investment in Capital Assets Unrestricted Total Net Position $ 115 822 179 8 5,992 7 7,008 9,533 13 496 10,042 99 1,505 1,604 - 8,612 10,042 979 979 137 137 9,591 10,179 989 69 1,058 16 3,196 6,428 9,640 578 8,344 9,634 18,556 1,184 1,184 19,614 10,824 1,670 1,670 237 237 1,604 (13,297) (11,693) (882) (882) $ EXHIBIT C-3 (Concluded) Workers' Compensation Self Insurance $ $ 8,658 6 222 8,886 Employee Benefits Self Insurance $ 51,123 47 148 61 61 51,440 Total $ 70,136 226 148 80 8 5,992 786 77,376 - 521 521 99 2,026 2,125 8,886 51,961 79,501 59 59 146 146 1,321 1,321 8,945 52,107 80,822 108 7,364 16,301 23,773 2,346 2,738 5,084 3,459 13,298 22,729 69 39,555 488 488 1,200 1,200 578 11,216 9,634 21,428 24,261 6,284 60,983 98 98 240 240 2,245 2,245 521 45,062 45,583 2,125 15,469 17,594 (15,414) (15,414) $ $ 116 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, 2015 (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 Total Operating Revenues $ Operating Expenses: Warehouse Fleet Support Services Printing and Graphics Administrative Costs Claims and Premiums Paid Total Operating Expenses 6,190 18,528 903 $ 2,522 2,522 7,196 18,181 1,023 26,400 953 1,846 2,799 (779) Depreciation (383) (277) - (1,162) Nonoperating Revenues (Expense): Investment Income Gain/(Loss) on Disposal of Capital Assets Total Nonoperating Revenues (Expenses) - 25,621 Operating Income (Loss) Before Depreciation Operating Income (Loss) Property and Public Liability Self Insurance (277) 8 8 (1) (1) Change in Net Position (1,154) (278) Total Net Position - As Previously Reported Change in Accounting Principle (1,406) (9,133) 692 (1,296) (10,539) (604) Total Net Position - As Restated Total Net Position - Ending $ 117 (11,693) $ (882) EXHIBIT C-4 (Concluded) Workers' Compensation Self Insurance $ - Employee Benefits Self Insurance $ $ 6,190 18,528 903 6,629 215 6,844 13,589 49,359 4,030 457 67,435 13,589 58,510 4,030 672 102,422 829 4,476 5,305 7,084 57,572 64,656 7,196 18,181 1,023 8,866 63,894 99,160 1,539 2,779 3,262 - (34) 1,539 (417) 2,745 - $ - Total 2,845 (6) (6) (7) 8 1 1,539 2,739 2,846 (16,419) (534) 44,158 (1,314) 27,025 (12,277) (16,953) 42,844 14,748 (15,414) $ 45,583 $ 17,594 118 CITY OF MESA, ARIZONA EXHIBIT C-5 INTERNAL SERVICE FUNDS COMBINING STATEMENT OF CASH FLOWS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 (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 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 $ - (321) - 1 1 (300) Pooled Cash and Investments at Beginning of Year (279) 1,122 $ 2,522 (1,877) (925) (280) (321) - Net Increase in Cash and Cash Equivalents Pooled Cash and Investments at End of Year 25,567 (18,017) (7,529) 21 Property and Public Liability Self Insurance 822 9,812 $ 9,533 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 Pension Liability (Decrease)/Increase in Other Accrued Expenses $ 383 14 (48) (12) 43 1,183 $ Noncash Transactions Affecting Financial Position: Gain/(Loss) on Disposal of Capital Assets 21 8 119 (277) - (54) (151) (6) 207 (98) 902 Total Adjustments Net Cash Provided by/(Used for) Operating Activities (1,162) (3) $ (280) - EXHIBIT C-5 (Concluded) Workers' Compensation Self Insurance $ 6,844 (4,079) (423) 2,342 Employee Benefits Self Insurance $ Total 69,217 (64,900) (1,290) 3,027 $ 104,150 (88,873) (10,167) 5,110 - (555) (876) - (555) (876) - 1 1 2 2 2,342 2,473 4,236 6,316 48,650 65,900 $ 8,658 $ 51,123 $ 70,136 $ 1,539 $ 2,745 $ 2,845 - 34 (18) (30) (7) 858 1,782 (61) 478 (20) (1,931) 803 $ 2,342 - 417 1,728 (151) (71) 607 (137) (128) 282 $ 3,027 - 2,265 $ 5,110 8 120 AGENCY FUND The Agency 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 STATEMENT OF CHANGES IN ASSETS AND LIABILITIES AGENCY FUND FOR THE FISCAL YEAR ENDED JUNE 30, 2015 (in thousands) Balance July 1, 2014 Additions PAYROLL AGENCY FUND Assets: Pooled Cash and Investments Due from Others Total Assets Liabilities: Accounts Payable Accrued Payroll Payable Total Liabilities $ $ $ $ 14,061 14,061 $ 1,719 12,342 14,061 $ $ $ 121 Balance June 30, 2015 Deductions 610,253 26 610,279 $ 357,587 418,498 776,085 $ $ $ 610,045 24 610,069 $ 359,208 416,667 775,875 $ $ $ 14,269 2 14,271 98 14,173 14,271 Supplemental Information COMPREHENSIVE ANNUAL FINANCIAL REPORT 2015 CITY OF MESA, ARIZONA EXHIBIT D-1 SUPPLEMENTAL INFORMATION BUDGETARY COMPARISON SCHEDULE GRANTS AND SPECIAL PROGRAMS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 (in thousands) Budgeted Amounts Original Revenues: Occupancy Taxes Licenses and Permits Intergovernmental Charges for Services Fines and Forfeitures Investment Income Contributions Miscellaneous Revenues Total Revenues $ Final 2,053 1,232 29,723 664 229 399 2,228 36,528 $ Actual 2,053 1,232 29,723 664 229 399 2,228 36,528 $ 2,056 396 9,458 172 1,236 35 1,004 2,101 16,458 Variance with Final Budget $ 3 (836) (20,265) (492) 1,007 35 605 (127) (20,070) Expenditures: Current: General Government Public Safety Cultural-Recreational Community Environment Capital Outlay Total Expenditures 2,256 12,855 1,356 218 24,662 41,347 2,341 13,042 1,221 218 22,533 39,355 2,509 5,453 963 208 5,839 14,972 (168) 7,589 258 10 16,694 24,383 Excess (Deficiency) of Revenues Over (Under) Expenditures (4,819) (2,827) 1,486 4,313 1,684 (321) 1,363 1,684 (321) 1,363 5,676 Other Financing Sources (Uses): Transfers In Transfers Out Total Other Financing Sources (Uses) - Net Change in Fund Balances Fund Balances - Beginning Fund Balance - Ending $ - (4,819) (2,827) 2,849 4,849 4,849 4,245 30 122 $ 2,022 $ 7,094 (604) $ 5,072 CITY OF MESA, ARIZONA EXHIBIT D-2 SUPPLEMENTAL INFORMATION BUDGETARY COMPARISON SCHEDULE HIGHWAY USER REVENUE FUND FOR THE FISCAL YEAR ENDED JUNE 30, 2015 (in thousands) Budgeted Amounts Original Revenues: Intergovernmental Charges for Services Investment Income Total Revenues $ Final 32,024 32,024 $ 32,024 32,024 Actual $ 33,903 8 41 33,952 Variance with Final Budget $ 1,879 8 41 1,928 Expenditures: Current: Community Environment Capital Outlay Total Expenditures 21,459 86 21,545 17,943 3,856 21,799 13,585 1,385 14,970 4,358 2,471 6,829 Excess (Deficiency) of Revenues Over (Under) Expenditures 10,479 10,225 18,982 8,757 Other Financing Uses: Transfers In Transfers Out Total Other Financing Uses (12,440) (12,440) (12,440) (12,440) (11,113) (11,113) 1,327 1,327 Net Change in Fund Balances (1,961) (2,215) 7,869 10,084 1,962 1,962 2,213 251 Fund Balances - Beginning Fund Balance - Ending $ 1 123 $ (253) $ 10,082 $ 10,335 CITY OF MESA, ARIZONA EXHIBIT D-3 SUPPLEMENTAL INFORMATION BUDGETARY COMPARISON SCHEDULE MESA HOUSING AUTHORITY FOR THE FISCAL YEAR ENDED JUNE 30, 2015 (in thousands) Budgeted Amounts Original Revenues: Intergovernmental Investment Income Miscellaneous Revenues Total Revenues $ Expenditures: Current: Public Safety Community Environment Capital Outlay Total Expenditures Final 26,904 11 26,915 $ 140 26,434 579 27,153 Actual 26,904 11 26,915 $ 399 25,481 1,273 27,153 19,687 18 1 19,706 Variance with Final Budget $ 259 18,868 1,187 20,314 (7,217) 7 1 (7,209) 140 6,613 86 6,839 Excess (Deficiency) of Revenues Over (Under) Expenditures (238) (238) (608) (370) Net Change in Fund Balances (238) (238) (608) (370) 367 367 Fund Balances - Beginning Fund Balance - Ending $ 129 124 $ 129 1,169 $ 561 802 $ 432 CITY OF MESA, ARIZONA EXHIBIT D-4 SUPPLEMENTAL INFORMATION BUDGETARY COMPARISON SCHEDULE QUALITY OF LIFE SALES TAX FOR THE FISCAL YEAR ENDED JUNE 30, 2015 (in thousands) Budgeted Amounts Original Revenues: Sales Taxes Licenses and Permits Investment Income Total Revenues $ Expenditures: Current: Public Safety Total Expenditures Final 21,408 21,408 $ 21,543 21,543 Actual 21,408 21,408 $ 21,543 21,543 20,799 72 13 20,884 Variance with Final Budget $ 21,511 21,511 (609) 72 13 (524) 32 32 Excess (Deficiency) of Revenues Over (Under) Expenditures (135) (135) (627) (492) Net Change in Fund Balances (135) (135) (627) (492) 135 135 Fund Balances - Beginning Fund Balance - Ending $ - 125 $ - 3,704 $ 3,077 3,569 $ 3,077 CITY OF MESA, ARIZONA EXHIBIT D-5 SUPPLEMENTAL INFORMATION BUDGETARY COMPARISON SCHEDULE STREET SALES TAX FOR THE FISCAL YEAR ENDED JUNE 30, 2015 (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 Final 25,690 350 94 204 71 4 26,413 $ 25,690 350 94 204 71 4 26,413 Actual $ 24,944 148 339 517 126 26,074 Variance with Final Budget $ (746) (202) 245 (204) 446 122 (339) 3,036 333 11 28,756 7,929 40,065 3,044 333 11 20,244 16,522 40,154 3,750 323 11 15,693 8,665 28,442 (706) 10 4,551 7,857 11,712 (13,652) (13,741) (2,368) 11,373 Other Financing Uses: Transfers Out Total Other Financing Uses (9,625) (9,625) (9,625) (9,625) (725) (725) 8,900 8,900 Net Change in Fund Balances (23,277) (23,366) (3,093) 20,273 29,479 29,479 41,942 12,463 Excess (Deficiency) of Revenues Over (Under) Expenditures Fund Balances - Beginning Fund Balance - Ending $ 6,202 126 $ 6,113 $ 38,849 $ 32,736 Statistical Section COMPREHENSIVE ANNUAL FINANCIAL REPORT 2015 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. 127 Revenue Capacity These schedules contain information to help readers assess the City’s most significant local revenue source, the sales tax. 139 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. 142 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. 150 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. 152 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) 2005-06 GOVERNMENTAL ACTIVITIES Net Investment in Capital Assets Restricted Unrestricted Total Governmental Activities Net Position BUSINESS-TYPE ACTIVITIES Net Investment in Capital Assets Restricted Unrestricted Total Business-type Activities PRIMARY GOVERNMENT Net Investment in Capital Assets Restricted Unrestricted Total Primary Government 2006-07 2007-08 2008-09 $ 765,875 $ 84,386 85,735 791,592 $ 95,107 128,548 794,720 $ 86,252 125,128 791,523 92,533 91,363 $ 935,996 $ 1,015,247 $ 1,006,100 $ 975,419 $ 390,100 $ 89,383 268,388 366,498 $ 96,756 308,375 410,074 $ 94,133 308,216 413,944 82,697 278,892 $ 747,871 $ 771,629 $ 812,423 $ 775,533 $ 1,155,975 $ 173,769 354,123 1,158,090 $ 191,863 436,923 1,204,794 $ 180,385 433,344 1,205,467 175,230 370,255 $ 1,683,867 $ 1,786,876 $ 1,818,523 $ 1,750,952 127 TABLE I (Concluded) 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 $ 844,777 $ 86,955 3,651 872,302 $ 39,296 (6,376) 913,702 $ 41,257 (96,986) 902,397 $ 56,719 (184,355) 866,332 $ 60,555 (120,803) 932,660 72,170 (666,758) $ 935,383 $ 905,222 $ 857,973 $ 774,761 $ 806,084 $ 338,072 $ 434,814 $ 47,011 271,706 430,436 $ 55,873 258,131 412,016 $ 69,739 254,189 346,352 $ 37,795 271,619 393,720 $ 43,023 178,702 327,743 47,576 160,934 $ 753,531 $ 744,440 $ 735,944 $ 655,766 $ 615,445 $ 536,253 $ 1,279,591 $ 133,966 275,357 1,302,738 $ 95,169 251,755 1,325,718 $ 110,996 157,203 1,248,749 $ 94,514 87,264 1,260,052 $ 103,578 57,899 1,260,403 119,746 (505,824) $ 1,688,914 $ 1,649,662 $ 1,593,917 $ 1,430,527 $ 1,421,529 $ 874,325 128 CITY OF MESA, ARIZONA TABLE II CHANGES IN NET POSITION LAST TEN FISCAL YEARS (accrual basis of accounting) (in thousands) EXPENSES 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 Interest on Long-term Debt Total Business-type Activities Expenses Total Primary Government Expenses 2005-06 $ 2006-07 2007-08 2008-09 2009-10 44,568 $ 48,201 $ 63,633 $ 54,226 $ 54,863 212,011 232,100 292,396 290,928 288,929 65,389 64,592 72,999 67,039 54,010 97,613 91,664 99,415 121,736 104,096 16,061 18,037 19,083 18,659 20,013 435,642 454,594 547,526 552,588 521,911 26,817 38,743 54,111 67,181 25,070 4,194 2,524 4,822 67 - 26,281 37,826 59,965 60,603 27,891 2,721 2,602 5,667 1,090 - 31,612 43,247 59,225 61,293 32,877 3,317 3,012 5,447 769 - 27,634 35,992 68,956 80,349 31,953 3,703 3,083 4,558 976 - 27,106 35,466 80,915 70,228 31,504 3,944 2,715 4,158 7,408 1,000 - 223,529 224,646 240,799 257,204 264,444 $ 659,171 $ 679,240 $ 788,325 $ 809,792 $ 786,355 129 TABLE II (Continued) 2010-11 $ 2011-12 2012-13 2013-14 2014-15 59,552 $ 57,472 $ 105,410 $ 103,819 $ 273,320 287,918 287,451 277,614 54,550 57,171 61,717 49,275 106,434 97,593 129,164 125,700 21,078 21,631 23,443 24,431 102,396 302,633 52,430 101,531 23,939 514,934 521,785 607,185 580,839 582,929 26,817 36,020 82,378 63,613 31,462 3,972 2,679 3,849 8,324 15 965 - 29,751 34,275 74,162 68,540 32,485 3,737 2,589 3,486 8,525 54 974 - 28,897 35,653 103,432 91,739 33,694 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 - 28,495 32,104 101,863 71,161 36,979 2,863 2,210 3,715 1,200 8,581 885 4,124 260,094 258,578 318,842 277,671 294,180 $ 775,028 $ 780,363 $ 926,027 $ 858,510 $ 877,109 130 CITY OF MESA, ARIZONA TABLE II (Continued) CHANGES IN NET POSITION LAST TEN FISCAL YEARS (accrual basis of accounting) (in thousands) PROGRAM REVENUES GOVERNMENTAL ACTIVITIES: Charges for services: Licenses and Permits Charges for Services Fines and Forfeitures Other activities Operating Grants and Contributions Capital Grants and Contributions Total Governmental Activities Program Revenues $ BUSINESS-TYPE ACTIVITIES: Charges for services: Electric Gas Water Wastewater Solid Waste Airport Golf Course Convention Center Hohokam Stadium/Fitch Complex Cubs Stadium District Cooling Economic Investment Operating Grants and Contributions Capital Grants and Contributions Total Business-type Activities Program Revenues 2005-06 2006-07 2007-08 2008-09 23,145 $ 17,650 9,049 282 68,784 16,777 135,687 20,128 $ 22,039 10,277 433 74,498 44,858 172,233 23,342 $ 23,703 10,761 324 63,787 21,916 143,833 13,426 24,740 10,215 78 63,055 35,436 146,950 36,113 44,089 88,498 49,618 38,899 2,087 2,522 3,728 55 141 27,692 293,442 34,519 45,250 92,007 55,398 42,895 2,954 2,457 4,746 193 147 20,724 301,290 34,148 46,540 97,559 53,951 46,168 3,192 2,448 3,658 229 11 80,570 368,474 35,313 41,708 95,995 54,720 46,762 2,959 2,310 2,687 834 101 31,222 314,611 429,129 473,523 512,307 461,561 Total Primary Government Program Revenues $ NET (EXPENSE)/REVENUE Governmental Activities Business-type Activities $ (299,955) $ (282,361) $ (403,693) $ (405,638) 69,913 76,644 127,675 57,407 Total Primary Government Net Expense $ (230,042) $ (205,717) $ (276,018) $ (348,231) 131 TABLE II (Continued) $ 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 11,824 $ 20,419 10,135 9 72,812 30,343 145,542 12,577 $ 20,304 11,820 8 65,284 31,461 141,454 13,359 $ 25,779 11,294 18 60,355 23,503 134,308 17,693 $ 27,675 9,885 2,945 55,312 25,049 138,559 18,797 $ 32,106 9,890 400 29,514 20,714 111,421 20,892 36,260 10,505 5,741 26,418 75,907 175,723 33,079 38,924 98,806 57,699 46,685 3,125 2,265 1,971 5,837 984 210 17,782 307,367 33,138 41,370 102,215 59,659 47,538 3,318 2,250 2,826 6,161 52 945 25 10,774 310,271 34,625 39,139 113,418 64,544 47,631 3,271 2,169 2,122 6,074 825 1,092 2,126 15,814 332,850 31,075 39,125 111,933 64,413 47,369 3,484 1,472 2,597 5,496 975 148 9,401 7,997 325,485 31,198 38,600 112,003 66,457 47,452 3,813 1,622 2,057 36 174 1,142 9,056 17,331 330,941 33,601 39,422 121,205 77,172 52,748 3,454 1,737 2,475 2 202 1,274 157 18,107 351,556 452,909 451,725 467,158 464,044 442,362 527,279 $ (376,369) $ (373,480) $ (387,477) $ (468,626) $ (469,418) $ 42,923 50,177 74,272 6,643 53,270 (407,206) 57,376 $ (333,446) $ (323,303) $ (313,205) $ (461,983) $ (416,148) $ (349,830) 132 CITY OF MESA, ARIZONA TABLE II (Continued) CHANGES IN NET POSITION LAST TEN FISCAL YEARS (accrual basis of accounting) (in thousands) GENERAL REVENUES AND OTHER CHANGES IN NET POSITION 2005-06 2006-07 2007-08 2008-09 128,372 $ 2,190 103,849 12,206 5,431 10,052 72,902 155,817 $ 2,390 113,049 14,038 7,825 7,054 61,440 147,763 $ 2,395 122,561 14,746 6,282 6,679 94,121 126,520 1,808 117,543 14,741 1,896 15,849 96,599 335,002 361,613 394,547 374,956 BUSINESS-TYPE ACTIVITIES: Occupancy Taxes Contributions Not Restricted to Specific Programs Investment Income Miscellaneous Special Item - Gain on Sale of Capital Assets Transfers 4,819 554 (72,902) 8,125 429 (61,440) 6,546 694 (94,121) 1,894 407 (96,599) Total Business-type Activities (67,529) (52,886) (86,881) (94,298) GOVERNMENTAL ACTIVITIES: Sales Taxes Property Taxes Occupancy Taxes Unrestricted Intergovernmental Revenues Contributions Not Restricted to Specific Programs Investment Income Miscellaneous Transfers $ Total Governmental Activities Total Primary Government $ 267,473 $ 308,727 $ 307,666 $ 280,658 Change in Net Position Governmental Activities Business-type Activities $ 35,047 $ 2,384 79,252 $ 23,758 (9,146) $ 40,794 (30,682) (36,891) Total Primary Government $ 37,431 $ 103,010 $ 31,648 $ (67,573) 133 TABLE II (Concluded) 2011-12 2012-13 2013-14 126,644 $ 14,234 2,019 86,103 17,171 1,503 8,939 83,615 137,280 $ 14,354 1,903 104,462 49,569 1,692 7,424 83,615 140,567 $ 22,549 1,919 135,075 88,646 966 5,550 109,520 146,337 33,241 2,081 145,266 47,761 1,786 7,844 94,427 336,672 340,228 400,299 504,792 478,743 508 (65,433) 839 (83,334) 850 (83,615) 825 860 (83,615) 851 1,453 288 18,697 (109,520) 999 1,141 233 5,157 (94,427) (64,925) (82,495) (82,765) (81,930) (88,231) (86,897) $ 271,408 $ 254,177 $ 257,463 $ 318,369 $ 416,561 $ 391,846 $ (40,036) $ (22,002) (36,808) $ (32,318) (47,249) $ (8,493) (68,327) $ (75,287) 35,374 $ (34,961) 71,537 (29,521) $ (62,038) $ (69,126) $ (55,742) $ (143,614) $ 413 $ $ 2009-10 2010-11 121,557 $ 14,318 1,581 104,580 14,757 261 13,846 65,433 121,046 14,244 2,148 92,613 15,610 617 7,060 83,334 336,333 $ 134 2014-15 42,016 CITY OF MESA, ARIZONA TABLE III FUND BALANCE, GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (modified accrual basis of accounting) (in thousands) 2005-06 2006-07 2007-08 2008-09 2009-10 GENERAL FUND Reserved (1)(2) Unreserved Nonspendable Restricted Committed Unassigned $ 61,257 $ 27,994 - 51,862 $ 74,711 - 4,048 92,187 - Total General Fund $ 89,251 $ 134,207 $ 135,169 $ 126,573 $ 96,235 $ 17,013 $ 53,674 31,871 15,724 - ALL OTHER GOVERNMENTAL FUNDS Reserved Unreserved, Reported in: Special Revenue Funds Capital Project Funds Nonspendable Restricted (3)(4) Committed Unassigned Total All Other Governmental Funds 8,392 $ 21,746 18,611 - $ 48,749 $ 77,177 $ 57,030 - 5,885 $ 84,886 $ 50,283 - 8,643 $ 24,627 17,568 - 24,922 11,143 - 24,816 28,442 - 48,080 $ 44,708 $ 70,271 $ 101,269 (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. 135 TABLE III (Concluded) 2010-11 $ 2011-12 2012-13 2013-14 2014-15 $ 405 1,992 4,898 93,875 $ 754 2,012 4,992 78,035 $ 1,724 284 1,185 50,426 $ 2,956 188 1,484 72,683 3,490 184 126 74,145 $ 101,170 $ 85,793 $ 53,619 $ 77,311 $ 77,945 $ 2,906 112,538 19,166 - $ 84 211,279 16,360 (1) $ 55 243,831 23,005 (1,177) $ - $ 23 190,609 21,379 (675) $ 134,610 $ 227,722 $ 265,714 $ 211,336 $ 138 172,316 30,092 (31) 202,515 136 CITY OF MESA, ARIZONA TABLE IV CHANGES IN FUND BALANCE, GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (modified accrual basis of accounting) (in thousands) 2005-06 2006-07 REVENUES Sales Taxes (1)(2) $ 128,372 $ 155,817 $ Property Taxes Occupancy Taxes 2,190 2,390 Special Assessments 5 417 Licenses and Permits 23,145 20,128 Intergovernmental 178,553 190,826 Charges for Services 17,650 22,039 Fines and Forfeitures 9,049 10,277 Investment Income 4,376 6,463 Capital Contributions Miscellaneous 9,633 6,366 Total Revenues 2007-08 2008-09 2009-10 147,763 $ 2,395 1,218 23,342 193,585 23,703 10,761 5,178 6,422 126,520 $ 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 13,675 372,973 414,723 414,367 384,976 384,922 36,731 190,762 56,188 60,080 40,662 210,542 54,711 65,314 48,112 233,507 57,765 66,616 36,507 230,864 53,171 72,647 40,113 216,026 40,150 72,081 8,857 16,181 234 56 79,317 8,358 18,151 57 77,475 25,871 19,230 58 77,309 36,906 18,845 28 77,899 34,846 21,186 9 539 82,530 Total Expenditures 448,406 475,270 528,468 526,867 507,480 Excess of Revenues Under Expenditures (75,433) (60,547) (114,101) (141,891) (122,558) 106,254 (32,340) 26,410 2,004 - 99,901 (33,233) 30,682 573 - 147,478 (53,960) 15,450 195 - 155,697 (59,106) 61,830 437 - 149,437 (66,654) 30,865 45,000 402 869 6,402 25,482 (27,475) 6,911 - 2,529 - 104,834 111,692 EXPENDITURES General Government Public Safety Cultural-Recreational Community Environment Debt Service Principal Interest Issuance Cost on Refunding Bonds Service Charges Cost of Issuance Capital Outlay 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 106,737 $ 31,304 $ 44,287 $ 6.86% 6.68% 158,858 159,919 (2,409) $ 16,967 $ 37,361 10.01% 12.42% 13.19% (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. 137 - TABLE IV (Concluded) $ 2010-11 2011-12 2012-13 2013-14 121,046 $ 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 4,524 146,337 34,022 2,081 1,264 20,892 185,529 36,260 10,505 1,793 1,344 6,587 366,023 371,704 404,265 418,469 446,614 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 81,066 243,570 40,365 60,512 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 28,367 23,269 13 657 74,150 477,776 491,805 542,204 599,905 551,969 (111,753) (120,101) (137,939) (181,436) (105,355) 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 - 123,044 (45,324) 18,999 2,952 - 67,238 (74,127) 17,415 (19,889) - 197,836 147,494 113,327 $ 1,574 $ 12.67% 77,735 $ 11.34% 9,555 $ 12.20% - 2014-15 17,555 (20,058) - 150,750 97,168 (30,686) $ (8,187) 19.05% 10.81% 138 CITY OF MESA, ARIZONA TABLE V SALES TAX COLLECTIONS BY CATEGORY LAST TEN FISCAL YEARS (in thousands) 2005-06 Utilities Communications Publishing Printing & Advertising Contracting Retail Sales Restaurants & Bars Amusements Rentals Miscellaneous $ Total $ 128,372 $ City Direct Tax Rate 7,539 $ 2,839 1,792 454 14,581 74,421 9,418 1,210 15,786 332 1.50% 2006-07 (1) 9,116 $ 3,939 1,963 478 21,424 85,015 11,726 1,457 20,534 165 2007-08 9,668 $ 4,312 1,923 375 19,301 77,308 12,039 1,349 21,369 119 2008-09 9,654 $ 3,749 1,402 280 15,263 63,230 10,956 1,363 20,514 107 2009-10 9,757 $ 3,809 1,102 175 10,913 63,469 10,948 1,176 20,123 84 2010-11 11,104 4,456 999 342 8,388 60,266 11,165 1,433 22,219 674 155,817 $ 147,763 $ 126,518 $ 121,555 $ 121,046 1.75% 1.75% 1.75% 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 139 1.75% TABLE V (Concluded) 2011-12 $ 11,878 $ 4,483 934 336 9,962 62,191 11,864 1,434 22,968 595 2012-13 2014-15 12,344 $ 4,230 830 455 13,794 69,276 12,972 1,469 24,374 823 13,111 4,796 747 461 14,103 71,996 13,708 1,542 25,102 771 $ 126,645 $ 137,279 $ 140,567 $ 146,337 1.75% 12,549 $ 4,651 866 434 12,402 66,789 12,577 1,432 24,847 732 2013-14 1.75% 1.75% 1.75% 140 CITY OF MESA, ARIZONA TABLE VI DIRECT AND OVERLAPPING SALES TAX RATES LAST TEN FISCAL YEARS City Direct Rate 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 1.50 1.75 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 6.60 6.60 6.60 5.60 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 141 CITY OF MESA, ARIZONA TABLE VII RATIOS OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS (in thousands) 2005-06 Governmental Activities General Obligation Bonds Municipal Development Corporation Bonds Highway User Revenue Bonds Special Assessment Bonds Community Facilities District Capital Leases Notes Payable $ Business-type Activities Utility System Revenue Bonds General Obligation Bonds Excise Tax Revenue Obligation Bonds Municipal Development Corporation Bonds Notes Payable Capital Leases Total Primary Government $ Percentage of Personal Income (1) Per Capita (1) 2007-08 2008-09 207,860 $ 9,970 131,950 5,049 23,273 - 223,115 $ 9,970 142,460 8,798 22,989 - 221,625 $ 9,970 142,290 8,046 17,503 - 267,063 $ 140,265 7,294 9,730 - 655,085 3,290 9,600 760 4,301 723,185 3,290 5,100 589 2,869 767,445 3,290 432 1,541 817,530 2,957 333 158 1,051,138 $ 1,142,365 $ 1,172,142 $ 1,245,330 $ 10.54% 10.68% 11.03% 9.97% $ 2006-07 2,309 $ (1) Information on personal income and population is presented on Table XII. 142 2,483 $ 2,529 $ 2,677 $ TABLE VII (Concluded) 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 273,869 $ 134,545 6,550 5,406 45,000 281,514 $ 128,515 5,806 2,166 45,000 288,669 $ 121,395 5,062 822 122,835 327,265 $ 120,942 4,318 2,712 140 129,435 346,860 $ 112,882 3,574 5,897 72 83,610 338,401 106,740 2,830 11,012 82,785 857,435 2,691 2,964 - 898,800 2,221 2,731 - 952,500 1,601 2,493 - 973,670 887 105,079 2,370 - 987,454 605 104,499 2,244 - 996,705 474 103,919 2,116 - 1,328,460 $ 1,366,753 $ 1,495,377 $ 1,666,818 $ 1,647,697 $ 11.49% 13.06% 14.10% 16.09% 15.42% 2,843 $ 3,101 $ 3,390 $ 3,747 $ 143 3,621 $ 1,644,982 14.53% 3,561 CITY OF MESA, ARIZONA TABLE VIII RATIOS OF GENERAL BONDED DEBT OUTSTANDING LAST TEN FISCAL YEARS (in thousands) General Bonded Debt Outstanding Year 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Secondary Assessed Value (1) $ 2,921,999 3,083,070 4,114,527 4,793,082 4,749,617 4,094,037 3,164,277 2,770,422 2,559,634 2,821,173 Less: Amounts Available in Debt Service Fund General Obligation Bonds $ 211,150 226,405 224,915 259,895 276,560 283,735 290,270 328,152 347,465 338,875 $ 134 1 138 372 3,584 Total $ 211,150 226,405 224,915 259,895 276,560 283,601 290,269 328,014 347,093 335,291 (1) Maricopa County Finance Department Assessor's Office. (2) Population figures are found on Table XII. 144 Percentage of Secondary Assessed Value 7.23% 7.34% 5.47% 5.42% 5.82% 6.93% 9.17% 11.84% 13.56% 11.88% Per Capita (2) $ 464 492 486 559 592 645 658 739 765 726 CITY OF MESA, ARIZONA TABLE IX DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT (1) JUNE 30, 2015 (in thousands) Debt Outstanding (2) Governmental Unit Debt repaid with property taxes Maricopa County Community College District Mesa Unified School District No. 4 Gilbert Unified School District No. 41 Queen Creek Unified School District No. 95 Higley Unified School District No. 60 Tempe Union High School District No. 213 Tempe Elementary School District No. 3 Eastmark Community Facilities District $ Other Debt: Maricopa County 654,190 281,950 116,680 64,350 98,505 105,000 124,260 3,250 131,380 Proportion Applicable to the City of Mesa Percent (2) Amount 8.04 % $ 86.24 26.24 29.48 0.75 0.23 0.55 100.00 8.04 52,597 243,154 30,617 18,970 739 242 683 3,250 10,563 Subtotal, overlapping debt 360,815 City direct debt (3) 547,016 Total Direct and Overlapping Debt $ 907,831 (1) Does not include debt issued by the Salt River Project Agricultural Improvement and Power District, which is considered self-supporting from earnings of the district or special assessment debt issued by 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 2014/15 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 Facilities District Bonds, Deferred Amounts on Refundings, Capital Leases, Highway Project Advancement Notes, and Unamortized Bond Premiums 145 CITY OF MESA, ARIZONA TABLE X LEGAL DEBT MARGIN INFORMATION LAST TEN FISCAL YEARS (in thousands) 2005-06 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 $ $ 59,920 584,400 $ 488,650 $ 162,531 548,570 $ $ 616,614 $ 412,662 $ 575,193 229,184 922,905 $ 715,678 $ 944,862 274,016 $ 958,616 $ 712,290 $ 986,306 278,913 2.13% $ 949,923 270,496 $ 25.70% $ 284,977 6,064 246,326 (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. 146 $ 4.72% 22.45% $ 287,585 2009-10 13,569 207,227 33.08% $ $ 7.16% 203,952 $ 246,872 2008-09 17,688 12.14% 16.38% $ 2007-08 22,453 95,750 Total Net Debt Applicable to the 20% Limit as a Percentage of the 20% Legal Debt Limitation Total Margin Available 184,984 65.82% Total Net Debt Applicable to 20% Limit Margin Available for Future General Obligation Bond Issues for 20% Bonds $ 115,400 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 175,320 2006-07 679,427 28.48% $ 958,340 TABLE X (Concluded) Legal Debt Margin Calculation for Fiscal Year 2014-15 Secondary Assessed Value $ 2,821,173 Legal Debt Limitation Debt Applicable to Limit: General Obligation Bonds Less: Cash With Fiscal Agents Total Net Debt Applicable to Limit Margin Available for Future General Obligation Bond Issues $ $ 6% Bonds (1) 169,270 $ $ $ $ $ 2011-12 2012-13 245,642 $ 189,857 $ 166,225 343,370 - 1,275 343,370 167,995 5,326 1,370 240,316 $ 188,487 $ 2.17% 0.72% 818,807 $ 632,855 $ 554,084 278,409 288,900 300,735 540,398 $ 343,955 $ 253,349 34.00% 45.65% 780,714 $ 532,442 $ 175 166,050 220,865 $ 388,860 153,578 2014-15 $ 605 $ 0.11% 152,973 $ 511,927 $ 167,887 $ 320,860 564,235 343,370 $ 67.20% $ 167,995 0.75% 344,040 $ 169,270 1,275 0.39% 54.28% 419,399 $ 2013-14 $ 20% Bonds (2) 564,235 1,275 - Total Margin Available 2010-11 $ 220,865 60.86% $ 147 388,860 CITY OF MESA, ARIZONA TABLE XI PLEDGED-REVENUE COVERAGE LAST TEN FISCAL YEARS (in thousands) Operating Revenues (1) 2005-06 2006-07 2007-08 $ Utility System Revenue Bonds Net Revenue Available Debt Service Operating for Debt Expenses Service Principal Interest 254,216 $ 270,070 278,366 174,561 $ 175,942 196,130 79,656 $ 94,128 82,236 2008-09 2009-10 274,497 275,193 197,992 194,159 76,505 81,034 2010-11 2011-12 2012-13 2013-14 2014-15 283,921 299,356 293,915 295,710 311,506 190,441 180,296 241,128 203,187 209,677 93,480 119,060 52,787 92,523 101,829 340 $ 340 7,960 Coverage Ratio 25,844 29,305 34,658 3.04 3.18 1.93 9,815 10,475 37,225 40,380 1.63 1.59 12,585 21,365 21,630 22,550 117,705 42,814 43,465 46,412 51,927 46,423 1.69 1.84 0.78 1.24 0.62 Highway User Revenue Fund Revenue Bonds Highway User Fund Revenues 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 $ 38,285 $ 40,975 38,512 34,260 31,791 32,053 27,825 30,046 30,923 33,952 Debt Service Principal Interest 135 $ 135 170 2,025 5,720 6,030 3,290 6,145 6,945 6,305 Coverage Ratio 5,830 6,401 6,828 6,823 6,691 6,365 5,563 5,627 5,472 4,982 6.42 6.27 5.50 3.87 2.56 2.59 3.14 2.55 2.49 3.01 (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. 148 TABLE XI (Concluded) Special Assessment Bonds Special Assessment Collections $ 188 851 1,710 Debt Service Principal Interest $ 12 343 752 $ Community Facility District Bonds Community Facility District Collections Coverage Ratio 185 357 457 0.96 1.21 1.41 $ - $ - $ - 752 744 417 377 1.03 0.82 - - - 1,088 996 897 861 827 744 744 744 744 744 337 297 257 217 178 1.01 0.96 0.90 0.90 195 - - 0.90 672 Excise Tax Revenues (2) 187,580 216,897 226,910 203,198 - Debt Service Principal Interest $ 3,900 4,500 5,100 9,970 - $ 479 309 108 17 - 7 131 456 65 232 Coverage Ratio - 1,202 923 Municipal Development Corporation Bonds $ Debt Service Principal Interest 0.99 0.98 Highway Project Advancement Notes Excise Tax Revenues (2) Coverage Ratio 42.83 45.10 43.57 20.35 - $ 149 208,547 200,873 199,949 213,309 221,355 234,183 Debt Service Principal Interest $ - $ 45 - 449 1,576 4,312 5,404 4,790 3,892 Coverage Ratio 464.30 127.48 46.37 39.47 45.78 60.17 CITY OF MESA, ARIZONA TABLE XII DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS Year Population (1) 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 455,151 460,155 463,397 465,272 467,355 440,677 441,160 444,856 454,981 462,376 Sources: (1) (2) (3) (4) (5) Personal Income (2) (in thousands) Per Capita Personal Income (3) $ $ 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 11,321,276 23,156 23,559 23,689 24,263 24,742 23,748 24,035 23,291 23,491 24,485 Median Age (3) Public School Enrollment (4) 32.6 32.9 33.1 33.3 33.6 32.6 34.3 34.4 35.3 35.5 74,626 74,128 73,054 70,297 67,749 66,144 65,662 64,892 64,932 64,532 Unemployment Rate (5) 3.8 % 2.9 4.3 8.0 8.7 9.0 7.5 7.2 6.5 5.4 2006-2013 City of Mesa Development Services (estimate), 2014-2015 ESRI Community Analyst 2006-2010 Claritas (estimate), 2011-2013 SitesUSA (estimate), 2014-2015 ESRI Community Analyst 2006-2010 Claritas, 2011-2013 SitesUSA, 2014-2015 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. 150 CITY OF MESA, ARIZONA TABLE XIII PRINCIPAL EMPLOYERS CURRENT YEAR AND NINE YEARS AGO 2015 Employer Banner Health Systems Mesa Public Schools Boeing City of Mesa Wal-Mart Gilbert Unified School District Fry's Food Stores Maricopa Community College Home Depot County of Maricopa TRW/Vehicle Safety Systems, Inc. Empire Southwest Machinery Bashas' Total Employees 9,573 8,500 4,700 3,545 2,507 1,300 1,087 1,002 963 902 34,079 Rank 2006 Percentage of Total City Employment 1 2 3 4 5 6 7 8 9 10 5.97 % 5.30 2.93 2.21 1.56 0.81 0.68 0.62 0.60 0.56 0.00 0.00 0.00 21.24 % Source: City of Mesa Office of Economic Development 151 Employees 6,600 10,000 4,900 3,700 2,280 1,000 750 800 800 1,000 31,830 Rank 2 1 3 4 5 6 10 8 9 7 Percentage of Total City Employment 2.83 % 4.29 2.10 1.59 0.98 0.00 0.43 0.00 0.32 0.00 0.34 0.34 0.43 13.65 % CITY OF MESA, ARIZONA TABLE XIV FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS 2005-06 2006-07 2007-08 2008-09 2009-10 Function/Program General Government Police Fire Cultural-Recreational Community Environment Energy Resources Water Resources Solid Waste Airport 934 1,311 454 462 161 115 156 138 11 979 1,332 468 445 183 125 177 132 10 966 1,306 472 417 181 132 166 136 9 838 1,282 470 335 189 140 213 126 10 835 1,240 455 329 184 122 232 124 10 Total 3,742 3,851 3,785 3,603 3,531 Source: City of Mesa Budget and Research Division 152 TABLE XIV (Concluded) 2010-11 2011-12 2012-13 2013-14 2014-15 824 1,163 457 334 189 116 230 120 9 870 1,158 473 332 184 115 233 117 9 864 1,163 479 313 183 117 229 127 10 880 1,173 482 317 178 117 238 125 10 876 1,154 503 338 182 116 240 127 10 3,442 3,491 3,485 3,520 3,545 153 CITY OF MESA, ARIZONA TABLE XV OPERATING INDICATORS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS 2005-06 2006-07 2007-08 2008-09 Function/Program Police Major Crimes 24,904 22,437 21,388 18,482 9,205 12,184 7,578 6,256 1,605 1,428 1,200 1,165 43,073 38,003 34,207 32,478 2,595 2,875 2,456 2,125 676 608 567 663 7,820 11,792 12,976 11,923 233,836 266,839 275,449 306,427 Total Attendance 1,195,075 1,161,887 1,165,451 1,348,555 Access to Electronic Resources 2,307,051 3,029,001 2,910,088 3,661,261 Electric Connections 15,806 15,723 15,215 14,546 Gas Connections 48,622 50,478 51,454 51,911 133,105 133,249 133,086 132,771 94.5 89.6 85.8 79.7 131.28 128.83 125.72 108.68 116,282 116,190 116,465 116,721 41.8 38.1 38.0 36.0 Traffic Accidents Fire Fires Rescue or Emergency False Alarms Hazardous Conditions Other Calls Libraries Number of Registered Borrowers Water Connections Average Daily Consumption (mgd)* Peak Daily Consumption (mg)** Wastewater Connections Average Daily Sewage Treatment (mgd)* Solid Waste Customers Served 113,146 115,305 112,632 112,832 Refuse Collected (tons) 261,369 266,817 243,208 234,709 Recyclables Collected (tons) 32,869 38,660 39,296 37,841 Green Waste Collected (tons) 17,500 18,215 17,601 18,936 924 901 934 873 271,295 261,623 337,178 283,336 Falcon Field Average Number of Aircraft Based Aircraft Operations (annual) * mgd - millions of gallons per day ** mg - millions of gallons 154 TABLE XV (Concluded) 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 17,345 16,623 16,740 16,149 14,561 14,795 5,890 5,952 6,047 6,186 6,107 6,622 1,048 981 1,012 929 1,075 1,083 34,079 38,788 42,925 43,416 44,885 45,832 1,478 1,478 1,292 1,255 1,176 1,106 701 478 446 454 477 534 12,819 11,840 11,192 11,803 9,403 8,964 352,607 220,812 142,943 166,492 196,020 125,336 1,367,667 1,095,196 1,143,718 1,178,137 1,166,560 1,166,131 2,542,927 1,691,966 1,566,775 1,515,299 1,541,323 1,549,150 14,738 15,064 15,841 13,815 16,460 16,703 52,832 53,434 55,828 55,544 58,011 59,214 133,701 134,072 135,138 136,640 137,910 139,560 72.7 76.2 81.6 78.2 76.7 74.1 111.14 114.30 122.30 115.68 117.13 113.45 117,831 118,413 119,615 120,953 122,623 124,142 33.6 33.7 33.4 33.8 33.1 33.3 113,079 115,811 118,949 119,142 121,674 122,552 217,295 223,217 209,116 215,463 217,745 233,754 36,490 35,486 34,443 34,616 34,629 35,541 18,588 19,149 17,882 19,878 18,854 21,151 841 789 749 700 729 702 248,381 221,910 222,650 190,605 276,731 241,848 155 CITY OF MESA, ARIZONA TABLE XVI CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS 2005-06 2006-07 2007-08 2008-09 4 4 4 4 285 351 368 330 17 17 17 17 3 3 3 3 Developed Parks (acres) 1,184 1,184 1,180 1,180 Undeveloped Acres 1,251 1,251 1,251 1,251 12 12 12 12 6 6 6 6 1,162 1,169 1,178 1,182 12 12 12 12 Function/Program Police Stations Stations 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) 298 303 308 316 1,121 1,147 1,202 1,223 2,022 2,008 2,068 2,104 117 117 117 125 1,522 1,544 1,577 1,598 56 60 60 60 78 68 70 69 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 156 TABLE XVI (Concluded) 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 4 4 5 6 8 8 289 290 267 267 291 292 18 18 19 20 20 20 3 4 4 4 4 4 1,154 1,154 1,553 1,177 1,232 1,901 1,078 1,074 705 1,104 1,157 633 12 13 9 9 9 9 6 6 6 6 4 4 1,184 1,190 1,303 1,307 1,418 1,427 12 12 1 1 1 1 321 329 438 432 440 423 1,243 1,247 1,240 1,256 1,256 1,311 2,127 2,136 2,270 2,284 2,315 2,364 125 125 125 125 125 112 1,606 1,613 1,652 1,677 1,677 1,781 60 60 60 60 60 60 69 69 70 72 72 74 2 2 1 1 1 1 157 FINANCIAL SERVICES DEPARTMENT P.O. Box 1466, Mesa, Arizona 85211-1466 (480) 644-2275 www.mesaaz.gov