City of Mesa, Arizona Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2016 Mayor John Giles Councilmember Dave Richins – District 1 Councilmember Alex Finter – District 2 Vice Mayor Dennis Kavanaugh – District 3 Councilmember Christopher Glover – District 4 Councilmember David Luna – District 5 Councilmember Kevin Thompson – District 6 Chris Brady, City Manager Kari Kent, Deputy City Manager John Pombier, Deputy City Manager Prepared by: Financial Services Department P.O. Box 1466 Mesa, Arizona 85211-1466 (480) 644-2275 www.mesaaz.gov 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 & Community 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 Transit Jodi Sorrell Deputy City Manager Natalie Lewis Falcon Field Corinne Nystrom Mayor and City Council Support Arts & Culture Cindy Ornstein Mesa Counts on College Amy Trethaway Community Services Ruth Giese Grants Downtown Coordination, DMA 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 Police Department John Meza Fire & Medical Department Harry Beck Fleet Services Pete Scarafiotti Human Resources Gary Manning Public Information & Communications Steve Wright Environmental Management & Sustainability Scott Bouchie Introductory Section Comprehensive Annual Financial Report 2016 TABLE OF CONTENTS Exhibit Page SECTION I – INTRODUCTORY SECTION Table of Contents Letter of Transmittal Certificate of Achievement for Excellence in Financial Reporting I V XI 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 30 41 48 49 53 55 56 59 71 73 74 75 76 76 79 91 Required Supplementary Information Schedule of the City’s Proportionate Share of Net Pension Liability Cost-Sharing Pension Plan 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 99 B-4 B-5 B-6 100 101 102 103 TABLE OF CONTENTS (Continued) Exhibit Page C-1 104 C-2 108 C-3 C-4 C-5 112 113 114 C-6 115 D-1 D-2 D-3 D-4 D-5 D-6 D-7 116 117 118 119 120 121 122 D-8 D-9 D-10 123 124 125 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 Funds Budgetary Comparison Schedule – Community Facilities District Special Revenue Fund Budgetary Comparison Schedule – Environmental Compliance Budgetary Comparison Schedule – Grants and Special Programs Budgetary Comparison Schedule – Highway User Revenue Budgetary Comparison Schedule – Mesa Housing Authority Budgetary Comparison Schedule – Quality of Life Sales Tax Budgetary Comparison Schedule – Street Sales Tax Budgetary Comparison Schedule – Community Facilities District Capital Projects Budgetary Comparison Schedule – General Capital Projects Budgetary Comparison Schedule – Streets III TABLE OF CONTENTS (Concluded) Exhibit Page I II 126 128 III 134 IV 136 V VI 138 140 VII VIII IX X XI 141 143 144 145 147 XII XIII 149 150 XIV XV XVI 151 153 155 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) 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 15, 2016 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, 2016 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, 2016, 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, 2016, are fairly presented in conformity with accounting principles generally accepted in the United States of America. The independent auditor’s report is presented as the first component of the financial section of this report. The independent audit of the financial statements of the City was part of a broader, federally mandated “Single Audit” designed to meet the special needs of federal grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the audited government’s internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of federal awards. These reports are available in the City’s separately issued Single Audit Report. Accounting principles generally accepted in the United States of America require that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A) and should be read in V 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 475,274 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 3,798 full-time (equivalent) City employees working within twenty-eight different City departments undertakes the various functions of Mesa’s city government and its operation. The City provides a full range of municipal services, including police and fire protection, parks and recreation, library, transportation, health and certain social services and general administration; and, the City owns and operates enterprises including operations of electric, gas, water, wastewater, solid waste, airport and 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 make important decisions about the direction of the City. The City Council sets the City’s long-term strategic direction and provides staff with budget priorities for the upcoming fiscal year. A proposed budget is presented to the City Council for review and discussion in mid spring with the final adoption of the operating budget by resolution in late spring. The City of Mesa begins the fiscal year on July 1st. VI Legal control over the budget derives from State statutes that prohibit the City from exceeding its adopted budget in total, and from the resolution itself that sets the limit. The residents of Mesa approved a Home Rule exemption to the State of Arizona’s expenditure limitation requirement. The City can determine the budget level as long as the City can identify resources to cover the expenses. The budget appropriated by the City Council consists of all planned expenditures and the associated resources to cover them. While the State does not require trust fund expenditures to be appropriated, the City chooses to include them in order to fully represent City activity. Factors Affecting Financial Condition The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specific environment within which the City operates. Local Economy The City’s economic indicator for residential construction in fiscal year (FY) 15/16 is up 45% from FY 14/15. Commercial construction increased 16% in FY 15/16 over the previous year. During FY 15/16 the City issued 2,066 permits for new residential construction. This is 43% more than the previous fiscal year. The corresponding dollar valuation associated with all FY 15/16 permits increased approximately $280 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 six 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, 2016, retail sales tax was up 6.4% while overall sales tax revenues were up 4.4%. Tourism also increased as evidence by a 12.1% increase in the transient lodging (‘bed’) tax. Other financial resources followed the economy’s continuation of a slow and steady recovery. The City incorporated this in the preparation of the FY 16/17 budget. Conservative budget practices and willingness to respond to economic indicators continues to allow the City to maintain unrestricted fund balance reserve levels as established in the City’s financial policies. The FY 16/17 budget continues the City’s fiscally conservative approach and reinforces the City’s effort to invest in economic development, improve public safety and attract and retain excellent employees. All fund balances were maintained at or above the levels prescribed by financial policy and prudent practice. Major Initiatives During the year, various major accomplishments were realized. Some of these were: VII • Mesa launched its open data portal in March to celebrate open data day. The portal makes it easier for citizens to access data, increases transparency and provides information about the progress Mesa is making towards addressing city-wide priorities. The City of Mesa as part of What Works Cities, an initiative of Bloomberg Philanthropies, has committed to using data and evidence based practices to improve the lives of Mesa residents. The open data portal plays an integral role in Mesa’s efforts by providing easy access to data the City is using to measure progress towards the Mayor and Council’s priorities. • In March 2016, the site plans for the expansion of the A.T. Still University campus in Mesa were approved. The expansion would add a 122,000 square feet three-story academic building and parking garage to the 195,000 square feet incorporated in the four existing buildings. • In April 2016, Santander Consumer USA held a grand opening and ribbon cutting ceremony at Centrica, a creative adaptive reuse project in Mesa’s Fiesta District. Santander Consumer USA, a full-service, technology-driven consumer finance company focuses on vehicle finance, third-party servicing and delivering superior service to more than 2.7 million customers across the full credit spectrum. They currently employ 188 people at its Mesa location and plan to employ more than 970 over three years. Santander Consumer USA, based in Dallas, is an established U.S consumer finance company opening its first office in Arizona, and is leasing the entire 117,000 square foot Centrica project. Centrica was transformed from a vacant retail center into single story Class A creative office space with more than 700 parking spots and redundant fiber optic backbone connectivity. • In March 2016, Arizona-based Ensemble Real Estate Solutions & Investments purchased the 12-story, 276-room Phoenix Marriott Mesa hotel located in downtown Mesa. Ensemble will maintain the Marriott brand and will invest $13 million to renovate the property. Ensemble plans a “top to bottom” renovation to include all public spaces, guestrooms, food and beverage outlets and pre-function/function spaces. The majority of the renovations will be implemented during the summer of 2017 to position the property for the 2017 / 2018 peak season. • In June 2016, H Mart, an upscale Asian-American supermarket chain, announced it will open its first Arizona store in the 63,000 square foot former Albertson’s building in Mesa. H Mart will invest more than $7 million in renovations in its flagship Arizona store and will employ approximately 100 people. The new store will stock more than 40,000 items featuring a wide variety of Asian, Hispanic and American foods and related products. The store will also include a pharmacy, cosmetics store, gift shop and an Asian food court with as many as seven restaurants and a Korean bakery. • The Boeing Apache center continues to see brisk demand with the announcement of two major contracts. Boeing announced a $1.5 billion contract with the United States in April 2016 to remanufacture 117 AH-64D Apaches to the new, more capable AH-64E model. In June 2016, Boeing announced a $667 million contract to supply Qatar with 24 AH-64E Apache helicopters. VIII • In June 2016, Dexcom, Inc., a leader in continuous glucose monitoring for patients with diabetes, announced that it will construct a new state of the art manufacturing facility in Mesa, Arizona for the company’s global manufacturing operations and is projected to create more than 500 jobs over the next several years. The company expects initial manufacturing operations in this facility to commence in the second quarter of 2017. • In July 2016, Phoenix-Mesa Gateway Airport broke passenger records for three months in a row (108K in May, 127K in June, and 132K in July). Phoenix-Mesa Gateway Airport projects to have more than 1.4 million passengers this year. Also, the General Aviation Center at the airport is undergoing renovations, adding 3,900 square feet to its restaurant space with the addition of Barrio Brewing Company. • In August 2016, LGE Design Build started construction on a new 33,000-square-foot distribution center for WireMasters, a distributor of wire cable and associated electrical components for cable harnesses serving the military, aerospace and defense industry. The new distribution center, expected to be complete in early 2017, will serve the southwestern United States. • In the fall of 2016, Benedictine University (BenU) at Mesa began its fourth fall semester with a campus record 387 traditional undergraduate students. The University currently offers 10 intercollegiate sports. In January 2017, BenU at Mesa students will have access to single or double suites in the former, and recently converted, Alhambra Hotel. Amenities such as study areas, lounges, a café, kitchens, laundry and exercise rooms, an outdoor commons area, patio space and parking will be included. • In September 2016, a grand opening ceremony was held for Southern Avenue Villas in Mesa’s Fiesta District, the first major apartment development in the District in more than 20 years. The complex has eight buildings that are three stories each. The development has several significant amenities such as a cabana for social gatherings; a large pool with a spa, shade canopy and tanning ledge; a spacious clubhouse with indoor basketball, fitness center, business center, game room and large clubroom; a sand volleyball court; and a dog park. 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, 2015. 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. IX Financial Section Comprehensive Annual Financial Report 2016 CliftonLarsonAllen LLP CLAconnect.com INDEPENDENT AUDITORS’ REPORT The Honorable Mayor and Members of 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, 2016, 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. (1) The Honorable Mayor and Members of 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, 2016, 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. 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. 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. (2) The Honorable Mayor and Members of City Council City of Mesa, Arizona Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 15, 2016, 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 15, 2016 (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, 2016. 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 $890.5 million. The City’s total net position increased by $16.2 million from $874.3 million in fiscal year 2015.  The City’s total revenues decreased by $21.9 million from $919.1 million to $897.2 million. The decrease is primarily from Capital Grants and Contributions, specifically related to developer contributions.  As of the end of fiscal year 2016, the City’s governmental funds reported a combined ending fund balance of $219 million, a $61.4 million decrease from the previous year. The decrease is primarily related to the $77.8 million pay-off of Highway Project Advancement Notes.  The City’s governmental fund balance is reported in one of five categories. Approximately 54.3% of the total fund balance amount, or $119 million, is designated by the City as committed, assigned, or unassigned. The remaining 45.7% or $100 million is designated as non-spendable or restricted.  The City’s total long-term liabilities increased by $67 million to $2.9 billion at June 30, 2016. Increase is related to new bond issuances, net of amounts refinanced and paid off; increase in postemployment benefit liabilities; and increase in pension liabilities. 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 4 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. 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, community environment and cultural-recreational. 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. 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, 2016 and 2015. 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 2016 2015 $ 563,378 $ 614,770 1,409,939 1,365,366 1,973,317 1,980,136 Business-Type Activities 2016 2015 $ 470,837 $ 436,696 1,425,547 1,421,645 1,896,384 1,858,341 Total Government 2016 2015 $ 1,034,215 $ 1,051,466 2,835,486 2,787,011 3,869,701 3,838,477 7,700 105,401 113,101 5,250 115,762 121,012 30,956 4,555 35,511 23,412 5,320 28,732 38,656 109,956 148,612 28,662 121,082 149,744 912,385 634,414 121,635 1,668,434 955,591 603,333 131,598 1,690,522 1,282,159 47,493 87,174 1,416,826 1,205,189 45,382 91,166 1,341,737 2,194,544 681,907 208,809 3,085,260 2,160,780 648,715 222,764 3,032,259 37,881 72,554 4,653 9,083 42,534 81,637 965,148 81,941 (666,986) $ 380,103 932,660 72,170 (666,758) $ 338,072 302,521 49,139 158,756 510,416 327,743 47,576 160,934 536,253 1,267,669 131,080 (508,230) $ 890,519 1,260,403 119,746 (505,824) $ 874,325 $ 5 $ 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 $890.5 million at the end of fiscal year 2016. The largest portion of net position ($1.3 billion or 142.3%) 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 are at $131.1 million in fiscal year 2016. The unrestricted net position may be used to meet the City’s ongoing obligations to citizens and creditors. Unrestricted net position decreased during fiscal year 2016 by $2.4 million to ($508.2) 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, 2016 and 2015: Capital Assets (net of accumulated depreciation/amortization) As of June 30 (In thousands of dollars) Governmental Activities 2015 2016 Land $ 383,742 $ 348,421 Infrastructure - Nondepr 3,321 3,308 Buildings 238,691 235,707 Other Improvements 80,027 73,550 Machinery & Equipment 62,385 56,623 Intangibles 10,544 15,818 Infrastructure 549,943 574,978 Construction-in-Progress 81,286 56,961 Total $ 1,409,939 $ 1,365,366 Business-Type Activities 2016 2015 $ 54,813 $ 54,333 17,666 17,666 77,665 75,464 82,604 87,210 37,795 37,156 6,647 7,798 1,005,053 1,043,965 143,304 98,052 $ 1,425,547 $ 1,421,644 Total Government 2016 2015 $ 438,555 $ 402,754 20,987 20,974 316,356 311,171 162,631 160,760 100,180 93,779 17,191 23,616 1,554,996 1,618,943 224,590 155,013 $ 2,835,486 $ 2,787,010 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, 2016. 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. As noted in the above table, the City’s capital asset balances at June 30, 2016 were overall consistent with prior year balances. Land increased by $35.8 million due to developer contributions, and acquisition of property including a future dispatch center. Construction-in-progress also increased during fiscal year 2016. Some of the larger current year project expenditures include $10 million water project for water mains from the Val Vista Water Treatment Plant to the City Zone pump stations and $9 million in Fiesta District improvements. The remaining projects primarily related to street overlay, transportation projects, water projects and wastewater projects. 6 Debt Administration – The following schedule shows the outstanding long-term debt of the City as of June 30, 2016 and 2015. 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 Notes Payable Total Governmental Activities 2016 2015 $ 350,560 $ 336,716 92,895 100,285 - $ 2,085 19,315 464,855 $ 2,830 10,974 77,835 528,640 Business-Type Activities 2016 2015 $ 390 $ 474 1,063,710 1,007,455 94,060 94,060 Total Government 2016 2015 $ 350,950 $ 337,190 1,063,710 1,007,455 92,895 100,285 94,060 94,060 1,985 $ 1,160,145 2,085 19,315 1,985 $ 1,625,000 2,116 $ 1,104,105 2,830 10,974 79,951 $ 1,632,745 At the end of the current fiscal year, the City had total outstanding debt of $1.6 billion. Of this amount, $445 million comprises debt backed by the full faith and credit of the City and $1.2 billion represents bonds secured by specified revenue sources (i.e., Utility System Revenue and Highway User Revenue). An additional amount of $21.4 million are special assessment and community facility district bonds where the City is contingently liable in the event that the assessment revenues are insufficient to satisfy the debt payments. The City’s outstanding long-term debt (considering new borrowings, debt retirements, and refunding) decreased $7.7 million. The change in debt includes new borrowings during the fiscal year totaling $137 million, refundings of $181.3 million, principal payments of $133.3 million, and payments to refund bond escrow agent of $192.9 million. 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, 2016 was $164.4 million in the 6% capacity and $201.7 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. 7 Changes in Net Position The following table shows the revenues and expenses of the City for the fiscal years ended June 30, 2016 and 2015. Changes in Net Position Year Ended June 30 (In thousands of dollars) Governmental Activities 2016 2015 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 $ Governmental Activities Expenses: General Government Public Safety Community Environment Cultural-Recreational 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 Net Position - Ending $ 81,866 26,361 35,925 $ 73,398 26,418 75,907 Business-Type Activities 2015 2016 $ 346,331 267 16,929 $ 333,292 157 18,107 151,826 33,825 2,331 149,350 44,928 2,210 6,008 534,630 146,337 33,241 2,081 145,266 47,761 1,786 7,844 560,039 96,860 305,376 117,120 54,967 20,424 102,396 302,633 101,531 52,430 23,939 - - - 594,747 582,929 (60,117) 102,148 $ $ 406,690 26,575 94,014 146,337 33,241 3,080 145,266 47,761 2,927 233 13,001 919,125 - 96,860 305,376 117,120 54,967 20,424 102,396 302,633 101,531 52,430 23,939 27,647 31,549 95,574 73,877 36,586 4,865 2,575 4,252 2,913 5,271 1,182 286,291 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 27,647 31,549 95,574 73,877 36,586 4,865 2,575 4,252 2,913 5,271 1,182 881,038 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 (22,890) 94,427 76,311 (102,148) 64,906 (94,427) 16,194 - 42,016 - 42,031 71,537 (25,837) (29,521) 16,194 42,016 338,072 266,535 536,253 565,774 874,325 832,309 $ 338,072 $ 8 510,416 999 1,141 233 5,157 359,086 428,197 26,628 52,854 151,826 33,825 3,492 149,350 44,928 5,230 (6,145) 7,047 897,232 380,103 1,161 3,020 (6,145) 1,039 362,602 Total Government 2016 2015 $ 536,253 $ 890,519 $ 874,325 Governmental Activities As presented in the following two graphs, the largest funding sources, including transfers, for the governmental activities are taxes (30%), Unrestricted Intergovernmental (23%), Transfers (16%), and Charges for Services (13%). The largest users of resources for the governmental activities are Public Safety (51%), Community Environment (20%), and General Government (16%). Revenues by Source Including Transfers – Governmental Activities For the Fiscal Year Ended June 30, 2016 Taxes 30% Capital Grants & Contributions 6% Operating Grants & Contributions 4% Unrestricted Contributions 7% Charges for Services Other 1% 13% Transfers 16% Unrestricted InterGovernmental 23% Functional Expenses – Governmental Activities For the Fiscal Year Ended June 30, 2016 Public Safety 51% Community Environment 20% General Government 16% Interest on Long-Term Debt 4% CulturalRecreational 9% 9 Governmental Activities Revenues For Fiscal Years 2016 and 2015 (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 Program Revenues Taxes Unrestricted Intergovernmental 2016 Contributions Investment Miscellaneous 2015 Governmental Activities Functional Expenses For Fiscal Years 2016 and 2015 (In thousands of dollars) $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 General Government Public Safety Community Environment 2016 10 2015 Cultural-Recreational Interest on Long-term Debt The graphs on the previous page compare governmental activities revenues and expenses from fiscal year 2016 to fiscal year 2015. Total governmental activities revenues decreased $25.4 million from $560 million to $534.6 million. Total governmental expenses increased by $11.8 million from $582.9 million to $594.7 million. Key factors in this change include:  Charges for services increased $8.5 million, sales taxes increased $5.5 million and Unrestricted Intergovernmental revenues increased $4.1 million. These increases are due to the continuing improvement in the local economy. However, there was a corresponding decrease in Capital Grants and Contributions of $40 million due to a decrease in developer contributions.  Increase in governmental expenditures is primarily related to capital outlay costs in the Community Facilities district, a blended component unit of the City. 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 140,000 120,000 100,000 80,000 60,000 40,000 20,000 Electric Gas Water 2016 11 Wastewater 2015 Solid Waste Other Programs Functional Expenses – Business-Type Activities 60,000 50,000 40,000 30,000 20,000 10,000 Electric Gas Water 2016 Wastewater Solid Waste Other Programs 2015 Total business-type activities program and general revenues increased slightly by $3.5 million from $359.1 million to $362.6 million. The business-type activities total expenses decreased by $7.9 million from $294.2 million to $286.3 million. The largest decrease in expenses was in the water utility, and related to the joint venture activity. Net (Expenses) Revenue – Business-Type Activities 50,000 40,000 30,000 20,000 10,000 (10,000) Electric Gas Water 2016 Wastewater 2015 12 Solid Waste Other Programs 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 102. 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 $219 million, a $61.4 million decrease from the previous year. $95.9 million of this total amount is restricted, $28.8 million is committed, and $4.1 million in Nonspendable, thus the balances are not available for spending in the coming year. The decrease of $61.4 million in the governmental funds is primarily driven by the $77.8 million pay-off of the Highway Project Advancement Notes. Not considering the $77.8 million debt payment, the governmental funds had a $16.4 million increase in fund balance, primarily driven by General Fund activity. 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, community environment and culturalrecreational. At the end of the current fiscal year, total fund balance of the General Fund was $94.8 million, while unassigned fund balance was $79.7 million. Total fund balance of the City’s General Fund increased by $16.9 million during the current fiscal year from $77.9 million to $94.8 million. This is primarily due to a decrease in transfers out 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 $25.9 million during the current fiscal year from $536.3 million to $510.4 million. The unrestricted net position of the Enterprise Fund amounted to $158.8 million. The decrease in current year is primarily related to transfers out to the General Fund. 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 $1.6 billion occurred during fiscal year 2016. General Fund revenues of $264.9 million, on a budgetary basis, were comparable to budgeted revenues of $270.2 million. Expenditures of $350 million were less than the budgeted expenditures of $383.1 million. Savings were primarily in general government and capital outlay. 14 ECONOMIC FACTORS In June 2016, the City Council approved a $1.7 billion budget, which is an increase of $60 million compared to prior year’s budget. The fiscal year 2017 budget includes $1.4 billion for operations and $258.6 million for scheduled bond capital improvements. The adopted fiscal year 2017 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 2016 CITY OF MESA, ARIZONA EXHIBIT A-1 STATEMENT OF NET POSITION JUNE 30, 2016 (in thousands) ASSETS Pooled Cash and Investments Accounts Receivable, Net Accrued Interest Receivable Due from Other Governments Internal Balances Inventory Prepaid Costs Deposits Restricted Assets: Pooled Cash and Investments Cash with Fiscal Agent Cash with Trustee Accounts Receivable, 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 Noncurrent Liabilities, Due Within One Year Noncurrent Liabilities, Due in More Than One Year Net Pension Liability Total Liabilities DEFERRED INFLOWS OF RESOURCES Pensions Total Deferred Inflows of Resources NET POSITION Net Investment in Capital Assets Restricted For: Airport Bond Indentures Construction Debt Service Public Safety Transportation Programs Other Programs Unrestricted Total Net Position $ 265,772 23,734 501 18,497 (2,773) 5,897 3,444 827 74,035 26,291 461 3,167 2,773 1,732 45 Total $ 339,807 50,025 962 21,664 5,897 5,176 872 10,900 37,579 8,761 11,616 907 177,716 468,349 941,590 1,973,317 115,149 40,390 61 4,624 3,093 199,016 215,783 1,209,764 1,896,384 126,049 77,969 8,822 11,616 907 4,624 3,093 376,732 684,132 2,151,354 3,869,701 7,700 105,401 113,101 30,956 4,555 35,511 38,656 109,956 148,612 26,044 38,448 6,916 589 49,638 35,487 876,898 634,414 1,668,434 5,874 81,300 25,775 1,256,384 47,493 1,416,826 31,918 38,448 6,916 589 130,938 61,262 2,133,282 681,907 3,085,260 37,881 37,881 4,653 4,653 42,534 42,534 965,148 302,521 1,267,669 24,822 6,840 47,818 2,461 (666,986) 380,103 9,869 27,777 3,093 8,390 10 158,756 510,416 The accompanying notes are an integral part of the financial statements. 16 $ $ 9,869 27,777 3,093 33,212 6,840 47,818 2,471 (508,230) 890,519 CITY OF MESA, ARIZONA EXHIBIT A-2 STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED JUNE 30, 2016 (in thousands) Functions/Programs: Governmental Activities: General Government Public Safety Community Environment Cultural-Recreational Interest on Long-Term Debt Total Governmental Activities Expenses $ Business-type Activities: Electric Gas Water Wastewater Solid Waste Airport Golf Course Convention Center Hohokam Stadium/Fitch Complex Cubs Stadium District Cooling Total Business-type Activities Total Government Charges for Services 96,860 305,376 117,120 54,967 20,424 594,747 $ 27,647 31,549 95,574 73,877 36,586 4,865 2,575 4,252 2,913 5,271 1,182 286,291 $ 881,038 9,278 30,819 26,942 14,827 81,866 Program Revenues Operating Grants and Contributions $ 32,254 38,962 130,674 79,523 55,354 3,623 1,645 2,798 63 201 1,234 346,331 $ 428,197 493 9,697 15,963 208 26,361 Capital Grants and Contributions $ 8 4 173 6 74 1 1 267 $ 26,628 281 915 10,866 2,797 1,770 200 100 16,929 $ 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 Revenues (Expenses) Transfers Total General Revenues and Transfers Change in Net Position Net Position - Beginning Net Position - Ending The notes to the financial statements are an integral part of this statement. 17 6,167 856 28,896 6 35,925 52,854 EXHIBIT A-2 (Continued) Net (Expense) Revenue and Changes in Net Position Primary Government Governmental Business-type Activities Activities Total * * $ (80,922) (264,004) (45,319) (39,926) (20,424) (450,595) $ - $ - $ 4,896 8,332 46,139 8,449 18,842 528 (930) (1,253) (2,749) (5,070) 52 77,236 (80,922) (264,004) (45,319) (39,926) (20,424) (450,595) 4,896 8,332 46,139 8,449 18,842 528 (930) (1,253) (2,749) (5,070) 52 77,236 (450,595) 77,236 (373,359) 151,826 33,825 2,331 149,350 44,928 2,210 6,008 102,148 492,626 1,161 3,020 (6,145) 1,039 (102,148) (103,073) 151,826 33,825 3,492 149,350 44,928 5,230 (6,145) 7,047 389,553 42,031 (25,837) 16,194 338,072 536,253 874,325 380,103 $ 510,416 $ 890,519 18 CITY OF MESA, ARIZONA EXHIBIT A-3 GOVERNMENTAL FUNDS BALANCE SHEET JUNE 30, 2016 (in thousands) ASSETS Pooled Cash and Investments Accounts Receivable, Net 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 Interest Payable Unearned Revenue Matured Bonds Payable Total Liabilities General Fund Highway Project Advancement Notes $ $ $ $ DEFERRED INFLOWS OF RESOURCES Unavailable Revenue Total Deferred Inflows of Resources FUND BALANCES Nonspendable Restricted Committed Assigned Unassigned Total Fund Balances Total Liabilities, Deferred Inflows of Resources and Fund Balances $ 81,457 18,570 325 6,372 1,414 2,621 176 110,935 9,390 2,773 956 589 $ $ 2 7,898 8,761 16,661 - Non-major Governmental Funds $ $ $ 118,965 4,694 77 12,120 77 582 3,002 37,579 11,616 907 189,619 14,236 1,414 5,960 - Total Governmental Funds $ $ $ 200,422 23,264 404 18,492 1,414 2,698 758 10,900 37,579 8,761 11,616 907 317,215 23,626 4,187 6,916 589 1,386 15,094 8,214 8,214 8,885 2,410 28,743 61,648 8,885 12,010 28,743 84,956 1,035 1,035 - 12,209 12,209 13,244 13,244 4,035 184 227 10,703 79,657 94,806 8,447 8,447 77 87,254 28,580 6 (155) 115,762 4,112 95,885 28,807 10,709 79,502 219,015 110,935 $ The accompanying notes are an integral part of the financial statements. 19 16,661 $ 189,619 $ 317,215 CITY OF MESA, ARIZONA EXHIBIT A-4 RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION JUNE 30, 2016 (in thousands) Fund Balances - total governmental funds $ 219,015 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. 1,408,008 Other assets used in governmental activities are not financial resources and therefore not reported in the governmental funds. 177,716 Deferred outflows related to deferred amounts on refunding and pensions are not financial resources and therefore not reported in the funds. 111,951 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. (1,523,754) 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. (23,461) Internal service funds are used by management to charge the costs of certain activities to individual funds. 10,628 Net position of the governmental activities - statement of net position The accompanying notes are an integral part of the financial statements. 20 $ 380,103 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, 2016 (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 Highway Project Advancement Notes Non-major Governmental Funds Total Governmental Funds $ $ $ $ EXPENDITURES Current: General Government Public Safety Community Environment Cultural-Recreational Debt Service: Principal Interest on Bonds Interest on Notes Service Charges Cost of Issuance Capital Outlay Total Expenditures 104,116 40 17,580 118,775 22,649 8,795 416 300 1,148 273,819 8,143 46 8,189 47,710 34,765 2,291 1,433 5,674 64,442 15,529 2,254 1,021 661 2,846 178,626 151,826 34,765 2,331 1,433 23,254 191,360 38,178 11,049 1,483 961 3,994 460,634 71,651 223,733 13,723 36,516 - 7,797 30,795 51,836 7,135 79,448 254,528 65,559 43,651 4,580 350,203 77,835 324 78,159 29,548 18,581 14 1,505 87,204 234,415 107,383 18,581 324 14 1,505 91,784 662,777 Excess (Deficiency) of Revenues Over (Under) Expenditures (76,384) (69,970) (55,789) (202,143) 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 Refunding Bond Escrow Agent Total Other Financing Sources (Uses) 101,863 (8,618) 93,245 20,709 (15,680) 46,530 2,283 43,304 (49,693) 47,453 122,572 (24,298) 46,530 2,283 43,304 (49,693) 140,698 (8,336) (61,445) Net Change in Fund Balances Fund Balance - Beginning Fund Balances - Ending $ - 16,861 (69,970) 77,945 78,417 94,806 $ The accompanying notes are an integral part of the financial statements. 21 8,447 124,098 $ 115,762 280,460 $ 219,015 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, 2016 (in thousands) Net change in fund balances - total governmental funds $ (61,445) 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. 8,269 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. (77,407) Current-year pension contributions are reclassified to deferred outflows of resources and therefore not reported as expenditures in governmental funds. 45,899 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 ($91,784) exceeded depreciation ($68,671) in the current period. 23,113 The net effect of miscellaneous transactions involving capital assets (e.g., donations, transfers and disposals) is to increase net position. 14,861 Change in equity in Joint Venture 24,659 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. 63,830 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. 7,218 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. (6,966) Change in net position of the governmental activities - statement of activities The accompanying notes are an integral part of the financial statements. 22 $ 42,031 CITY OF MESA, ARIZONA EXHIBIT A-7 STATEMENT OF NET POSITION PROPRIETARY FUNDS JUNE 30, 2016 (in thousands) ASSETS Current Assets: Pooled Cash and Investments Accounts Receivable (Net of Allowances) Accrued Premiums Receivable Accrued Interest Receivable Due from Other Governments Advances to Other Funds 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 Business-type Activities Enterprise Fund Governmental Activities Internal Service Funds $ $ 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 $ 74,035 26,291 461 3,167 2,773 1,732 45 115,149 40,390 61 4,624 3,093 271,821 72,634 199,016 215,783 1,209,764 1,624,563 80 1,851 1,931 1,896,384 74,565 30,956 4,555 35,511 1,150 1,150 1,931,895 The accompanying notes are an integral part of the financial statements. 23 65,350 311 159 97 5 5,897 746 69 $ 75,715 (Continued) CITY OF MESA, ARIZONA EXHIBIT A-7 (Continued) STATEMENT OF NET POSITION PROPRIETARY FUNDS JUNE 30, 2016 (in thousands) LIABILITIES Current Liabilities-Payable From Current Assets: Accounts Payable and Accrued Liabilities Claims Payable Current Liabilities-Payable From Restricted Assets: Accounts Payable and Accrued Liabilities 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 Business-type Activities Enterprise Fund Governmental Activities Internal Service Funds $ $ Long-Term Liabilities: Bonds Payable Notes Payable Unamortized Bond Premium 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 Restricted For: Airport Bond Indentures Construction Debt Service Golf Course Unrestricted Total Net Position $ 5,874 10,947 23,520 158 16,870 29,805 - 25,148 134 493 112,949 40 40,906 1,133,012 1,851 39,396 3,618 47,493 78,507 1,303,877 617 12,002 10,386 23,005 1,416,826 63,911 4,653 4,653 1,176 1,176 302,521 1,931 9,869 27,777 3,093 8,390 10 158,756 510,416 8,697 10,628 The accompanying notes are an integral part of the financial statements. 24 2,418 38,448 $ 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, 2016 (in thousands) Operating Revenues: Electric Sales Pledged as Security for Revenue Bonds Gas Sales Pledged as Security for Revenue Bonds Water Sales Pledged as Security for Revenue Bonds Wastewater Charges Pledged as Security for Revenue Bonds Solid Waste Charges Pledged as Security for Revenue Bonds Airport Fees Golf Course Fees Convention Center Fees Hohokam Stadium/Fitch Complex Fees Cubs Stadium Fees District Cooling Charges Charges For Services Self-Insurance Contributions Other Revenue Total Operating Revenues Business-type Activities Enterprise Fund Governmental Activities Internal Service Funds $ $ 32,254 38,962 125,304 71,708 54,871 3,623 1,645 2,798 63 201 1,234 332,663 Operating Expenses: Electric Gas Water Wastewater Solid Waste Airport Golf Course Convention Center Hohokam Stadium/Fitch Complex Cubs Stadium District Cooling Warehouse, Maintenance & Services Self-Insurance Total Operating Expenses 22,098 23,222 48,113 31,316 33,703 3,368 2,312 3,999 1,131 1,868 760 171,890 Operating Income (Loss) Before Depreciation and Amortization 160,773 Depreciation and Amortization (67,883) Operating Income (Loss) 92,890 The accompanying notes are an integral part of the financial statements. 25 25,331 78,034 757 104,122 25,461 86,012 111,473 (7,351) (509) (7,860) (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, 2016 (in thousands) Business-type Activities Enterprise Fund Governmental Activities Internal Service Funds 2,055 965 267 727 - (44,786) (15) (43) (10,019) (4,228) 13,668 (1,502) 1,161 5,095 (37,382) 727 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 55,508 Capital Contributions Transfers In Transfers Out (7,133) 16,929 3,051 (101,325) 167 - Change in Net Position (25,837) (6,966) Total Net Position - Beginning 536,253 17,594 Total Net Position - Ending $ The accompanying notes are an integral part of the financial statements. 26 510,416 $ 10,628 CITY OF MESA, ARIZONA EXHIBIT A-9 STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 (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 $ Net Cash Provided By (Used For) Operating Activities 337,692 (116,917) (53,699) 5,095 Governmental Activities Internal Service Funds $ 172,171 Cash Flows From Noncapital Financing Activities: Intergovernmental Transient Occupancy Tax Investment in Joint Ventures Advances to Other Funds Transfers In from Other Funds Transfers Out to Other Funds Net Cash Used For Noncapital Financing Activities 104,789 (97,971) (12,166) (5,348) 1,460 1,161 1 (2,773) 3,051 (101,325) - (98,425) - Cash Flows From Capital and Related Financing Activities: Proceeds from Bond Sales 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 248,719 (67,044) (177,721) (59,933) 19,278 (148) - Net Cash Used For Capital and Related Financing Activities (36,701) (148) Cash Flows From Investing Activities: Interest Received on Investments 2,970 710 Net Cash Provided By Investing Activities 2,970 710 Net Change in Pooled Cash and Investments Total Cash and Investments at Beginning of Year Total Cash and Investments at End of Year $ The accompanying notes are an integral part of the financial statements. 27 40,015 (4,786) 189,620 70,136 229,635 $ 65,350 (Continued) CITY OF MESA, ARIZONA EXHIBIT A-9 (Continued) STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 (in thousands) Reconciliation of Operating Income to Net Cash Provided By (Used For) Operating Activities: Operating Income Business-type Activities Enterprise Fund Governmental Activities Internal Service Funds $ $ 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 92,890 67,883 5,095 Total Adjustments Net Cash Provided By (Used For) 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 28 509 - 4,111 526 (871) 36 (1,554) 4,055 (93) 95 (29) (1,041) (112) 3,183 79,281 2,512 $ 172,171 $ $ 11,319 (10,019) (3,204) 7,544 $ The accompanying notes are an integral part of the financial statements. (7,860) (5,348) 167 - CITY OF MESA, ARIZONA EXHIBIT A-10 STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES AGENCY FUNDS JUNE 30, 2016 (in thousands) Payroll Agency ASSETS Pooled Cash and Investments $ 10,236 Due from Others 6 Total Assets $ 10,242 LIABILITIES Accounts Payable Accrued Payroll Payable Total Liabilities $ $ 1,335 8,907 10,242 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, 2016 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 475,274 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, 2016 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, 2016 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. 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 32 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 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 Highway Project Advancement Notes Fund accumulates monies for payment of principal and interest requirements for the Highway Project Advancement Notes. 33 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 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. Five 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. Four non-major Debt Service Funds are used to account for the accumulation of resources for the payment of long-term obligation principal, interest and service charges. 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 34 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 Required Supplementary Information Section, and the other funds are located in the Supplementary Information Section. On June 3, 1980, the voters of Arizona approved an expenditure limitation for all local governments. This limitation restricts the growth of expenditures to a percentage determined by population and inflation, with certain expenditures excluded from the limitation. The State Economic Estimates Commission determines and publishes, prior to April 1st of each year, the expenditure limitation for the following fiscal year for each governmental unit. Fiscal year 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 June 15, 2015. 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 fund’s portion of this pool is reported on the financial statements as “pooled cash and investments”. Assets related to long-term investments of the invested pool are held by a single master custodian. In addition, certain cash deposits and short-term investments are held separately in State of Arizona Local Government Investment Pools (LGIP), and FDIC Insured Cash Sweep accounts with two local banks. The City considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Investments are recorded at fair value in accordance with GASB Statement No. 72, Fair Value Measurement and Application. Accordingly, the change in fair value of investments is recognized as an increase or decrease to investment assets and investment income. 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. 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 35 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 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. 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. 36 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 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. 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) and Public Safety Personnel Retirement System (PSPRS) and additions to/deductions from ASRS and PSPRS’s fiduciary net position have been determined on the same basis as they are reported by ASRS 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 37 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 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. 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, 2016 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 2015-2016, current property tax collections were $32,894,474 or 98.10% 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 38 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 June 30, 2016 was $907,249 of which $435,548 was recorded as revenue and $471,701 as unavailable revenue. s. New Accounting Pronouncements GASB Statement No. 72, Fair Value Measurement and Application, addresses accounting and financial reporting issues related to fair value measurements. The City implemented this Statement in fiscal year 2016. See Note 4 for the current year effect of implementing GASB Statement No. 72. 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. The City has implemented this Statement in fiscal year 2016 with no impact. 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. 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 has implemented this Statement in fiscal year 2016 with no impact. 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. 39 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 GASB Statement No. 78, Pensions Provided through Certain Multiple-Employer Defined Benefit Pension Plans, amends Statement 68 to exclude pensions provided to employees of state or local governmental employers through a cost-sharing multiple-employer defined benefit pension plan that (1) is not a state or local governmental pension plan, (2) is used to provide defined benefit pensions both to employees of state or local governmental employers and to employees of employers that are not state or local governmental employers, and (3) has no predominant state or local governmental employer (either individually or collectively with other state or local governmental employers that provide pensions through the pension plan). The City is not a participant in this type of pension plan and therefore has early implemented this statement in fiscal year 2016 with no effect. GASB Statement No. 79, Certain External Investment Pools and Pool Participants, establishes criteria for an external investment pool to qualify for making the election to measure all of its investments at amortized cost for financial reporting purposes. This Statement also adds additional note disclosure requirements for governments that participate in those pools. The City has implemented this Statement in fiscal year 2016 with no impact. GASB Statement No. 80, Blending Requirements for Certain Component Unites – an amendment of GASB Statement No. 14, amends the blending requirements for certain component units. The requirements of this Statement are effective for reporting periods beginning after June 15, 2016. The City will implement this Statement in fiscal year 2017. GASB Statement No. 81, Irrevocable Split-Interest Agreements, provides recognition and measurement guidance for situations in which a government is a beneficiary of an irrevocable splitinterest agreement. The requirements of this Statement are effective for financial statements for periods beginning after December 15, 2016, and should be applied retroactively. The City will implement this Statement in fiscal year 2017. GASB Statement No. 82, Pension Issues – An Amendment of GASB Statements No. 67, No. 68, and No. 73, addresses issues regarding (1) the presentation of payroll-related measures in required supplementary information, (2) the selection of assumptions and the treatment of deviations from the guidance in an Actuarial Standard of Practice for financial reporting purposes, and (3) the classification of payments made by employers to satisfy employee (plan member) contribution requirements. The City has early implemented this statement in fiscal year 2016 with no effect. Implementation Guide No. 2015-1, provides guidance that clarifies, explains, or elaborates on GASB Statements and Interpretations and supersedes all previously issued Implementation Guides, including the 2013-2014 Comprehensive Implementation Guide. The requirements of this Implementation Guide were implemented by the City in fiscal year 2016 with no effect. Implementation Guide No. 2016-1, Implementation Guidance Update – 2016, provides guidance that clarifies, explains or elaborates on GASB Statements and Interpretations and amends, removes, supersedes, or adds questions not originally contained in Implementation Guide No. 2015-1. The requirements of this Implementation Guide are effective for reporting periods beginning after June 15, 2016. The City will implement this Implementation Guide in fiscal year 2017. 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. 77 and 80, and the Implementation Guide No. 2016-1 will have on the City’s financial statements. 40 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 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. 41 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 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 to 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 from Other Funds Customer and Defendant Deposits Compensated Absences Restricted Bond Interest Payable Restricted Unearned Revenue Matured Bonds Payable Pension Long-term Liabilities Total Liabilities 200,422 23,264 404 18,492 1,414 2,698 758 $ Internal Service Funds (2) - $ 65,350 470 97 5 5,897 746 69 10,900 37,579 8,761 11,616 907 317,215 177,716 1,408,008 1,585,724 1,931 74,565 - 7,700 104,251 111,951 1,150 1,150 Reclassifications and Eliminations $ Statement of Net Position Total (4,187) - $ (4,187) 265,772 23,734 501 18,497 (2,773) 5,897 3,444 827 10,900 37,579 8,761 11,616 907 177,716 1,409,939 1,973,317 - 7,700 105,401 113,101 $ 317,215 $ 1,697,675 $ 75,715 $ (4,187) $ 2,086,418 $ 23,626 4,187 6,916 589 8,885 12,010 28,743 84,956 $ 622,412 901,342 1,523,754 $ 2,418 38,448 12,002 11,043 63,911 $ (4,187) (4,187) $ 26,044 38,448 6,916 589 8,885 12,010 28,743 634,414 912,385 1,668,434 Deferred Inflows of Resources Unavailable Revenue Pension Total Deferred Inflows of Resources Fund Balance/Net Position Total Fund Balance/Net Position Total Liabilities and Fund Balance/Net Position Long-term Assets/ Liabilities (1) $ 13,244 13,244 (13,244) 36,705 23,461 1,176 1,176 - 37,881 37,881 219,015 150,460 10,628 - 380,103 317,215 $ 1,697,675 42 $ 75,715 $ (4,187) $ 2,086,418 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 (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 $ 177,716 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 $ $ 2,284,019 (876,011) 1,408,008 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 $ $ 7,700 104,251 111,951 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 Compensated absences Post-employment benefits Unamortized bond premiums Pension liability Total $ $ 464,855 26,788 396,132 13,567 622,412 1,523,754 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 43 $ $ 472 11,515 1,257 13,244 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 Deferred inflows relating to pensions represent a future acquisition of net position that is not reported in the funds. Deferred Inflows – Pensions $ 36,705 (2) Internal service funds are used by management to charge the costs of certain activities, such as fleet support, materials and supplies, printing and graphics, and self-insurance, to the individual funds. The assets, 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 44 $ 10,628 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balance to the Government-wide Statement of Activities (in thousands): Long-term Revenues/ Expenses(1) 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 Community Environment Cultural-Recreational Debt Service: Principal Interest on Bonds Interest on Notes Service Charge Cost of Issuance Capital Outlay Other Financing Uses: Transfers Out Pmt to Ref Bond Escrow Agent Total Expenditures\Expenses & Other Financing Uses Net Change for the Year $ $ $ $ 151,826 34,765 2,331 1,433 23,254 191,360 38,178 11,049 1,483 961 3,994 122,572 89,834 2,283 675,323 79,448 254,528 65,559 43,651 $ $ $ Capital Related Items(2) (940) 7,952 1,257 8,269 2,067 27,389 1,100 952 $ $ $ 44,935 4,040 48,975 8,014 11,463 49,424 9,059 Internal Service Funds(3) $ $ $ Long-term Debt (4) 727 19,308 757 20,792 13,420 11,996 1,037 1,305 $ $ $ Eliminations (5) (89,834) (2,283) (92,117) (6,089) - $ $ $ (24,298) (24,298) - Statement of Activities $ $ $ 151,826 33,825 2,331 9,385 23,254 191,360 38,178 11,049 2,210 65,204 6,008 102,314 636,944 96,860 305,376 117,120 54,967 107,383 18,581 324 14 1,505 91,784 - (91,784) - (107,383) - - 18,581 324 14 1,505 - 24,298 49,693 - 166 - - (49,693) (24,298) - 166 - 736,768 31,508 (13,658) 27,758 (163,165) (24,298) 594,913 (61,445) $ (23,239) $ 45 62,633 $ (6,966) $ 71,048 $ - $ (Continued) 42,031 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 (1) Revenues in the statement of activities that do not provide current financial resources include unavailable revenues. 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 Unavailable revenue Total $ $ (940) 7,952 1,257 8,269 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 $ $ 860 23,766 52,781 77,407 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 $ (45,899) (2) 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 $ $ 91,784 (68,671) 23,113 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 46 $ $ 24,659 14,861 39,520 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 (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 $ $ 20,792 (27,758) (6,966) (4) Bond and note proceeds are reported as financing sources and the repayment of principal consumes financial resources in the governmental funds. Neither transaction has any effect on the statement of activities. New debt issued (including refunded debt): General Obligation bond proceeds Community Facilities District Bonds Principal repayments Payment to refunded bond escrow accounts Total $ $ (81,004) (8,830) 107,383 46,281 63,830 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 $ $ 3,412 7,051 (2,283) (962) 7,218 (5) Interfund transfers between governmental activities, other than Internal Service Funds, are eliminated in the consolidation of these activities for the statement of activities. The elimination is reflected as a reduction of transfers in and transfers out to eliminate the doubling up effect of these transactions within the governmental activities. Elimination of transfers to/from the Internal Service Funds is netted into the results of the Internal Service Funds in (3) above. Transfers out Transfers in Total 47 $ $ (24,298) 24,298 - (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 3. FUND BALANCE As of June 30, 2016 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 $ 2,621 1,414 4,035 Highway Project Advancement Notes $ - Non-Major Governmental Funds Total Governmental Funds $ $ 77 77 2,698 1,414 4,112 Restricted: Arts & Culture Capital Projects Community Facility District Court Debt Service Fire Housing Library Police Transportation Programs Restricted Sub-total 184 184 8,447 8,447 25,931 22 1,279 4,388 3,338 664 313 3,501 47,818 87,254 184 25,931 22 1,279 12,835 3,338 664 313 3,501 47,818 95,885 Committed To: Arts & Culture Capital Projects Cemetery Debt Service Development Services Economic Development Environmental Compliance Parks & Recreation Vehicle Replacement Committed To Sub-total 193 34 227 - 1,129 4,533 6,863 2,618 995 9,494 49 2,899 28,580 1,129 4,533 7,056 2,618 995 34 9,494 49 2,899 28,807 Assigned To: Development Services Economic Development General Government Parks & Recreation Police Assigned To Sub-total 27 2,010 5,023 398 3,245 10,703 - 6 6 27 2,010 5,029 398 3,245 10,709 Unassigned 79,657 - Total Fund Balances $ 94,806 $ 48 8,447 (155) $ 115,762 79,502 $ 219,015 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 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, 2016 as reported in Exhibit B-6 is 13.4% of General Fund expenditures budgeted for fiscal year 2015-2016. 4. POOLED CASH AND INVESTMENTS Total Pooled City Cash and Investments at fair value are as follows (in thousands): Cash on Hand Carrying Amount of City Deposits Investment in Insured Cash Sweep Accounts 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 $ $ 136 47,371 41,036 44,257 8,822 77,969 343,292 562,883 (10,236) 552,647 (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, 2016 for debt service payments due to bondholders on July 1, 2016. Deposits At year-end, the City’s cash totaled $47,506,310 which included $135,805 of petty cash. The carrying amount of the City’s deposits was $47,370,505 and the bank balance was $51,209,621. The difference of $3,839,116 represents outstanding checks and deposits in transit. 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 Arizona Revised Statute (§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, 2016 are covered under House Bill 2619. 49 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 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 Standard & Poor’s and participates in the State Treasurer’s Investment Pool (LGIP), which is overseen according to Arizona State Statute by the State Board of Deposit. Within the State Treasurer’s Investment Pools, the City participates in 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. The Pools carried weighted average credit ratings of AAA. The City also maintains shortterm investments in FDIC Insured Cash Sweep Accounts held by two local banks. The City’s investment in their own Special Improvement District bonds have no credit rating. Fair Value of Investments The City measures and records its investments using fair value measurement guidelines established by generally accepted accounting principles. These guidelines recognize a three-tiered fair value hierarchy, as follows: • • • Level 1: Quoted prices for identical investments in active markets; Level 2: Observable inputs other than quoted market prices; and, Level 3: Unobservable inputs. 50 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 At June 30, 2016 the City had the following recurring fair value measurements (in thousands): Fair Value Measurements Using: Investment by Fair Value Level Debt Securities U.S. Treasuries U.S. Agencies: Federal Home Loan Bank Federal Home Loan Mortgage Corp. Federal National Mortgage Assn 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 Chevron Corp JP Morgan Chase & Corp Toyota Motor Credit Co Commercial Paper Bank of Tokyo Mitsubishi Bank of Montreal Chicago BNP Paribas NY City of Mesa Special Improvement District Bonds JP Morgan MMF FDIC Insured Cash Sweep Money Market Funds Fair Value 6/30/2016 Level 1 $ 118,216 $ 118,216 38,218 28,056 90,919 2,594 38,218 28,056 90,919 2,594 5,012 5,050 2,836 4,756 5,049 995 5,014 4,475 3,388 3,385 3,370 Level 2 Level 3 $ $ - - 5,012 5,050 2,836 4,756 5,049 995 5,014 4,475 3,388 3,385 3,370 - - 6,720 6,701 6,701 6,720 6,701 6,701 - - 1,836 1 41,036 1 41,036 1,836 - - Total Debt Securities at Fair Value 384,328 $ 382,492 $ 1,836 Investments Measured at Fair Value Arizona State Treasurers Investment Pool: State of Arizona Pool 7 State of Arizona Pool 700 Total Investments Measured at Fair Value: 33,640 10,617 44,257 Total Investments Measured At Fair Value: $ - $ 428,585 Debt classified in Level 1 are valued using prices quoted in active markets for those securities. Debt securities classified in Level 2 are valued using quoted prices for similar securities in active markets. 51 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 Investments valued using the net asset value (NAV) per share (or its equivalent) are City investments in Arizona State Treasurers Investment Pool (LGIP) and unlike more traditional investments, generally do not have readily obtainable market values. Investments valued at NAV utilized Net Asset Values as provided by State of Arizona Treasurer’s Office at June 30, 2016. The City’s investments at June 30, 2016 are as follows (in thousands): Investment Maturities (in Years) Investment Type Fair Value Less Than 1 U.S. Treasuries U.S. Agencies: Federal Home Loan Bank Federal Home Loan Mortgage Corp. Federal National Mortgage Assn 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 Chevron Corp JP Morgan Chase & Corp Toyota Motor Credit Co Commercial Paper Bank of Tokyo Mitsubishi Bank of Montreal Chicago BNP Paribas NY City of Mesa Special Improvement District Bonds JP Morgan MMF Total $ 118,216 $ 1-2 Concentration of Credit Risk % More than 2 7,332 $ 43,729 38,218 28,056 90,919 2,594 6,643 6,848 15,393 2,594 24,606 16,897 15,554 - 5,012 5,050 2,836 4,756 5,049 995 5,014 4,475 3,388 3,385 3,370 - 6,720 6,701 6,701 6,720 6,701 6,701 1,836 1 $ 343,292 343 1 $ 59,276 5,012 5,050 * 2,836 4,756 5,049 995 5,014 4,475 - $ 67,155 34.44% 6,969 4,311 59,972 - 11.13% 8.17% 26.48% 0.76% 3,388 3,385 ** 3,370 1.46% 1.47% 0.83% 1.39% 1.47% 0.29% 1.46% 1.30% 0.99% 0.99% 0.98% - - 1.96% 1.95% 1.95% 357 $ 134,330 1,136 $ 149,686 0.53% 0.00% 100.00% * $5,050 of these securities are callable on or after April 22, 2018 ** $3,385 of these securities are callable on or after February 22, 2019 52 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 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 Business-Type Activities: Utility Customers Other Customers Due from Other Governments Total Business-type Activities Receivables Allowance Net $ 11,771 5,917 6,434 $ (2,038) (3,514) $ 9,733 5,917 2,920 5,932 440 - 5,932 440 4,025 669 11,517 99 907 12,120 - 4,025 669 11,517 99 907 12,120 159 311 5 60,306 $ (5,552) 159 311 5 $ 54,754 26,736 2,985 3,167 32,888 $ $ 25,989 302 3,167 $ 29,458 $ $ $ 53 (747) (2,683) $ (3,430) (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 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 Unavailable Revenue Receivables not yet collected Delinquent Property Taxes Special Assessments not yet due General Fund $ 1,239 Highway Project Advancement Notes $ - Non-Major Funds $ 59 146 $ 1,386 $ 8,214 8,214 2,257 94 2,410 General Fund $ 1,035 $ 1,035 Non-Major Funds $ 222 472 11,515 $ 12,209 $ Unbilled Accounts Receivable Unbilled utility service receivables are recorded in the year in which the services are provided. At June 30, 2016, unbilled utility service receivables are recorded in the Enterprise Fund as follows (in thousands): Electric Gas Water Wastewater Solid Waste 54 $ 1,025 782 5,183 2,466 1,941 $ 11,397 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 6. INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS The following advances are included in the fund financial statements at June 30, 2016 (in thousands): Fund Governmental Funds: General Fund Non-major Governmental Funds Total Governmental Funds Proprietary Funds: Enterprise Fund Total Advances to Other Funds $ $ 1,414 1,414 2,773 4,187 Advances from Other Funds $ $ 2,773 1,414 4,187 4,187 The advances at June 30, 2016 are long-term loans to the Development Impact Fees fund to cover expenses which exceeded revenues received, and an advance from the Enterprise Fund to the General Fund for property acquisition. The advances outstanding at June 30, 2016 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, 2016 (in thousands): Fund Governmental Funds: General Fund Non-major Governmental Funds Total Governmental Funds Proprietary Funds: Enterprise Fund Total Transfers Out Transfers In $ $ $ 8,618 15,680 24,298 101,325 125,623 $ 101,863 20,709 122,572 3,051 125,623 Transfers from business-type activities to governmental activities on the government-wide statement of activities include a $99,671,000 operational subsidy from the Enterprise Fund to the General Fund. The remaining interfund transfers generally fall within one of the two following categories: 1) debt service payments made from a debt service fund but funded from an operating fund; and 2) subsidy transfers. 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 $4,040,000 and capital asset transfers from the governmental activities to the business-type activities in the amount of $166,000. 55 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 7. CAPITAL ASSETS A summary of capital asset activity, for the government-wide financial statements, for the year ended June 30, 2016 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, 2015 Additions Retirements $ 348,421 3,308 56,961 408,690 $ 35,322 13 83,362 118,697 $ 325,289 171,521 182,070 23,249 1,075,277 1,777,406 8,190 12,543 16,814 2 12,712 50,261 (1,593) (4,224) (5,817) 1,463 2,225 352 4,040 (89,582) (97,971) (125,447) (7,431) (500,299) (820,730) 956,676 (6,669) (8,127) (11,009) (5,276) (38,099) (69,180) (18,919) 1,429 4,181 5,610 (207) 4,040 (96,251) (104,669) (132,275) (12,707) (538,398) (884,300) 941,590 $1,365,366 $ 99,778 $ (59,079) $ 3,874 $ 1,409,939 (1) (58,871) (58,872) Transfers $ Balance June 30, 2016 (166) (166) $ 383,742 3,321 81,286 468,349 334,942 184,696 194,660 23,251 1,088,341 1,825,890 Depreciation and Amortization expense was charged to governmental functions in the governmentwide financial statements as follows (in thousands): General Government Public Safety Community Environment Cultural-Recreational Capital assets held by the City's Internal Service funds are charged to the various functions based on their usage of assets 56 $ 7,709 11,319 40,698 8,945 509 $69,180 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 Balance July 1, 2015 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 $ 54,333 17,560 106 98,052 170,051 Additions Retirements $ $ 481 76,686 77,167 (1) (27,394) (27,395) Transfers $ (4,040) (4,040) Balance June 30, 2016 $ 54,813 17,560 106 143,304 215,783 100,758 136,983 77,410 27,753 1,750,740 2,093,644 4,486 9,338 12,065 25,889 (636) (405) (1,041) 166 166 105,244 136,983 86,278 27,753 1,762,400 2,118,658 (25,294) (49,773) (40,254) (19,955) (706,775) (842,051) 1,251,593 (2,285) (4,606) (8,865) (1,151) (50,976) (67,883) (41,994) 636 404 1,040 (1) 166 (27,579) (54,379) (48,483) (21,106) (757,347) (908,894) 1,209,764 $1,421,644 $ 35,173 $ (27,396) $(3,874) $ 1,425,547 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 57 $ 4,284 4,511 28,552 20,213 2,694 1,497 272 253 1,782 3,403 422 $ 67,883 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 Construction in progress and related construction commitments are composed of the following (in thousands): Construction in Progress Governmental Activities General Government Public Safety Community Environment Cultural-Recreational Warehouse, Maintenance & Services Total Business-type Activities Electric Gas Water Wastewater Solid Waste Airport Golf Course Convention Center Spring Training District Cooling Total $ $ 32,303 978 45,203 2,722 80 81,286 Commitments $ $ 21,204 278 26 77 2 21,587 Construction in Progress Commitments $ $ $ 5,821 8,524 79,637 26,811 7,465 4,755 199 1,071 9,021 143,304 $ 594 451 17,053 4,947 5,664 797 63 194 6 29,769 For the year ended June 30, 2016, the City capitalized net interest costs of $4,192,327. Total interest expense in the Business-type Activities Enterprise Fund before capitalization was $49,527,045. 58 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 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 $ 336,716 100,285 $ 81,005 - $ 2,830 10,974 450,805 Notes Payable Unamortized Premiums Post Employment Benefits Compensated Absences Governmental Activities Total Governmental Activities: Bonds Payable: General Obligation Bonds Highway User Revenue Bonds Special Assessment Bonds with Governmental Commitment Community Facility District Total Bonds Payable Ending Balances Amounts Due Within One Year (67,161) (7,390) $ 350,560 92,895 $ 8,830 89,835 (745) (489) (75,785) 2,085 19,315 464,855 745 511 31,893 77,835 18,376 382,000 26,575 $ 955,591 2,242 39,935 24,422 $ 156,434 (77,835) (7,051) (15,417) (23,552) $ (199,640) 13,567 406,518 27,445 $ 912,385 3,594 35,487 Business-type Activities: Bonds Payable: Revenue Bonds General Obligation Bonds Excise Tax Revenue Obligations Total Bonds Payable $1,007,455 474 94,060 1,101,989 $ 228,535 105 228,640 $ (172,280) (189) (172,469) $1,063,710 390 94,060 1,158,160 Notes Payable Unamortized Bond Premiums Post Employment Benefits Compensated Absences Business-type Activities Total 2,116 22,521 74,625 3,938 $1,205,189 20,079 6,324 3,721 $ 258,764 (131) (3,204) (2,442) (3,548) $ (181,794) 1,985 39,396 78,507 4,111 $1,282,159 $ $ $ 22,737 7,900 25,070 78 25,148 134 493 25,775 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, $11,043,000 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. 59 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 b. Bonds Payable At June 30, 2016, 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, (partially refunded by 2016 taxable general obligation refunding), 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. $ 17,066 $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. 500 $9,710,000 2006 general obligation serial bonds, (partially refunded by 2016 general obligation refunding 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. 1,750 $15,915,000 2007 general obligation serial bonds, (partially refunded by 2016 general obligation refunding 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. 2,815 $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. 41,995 $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. 23,675 $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. 23,825 $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. 12,424 60 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 $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. $ 8,825 $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. 54,450 $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. 30,925 $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. 6,990 $37,700,000 2016 general obligation serial bonds due in annual installments ranging from $825,000 to $2,775,000, plus semi-annual interest ranging from 2 percent to 4 percent through July 1, 2036. 37,700 $20,475,000 2016 general obligation refunding serial bonds due in annual installments ranging from $60,000 to $5,300,000, plus semi-annual interest ranging from 2 percent to 4 percent through July 1, 2027. 20,475 $22,829,500 2016 taxable general obligation refunding serial bonds due in annual installments ranging from $1,000,000 to $3,565,000, plus semiannual interest ranging from .85 percent to 3.0 percent through July 1, 2029. Total General Obligation Bonds $ 22,830 $ 350,560 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. $ 1,700 $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. 875 $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. 11,875 61 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 $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. 975 $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. 22,840 $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 $ 92,895 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 410 $ 62 1,675 2,085 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 Community Facilities District $2,712,000 2013 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) Assessment District No. 1 Special Assessment Revenue Bonds, due in annual principle installments ranging from $62,000 to $95,000, plus semi-annual interest ranging from 4.6 percent to 5.3 percent through July 1, 2038. $ 2,478 $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. 3,105 $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. 3,195 $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. 1,929 $6,800,000 2016 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) General Obligation Bonds, due in annual principle installments ranging from $165,000 to $680,000, plus semi-annual interest ranging from 4 percent to 5 percent through July 15, 2039. 6,595 $970,000 2016 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) Assessment District No. 4 Special Assessment Revenue Bonds, due in annual principle installments ranging from $25,000 to $65,000, plus semi-annual interest ranging from 2.4 percent to 5 percent through July 1, 2040. 953 $1,060,000 2016 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) Assessment District No. 5 Special Assessment Revenue Bonds, due in annual principle installments ranging from $30,000 to $70,000, plus semi-annual interest ranging from 1.85 percent to 4.75 percent through July 1, 2040. 1,060 Total Community Facilities District Bonds Total bonds payable recorded in governmental activities 63 $ 19,315 $ 464,855 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 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. $ 79 $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. 206 $105,501 2016 general obligation refunding serial bonds, due in annual principal installments ranging from $4,600 to $16,399, plus semi-annual interest ranging from .85 percent to 3 percent through July 1, 2029. 105 Total General Obligation Bonds $ 390 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. $ 1,000 $129,000,000 2002 utility systems revenue refunding serial bonds, (partially refunded by 2012, 2012 taxable & 2016 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. 9,020 $64,625,000 2004 utility systems revenue serial bonds, (partially refunded by 2006 (Series 2) and 2016 utility systems revenue refunding bonds), due in annual principal installments ranging from $1,125,000 to $11,000,000, plus semi-annual interest ranging from 5.00 percent to 6.00 percent through July 1, 2022. 2,250 $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. 40,235 $91,200,000 2005 utility systems revenue serial bonds, (partially refunded by 2006, 2012 & 2016 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. 10,750 64 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 $105,400,000 2006 utility systems revenue serial bonds, (partially refunded by 2006 (Series 2) & 2016 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. $ 17,650 $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. 126,700 $65,550,000 2007 utility systems revenue serial bonds, (partially refunded by 2016 utility systems revenue refunding bonds), due in annual principal installments ranging from $2,500,000 to $41,800,000, plus semi-annual interest ranging from 4.25 percent to 6.25 percent through July 1, 2031. 8,000 $52,875,000 2008 utility systems revenue serial bonds, (partially refunded by 2016 utility systems revenue refunding bonds), due in annual principal installments ranging from $700,000 to $44,675,000, plus semi-annual interest ranging from 4.875 percent to 5.25 percent through July 1, 2032. 6,100 $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. 4,300 $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 65 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 $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. $ $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. 22,430 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 $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 $90,500,000 2016 utility systems revenue serial bonds, due in annual principal installments ranging from $1,000,000 to $22,550,000, plus semiannual interest ranging from 3 percent to 5 percent through July 1, 2040. 90,500 $138,035,000 2016 utility systems revenue refunding serial bonds, due in annual principal installments ranging from $3,375,000 to $44,890,000, plus semi-annual interest ranging from 4 percent to 5 percent through July 1, 2032. Total Utility Systems Revenue Bonds $ 138,035 $ 1,063,710 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 $ 1,158,160 66 94,060 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 The following tables summarize the City’s debt service requirements to maturity for its long term bonds payable at June 30, 2016 (in thousands). The deferred amounts on refundings are not included. Governmental Activities General Obligation Bonds Highway User Revenue Bonds Fiscal Year 2017 2018 2019 2020 2021 2022-26 2027-31 2032-36 Principal $ 22,737 19,269 17,754 17,290 17,837 101,685 107,163 46,825 Interest $ 12,996 12,018 11,253 10,627 9,999 39,963 19,224 2,779 Total $ 35,733 31,287 29,007 27,917 27,836 141,648 126,387 49,604 Fiscal Year 2017 2018 2019 2020 2021 2022-26 2027-31 2032-36 TOTALS $ 350,560 $ 118,859 $ 469,419 TOTALS Principal $ 7,900 8,375 8,715 9,155 9,645 45,200 3,905 - Interest $ 4,473 4,080 3,663 3,243 2,796 6,568 156 - $ $ 24,979 Special Assessment Bonds Fiscal Year 2017 2018 2019 2020 2021 2022-26 2027-31 2032-36 2037-41 TOTALS Principal $ 745 335 335 335 335 - Interest $ 98 68 48 29 10 - $ $ 2,085 253 $ $ 92,895 $ Total 12,373 12,455 12,378 12,398 12,441 51,768 4,061 - $ 117,874 Community Facilities District Total 843 403 383 364 345 - Fiscal Year 2017 2018 2019 2020 2021 2022-26 2027-31 2032-36 2037-41 2,338 TOTALS 67 Principal $ 511 527 544 557 582 3,320 4,148 5,306 3,820 Interest $ 910 895 878 858 837 3,801 2,961 1,813 399 $ $ 13,352 19,315 $ $ Total 1,421 1,422 1,422 1,415 1,419 7,121 7,109 7,119 4,219 32,667 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 Business-type Activities General Obligation Bonds Fiscal Year 2017 2018 2019 2020 2021 2022-26 2027-31 2032-36 2037-41 TOTALS Principal $ 78 76 46 40 43 75 32 - Interest $ 13 11 7 6 5 10 1 - $ $ 390 53 $ $ Revenue Bonds Total 91 87 53 46 48 85 33 443 Fiscal Year 2017 2018 2019 2020 2021 2022-26 2027-31 2032-36 2037-41 Principal $ 25,070 31,355 32,660 30,560 31,840 197,950 246,235 310,545 157,495 Interest $ 47,931 46,500 44,990 43,380 41,951 183,658 135,751 74,318 10,268 TOTALS $ 1,063,710 $ 628,747 $ Total 73,001 77,855 77,650 73,940 73,791 381,608 381,986 384,863 167,763 $ 1,692,457 Excise Tax Revenue Obligations Fiscal Year 2017 2018 2019 2020 2021 2022-26 2027-31 2032 Principal $ 36,585 46,690 10,785 Interest $ 4,703 4,703 4,703 4,703 4,703 20,035 9,928 539 TOTALS $ 94,060 $ 54,017 $ Total 4,703 4,703 4,703 4,703 4,703 56,620 56,618 11,324 $ 148,077 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, 2016, 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, 2016 are $2,085,000. General Obligation Bonds The general obligation bonds are backed by the ultimate taxing power and general revenues of the City; however, $390,237 of these bonds at June 30, 2016 is carried as a liability of the Enterprise Fund to reflect the intention of retirement from resources of that fund. 68 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 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, 2016 is (in thousands): 6% Bonds 20% Bonds Total Available $ 164,428 201,680 $ 366,108 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, 2016, the amount provided in the Replacement and Extension Funds equaled $25,293,503 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 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, 2016, $122,835,000 has been repaid to the City by ADOT, and the City has paid $122,835,000 of HPAN notes. 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. 69 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 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, 2016 (in thousands): Fiscal Year 2017 2018 2019 2020 2021 2022-26 2027-29 TOTALS Business-type Activities Interest Principal & Fees Total $ 134 $ 44 $ 178 137 41 178 140 38 178 143 35 178 146 31 177 781 107 888 504 22 526 $ 1,985 $ 318 $ 2,303 e. Short-term Debt The City had no short-term debt activity for the fiscal year ended June 30, 2016. 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. g. Pledged Revenues 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 70 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 pipelines and water and wastewater treatment plants. The bonds are payable solely from utility customer net revenues and are payable through 2040. 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 $1.7 billion. Principal and interest paid for the current year and total customer net revenues were $61,593,821 and $166,312,000, respectively. Highway User Revenue Bonds The City has pledged future Highway User Taxes Revenue to repay $230.5 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 37.9 percent of eligible revenues. The total principal and interest remaining to be paid on the bonds is $117,874,000. Principal and interest paid for the current year and total highway user tax revenues were $12,233,688 and $35,383,437, respectively. 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 $2,338,125. Principal and interest paid for the current year and total assessments collected were $882,615, and $790,082, respectively. 9. REFUNDED, REFINANCED AND DEFEASED OBLIGATIONS On March 17, 2016 the City defeased $9,000,000 of utility revenue bonds. On April 6, 2016, the City issued $138,035,000 of utility revenue bonds with an original issue premium of $19,395,105 to advance refund $146,480,000 of outstanding utility revenue bonds. The refunding bonds were issued with an interest rate ranging from 4.0 to 5.0 percent. Net proceeds in the amount of $157,081,973 (after payment of $207,544 in underwriters’ fees and deposit of $140,588 to the City’s bond fund) were provided to a refunding escrow agent to pay issuance costs of $400,000 for insurance premiums and other issuance costs with the remaining $156,681,973 used to provide cash and purchase United States Government securities. The cash and securities were deposited in an irrevocable trust to provide for all future debt service payments of the refunded bonds. As a result, the refunded bonds are considered to be defeased and the liability for those bonds has been removed from the debt of the City. The advanced refunding resulted in a difference between the reacquisition price and the net carrying amount of the old debt of $10,201,973. This difference, reported in the accompanying financial statements as a deduction from general obligation bonds payable, is being charged to operations through the year 2032 using the effective interest method. The purpose of the refunding was to take advantage of lower interest rates and restructure debt service payments to achieve a more level debt retirement schedule. The refunding will decrease debt service payments by $11,581,762 over the next 16 years producing an economic gain (difference between the present value of old and new debt service payments) of $13,583,987. 71 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 On April 6, 2016, the City issued $20,475,000 of general obligation bonds with an original issue premium of $1,128,271 to advance refund $20,475,000 of outstanding general obligation bonds. The refunding bonds were issued with an interest rate ranging from 2.0 to 4.0 percent. Net proceeds of $21,536,306 (after payment of $66,965 in underwriters’ fees) were provided to a refunding escrow agent to pay issuance costs of $187,326 for insurance premiums and other issuance costs with the remaining $21,348,980 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 $873,980. This difference, reported in the accompanying financial statements as a deduction from general obligation 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 restructure debt service payments to achieve a more level debt retirement schedule. The refunding will decrease debt service payments by $2,682,106 over the next 11 years producing an economic gain (difference between the present value of old and new debt service payments) of $2,371,379. On May 4, 2016, the City issued $22,935,000 of taxable general obligation bonds with an original issue premium of $133,437 and contributed cash in the amount of $5,666,755 to advance refund and defease $25,925,000 of outstanding general obligation bonds. The refunding bonds were issued with an interest rate ranging from 0.848 to 2.989 percent. Net proceeds in the amount of $28,659,932 (after payment of $71,696 in underwriters’ fees and deposit of $3,564 to the City’s bond fund) were provided to a refunding escrow agent to pay issuance costs of $185,000 for insurance premiums and other issuance costs with the remaining $28,474,931 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 and defeasance resulted in a difference between the reacquisition price and the net carrying amount of the old debt of $2,549,332. This difference, reported in the accompanying financial statements as a deduction from general obligation bonds payable, is being charged to operations through the year 2029 using the effective interest method. The purpose of the refunding was to restructure debt service payments to achieve a more level debt retirement schedule. The refunding will increase debt service payments by $4,312,717 over the next 13 years producing an economic loss (difference between the present value of old and new debt service payments) of $1,159,105. 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. 72 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 In accordance with GASB Statement No. 7, the refunded debt outstanding at June 30, 2016 as reflected below is not included in the City’s financial statements (in thousands). Utility System Revenue Bond Issue dated February 1, 2002 $ 15,200 Utility System Revenue Refunding Bond Issue dated February 1, 2002 7,000 Utility System Revenue Bond Issue dated February 1, 2003 4,000 General Obligation Bond Issue dated January 15, 2004 22,935 Utility System Revenue Bond Issue dated June 1, 2004 3,875 Utility System Revenue Bond Issue dated June 1, 2005 2,750 General Obligation Bond Issue dated June 1, 2006 7,375 General Obligation Bond Issue dated May 1, 2007 13,100 Utility System Revenue Bond Issue dated May 1, 2007 57,550 Street and Highway User Revenue Bond Issue dated May 1, 2007 Utility System Revenue Bond Issue dated May 29, 2008 Total Refunded Bonds Outstanding 7,675 46,775 $ 188,235 10. SELF-INSURANCE INTERNAL SERVICE FUND The Property and Public Liability, Workers’ Compensation and Employee Benefits Internal Service Funds have been established to account for the costs of claims incurred by the City under self-insurance programs. The City is fully self-insured for all public liability risks, up to a maximum of $3,000,000 per occurrence, for the current policy year under the Property and Public Liability Insurance program. In addition, the City carries full property insurance with a $50,000 per occurrence deductible. Under the Workers’ Compensation Program, the City is subject to a maximum deductible of $1,000,000 liability per occurrence. In the Employee Benefits Fund, the City has excess insurance coverage when an individual’s claims exceed $225,000 per contract year. There were no changes in insurance coverage during this fiscal year for any of the three Self-Insurance Funds. The Workers’ Compensation Fund does not have a stop loss receivable at June 30, 2016. Over the past three fiscal years the Fund has received settlements in excess of insurance coverage of $189,911. The Fund has not received any settlements in excess of insurance coverage this past year. The Property and Public Liability Fund does not have a stop loss receivable at June 30, 2016, 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, 2016. Over the past three fiscal years the Fund has received settlements in excess of insurance coverage of $4,519,450 with $2,023,119 received this current fiscal year. 73 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 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. Changes in the balances of claims liabilities during the past two fiscal years are as follows (in thousands): Property & Public Liability Unpaid Claims, 6/30/14 Adjustments to Reserves-FY 14-15 Claim Payments-FY 14-15 $ 9,581 679 (636) Workers' Compensation Employee Benefits Total $ 22,807 3,976 (3,118) $ 4,669 54,894 (56,825) $ 37,057 59,549 (60,579) Unpaid Claims, 6/30/15 9,624 23,665 2,738 36,027 Adjustments to Reserves-FY 15-16 Claim Payments-FY 15-16 3,578 (603) 2,481 (2,993) 66,977 (67,019) 73,036 (70,615) 23,153 $ 2,696 $ 38,448 Unpaid Claims, 6/30/16 $ 12,599 $ 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 74 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 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, 2016, is $11,448,098. 12. NET POSITION a. Restricted Net Position The government-wide statement of net position reports $131.1 million of restricted net position, of which $50.5 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 exceeded 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. 75 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 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, 2016 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 Expenses Depreciation and Other Amortization $ 4,284 $ 22,098 4,511 23,222 28,552 48,113 20,213 31,316 2,694 33,703 1,497 3,368 272 2,312 253 3,999 1,782 1,131 3,403 1,868 422 760 $ 67,883 $ 171,890 Operating Revenues $ 32,254 38,962 125,304 71,708 54,871 3,623 1,645 2,798 63 201 1,234 $ 332,663 Operating Income (Loss) $ 5,872 11,229 48,639 20,179 18,474 (1,242) (939) (1,454) (2,850) (5,070) 52 $ 92,890 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, 2016 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 $ 172,723 4,993 $ 177,716 76 Business-Type Activities $ 85,862 56,042 57,112 3,093 $ 202,109 Total $172,723 4,993 85,862 56,042 57,112 3,093 $379,825 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 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 $1,244,863,412 has been spent on this project through the fiscal year ended June 30, 2016, of which the City’s share and equity interest is $172,723,066. The City has received and accrued $59.7 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 VMRI’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 VMRI for a developmental study to further extend the LRT system an additional two miles from Mesa Drive to Gilbert Road. Construction started fall of 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. 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 $4,993,312 and is reflected in the governmental funds financial statements. Separate financial statements are not prepared. 77 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 Total investment in the joint venture as of June 30, 2016 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 Fort McDowell Total Joint Venture $ 4,993 1,150 101 411 69 10 6,734 $ 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 $85,861,975 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 equity in the joint venture is $57,112 and is reflected in the proprietary funds financial statements. Separate financial statements are not prepared. Total investment in the joint venture as of June 30, 2016 is (in thousands): Mesa's Share Gilbert's Share Queen Creek's Share Total Joint Venture $ $ 78 57,112 54,279 24,095 135,486 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 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 $56,041,918 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. The Elected Officials Retirement Plan is not described below because of its relative insignificance to the financial statements. At June 30, 2016, 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 $ 634,414 105,401 37,881 53,949 Business-Type Activities $ 47,493 4,555 4,653 2,058 Total $ 681,907 109,956 42,534 56,007 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 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. 79 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 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: On or After Before 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, 2016, covered employees were required by state statute to contribute at the actuarially determined rate of 11.47 percent (11.35 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 11.47 percent (10.85 percent for retirement, 0.50 percent for the health insurance premium benefit, and 0.12 percent for long-term disability) of the active members’ annual covered payroll. 80 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 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, 2016 was 9.57 percent (9.31 percent retirement, 0.20 percent health, 0.06 percent long-term disability). The City’s ACR contributions to the System for the year ending June 30, 2016 were $111,503. d. Pension Liability At June 30, 2016, the City reported a liability of $255,337,070 for its proportionate share of the ASRS’ net pension liability. The net pension liability was measured as of June 30, 2015. 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, 2014, to the measurement date of June 30, 2015. The City’s reported liability at June 30, 2016, increased by $13,545,310 from the City’s prior year liability of $241,791,760 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 2015 contributions. The City’s proportion measured as of June 30, 2015, was 1.639250 percent, which was a decrease of 0.005147 from its proportion measured as of June 30, 2014. e. Pension Expense and Deferred Outflows/Inflows of Resources For the year ended June 30, 2016, the City recognized pension expense for ASRS of $11,066,538. At June 30, 2016, 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 City contributions subsequent to the measurement date Total 81 Deferred Outflows of Resources $ 6,968 Deferred Inflows of Resources $ 13,380 - 8,183 569 16,955 24,492 3,455 $ 25,018 $ (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 The $16,955,163 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, 2017. 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 $ (7,818) 2017 (9,709) 2018 (5,861) 2019 5,907 2020 Thereafter $ (17,481) 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, 2014 June 30, 2015 Entry Age Normal 8% 3 - 6.75% 3% Included 1994 GAM Scale BB Actuarial assumptions used in the June 30, 2014 valuation were based on the results of an actuarial study for the 5-year period ended June 30, 2013. 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. 82 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 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 Commodities Real Estate Multi-asset class Total Target Allocation 58% 25% 2% 10% 5% 100% Long-Term Expected Real Rate of Return 3.94% 0.93% 0.08% 0.42% 0.17% 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% $ $ $ 201,031 334,579 255,337 Pension Plan Fiduciary Net Position Detailed information about the pension plan’s fiduciary net position is available in the separately issued ASRS financial report. 83 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 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. 84 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 b. Benefits Provided The PSPRS provides 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 On or after January 1, 2012 Retirement and Disability Years of service 20 years any age and age required to receive benefit 15 years age 62 Final average salary is based on Benefit percentage Normal Retirement Accidental Disability Retirement Catastrophic Disability Retirement Ordinary Disability Retirement Survivor Benefit Retired Members Active Members 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 90% for the first 60 months then reduced to either 62.5% or normal retirement, whichever is greater Normal retirement calculated with actual years of credited service or 20 years of credited service, whichever is greater, multiplied by years of credited service (not to exceed 20 years) divided by 20 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. 85 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 c. Employees Covered by Benefit Terms At June 30, 2016, 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 219 56 382 657 PSPRS Police 475 129 748 1,352 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 11.65 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, 2016 were 34.40 percent (34.17 pension plus 0.23 health care), for fire personnel and 35.52 percent (34.58 pension plus 0.94 health care) for police members. e. Annual Pension Contributions Fire personnel contributed $3,914,204 ($3,800,638 regular members plus $113,566 DROP members) and police personnel contributed $7,521,263 ($7,303,439 regular members plus $217,824 DROP members) during fiscal year 2015-2016. For 2016, the City’s annual pension cost of $11,223,876 ($11,146,750 pension, $77,126 health care) for fire and $22,267,577 ($21,673,738 pension, $593,839 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, 2014 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, 2016 was 28.62 percent for both fire and police. The City’s ACR contributions for the year ending June 30, 2016 were $49,968 for fire and $23,632 for police. f. Pension Liability At June 30, 2016, the City reported net pension liabilities of $143,957,780 and $282,610,577 for fire and police, respectively. The net pension liabilities were measured as of June 30, 2015, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. 86 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 g. Pension Expense and Deferred Outflows/Inflows of Resources For the year ended June 30, 2016, the City recognized pension expense of $14,385,864 and $30,683,253 for fire and police, respectively. At June 30, 2016, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources (in thousands): Fire 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 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 $ 16,673 Deferred Inflows of Resources $ 8,072 - 484 11,197 28,354 $ 8,072 Deferred Outflows of Resources $ 34,475 Deferred Inflows of Resources $ 9,444 - 939 21,697 57,111 $ 9,444 $ $ 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 $ $ 87 Fire 1,489 1,489 1,489 3,111 1,774 (267) 9,085 Police $ 5,722 5,722 5,722 8,450 400 (46) $ 25,970 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 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, 2015 Entry Age Normal 7.85% 4% - 8% including inflation 3% Included RP-2000 mortality table (adjusted by 105% for both males and females) Actuarial assumptions used in the June 30, 2015, valuation were based on the results of an actuarial experience study for the 5-year period ended June 30, 2013. 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, 2015, these best estimates are summarized in the following table: Asset Class Short Term Investments Absolute Return Risk Parity Fixed Income Real Assets GTAA Real Estate Private Equity Credit Opportunities Non-U.S. Equity U.S. Equity Total i. Target Allocation 2% 5% 4% 7% 8% 10% 10% 11% 13% 14% 16% 100% Long-Term Expected Real Rate of Return 0.75% 4.11% 5.13% 2.92% 4.77% 4.38% 9.50% 4.48% 7.08% 8.25% 6.23% Discount Rate 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 88 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 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, 2015 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, 2016 Police Balance at June 30, 2015 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, 2016 89 Total Pension Liability $ 299,681 Plan Fiduciary Net Position $ 161,964 6,127 23,086 - - (3,518) - $ (17,323) 8,372 308,053 Total Pension Liability $ 542,745 (17,323) (144) 45 2,131 164,095 - (2,173) - $ (3,518) (9,828) (3,847) (5,878) Plan Fiduciary Net Position $ 274,946 12,216 41,908 - (29,998) 21,953 564,698 6,127 23,086 - 9,828 3,847 5,878 $ 19,680 7,613 10,065 $ Net Position Liability $ 137,717 (29,998) (246) 28 7,142 282,088 144 (45) 6,241 $ 143,958 Net Position Liability $ 267,799 12,216 41,908 (2,173) (19,680) (7,613) (10,065) 246 (28) 14,811 $ 282,610 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 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): Fire Net Pension Liability Police Net Pension Liability l. 1% Decrease 6.85% $ 179,652 352,716 Current Discount Rate 7.85% $ 143,958 282,610 1% Increase 8.85% $ 114,035 224,406 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. 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. 90 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 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 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 $ - Police Fiscal Year Ending 2013 2014 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, 2016, approximately 1,825 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 2015-2016 was $28,400,907. A liability of $3,882,510 is accrued in the business-type activities financial statements; the remaining $24,518,397 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 91 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 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, 2015, Membership Consisted of: Retirees and Beneficiaries Receiving Benefits Active Employees Total 1,825 3,176 5,001 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, 2016, the City contributed $17,858,318 to the plan (approximately 70.4 percent of total premiums). Plan members receiving benefits contributed $7,510,361 or approximately 29.6 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. 92 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 The City’s annual OPEB cost for the current year and the related information for the plan are as follows at June 30, 2016 (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 $ 53,744 20,547 (28,033) 46,258 (17,858) 28,400 456,625 $485,025 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, 2014 through 2016 were as follows: Fiscal Year Ended 2014 2015 2016 Annual OPEB Cost 49,962 50,750 46,258 Actual Contribution 16,011 17,125 17,858 Percentage of OPEB Cost Contributed 32.0% 33.7% 38.6% Net OPEB Obligation 423,000 456,625 485,025 Funded Status and Funding Progress The funded status of the plan as of July 1, 2015 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 $ 639,564 $ 639,564 0.0% $ 380,860 167.9% 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. 93 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 Actuarial Methods and Assumptions Projections of benefits are based on the substantive plan (the plan understood by the employer and plan members) and include the type of benefits in force at the valuation date and the pattern of sharing benefits between the City and the plan members at that point. Actuarial calculations reflect a long-term perspective and employ methods and assumptions that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets. Significant 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, 2015 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 94 (Concluded) Required Supplementary Information Comprehensive Annual Financial Report 2016 CITY OF MESA, ARIZONA EXHIBIT B-1 REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF THE CITY'S PROPORTIONATE SHARE OF NET PENSION LIABILITY COST-SHARING PENSION PLAN JUNE 30, 2016 (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) 2016 2015 2014 through (2015) (2014) 2006 Information 1.639250% 1.634103% $ 255,337 $ 241,792 not available $ See accompanying notes to pension plan schedules. 95 151,154 $ 147,402 168.93% 164.04% 68.35% 69.49% 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, 2016 (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) $ 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) Reporting Fiscal Year (Measurement Date) 2016 2015 2014 through (2015) (2014) 2006 Information 6,127 $ 6,281 not available 23,086 20,708 4,044 (3,518) - (6,961) 23,097 (17,323) 8,372 299,681 308,053 (16,309) 30,860 268,821 299,681 9,828 3,847 5,878 9,157 3,488 19,840 (17,323) (144) 45 2,131 161,964 164,095 City's Net Pension Liability - Ending (a) - (b) $ Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 143,958 (16,309) (160) (113) 15,903 146,061 161,964 $ 53.27% Covered-Employee Payroll $ City's Net Pension Liability as a Percentage of Covered-Employee Payroll 31,661 454.69% See accompanying notes to pension plan schedules. 96 137,717 54.05% $ 30,782 447.39% 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, 2016 (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) $ 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) $ Plan Fiduciary Net Position as a Percentage of the Total Pension Liability Reporting Fiscal Year (Measurement Date) 2016 2015 2014 through (2015) (2014) 2006 Information 12,216 $ 12,481 not available 41,908 36,514 8,728 (2,173) - (11,331) 51,228 (29,998) 21,953 542,745 564,698 (27,566) 70,054 472,691 542,745 19,680 7,613 10,065 17,443 6,784 33,360 (29,998) (246) 28 7,142 274,946 282,088 (27,566) (269) 288 30,040 244,906 274,946 282,610 $ 49.95% Covered-Employee Payroll $ City's Net Pension Liability as a Percentage of Covered-Employee Payroll 62,461 452.46% See accompanying notes to pension plan schedules. 97 267,799 50.66% $ 59,688 448.66% CITY OF MESA, ARIZONA EXHIBIT B-3 REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CITY PENSION CONTRIBUTIONS JUNE 30, 2016 (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) City's Covered-Employee Payroll City's Contributions as a Percentage of Covered-Employee Payroll $ 2016 16,955 $ 2015 16,146 $ 2014 15,750 $ 16,955 - $ 16,146 - $ 15,750 - $ 155,868 $ 151,154 $ 147,402 10.88% 10.68% 2013 through 2006 Information not available 10.68% 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) City's Covered-Employee Payroll City's Contributions as a Percentage of Covered-Employee Payroll $ 2016 11,197 $ 2015 9,827 $ 2014 9,157 $ 11,197 - $ 9,827 - $ 9,157 - $ 32,796 $ 31,661 $ 30,782 34.14% 31.04% 2013 through 2006 Information not available 29.75% 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) City's Covered-Employee Payroll City's Contributions as a Percentage of Covered-Employee Payroll $ 2016 21,697 $ 2015 19,680 $ 2014 17,443 $ 21,697 - $ 19,680 - $ 17,443 - $ 62,760 $ 62,461 $ 59,688 34.57% 31.51% See accompanying notes to pension plan schedules. 98 29.22% 2013 through 2006 Information not available CITY OF MESA, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION NOTES TO PENSION PLAN SCHEDULES JUNE 30, 2016 (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 Asset Valuation Method Actuarial Assumptions: Investment Rate of Return Projected Salary Increases Wage Growth Retirement Age Mortality Entry age normal Level percent of payroll, closed 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) 99 CITY OF MESA, ARIZONA EXHIBIT B-4 REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF AGENT OTHER POST-EMPLOYMENT BENEFITS PLAN'S FUNDING PROGRESS JUNE 30, 2016 (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 ) Fire 2013 2014 2015 Police 2013 2014 2015 Note: 7,331 214 (25) $ 15,823 6,392 6,559 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% 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. 100 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, 2016 (in thousands) Actuarial Valuation Date July 1, 2011 2013 2015 Actuarial Value of Assets (a) $ - Actuarial Accrued Liability (AAL) (b) $ 992,016 650,918 639,563 Percent Funded (a/b) 0.0% 0.0% 0.0% Unfunded AAL (b-a) $ 992,016 650,918 639,563 101 Annual Covered Payroll (c) $ 330,113 360,860 380,860 Unfunded AAL as a Percentage of Covered Payroll (( b - a ) / c ) 300.5% 180.4% 167.9% CITY OF MESA, ARIZONA EXHIBIT B-6 REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE GENERAL FUND FOR THE FISCAL YEAR ENDED JUNE 30, 2016 (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 Community Environment Cultural-Recreational Capital Outlay Total Expenditures Actual Budgetary Basis Final 101,807 16,489 120,070 22,325 7,548 146 312 1,512 270,209 $ 101,807 16,489 120,070 22,325 7,548 146 312 1,512 270,209 $ 95,334 40 17,580 118,775 22,649 8,795 235 300 1,148 264,856 Variance with Final Budget $ (6,473) 40 1,091 (1,295) 324 1,247 89 (12) (364) (5,353) 90,978 223,563 14,704 37,355 9,739 376,339 89,100 226,214 15,146 38,111 14,517 383,088 71,457 223,733 13,723 36,516 4,580 350,009 17,643 2,481 1,423 1,595 9,937 33,079 (106,130) (112,879) (85,153) 27,726 Other Financing Sources (Uses): Transfers In Transfers Out Total Other Financing Sources (Uses) 121,789 (27,751) 94,038 121,789 (36,511) 85,278 101,863 (8,618) 93,245 (19,926) 27,893 7,967 Net Change in Fund Balances (12,092) (27,601) 8,092 35,693 55,652 55,652 43,297 (12,355) Excess (Deficiency) of Revenues Over (Under) Expenditures Fund Balance - Beginning Fund Balance - Ending $ 43,560 See accompanying note to budgetary comparison schedule. 102 $ 28,051 $ 51,389 $ 23,338 CITY OF MESA, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION NOTES TO BUDGETARY COMPARISON SCHEDULES JUNE 30, 2016 (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, 2016 on the “GAAP basis” to the “budget basis” as follows: Net Change in Fund Balance-Budget Basis Exhibit B-6 $ 8,092 Basis Differences: Compensated Absences Sales Tax Accrual Unrealized Gain on Investments Net Change in Fund Balance-GAAP Basis Exhibit A-5 (194) 8,782 181 $ 16,861 103 Combining Statements Comprehensive Annual Financial Report 2016 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 is designed to provide an accumulation of monies from which the interest earnings will provide perpetual care of the Cemetery. Community Facilities District accounts for the operations of the Eastmark and other Community Facility Districts which are paid from special assessments levied against the benefited properties. Development Impact Fees 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. Environmental Compliance 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 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 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 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 accounts for expenditures of the voter-approved sales tax to improve the quality of life for Mesa residents. Street Sales Tax 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. Community Facilities District Capital Projects accounts for the costs of construction of drains, basins, channels and other storm sewer improvements and street improvements in the Eastmark and other Community Facilities Districts. General Capital Projects accounts for the costs of general City construction projects and 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 Parks accounts for the costs of park facilities and improvements. Public Safety accounts for the cost of public safety facilities. Streets accounts for the cost of right-of-way acquisitions and street improvements. 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. Community Facilities District Debt Service accumulates monies for the payment of Eastmark and other Community Facilities Districts 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 Bonds accumulates monies for the payment of principal and interest requirements of the City’s General Obligation Bonds. Highway User Revenue Bonds accumulates monies for the payment of principal and interest requirements of the City’s Highway User Revenue Bonds. Special Assessment Bonds 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, 2016 (in thousands) ASSETS Pooled Cash and Investments Accounts Receivable, Net Accrued Interest Receivable Due from Other Governments Prepaid Costs Deposits Restricted Assets: Pooled Cash and Investments Cash with Fiscal Agent 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 Interest Payable Unearned Revenue Matured Bonds Payable Total Liabilities Special Revenue Funds Cemetery Community Facilities District Development Impact Fees $ $ $ $ $ DEFERRED INFLOWS OF RESOURCES Unavailable Revenue Total Deferred Inflows of Resources FUND BALANCES Nonspendable Restricted Committed Assigned Unassigned Total Fund Balances Total Liabilities, Deferred Inflows of Resources and Fund Balances $ 6,779 73 14 6,866 $ - $ 54 62 116 - $ $ 4,927 3 4,930 1,414 - Environmental Compliance $ $ $ 9,931 7 7 9,945 446 - - 94 94 1,414 446 3 3 - - 5 5 6,863 6,863 22 22 3,516 3,516 9,494 9,494 6,866 $ 104 116 $ 4,930 $ 9,945 EXHIBIT C-1 (Continued) Special Revenue Funds Grants and Special Programs $ $ $ Highway User Revenue Mesa Arts Center Restoration Mesa Housing Authority Quality of Life Sales Tax 5,161 92 2 3,617 5 - $ 11,916 2 3,250 - $ $ 1,489 176 1,360 - $ 8,877 $ 15,168 $ 3,025 1,716 - $ $ 1,347 35 - $ $ 619 - Total Special Revenue Funds 802 1,830 1 - $41,252 2,454 44 69 - $ 83,655 4,694 76 8,227 74 - $ 2,633 $43,819 $ 96,726 $ - $ 3,880 5,960 $ 7,815 1,414 5,960 515 2,231 1,119 59 94 1,742 2,361 - 9,840 2,410 17,599 73 73 - - - - 141 141 222 222 14,049 14,049 1,253 1,253 664 664 2,633 2,633 69 33,769 33,838 3,025 $ 2,633 $43,819 5 5,798 919 6 (155) 6,573 $ 1,119 - 1,344 3 - Street Sales Tax 8,877 $ 15,168 $ 1,347 $ 105 74 60,451 18,529 6 (155) 78,905 $ 96,726 CITY OF MESA, ARIZONA EXHIBIT C-1 NON-MAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET JUNE 30, 2016 (in thousands) Capital Projects Funds Community Facilities District General Capital Projects Parks Public Safety Streets Total Capital Projects Funds $ - $ 8,157 3 - $7,681 148 $4,769 - $14,703 3,893 434 $ 35,310 3,893 3 582 - $ 8,160 $7,829 $4,769 $19,030 $ 39,788 - $ 724 - $ 928 - $2,017 - $ 2,752 - $ 6,421 - - 724 928 2,017 2,752 6,421 DEFERRED INFLOWS OF RESOURCES Unavailable Revenue Total Deferred Inflows of Resources - - - - - - FUND BALANCES Nonspendable Restricted Committed Assigned Unassigned Total Fund Balances - 3 7,433 7,436 6,901 6,901 2,752 2,752 16,278 16,278 3 25,931 7,433 33,367 - $ 8,160 $7,829 $4,769 $19,030 $ 39,788 ASSETS Pooled Cash and Investments Accounts Receivable, Net Accrued Interest Receivable Due from Other Governments Prepaid Costs Deposits Restricted Assets: Pooled Cash and Investments Cash with Fiscal Agent 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 Interest Payable Unearned Revenue Matured Bonds Payable Total Liabilities Total Liabilities, Deferred Inflows of Resources and Fund Balances $ $ $ 106 EXHIBIT C-1 (Concluded) Debt Service Funds Highway User General Revenue Obligation Bonds Bonds Community Facilities District $ $ $ $ 829 934 9,610 11,373 - $ $ $ 1 2,087 26,823 95 907 29,913 - $ $ $ 37 9,812 9,849 - Special Assessment Bonds Total Debt Service Funds Total Nonmajor Governmental Funds $ $ $ $ 49 10 1,911 1,970 $ - 1 - 3,002 37,579 11,616 907 $53,105 $ $ $ - 118,965 4,694 77 12,120 77 582 3,002 37,579 11,616 907 189,619 14,236 1,414 5,960 461 473 934 5,943 20,880 26,823 2,422 7,390 9,812 59 59 8,885 28,743 37,628 8,885 2,410 28,743 61,648 9,604 9,604 472 472 - 1,911 1,911 11,987 11,987 12,209 12,209 835 835 2,618 2,618 37 37 - 872 2,618 3,490 77 87,254 28,580 6 (155) 115,762 1,970 $53,105 11,373 $ 29,913 $ 9,849 $ 107 $ 189,619 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, 2016 (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 Community Facilities District Development Impact Fees Environmental Compliance $ $ $ $ Expenditures: Current: General Government Public Safety Community Environment Cultural-Recreational Debt Service: Principal Retirement Interest on Bonds 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 Refunding Bond Escrow Agent Total Other Financing Sources (Uses) 95 121 216 152 15,066 76 15,294 - 911 80 3,990 6,285 - 3 81 1 1 1,694 12,960 216 56 5,010 2,334 (32) (32) (2,855) (2,855) 24 2,155 2,334 (2) 1,361 7,160 6,647 $ 4,941 70 5,011 78 - 216 Fund Balances - Beginning 53 84 137 - - Net Change in Fund Balances Fund Balances - Ending Special Revenue Funds 6,863 $ 108 22 $ 3,516 - $ 9,494 EXHIBIT C-2 (Continued) Special Revenue Funds Grants and Special Programs Highway User Revenue Mesa Arts Center Restoration Mesa Housing Authority $ $ $ $ 2,291 492 11,690 15 1,051 27 196 1,620 17,382 2 560 30 592 Street Sales Tax Total Special Revenue Funds 16,319 1 61 16,381 $ 21,693 90 31 21,814 $ 26,017 151 152 342 587 699 27,948 $ 47,710 53 2,291 5,674 63,718 15,529 1,611 1,017 280 2,324 140,207 2,692 7,845 175 850 18,130 - - 266 15,655 - 22,258 - 4,116 346 13,886 - 7,797 30,795 51,836 7,135 5,821 17,383 1,097 19,227 538 538 357 16,278 22,258 14,611 32,959 3 24,119 121,685 16,205 54 103 (5,011) 18,522 - - (1) $ 35,403 10 14 5 35,432 Quality of Life Sales Tax 18 (538) (520) (12,238) (12,238) (521) 3,967 54 103 7,094 10,082 1,199 561 6,573 $ 14,049 664 $ 1,253 $ (444) (444) - 18 (15,663) (15,645) (5,011) 2,877 3,077 38,849 76,028 $ 2,633 $ 33,838 $ 78,905 109 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, 2016 (in thousands) 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 Community Facilities District General Capital Projects Parks Public Safety Streets Total Capital Projects Funds $ $ $ $ $ $ Expenditures: Current: General Government Public Safety Community Environment Cultural-Recreational Debt Service: Principal Retirement Interest on Bonds 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 Refunding Bond Agent Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending $ 217 217 522 522 - - 165 165 165 217 522 904 - - - - - - 44 626 8,210 8,880 9,026 9,026 27 4,335 4,362 288 27,967 28,255 120 13,547 13,667 44 1,061 63,085 64,190 (8,663) (8,504) (4,362) (28,255) (13,502) (63,286) (17) 8,685 8,668 5,456 5,456 2,310 63 2,373 24,950 676 25,626 10,440 283 10,723 5,456 (17) 46,385 1,022 52,846 5 (3,048) (1,989) (2,629) (2,779) (10,440) (5) 10,484 8,890 5,381 19,057 43,807 - $ 7,436 $ 6,901 $ 2,752 $ 16,278 $ 33,367 110 EXHIBIT C-2 (Concluded) Community Facilities District $ 677 643 1,320 Debt Service Funds Highway User General Revenue Obligation Bonds Bonds $ $ - Total Debt Service Funds $ $ 790 790 34,712 1,433 559 643 4 164 37,515 Total Nonmajor Governmental Funds $ 47,710 34,765 2,291 1,433 5,674 64,442 15,529 2,254 1,021 661 2,846 178,626 - - - - - 7,797 30,795 51,836 7,135 489 832 1,321 20,880 12,767 7 444 34,098 7,390 4,844 4 12,238 745 138 883 29,504 18,581 11 444 48,540 29,548 18,581 14 1,505 87,204 234,415 1,307 (12,238) (93) (11,025) (55,789) 49 145 194 2,855 1,261 43,304 (49,693) (2,273) 12,238 12,238 93 93 15,235 145 1,261 43,304 (49,693) 10,252 20,709 (15,680) 46,530 2,283 43,304 (49,693) 47,453 193 (966) - - (773) (8,336) 37 - (1) 642 $ 34,035 559 643 4 164 35,405 Special Assessment Bonds 835 3,584 $ 2,618 $ 37 $ - 111 4,263 $ 3,490 124,098 $ 115,762 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, 2016 (in thousands) ASSETS Current Assets: Pooled Cash and Investments Accounts Receivable Accrued Premiums Receivable Accrued Interest Receivable Due from Other Governments Inventory Prepaid Costs Deposits Total Current Assets Warehouse, Maintenance and Services Property and Public Liability Self Insurance Workers' Compensation 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 $ 737 288 5 5,897 7 6,934 9,643 15 517 10,175 Employee Benefits Self Insurance Total 8,614 8 209 8,831 $ 46,356 23 159 74 13 69 46,694 $ 65,350 311 159 97 5 5,897 746 69 72,634 66 1,407 1,473 - - 14 444 458 80 1,851 1,931 8,407 10,175 8,831 47,152 74,565 857 857 122 122 49 49 122 122 1,150 1,150 9,264 10,297 8,880 47,274 75,715 573 40 613 30 1,946 10,653 12,629 33 9,153 14,000 23,186 1,782 2,696 4,478 2,418 13,795 24,653 40 40,906 617 8,937 7,909 17,463 1,277 1,001 2,278 511 417 928 1,277 1,059 2,336 617 12,002 10,386 23,005 18,076 14,907 24,114 6,814 63,911 876 876 125 125 50 50 125 125 1,176 1,176 458 39,877 $ 40,335 1,931 8,697 $ 10,628 1,473 (11,161) (9,688) $ 112 (4,735) (4,735) $ (15,284) (15,284) 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, 2016 (in thousands) Operating Revenues: Charges For Services: Warehouse Fleet Support Services Printing and Graphics Self-Insurance Contributions: Employee City State Retirement System Other Total Operating Revenues Warehouse, Maintenance and Services Property and Public Liability Self Insurance Workers' Compensation Self Insurance Employee Benefits Self Insurance $ $ $ $ Operating Expenses: Warehouse Fleet Support Services Printing and Graphics Administrative Costs Claims and Premiums Paid Total Operating Expenses 6,472 17,939 920 14,287 59,555 4,192 757 104,122 6,292 17,951 1,218 25,461 1,145 4,798 5,943 979 2,988 3,967 7,199 68,903 76,102 6,292 17,951 1,218 9,323 76,689 111,473 Operating Income (Loss) (445) (3,051) (3,051) - 125 125 (445) (2,926) Capital Contributions Transfers In Transfers Out 167 2,953 (670) (927) Change in Net Position 2,005 (9,688) 113 (4,735) (4,626) (7,351) - (194) (509) 456 (4,820) (7,860) 554 554 504 (374) 130 (882) $ 456 48 48 (3,853) (11,693) $ 6,472 17,939 920 14,287 52,453 4,192 544 71,476 (315) Total Net Position - Ending $ 4,210 213 4,423 Depreciation Total Net Position - Beginning - 2,892 2,892 (130) Income (Loss) Before Capital Contributions - 25,331 Operating Income (Loss) Before Depreciation Nonoperating Revenues (Expense): Investment Income Total Nonoperating Revenues (Expenses) - Total (15,414) $ (15,284) $ 727 727 (4,266) (7,133) (982) 167 2,953 (2,953) (5,248) (6,966) 45,583 17,594 40,335 $ 10,628 CITY OF MESA, ARIZONA EXHIBIT C-5 INTERNAL SERVICE FUNDS COMBINING STATEMENT OF CASH FLOWS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 (in thousands) 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 Warehouse, Maintenance and Services Property and Public Liability Self Insurance Workers' Compensation Self Insurance $ $ $ Cash Flows From Noncapital Financing Activities: Operating Transfers-In From Other Funds Net Cash Provided By (Used For) Noncapital Financing 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 25,225 (17,685) (9,891) 4,423 (3,708) (431) Total $ 72,249 (75,517) (927) $ 104,789 (97,971) (12,166) (4,195) (5,348) (2,351) 914 284 2,283 (927) (374) (982) - 2,283 (927) (374) (982) - (17) - - (131) (148) (17) - - (131) (148) 123 123 46 46 541 541 710 710 110 (44) - Net Change in Cash and Cash Equivalents (85) Pooled Cash and Investments at Beginning of Year 822 Pooled Cash and Investments at End of Year 2,892 (1,061) (917) Employee Benefits Self Insurance 9,533 (4,767) (4,786) 8,658 51,123 70,136 $ 46,356 $ 65,350 $ $ (7,860) $ 737 $ 9,643 $ 8,614 $ (445) $ (3,051) $ 456 Reconciliation of Operating Income (Loss) to Net Cash Provided by Operating Activities: Operating Income (Loss) (4,820) 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 Deposits and Prepaid Costs (Decrease)/Increase in Accounts Payable (Decrease)/Increase in Pension Liability (Decrease)/Increase in Other Accrued Expenses (106) 95 (416) (79) (1,715) (21) 14 (4) 3,976 13 (75) (15) (95) 13 (21) (564) (14) 1,017 (93) 95 (29) (1,041) (112) 3,183 Total Adjustments (1,906) 3,965 (172) 625 2,512 315 Net Cash Provided by (Used for) Operating Activities $ Noncash Transactions Affecting Financial Position: Contributions of Capital Assets $ (2,351) 167 114 - 194 - $ 914 $ 284 $ $ - $ - $ (4,195) - 509 $ $ (5,348) 167 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, 2016 (in thousands) Balance Additions July 1, 2015 PAYROLL AGENCY FUND Assets: Pooled Cash and Investments Due from Others Total Assets Liabilities: Accounts Payable Accrued Payroll Payable Total Liabilities $ $ $ $ 14,269 2 14,271 $ 98 14,173 14,271 $ $ $ Deductions 637,457 58 637,515 $ 330,323 413,486 743,809 $ 115 $ $ Balance June 30, 2016 641,490 54 641,544 $ 329,086 418,752 747,838 $ $ $ 10,236 6 10,242 1,335 8,907 10,242 Supplemental Information Comprehensive Annual Financial Report 2016 CITY OF MESA, ARIZONA EXHIBIT D-1 SUPPLEMENTAL INFORMATION BUDGETARY COMPARISON SCHEDULE COMMUNITY FACILITIES DISTRICT SPECIAL REVENUE FUND FOR THE FISCAL YEAR ENDED JUNE 30, 2016 (in thousands) Budgeted Amounts Final Original Revenues: Property Taxes Contributions Total Revenues $ Expenditures: Current: General Government Debt Service: Service Charges Total Expenditures 60 88 148 $ Variance with Final Budget Actual 60 88 148 $ 53 84 137 $ (7) (4) (11) 148 145 78 67 148 3 148 3 81 67 Excess (Deficiency) of Revenues Over (Under) Expenditures - - 56 56 Other Financing Uses: Transfers Out Total Other Financing Uses - (36) (36) (32) (32) 4 4 Net Change in Fund Balances - (36) 24 60 51 (2) (53) Fund Balance - Beginning Fund Balance - Ending 51 $ 51 116 $ 15 $ 22 $ 7 CITY OF MESA, ARIZONA EXHIBIT D-2 SUPPLEMENTAL INFORMATION BUDGETARY COMPARISON SCHEDULE ENVIRONMENTAL COMPLIANCE FOR THE FISCAL YEAR ENDED JUNE 30, 2016 (in thousands) Budgeted Amounts Final Original Revenues: Intergovernmental Charges for Services Investment Income Total Revenues $ 14,800 2 14,802 $ Actual 14,800 2 14,802 $ 152 15,066 76 15,294 Variance with Final Budget $ 152 266 74 492 Expenditures: Current: General Government Public Safety Community Environment Cultural-Recreational Capital Outlay Total Expenditures 1,142 2,010 4,599 6,356 2,941 17,048 1,144 82 4,940 6,359 4,881 17,406 911 80 3,990 6,285 1,694 12,960 233 2 950 74 3,187 4,446 Excess (Deficiency) of Revenues Over (Under) Expenditures (2,246) (2,604) 2,334 4,938 Net Change in Fund Balances (2,246) (2,604) 2,334 4,938 3,435 3,435 7,160 3,725 Fund Balances - Beginning Fund Balance - Ending $ 1,189 117 $ 831 $ 9,494 $ 8,663 CITY OF MESA, ARIZONA EXHIBIT D-3 SUPPLEMENTAL INFORMATION BUDGETARY COMPARISON SCHEDULE GRANTS AND SPECIAL PROGRAMS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 (in thousands) Budgeted Amounts Final Original Revenues: Occupancy Taxes Licenses and Permits Intergovernmental Charges for Services Fines and Forfeitures Investment Income Contributions Miscellaneous Revenues Total Revenues $ 1,739 23,421 64 1,095 194 2,246 28,759 $ 1,739 23,421 64 1,095 194 2,246 28,759 Expenditures: Current: General Government Public Safety Community Environment Cultural-Recreational Capital Outlay Total Expenditures 2,072 13,667 133 1,013 13,862 30,747 3,144 13,523 607 1,182 14,617 33,073 Excess (Deficiency) of Revenues Over (Under) Expenditures (1,988) (4,314) Other Financing Sources (Uses): Transfers In Transfers Out Total Other Financing Uses - Net Change in Fund Balances Fund Balances - Beginning Fund Balance - Ending $ (4,314) 2,266 2,266 118 $ $ (2,048) 2,291 492 11,690 15 1,051 27 196 1,620 17,382 $ 2,692 7,845 175 850 5,821 17,383 4,313 18 (538) (520) 18 (538) (520) (521) 3,793 7,094 $ 6,573 552 492 (11,731) (49) (44) 27 2 (626) (11,377) 452 5,678 432 332 8,796 15,690 (1) - (1,988) 278 Variance with Final Budget Actual 4,828 $ 8,621 CITY OF MESA, ARIZONA EXHIBIT D-4 SUPPLEMENTAL INFORMATION BUDGETARY COMPARISON SCHEDULE HIGHWAY USER REVENUE FOR THE FISCAL YEAR ENDED JUNE 30, 2016 (in thousands) Budgeted Amounts Final Original Revenues: Intergovernmental Charges for Services Investment Income Miscellaneous Revenues Total Revenues $ 34,281 34,281 $ Actual 34,281 34,281 $ 35,403 10 14 5 35,432 Variance with Final Budget $ 1,122 10 14 5 1,151 Expenditures: Current: Community Environment Capital Outlay Total Expenditures 21,455 591 22,046 19,068 2,760 21,828 18,130 1,097 19,227 938 1,663 2,601 Excess (Deficiency) of Revenues Over (Under) Expenditures 12,235 12,453 16,205 3,752 (12,235) (12,235) (12,239) (12,239) (12,238) (12,238) Other Financing Uses: Transfers Out Total Other Financing Uses 1 1 Net Change in Fund Balances - 214 3,967 3,753 Fund Balances - Beginning - - 10,082 10,082 Fund Balance - Ending $ - 119 $ 214 $ 14,049 $ 13,835 CITY OF MESA, ARIZONA EXHIBIT D-5 SUPPLEMENTAL INFORMATION BUDGETARY COMPARISON SCHEDULE MESA HOUSING AUTHORITY FOR THE FISCAL YEAR ENDED JUNE 30, 2016 (in thousands) Budgeted Amounts Final Original Revenues: Intergovernmental Charges for Services Investment Income Total Revenues $ Expenditures: Current: General Government Public Safety Community Environment Capital Outlay Total Expenditures 26,831 3 26,834 $ 22 154 26,778 696 27,650 Actual 26,831 3 26,834 $ 16,319 1 61 16,381 22 367 25,381 700 26,470 266 15,655 357 16,278 Variance with Final Budget $ (10,512) 1 58 (10,453) 22 101 9,726 343 10,192 Excess (Deficiency) of Revenues Over (Under) Expenditures (816) 364 103 (261) Net Change in Fund Balances (816) 364 103 (261) 4,086 561 (3,525) Fund Balances - Beginning Fund Balance - Ending 4,086 $ 3,270 120 $ 4,450 $ 664 $ (3,786) CITY OF MESA, ARIZONA EXHIBIT D-6 SUPPLEMENTAL INFORMATION BUDGETARY COMPARISON SCHEDULE QUALITY OF LIFE SALES TAX FOR THE FISCAL YEAR ENDED JUNE 30, 2016 (in thousands) Budgeted Amounts Final Original Revenues: Sales Taxes Licenses and Permits Investment Income Total Revenues $ Expenditures: Current: Public Safety Total Expenditures 21,210 21,210 $ 21,210 21,210 Actual 21,210 21,210 $ 22,258 22,258 21,693 90 31 21,814 Variance with Final Budget $ 22,258 22,258 483 90 31 604 - Excess (Deficiency) of Revenues Over (Under) Expenditures - (1,048) (444) 604 Net Change in Fund Balances - (1,048) (444) 604 Fund Balances - Beginning - Fund Balance - Ending $ - 121 $ (1,048) 3,077 $ 2,633 3,077 $ 3,681 CITY OF MESA, ARIZONA EXHIBIT D-7 SUPPLEMENTAL INFORMATION BUDGETARY COMPARISON SCHEDULE STREET SALES TAX FOR THE FISCAL YEAR ENDED JUNE 30, 2016 (in thousands) Budgeted Amounts Final Original Revenues: Sales Taxes Licenses and Permits Intergovernmental Charges for Services Fines and Forfeitures Investment Income Miscellaneous Revenues Total Revenues $ Expenditures: Current: General Government Public Safety Community Environment Capital Outlay Total Expenditures 25,452 289 130 206 71 2 26,150 $ 25,452 289 130 206 71 2 26,150 Actual $ 26,017 151 152 342 587 699 27,948 Variance with Final Budget $ 565 (138) 152 212 (206) 516 697 1,798 3,011 341 17,782 20,039 41,173 3,271 352 17,300 21,795 42,718 4,116 346 13,886 14,611 32,959 Excess (Deficiency) of Revenues Over (Under) Expenditures (15,023) (16,568) (5,011) 11,557 Net Change in Fund Balances (15,023) (16,568) (5,011) 11,557 33,577 33,577 38,849 5,272 Fund Balances - Beginning Fund Balance - Ending $ 18,554 122 $ 17,009 $ 33,838 (845) 6 3,414 7,184 9,759 $ 16,829 CITY OF MESA, ARIZONA EXHIBIT D-8 SUPPLEMENTAL INFORMATION BUDGETARY COMPARISON SCHEDULE COMMUNITY FACILITIES DISTRICT CAPITAL PROJECTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 (in thousands) Budgeted Amounts Final Original Revenues: Contributions Total Revenues $ Expenditures: Current: General Government Debt Service: Principal Retirement Cost of Issuance Capital Outlay Total Expenditures - $ Variance with Final Budget Actual - $ 217 217 $ 217 217 3,012 2,938 - 900 20,500 24,412 1,025 20,375 24,338 44 626 8,210 8,880 (44) 399 12,165 15,458 Excess (Deficiency) of Revenues Over (Under) Expenditures (24,412) (24,338) (8,663) 15,675 Other Financing Sources (Uses): Transfers Out Face Amount of Bonds Issued Total Other Financing Uses 24,412 24,412 (19) 24,412 24,393 (17) 8,685 8,668 (2) 15,727 15,725 Net Change in Fund Balances Fund Balances - Beginning Fund Balance - Ending $ 2,938 - 55 5 (50) 26 26 (5) (31) 26 123 $ 81 $ - $ (81) CITY OF MESA, ARIZONA EXHIBIT D-9 SUPPLEMENTAL INFORMATION BUDGETARY COMPARISON SCHEDULE GENERAL CAPITAL PROJECTS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 (in thousands) Budgeted Amounts Final Original Revenues: Miscellaneous Revenues Total Revenues $ Expenditures: Current: General Government Cultural-Recreational Capital Outlay Total Expenditures 849 849 $ Actual 849 849 $ 522 522 Variance with Final Budget $ (327) (327) 705 1,250 17,292 19,247 697 1,245 22,380 24,322 9,026 9,026 697 1,245 13,354 15,296 Excess (Deficiency) of Revenues Over (Under) Expenditures (18,398) (23,473) (8,504) 14,969 Other Financing Sources (Uses): Transfers In Total Other Financing Uses 8,259 8,259 8,259 8,259 5,456 5,456 2,803 2,803 (10,139) (15,214) (3,048) 12,166 11,329 11,329 10,484 Net Change in Fund Balances Fund Balances - Beginning Fund Balance - Ending $ 1,190 124 $ (3,885) $ 7,436 (845) $ 11,321 CITY OF MESA, ARIZONA EXHIBIT D-10 SUPPLEMENTAL INFORMATION BUDGETARY COMPARISON SCHEDULE STREETS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 (in thousands) Budgeted Amounts Final Original Revenues: Intergovernmental Total Revenues $ Expenditures: Debt Service: Cost of Issuance Capital Outlay Total Expenditures Excess (Deficiency) of Revenues Over (Under) Expenditures Other Financing Sources (Uses): Face Amount of Bonds Issued Premium on Issuance of Bonds (Net) Total Other Financing Uses Net Change in Fund Balances $ $ 165 165 $ (18,961) (18,961) 135 43,783 43,918 120 13,547 13,667 15 30,236 30,251 (24,707) (24,792) (13,502) 11,290 24,299 24,299 24,299 24,299 10,440 283 10,723 13,859 (283) 13,576 (2,779) (2,286) 19,057 (5,798) (493) 24,855 $ 19,126 19,126 Variance with Final Budget 43,833 43,833 (408) Fund Balances - Beginning Fund Balance - Ending 19,126 19,126 Actual 24,447 125 24,855 $ 24,362 $ 16,278 $ (8,084) Statistical Section Comprehensive Annual Financial Report 2016 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. 126 Revenue Capacity These schedules contain information to help readers assess the City’s most significant local revenue source, the sales tax. 138 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. 141 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. 149 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. 151 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) 2007-08 2006-07 GOVERNMENTAL ACTIVITIES Net Investment in Capital Assets Restricted Unrestricted $ 791,523 92,533 91,363 $ 844,777 86,955 3,651 $ 1,015,247 $ 1,006,100 $ 975,419 $ 935,383 $ 366,498 96,756 308,375 $ 410,074 94,133 308,216 $ 413,944 82,697 278,892 $ 434,814 47,011 271,706 Total Business-type Activities $ 771,629 $ 812,423 $ 775,533 $ 753,531 PRIMARY GOVERNMENT Net Investment in Capital Assets Restricted Unrestricted $ 1,158,090 191,863 436,923 $ 1,204,794 180,385 433,344 $ 1,205,467 175,230 370,255 $ 1,279,591 133,966 275,357 Total Primary Government $ 1,786,876 $ 1,818,523 $ 1,750,952 $ 1,688,914 BUSINESS-TYPE ACTIVITIES Net Investment in Capital Assets Restricted Unrestricted 791,592 95,107 128,548 126 $ 2009-10 794,720 86,252 125,128 Total Governmental Activities Net Position $ 2008-09 TABLE I (Concluded) 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 $ 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) $ 965,148 81,941 (666,986) $ 905,222 $ 857,973 $ 774,761 $ 806,084 $ 338,072 $ 380,103 $ 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 $ 302,521 49,139 158,756 $ 744,440 $ 735,944 $ 655,766 $ 615,445 $ 536,253 $ 510,416 $ 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) $ 1,267,669 131,080 (508,230) $ 1,649,662 $ 1,593,917 $ 1,430,527 $ 1,421,529 $ $ 127 874,325 890,519 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 Community Environment Cultural-Recreational 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 2006-07 2007-08 2008-09 2009-10 $ 48,201 232,100 91,664 64,592 18,037 $ 63,633 292,396 99,415 72,999 19,083 $ 54,226 290,928 121,736 67,039 18,659 $ 54,863 288,929 104,096 54,010 20,013 454,594 547,526 552,588 521,911 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 - 224,646 240,799 257,204 264,444 $ 679,240 $ 788,325 $ 809,792 $ 786,355 128 TABLE II (Continued) 2010-11 2011-12 2012-13 2013-14 2014-15 $ 59,552 273,320 106,434 54,550 21,078 $ 57,472 287,918 97,593 57,171 21,631 $ 105,410 287,451 129,164 61,717 23,443 $ 103,819 277,614 125,700 49,275 24,431 $ 102,396 302,633 101,531 52,430 23,939 514,934 521,785 607,185 580,839 582,929 594,747 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 27,647 31,549 95,574 73,877 36,586 4,865 2,575 4,252 2,913 5,271 1,182 - 260,094 258,578 318,842 277,671 294,180 286,291 $ 775,028 $ 780,363 $ 926,027 $ 858,510 $ 877,109 $ 881,038 129 2015-16 $ 96,860 305,376 117,120 54,967 20,424 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 2006-07 $ 20,128 22,039 10,277 433 74,498 44,858 172,233 2007-08 $ 23,342 23,703 10,761 324 63,787 21,916 143,833 2008-09 $ 13,426 24,740 10,215 78 63,055 35,436 146,950 2009-10 $ 11,824 20,419 10,135 9 72,812 30,343 145,542 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 33,079 38,924 98,806 57,699 46,685 3,125 2,265 1,971 5,837 984 210 17,782 307,367 Total Primary Government Program Revenues $ 473,523 $ 512,307 $ 461,561 $ 452,909 NET (EXPENSE)/REVENUE Governmental Activities Business-type Activities $ (282,361) 76,644 $ (403,693) 127,675 $ (405,638) 57,407 $ (376,369) 42,923 Total Primary Government Net Expense $ (205,717) $ (276,018) $ (348,231) $ (333,446) 130 TABLE II (Continued) 2010-11 $ 12,577 20,304 11,820 8 65,284 31,461 141,454 2011-12 $ 13,359 25,779 11,294 18 60,355 23,503 134,308 2012-13 $ 17,693 27,675 9,885 2,945 55,312 25,049 138,559 2013-14 $ 18,797 32,106 9,890 400 29,514 20,714 111,421 2014-15 $ 20,892 36,260 10,505 5,741 26,418 75,907 175,723 2015-16 $ 23,254 38,178 11,049 9,385 26,361 35,925 144,152 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 32,254 38,962 130,674 79,523 55,354 3,623 1,645 2,798 63 201 1,234 267 16,929 363,527 $ 451,725 $ 467,158 $ 464,044 $ 442,362 $ 527,279 $ 507,679 $ (373,480) 50,177 $ (387,477) 74,272 $ (468,626) 6,643 $ (469,418) 53,270 $ (407,206) 57,376 $ (450,595) 77,236 $ (323,303) $ (313,205) $ (461,983) $ (416,148) $ (349,830) $ (373,359) 131 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 2006-07 2007-08 2008-09 2009-10 $ 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 $ 121,557 14,318 1,581 104,580 14,757 261 13,846 65,433 Total Governmental Activities 361,613 394,547 374,956 336,333 BUSINESS-TYPE ACTIVITIES: Occupancy Taxes Investment Income Gain (Loss) on Sale of Capital Assets Miscellaneous Transfers 8,125 429 (61,440) 6,546 694 (94,121) 1,894 407 (96,599) 508 (65,433) Total Business-type Activities (52,886) (86,881) (94,298) (64,925) GOVERNMENTAL ACTIVITIES: Sales Taxes Property Taxes Occupancy Taxes Unrestricted Intergovernmental Revenues Contributions Not Restricted to Specific Programs Investment Income Miscellaneous Transfers Total Primary Government $ 308,727 $ 307,666 $ 280,658 $ 271,408 Change in Net Position Governmental Activities Business-type Activities $ 79,252 23,758 $ $ (30,682) (36,891) $ (40,036) (22,002) Total Primary Government $ 103,010 $ 31,648 $ (67,573) $ (62,038) 132 (9,146) 40,794 TABLE II (Concluded) 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 $ 121,046 14,244 2,148 92,613 15,610 617 7,060 83,334 $ 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 $ 151,826 33,825 2,331 149,350 44,928 2,210 6,008 102,148 336,672 340,228 400,299 504,792 478,743 492,626 839 (83,334) 850 (83,615) 825 860 (83,615) 851 1,453 18,697 288 (109,520) 999 1,141 5,157 233 (94,427) 1,161 3,020 (6,145) 1,039 (102,148) (82,495) (82,765) (81,930) (88,231) (86,897) (103,073) $ 254,177 $ 257,463 $ 318,369 $ 416,561 $ 391,846 $ 389,553 $ (36,808) (32,318) $ (47,249) (8,493) $ (68,327) (75,287) $ 35,374 (34,961) $ 71,537 (29,521) $ 42,031 (25,837) $ (69,126) $ (55,742) $ (143,614) $ $ 42,016 $ 16,194 413 133 CITY OF MESA, ARIZONA TABLE III FUND BALANCE, GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (modified accrual basis of accounting) (in thousands) 2006-07 2007-08 2008-09 GENERAL FUND Reserved (1)(2) Unreserved Nonspendable Restricted Committed Assigned Unassigned $ 77,177 57,030 - $ 84,886 50,283 - $ 51,862 74,711 - $ Total General Fund $ 134,207 $ 135,169 $ 126,573 $ 96,235 $ 101,170 $ $ 8,643 $ 17,013 $ 53,674 $ 24,627 17,568 - 24,922 11,143 - 24,816 28,442 - 31,871 15,724 - 2,906 112,538 19,166 - $ 48,080 $ 44,708 $ 70,271 $ 101,269 $ 134,610 ALL OTHER GOVERNMENTAL FUNDS Reserved Unreserved, Reported in: Special Revenue Funds Capital Project Funds Nonspendable Restricted (3)(4) Committed Assigned Unassigned Total All Other Governmental Funds 5,885 2009-10 4,048 92,187 - (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. 134 2010-11 $ 405 1,992 4,898 93,875 - TABLE III (Concluded) 2011-12 $ 2012-13 754 2,012 4,992 78,035 $ 2013-14 1,724 284 1,185 50,426 $ 2014-15 2,956 188 1,484 72,683 $ 2015-16 3,490 184 126 74,145 $ 4,035 184 227 10,703 79,657 $ 85,793 $ 53,619 $ 77,311 $ 77,945 $ 94,806 $ $ $ $ $ - 84 211,279 16,360 (1) $ 227,722 55 243,831 23,005 (1,177) $ 265,714 23 190,609 21,379 (675) $ 211,336 138 172,316 30,092 (31) $ 202,515 77 95,701 28,580 6 (155) $ 124,209 135 CITY OF MESA, ARIZONA TABLE IV CHANGES IN FUND BALANCE, GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (modified accrual basis of accounting) (in thousands) 2006-07 REVENUES Sales Taxes (1)(2) $ 155,817 Property Taxes Occupancy Taxes 2,390 Special Assessments 417 Licenses and Permits 20,128 Intergovernmental 190,826 Charges for Services 22,039 Fines and Forfeitures 10,277 Investment Income 6,463 Contributions Miscellaneous 6,366 Total Revenues 414,723 EXPENDITURES Current General Government Public Safety Community Environment Cultural-Recreational Debt Service Principal Interest Service Charges Cost of Issuance Capital Outlay Total Expenditures 2007-08 $ 147,763 2,395 1,218 23,342 193,585 23,703 10,761 5,178 6,422 414,367 2008-09 $ 126,520 1,808 806 13,426 191,085 24,343 10,215 2,018 14,755 384,976 2009-10 $ 121,557 13,886 1,581 923 11,824 190,731 20,419 10,135 191 13,675 384,922 40,662 210,542 65,314 54,711 48,112 233,507 66,616 57,765 36,507 230,864 72,647 53,171 40,113 216,026 72,081 40,150 8,358 18,151 57 77,475 475,270 25,871 19,230 58 77,309 528,468 36,906 18,845 28 77,899 526,867 34,846 21,186 9 539 82,530 507,480 Excess of Revenues Under Expenditures (60,547) (114,101) (141,891) (122,558) OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Face Amount of Bonds Issued Face Amount of Notes Issued Premium on Issuance of Bonds (Net) Premium on Issuance of Notes Proceeds from Capital Leases Issuance of Refunding Bonds Payment to Refunding Bond Agent Total Other Financing Sources (Uses) 99,901 (33,233) 30,682 573 6,911 104,834 147,478 (53,960) 15,450 195 2,529 111,692 155,697 (59,106) 61,830 437 158,858 149,437 (66,654) 30,865 45,000 402 869 159,919 Net Change in Fund Balances Debt Service as a percentage of Noncapital Expenditures $ 44,287 $ 6.68% (2,409) 10.01% $ 16,967 12.42% (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. 136 $ 37,361 13.19% TABLE IV (Concluded) 2010-11 $ $ 121,046 14,274 2,148 1,069 12,577 174,781 20,304 11,820 587 7,417 366,023 2011-12 $ 126,644 14,323 2,019 996 13,359 168,433 25,779 11,294 1,284 7,573 371,704 2012-13 $ 137,280 14,404 1,903 897 17,693 184,823 27,675 9,885 1,501 2,264 5,940 404,265 2013-14 $ 140,567 22,500 1,919 1,062 18,797 185,303 32,106 9,890 589 1,212 4,524 418,469 2014-15 $ 146,337 34,022 2,081 1,264 20,892 185,529 36,260 10,505 1,793 1,344 6,587 446,614 2015-16 $ 151,826 34,765 2,331 1,433 23,254 191,360 38,178 11,049 1,483 961 3,994 460,634 38,843 215,166 68,463 42,191 41,083 226,429 64,404 43,904 74,596 226,677 55,197 37,787 75,077 231,364 56,573 38,788 81,066 243,570 60,512 40,365 79,448 254,528 65,559 43,651 31,690 21,211 10 29 60,173 477,776 25,513 22,643 8 870 66,951 491,805 31,519 23,433 10 1,448 91,537 542,204 71,015 23,704 727 102,657 599,905 28,367 23,269 13 657 74,150 551,969 107,383 18,905 14 1,505 91,784 662,777 (111,753) (120,101) (137,939) (181,436) (105,355) (202,143) 128,065 (44,418) 29,320 360 113,327 121,459 (38,136) 27,290 77,835 8,027 8,250 67,238 (74,127) 197,836 147,818 (64,203) 62,672 3,681 17,415 (19,889) 147,494 141,909 (32,389) 40,800 430 150,750 123,044 (45,324) 18,999 2,952 17,555 (20,058) 97,168 122,572 (24,298) 46,530 2,283 43,304 (49,693) 140,698 1,574 12.67% $ 77,735 11.34% $ 9,555 12.20% $ (30,686) 19.05% 137 $ (8,187) 10.81% $ (61,445) 22.12% CITY OF MESA, ARIZONA TABLE V SALES TAX COLLECTIONS BY CATEGORY LAST TEN FISCAL YEARS (in thousands) 2006-07 (1) Utilities Communications Publishing Printing & Advertising Contracting Retail Sales Restaurants & Bars Amusements Rentals Miscellaneous $ Total $ 155,817 City Direct Tax Rate 9,116 3,939 1,963 478 21,424 85,015 11,726 1,457 20,534 165 1.75% 2007-08 $ 9,668 4,312 1,923 375 19,301 77,308 12,039 1,349 21,369 119 $ 147,763 1.75% 2008-09 $ 9,654 3,749 1,402 280 15,263 63,230 10,956 1,363 20,514 107 $ 126,518 1.75% 2009-10 2010-11 2011-12 9,757 3,809 1,102 175 10,913 63,469 10,948 1,176 20,123 84 $ 11,104 4,456 999 342 8,388 60,266 11,165 1,433 22,219 674 $ 11,878 4,483 934 336 9,962 62,191 11,864 1,434 22,968 595 $ 121,555 $ 121,046 $ 126,645 $ 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 138 1.75% TABLE V (Concluded) 2012-13 2013-14 2014-15 $ 12,549 4,651 866 434 12,402 66,789 12,577 1,432 24,847 732 $ 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 $ $ 137,279 $ 140,567 $ 146,337 $ 151,826 1.75% 1.75% 1.75% 2015-16 13,251 4,229 688 428 14,623 76,160 14,240 1,561 25,578 1,068 1.75% 139 CITY OF MESA, ARIZONA TABLE VI DIRECT AND OVERLAPPING SALES TAX RATES LAST TEN FISCAL YEARS Fiscal Year City Direct Rate Maricopa County 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 1.75% 1.75% 1.75% 1.75% 1.75% 1.75% 1.75% 1.75% 1.75% 1.75% 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% 6.60% * 6.60% 6.60% 5.60% 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 140 CITY OF MESA, ARIZONA TABLE VII RATIOS OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS (in thousands) 2006-07 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 $ 221,625 9,970 142,290 8,046 17,503 - 2008-09 $ 267,063 140,265 7,294 9,730 - 2009-10 $ 273,869 134,545 6,550 5,406 45,000 723,185 3,290 5,100 589 2,869 767,445 3,290 432 1,541 817,530 2,957 333 158 857,435 2,691 2,964 - $ 1,142,365 $ 1,172,142 $ 1,245,330 $ 1,328,460 Percentage of Personal Income (1) Per Capita (1) 223,115 9,970 142,460 8,798 22,989 - 2007-08 10.54% $ 2,483 (1) Information on personal income and population is presented on Table XII. 141 10.68% $ 2,529 11.03% $ 2,677 11.49% $ 2,843 TABLE VII (Concluded) 2010-11 $ 281,514 128,515 5,806 2,166 45,000 2011-12 $ 288,669 121,395 5,062 822 122,835 2012-13 $ 327,265 120,942 4,318 2,712 140 129,435 2013-14 $ 346,860 112,882 3,574 5,897 72 83,610 2014-15 $ 338,401 106,740 2,830 11,012 82,785 2015-16 $ 350,593 98,743 2,085 19,300 - 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 - 1,062,871 390 103,339 1,985 - $ 1,366,753 $ 1,495,377 $ 1,666,818 $ 1,647,697 $ 1,644,982 $ 1,639,306 13.06% $ 3,101 14.10% $ 3,390 16.09% $ 3,747 15.42% $ 3,621 142 14.53% $ 3,561 13.91% $ 3,451 CITY OF MESA, ARIZONA TABLE VIII RATIOS OF GENERAL BONDED DEBT OUTSTANDING LAST TEN FISCAL YEARS (in thousands) Year Secondary Assessed Value (1) General Obligation Bonds 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 $ 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 2,757,913 $ 226,405 224,915 259,895 276,560 283,735 290,270 328,152 347,465 338,875 350,983 Less: Amounts Available in Debt Service Fund $ 134 1 138 372 3,584 2,618 Total $ 226,405 224,915 259,895 276,560 283,601 290,269 328,014 347,093 335,291 348,365 Source: (1) Maricopa County Finance Department Assessor's Office. (2) Population figures are found on Table XII. 143 Percentage of Secondary Assessed Value 7.34% 5.47% 5.42% 5.82% 6.93% 9.17% 11.84% 13.56% 11.88% 12.63% Per Capita (2) $ 492 486 559 592 645 658 739 765 726 733 CITY OF MESA, ARIZONA TABLE IX DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT (1) JUNE 30, 2016 (in thousands) 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 Debt Outstanding (2) $ Other Debt: Maricopa County Estimated Percentage Applicable to City of Mesa Percent (2)(4) Amount 593,820 284,810 101,545 60,000 124,290 100,500 112,635 9,985 7.97% 86.40% 26.32% 32.05% 0.83% 0.27% 0.65% 100.00% $ 47,327 246,076 26,727 19,230 1,032 271 732 9,985 282,930 7.97% 22,550 Subtotal, overlapping debt 373,930 City direct debt (3) 478,422 Total Direct and Overlapping Debt $ 852,352 (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. (2) Source: Hilltop Securities, Inc. (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. (4) Proportion applicable to the City is computed on the ratio of secondary assessed valuation for fiscal year 2015/16 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'sability 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. 144 CITY OF MESA, ARIZONA TABLE X LEGAL DEBT MARGIN INFORMATION LAST TEN FISCAL YEARS (in thousands) 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 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 Total Net Debt Applicable to 20% Limit Margin Available for Future General Obligation Bond Issues for 20% Bonds Total Net Debt Applicable to the 20% Limit as a Percentage of the 20% Legal Debt Limitation Total Margin Available 2006-07 2007-08 2008-09 2009-10 2010-11 $ 184,984 $ 246,872 $ 287,585 $ 284,977 $ 245,642 22,453 17,688 13,569 6,064 5,326 $ 162,531 $ 229,184 $ 274,016 $ 278,913 $ 240,316 12.14% 7.16% 4.72% 2.13% 2.17% $ 616,614 $ 922,905 $ 958,616 $ 949,923 $ 818,807 203,952 207,227 246,326 270,496 278,409 $ 412,662 $ 715,678 $ 712,290 $ 679,427 $ 540,398 33.08% $ 575,193 22.45% $ 944,862 25.70% $ 986,306 28.48% $ 958,340 (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. 145 34.00% $ 780,714 TABLE X (Concluded) Legal Debt Margin Calculation for Fiscal Year 2015-16 Secondary Assessed Value $ 2,757,913 Legal Debt Limitation Debt Applicable to Limit: General Obligation Bonds Total Net Debt Applicable to Limit Margin Available for Future General Obligation Bond Issues 6% Bonds (1) $ 165,475 20% Bonds (2) $ 551,583 1,047 1,047 349,903 349,903 $ 164,428 Total Margin Available 2011-12 2012-13 2013-14 $ 189,857 $ 166,225 $ 153,578 1,370 175 605 $ 188,487 $ 166,050 $ 152,973 0.72% 0.11% $ 554,084 $ 511,927 288,900 300,735 344,040 $ 343,955 $ 253,349 $ 167,887 45.65% $ 532,442 54.28% $ 419,399 $ $ 366,108 169,270 2015-16 $ 1,275 $ 167,995 $ 564,235 $ 220,865 $ 388,860 551,583 349,903 $ 60.86% $ 164,428 0.63% 343,370 $ 165,475 1,047 0.75% 67.20% $ 320,860 201,680 2014-15 0.39% $ 632,855 $ 201,680 63.44% $ 146 366,108 CITY OF MESA, ARIZONA TABLE XI PLEDGED-REVENUE COVERAGE LAST TEN FISCAL YEARS (in thousands) Operating Revenues (1) 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 $ 270,070 278,366 274,497 275,193 283,921 299,356 293,915 295,710 311,506 323,099 Operating Expenses $ 175,942 196,130 197,992 194,159 190,441 180,296 241,128 203,187 209,677 218,706 Utility System Revenue Bonds Net Revenue Available for Debt Debt Service Service Principal Interest $ 94,128 82,236 76,505 81,034 93,480 119,060 52,787 92,523 101,829 104,393 $ 340 7,960 9,815 10,475 12,585 21,365 21,630 22,550 21,860 25,800 $ Coverage Ratio 29,305 34,658 37,225 40,380 42,814 43,465 46,412 51,927 46,423 44,794 Highway User Revenue Fund Revenue Bonds Highway User Fund Revenues 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 $ 40,975 38,512 34,260 31,791 32,053 27,825 30,046 30,923 33,952 35,383 Debt Service Principal Interest $ 135 170 2,025 5,720 6,030 3,290 6,145 6,945 6,305 7,390 $ 6,401 6,828 6,823 6,691 6,365 5,563 5,627 5,472 5,158 4,844 Coverage Ratio 6.27 5.50 3.87 2.56 2.59 3.14 2.55 2.49 2.96 2.89 (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. 147 3.18 1.93 1.63 1.59 1.69 1.84 0.78 1.24 1.49 1.48 TABLE XI (Concluded) Special Assessment Bonds Special Assessment Collections $ 851 1,710 1,202 923 1,088 996 897 861 827 790 Debt Service Principal Interest $ 343 752 752 744 744 744 744 744 744 745 $ Community Facility District Bonds Coverage Ratio 357 457 417 377 337 297 257 217 178 138 1.21 1.41 1.03 0.82 1.01 0.96 0.90 0.90 0.90 0.89 Community Facility District Collections Debt Service Principal Interest $ $ Municipal Development Corporation Bonds Excise Tax Revenues (2) $ 216,897 226,910 203,198 - Debt Service Principal Interest $ 4,500 5,100 9,970 - $ 309 108 17 - 65 232 489 $ 7 131 456 832 0.99 0.98 1.00 Highway Project Advancement Notes Excise Tax Revenues (2) Coverage Ratio $ 195 672 1,320 Coverage Ratio 45 44 20 - $ 148 208,547 200,873 199,949 213,309 221,355 234,183 242,020 Debt Service Principal Interest $ 77,835 $ 449 1,576 4,312 5,404 4,790 3,892 324 Coverage Ratio 464.30 127.48 46.37 39.47 46.21 60.17 3.10 CITY OF MESA, ARIZONA TABLE XII DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS Year Population (1) 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 460,155 463,397 465,272 467,355 440,677 441,160 444,856 454,981 462,376 475,274 Sources: (1) (2) (3) Personal Income (in thousands) Per Capita Personal Income (1) $ $ 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 11,783,944 23,559 23,689 24,263 24,742 23,748 24,035 23,291 23,491 24,485 24,794 Median Age (1) Public School Enrollment (2) 32.9 33.1 33.3 33.6 32.6 34.3 34.4 35.3 35.5 35.7 74,128 73,054 70,297 67,749 66,144 65,662 64,892 64,932 64,532 65,049 Unemployment Rate (3) 2007-2010 Claritas, 2011-2013 SitesUSA, 2014-2016 ESRI Community Analyst Arizona Department of Education AZ Dept of Economic Security. Data is Phoenix-Mesa-Scottsdale Metropolitan Area. Beginning in 2011 unemployment rate is not seasonally adjusted. 149 2.9% 4.3% 8.0% 8.7% 9.0% 7.5% 7.2% 6.5% 5.4% 5.3% CITY OF MESA, ARIZONA TABLE XIII PRINCIPAL EMPLOYERS CURRENT YEAR AND NINE YEARS AGO 2016 Employer Banner Health Systems Mesa Public Schools Boeing City of Mesa Wal-Mart Gilbert Unified School District Fry's Food Stores Drivetime Automotive Group County of Maricopa Santander Consumer Holdings USA Home Depot Empire Southwest Machinery Bashas' Total Employees Rank 2007 Percentage of Total City Employment Employees 9,573 8,435 4,700 3,798 2,541 1,229 1,128 990 986 1 2 3 4 5 6 7 8 9 6.11% 5.39% 3.00% 2.43% 1.62% 0.78% 0.72% 0.63% 0.63% 6,600 10,000 4,600 3,851 2,280 1,000 1,300 970 34,350 10 0.62% 0.00% 0.00% 0.00% 21.93% 750 1,025 1,000 32,406 Source: City of Mesa Office of Economic Development 150 Rank 2 1 3 4 5 8 6 10 7 8 Percentage of Total City Employment 3.43% 5.19% 2.39% 2.00% 1.18% 0.00% 0.52% 0.00% 0.67% 0.00% 0.39% 0.53% 0.52% 16.83% CITY OF MESA, ARIZONA TABLE XIV FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS 2006-07 2007-08 2008-09 2009-10 Function/Program General Government Police Fire Community Environment Cultural-Recreational Energy Resources Water Resources Environmental Management & Sustainability Airport 979 1,332 468 183 445 125 177 132 10 966 1,306 472 181 417 132 166 136 9 838 1,282 470 189 335 140 213 126 10 835 1,240 455 184 329 122 232 124 10 Total 3,851 3,785 3,603 3,531 Source: City of Mesa Office of Management and Budget and Human Resources 151 TABLE XIV (Concluded) 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 824 1,163 457 189 334 116 230 120 9 870 1,158 473 184 332 115 233 117 9 864 1,163 479 183 313 117 229 127 10 880 1,173 482 178 317 117 238 125 10 876 1,154 503 182 338 116 240 127 10 860 1,155 492 189 599 116 238 138 11 3,442 3,491 3,485 3,520 3,545 3,798 152 CITY OF MESA, ARIZONA TABLE XV OPERATING INDICATORS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS Function/Program Police Major Crimes Traffic Accidents Fire Fires Rescue or Emergency False Alarms Hazardous Conditions Other Calls Libraries Number of Registered Borrowers Total Attendance Access to Electronic Resources Electric Connections Gas Connections Water Connections Average Daily Consumption (mgd)* Peak Daily Consumption (mg)** Wastewater Connections Average Daily Sewage Treatment (mgd)* Solid Waste Customers Served Refuse Collected (tons) Recyclables Collected (tons) Green Waste Collected (tons) Falcon Field Average Number of Aircraft Based Aircraft Operations (annual) 2006-07 2007-08 2008-09 2009-10 22,437 12,184 21,388 7,578 18,482 6,256 17,345 5,890 1,428 38,003 2,875 608 11,792 1,200 34,207 2,456 567 12,976 1,165 32,478 2,125 663 11,923 1,048 34,079 1,478 701 12,819 266,839 1,161,887 3,029,001 15,723 50,478 275,449 1,165,451 2,910,088 15,215 51,454 306,427 1,348,555 3,661,261 14,546 51,911 352,607 1,367,667 2,542,927 14,738 52,832 133,249 89.64 128.83 133,086 85.76 125.72 132,771 79.72 108.68 133,701 72.67 111.14 116,190 38.10 116,465 38.00 116,721 36.00 117,831 33.60 115,305 266,817 38,660 18,215 112,632 243,208 39,296 17,601 112,832 234,709 37,841 18,936 113,079 217,295 36,490 18,588 901 261,623 934 337,178 873 283,336 841 248,381 * mgd - millions of gallons per day ** mg - millions of gallons 153 TABLE XV (Concluded) 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 16,623 5,952 16,740 6,047 16,149 6,186 14,561 6,107 14,795 6,622 13,208 6,968 981 38,788 1,478 478 11,840 1,012 42,925 1,292 446 11,192 929 43,416 1,255 454 11,803 1,075 44,885 1,176 477 9,403 1,083 45,832 1,106 534 8,964 1,053 49,743 1,083 507 10,613 220,812 1,095,196 1,691,966 15,064 53,434 142,943 1,143,718 1,566,775 15,841 55,828 166,492 1,178,137 1,515,299 13,815 55,544 196,020 1,166,560 1,541,323 16,460 58,011 125,336 1,166,131 1,549,150 16,703 59,214 122,810 1,157,394 1,345,977 16,854 60,383 134,072 76.23 114.30 135,138 81.60 122.30 136,640 81.03 115.68 137,910 80.85 117.13 139,560 79.55 113.45 141,824 78.55 116.62 118,413 33.70 119,615 33.40 120,953 33.60 122,623 33.10 124,142 33.30 126,359 34.60 115,811 223,217 35,486 19,149 118,949 209,116 34,443 17,882 119,142 215,463 34,616 19,878 121,674 217,745 34,629 18,854 122,552 233,754 35,541 21,151 127,517 236,849 35,499 20,602 789 221,910 749 222,650 700 190,605 729 276,731 702 241,848 663 270,702 154 CITY OF MESA, ARIZONA TABLE XVI CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS Function/Program Police Stations Stations Vehicular Patrol Units Fire Stations Libraries Parks and Recreation Developed Parks (acres) Undeveloped Acres Swimming Pools Recreation Facilities Community Environment Streets (miles) Paved Unpaved Storm Sewers (miles) Gas Mains (miles) Water Mains (miles) Storage Capacity (millions of gallons) Wastewater Mains (miles) Treatment Capacity (millions of gallons per day) Solid Waste Collection Trucks Golf Courses 2006-07 2007-08 2008-09 2009-10 4 351 17 3 4 368 17 3 4 330 17 3 4 289 18 3 1,184 1,251 12 6 1,180 1,251 12 6 1,180 1,251 12 6 1,154 1,078 12 6 1,169 12 303 1,147 1,178 12 308 1,202 1,182 12 316 1,223 1,184 12 321 1,243 2,008 117 2,068 117 2,104 125 2,127 125 1,544 60 1,577 60 1,598 60 1,606 60 68 2 70 2 69 2 69 2 155 TABLE XVI (Concluded) 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 4 290 18 4 5 267 19 4 6 267 20 4 8 291 20 4 8 292 20 4 8 287 20 4 1,154 1,074 13 6 1,553 705 9 6 1,177 1,104 9 6 1,232 1,157 9 4 1,901 633 9 4 1,901 633 9 4 1,190 12 329 1,247 1,303 1 438 1,240 1,307 1 432 1,256 1,418 1 440 1,256 1,427 1 423 1,311 1,427 1 423 1,311 2,136 125 2,270 125 2,284 125 2,315 125 2,364 112 2,364 112 1,613 60 1,652 60 1,677 60 1,677 60 1,781 60 1,781 60 69 2 70 1 72 1 72 1 74 1 73 1 156 Financial Services Department P.O. Box 1466 Mesa, Arizona, 85211-1466 (480) 644-2275 www.mesaaz.gov