TOWN OF FOUNTAIN HILLS, ARIZONA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2020 Issued by: Administration Department Finance Division TOWN OF FOUNTAIN HILLS, ARIZONA TABLE OF CONTENTS INTRODUCTORY SECTION Page Letter of Transmittal 1 List of Principal Officials 11 GFOA Certificate of Achievement 12 Organizational Chart 13 FINANCIAL SECTION INDEPENDENT AUDITOR’S REPORT 17 MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) 21 BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements: Statement of Net Position 34 Statement of Activities 35 Fund Financial Statements: Balance Sheet – Governmental Funds 38 Reconciliation of the Balance Sheet – Governmental Funds to the Statement of Net Position 41 Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds 42 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds to the Statement of Activities 44 Notes to Financial Statements 45 TOWN OF FOUNTAIN HILLS, ARIZONA TABLE OF CONTENTS FINANCIAL SECTION – continued Page REQUIRED SUPPLEMENTARY INFORMATION Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual: General Fund 66 Highway User Revenue Fund 67 Grants Fund 68 Note to Required Supplementary Information 69 COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES Governmental Funds: Combining Balance Sheet – All Non-Major Governmental Funds – By Fund Type 72 Combining Statement of Revenues, Expenditures and Changes in Fund Balances – All Non-Major Governmental Funds – By Fund Type 73 Special Revenue Funds: Combining Balance Sheet 76 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 78 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual 80 Debt Service Funds: Combining Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual 86 TOWN OF FOUNTAIN HILLS, ARIZONA TABLE OF CONTENTS FINANCIAL SECTION – continued Page Capital Projects Fund: Combining Balance Sheet 90 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 91 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual 92 STATISTICAL SECTION Financial Trends: Net Position by Component 96 Changes in Net Position 98 Financial Trends: Fund Balances – Governmental Funds 100 Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds 102 Revenue Capacity: Governmental Activities – Tax Revenues by Source 104 Assessed Value and Estimated Actual Value of Taxable Property 105 Principal Property Taxpayers 106 Property Tax Levies and Collections 107 Taxable Sales by Category 108 Direct and Overlapping Sales Tax Rates 110 TOWN OF FOUNTAIN HILLS, ARIZONA TABLE OF CONTENTS STATISTICAL SECTION – continued Page Debt Capacity: Ratios of Outstanding Debt by Type 111 Ratios of General Bonded Debt Outstanding 112 Direct and Overlapping Governmental Activities Debt 113 Legal Debt Margin Information 114 Calculation of Legal Debt Margin 116 Revenue Bond Coverage 117 Demographic and Economic Information: Demographic and Economic Statistics 118 Principal Employers 119 Operating Information: Authorized Full-Time Equivalent Government Employees by Function 120 Operating Indicators by Function 121 Capital Assets Statistics by Function 122 (This page intentionally left blank) INTRODUCTORY SECTION (This page intentionally left blank) TOWN OF FOUNTAIN HILLS 16705 E. Avenue of the Fountains, Fountain Hills, AZ 85268 480.816.5100 | Fax: 480.837.3145 November 3, 2020 To the Honorable Mayor, Members of the Town Council, and Citizens of the Town of Fountain Hills: State law requires that all general-purpose local governments publish, within six months of the close of each fiscal year, a complete set of financial statements presented in conformity with accounting principles generally accepted in the United States of America and audited in accordance with auditing standards generally accepted in the United States by a certified public accounting firm licensed in the State of Arizona. Pursuant to that requirement, we hereby issue the Comprehensive Annual Financial Report (CAFR) of the Town of Fountain Hills (Town) for the fiscal year ended June 30, 2020. This report consists of management’s representations concerning the finances of the Town. 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 Town 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 Town of Fountain Hills’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 Town’s comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free of 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 Town’s financial statements have been audited by Heinfeld, Meech & Co., P.C., a certified public accounting firm. The goal of the independent audit was to provide reasonable assurance that the financial statements of the Town for the fiscal year ended June 30, 2020, 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 auditors concluded, based upon the audit, that there was a reasonable basis for rendering an unmodified opinion that the Town’s financial statements for the fiscal year ended June 30, 2020, 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. www.fh.az.gov Generally accepted accounting principles in the Unites 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). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The Town of Fountain Hills’ MD&A can be found immediately following the report of the independent auditors. PROFILE OF THE GOVERNMENT The Town of Fountain Hills overlooks the Verde River Valley and the east valley of the metro Phoenix area. The Town is a master planned community established in 1970 by McCulloch Properties (now MCO Properties, Inc.). Prior to 1970, the area was a cattle ranch and was part of one of the largest land and cattle holdings in Arizona. The land was purchased by Robert McCulloch in the late 1960s and the community designed by Charles Wood, Jr. (designer of Disneyland in southern California). The centerpiece of Fountain Hills is one of the world's tallest man-made fountains, a focal point that attracts thousands of visitors each year. Located on 13,006 acres of land, Fountain Hills is surrounded by the McDowell Mountains and Scottsdale on the west, the Fort McDowell Yavapai Nation on the east, the Salt River PimaMaricopa Indian Community on the south, and by the McDowell Mountain Regional Park on the north. The elevation is 1,520 feet at the fountain, 2,460 feet at the Adero Canyon Trailhead, and is approximately 500 feet above Phoenix. Over the past twenty-six plus years, Fountain Hills has grown from 10,190 residents to a town of 25,200 in 2019. On June 5, 2006, the Town of Fountain Hills became twenty square miles and about ten percent larger by annexing 1,300 acres of State Trust Land. The process to annex the State Trust Land occurred over a two and one-half year period and development of the land will occur over the next decade. Annexing this property into the Town ensures that its future development will be of the highest quality under Town standards. The Town offers a wide range of living accommodations, from small condominium complexes to large custom homes. Fountain Hills also offers recreational and cultural programs and services that contribute to a high quality of life for its residents. The community consists of primarily residential property and open space; of the total 20.32 square miles of land, only 2.5% of the total is zoned commercial and/or industrial, 23.3% is preserved as open space and 51.0% is residential. Page 2 The Town’s Mission Statement The Town of Fountain Hills’ purpose is to serve the best interests of the community by:  providing for its safety and well-being;  respecting its special, small-town character and quality of life;  providing superior public services;  sustaining the public trust through open and responsive government;  and maintaining the stewardship and preservation of its financial and natural resources. To serve, respect, and provide trust and stewardship. Fountain Hills Town Hall The Town of Fountain Hills is an Arizona municipal corporation, acting as a general law town as prescribed in the Arizona Revised Statutes. The Town was incorporated on December 5, 1989, with the governmental and administrative affairs of the Town operating under the CouncilManager form of government. Legislative authority is vested in a seven member Town Council. The Mayor is a member of the Town Council who is directly elected by voters and chairs the Town Council meetings. The members of the Council are elected at large and serve four year overlapping terms. The Town Council is responsible for the adoption of local ordinances, budget adoption, appointment of residents to citizen advisory committees and hiring the Town Manager. The Town Manager is responsible for implementation of the policies of the Town Council and overall management of the Town through department directors and approximately 61 FTE employees. The Presiding Judge, Town Attorney, and Town Prosecutor are under the direction of the Town Council. The Town provides or administers a full range of services including public safety (law enforcement, fire and emergency medical services); development services (code enforcement, planning and zoning); public works (including construction and maintenance of streets and infrastructure); municipal court; recreational activities; community center; senior services and cultural events. The Town does not maintain utility or other operations that require the establishment of enterprise funds. Page 3 The financial reporting entity (the Town) includes all the funds of the primary government (i.e., the Town of Fountain Hills as legally defined) as well as all of its component units. The component units consist of legally separate entities for which the primary government is financially accountable. Blended component units, although legally separate entities, are, in substance, part of the primary government’s operations and are included as part of the primary government. Accordingly, the Cottonwoods Maintenance District, the Eagle Mountain Community Facilities District and the Fountain Hills Municipal Property Corporation are included in the financial report of the Town. 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 Town of Fountain Hills operates. Internal Controls. As earlier noted, the management of the Town of Fountain Hills, Arizona, is responsible for establishing and maintaining a system of internal control. Internal accounting controls are designed to provide reasonable, but not absolute, assurance regarding; 1) Safeguarding of assets against loss from unauthorized use or deposition, and 2) Reliability of financial records for preparing financial statements and maintaining accountability for assets. The concept of reasonable assurance recognizes: 1) The cost of a control should not exceed the benefits likely to be derived, and 2) The valuation of costs and benefits requires estimates and judgments by management. The system of internal control is subject to periodic evaluation by management and is also considered by the independent auditors in connection with the annual audit of the Town’s financial statements. All internal control evaluations occur within the above framework. The Town's internal accounting controls are considered to adequately safeguard assets and provide reasonable assurance of proper recording of financial transactions. Budgetary Controls. The budget process is a cyclical process and begins each year with the preparation of the base budget by each department head. Each budget is based on expenditures to date and the previous years’ experience. The departments’ base budgets, along with any requests for new positions, programs or services are reviewed by the Town Manager. The Town Manager then meets with department heads to review their base budgets and requests for new services and/or programs. Once management has reviewed the departments’ requests, a tentative budget is presented to the Town Council by the Town Manager. Page 4 The Town Council formally adopts the budget and appropriates funding for the General Fund, Special Revenue Funds, Debt Service Funds, and Capital Projects Funds. Therefore, these funds have appropriated budgets, and budget to actual information is presented. In April/May, the Town Manager submits to the Town Council a proposed budget for the fiscal year commencing the following July 1st. The budget includes proposed expenditures and the means of financing them. The Town Council is legally required to hold public hearings on the proposed budget in order to obtain comments from local taxpayers and to adopt a final budget by June 30th, the close of the Town of Fountain Hills’ fiscal year. The budget is legally enacted through passage of a resolution and is prepared by fund and department. The resolution sets the limit for expenditures during the fiscal year. The Town Manager may authorize transfers from and within personnel and from operating capital to services or supplies within a department. Additional expenditures may be authorized for expenditures directly necessitated by a natural or man-made disaster as prescribed in the State Constitution, Article IX, Section 20. The Town is subject to the State of Arizona’s Expenditure Limitation Law for Towns and Cities. This law does not permit the Town to spend more than budgeted revenues plus the carry-over of unrestricted cash balance from the prior fiscal year. The limitation is applied to the total of the combined funds. All appropriations lapse at year-end. To ensure compliance with the state imposed expenditure limitation, a uniform expenditure report must be filed with the state each year. This report reconciles total Town expenditures from the audited financial statements to total expenditures for reporting in accordance with the state’s uniform expenditure reporting system (ARS Section 41-1279.07). The appropriated budget is prepared by fund and department. Department heads may make transfers of appropriations within the department. Transfers of appropriations between departments, however, require Town Council approval. Budget-to-actual comparisons are provided in this report for each individual governmental fund for which an appropriated annual budget has been adopted. Budget-toactual comparisons for the General Fund and Major Special Revenue Funds are presented in the Required Supplementary Information and all other funds are presented in Combining and Individual Fund Financial Statements and Schedules. Local Economy. The Town of Fountain Hills, Arizona, continues to face many issues during these uncertain economic times. Its citizens, governing body, and municipal government are committed to finding solutions for each of these issues. In order to address these issues, the Town has proposed a baseline budget requiring any new positions to be deemed mission critical. All vacancies will be evaluated to assess the need for replacement, including possible modification or elimination of the job description. The Town will be closely monitoring its revenue sources and make adjustments accordingly. Overall local sales tax receipts continued to increase during the fiscal year, partly due to a 0.3% rate increase that became effective on November 1, 2019 for most sales tax categories. The following chart is a look at the past five years’ local sales tax activity by sector: Page 5 As shown in the chart, sales tax collections remained relatively steady across most sectors. Retail sales experienced a significant 28.7% increase over the prior year, and Transportation/Utility revenues increased 8.9% from FY18-19. Construction sales tax, a one-time revenue source, is driven entirely by development activity in the community, and it decreased by 1.2% from the prior year. Recent building permit activity indicates that construction sales tax is likely to increase over the next fiscal year. The Restaurant/Bar sector was the only other sector to decrease during the year with a 0.2% drop in revenues. Construction activity provides revenue to the Town through local sales tax, the proceeds of which are utilized for general operations and capital expenditures. Without the resources to fund capital projects, the Town must find additional funds to pay for necessary infrastructure projects. For operating costs, the Town is dependent upon State-shared revenues and local sales tax as a major source of operating revenue, accounting for 87% of total General Fund revenue for fiscal year 2019-20. State-shared revenues are derived as a proportionate share of state sales, income and vehicle license taxes which are distributed based on the Town’s population compared to all other incorporated cities and towns in Arizona (currently 0.4%). State-shared income tax revenue category is based on two years prior personal and corporate earnings, and revenue from this source increased by 8.5% in FY19-20. State sales tax has increased over the past several years, and this trend continued by increasing revenue by 4.3% compared to the prior year. Other local activity has remained fairly static during the period due to the lack of major retailers (the Town has three grocery stores and one major retailer). Fountain Hills is past the historic period of rapid growth, and the long-term economic outlook for the Town must recognize this fact. The opportunity to further expand the retail tax base in Fountain Hills is limited by the lack of available commercial land – over 70% of the currently available commercial lots are already developed. Page 6 Development Activity over the past year: Development Services has been involved with the following development activities during fiscal year 2019-20 (7/1/2019 – 6/30/2020): o o o o o o o o o o o o o Three Temporary Visitor Permits were issued. One Temporary User Permit was issued. Three Site Plans were approved during the period. Two Special Use Permits were granted. Four Administrative Use Permits were issued. Eleven Banner and Sign Permits were issued. Sixteen commercial development/subdivision cases were granted. Five Zoning Verification Letters were issued. Four Saguaro Cactus Permits were issued. Twenty-nine new Single-Family Residential Building Permits were issued. Eighteen Multi-Family Permits were issued. There were new two Commercial Building Permits issued. There were thirteen Commercial Tenant Improvement Permits issued during the last fiscal year. A summary of the activity, by month, is shown below: Permits Issued T.I. & Comm Pools, Fences & Other DUP/MULTI Fiscal year SFR Bldgs. Total Units Add Ons (Not Garages Garages & Carports MONTH TOTAL JULY 3 4 1 22 3 0 33 AUGUST 5 2 0 41 2 0 50 SEPTEMBER 0 4 1 28 1 0 34 OCTOBER 2 2 0 47 6 1 58 NOVEMBER 0 1 1 18 3 0 23 DECEMBER 3 2 0 32 4 1 42 JANUARY 3 0 2 44 4 0 53 FEBRUARY 2 2 3 41 2 0 50 MARCH 4 1 0 52 5 0 62 APRIL 3 0 2 29 6 1 41 MAY 2 0 3 37 6 0 48 JUNE YEARLY TOTAL 2 0 2 42 7 0 53 29 18 15 433 49 3 547 Page 7 Economic Outlook. Local Sales Tax – Not having a property tax, the Town of Fountain Hills relies heavily on Town transaction privilege tax (TPT), sometimes called a sales tax. Overall, sales tax revenues provide over 50% of the General Fund revenues. On November 1, 2019 the Town’s TPT rate went up 0.3% resulting in a total TPT rate of 2.9% for most categories. Sales taxes received from the Construction category is equally divided between the General Fund and the Capital Projects Fund. State-Shared Revenues – The Town of Fountain Hills receives significant revenue allocations from the State. These "State-Shared Revenues" include allocations of the state-collected income tax, sales tax, fuel tax, and motor vehicle license tax. Revenues received from income tax, sales tax, and a portion of vehicle license tax are placed in the Town's General Fund, where it is used to sustain a large portion of the Town's day-to-day activities. Revenues from the fuel tax and the majority of the vehicle license tax are placed in the Streets Fund (discussed in the next section) and are restricted as to their use. Overall, State-Shared Revenues have steadily increased from year-to-year. Streets Fund – The State-Shared fuel tax, referred to as Highway User Revenue Fund (HURF), is placed in the Streets Fund to be used specifically for street maintenance and related activity. In addition to the fuel tax, 70% of the revenues received from the vehicle license tax are placed in the Streets Fund to be used for these same purposes. Long-term Financial Planning. Fountain Hills’ Financial Policies are balanced on sound financial reserves and conservative revenue growth forecasts for the foreseeable future. Potential for State legislative impacts to revenue-sharing or local revenues and additional demands for essential Town services remain. The Town’s Financial Policies set forth guidelines against which current budgetary performance can be measured and proposals for future programs can be evaluated. The Town’s Financial Policies have helped weather the uncertainty caused by the coronavirus pandemic. This policy continues to require the Town to internally restrict an amount equal to 20% of the average actual General Fund revenues for the preceding five fiscal years as part of its General Fund balance. This amount is estimated to be approximately 60 days of expenditure coverage and is considered a “Rainy Day” fund. Additionally, a reserve of 20% of the average actual General Fund revenues for the preceding five fiscal years will be maintained as Unassigned Fund Balance. This additional fund balance reserve will provide increased flexibility in the event of unanticipated decreases in revenue collection. The Council also adopted Financial Policies that include guidelines for the issuance of debt for capital expenditures, community facility districts, financing alternatives, expenditure controls and financial planning. The policy was amended during FY 09-10 to reduce the allocation of the local construction sales tax to the Capital Projects Fund from 85% to 50%, reflecting the transition from one-time building activity to ongoing redevelopment activity. The debt policy was prepared with a preference for “payas-you-go” financing for capital spending; however, the policy did not anticipate the lack of funding for capital projects, and the use of bond funding should be reconsidered. Page 8 In early 2009, the Strategic Planning Advisory Commission (SPAC) began the process of gathering public input to update the Strategic Plan’s vision, confirm residents’ values, and create a fresh structure for the Strategic Plan revision. Subsequently, Strategic Plan 2010 was built upon the foundation of a clearly defined vision statement and eight key values, with specific indicators to evaluate Council and staff priorities. In 2017, SPAC again updated the Strategic Plan. Based on citizen input, the newest Strategic Plan is designed to guide our future decisions grounded on these common values: 1. Economic Growth 2. Infrastructure Maintenance 3. Demographic Balance 4. Financial Stability and Sustainability 5. Community and Quality of Life These values guide the Town’s annual budget process. MAJOR INITIATIVES AND SERVICE EFFORTS AND ACCOMPLISHMENTS The Town of Fountain Hills’ adopted FY19-20 budget reflected the continued slow recovery in the local economy, which is also somewhat mirrored at the national and state levels. Due to the challenging economic conditions of the recession, the Town had made significant reductions in staff and service levels in past years. This reduction was accomplished by a thorough assessment of all existing and proposed programs and workload. As a result, Town staffing was reduced from 115 Full-Time Equivalents (FTEs) to 62.07 FTEs in FY19-20. The Town Council established priorities in FY16-17, and the two top priorities were determined to be Economic Development and Pavement Management. In order to implement the Pavement Management program, the Council approved the use of Vehicle License Tax revenues to annual pavement maintenance with an effective date of July 1, 2013. Also, effective July 1, 2016, 0.2% of local sales tax revenues that had been allocated to MPC debt service payments were reallocated to pavement maintenance. Economic Development initiatives are funded through a dedicated portion of the local sales tax which provides funding for business attraction, retention and expansion. For the Year. The following list depicts the continued commitment of the Town of Fountain Hills to make the community a better place to live. Fiscal year 2019-20 goals attained are summarized within this list of accomplishments:       Implemented a 0.3% local sales tax increase to ensure adequate funding of Town operations Secured grant funding from the Arizona Office of Tourism - Proposition 302 Secured grant funding from Salt River Pima-Maricopa Indian Community - Proposition 202 Received Council approval of the Ten-Year Pavement Management Plan Completed a Development Fee Study resulting in updated funding sources for new parks, streets, and fire protection infrastructure Completed a major update to audio-visual equipment in Council Chambers to increase quality of community broadcasts and presentations Page 9 AWARDS AND ACKNOWLEDGEMENTS Awards. The Government Finance Officers Association (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the Town of Fountain Hills for its Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2019. This was the twenty-fourth consecutive year that the Town has received this prestigious award. In order to be awarded a Certificate of Achievement, the Town published an easily readable and efficiently organized CAFR. This report satisfied both accounting principles generally accepted in the United States of America (GAAP) and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current CAFR continues to meet the Certificate of Achievement program’s requirements, and we are submitting it to the GFOA to determine its eligibility for the fiscal year ended 2020 Certificate. For the eighth year, the Town was also given the Award for Outstanding Achievement in Popular Annual Financial Reporting for the fiscal year ended June 30, 2019. In addition, the government received the GFOA’s Distinguished Budget Presentation Award for its annual budget for the fiscal year beginning July 1, 2019. In order to qualify for the Distinguished Budget Presentation Award, the government’s budget document was judged to be proficient in several categories, including as a policy document, a financial plan, an operations guide, and a communications device. This is the eighteenth consecutive year that the Town has received the award. Acknowledgments. The preparation of this Comprehensive Annual Financial Report could not have been accomplished without the efficient and dedicated services of the entire team of the Finance Division. I also wish to extend my appreciation to the Mayor and members of Town Council for their leadership and support in planning and conducting the financial affairs of the Town in a responsible and progressive manner. Each employee of the Town has my sincere appreciation for the contributions made in the preparation of this report. Respectfully submitted, Grady E. Miller Town Manager Page 10 TOWN OF FOUNTAIN HILLS, ARIZONA LIST OF PRINCIPAL OFFICIALS JUNE 30, 2020 ELECTED OFFICIALS Ginny Dickey, Mayor Mike Scharnow, Vice-Mayor Dennis Brown, Councilmember Sherry Leckrone, Councilmember Alan Magazine, Councilmember David Spelich, Councilmember Art Tolis, Councilmember DEPARTMENT DIRECTORS Grady Miller, Town Manager David Trimble, Deputy Town Manager/Administrative Services Director Rachael Goodwin, Community Services Director James Smith, Economic Development Director John Wesley, Development Services Director Justin Weldy, Public Works Director David Pock, Finance Director Elizabeth Burke, Town Clerk Captain Dave Ott, Rural Metro Corporation, Fire Chief Captain Larry Kratzer, Maricopa County Sheriff’s Office, District Commander Robert Melton, Presiding Judge Mark Iacovino, The Law Office of Mark Iacovino, Town Prosecutor Aaron Arnson, Pierce Coleman PLLC, Town Attorney Page 11 Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to Town of Fountain Hills Text38: Arizona For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2019 Executive Director/CEO Page 12 Page 13 Fire / EMS Presiding Judge GIS Planning Community Center Senior Services Volunteer Program Facilities Code Enforcement Recreation Streets Inspection Engineering Building Safety Parks Public Works Development Services Town Manager Community Services Town Prosecutor Mayor and Town Council Citizens of Fountain Hills Public Information Economic Development / Tourism Town Clerk Administrative Services Finance Administration Town Attorney Town of Fountain Hills Organization Contracted Appointed by Council Law Enforcement (This page intentionally left blank) Page 14 FINANCIAL SECTION Page 15 (This page intentionally left blank) Page 16 INDEPENDENT AUDITOR’S REPORT The Honorable Mayor and Members of the Town Council Town of Fountain Hills, Arizona Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Town of Fountain Hills, Arizona (the Town), as of and for the year ended June 30, 2020, and the related notes to the financial statements, which collectively comprise the Town’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. Auditor’s 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 auditor’s 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. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Town of Fountain Hills, Arizona, as of June 30, 2020, and the respective changes in financial position thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Page 17 Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis and 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. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Town’s basic financial statements. The Introductory Section, Combining and Individual Fund Financial Statements and Schedules, and Statistical Section 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 relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Combining and Individual Fund Financial Statements and Schedules information is fairly stated in all material respects in relation to the basic financial statements as a whole. The Introductory Section and Statistical Section have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 3, 2020, on our consideration of the Town of Fountain Hills, 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 solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of 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 Town of Fountain Hills, Arizona’s internal control over financial reporting and compliance. Heinfeld, Meech & Co., P.C. Phoenix, Arizona November 3, 2020 Page 18 MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) (Required Supplementary Information) Page 19 (This page intentionally left blank) Page 20 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2020 As management of the Town of Fountain Hills, Arizona (Town), we offer readers of the Town’s financial statements this narrative overview and analysis of the financial activities of the Town for the fiscal year ended June 30, 2020. This discussion and analysis is intended to be an easily readable breakdown of the Town of Fountain Hills’ financial activities based on currently known facts, decisions and conditions. This analysis focuses on current year activities and operations and should be read in combination with the transmittal letter and the financial statements that follow. The management’s discussion and analysis is presented as required supplementary information to supplement the basic financial statements. FINANCIAL HIGHLIGHTS  The Town’s total net position of governmental activities increased $0.5 million to $124.2 million, representing a 0.4 percent increase of the total net position.  General revenues from governmental activities accounted for $23.3 million in revenue, or 85.7 percent of all revenues from governmental activities. Program specific revenues in the form of charges for services and grants and contributions accounted for $3.9 million or 14.3 percent of total governmental activities revenues.  The Town had $26.8 million in expenses related to governmental activities, an increase of 1.3 percent from the prior fiscal year, primarily due to increased public safety costs.  Among the major governmental funds, the General Fund had $19.4 million in current fiscal year revenues, which consisted primarily of taxes and intergovernmental revenues. The total expenditures of the General Fund were $16.3 million. The General Fund’s fund balance increased $2.1 million to $9.4 million at the end of the current fiscal year. OVERVIEW OF FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the Town’s basic financial statements. The Town’s basic financial statements comprise three components: 1) governmentwide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Page 21 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2020 OVERVIEW OF FINANCIAL STATEMENTS – continued Government-wide financial statements. The government-wide financial statements provide readers with a broad overview of the Town’s finances, in a manner similar to a private-sector business. These statements are prepared using the accrual basis of accounting. The Statement of Net Position presents information on all of the Town’s assets, liabilities, and deferred inflows/outflows of resources with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the Town is improving or deteriorating. The Statement of Activities presents information showing how the Town’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., earned but unused compensated absences). The government-wide financial statements distinguish functions of the Town that are principally supported by taxes and intergovernmental revenues (governmental activities). The governmental activities of the Town include administration, development services, public safety, public works, and culture and recreation. Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The Town uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the Town are included in governmental funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements use the modified accrual basis of accounting and focus on near-term inflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating the Town’s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the Town’s near-term financing decision. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. Page 22 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2020 OVERVIEW OF FINANCIAL STATEMENTS – continued Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures and changes in fund balances for the General, Highway User Revenue (HURF), Grants, Capital Projects and all Debt Service Funds, all of which are considered major funds. Data from other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements and schedules. Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found immediately following the basic financial statements. Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the Town’s budget process. The Town adopts an annual budget for all governmental funds. A schedule of revenues, expenditures and changes in fund balances - budget and actual has been provided for the General Fund and major Special Revenue Funds as required supplementary information. GOVERNMENT-WIDE FINANCIAL ANALYSIS While this document contains information about the funds used by the Town to provide services to our citizens, the Statement of Net Position and the Statement of Activities serve to provide an answer to the question of how the Town, as a whole, did financially throughout the year. These statements include all assets and liabilities using the accrual basis of accounting similar to the accounting used by the private sector. The basis for this accounting takes into account all of the current year’s revenues and expenses regardless of when the cash is received or paid. These two statements report the Town’s assets and the changes in those assets. The change in assets is important because it tells the reader whether the financial position of the Town as a whole has improved or diminished. However, in evaluating the overall position of the Town, nonfinancial information such as changes in the Town’s tax base and the condition of the Town’s capital assets will also need to be evaluated. Analysis of Net Position. Net position may serve over time as a useful indicator of a government’s financial position. In the case of the Town, assets related to governmental activities exceeded liabilities by $124.2 million at the end of the fiscal year. Page 23 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2020 GOVERNMENT-WIDE FINANCIAL ANALYSIS – continued The largest portion of the Town’s governmental activities net position reflects its investment in capital assets (e.g., land, infrastructure, buildings and improvements, vehicles, machinery and equipment and construction in progress); less any related outstanding debt used to acquire those assets. The Town uses these capital assets to provide services to its citizens; consequently, these assets are not available for future spending. Although the Town’s investment in its capital assets is reported net of related outstanding 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. In addition, a portion of the Town’s net position represents resources that are subject to external restrictions on how they may be used. The remaining balance is unrestricted and may be used to meet the Town’s ongoing obligations to its citizens and creditors. The following tables present a summary of the Town’s net position for the fiscal years ended June 30, 2020 and June 30, 2019. Current and other assets Capital assets, net Total assets Governmental Activities As of As of June 30, 2020 June 30, 2019 $ 23,329,463 $ 20,419,804 104,404,331 107,559,746 127,733,794 127,979,550 Current and other liabilities Long-term liabilities Total liabilities Net position Net investment in capital assets Restricted Unrestricted Total net position 3,338,678 236,576 3,575,254 $ 3,661,199 631,777 4,292,976 104,004,331 104,781,328 2,766,041 3,646,449 17,388,168 15,258,797 124,158,540 $ 123,686,574 At the end of the current fiscal year the Town reported positive balances in all three categories of net position for governmental activities. The Town also reported positive balances in all net position categories in the prior fiscal year. Page 24 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2020 GOVERNMENT-WIDE FINANCIAL ANALYSIS – continued The Town’s financial position is the product of several financial transactions including the net results of activities, the acquisition and payment of debt, the acquisition and disposal of capital assets, and the depreciation of capital assets. Changes in net position. The Town’s total revenues for the current fiscal year were $27.2 million. The total cost of all programs and services was $26.8 million. The following table presents a summary of the changes in net position for the fiscal years ended June 30, 2020 and June 30, 2019. Governmental Activities Fiscal Fiscal Year Ended Year Ended June 30, 2020 June 30, 2019 Revenues Program revenues: Charges for services Operating grants and contributions Capital grants and contributions General revenues Property taxes Sales taxes Franchise taxes State-shared revenue Vehicle License taxes Investment earnings Miscellaneous Total revenues Expenses General government Development services Public safety Public works Culture and recreation Interest on long-term debt Total expenses Excess before special item Special item – Donation of capital assets Changes in net position Net position, beginning Net position, ending $ 1,783,926 2,007,841 91,245 $ 2,676,671 1,850,676 181,939 2,077,368 13,172,390 434,896 5,813,932 1,060,839 545,983 236,452 $ 27,224,872 2,476,546 11,491,123 423,947 5,453,029 1,061,441 554,549 202,969 $ 26,372,890 $ 3,318,477 867,725 8,142,069 10,263,244 3,767,996 57,054 26,416,565 (43,675) 6,118,700 6,075,025 117,611,549 $ 123,686,574 3,470,936 825,884 9,003,452 9,961,306 3,490,447 881 26,752,906 471,966 0 471,966 123,686,574 $124,158,540 Page 25 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2020 GOVERNMENT-WIDE FINANCIAL ANALYSIS – continued The charts below compare the governmental expenses from fiscal years 2019-20 and 2018-19. Page 26 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2020 GOVERNMENT-WIDE FINANCIAL ANALYSIS – continued The following items are significant current year transactions that have had an impact on the change of net position.  Fees, Fines and Charges for Services revenue decreased 33.4 percent compared to the prior year due to the coronavirus pandemic resulting in the shutdown of the U.S. economy.  Investment income decreased in the current year 1.5 percent over the prior year due to the coronavirus pandemic, slowing economy, and lower interest rates.  Interest on long-term debt decreased 98.5 percent due to the retirement of all town-wide bonded debt.  Public safety costs, which include fire protection and police services, increased 10.6 percent; the fire contract is multi-year with automatic increases while the police contract is based on cost reimbursement.  Overall, expenses increased 1.3 percent due primarily to increase public safety costs. The following table presents the cost of the Town’s major functional activities. The table also shows each function’s net cost (total cost less charges for services generated by the activities and intergovernmental aid provided for specific programs). The net cost shows the financial burden that was placed on the Town’s taxpayers by each of these functions. Governmental Activities General government Development services Public safety Public works Culture and recreation Interest on long-term debt Total expenses Year Ended June 30, 2020 Total Net (Expense)/ Expenses Revenue Year Ended June 30, 2019 Total Net (Expense)/ Expenses Revenue $ 3,470,936 825,884 9,003,452 9,961,306 3,490,447 881 $ 26,752,906 $ 3,318,477 867,725 8,142,069 10,263,244 3,767,996 57,054 $ 26,416,565 $ (2,845,747) (216,992) (8,856,335) (7,989,399) (2,960,540) (881) $ (22,869,894) $ (2,946,699) 276,146 (7,940,248) (8,573,437) (2,465,987) (57,054) $ (21,707,279)  The cost of all governmental activities this year was $26.8 million.  Federal, State, and county governments and charges for services subsidized certain governmental programs with revenues of $3.9 million.  Net cost of governmental activities of $22.9 million was financed by general revenues, which consist of primarily sales taxes of $13.2 million and State-shared revenues of $6.9 million. Page 27 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2020 FINANCIAL ANALYSIS OF THE TOWN’S FUNDS As noted earlier, the Town uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds. The focus of the Town’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the Town’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of the Town’s net resources available for spending at the end of the fiscal year. The financial performance of the Town as a whole is reflected in its governmental funds. As the Town completed the year, its governmental funds reported an increase of $1.2 million in the combined fund balance from $19.3 million to $20.5 million. The General Fund comprises 45.9 percent of the total fund balance. Approximately $5.5 million or 58.8 percent of the General Fund’s fund balance is unassigned. The General Fund is the principal operating fund of the Town. The fund balance increased by $2.1 million to $9.4 million as of fiscal year end. General Fund revenues increased $1.9 million primarily due to increased local sales tax collections. General Fund expenditures increased $1.7 million. In addition to the increases of the public safety contracts, the Town also replaced a fire truck, which was a major investment in capital assets. The Highway User Revenue Fund comprises 8.0 percent of total fund balance. The fund balance decreased $1.0 million from the prior year because of the continuation of the pavement management program. The Capital Projects Fund comprises 29.7 percent of the total fund balance. All of the fund balance is committed or assigned to capital projects. The fund balance increased $268 thousand due to increased construction-related sales tax. BUDGETARY HIGHLIGHTS A majority of the budget transfers for the fiscal year moved budget authority between departments within the General Fund; however, the final budget for the General Fund did increase $234,500 thousand as a result of transfers from non-major funds. Page 28 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2020 BUDGETARY HIGHLIGHTS – continued A schedule showing the budget amounts compared to the Town’s actual financial activity for the General Fund is provided in this report as required supplementary information. The significant variances are summarized as follows:  The favorable variance of $2.1 million in overall revenues is primarily due to increased local sales taxes collected from a 0.3% tax rate increase, effective 11/1/2019, and an increase in construction activity.  The favorable total expenditures variance of $1.7 million is due primarily to lowered expenditures throughout all departments, in particular contractual services. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets. As of the end of the current fiscal year, the Town had invested $227.5 million in capital assets, including buildings, facilities, vehicles, computers, equipment, infrastructure and artwork. This amount represents a net increase, prior to depreciation, of $1.5 million from the prior fiscal year. The increase was primarily due to the purchase and replacement of vehicles and equipment and the completion of Phase IV of the unpaved alley project and sidewalk infills. Total depreciation expense for the current fiscal year was $5.3 million. The following schedule presents a summary of capital asset balances for the fiscal years ended June 30, 2020 and June 30, 2019. Capital assets – non-depreciable Capital assets – depreciable, net Total Governmental Activities As of As of June 30, 2020 June 30, 2019 $ 34,417,953 $ 33,387,396 69,986,378 74,172,350 $104,404,331 $107,559,746 The estimated construction commitments amount is $910,125. Additional information on the Town’s capital assets can be found in Note 5. Debt Administration. At year-end, the Town had $400 thousand in governmental long-term debt outstanding, with the entire balance due within one year. Long-term debt decreased by $2.4 million during the current fiscal year. Page 29 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2020 CAPITAL ASSETS AND DEBT ADMINISTRATION – continued State statutes currently limit the amount of general obligation debt a Town may issue to a percentage of its total assessed valuation for water, sewer, artificial lighting, parks, open space, recreational facility improvements, public safety, law enforcement, fire and emergency facilities and street and transportation facilities. The current 20 percent debt limitation for the Town is $113 million. State statutes also currently limit the amount of general obligation debt a Town may issue to a percentage of its total assessed valuation for all other purposes. The current 6 percent debt limitation for the Town is $33.9 million. Additional information on the Town’s long-term debt can be found in Notes 6 and 7 in the notes to the financial statements. ECONOMIC FACTORS AND NEXT YEAR’S BUDGET AND RATES Many factors were considered by the Town’s administration during the process of developing the fiscal year 2020-21 budget. Among them:    Revenue projections were developed using conservative growth estimates and did not include anticipated revenues that will be received from soon-to-be completed developments. The COVID-19 pandemic has increased uncertainty around budgeted revenues. In response, a large contingency line item has been budgeted in case less revenues are received. Also considered in the development of the budget is the local economy and inflation of the surrounding area. Budgeted expenditures for the Town increased 3.7 percent to $33.8 million in fiscal year 2020-21. Revenues from local sales taxes and state-shared revenue are expected to be the primary funding sources. CONTACTING THE TOWN’S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, investors and creditors with a general overview of the Town’s finances and to demonstrate the Town’s accountability for the resources it receives. If you have questions about this report or need additional information, contact the Finance Division, Town of Fountain Hills, 16705 East Avenue of the Fountains, Fountain Hills, Arizona 85268 or visit our website at www.fh.az.gov. Page 30 BASIC FINANCIAL STATEMENTS Page 31 (This page intentionally left blank) Page 32 GOVERNMENT-WIDE FINANCIAL STATEMENTS Page 33 TOWN OF FOUNTAIN HILLS, ARIZONA STATEMENT OF NET POSITION JUNE 30, 2020 Governmental Activities ASSETS Current assets: Cash and investments Accounts receivable Intergovernmental receivable Taxes receivable Interest receivable Inventory, at cost Prepaid items Total current assets $ Noncurrent assets: Capital assets not being depreciated Capital assets, net of accumulated depreciation Total noncurrent assets Total assets 22,129,907 147,094 938,992 65,807 36,263 8,982 2,418 23,329,463 34,417,953 69,986,378 104,404,331 127,733,794 LIABILITIES Current liabilities: Accounts payable Accrued wages and benefits Other liabilities Customer deposits Compensated absences payable General obligation bonds payable Unearned revenues Total current liabilities 2,178,254 83,651 1,504 52,350 345,921 400,000 276,998 3,338,678 Noncurrent liabilities: Non-current portion of long-term liabilities Total noncurrent liabilities Total liabilities 236,576 236,576 3,575,254 NET POSITION Net investment in capital assets Restricted Unrestricted Total net position $ 104,004,331 2,766,041 17,388,168 124,158,540 The notes to the basic financial statements are an integral part of this statement. Page 34 TOWN OF FOUNTAIN HILLS, ARIZONA STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2020 Net (Expense) Revenue and Changes in Net Position Program Revenues Functions/Programs Governmental activities: General government Development services Public safety Public works Culture and recreation Interest on long-term debt Total governmental activities Expenses $ $ 3,470,936 $ 825,884 9,003,452 9,961,306 3,490,447 881 26,752,906 $ Charges for Services Operating Grants and Contributions Capital Grants and Contributions 533,189 $ 608,892 100,444 131,750 409,651 92,000 $ 46,673 1,840,157 29,011 91,245 1,783,926 $ 2,007,841 $ 91,245 Governmental Activities $ General revenues: Taxes: Property taxes Sales taxes Franchise taxes State sales & income tax revenue sharing - unrestricted Vehicle license tax revenue sharing - unrestricted Investment earnings Miscellaneous Total general revenues (2,845,747) (216,992) (8,856,335) (7,989,399) (2,960,540) (881) (22,869,894) 2,077,368 13,172,390 434,896 5,813,932 1,060,839 545,983 236,452 23,341,860 471,966 Changes in net position 123,686,574 Net position, beginning of year Net position, end of year $ 124,158,540 The notes to the basic financial statements are an integral part of this statement. Page 35 (This page intentionally left blank) Page 36 FUND FINANCIAL STATEMENTS Page 37 TOWN OF FOUNTAIN HILLS, ARIZONA BALANCE SHEET - GOVERNMENTAL FUNDS JUNE 30, 2020 General ASSETS Cash and investments Accounts receivable Intergovernmental receivable Taxes receivable Interest receivable Inventory, at cost Prepaid items Total assets $ 9,175,656 120,779 604,412 $ 13,607 8,982 2,418 9,925,854 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: $ Accounts payable Accrued wages and benefits Other liabilities Customer deposits Unearned revenues Total liabilities 364,867 67,105 1,498 52,350 18,097 503,917 Deferred inflows of resources: Unavailable revenues - property taxes Unavailable revenues - intergovernmental Unavailable revenues - other Total deferred inflows of resources Highway User Revenue $ 2,410,401 24,440 193,861 $ $ 2,628,702 $ 262,097 $ 944,078 7,781 6 $ 3,196 3,043 3,043 Fund balances (deficits): Nonspendable Restricted Committed Assigned Unassigned Total fund balances 195,736 66,361 951,865 258,901 262,097 24,291 24,291 66,361 66,361 11,400 1,426,674 3,249,354 622,641 5,535,499 9,418,894 Total liabilities, deferred inflows of resources and fund balances $ 9,925,854 225,872 (66,361) (66,361) 1,652,546 $ 2,628,702 The notes to the basic financial statements are an integral part of this statement. Page 38 Grants $ 262,097 General Obligation Debt Service $ 113,164 Eagle Mountain Debt Service Municipal Property Corporation Debt Service $ $ 57,307 $ 170,471 $ 23,478 11,537 Capital Projects Non-Major Governmental Funds Total Governmental Funds $ $ $ 6,838,934 58,623 3,361,001 1,875 15,735 20,638 2,018 8,500 $ 31,978 $ $ 11,537 $ $ 6,918,195 $ 3,380,629 $ $ 759,845 $ 106,268 8,765 $ 759,845 46,252 115,033 22,129,907 147,094 938,992 65,807 36,263 8,982 2,418 23,329,463 2,178,254 83,651 1,504 52,350 276,998 2,592,757 5,666 51,918 58,623 93,695 204,236 58,623 46,252 5,666 124,219 26,312 124,219 $ 170,471 58,623 11,537 26,312 $ 31,978 11,537 $ 11,537 $ 4,488,812 1,610,915 1,120,141 1,579,998 565,457 6,099,727 3,265,596 6,918,195 $ 3,380,629 11,400 2,708,883 9,318,164 3,024,885 5,469,138 20,532,470 $ 23,329,463 Page 39 (This page intentionally left blank) Page 40 TOWN OF FOUNTAIN HILLS, ARIZONA RECONCILIATION OF THE BALANCE SHEET - GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION JUNE 30, 2020 Total governmental fund balances 20,532,470 Amounts reported for governmental activities in the Statement of Net Position are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. Governmental capital assets Less accumulated depreciation $ 227,543,496 (123,139,165) 104,404,331 51,918 58,623 93,695 204,236 (582,497) (400,000) (982,497) Some receivables are not available to pay for current period expenditures and, therefore, are reported as deferred inflows of resources in the funds. Property taxes Intergovernmental Other Long-term liabilities are not due and payable in the current period and, therefore, are not reported in the funds. Compensated absences payable Bonds payable Net position of governmental activities $ 124,158,540 The notes to the basic financial statements are an integral part of this statement. Page 41 TOWN OF FOUNTAIN HILLS, ARIZONA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2020 General Revenues: Property taxes Sales taxes Franchise taxes Licenses and permits Leases and rents Intergovernmental Charges for services Other Fines and forfeitures Investment earnings Total revenues $ Highway User Revenue $ 10,775,505 434,896 715,368 286,391 6,178,807 219,106 320,206 256,153 228,622 19,415,054 Expenditures: Current General government Development services Public safety Public works Culture and recreation Capital outlay Debt service Principal retirement Interest on long-term debt Fiscal charges Total expenditures Grants $ 961,250 77,500 2,572,745 3,841 48,326 45,419 3,631,581 2,937,208 797,513 8,564,335 954,970 2,430,480 603,077 77,500 77,500 4,194,703 337,999 132,722 16,287,583 4,532,702 210,222 Excess (deficiency) of revenues over expenditures 3,127,471 (901,121) (132,722) Other financing sources (uses): Transfer in Transfer out Proceeds from sale of capital assets Total other financing sources (uses) 200,000 (346,813) 66,361 (1,003,235) (1,003,235) (146,813) 66,361 Changes in fund balances 2,124,236 (1,047,934) (66,361) Fund balances, beginning of year 7,294,658 2,700,480 Fund balances, end of year $ 9,418,894 $ 1,652,546 The notes to the basic financial statements are an integral part of this statement. Page 42 $ (66,361) General Obligation Debt Service $ 1,665,453 Eagle Mountain Debt Service Municipal Property Corporation Debt Service $ $ 414,614 Capital Projects Non-Major Governmental Funds Total Governmental Funds $ $ $ 955,010 6,701 480,625 120,363 7,063 1,672,516 $ 1,736 416,350 1,866 1,866 15,000 76,244 10,000 193,926 1,173,936 8,693 25,551 67,351 785,528 2,294 263,189 404,170 1,723 492,455 179,362 2,086,768 13,172,390 434,896 835,731 286,391 8,920,296 222,947 387,225 281,704 545,983 27,174,331 1,642,725 3,280,191 797,513 8,566,058 6,046,298 2,609,842 2,716,523 1,615,000 48,450 850 1,664,300 395,000 13,991 138 409,129 300,000 4,860 1,010 305,870 2,049,189 936,729 2,310,000 67,301 1,998 26,395,724 8,216 7,221 (304,004) (875,253) (151,201) 778,607 303,235 368,607 (312,569) 303,235 990,775 (266,361) 418,585 1,142,999 56,038 1,928,978 (1,928,978) 418,585 418,585 8,216 7,221 (769) 267,746 (95,163) 1,197,192 116,003 19,091 12,306 5,831,981 3,360,759 19,335,278 124,219 $ 26,312 $ 11,537 $ 6,099,727 $ 3,265,596 $ 20,532,470 Page 43 TOWN OF FOUNTAIN HILLS, ARIZONA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2020 Changes in fund balances - total governmental funds $ 1,197,192 Amounts reported for governmental activities in the Statement of Activities are different because: Governmental funds report the portion of capital outlay for capitalized assets as expenditures. However, in the Statement of Activities, the costs of those assets are allocated over their estimated useful lives as depreciation expense. Expenditures for capitalized assets Less current year depreciation $ 2,689,270 (5,318,203) (2,628,933) (9,400) 58,623 87,275 136,498 Some revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds. Property taxes Intergovernmental Other Repayments of bond principal are expenditures in the governmental funds, but the repayment reduces long-term liabilities in the Statement of Net Position. 2,310,000 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. Loss on disposal of assets Amortization of deferred bond items Compensated absences Changes in net position in governmental activities The notes to the basic financial statements are an integral part of this statement. Page 44 (526,482) 68,418 (84,727) (542,791) $ 471,966 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2020 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the Town of Fountain Hills, Arizona (Town) have been prepared in conformity with accounting principles generally accepted in the United States of America as applied to government units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The more significant of the Town’s accounting policies are described below. A. Reporting Entity The Town’s major operations include development services, culture and recreation, public works, public safety and general administrative services. The Town is a municipal corporation governed by an elected Mayor and Council. The financial reporting entity consists of a primary government and its component units. A component unit is a legally separate entity that must be included in the reporting entity in conformity with generally accepted accounting principles. The Town is a primary government that has a separately elected governing body, is legally separate, and is fiscally independent of other state or local governments. Furthermore, the component units combined with the Town for financial statement presentation purposes and the Town are not included in any other governmental reporting entity. Consequently, the Town’s financial statements include only the funds of those organizational entities for which its elected governing body is financially accountable. Eagle Mountain Community Facilities District and the Cottonwoods Maintenance District. As special purpose districts and separate political subdivisions under the Arizona Constitution, the Districts can levy taxes and issue bonds independently of the Town. Property owners in the designated areas are assessed taxes for the costs of operating the Districts. The Town Council serves as the Board of Directors; however, the Town has no liability for the Districts’ debt, the Districts are responsible for the debt; the debt is therefore not subject to the Town’s debt limit. The Districts cannot be part of another reporting entity. The Districts’ governing bodies are substantially the same as the Town and the Town’s management oversees operations, resulting in the Town having the ability to exercise control. As a result, for financial reporting purposes, transactions of the Districts are combined together and included as if they were part of the Town’s operations. Page 45 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2020 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Town of Fountain Hills, Arizona Municipal Property Corporation. The Town of Fountain Hills, Arizona Municipal Property Corporation’s (MPC) Board of Directors consists of three members which are appointed by the Fountain Hills Town Council. The MPC, which is a nonprofit corporation incorporated under the laws of the State of Arizona, was formed for the sole purpose of assisting the Town in obtaining financing for various projects of the Town. The Town has a “moral obligation” for the repayment of the MPC’s bonds. The MPC cannot be part of another reporting entity. The MPC provides services exclusively to the Town. As a result, for financial reporting purposes, transactions of the MPC are combined together and included as if they were part of the Town’s operations. B. Government-Wide and Fund Financial Statements The government-wide financial statements (i.e., the statement of net position and the statement of activities) present financial information about the Town as a whole. The reported information includes all of the Town's component units. For the most part, the effect of internal activity has been removed from these statements. Interfund services provided and used, such as interfund transfers, are not eliminated in the process of consolidation. Governmental activities normally are supported by taxes and intergovernmental revenues. The Town does not have any fiduciary or business-type activities. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes, unrestricted state shared revenues, investment income and other items not included among program revenues are reported instead as general revenues. C. 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 a liability is incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the grantor or provider have been met. As a general rule, the effect of internal activity has been eliminated from the governmentwide financial statements; however, the effects of interfund services provided and used between functions are reported as expenses and program revenues at amounts approximating their external exchange value. Page 46 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2020 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Fund Financial Statements – Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the Town considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences, and claims and judgments, are recorded only when payment is due. Property taxes, sales taxes, franchise taxes, state shared revenues, licenses and permits, charges for services, and investment earnings associated with the current fiscal period are all considered to be susceptible to accrual and have been recognized as revenues of the current fiscal period. Grants and similar awards are recognized as revenue as soon as all eligibility requirements imposed by the grantor or provider have been met. Miscellaneous revenue is not susceptible to accrual because generally they are not measurable until received in cash. Unearned revenues arise when resources are received by the Town before it has legal claim to them, as when grant monies are received prior to meeting all eligibility requirements imposed by the provider. The focus of governmental fund financial statements is on major funds rather than reporting funds by type. Each major fund is presented in a separate column. The Town reports the following major governmental funds. General Fund – The General Fund is the Town’s primary operating fund. This fund accounts for all financial resources of the Town, except those required to be accounted for in other funds. Highway User Revenue Fund (HURF) – This fund accounts for the Town’s share of motor vehicle fuel tax revenues and sales tax. Grants Fund – This fund accounts for the activities of various restricted grants and contributions received by the Town. General Obligation Debt Service Fund – This fund accounts for the Town’s property tax revenues received to pay the debt service of the Town’s general obligation bonds. Municipal Property Corporation Debt Service Fund – This fund accounts for the revenues received to pay the debt service on MPC revenue bonds. Page 47 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2020 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Eagle Mountain Debt Service Fund – This fund accounts for the property tax revenues restricted to pay the debt service of the Eagle Mountain Community Facilities District. Capital Projects Fund – This fund accounts for the capital improvements to various projects and equipment purchases of the Town. D. Cash and Investments Cash and cash equivalents at year end were cash on hand, cash in bank, restricted cash, and cash and investments held by the State Treasurer. Cash and investments are pooled, except for investments that are restricted under provisions of bond indentures or other restrictions that are required to be reported in the individual funds. Arizona Revised Statutes authorize the Town to invest public monies in the State Treasurer’s local government investment pools, the County Treasurer’s investment pool, obligations of the U.S. Government and its agencies, obligations of the state and certain local government subdivisions, interest-bearing savings accounts and certificates of deposit, collateralized repurchase agreements, certain obligations of U.S. corporations, and certain other securities. Investments are stated at fair value. Arizona statute requires a pooled collateral program for public deposits and a Statewide Collateral Pool Administrator (Administrator) in the State Treasurer’s Office. The purpose of the pooled collateral program is to ensure that governmental entities’ public deposits placed in participating depositories are secured with collateral of 102 percent of the public deposits, less any applicable deposit insurance. An eligible depository may not retain or accept any public deposit unless it has deposited the required collateral with a qualified escrow agent or the Administrator. The Administrator manages the pooled collateral program, including reporting on each depository’s compliance with the program. E. Investment Earnings Investment earnings is composed of interest, dividends, and net changes in the fair value of applicable investments. Investment earnings is a component of revenue in the governmental funds financial statements. Page 48 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2020 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES F. Receivables and Payables Activity between funds that is representative of lending/borrowing arrangements outstanding at the end of the fiscal year is referred to as either “due to/from other funds” (i.e., the current portion of interfund loans) or “advances to/from other funds” (i.e., the non-current portion of interfund loans). Interfund balances between governmental funds are eliminated on the statement of net position. Property taxes are levied by the Town and collected by the Maricopa County Treasurer. Property taxes are levied no later than the third Monday in August and are payable in two installments due October 1 of the current year and March 1 of the subsequent year. Taxes become delinquent after the first business day of November and May, respectively. Interest attaches on installments after the delinquency date. All receivables are shown net of an allowance for uncollectibles. G. Inventory All inventories are valued at average cost using the first-in/first-out (FIFO) method. Inventories consist of expendable supplies held for consumption. Inventories are recorded as expenses when consumed in the government-wide financial statements, and as expenditures when consumed in the governmental funds. H. Prepaid Items Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both the government-wide and fund financial statements. In the government-wide and fund financial statements, prepaids are recognized as expenses/expenditures when goods and/or services are received rather than when purchased. I. Capital Assets Capital assets, which include land and improvements, artwork, buildings and improvements, vehicles, machinery, and equipment, construction in progress, and infrastructure assets, are reported in the government-wide financial statements. Capital assets are defined by the Town as assets with an initial, individual cost in excess of $10,000 and an estimated useful life in excess of one year. Capital assets are recorded at historical cost, if purchased or constructed. Donated capital assets are recorded at the acquisition value at the date of donation. Page 49 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2020 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The costs of normal maintenance and repairs that do not add to the value of the assets or materially extend the life of the asset are not capitalized. Capital assets of the Town are depreciated using the straight-line method over the following estimated useful lives: Buildings and building improvements Improvements other than buildings Infrastructure Vehicles, machinery and equipment 20 - 50 years 20 years 15 - 50 years 5 - 20 years J. Deferred Outflows/Inflows of Resources In addition to assets, the statement of financial position may report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period and so will not be recognized as an outflow of resources (expense/expenditure) until then. The Town did not have any items that qualified for reporting in this category. In addition to liabilities, the statement of financial position may report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period and so will not be recognized as an inflow of resources (revenue) until that time. K. Compensated Absences The Town’s employee vacation and sick leave policies generally provide for granting vacation and sick leave with pay. Sick leave and vacation benefits accrue as pay periods are completed at the current rate of pay. All eligible full-time and part-time regularly-scheduled employees can accrue vacation leave. Employees accrue up to a maximum of two times the yearly maximum accrual of vacation through carryover of balances. In the event of termination, employees will be paid for any accrued, but unused, vacation hours. Full-time and part-time regularly-scheduled employees accrue sick leave, up to a maximum of 1040 hours. Part-time non-regularly-scheduled, temporary, or seasonal, and other employees accrue paid sick time for hours worked, not to exceed 40 hours per calendar year. Page 50 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2020 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The current and long-term liabilities, including related benefits, for accumulated vacation and sick leave are reported on the government-wide financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee termination, resignations and retirements. Generally, resources from the General Fund are used to pay for compensated absences. L. Long-term Obligations In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities on the statement of net position. Bond premiums and discounts are amortized over the life of the bonds using the straight-line method. Deferred amounts on refunding result from the difference between the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, 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 issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. M. Interfund Activity Flows of cash from one fund to another without a requirement for repayment are reported as interfund transfers. Interfund transfers between governmental funds are eliminated in the statement of activities. Interfund transfers in the fund financial statements are reported as other financing sources/uses in governmental funds. N. Net Position Flow Assumption In the government-wide financial statements the Town applies restricted resources first when outlays are incurred for purposes for which either restricted or unrestricted amounts are available. Page 51 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2020 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES O. Estimates The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. NOTE 2 – FUND BALANCE CLASSIFICATIONS Fund balances of the governmental funds are reported separately within classifications based on a hierarchy of the constraints placed on the use of those resources. The classifications are based on the relative strength of the constraints that control how the specific amounts can be spent. The classifications are nonspendable, restricted, committed, assigned, and unassigned fund balance classifications. Nonspendable. The nonspendable fund balance classification includes amounts that cannot be spent because they are not in spendable form, or legally or contractually required to be maintained intact. Restricted. Fund balance is reported as restricted when constraints placed on the use of resources are either externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments or is imposed by law through constitutional provisions or enabling legislation. Committed. The committed fund balance classification includes amounts that can be used only for the specific purposes imposed by formal action of the Town Council, the Town’s highest level of decision making authority, by ordinance. Those committed amounts cannot be used for any other purpose unless the Town Council removes or changes the specified use by taking the same type of action it employed to previously commit those amounts. Assigned. Amounts in the assigned fund balance classification are intended to be used by the Town for specific purposes but do not meet the criteria to be classified as restricted or committed. In governmental funds other than the General Fund, assigned fund balance represents the remaining amount that is not restricted or committed. In the General Fund, assigned amounts represent intended uses established by the Town Council or a management official delegated that authority by formal Town Council action. The authority to make assignments has been delegated by the Town Council to the Finance Director. Page 52 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2020 NOTE 2 – FUND BALANCE CLASSIFICATIONS Unassigned. Unassigned fund balance is the residual classification for the General Fund and includes all spendable amounts not contained in the other classifications. In other governmental funds, the unassigned classification is used only to report a deficit balance resulting from overspending for specific purposes for which amounts had been restricted, committed, or assigned. The Town applies restricted resources first when outlays are incurred for purposes for which either restricted or unrestricted (committed, assigned, and unassigned) amounts are available. Similarly, within unrestricted fund balance, committed amounts are reduced first followed by assigned, and then unassigned amounts when expenditures are incurred for purposes for which amounts in any of the unrestricted fund balance classifications could be used. The Town has established a fund balance policy which states that the combined General Fund operating fund balance should be at least 30 percent of the average actual General Fund revenues for the preceding five fiscal years. The Town has established a stabilization fund (Rainy Day fund) in the Town’s fund balance policy. The Rainy Day fund had a balance of $3,086,699, reported as a committed fund balance at June 30, 2020. The Rainy Day fund may only be used for the following: 1) to replace the loss of more than 25 percent of the Town’s local share of state shared revenues, 2) for any event that threatens the health, safety or welfare of the Town’s citizens, 3) for any event that threatens the fiscal stability of the Town, and lastly 4) to address any matter declared as an emergency by the governor of the State of Arizona or the Mayor of the Town. All withdrawals from the Rainy Day fund shall be subject to the following rules: 1) any appropriation shall require the approval by at least 2/3 vote by the Town Council, and 2) the maximum amount of Rainy Day withdrawal in any fiscal year shall not exceed one-half of the total balance in the fund. Replenishment of the Rainy Day fund when spent by the Town should not exceed a period of more than five years, and should be repaid in annual installments of not less than one percent of the previous fiscal year General Fund balance. Repayments shall be appropriated as part of the annual budget adoption. Page 53 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2020 NOTE 2 – FUND BALANCE CLASSIFICATIONS The table below provides detail of the major components of the Town’s fund balance classifications at year end. General Fund Highway User Revenue Fund Grants Fund General Obligation Debt Service Fund Eagle Municipal Mountain Property Debt Corporation Service Debt Service Fund Fund $ $ Capital Projects Fund Non-Major Governmental Funds Total Fund Balances: Nonspendable: Inventory Prepaid items $ 8,982 $ $ $ $ $ $ 2,418 8,982 2,418 Restricted: 21,989 Capital Projects 124,219 Debt Service 26,312 11,537 162,068 1,426,674 Highways and Streets 21,989 1,426,674 1,098,152 Development Fees 1,098,152 Committed: Rainy Day 3,086,699 3,086,699 Public Art 162,655 162,655 Downtown Strategy 991,495 991,495 Economic Development 103,546 103,546 Tourism 83,261 83,261 4,488,812 Capital Projects Local Court Enhancement 4,488,812 401,696 401,696 Assigned: 1,610,915 Capital Projects 565,457 Environmental Vehicle Replacement Unassigned: Total fund balances Page 54 1,610,915 622,641 5,535,499 225,872 565,457 848,513 (66,361) $9,418,894 $1,652,546 $(66,361) $ 5,469,138 124,219 $ 26,312 $ 11,537 $ 6,099,727 $ 3,265,596 $20,532,470 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2020 NOTE 3 – CASH AND INVESTMENTS Arizona Revised Statutes authorize the Town to invest public monies in the State Treasurer’s local government investment pools, the County Treasurer’s investment pool, obligations of the U.S. Government and its agencies, obligations of the state and certain local government subdivisions, interest-bearing savings accounts and certificates of deposit, collateralized repurchase agreements, certain obligations of U.S. corporations, and certain other securities. The statutes do not include any requirements for credit risk, custodial credit risk, concentration of credit risk, interest rate risk, or foreign currency risk for the Town’s investments. Custodial Credit Risk – Deposits. Custodial credit risk is the risk that in the event of bank failure the Town’s deposits may not be returned to the Town. The Town does not have a deposit policy for custodial credit risk. At year end, the carrying amount of the Town’s deposits was $925,635 and the bank balance was $1,042,404. At year end, $542,404 of the Town’s deposits were covered by collateral held by the pledging financial institution in the Town’s name. The remaining amount is covered by FDIC. Fair Value Measurements. The Town categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset.    Level 1 inputs are quoted prices in active markets for identical assets Level 2 inputs are significant other observable inputs Level 3 inputs are significant unobservable inputs Valuation Techniques. Equity securities classified in Level 1 of the fair value hierarchy are valued using prices quoted in active markets for those securities. Debt securities classified in Level 2 of the fair value hierarchy are valued using matrix pricing techniques. Matrix pricing is used to value securities based on the securities’ relationship to benchmark quoted prices. The State Treasurer’s pools are external investment pools, the Local Government Investment Pool (Pool 5) and Local Government Investment Pool-Government (Pool 7), with no regulatory oversight. The pools, as an investment company, are not registered with the Securities and Exchange Commission. The activity and performance of the pools are reviewed monthly by the State Board of Investment. The fair value of each participant’s position in the State Treasurer investment pools approximates the value of the participant’s shares in the pool and the participants’ shares are not identified with specific investments. Participants in the pool are not required to categorize the value of shares in accordance with the fair value hierarchy. Page 55 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2020 NOTE 3 – CASH AND INVESTMENTS All investments in which the fair value hierarchy is applicable are measured at fair value on a recurring basis. At year end, cash and investments as of June 30, 2020, are classified in the accompanying financial statements as follows: Carrying amount of investments Carrying amount of cash deposits Cash on hand Total pooled cash and investments $ $ 21,203,422 925,635 850 22,129,907 At year end, the Town’s investments consisted of the following: Investment Maturities (in Years) Credit Rating Less than 1 S&P Investment Type Category Fair Value U.S. Government and Agency Notes Level 1 $ 4,695,240 $ Federal Agency Notes Level 1 1,794,679 1,794,679 Corporate and Foreign Bonds Level 2 2,286,429 2,286,429 BBB+, AA+ A3 - Aaa Asset Backed Securities Level 2 232,470 Certificates of Deposit Level 2 357,333 151,067 Wells Fargo Money Market Funds Level 1 32,402 32,402 $ State Treasurer’s Investment Pool 7 Total Not applicable 1-5 $ 4,695,240 AA+, AAA AA+ Moody’s Aaa Aaa 232,470 NR AAA 206,266 A-1, AA- P-1, Aa2 n/a n/a 183,469 $ 9,215,084 11,804,869 44 days average maturities $ 21,203,422 Interest Rate Risk. Interest rate risk is the risk that changes in interest rates may reduce the market value of Town investments. In accordance with its investment policy, the Town manages its exposure to declines in fair values by the following: Page 56  Structuring the investment portfolio so that securities mature concurrent with the anticipated cash requirements for ongoing operations, thereby avoiding, as much as possible, the need to sell securities into an adverse market environment prior to maturity.  Investing funds primarily in shorter-term securities or similar investment pools and limiting the average maturity of the portfolio in accordance with the needs of the Town.  With respect to any firm or individual given responsibility for investments utilizing external research and advice regarding the current interest rate outlook and global economic condition to optimize portfolio duration strategy. TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2020 NOTE 3 – CASH AND INVESTMENTS Credit Risk. Credit risk is the risk of default of debt by an issuer or counterparty to an investment. The Town will limit credit risk by limiting investments in the Town’s portfolio to the asset classes designated as acceptable in ARS §35-323. When possible, analysis of the credit worthiness of all individual debt issuers held in the portfolio should be conducted on an annual basis in an effort to guard against investing in a weak or deteriorating credit situation. Additionally, the Town will pre-qualify financial institutions, brokers/dealers, and investment advisers with which the Town will do business. Custodial Credit Risk – Investments. Custodial credit risk is the risk that in the event of depository financial institution failure, the Town’s deposits may not be returned to the Town. The Town’s investment in the State Treasurer’s investment pool represents a proportionate interest in the pool’s portfolio; however the Town’s portion is not identified with specific investments and is not subject to custodial credit risk. Concentration of Credit Risk. Concentration of credit risk is the risk of loss from over concentration of investments. In accordance with its investment policy, the Town diversifies its investment portfolio to minimize the risk of loss resulting from over concentration of assets in a specific maturity, specific issuer, or specific class of securities. With the exception of U.S. Treasury notes and securities and authorized pools, the investment policy establishes a maximum percentage of 30 percent in insured or collateralized certificates of deposit; 20 percent in certificates of deposit registry services; 30 percent in commercial paper; and 30 percent in bonds, debentures, or notes. Investment Type U.S. Government and Agency Notes Federal Agency notes Corporate and Foreign Bonds Asset Backed Securities Certificates of Deposit Wells Fargo Money Market Funds State Treasurer’s investment pool 7 Fair Value $ 4,695,240 1,794,679 2,286,429 232,470 357,333 32,402 11,804,869 $ 21,203,422 Percent of Town Investments 22.1% 8.5% 10.8% 1.1% 1.7% 0.2% 55.7% Page 57 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2020 NOTE 4 – RECEIVABLES Receivable balances, net of allowance for uncollectibles, have been disaggregated by type and presented separately in the financial statements with the exception of intergovernmental receivables. Intergovernmental receivables, net of allowance for uncollectibles, as of year-end for the Town’s individual major funds consisted entirely of receivables due from the State. NOTE 5 – CAPITAL ASSETS A summary of capital asset activity at year end is as follows: Beginning Ending Balance Increase Decrease Balance Governmental Activities Capital assets, not being depreciated: $ 29,690,368 $ $ $ 29,690,368 Land 2,573,900 2,573,900 Artwork 1,123,128 1,914,970 884,413 2,153,685 Construction in progress 33,387,396 1,914,970 884,413 34,417,953 Total capital assets, not being depreciated Capital assets, being depreciated: 149,597,675 568,457 150,166,132 Infrastructure 23,583,418 656,004 22,927,414 Buildings and building improvements 15,149,782 132,722 15,282,504 Improvements other than buildings 4,301,940 957,534 509,981 4,749,493 Vehicles, machinery and equipment 192,632,815 1,658,713 1,165,985 193,125,543 Total capital assets being depreciated Less accumulated depreciation for: (99,187,268) (4,016,174) (103,203,442) Infrastructure (6,192,136) (492,604) (200,265) (6,484,475) Buildings and building improvements (10,892,967) (528,834) (439,238) (10,982,563) Improvements other than buildings (2,188,094) (280,591) (2,468,685) Vehicles, machinery and equipment (118,460,465) (5,318,203) (639,503) (123,139,165) Total accumulated depreciation Total capital assets, being depreciated, net Governmental activities capital assets, net 74,172,350 $ 107,559,746 (3,659,490) $ (1,744,520) 526,482 $ 1,410,895 Depreciation expense was charged to functions/programs as follows: Governmental activities: General government Development services Public safety Streets and highways Culture and recreation Total depreciation expense Page 58 $ 172,408 16,721 312,776 3,953,846 862,452 $ 5,318,203 69,986,378 $ 104,404,331 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2020 NOTE 5 – CAPITAL ASSETS Construction Commitments – At June 30, 2020, the Town has the following active construction commitments: Project Golden Eagle Drainage Improvements Panorama Storm Drain Improvements Four Peaks Park Playground Upgrade Fountain Lake Liner Replacement Fountain Lighting Replacement Avenue of the Fountains - La Montana Roundabout Unpaved Alley Paving Fountain Hills Boulevard Shoulder Paving Shea Boulevard Widening Total commitments Governmental Activities Remaining Spent-to-Date Commitment $ 140,890 $ 77,673 65,275 33,030 475,000 32,144 40,853 98,795 42,139 47,861 179,828 571,685 20,708 8,949 692,733 7,956 83,747 32,032 $ 1,741,173 $ 910,125 NOTE 6 – BONDS PAYABLE Bonds payable at year end consisted of the following general obligation and revenue bonds. The bonds are both callable and noncallable with interest payable semiannually. Purpose Governmental activities: Private Placement General Obligation Bonds: Eagle Mountain Community Facilities District, General Obligation Refunding Bonds, Series 2015 Total Original Amount Issued Outstanding Due Interest Remaining Principal Within Rates Maturities June 30, 2020 One Year 2,300,000 1.76% 7/1/20-21 $ $ 400,000 $ 400,000 400,000 $ 400,000 Page 59 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2020 NOTE 6 – BONDS PAYABLE Annual debt service requirements to maturity on the bonds payable at year end are summarized as follows: Year ending June 30, 2021 Governmental Activities Principal Interest $ 400,000 $ 7,040 Private Placements The Town had outstanding bonds during the fiscal year from private placements reported as governmental activities. The Municipal Facilities Revenue Refunding Bonds contain a provision that the Town must maintain excise taxes coverage of two and one-half times debt service. In the event the Town does not maintain this coverage, the Town will impose additional excise taxes. The Town does not have a line of credit associated with the bonds. The Eagle Mountain Community Facilities District has outstanding bonds from private placements reported as governmental activities of $400,000. There are no specific provisions regarding default on the Eagle Mountain Community Facilities District debt. Pledged Revenues The Town has pledged excise tax revenues to repay a total of $300,000 in outstanding Municipal Facilities Revenue Refunding Bonds. For the current fiscal year, the net revenues available to service the debt were $20,862,372. For the fiscal year ended June 30, 2020, the debt principal and interest paid on this debt was $304,860 (one percent of pledged revenues). There is no principal and interest remaining to be paid on the bonds. Page 60 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2020 NOTE 7 – CHANGES IN LONG-TERM LIABILITIES Long-term liability activity for the current fiscal year was as follows: Beginning Balance Governmental activities: Bonds payable: General obligation bonds Private placement general obligation bonds Private placement revenue bonds Premium Total bonds payable Compensated absences payable Governmental activity long-term Liabilities Additions Ending Balance Reductions $ 1,615,000 $ $ 1,615,000 $ 795,000 300,000 68,418 2,778,418 497,770 307,154 395,000 300,000 68,418 2,378,418 222,427 $ 3,276,188 $ 307,154 $ 2,600,845 $ Due Within One Year $ 400,000 400,000 400,000 582,497 400,000 345,921 982,497 $ 745,921 NOTE 8 – INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS At year end, interfund balances were as follows: Interfund transfers: At year end, interfund transfers were as follows: Transfers out General Fund Transfers in HURF Fund Grants Fund Municipal Property Corporation Debt Service Fund Capital Projects Fund Non-Major Governmental Funds Total $ Highway User Revenue Fund $ Non-Major Capital Governmental Projects Funds Fund $ 200,000 $ 66,361 303,235 500,000 346,813 200,000 $ 1,003,235 $ 346,813 $ 266,361 $ Total $ 200,000 66,361 303,235 143,962 990,775 168,607 368,607 312,569 $ 1,928,978 Page 61 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2020 NOTE 8 – INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS The General Fund transferred $500,000 to Capital Projects Fund for funding facilities replacement; $303,235 to Municipal Property Corporation Debt Service Fund for debt service costs; and $200,000 to Environmental Fund for funding operations of that fund. The Highway User Revenue Fund transferred $346,813 to Capital Projects Fund for street-related capital projects. The Capital Projects Fund transferred $200,000 to Highway User Fund for pavement maintenance costs; and $66,361 to the Grants Fund for the Town's matching portion of a park improvement grant. The Economic Development Fund transferred $168,607 to the Tourism Fund to provide funding for operating costs of the tourism program. The Downtown Strategy Fund transferred $143,962 to the Capital Projects Fund for downtown street improvements. NOTE 9– DEFICIT IN FUND BALANCE The Grants Fund had a deficit fund balance of $66,361. The deficit will be covered by future revenue reimbursements. NOTE 10– CONTINGENT LIABILITIES Compliance – Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies, principally the state government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures/expenses that may be disallowed by the grantor cannot be determined at this time, although the Town expects such amounts, if any, to be immaterial. Lawsuits – The Town is a party to a number of various types of lawsuits, many of which normally occur in governmental operations. The ultimate outcome of the actions is not determinable; however, Town management believes that the outcome of these proceedings, either individually or in the aggregate, will not have a materially adverse effect on the accompanying financial statements. NOTE 11 – RISK MANAGEMENT The Town is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; and natural disasters. The Town’s insurance protection is provided by the Arizona Municipal Risk Retention Pool (Pool). The Pool is made up of various towns and cities within Arizona that operate a common risk management and insurance program. The Pool is structured such that member premiums are based on an actuarial review that will provide adequate reserves to allow the Pool to meet its expected financial obligations. The Pool has the authority to assess its’ members additional premiums should reserves and annual premiums be insufficient to meet the Pool’s obligations. Page 62 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2020 NOTE 11 – RISK MANAGEMENT The Town joined the Arizona Municipal Workers’ Compensation Pool (Pool) together with other governments in the state for risks of loss related to workers’ compensation claims. The Pool is a public entity risk pool currently operating as a common risk management and insurance program for towns and cities in the State. The Town is responsible for paying a premium, based on an experience rating formula that allocates pool expenditures and liabilities among members. The Town continues to carry commercial insurance for all other risks of loss, including employee health, dental, and vision insurance. There were no settlements that exceeded insurance coverage in any of the past three years. NOTE 12 – RETIREMENT PLANS Defined Contribution Pension Plan All full-time employees of the Town participate in a defined contribution pension plan administered by the ICMA Retirement Corporation as a 401(a) plan. The contribution rates are 11 percent for both the employee and the Town. The payroll for the Town employees covered by this plan for the year ended June 30, 2020, was $3,502,664. The Town’s total payroll was $4,152,592. A defined contribution pension plan provides benefits in return for services rendered, provides an individual account for each participant, and specifies how contributions to the individual’s account are to be determined, instead of specifying the amount of benefit the individual is to receive. Under a defined contribution pension plan, the benefits a participant will receive depend solely on the amount contributed to the participant’s account and the returns earned on investment of those contributions. All full-time Town employees must participate in the pension plan from the date they are hired. Contributions made by an employee vest immediately and contributions made by the Town vest on a pro rata basis for five years. Town Council has the authority to establish and amend benefit terms and to establish and amend the contribution rates. Page 63 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2020 NOTE 12 – RETIREMENT PLANS An employee that leaves the employment of the Town is entitled to his or her contributions and the vested portion of the Town’s contributions, plus interest earned. During the fiscal year, the Town’s required and actual contributions amounted to $385,293. The employees’ contributions totaled $385,293. Employees may also contribute to the ICMA Retirement Corporation 457 plan on a voluntary basis (with the exception of one contract employee that is limited to 11 percent of earnings); there is no employer match for those contributions. During the fiscal year, employees contributed $121,766 to that plan. The Town contributed $8,591 for the contract employee’s 457 account. No pension provision changes occurred during the year that affected the required contributions to be made by the Town or its employees. The ICMA Retirement Corporation held no securities of the Town or other related parties during the fiscal year 2019-20 or as of the close of the fiscal year. NOTE 13 – SUBSEQUENT EVENT The Town applied for AZ Cares funding from the Governor's Office and was subsequently awarded $2,893,126 on July 1st, 2020. The funding was made available through the U.S. Department of the Treasury's Coronavirus Aid, Relief, and Economic Security (CARES) Act, and the funds will be used to pay public safety contract expenditures. Page 64 REQUIRED SUPPLEMENTARY INFORMATION Page 65 TOWN OF FOUNTAIN HILLS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL YEAR ENDED JUNE 30, 2020 Budgeted Amounts Original Final Actual Variance with Final Budget Positive (Negative) Revenues: Sales taxes Franchise taxes Licenses and permits Leases and rents Intergovernmental Charges for services Other Fines and forfeitures Investment earnings Total revenues 9,125,999 187,231 929,417 283,584 6,220,134 297,800 89,765 179,000 26,640 17,339,570 9,125,999 187,231 929,417 283,584 6,220,134 297,800 89,765 179,000 26,640 17,339,570 10,775,505 434,896 715,368 286,391 6,178,807 219,106 320,206 256,153 228,622 19,415,054 Expenditures: Current General government Mayor and council Administration Non departmental Municipal court Total general government 98,544 2,050,966 1,073,362 397,276 3,620,148 98,544 2,061,184 629,862 397,276 3,186,866 74,752 1,979,104 516,221 367,131 2,937,208 23,792 82,080 113,641 30,145 249,658 Development services 1,100,290 1,100,290 797,513 302,777 Public safety Fire and emergency Law enforcement Total public safety 4,021,299 4,785,920 8,807,219 4,021,299 4,785,920 8,807,219 3,832,350 4,731,985 8,564,335 188,949 53,935 242,884 Public works 1,100,934 1,174,934 954,970 219,964 Culture and recreation 2,735,179 2,813,961 2,430,480 383,481 Capital outlay Total expenditures 416,149 17,779,919 931,149 18,014,419 603,077 16,287,583 328,072 1,726,836 (440,349) (674,849) 3,127,471 3,802,320 Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses): 39,100 (1,042,335) (1,003,235) 39,100 (1,042,335) (1,003,235) 39,100 (1,042,335) (1,003,235) - Changes in fund balances (1,443,584) (1,678,084) 2,124,236 3,802,320 Fund balances, beginning of year 5,282,559 7,350,184 7,294,658 (55,526) Excess (deficiency) of revenues over expenditures Fund balances (deficits), end of year Page 66 $ 3,838,975 $ 5,672,100 See accompanying notes to this schedule. $ 9,418,894 $ $ 1,649,506 247,665 (214,049) 2,807 (41,327) (78,694) 230,441 77,153 201,982 2,075,484 3,746,794 TOWN OF FOUNTAIN HILLS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL HIGHWAY USER REVENUE YEAR ENDED JUNE 30, 2020 Budgeted Amounts Original Revenues: Sales taxes Intergovernmental Charges for services Other Investment earnings Total revenues $ 819,678 2,452,224 200,000 43,500 24,000 3,539,402 Expenditures: Current Public works Capital outlay Total expenditures 5,194,059 Excess (deficiency) of revenues over expenditures Final $ 819,678 2,452,224 200,000 43,500 24,000 3,539,402 Actual $ 961,250 2,572,745 3,841 48,326 45,419 3,631,581 Variance with Final Budget Positive (Negative) $ 141,572 120,521 (196,159) 4,826 21,419 92,179 5,194,059 5,173,115 20,944 5,194,059 4,194,703 337,999 4,532,702 978,412 (317,055) 661,357 (1,654,657) (1,654,657) (901,121) 753,536 200,000 (521,318) (321,318) 200,000 (521,318) (321,318) 200,000 (346,813) (146,813) 174,505 174,505 Changes in fund balances (1,975,975) (1,975,975) (1,047,934) 928,041 Fund balances, beginning of year 2,422,099 2,422,099 2,700,480 278,381 Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses) Fund balances, end of year $ 446,124 $ 446,124 $ 1,652,546 $ 1,206,422 See accompanying notes to this schedule. Page 67 TOWN OF FOUNTAIN HILLS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GRANTS YEAR ENDED JUNE 30, 2020 Budgeted Amounts Original & Final Revenues: Intergovernmental Total revenues $ 1,582,525 1,582,525 Actual $ 77,500 77,500 Variance with Final Budget Positive (Negative) $ (1,505,025) (1,505,025) Expenditures: Current General government Capital outlay Total expenditures 1,357,525 305,000 1,662,525 77,500 132,722 210,222 1,280,025 172,278 1,452,303 Excess (deficiency) of revenues over expenditures (80,000) (132,722) (52,722) Other financing sources (uses): Transfer in Total other financing sources (uses) 80,000 80,000 66,361 66,361 (13,639) (13,639) (66,361) (66,361) Changes in fund balances Fund balances, beginning of year Fund balances (deficits), end of year $ $ (66,361) See accompanying notes to this schedule. Page 68 $ (66,361) TOWN OF FOUNTAIN HILLS, ARIZONA NOTE TO REQUIRED SUPPLEMENTARY INFORMATION JUNE 30, 2020 NOTE 1 – BUDGETARY BASIS OF ACCOUNTING The Town Council follows these procedures in establishing the budgetary data reflected in the financial statements: 1. In accordance with Arizona Revised Statutes, the Town Manager submits a proposed budget for the fiscal year commencing the following July 1 to the Town Council. The operating budget includes proposed expenditures and the means of financing them for the upcoming year. 2. Public hearings are conducted to obtain taxpayer comment. 3. Prior to the third Monday in August, the budget for the Town is legally enacted through passage of a resolution. To ensure compliance with the expenditure limitation, a uniform expenditure report must be filed with the State each year. This report, issued under a separate cover, reconciles total Town expenditures from the audited basic financial statements to total expenditures for reporting in accordance with the State’s uniform expenditure reporting system (A.R.S 41-1279.07). 4. Expenditures may not legally exceed the expenditure limitation described below for all fund types as a whole. For management purposes, the Town adopts a budget by department for the General Fund and in total by fund for other funds. The Town Manager, subject to Town Council approval, may at any time transfer any unencumbered appropriation balance or portion thereof between a department or activity. The adopted budget cannot be amended in any way without Town Council approval. 5. Formal budgetary integration is employed as a management control device during the year for the General, Highway User Revenue, Excise Tax, Special Revenue, Debt Service, and Capital Projects Funds on essentially the same modified accrual basis of accounting used to record actual revenues and expenditures. The Town is subject to the State of Arizona’s Spending Limitation Law for Towns and Cities. This law does not permit the Town to spend more than budgeted revenues plus the carryover unrestricted cash balance from the prior fiscal year. The limitation is applied to the total of the combined funds. The Town complied with this law during the year. Page 69 (This page intentionally left blank) Page 70 COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES Page 71 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING BALANCE SHEET - ALL NON-MAJOR GOVERNMENTAL FUNDS - BY FUND TYPE JUNE 30, 2020 ASSETS Cash and investments Accounts receivable Intergovernmental receivable Interest receivable Total assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable Accrued wages and benefits Total liabilities Special Revenue Capital Projects Total Non-Major Governmental Funds $ 2,262,849 1,875 15,735 2,018 2,282,477 $ 1,098,152 $ $ 1,098,152 $ 106,268 8,765 115,033 $ $ $ Fund balances: Restricted Committed Assigned Total fund balances Total liabilities and fund balances Page 72 21,989 1,579,998 565,457 2,167,444 $ 2,282,477 $ 1,098,152 1,098,152 106,268 8,765 115,033 1,120,141 1,579,998 565,457 3,265,596 1,098,152 $ 3,361,001 1,875 15,735 2,018 3,380,629 $ 3,380,629 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES ALL NON-MAJOR GOVERNMENTAL FUNDS - BY FUND TYPE YEAR ENDED JUNE 30, 2020 Revenues: Property taxes Sales taxes Licenses and permits Intergovernmental Other Fines and forfeitures Investment earnings Total revenues Special Revenue Capital Projects Total Non-Major Governmental Funds $ $ $ Expenditures: Current General government Public safety Public works Culture and recreation Total expenditures 6,701 480,625 17,575 76,244 8,693 25,551 53,507 668,896 102,788 13,844 116,632 492,455 171,891 927,535 7,471 9,194 263,189 1,723 492,455 179,362 936,729 Excess (deficiency) of revenues over expenditures (258,639) 107,438 (151,201) Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses) 368,607 (312,569) 56,038 Changes in fund balances (202,601) 107,438 (95,163) Fund balances, beginning of year 2,370,045 990,714 3,360,759 Fund balances, end of year 263,189 6,701 480,625 120,363 76,244 8,693 25,551 67,351 785,528 1,723 $ 2,167,444 368,607 (312,569) 56,038 $ 1,098,152 $ 3,265,596 Page 73 (This page intentionally left blank) Page 74 NON-MAJOR GOVERNMENTAL FUNDS Special Revenue Funds Downtown Strategy Fund – accounts for the portion of Town sales tax committed by the Town Council for the development of the downtown area. Economic Development Fund – accounts for the portion of Town sales tax committed by the Town Council for economic development and tourism. Tourism Fund – accounts for the portion of Town sales tax committed by the Town Council as well as any grants received for all tourism activities. Local Court Enhancement Fund – accounts for a local court surcharge, committed for court enhancement. Environmental Fund – accounts for all funds received from collection of the environmental fee. Cottonwoods Maintenance Fund – accounts for all funds restricted to pay for maintenance of the Cottonwoods Maintenance District. Capital Projects Funds Facilities Replacement Fund – accounts for all funds assigned for the maintenance and repair of facilities and equipment. Development Fees Fund – accounts for restricted development fees collected from building permits. Page 75 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING BALANCE SHEET - NON-MAJOR SPECIAL REVENUE FUNDS JUNE 30, 2020 Downtown Strategy ASSETS Cash and investments Accounts receivable Intergovernmental receivable Interest receivable Total assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable Accrued wages and benefits Total liabilities $ 990,717 $ 3,115 2,018 995,850 $ $ 4,355 $ Fund balances: Restricted Committed Assigned Total fund balances Total liabilities and fund balances Page 76 Economic Development $ $ 84,322 1,875 107,966 $ 86,197 $ 4,355 2,174 2,246 4,420 2,687 249 2,936 991,495 103,546 83,261 991,495 103,546 83,261 995,850 $ 95,506 Tourism 12,460 $ 107,966 $ 86,197 Local Court Enhancement Environmental Cottonwoods Maintenance $ $ 668,404 $ 22,364 $ $ 668,404 $ 22,364 $ $ 96,677 6,270 102,947 $ 375 $ 401,536 Totals 160 $ 401,696 $ 375 21,989 565,457 565,457 $ 401,696 $ 668,404 21,989 $ 22,364 106,268 8,765 115,033 21,989 1,579,998 565,457 2,167,444 401,696 401,696 2,262,849 1,875 15,735 2,018 2,282,477 $ 2,282,477 Page 77 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NON-MAJOR SPECIAL REVENUE FUNDS YEAR ENDED JUNE 30, 2020 Downtown Strategy Revenues: Property taxes Sales taxes Licenses and permits Intergovernmental Other Fines and forfeitures Investment earnings Total revenues $ Economic Development $ 96,125 Tourism $ 384,500 8,674 76,244 19 39,466 135,591 631 393,805 1,090 77,353 38,474 223,137 38,474 223,137 171,891 171,891 97,117 170,668 (94,538) Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses) (143,962) (143,962) (168,607) (168,607) 168,607 Changes in fund balances (46,845) 2,061 74,069 Fund balances, beginning of year 1,038,340 101,485 9,192 Expenditures: Current General government Public works Culture and recreation Total expenditures Excess (deficiency) of revenues over expenditures Fund balances, end of year Page 78 168,607 $ 991,495 $ 103,546 $ 83,261 Local Court Enhancement Environmental Cottonwoods Maintenance $ $ $ 6,701 Totals $ 17,575 25,551 909 26,460 11,137 28,712 274 6,975 487,791 4,664 1,578 487,791 4,664 263,189 492,455 171,891 927,535 24,882 (459,079) 2,311 (258,639) 1,578 200,000 368,607 (312,569) 56,038 200,000 $ 6,701 480,625 17,575 76,244 8,693 25,551 53,507 668,896 24,882 (259,079) 2,311 (202,601) 376,814 824,536 19,678 2,370,045 401,696 $ 565,457 $ 21,989 $ 2,167,444 Page 79 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL NON-MAJOR SPECIAL REVENUE FUNDS YEAR ENDED JUNE 30, 2020 Downtown Strategy Budget Revenues: Property taxes Sales taxes Licenses and permits Intergovernmental Other Fines and forfeitures Investment earnings Total revenues $ Variance Positive (Negative) Actual $ $ 81,968 96,125 14,157 1,260 83,228 39,466 135,591 38,206 52,363 46,400 38,474 7,926 46,400 38,474 7,926 36,828 97,117 60,289 Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses) (950,000) (950,000) (143,962) (143,962) 806,038 806,038 Changes in fund balances (913,172) (46,845) 866,327 Fund balances, beginning of year 1,038,340 1,038,340 Expenditures: Current General government Public works Culture and recreation Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures Fund balances (deficits), end of year Page 80 $ 125,168 $ 991,495 $ 866,327 Economic Development Budget $ Variance Positive (Negative) Actual $ 327,871 $ Tourism $ Budget Actual $ 384,500 56,629 8,674 8,674 240 328,111 631 393,805 391 65,694 285,482 223,137 62,345 Variance Positive (Negative) $ $ 90,000 76,244 19 (13,756) 19 180 90,180 1,090 77,353 910 (12,827) 259,103 171,891 87,212 285,482 223,137 62,345 259,103 171,891 87,212 42,629 170,668 128,039 (168,923) (94,538) 74,385 168,607 168,607 (168,607) (168,607) (168,607) (168,607) 168,607 168,607 (125,978) 2,061 (316) 74,069 101,485 101,485 9,192 9,192 (24,493) $ 103,546 128,039 $ 128,039 $ 8,876 $ 83,261 74,385 $ 74,385 (Continued) Page 81 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL NON-MAJOR SPECIAL REVENUE FUNDS YEAR ENDED JUNE 30, 2020 Local Court Enhancement Budget Revenues: Property taxes Sales taxes Licenses and permits Intergovernmental Other Fines and forfeitures Investment earnings Total revenues $ Variance Positive (Negative) Actual $ $ 100,000 (100,000) 49,000 840 149,840 25,551 909 26,460 (23,449) 69 (123,380) Expenditures: Current General government Public works Culture and recreation Capital outlay Total expenditures 24,800 1,578 23,222 130,000 154,800 1,578 130,000 153,222 Excess (deficiency) of revenues over expenditures (4,960) 24,882 29,842 Changes in fund balances (4,960) 24,882 29,842 Fund balances, beginning of year 376,814 376,814 Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses) Fund balances (deficits), end of year Page 82 $ 371,854 $ 401,696 $ 29,842 Environmental Budget $ $ Cottonwoods Maintenance Variance Positive (Negative) Actual $ $ Budget $ 6,642 Variance Positive (Negative) Actual $ 6,701 $ 59 491,976 17,575 (474,401) 2,400 494,376 11,137 28,712 8,737 (465,664) 72 6,714 274 6,975 202 261 735,254 487,791 247,463 5,101 4,664 437 735,254 487,791 247,463 5,101 4,664 437 (240,878) (459,079) (218,201) 1,613 2,311 698 200,000 200,000 200,000 200,000 (40,878) (259,079) (218,201) 1,613 2,311 698 824,536 824,536 19,678 19,678 783,658 $ 565,457 $ (218,201) $ 21,291 $ 21,989 $ 698 (Continued) Page 83 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL NON-MAJOR SPECIAL REVENUE FUNDS YEAR ENDED JUNE 30, 2020 Totals Budget Revenues: Property taxes Sales taxes Licenses and permits Intergovernmental Other Fines and forfeitures Investment earnings Total revenues $ 6,642 409,839 491,976 190,000 Variance Positive (Negative) Actual $ 49,000 4,992 1,152,449 6,701 480,625 17,575 76,244 8,693 25,551 53,507 668,896 $ 59 70,786 (474,401) (113,756) 8,693 (23,449) 48,515 (483,553) Expenditures: Current General government Public works Culture and recreation Capital outlay Total expenditures 356,682 740,355 259,103 130,000 1,486,140 263,189 492,455 171,891 927,535 93,493 247,900 87,212 130,000 558,605 Excess (deficiency) of revenues over expenditures (333,691) (258,639) 75,052 Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses) 368,607 (1,118,607) (750,000) 368,607 (312,569) 56,038 806,038 806,038 Changes in fund balances (1,083,691) (202,601) 881,090 Fund balances, beginning of year 2,370,045 2,370,045 Fund balances (deficits), end of year Page 84 $ 1,286,354 $ 2,167,444 $ 881,090 (This page intentionally left blank) Page 85 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL ALL DEBT SERVICE FUNDS YEAR ENDED JUNE 30, 2020 General Obligation Debt Service Budget Revenues: Property taxes Investment earnings Total revenues $ Expenditures: Debt service Principal retirement Interest on long-term debt Fiscal charges Total expenditures 1,674,485 1,200 1,675,685 Variance Positive (Negative) Actual $ 1,665,453 7,063 1,672,516 $ (9,032) 5,863 (3,169) 1,615,000 48,450 850 1,664,300 1,615,000 48,450 850 1,664,300 11,385 8,216 (3,169) Changes in fund balances 11,385 8,216 (3,169) Fund balances, beginning of year 116,003 116,003 Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfer in Total other financing sources (uses) Fund balances, end of year Page 86 $ 127,388 $ 124,219 $ (3,169) Eagle Mountain Debt Service Budget $ $ 413,042 240 413,282 Municipal Property Corporation Debt Service Variance Positive (Negative) Actual $ 414,614 1,736 416,350 $ Budget 1,572 1,496 3,068 Variance Positive (Negative) Actual $ $ $ 840 840 1,866 1,866 395,000 13,992 200 409,192 395,000 13,991 138 409,129 1 62 63 300,000 4,860 1,010 305,870 300,000 4,860 1,010 305,870 4,090 7,221 3,131 (305,030) (304,004) 303,235 303,235 303,235 303,235 (1,795) (769) 12,306 12,306 4,090 7,221 19,091 19,091 23,181 $ 26,312 3,131 $ 3,131 $ 10,511 $ 11,537 1,026 1,026 1,026 1,026 $ 1,026 (Continued) Page 87 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL ALL DEBT SERVICE FUNDS YEAR ENDED JUNE 30, 2020 Totals Budget Revenues: Property taxes Investment earnings Total revenues $ 2,087,527 2,280 2,089,807 Variance Positive (Negative) Actual $ 2,080,067 10,665 2,090,732 $ (7,460) 8,385 925 Expenditures: Debt service Principal retirement Interest on long-term debt Fiscal charges Total expenditures 2,310,000 67,302 2,060 2,379,362 2,310,000 67,301 1,998 2,379,299 1 62 63 Excess (deficiency) of revenues over expenditures (289,555) (288,567) 988 Other financing sources (uses): Transfer in Total other financing sources (uses) 303,235 303,235 303,235 303,235 Changes in fund balances 13,680 14,668 Fund balances, beginning of year 147,400 147,400 Fund balances, end of year Page 88 $ 161,080 $ 162,068 988 $ 988 (This page intentionally left blank) Page 89 TOWN OF FOUNTAIN HILLS, ARIZONA BALANCE SHEET - NON-MAJOR CAPITAL PROJECTS FUND JUNE 30, 2020 Development Fees ASSETS Cash and investments Total assets LIABILITIES AND FUND BALANCES Fund balances: Restricted Total fund balances Total liabilities and fund balances Page 90 $ $ 1,098,152 1,098,152 $ 1,098,152 1,098,152 $ 1,098,152 TOWN OF FOUNTAIN HILLS, ARIZONA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NON-MAJOR CAPITAL PROJECTS FUND YEAR ENDED JUNE 30, 2020 Development Fees Revenues: Licenses and permits Investment earnings Total revenues $ 102,788 13,844 116,632 Expenditures: Current Public safety Culture and recreation Total expenditures 1,723 7,471 9,194 Changes in fund balances 107,438 Fund balances, beginning of year 990,714 Fund balances, end of year $ 1,098,152 Page 91 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL ALL CAPITAL PROJECTS FUNDS YEAR ENDED JUNE 30, 2020 Capital Projects Budget Revenues: Sales taxes Licenses and permits Intergovernmental Other Investment earnings Total revenues $ 640,293 Variance Positive (Negative) Non-GAAP Actual $ 955,010 $ 314,717 90,000 15,000 (75,000) 7,224 737,517 171,431 1,141,441 164,207 403,924 116,672 2,294 114,378 Expenditures: Current General government Public safety Public works Culture and recreation Capital outlay Total expenditures 190,000 116,281 73,719 2,653,378 2,960,050 1,519,608 1,638,183 1,133,770 1,321,867 Excess (deficiency) of revenues over expenditures (2,222,533) (496,742) 1,725,791 1,300,000 (280,000) 1,020,000 490,775 (266,361) 418,585 642,999 (809,225) 13,639 418,585 (377,001) Changes in fund balances (1,202,533) 146,257 1,348,790 Fund balances, beginning of year 4,342,555 4,342,555 Other financing sources (uses): Transfer in Transfer out Proceeds from sale of capital assets Total other financing sources (uses) Fund balances, end of year Page 92 $ 3,140,022 $ 4,488,812 $ 1,348,790 Facilities Replacement Fund $ Variance Positive (Negative) Non-GAAP Actual Budget $ Development Fees $ $ Budget $ Variance Positive (Negative) Actual $ $ 164,025 102,788 (61,237) 7,200 171,225 13,844 116,632 6,644 (54,593) 9,500 1,723 7,777 7,200 7,200 10,000 22,495 32,495 10,000 15,295 25,295 819,144 287,889 531,255 40,500 7,471 33,029 819,144 123,117 411,006 (123,117) 408,138 50,000 9,194 40,806 (811,944) (378,511) 433,433 121,225 107,438 (13,787) 500,000 500,000 500,000 500,000 (311,944) 121,489 433,433 121,225 107,438 (13,787) 1,489,426 1,489,426 990,714 990,714 1,177,482 $ 1,610,915 $ 433,433 $ 1,111,939 $ 1,098,152 $ (13,787) (Continued) Page 93 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL ALL CAPITAL PROJECTS FUNDS YEAR ENDED JUNE 30, 2020 Totals Budget Revenues: Sales taxes Licenses and permits Intergovernmental Other Investment earnings Total revenues $ 21,624 915,942 955,010 102,788 15,000 10,000 207,770 1,290,568 Expenditures: Current General government Public safety Public works Culture and recreation Capital outlay Total expenditures 116,672 9,500 1,009,144 40,500 2,653,378 3,829,194 2,294 1,723 404,170 7,471 1,642,725 2,058,383 114,378 7,777 604,974 33,029 1,010,653 1,770,811 Excess (deficiency) of revenues over expenditures (2,913,252) (767,815) 2,145,437 1,800,000 (280,000) 1,520,000 990,775 (266,361) 418,585 1,142,999 (809,225) 13,639 418,585 (377,001) Changes in fund balances (1,393,252) 375,184 1,768,436 Fund balances, beginning of year 6,822,695 6,822,695 Other financing sources (uses): Transfer in Transfer out Proceeds from sale of capital assets Total other financing sources (uses) Fund balances, end of year Page 94 $ 640,293 164,025 90,000 Variance Positive (Negative) Non-GAAP Actual 5,429,443 $ $ 7,197,879 $ $ 314,717 (61,237) (75,000) 10,000 186,146 374,626 1,768,436 STATISTICAL SECTION The statistical section presents financial statement trends as well as detailed financial and operational information not available elsewhere in the report. The statistical section is intended to enhance the reader’s understanding of the information presented in the financial statements, notes to the financial statements, and other supplementary information presented in this report. The statistical section is comprised of the five categories of statistical information presented below. Financial Trends These schedules contain information on financial trends to help the reader understand how the Town’s financial position and financial activities have changed over time. Revenue Capacity These schedules contain information to help the reader assess the factors affecting the Town’s ability to generate revenue. Debt Capacity These schedules present information to help the reader evaluate the Town’s current levels of outstanding debt as well as assess the Town’s ability to make debt payments and/or issue additional debt in the future. Demographic and Economic Information These schedules present various demographic and economic indicators to help the reader understand the environment in which the Town’s financial activities take place and to help make comparisons with other cities. Operating Information These schedules contain information about the Town’s operations and various resources to help the reader draw conclusions as to how the Town’s financial information relates to the services provided by the Town. Note: For locally assessed property (i.e., excluding mines, utilities, etc.) Proposition 117, approved by voters in 2012, amended the Arizona Constitution to require that all property taxes after fiscal year 2014-15 be based upon property values limited to five percent in annual growth. The aggregate assessed value of all taxable properties within a taxing jurisdiction (i.e., after applying assessment ratios based on the use of a property), including property values with a growth limit, is currently referred to as net limited assessed value and formerly as primary assessed value. In accordance with Proposition 117, this value is used for all taxing purposes beginning with fiscal year 2015-16. Aggregate assessed value without a growth limit is currently referred to as net full cash assessed value and formerly as secondary assessed value. This value remains the value utilized for determining debt capacity limits. Page 95 Town of Fountain Hills, Arizona Net Position by Component Last Ten Fiscal Years (accrual basis of accounting) Fiscal Year ended June 30 2011 Governmental activities: Net investment in capital assets Restricted Unrestricted Total governmental activities net position 2013 2014 $ 92,579,483 $ 92,006,103 $ 89,800,560 $ 89,713,260 4,385,595 5,951,416 5,721,744 5,480,867 22,598,669 21,064,267 20,612,758 19,186,823 $ 119,563,747 $ 119,021,786 $ 116,135,062 $ 114,380,950 Source: The source of this information is the Town's financial records. Page 96 2012 Fiscal Year ended June 30 2015 2016 $ 95,325,824 $ 95,647,990 6,310,810 4,530,239 15,180,582 17,232,506 $ 116,817,216 $ 117,410,735 2017 2018 2019 2020 $ 94,909,703 $ 96,777,854 $ 104,781,328 $ 104,004,331 4,471,661 4,589,526 3,646,449 2,766,041 17,578,068 16,244,169 15,258,797 17,388,168 $ 116,959,432 $ 117,611,549 $ 123,686,574 $ 124,158,540 Page 97 Town of Fountain Hills, Arizona Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) Fiscal Year Ended June 30 Expenses Governmental activities: General government Development services Public safety Public works Culture and recreation Interest on long-term debt $ Total governmental activities expenses Program Revenues Governmental activities: Fines, fees and charges for services: General government Development services Public safety Public works Culture and recreation Operating grants and contributions Capital grants and contributions Total governmental activities program revenues Net (Expenses)/Revenues General Revenues and Other Changes in Net Assets Governmental activities: Taxes: Property taxes Sales taxes Franchise taxes State shared revenues Investment earnings Miscellaneous Special item - Donation of capital assets Total governmental activities Changes in Net Position Governmental activities $ 2011 2012 2,876,848 $ 1,572,202 5,963,067 5,567,973 2,840,154 851,957 3,119,113 1,442,613 5,820,136 4,718,047 2,754,731 779,576 19,672,201 18,634,216 19,702,089 20,493,302 337,279 344,821 65,568 77,409 339,341 1,614,462 2,273,414 272,469 322,984 63,926 95,201 303,508 1,285,656 1,392,706 380,926 377,483 63,824 112,521 288,745 1,266,906 150,535 215,943 531,193 74,887 250,421 340,353 1,307,738 144,570 5,052,294 3,736,450 2,640,940 2,865,105 (14,619,907) (14,897,766) (17,061,149) (17,628,197) 1,349,079 8,013,480 322,659 5,217,140 28,456 68,125 - 1,453,405 7,787,489 332,130 4,515,511 88,877 178,393 - 1,385,147 7,957,163 334,668 4,979,183 69,998 300,899 - 1,449,646 8,459,267 349,414 5,326,332 123,311 166,115 - 14,998,939 14,355,805 15,027,058 15,874,085 379,032 Source: The source of this information is the Town's financial records. Page 98 $ 2013 $ 2,909,443 1,633,361 6,100,131 5,712,817 2,779,294 567,043 2014 $ 2,432,965 1,237,717 6,958,056 6,630,875 2,760,690 472,999 (541,961) $ (2,034,091) $ (1,754,112) Fiscal Year Ended June 30 $ $ 2015 2016 2,479,365 $ 2,074,611 6,816,152 4,963,979 2,822,954 698,542 2,516,966 2,253,208 7,178,890 6,476,688 3,124,523 241,694 19,855,603 21,791,969 23,529,738 23,270,594 26,416,565 26,752,906 337,655 693,670 86,641 236,706 339,158 1,431,017 2,874,796 298,737 1,257,492 90,345 48,688 321,189 1,615,973 381,011 837,163 1,062,094 155,454 216,724 393,028 1,699,931 494,328 295,716 1,314,915 155,973 52,465 497,914 1,737,958 304,951 280,312 1,143,871 90,774 10,214 1,151,500 1,850,676 181,939 533,189 608,892 100,444 131,750 409,651 2,007,841 91,245 5,999,643 4,013,435 4,858,722 4,359,892 4,709,286 3,883,012 (13,855,960) (17,778,534) (18,671,016) (18,910,702) (21,707,279) (22,869,894) 904,660 8,983,049 352,673 5,713,235 150,358 188,251 - 2,569,504 9,395,667 360,320 5,813,678 219,058 13,826 - 2,296,199 9,415,151 367,119 6,057,278 55,127 28,839 - 2,263,623 10,311,577 421,682 6,396,667 158,860 10,410 - 2,476,546 11,491,123 423,947 6,514,470 554,549 202,969 6,118,700 2,077,368 13,172,390 434,896 6,874,771 545,983 236,452 - 16,292,226 18,372,053 18,219,713 19,562,819 27,782,304 23,341,860 2,436,266 $ 593,519 2017 $ $ 3,142,722 1,364,378 7,563,898 7,904,577 3,375,414 178,749 2018 $ (451,303) $ 3,431,752 1,460,967 7,567,012 7,380,663 3,311,648 118,552 652,117 2019 $ $ 3,318,477 867,725 8,142,069 10,263,244 3,767,996 57,054 6,075,025 2020 $ $ 3,470,936 825,884 9,003,452 9,961,306 3,490,447 881 471,966 Page 99 Town of Fountain Hills, Arizona Fund Balances — Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year ended June 30 General fund Nonspendable Inventory Prepaid items Committed Assigned Unassigned Total general fund All other governmental funds Nonspendable Cash with escrow agent Prepaid items Restricted Committed Assigned Unassigned Total all other governmental funds 2011 2012 $ 13,183 $ 29,234 8,263,549 9,332 28,245 1,345,200 2,190,910 3,656,173 $ 10,201 32,493 1,345,200 2,191,063 4,117,865 $ 14,358 18,348 1,345,200 1,647,193 4,972,853 $ 8,305,966 $ 7,229,860 $ 7,696,822 $ 7,997,952 $ - $ 6,217 4,379,987 11,480,869 - 2,623,895 5,474 3,300,426 2,039,560 9,312,168 - $ 2,301,609 4,706 3,354,189 2,175,094 9,005,276 - $ 1,973,067 997 3,505,590 2,089,361 7,147,586 - $ 15,867,073 $ 17,281,523 $ 16,840,874 $ 14,716,601 Source: The source of this information is the Town's financial records. Page 100 2013 2014 Fiscal Year ended June 30 2015 2016 9,272 4,123 2,652,357 1,701,086 5,853,806 2017 $ 6,975 10,655 2,634,923 1,872,492 4,369,457 $ $ 8,894,502 $ 10,220,644 $ 7,177,642 $ 1,645,000 656 10,066,786 1,079,780 5,444,124 - $ $ $ 18,236,346 $ 11,814,544 5,055 4,500,044 1,366,081 5,943,364 - $ 5,872 16,868 2,714,135 1,743,768 2,696,999 2018 $ 13,490 21,945 2,893,850 2,101,574 2,140,434 $ 7,171,293 2019 $ 5,168 17,311 3,027,804 2,380,653 1,863,722 $ 7,294,658 2020 $ 8,982 2,418 3,249,354 622,641 5,535,499 $ 9,418,894 - $ - $ - $ 474 4,432,710 4,571,263 3,579,891 2,708,883 8,576,250 7,248,890 5,868,386 6,068,810 1,784,761 2,340,683 2,592,343 2,402,244 (66,361) $ 14,794,195 $ 14,160,836 $ 12,040,620 $ 11,113,576 Page 101 Town of Fountain Hills, Arizona Statement of Revenues, Expenditures and Changes in Fund Balances Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year Ended June 30 2011 Revenues Taxes Licenses and permits Leases and rents Intergovernmental Charges for services Other Fines and forfeitures Special assessments Investment earnings Total revenues $ 2012 9,704,054 312,367 227,195 7,165,103 388,635 72,125 236,221 28,456 18,134,156 $ 2013 9,577,321 194,976 206,018 6,035,448 405,663 178,393 223,673 88,877 16,910,369 $ 2014 9,713,445 570,904 213,871 6,323,047 162,086 300,899 187,251 69,998 17,541,501 $ 10,271,737 891,782 252,584 6,677,518 161,376 134,114 170,995 123,311 18,683,417 Expenditures Current: General government Development services Public safety Public works Culture and recreation Capital outlay Debt service: Principal Interest Other debt service Total expenditures 2,575,975 1,564,615 5,772,800 1,123,230 1,871,446 1,043,304 2,887,321 1,421,787 5,869,445 1,054,930 1,794,332 884,323 2,699,109 1,643,757 6,022,269 2,058,990 1,791,018 453,002 2,194,845 1,774,983 6,890,770 3,085,559 1,921,939 1,750,465 2,114,999 729,077 15,254 16,810,700 1,965,000 639,135 55,752 16,572,025 2,280,000 554,860 12,183 17,515,188 2,415,000 460,811 12,188 20,506,560 Excess (deficiency) of revenues over (under) expenditures 1,323,456 338,344 26,313 (1,823,143) 431,880 (431,880) 2,470,027 (2,470,027) 1,279,397 (1,279,397) 1,838,453 (1,838,453) - - - - Other Financing Sources (Uses) Transfers in Transfers out Proceeds from sale of capital assets Issuance of refunding bonds Issuance of long-term debt Bond Premium Payment to refunded bonds escrow agent Total other financing sources (uses) Net change in fund balances $ 1,323,456 $ 338,344 $ 26,313 $ (1,823,143) Expenditures for capitalized assets $ 389,082 $ 1,333,785 $ 467,691 $ 2,385,168 Debt service as a percentage of noncapital expenditures 17.4% Source: The source of this information is the Town's financial records. Page 102 17.5% 16.7% 15.9% Fiscal Year Ended June 30 2015 $ 2016 2017 2018 2019 2020 10,240,382 1,043,382 269,753 9,770,048 176,541 188,251 186,456 150,358 22,025,171 $ 12,299,285 1,372,045 258,165 7,559,436 197,109 147,662 209,380 219,058 22,262,140 $ 12,069,714 1,310,973 284,090 7,917,651 351,476 153,438 257,727 55,127 22,400,196 $ 13,019,341 2,004,386 282,531 8,266,028 254,122 207,697 182,997 158,860 24,375,962 $ 14,342,801 2,040,622 280,801 8,401,676 181,105 347,141 130,483 554,549 26,279,178 $ 15,694,054 835,731 286,391 8,920,296 222,947 387,225 281,704 2,275,124 2,073,990 6,675,874 1,275,779 1,962,585 8,799,068 2,324,026 2,217,814 7,034,887 2,498,714 2,240,865 6,471,382 2,713,548 1,275,147 7,420,032 3,954,450 2,484,940 1,693,265 3,195,936 1,397,249 7,402,227 3,420,317 2,375,758 4,317,214 3,147,063 858,957 6,295,989 7,880,668 2,845,027 4,487,854 3,280,191 797,513 8,566,058 6,046,298 2,609,842 2,716,523 1,850,000 454,957 243,585 25,610,962 4,260,000 308,106 2,005 27,357,799 2,675,000 244,986 2,180 22,463,548 2,720,000 185,164 1,805 25,015,670 2,635,000 123,871 1,600 28,276,029 2,310,000 67,301 1,998 26,395,724 (3,585,791) (5,095,659) (63,352) (639,708) (1,996,851) 778,607 2,519,774 (2,519,774) 562,044 (562,044) 5,194,138 (5,194,138) 4,543,728 (4,543,728) 3,672,532 (3,672,532) 4,180,000 7,565,000 342,086 (4,085,000) 8,002,086 - - - - 1,928,978 (1,928,978) 418,585 418,585 $ 4,416,295 $ (5,095,659) $ $ 9,067,254 $ 6,394,346 15.4% 21.8% $ (63,352) $ 1,696,612 14.1% $ 545,983 27,174,331 (639,708) $ (1,996,851) $ 1,197,192 4,293,214 4,465,837 2,689,270 14.0% $ 11.6% $ 10.0% Page 103 Town of Fountain Hills, Arizona Governmental Activities - Tax Revenues by Source Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year Ended June 30 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Property Tax $ 1,367,915 1,457,702 1,421,615 1,463,056 904,660 2,543,298 2,287,444 2,286,081 2,427,730 2,086,768 Sales Tax $ 8,013,480 7,779,219 7,957,162 8,459,267 8,983,050 9,391,267 9,419,551 10,311,578 11,491,124 13,172,390 Franchise Tax $ 322,659 $ 332,130 334,668 349,414 352,673 360,320 367,119 421,682 423,947 434,896 Source: The source of this information is the Town's financial records. Page 104 Total 9,704,054 9,569,051 9,713,445 10,271,737 10,240,383 12,294,885 12,074,114 13,019,341 14,342,801 15,694,054 Town of Fountain Hills, Arizona Assessed Value and Estimated Actual Value of Taxable Property Last Ten Fiscal Years Fiscal Year 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 $ Net Assessed Taxable Value* 576,401,885 452,236,007 377,816,392 365,963,182 403,330,477 402,223,763 423,688,665 444,639,625 466,895,716 494,576,905 Total Direct Tax Rate** $ 0.1639 0.2258 0.2657 0.2773 0.1151 0.5246 0.4472 0.4259 0.4257 0.3382 $ Estimated Actual Taxable Value* 5,068,665,363 4,096,551,487 3,422,463,416 3,359,684,579 3,722,794,676 3,744,585,506 3,965,824,715 4,166,589,970 4,381,287,279 4,657,015,387 Net Assessed Taxable Value as a Percentage of Estimated Actual Taxable Value 11.37% 11.04% 11.04% 10.89% 10.83% 10.74% 10.68% 10.67% 10.66% 10.62% Source: The source of this information is the Arizona Department of Revenue's Abstract of the Assessment Roll and the Town's financial records. *Note: On November 6, 2012, voters approved Proposition 117, an amendment to the Arizona Constitution. Beginning with Tax Year 2015 (Fiscal Year 2016), both primary and secondary taxes are levied against the net limited assessed value. The net full cash assessed value is used for determining the Town’s bonding capacity and as the ceiling for net limited assessed value. ** Per $100 of assessed taxable value. Page 105 Page 106 $ 21,274,283 $ 22,143,385 1 2 3 5 6 8 9 10 7 2,058,652 3,497,492 3,025,000 2,299,280 2,201,100 2,089,587 1,649,928 1,608,357 1,504,850 4 Rank 2,209,139 Net Full Cash Assessed Value 2011 3.84% 0.61% 0.52% 0.40% 0.38% 0.36% 0.29% 0.28% 0.26% 0.36% 0.38% Percentage of Total Net Full Cash Assessed Value Note: On November 6, 2012, voters approved Proposition 117, an amendment to the Arizona Constitution. Beginning with Tax Year 2015 (Fiscal Year 2015-2016), both primary and secondary taxes are levied against the net assessed limited property valuation. The net assessed full cash property valuation is used for determining the Town’s bonding capacity and as the ceiling for net limited assessed property valuation. 4.04% 0.26% 0.26% Percentage of Total Net Limited Assessed Value 0.80% 0.75% 0.55% 0.46% 0.42% 0.27% 0.27% Source: The source of this information is the Maricopa County Assessor's Office. Totals Taxpayer EPCOR - Chaparral City Water Company RCS-Park Place 1 LLC Hunter Retail LLC WSL Fountain View Investors V, LLC Whitestone Fountain Hills, LLC Target Corporation MJFFH7 LLC FPACP4 Ridgeview LLC Smith's Food & Drug Centers Inc. Fountain Hills Invest Co., LLC Inland Western Fountain Hills Four Peaks LLC Chapparal City Water Company EN LLC Pacific FH Resort LLC J & R Holdings XX LLC Qwest Corporation Firerock LLC Fountain Hills AZ Development LLLP Net Limited Assessed Value Rank 3,947,760 1 3,722,850 2 2,703,022 3 2,253,853 4 2,064,014 5 1,339,330 6 1,319,079 7 1,311,954 8 1,307,358 9 1,305,063 10 2020 Town of Fountain Hills, Arizona Principal Property Taxpayers June 30, 2020 and 2011 Town of Fountain Hills, Arizona Property Tax Levies and Collections Last Ten Fiscal Years Fiscal Total Year Tax Levy 2011 $ 1,340,544 2012 1,446,076 2013 1,429,285 2014 1,449,884 2015 892,104 2016 2,532,115 2017 2,278,728 2018 2,272,027 2019 2,404,250 2020 2,092,340 Current Tax Collections $ 1,307,092 1,414,482 1,401,654 1,426,612 881,170 2,502,995 2,241,482 2,230,328 2,369,262 2,044,210 Percent of Current Taxes Collected 97.5% 97.8% 98.1% 98.4% 98.8% 98.8% 98.4% 98.2% 98.5% 97.7% Delinquent Tax Collections $ 24,924 20,255 18,833 18,448 6,995 19,374 29,635 31,614 21,149 - Total Tax Collections $ 1,332,016 1,434,737 1,420,487 1,445,060 888,165 2,522,369 2,271,117 2,261,942 2,390,411 2,044,210 Ratio of Total Tax Collections to Total Tax Levy 99.4% 99.2% 99.4% 99.7% 99.6% 99.6% 99.7% 99.6% 99.4% 97.7% Source: The source of this information is the Maricopa County Treasurer's Office. Page 107 Town of Fountain Hills, Arizona Taxable Sales by Category Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year Ended June 30 2011 Sales category: Construction Transportation/utilities Wholesale/retail Restaurants/bars Real estate, rental & leasing Services Other Total 2012 2014 $ 567,135 1,388,075 3,567,986 559,931 731,758 276,566 922,029 $ 600,403 1,409,349 3,601,904 575,704 678,326 274,521 639,012 $ 567,589 1,402,734 3,598,895 645,258 720,023 310,303 712,360 $ 783,064 1,375,623 3,653,181 655,654 782,453 342,079 867,213 $ 8,013,480 $ 7,779,219 $ 7,957,162 $ 8,459,267 Note: Other includes all state and local sales tax audit adjustments. Source: The source of this information is the Town's financial records. Page 108 2013 Fiscal Year Ended June 30 2015 2016 $ 935,694 1,405,768 4,214,119 682,180 617,348 604,618 523,323 $ 918,717 1,327,441 4,815,582 742,540 552,856 779,753 254,378 $ 8,983,050 $ 9,391,267 2017 $ 730,163 1,288,153 4,982,218 811,985 636,834 852,675 117,523 $ 9,419,551 2018 2019 2020 1,408,332 1,309,928 5,235,992 829,857 745,171 747,834 34,464 $ 1,932,716 1,290,585 5,464,247 893,595 842,233 1,025,548 42,200 $ 1,910,021 1,405,005 7,031,474 892,210 965,124 916,769 51,786 $ 10,311,578 $ 11,491,124 $ 13,172,389 $ Page 109 Town of Fountain Hills, Arizona Direct and Overlapping Sales Tax Rates Last Ten Fiscal Years Fiscal Year Ended June 30 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020* Town Rate 2.60% 2.60% 2.60% 2.60% 2.60% 2.60% 2.60% 2.60% 2.60% 2.90% Maricopa County 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% State Rate 6.60% 6.60% 5.60% 5.60% 5.60% 5.60% 5.60% 5.60% 5.60% 5.60% Total Tax Rate 9.90% 9.90% 8.90% 8.90% 8.90% 8.90% 8.90% 8.90% 8.90% 9.20% * 0.3% Town rate increase effective 11/1/2019 Source: The source of this information is the Arizona Department of Revenue. Page 110 Page 111 Community General Facilities Obligation District Bonds* Bonds** $ 4,595,000 $ 3,370,000 3,755,000 3,090,000 2,900,000 2,800,000 2,000,000 2,495,000 9,517,086 2,300,000 7,678,669 1,935,000 5,680,252 1,560,000 3,631,835 1,180,000 1,683,417 795,000 400,000 Municipal Property Corporation Bonds* $ 7,885,000 7,040,000 5,905,000 4,695,000 3,525,000 1,400,000 1,030,000 670,000 300,000 - Highway User Revenue Bonds Special Assessment Bonds - Total Outstanding Debt $ 15,850,000 13,885,000 11,605,000 9,190,000 15,342,086 11,013,669 8,270,252 5,481,835 2,778,417 400,000 Population data can be found in the Schedule of Demographic and Economic Statistics. ** All bond amounts presented include amoritization of original issuance discounts and premiums. The Town is not obligated for repayment of the Eagle Mountain Community Facilities District general obligation bonds. * All bond amounts presented include amortization of original issuance discounts and premiums. Source: The source of this information is the Town's financial records and the U.S. Bureau of Economic Analysis. 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Fiscal Year Ended June 30 Governmental Activities Town of Fountain Hills, Arizona Ratios of Outstanding Debt by Type Last Ten Fiscal Years Debt Per Capita $ 705 611 503 394 651 461 338 223 113 16 Page 112 Bonds* $ 7,965,000 6,845,000 5,700,000 4,495,000 11,817,086 9,613,669 7,240,252 4,811,835 2,478,417 400,000 Year 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Obligation Net General Percentage of Property 5,068,665,363 4,096,551,487 3,422,463,416 3,359,684,579 3,722,794,676 3,744,585,506 3,965,824,715 4,166,589,970 4,381,287,279 4,657,015,387 Taxable Value of Obligation Net General Net General Obligation Bonded Property 0.16% 0.16% 0.16% 0.13% 0.31% 0.24% 0.17% 0.11% 0.05% per Capita 347 293 241 187 477 369 281 189 91 8 Note: On November 6, 2012, voters approved Proposition 117, an amendment to the Arizona Constitution. Beginning with Tax Year 2015 (Fiscal Year 2016), both primary and secondary taxes are levied against the net limited assessed value. The net full cash assessed value is used for determining the Town’s bonding capacity and as the ceiling for net limited assessed value. Population data can be found in the Schedule of Demographic and Economic Statistics. * All bond amounts presented are net of original issuance discounts and premiums. The Town is not obligated for repayment of the Eagle Mountain Community Facilities District general obligation bonds Corporation Property Municipal Assessed Valuation Bonds* 1.37% $ 6,993,694 1.49% 4,300,489 1.49% 3,561,814 1.20% 2,721,933 2.83% 1,764,338 2.25% 1,088,117 1.63% 860,437 1.06% 664,484 0.49% 287,694 0.04% - Taxable Value of Bonded Debt Debt per Net Limited Estimated Actual Estimated Actual Principal Bonds $ 83,081 $ 7,881,919 $ 94,380 6,750,620 82,184 5,617,816 87,949 4,407,051 420,782 11,396,304 576,281 9,037,388 343,697 6,896,555 83,185 4,728,650 196,412 2,282,005 202,449 197,551 Restricted for Less: Amounts Source: The source of this information is the Department of Revenue and the Town's financial records. Obligation Fiscal General Town of Fountain Hills, Arizona Ratios of General Bonded Debt Outstanding Last Ten Fiscal Years Debt per Capita $ 308 186 153 115 74 44 35 27 12 - Corporation Property Net Municipal $ All Sources 18,248,326 17,184,895 17,723,994 18,891,967 22,161,316 22,262,139 22,400,196 24,375,962 26,279,178 27,586,011 Total Revenues- Town of Fountain Hills, Arizona Direct and Overlapping Governmental Activities Debt as of June 30, 2020 Governmental Unit Outstanding Debt Overlapping: Maricopa County Maricopa County Community College District Maricopa County Special Healthcare District East Valley Institute of Technology Fountain Hills Unified School District $ Estimated Share of Overlapping Debt Estimated Percentage Applicable 250,065,000 429,125,000 7,780,000 1.15% $ 1.15% 1.15% 2.58% 96.28% Total Overlapping Debt 2,875,748 4,934,938 7,490,584 15,301,270 Direct: Town of Fountain Hills, Arizona* General Obligation Bonds Revenue Bonds Eagle Mountain Community Facilities District** 400,000 Total Direct Debt Total direct and overlapping debt 400,000 $ 15,701,270 Source: The source of this information is the Town's records, the State and County Abstract of the Assessment Roll, the Arizona Department of Revenue Report of Indebtedness and the applicable governmental unit. * All bond amounts include amortization of original issuance discounts and premiums. ** The Town is not obligated for repayment of the Eagle Mountain Community Facilities District general obligation bonds. Note: The estimated percentage of debt outstanding applicable to the Town is calculated based on the Town's net limited assessed valuation as a percentage of the net limited assessed valuation of the overlapping jurisdiction. Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the Town of Fountain Hills. This schedule further estimates the portion of outstanding debt of those overlapping governments that is borne by residents and businesses of the Town. This process recognizes that, when considering a town's ability to issue and repay long-term debt, the entire debt burden borne by residents should be taken into account. However, this fact does not imply that every taxpayer is a resident, and, therefore, responsible for repaying the debt of each overlapping government. Page 113 Town of Fountain Hills, Arizona Legal Debt Margin Information Last Ten Fiscal Years Fiscal Year Ended June 30 2011 2012 2013 2014 2015 6% Debt Limit Debt limit Total net debt applicable to limit Legal debt margin $ 34,584,113 $ 34,584,113 $ 27,134,160 - $ 22,668,984 - $ 21,957,791 - $ 24,199,829 - $ 27,134,160 $ 22,668,984 $ 21,957,791 $ 24,199,829 Total debt applicable to the limit as a percentage of debt limit - - - - - 20% Debt Limit Debt limit Total net debt applicable to limit Legal debt margin $ 115,280,377 4,595,000 $ 110,685,377 $ 90,447,201 3,755,000 $ 86,692,201 $ 75,563,278 2,900,000 $ 72,663,278 $ 73,192,636 2,000,000 $ 71,192,636 $ 80,666,095 9,175,000 $ 71,491,095 Total debt applicable to the limit as a percentage of debt limit 4% 4% 4% 3% 11% Source: The source of this information is the Town's financial records. Note: All amounts presented are net of original issuance discounts and premiums. Note: On November 6, 2012, voters approved Proposition 117, an amendment to the Arizona Constitution. Beginning with Tax Year 2015 (Fiscal Year 2016), both primary and secondary taxes are levied against the net limited assessed value. The net full cash assessed value is used for determining the Town’s bonding capacity and as the ceiling for net limited assessed value. Page 114 Fiscal Year Ended June 30 2016 $ $ 2017 28,325,296 28,325,296 - 2018 2019 2020 $ 30,651,126 - $ 31,459,192 - $ 32,400,042 - $ 33,907,227 - $ 30,651,126 $ 31,459,192 $ 32,400,042 $ 33,907,227 - - $ 94,417,653 7,405,000 $ 87,012,653 $ 102,170,422 5,475,000 $ 96,695,422 8% 5% $ $ - 104,863,974 3,495,000 101,368,974 3% $ $ - 108,000,140 1,615,000 106,385,140 1% $ $ 113,024,089 113,024,089 - Page 115 Town of Fountain Hills, Arizona Calculation of Legal Debt Margin as of June 30, 2020 Net full cash assessed valuation $ 565,120,444 $ 113,024,089 - Water, Sewer, Artificial Lighting, Parks, Open Space, Recreational Facility Improvements, Public Safety, Law Enforcement, Fire and Emergency Facilities, Street and Transportation Facilities Debt limit - 20% of net full cash assessed valuation Net debt applicable to limit 20% legal debt margin 113,024,089 All Other General Obligation Bonds Debt limit - 6% of net full cash assessed valuation Net debt applicable to limit 33,907,227 - 6% legal debt margin Total legal debt margin 33,907,227 $ 146,931,316 Source: The source of this information is the Maricopa County Assessor's Office and the Town's financial records. Note: On November 6, 2012, voters approved Proposition 117, an amendment to the Arizona Constitution. Beginning with Tax Year 2015 (Fiscal Year 2016), both primary and secondary taxes are levied against the net limited assessed value. The net full cash assessed value is used for determining the Town’s bonding capacity and as the ceiling for net limited assessed value. Page 116 Town of Fountain Hills Revenue Bond Coverage Last Ten Fiscal Years Municipal Facilities Corporation Revenue Bonds Fiscal Year Ended June 30 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Principal $ 1,035,000 1,085,000 1,150,000 1,225,000 2,545,000 480,000 370,000 360,000 370,000 300,000 Interest $ 386,630 327,312 285,287 234,176 184,500 32,740 22,680 16,686 10,854 4,860 $ Total 1,421,630 1,412,312 1,435,287 1,459,176 2,729,500 512,740 392,680 376,686 380,854 304,860 Pledged Revenues $ 13,489,416 12,995,685 13,397,842 14,313,158 15,583,484 16,250,673 16,815,224 18,194,833 19,765,936 20,862,372 Coverage 9.5 9.2 9.3 9.8 5.7 31.7 42.8 48.3 51.9 68.4 Source: The source of this information is the Town's financial records. Page 117 Page 118 $ - 4 4 1 12,990 4 56 20 13,005.7 20.32 1,218 6.7% 1,981 53.9 44,660 2011 22,741 $ - 3 6 1 12,977 4 56 20 13,005.7 20.32 1,209 5.6% 1,886 53.9 47,260 2012 23,070 $ - 3 7 1 12,991 4 54 20 13,005.7 20.32 1,196 6.0% 1,820 53.0 48,244 2013 23,318 $ - 3 7 1 12,981 4 43 20 13,005.7 20.32 1,165 5.4% 1,692 53.7 46,619 $ - 3 7 1 13,002 4 46 20 13,005.7 20.32 1,247 2.4% 1,619 53.8 48,240 2015 23,899 Calendar Year 2014 23,573 $ - 3 7 1 13,130 4 50 20 13,005.7 20.32 1,209 1.9% 1,506 53.7 50,162 2016 24,482 $ 3 7 1 1 13,176 4 52 20 13,005.7 20.32 1,175 1.6% 1,444 53.5 60,531 2017 24,583 $ 3 5 1 1 13,558 4 54 20 13,005.7 20.32 1,172 3.9% 1,380 57.5 54,936 2018 24,987 $ 3 5 1 2 13,749 4 55 20 13,005.7 20.32 1,052 8.7% 1,338 58.8 57,468 2019* 25,200 * Information obtained is based on calendar years; therefore, the latest information obtained was from 2019. Note: N/A indicates the information is not available. Sources: The sources of the "Per Capita Personal Income", "Median Age" and "Unemployment Rate" information are Sites USA (2009-2017), U.S. Census Bureau and Arizona Office of Economic Opportunity (beginning in 2018). The source of the "Population" is the U.S. Census Bureau July 1, 2019 estimate. The source of School Enrollment is the Fountain Hills Unified School District No. 98. Other information is from the Town's records. - 12,983 4 53 20 Number of units Housing Lodging Restaurants Shopping centers 4 4 1 13,005.7 20.32 1,226 Land use Total acres Total square miles Vacant lots Schools Public Preschool Charter Vocational 4.8% Town of Fountain Hills unemployment rate 53.9 40,672 2,103 $ Public school enrollment Median age Per capita personal income Population 2010 22,489 Town of Fountain Hills, Arizona Demographic and Economic Statistics Last Ten Calendar Years Town of Fountain Hills, Arizona Principal Employers Prior Fiscal Year and Nine Years Ago 2019* Employer Fountain Hills Unified School District No. 98 Rural Metro Corporation Safeway Stores Fountain View Village Firerock Country Club Fry's Food Stores Target Stores Eagle Mountain Golf Club Fountain Hills Family Practice PC Bashas Golf International Inc Quotemedia Inc Sunridge Canyon Golf Course Town of Fountain Hills United States Postal Service Monks Construction MCO Properties, Inc. Totals Total Town employment 2010 Percentage Number of of Total Town Employees Rank Employment 320 1 6.3% 130 2 2.5% 130 2 2.5% 120 4 2.3% 100 5 2.0% 90 6 1.8% 90 6 1.8% 70 8 1.4% 70 8 1.4% 60 10 1.2% 60 10 1.2% 60 10 1.2% 60 10 1.2% 60 10 1.2% 60 10 1.2% 1,480 29.2% 5,110 Number of Employees Rank 278 1 91 5 76 125 69 6 2 7 64 8 58 61 10 9 110 103 3 4 1,035 5,486 Source: The source of this information is the Maricopa Association of Governments. Note: MAG data includes employers with 5+ employees and is rounded to nearest 10. * Data for 2020 was not available. Page 119 Page 120 56.61 Source: The source of this information is the Town's financial records. 58.36 50.99 20.18 52.32 21.06 52.32 20.76 53.94 20.76 61.13 21.18 16.30 Total 21.53 16.30 12.25 21.63 16.25 11.63 3.63 2017 Community services 18.75 11.33 3.63 2016 7.50 20.25 10.56 3.63 2015 23.25 11.68 4.00 2014 Development services 11.58 5.00 2013 9.80 11.25 Administration 5.00 2012 Public works 5.00 Municipal court 2011 Fiscal Year Ended June 30 55.94 20.56 8.50 9.80 13.45 3.63 2018 Town of Fountain Hills, Arizona Authorized Full-time Equivalent Government Employees by Function Last Ten Fiscal Years 56.19 20.56 7.50 10.80 13.70 3.63 2019 60.82 20.56 9.00 12.43 15.20 3.63 2020 Page 121 2.7 none none 350 1,546 843 14 3,315 1,759 1,205 9,742 645 1,909 3,179 3:46 Administration FTEs per 1,000 residents Registered voters - general election Voter turnout - general election Development Services Building permits issued Building inspections conducted Number of code violation cases Number of zoning cases Community Services Number of Community Center bookings Number of participants in recreational programs Number of Senior Services members Number of home delivered meals Law Enforcement (contracted) Physical arrests Traffic violations Fire & Emergency Medical (contracted) Total incident responses Average response time (in minutes) 3,082 3:50 522 1,366 3,236 1,833 1,208 8,419 346 1,257 804 7 2.6 16,074 34% 2,173 731 2012 Note: N/A indicates that the information is not available. Source: The source of this information is the Town's financial records. 2,584 738 2011 Function/Program Municipal Court Cases filed Hearings/Trials held 3,136 3:53 545 1,296 3,196 1,789 1,118 6,941 457 1,395 746 10 2.5 none none 1,740 703 2013 2,956 3:37 743 1,379 3,383 2,291 1,189 4,799 445 2,131 716 41 2.2 N/A N/A 1,649 1,665 2014 3,166 3:57 445 1,539 3,439 2,249 1,273 4,035 443 2,448 752 65 2.2 16,213 38% 1,738 1,585 2015 3,191 3:25 220 1,215 3,124 2,910 1,326 3,497 410 2,129 713 72 2.2 none none 1,593 1,564 2016 3,425 3:33 220 1,803 3,764 3,773 1,335 3,920 509 2,704 669 50 2.2 16,387 41% 2,014 1,844 2017 Fiscal Year Ended June 30 Town of Fountain Hills, Arizona Operating Indicators by Function Last Ten Fiscal years 3,659 3:32 214 1,053 4,395 3,794 1,220 3,093 468 3,707 654 41 2.3 none none 1,277 676 2018 4,073 3:51 67 1,248 3,857 3,489 1,313 3,562 576 4,795 655 11 2.2 16,775 51% 891 801 2019 3,896 4:21 86 2,618 3,169 1,830 1,265 5,215 547 4,069 690 7 2.4 none none 2,237 568 2020 Page 122 2 116 7 6 7 1 740 4.3 178.9 390 34 13 2012 2 116 7 6 7 1 740 10.43 178.9 390 34 13 2013 Note: N/A indicates the information is not available. 2 116 7 6 7 1 740 10.43 178.9 390 34 13 2014 Source: The source of this information is the Town's facilities records. 116 7 6 7 1 N/A N/A Parks and recreation Acreage-developed parks Playgrounds Baseball/softball diamonds Soccer/football fields Community centers Preserve acreage Miles of trails 2 178.9 390 34 13 2011 Public works Streets (centerline miles) Streets (lane miles) Pedestrian lighting Traffic signals Public safety Number of fire stations Function/Program 2 119 7 6 7 1 807.2 15.8 178.9 390 85 13 2015 2 119 7 6 7 1 807.2 15.8 178.9 390.5 91 13 2016 Fiscal Year Ended June 30 Town of Fountain Hills, Arizona Capital Assets Statistics by Function Last Ten Fiscal Years 2 119 7 6 7 1 807.2 18.5 178.9 390.5 91 13 2017 2 119 7 6 7 1 807.2 18.5 180.0 391.5 91 13 2018 2 119 9 6 7 1 889.2 18.5 180.0 391.5 91 13 2019 2 119 9 6 7 1 913.2 18.5 180.0 391.5 91 13 2020