TOWN OF FOUNTAIN HILLS, ARIZONA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2021 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) 23 BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements: Statement of Net Position 36 Statement of Activities 37 Fund Financial Statements: Balance Sheet – Governmental Funds 40 Reconciliation of the Balance Sheet – Governmental Funds to the Statement of Net Position 43 Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds 44 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds to the Statement of Activities 46 Statement of Net Position – Proprietary Fund 47 Statement of Revenues, Expenses, and Changes in Net Position – Proprietary Fund 48 Statement of Cash Flows – Proprietary Fund 49 TOWN OF FOUNTAIN HILLS, ARIZONA TABLE OF CONTENTS FINANCIAL SECTION – continued Notes to Financial Statements Page 50 REQUIRED SUPPLEMENTARY INFORMATION Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual: General Fund 70 Highway User Revenue Fund 71 Grants Fund 72 Note to Required Supplementary Information 73 COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES Governmental Funds: Combining Balance Sheet – All Non-Major Governmental Funds – By Fund Type 76 Combining Statement of Revenues, Expenditures and Changes in Fund Balances – All Non-Major Governmental Funds – By Fund Type 78 Special Revenue Funds: Combining Balance Sheet 82 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 84 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual 86 Debt Service Funds: Combining Balance Sheet 92 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 94 TOWN OF FOUNTAIN HILLS, ARIZONA TABLE OF CONTENTS FINANCIAL SECTION – continued Combining Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual Page 96 Capital Projects Fund: Combining Balance Sheet 99 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 100 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual 102 STATISTICAL SECTION Financial Trends: Net Position by Component 106 Changes in Net Position 108 Fund Balances – Governmental Funds 110 Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds 112 Revenue Capacity: Governmental Activities – Tax Revenues by Source 114 Assessed Value and Estimated Actual Value of Taxable Property 115 Principal Property Taxpayers 116 Property Tax Levies and Collections 117 Taxable Sales by Category 118 Direct and Overlapping Sales Tax Rates 120 TOWN OF FOUNTAIN HILLS, ARIZONA TABLE OF CONTENTS STATISTICAL SECTION – continued Page Debt Capacity: Ratios of Outstanding Debt by Type 121 Ratios of General Bonded Debt Outstanding 122 Direct and Overlapping Governmental Activities Debt 123 Legal Debt Margin Information 124 Calculation of Legal Debt Margin 126 Revenue Bond Coverage 127 Demographic and Economic Information: Demographic and Economic Statistics 128 Principal Employers 129 Operating Information: Authorized Full-Time Equivalent Government Employees by Function 130 Operating Indicators by Function 131 Capital Assets Statistics by Function 132 (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 4, 2021 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 Annual Comprehensive Financial Report (ACFR) of the Town of Fountain Hills (Town) for the fiscal year ended June 30, 2021. 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, 2021, 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, 2021, 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 Page 1 Accounting principles generally accepted 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’s 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 thirty years, Fountain Hills has grown from 10,030 residents to a town of 23,820 in 2020. 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 in the years to come. 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 62 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, Internal 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 1. The budget includes proposed expenditures and the means of financing them. The Town Council is then required to hold public hearings on the proposed budget and to adopt a final budget by June 30, the close of the Town of Fountain Hills’ fiscal year. Public hearings on the budget are held each year in accordance with legal requirements in order to obtain comments from local taxpayers. 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. All inter-departmental and inter-fund transfers are approved by Town Council. 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 non-personnel appropriations within their 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-to-actual 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, relies mostly on its Transaction Privilege Tax (Sales Tax) and Voter-Approved Local Revenue (State Shared Revenue) collections to fund nearly 90% of its General Fund (Operating) expenditures. During the past fiscal year, the Town’s revenue collections from these sources met, or exceeded, budgeted expectations. However, the effects of the pandemic on personal income will not have an effect on collections until Fiscal Year 2023 since it lags by two years. 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, elimination or modification to the job description. The Town will be closely monitoring its revenue sources and make adjustments accordingly. Page 5 Local sales tax collections have continued to grow during the past fiscal year. The following chart is a look at the past five years’ local sales tax activity by category: As shown in the chart, sales tax collections continue to show signs of moderate growth and relative stability across all categories. Retail sales experienced a 27% increase over the prior year, and restaurant/bar revenues have recovered to pre-pandemic levels with an increase of 19% compared to FY20. Construction sales tax, a one-time revenue source, is driven entirely by development activity in the community and increased slightly compared to the prior year. Recent building permit activity indicates that construction sales tax is likely to be stable over the next few fiscal years. The Transportation/Communication/Utility and Services categories also increased during the year with an 8.8% and 22.8% increase in revenues, respectively. 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 93% of total General Fund revenue collected for fiscal year 2020-21. 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 0.44%). State-shared income tax revenue category is based on two years prior personal and corporate earnings. Revenue from the State income tax increased by 11.5% in fiscal year 2020-21. State sales tax has increased over the past several years, and this year continued the trend by increasing revenue by 15.8% compared to the prior year. Other local activity has remained fairly consistent during the period as a result of the lack of major retailers (the Town has three grocery stores and one major retailer). 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 Page 7 Economic Outlook Retail Sales – Not having a property tax, the Town of Fountain Hills relies heavily on transaction privilege taxes (TPT), sometimes called a sales tax. Overall, Town TPT revenues provide over 50% of the General Fund revenues. On November 1, 2019 the Town’s TPT rate went up 0.3%, The Town's TPT rate is currently at 2.9%. The construction TPT 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 Voter-Approved Local Revenues (VALR), or state-shared revenues, include allocations of the state-collected income tax, sales tax, fuel tax and motor vehicle-in-lieu taxes. All but the fuel tax and the 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. These revenue sources have improved recently with the economy showing signs of recovery. Highway User Revenue Fund (Streets) – The Town receives a proportionate share of the fuel tax collected in Maricopa County. These revenues are placed in the Streets Fund to be used specifically for street maintenance and related activity. Although the state-shared revenue formula generally allocates revenues based on official census data, in recent years, the state legislature has reduced the formula distribution of state-shared revenues to cities. Long-term Financial Planning Fountain Hills’ Financial Policies are balanced on sound financial reserves and conservative revenue growth forecasts for the foreseeable future. However, potential for State legislative impacts to revenuesharing, reductions in 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 encountered during the 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 about 60 days of expenditures 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 does allow for bond financing of larger projects so that the cost can be equitably distributed among the Town’s current and future residents. 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 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. Although the Plan was to be updated in 2021, the committee was unable to meet due to the pandemic. As a result, the newest version of the Strategic Plan will be introduced in fiscal year 2021-22. MAJOR INITIATIVES AND SERVICE EFFORTS AND ACCOMPLISHMENTS The Town of Fountain Hills’ adopted budget for fiscal year 2020-21 reflected a cautious approach to the anticipated recovery from the pandemic. Due to the uncertain economic conditions, the Town reduced its expected revenue projections and kept expenditure levels low as well. At the start of the fiscal year, the CARES Act provided some resources to local governments through the State of Arizona. These resources allowed the Town to save nearly $2.9M in the General Fund that would have otherwise been spent to pay for public safety contracts with Maricopa County Sheriff’s Office and Rural Metro. The Town Council established priorities in FY16-17 of which the top two are Economic Development and Pavement Management. In order to implement the Pavement Management program, the Council approved the use of Vehicle License Tax revenues to be dedicated 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 2020-21 goals attained are summarized within this list of accomplishments:        Page 9 Implemented policies and programs to address the worldwide pandemic Provided $300,000 in assistance to local businesses in the form of grants Completed the roundabout located at La Montana and Avenue of the Fountains Completed major storm drain improvements on Panorama Drive Continued park improvements at Four Peaks Park, including a basketball court, new playground equipment covered by a new shade structure, and completed sidewalk loop Secured grant funding from the Arizona Office of Tourism - Proposition 302 Secured grant funding from Salt River Pima-Maricopa Indian Community - Proposition 202 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 Annual Comprehensive Financial Report (ACFR) for the fiscal year ended June 30, 2020. This was the twenty-fifth 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 ACFR. 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 ACFR continues to meet the Certificate of Achievement program’s requirements, and we will be submitting it to the GFOA to determine its eligibility for the fiscal year ended 2021 Certificate. For the ninth year, the Town was also given the Award for Outstanding Achievement in Popular Annual Financial Reporting for the fiscal year ended June 30, 2020. In addition, the government received the GFOA’s Distinguished Budget Presentation Award for its annual budget for the fiscal year beginning July 1, 2020. 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 nineteenth consecutive year that the Town has received the award. Acknowledgments The preparation of this Annual Comprehensive Financial Report could not have been accomplished without the efficient and dedicated services of the entire Finance Division team. 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, 2021 ELECTED OFFICIALS Ginny Dickey, Mayor Alan Magazine, Vice-Mayor Gerry Friedel, Councilmember Sharron Grzybowski, Councilmember Peggy McMahon, Councilmember Mike Scharnow, Councilmember David Spelich, 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 Arizona For its Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2020 Executive Director/CEO Page 12 Town of Fountain Hills Organization Citizens of Fountain Hills Mayor and Town Council Presiding Judge Town Prosecutor Fire / EMS Community Services Development Services Public Works Administration Parks Building Safety Engineering Finance Recreation Code Enforcement Facilities Administrative Services Community Center GIS Inspection Town Clerk Senior Services Planning Streets Economic Development / Tourism Volunteer Program Page 13 Town Attorney Town Manager Community Relations Law Enforcement Appointed by Council Contracted (This page intentionally left blank) Page 14 FINANCIAL SECTION Page 15 (This page intentionally left blank) Page 16 Independent Auditor’s Report Honorable Mayor and Members of the Town Council Town of Fountain Hills, Arizona Report on Audit of Financial Statements Opinions 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 (Town), as of and for the year ended June 30, 2021, and the related notes to the financial statements, which collectively comprise the Town’s basic financial statements as listed in the table of contents. 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, 2021, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Basis for Opinions 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. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of Town of Fountain Hills, Arizona, and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for 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. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Town’s ability to continue as a going concern for one year beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. Page 17 Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we:      Exercise professional judgment and maintain professional skepticism throughout the audit. Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Obtain an understanding of internal control relevant to the audit 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 Town’s internal control. Accordingly, no such opinion is expressed. Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Town’s ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit. 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 is the responsibility of management and, 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. Page 18 Supplementary 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 Combining and Individual Fund Financial Statements and Schedules are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Combining and Individual Fund Financial Statements and Schedules information is fairly stated in all material respects in relation to the basic financial statements as a whole. Other Information Management is responsible for the other information included in the annual report. The other information comprises the Introductory Section and Statistical Section but does not include the basic financial statements and our auditor’s report thereon. Our opinions on the basic financial statements do not cover the other information and we do not express an opinion or any form of assurance thereon. In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on other work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 4, 2021, on our consideration of 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 the Town of Fountain Hills, Arizona’s 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 Town of Fountain Hills, Arizona’s internal control over financial reporting and compliance. Heinfeld, Meech & Co., P.C. Scottsdale, Arizona November 4, 2021 Page 19 (This page intentionally left blank) Page 20 MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) (Required Supplementary Information) Page 21 (This page intentionally left blank) Page 22 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2021 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, 2021. 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 will focus 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 $3.6 million to $127.8 million, representing a 2.9 percent increase of the total net position.  General revenues from governmental activities accounted for $24.6 million in revenue, or 78.4 percent of all revenues from governmental activities. Program specific revenues in the form of charges for services and grants and contributions accounted for $6.8 million or 21.6 percent of total governmental activities revenues.  The Town had $27.8 million in expenses related to governmental activities, an increase of 3.8 percent from the prior fiscal year, primarily due to increased capital project expenditures.  Among the major governmental funds, the General Fund had $22.2 million in current fiscal year revenues, which consisted primarily of taxes and intergovernmental revenues. The total expenditures of the General Fund were $14.0 million. The General Fund’s fund balance increased $6.0 million to $15.5 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 23 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2021 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 Town funds are included in the governmental fund classification, except for one internal service fund that is classified as a proprietary fund. 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 24 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2021 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, and Capital Projects 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. Proprietary fund. The Town maintains one proprietary fund, which is the Technology Replacement Fund, an internal service fund. The fund provides goods and services to other funds and departments on a cost-reimbursement basis. The activity is intended to operate on an essentially “break-even” basis over time. 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 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. Page 25 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2021 GOVERNMENT-WIDE FINANCIAL ANALYSIS – continued 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 $127.8 million at the end of the fiscal year. 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, 2021 and June 30, 2020. Current and other assets Capital assets, net Total assets Governmental Activities As of As of June 30, 2021 June 30, 2020 $ 25,980,153 $ 23,329,463 103,822,185 104,404,331 129,802,338 127,733,794 Current and other liabilities Long-term liabilities Total liabilities Net position Net investment in capital assets Restricted Unrestricted Total net position $ 1,861,024 190,600 2,051,624 3,338,678 236,576 3,575,254 103,822,185 2,610,178 21,318,351 127,750,714 $ 104,004,331 2,766,041 17,388,168 124,158,540 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 26 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2021 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 $31.4 million. The total cost of all programs and services was $27.8 million. The following table presents a summary of the changes in net position for the fiscal years ended June 30, 2021 and June 30, 2020. Governmental Activities Fiscal Fiscal Year Ended Year Ended June 30, 2021 June 30, 2020 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 Changes in net position Net position, beginning Net position, ending Page 27 $ 1,899,349 4,733,757 135,525 $ 1,783,926 2,007,841 91,245 402,481 15,657,292 426,260 6,590,986 1,196,198 49,665 262,953 $ 31,354,466 2,077,368 13,172,390 434,896 5,813,932 1,060,839 545,983 236,452 $ 27,224,872 $ $ 3,793,915 968,808 9,214,615 10,175,540 3,601,870 7,544 27,762,292 3,592,174 124,158,540 $127,750,714 3,470,936 825,884 9,003,452 9,961,306 3,490,447 881 26,752,906 471,966 123,686,574 $124,158,540 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2021 GOVERNMENT-WIDE FINANCIAL ANALYSIS – continued The charts below compare the governmental expenses from fiscal years 2020-21 and 2019-20. Page 28 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2021 GOVERNMENT-WIDE FINANCIAL ANALYSIS – continued The following items are significant current year transactions that have had an impact on the change of net position.  Revenue from operating grants increased 135.8 percent compared to the prior year. $2.9 million in AZ CARES funding was received as a result of the federal government’s response to the coronavirus pandemic.  Investment income decreased 90.9 percent due to the coronavirus pandemic, slowing economy, and lower interest rates.  Property taxes decreased 80.6 percent due to the retirement of all town-wide bonded debt.  Overall, expenses increased 3.8 percent primarily due to 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, 2021 Net (Expense)/ Total Expenses Revenue Year Ended June 30, 2020 Total Net (Expense)/ Expenses Revenue $ 3,793,915 968,808 9,214,615 10,175,540 3,601,870 7,544 $ 27,762,292 $ 3,470,936 825,884 9,003,452 9,961,306 3,490,447 881 $ 26,752,906 $ (3,435,515) (275,647) (6,155,942) (8,011,077) (3,107,936) (7,544) $ (20,993,661) $ (2,845,747) (216,992) (8,856,335) (7,989,399) (2,960,540) (881) $ (22,869,894)  The cost of all governmental activities this year was $27.8 million.  Federal, State, and county governments and charges for services subsidized certain governmental programs with revenues of $6.8 million.  Net cost of governmental activities of $21.0 million was financed by general revenues, which consist of primarily sales taxes of $15.7 million and State-shared revenues of $7.8 million. Page 29 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2021 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 $3.7 million in the combined fund balance from $20.5 million to $24.3 million. The General Fund comprises 63.7 percent of the total fund balance. Approximately $11.0 million, or 70.9 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 $6.0 million to $15.5 million as of fiscal year end. General Fund revenues increased $2.8 million primarily due to increased local sales tax collections. General Fund expenditures decreased $2.3 million since approximately $2.9 million in AZ CARES funding was used to pay public safety costs for the fiscal year. The Highway User Revenue Fund comprises 4.8 percent of total fund balance. The fund balance decreased $500 thousand from the prior year because of the continuation of the pavement management program. The Capital Projects Fund comprises 18.5 percent of the total fund balance. All of the fund balance is committed or assigned to capital projects. The fund balance decreased $1.6 million due to increased capital project expenditures during the fiscal year. The Grants Fund was utilized during the year to account for the AZ CARES funding. This is Federal funding to assist with COVID-19 related relief. The fund balance decreased $66,361. Proprietary fund. Unrestricted net position of the Internal Service Fund at the end of the fiscal year amounted to $95,787. This was an increase of $95,787 that was due to internal charges to other governmental funds and transfer in from the General Fund. Page 30 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2021 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 decrease $2.6 million as a result of transfers to the Grants fund to pay public safety costs using AZ CARES funding. 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 $2.8 million in overall revenues is primarily due to increased local sales taxes and an increase in construction activity.  The favorable total expenditures variance of $2.9 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 $103.8 million in capital assets, including buildings, facilities, vehicles, computers, equipment, infrastructure and artwork. This amount represents a net increase, prior to depreciation, of $4.3 million from the prior fiscal year. The increase was primarily due to the reconstruction of a portion of the Panorama Drive storm water system, purchase and replacement of vehicles and equipment, and continuation of the sidewalk infill program. 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, 2021 and June 30, 2020. Capital assets – non-depreciable Capital assets – depreciable, net Total Governmental Activities As of As of June 30, 2021 June 30, 2020 $ 34,155,329 $ 34,417,953 69,666,856 69,986,378 $103,822,185 $104,404,331 The estimated construction commitments amount is $1,710,344. Additional information on the Town’s capital assets can be found in Note 6. Page 31 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2021 CAPITAL ASSETS AND DEBT ADMINISTRATION – continued Debt Administration. At year-end, the Town had retired the final $400 thousand in governmental long-term debt outstanding for the Eagle Mountain Community Facilities District, with the entire principal balance being paid. As a result, long-term debt decreased by $400 thousand during the current fiscal year. 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 $119 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 $35.6 million. Additional information on the Town’s long-term debt can be found in Notes 7 and 8 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 2021-22 budget. Among them:    Revenue projections were developed using conservative growth estimates. Federal grants related to COVID-19 pandemic relief. Also considered in the development of the budget is the local economy and inflation of the surrounding area. Budgeted expenditures for the Town increased 11.6 percent to $39.1 million in fiscal year 2021-22. Revenues from local sales taxes, state-shared revenue, and federal revenues 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.fountainhillsaz.gov. Page 32 BASIC FINANCIAL STATEMENTS Page 33 (This page intentionally left blank) Page 34 GOVERNMENT-WIDE FINANCIAL STATEMENTS Page 35 TOWN OF FOUNTAIN HILLS, ARIZONA STATEMENT OF NET POSITION JUNE 30, 2021 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 24,811,172 181,888 861,482 31,875 19,502 7,117 67,117 25,980,153 34,155,329 69,666,856 103,822,185 129,802,338 LIABILITIES Current liabilities: Accounts payable Retainage payable Accrued wages and benefits Other liabilities Customer deposits Compensated absences payable Unearned revenues Total current liabilities 954,829 106,127 156,566 1,632 40,350 324,163 277,357 1,861,024 Noncurrent liabilities: Non-current portion of long-term liabilities Total noncurrent liabilities Total liabilities 190,600 190,600 2,051,624 NET POSITION Net investment in capital assets Restricted for: Public works Capital outlay Debt service Unrestricted Total net position 103,822,185 $ 926,944 1,480,691 202,543 21,318,351 127,750,714 The notes to the basic financial statements are an integral part of this statement. Page 36 TOWN OF FOUNTAIN HILLS, ARIZONA STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2021 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 $ $ 3,793,915 $ 968,808 9,214,615 10,175,540 3,601,870 7,544 27,762,292 $ Charges for Services Operating Grants and Contributions Capital Grants and Contributions 310,411 $ 693,161 104,726 355,619 435,432 35,761 $ 2,939,947 1,747,200 10,849 14,000 61,644 47,653 1,899,349 $ 4,733,757 $ 135,525 Governmental Activities 12,228 $ 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 402,481 15,657,292 426,260 6,590,986 1,196,198 49,665 262,953 24,585,835 Changes in net position 3,592,174 124,158,540 Net position, beginning of year Net position, end of year The notes to the basic financial statements are an integral part of this statement. Page 37 (3,435,515) (275,647) (6,155,942) (8,011,077) (3,107,936) (7,544) (20,993,661) $ 127,750,714 (This page intentionally left blank) Page 38 FUND FINANCIAL STATEMENTS Page 39 TOWN OF FOUNTAIN HILLS, ARIZONA BALANCE SHEET - GOVERNMENTAL FUNDS JUNE 30, 2021 General ASSETS Cash and investments Accounts receivable Intergovernmental receivable Taxes receivable Interest receivable Inventory, at cost Prepaid items Total assets $ $ LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: $ Accounts payable Retainage payable Accrued wages and benefits Other liabilities Customer deposits Unearned revenues Total liabilities Deferred inflows of resources: Unavailable revenues - property taxes Unavailable revenues - other Total deferred inflows of resources Fund balances: Nonspendable Restricted Committed Assigned Unassigned Total fund balances 15,268,951 131,755 615,125 Highway User Revenue $ 1,064,630 50,133 228,386 $ 258,901 10,121 7,117 20,171 16,053,240 $ 1,343,149 $ 258,901 398,016 $ 110,526 $ 133,858 1,625 40,350 18,456 592,305 17,457 7 127,990 1,905 1,905 41,272 41,272 258,901 258,901 27,287 885,672 3,387,433 1,085,667 10,958,643 15,459,030 Total liabilities, deferred inflows of resources and fund balances $ 16,053,240 288,215 1,173,887 $ 1,343,149 The notes to the basic financial statements are an integral part of this statement. Page 40 Grants $ 258,901 Capital Projects Non-Major Governmental Funds Total Governmental Funds $ $ $ 4,887,095 17,971 31,875 449 8,932 $ $ 46,571 4,942,598 339,113 106,127 3,235,808 $ 375 3,286,478 $ $ 107,174 $ 5,251 445,240 112,425 27,012 $ 3,305,053 1,192,305 4,497,358 3,147,041 4,942,598 Page 41 $ 3,286,478 954,829 106,127 156,566 1,632 40,350 277,357 1,536,861 27,012 43,177 70,189 27,012 1,656,222 1,125,438 365,381 24,715,385 181,888 861,482 31,875 19,502 7,117 67,117 25,884,366 27,287 2,541,894 7,817,924 2,931,568 10,958,643 24,277,316 $ 25,884,366 (This page intentionally left blank) Page 42 TOWN OF FOUNTAIN HILLS, ARIZONA RECONCILIATION OF THE BALANCE SHEET - GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION JUNE 30, 2021 Total governmental fund balances $ 24,277,316 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 $ 231,869,678 (128,047,493) 103,822,185 27,012 43,177 70,189 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 Other Long-term liabilities (compensated absences payable) are not due and payable in the current period and, therefore, are not reported in the funds. (514,763) The Internal Service Fund is used by management to charge the cost of technology replacement to the individual funds. The assets and liabilities of the Internal Service Fund are included in the Statement of Net Position. 95,787 Net position of governmental activities The notes to the basic financial statements are an integral part of this statement. Page 43 $ 127,750,714 TOWN OF FOUNTAIN HILLS, ARIZONA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2021 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 $ 13,042,381 426,260 854,384 264,621 6,995,548 83,583 272,194 210,882 29,051 22,178,904 Grants $ 1,079,813 2,584,538 15,507 2,798 3,006,715 734 3,683,390 388 3,007,103 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 13,982,463 4,356,971 2,982,274 Excess (deficiency) of revenues over expenditures 8,196,441 (673,581) 24,829 Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses) 200,000 (5,078) 194,922 41,532 (2,156,305) (2,156,305) Changes in fund balances 6,040,136 (478,659) 66,361 Fund balances (deficits), beginning of year 9,418,894 1,652,546 (66,361) Fund balances (deficits), end of year 3,274,735 954,667 6,013,302 1,087,335 2,519,865 132,559 $ 15,459,030 64,693 2,893,126 4,356,971 24,455 $ 1,173,887 The notes to the basic financial statements are an integral part of this statement. Page 44 41,532 $ Capital Projects Non-Major Governmental Funds Total Governmental Funds $ $ $ 995,192 427,387 539,906 438,788 $ 427,387 15,657,292 426,260 1,293,172 264,621 12,713,449 99,090 320,291 239,191 49,654 31,490,407 78,995 47,653 14,877 15,469 1,104,533 30,422 28,309 4,012 1,516,477 3,293 277,572 431,944 4,516,516 445,564 206,883 84,537 3,620,293 954,667 8,906,428 6,321,814 2,726,748 4,758,067 4,951,753 400,000 7,044 500 1,422,100 400,000 7,044 500 27,695,561 (3,847,220) 94,377 3,794,846 2,486,383 (241,532) 2,244,851 358,713 (733,713) (375,000) 3,086,628 (3,136,628) (50,000) (1,602,369) (280,623) 3,744,846 6,099,727 3,427,664 20,532,470 4,497,358 Page 45 $ 3,147,041 $ 24,277,316 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, 2021 Changes in fund balances - total governmental funds $ 3,744,846 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 $ 4,758,055 (5,340,201) (582,146) (24,906) (58,623) (50,518) (134,047) 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. 400,000 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. Compensated absences 67,734 The Internal Service Fund is used by management to charge the cost of technology replacement to the individual funds. The changes in net position of the Internal Service Fund is reported with governmental activities in the Statement of Activities. Changes in net position in governmental activities The notes to the basic financial statements are an integral part of this statement. Page 46 95,787 $ 3,592,174 TOWN OF FOUNTAIN HILLS, ARIZONA STATEMENT OF NET POSITION PROPRIETARY FUNDS JUNE 30, 2021 Governmental Activities: Internal Service Funds ASSETS Current assets: Cash and investments Total current assets Total assets NET POSITION Unrestricted Total net position $ $ 95,787 95,787 95,787 95,787 95,787 The notes to the basic financial statements are an integral part of this statement. Page 47 TOWN OF FOUNTAIN HILLS, ARIZONA STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2021 Governmental Activities: Internal Service Funds Operating revenues: Charges for services Total operating revenues $ 65,000 65,000 Operating expenses: Cost of services Total operating expenses 19,224 19,224 Operating income (loss) 45,776 Nonoperating revenues (expenses): Investment earnings Total nonoperating revenues (expenses) 11 11 Income (loss) before transfers 45,787 Transfer in 50,000 Changes in net position 95,787 Total net position, beginning of year Total net position, end of year $ 95,787 The notes to the basic financial statements are an integral part of this statement. Page 48 TOWN OF FOUNTAIN HILLS, ARIZONA STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS YEAR ENDED JUNE 30, 2021 Governmental Activities: Internal Service Funds Increase/Decrease in Cash and Cash Equivalents Cash flows from operating activities: Cash received from charges for services Cash payments to suppliers for goods and services $ Net cash provided by/used for operating activities 45,776 Cash flows from investing activities: Investment income 11 Net cash provided by/used for investing activities 11 Cash flows from noncapital financing activities: Transfers in 50,000 Net cash provided by/used for noncapital financing activities 50,000 Net increase/decrease in cash and cash equivalents 95,787 Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year 65,000 (19,224) 0 $ 95,787 $ 95,787 0 $ 95,787 Reconciliation of Cash and Cash Equivalents to the Statement of Net Position Cash and investments Less investments not maturing in less than three months Total cash and cash equivalents The notes to the basic financial statements are an integral part of this statement. Page 49 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2021 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 50 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2021 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 51 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2021 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. Capital Projects Fund – This fund accounts for the capital improvements to various projects and equipment purchases of the Town. Page 52 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2021 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Additionally, the Town reports the following fund type: Proprietary Fund – The Proprietary Fund is an Internal Service Fund that accounts for the operation of technology replacement services to other Town departments on a cost reimbursement basis. The Proprietary Fund financial statements are reported using the economic resources measurement focus and accrual basis of accounting and are presented in a single column. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the Town’s internal service fund are charges to Town departments for technology replacement. Operating expenses for the internal service fund include the cost of goods and services. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. D. Cash and Investments For purposes of the Statement of Cash Flows, the Town considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents at year end was cash in bank Cash and cash equivalents at year end were cash on hand, cash in bank, restricted cash, cash and investments held by the State Treasurer, and investments in the State Treasurer’s Local Government Investment Pool. 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 federal depository insurance. Page 53 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2021 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 and is reported in nonoperating revenue in the proprietary fund financial statements. 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. G. Property Tax Calendar 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. Pursuant to A.R.S., a lien against assessed real and personal property attaches on the first day of January preceding assessment and levy; however according to case law, an enforceable legal claim to the asset does not arise. All receivables are shown net of an allowance for uncollectibles. H. 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. I. 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. Page 54 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2021 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES J. 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. 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 K. 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. L. 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. Page 55 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2021 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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. 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. M. 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. N. 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. Page 56 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2021 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES O. 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. P. 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. Page 57 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2021 NOTE 2 – FUND BALANCE CLASSIFICATIONS 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. 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 $3,296,434, reported as a committed fund balance at June 30, 2021. The Rainy Day fund may only be used for the following: 1) to replace the loss of more than 20 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 58 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2021 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 Fund Balances: Nonspendable: Inventory Prepaid items Restricted: Capital Projects Debt Service Highways and Streets Development Fees Committed: Rainy Day Public Art Downtown Strategy Economic Development Tourism Capital Projects Local Court Enhancement Assigned: Capital Projects Environmental Vehicle Replacement Unassigned: Total fund balances $ Highway User Revenue Fund 7,117 $ 20,170 Capital Projects Fund $ Non-Major Governmental Funds $ $ 23,572 175,531 885,672 1,457,119 3,296,434 90,999 449,768 156,419 124,129 3,305,053 395,122 1,192,305 Total 7,117 20,170 23,572 175,531 885,672 1,457,119 3,296,434 90,999 449,768 156,419 124,129 3,305,053 395,122 1,192,305 365,381 1,373,882 10,958,643 3,147,041 $ 24,277,316 365,381 1,085,667 288,215 10,958,643 $ 15,459,030 $ 1,173,887 $ 4,497,358 $ NOTE 3 – STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY At year end, the Downtown Strategy Fund had expenditures that exceeded the budget, however, this does not constitute a violation of any legal provisions. Page 59 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2021 NOTE 4 – 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 $571,205 and the bank balance was $887,363. At year end, $387,363 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 60 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2021 NOTE 4 – 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, 2021, 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 $ 24,239,167 571,205 800 $ 24,811,172 At year end, the Town’s investments consisted of the following: Investment Maturities (in Years) Investment Type Category Fair Value Less than 1 1-5 U.S. Government and Agency Notes Federal Agency Notes Corporate and Foreign Bonds Asset Backed Securities Certificates of Deposit US Bank Money Market Funds Level 1 Level 1 Level 2 Level 2 Level 2 Level 1 $ 3,408,792 2,934,037 1,852,883 762,726 479,206 13,539 $ 247,839 550,840 201,084 $3,160,953 2,383,197 1,852,883 762,726 278,122 $ 999,763 $8,437,881 State Treasurer’s Investment Pool 7 Total Not applicable Credit Rating S&P Moody’s A+, AA+, AAA Aaa AA+ Aaa BBB+ to AA+ A3 - Aaa NR to AAA NR to Aaa A-1 to A+ P-1 to Aaa n/a n/a 14,787,984 62 days average maturities $24,239,167 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 61  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, 2021 NOTE 4 – 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. The State Treasurer’s Local Government Investment Pool 7 was rated AAA by Moody’s at year end. 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 US Bank Money Market Funds State Treasurer’s investment pool 7 Page 62 Fair Value 3,408,792 2,934,037 1,852,883 762,726 479,206 13,539 14,787,984 $ 24,239,167 $ Percent of Town Investments 14.1% 12.1% 7.6% 3.1% 2.0% 0.1% 61.0% TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2021 NOTE 5 – 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 6 – 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 2,153,685 4,566,516 4,829,140 1,891,061 Construction in progress 34,417,953 4,566,516 4,829,140 34,155,329 Total capital assets, not being depreciated Capital assets, being depreciated: 150,166,132 4,397,146 154,563,278 Infrastructure 22,927,414 189,091 23,116,505 Buildings and building improvements 15,282,504 142,018 15,424,522 Improvements other than buildings 4,749,493 292,424 431,873 4,610,044 Vehicles, machinery and equipment 193,125,543 5,020,679 431,873 197,714,349 Total capital assets being depreciated Less accumulated depreciation for: (103,203,442) (4,001,765) (107,205,207) Infrastructure (6,484,475) (485,173) (6,969,648) Buildings and building improvements (11,421,801) (531,332) (11,953,133) Improvements other than buildings (2,029,447) (321,931) 431,873 (1,919,505) Vehicles, machinery and equipment (123,139,165) (5,340,201) 431,873 (128,047,493) Total accumulated depreciation Total capital assets, being depreciated, net Governmental activities capital assets, net 69,986,378 $ 104,404,331 (319,522) $ 4,246,994 69,666,856 $ 4,829,140 $ 103,822,185 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 63 $ 194,927 16,721 308,187 3,952,941 867,425 $ 5,340,201 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2021 NOTE 6 – CAPITAL ASSETS Construction Commitments – At June 30, 2021, the Town has the following active construction commitments: Governmental Activities Remaining Project Spent-to-Date Commitment Golden Eagle Drainage Improvements $ 208,791 $ 1,100,000 Video Surveillance Cameras 127,065 50,000 Four Peaks Park Playground Upgrade 830,629 200,000 Four Peaks Park Playground Parking Lot Improvements 263 65,000 Unpaved Alley Paving 253,231 34,000 Shea Boulevard Widening - Palisades to Technology 112,851 226,000 Desert Vista Sidewalk Improvements 73,160 12,741 Traffic Signal at Palisades and Eagle Ridge 26,424 22,603 Total commitments $ 1,632,414 $ 1,710,344 NOTE 7 – BONDS PAYABLE Private Placements The Town had bonds during the fiscal year from private placements reported as governmental activities. The Eagle Mountain Community Facilities District has no outstanding bonds at the end of the fiscal year from private placements reported as governmental activities. There are no specific provisions regarding default on the Eagle Mountain Community Facilities District debt. The Town has no remaining bonds payable at year end. Page 64 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2021 NOTE 8 – CHANGES IN LONG-TERM LIABILITIES Long-term liability activity for the current fiscal year was as follows: Beginning Balance Governmental activities: Bonds payable: Private placement general obligation bonds $ Total bonds payable Compensated absences payable Governmental activity long-term $ Liabilities Additions 400,000 $ 400,000 582,497 297,848 Ending Balance Reductions $ 400,000 $ 400,000 365,582 982,497 $ 297,848 $ 765,582 $ Due Within One Year $ 514,763 324,163 514,763 $ 324,163 NOTE 9 – 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 Transfers in HURF Fund Grants Fund Capital Projects Fund Non-Major Governmental Funds Internal Service Fund Total Page 65 General Fund $ Highway User Revenue Fund $ 1,906,305 200,000 50,000 $ 2,156,305 $ Non-Major Capital Governmental Projects Funds Total Fund $ 200,000 $ $ 200,000 41,532 41,532 5,078 575,000 2,486,383 158,713 358,713 50,000 5,078 $ 241,532 $ 733,713 $ 3,136,628 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2021 NOTE 9 – INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS The General Fund transferred $1,906,305 to Capital Projects Fund for future projects, as required by the Town’s financial policies; $50,000 to Internal Service Fund for technology replacement costs; and $200,000 to Environmental Fund for continued storm drain and wash maintenance. The Highway User Revenue Fund transferred $5,078 to Capital Projects Fund for street-related capital projects. The Capital Projects Fund transferred $200,000 to Highway User Revenue Fund for pavement maintenance. and $41,532 to the Grants Fund for the Town's matching portion of a park improvement grant. The Economic Development Fund transferred $158,713 to the Tourism Fund to provide funding for operating costs of the tourism program. The Downtown Strategy Fund transferred $575,000 to the Capital Projects Fund for downtown street improvements. The General Fund transferred $50,000 to the Internal Service Fund for technology replacements. 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 66 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2021 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, 2021, was $3,596,773 The Town’s total payroll was $4,345,699. 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. The assets are held in a trust not controlled by the Town and all investment decisions are made by the employee. The plan does not require reporting under provisions of GASB Statement No. 84, Fiduciary Activities. 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 $395,645. The employees’ contributions totaled $395,645. 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 $107,073 to that plan. The Town contributed $9,026 for the contract employee’s 457 account. Page 67 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2021 NOTE 12 – RETIREMENT PLANS 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 2020-21 or as of the close of the fiscal year. NOTE 13 – SUBSEQUENT EVENT The Town applied for American Rescue Plan Act funding from the Governor's Office and was subsequently awarded $8,416,299 on July 2, 2021. The funding was made available through the U.S. Department of the Treasury's American Rescue Plan Act, and the funds will be used to pay public safety contract expenditures. Page 68 REQUIRED SUPPLEMENTARY INFORMATION Page 69 TOWN OF FOUNTAIN HILLS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL YEAR ENDED JUNE 30, 2021 Budgeted Amounts Actual Final Original 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 10,422,156 211,974 992,736 278,590 6,840,899 321,550 81,355 185,004 26,640 19,360,904 10,422,156 211,974 992,736 278,590 6,840,899 321,550 81,355 185,004 26,640 19,360,904 13,042,381 426,260 854,384 264,621 6,995,548 83,583 272,194 210,882 29,051 22,178,904 Expenditures: Current General government Mayor and council Administration Non departmental Municipal court Total general government 74,882 2,339,660 2,204,940 402,603 5,022,085 74,882 2,339,660 1,745,772 402,603 4,562,917 50,769 2,081,037 753,253 389,676 3,274,735 24,113 258,623 992,519 12,927 1,288,182 Development services 946,483 1,019,383 954,667 64,716 Public safety Fire and emergency Law enforcement Total public safety 4,197,328 5,029,469 9,226,797 3,153,546 3,914,125 7,067,671 2,660,413 3,352,889 6,013,302 493,133 561,236 1,054,369 Public works 1,120,861 1,120,861 1,087,335 33,526 Culture and recreation 3,026,686 2,961,686 2,519,865 441,821 Capital outlay Total expenditures 111,989 19,454,901 163,589 16,896,107 132,559 13,982,463 31,030 2,913,644 Excess (deficiency) of revenues over expenditures (93,997) 2,464,797 8,196,441 5,731,644 Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses): (250,000) (250,000) (250,000) (250,000) (2,156,305) (2,156,305) (1,906,305) (1,906,305) Changes in fund balances (343,997) 2,214,797 6,040,136 3,825,339 Fund balances, beginning of year 3,838,975 5,672,100 9,418,894 3,746,794 Fund balances (deficits), end of year Page 70 $ 3,494,978 $ 7,886,897 See accompanying notes to this schedule. $ 15,459,030 $ $ 2,620,225 214,286 (138,352) (13,969) 154,649 (237,967) 190,839 25,878 2,411 2,818,000 7,572,133 TOWN OF FOUNTAIN HILLS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL HIGHWAY USER REVENUE YEAR ENDED JUNE 30, 2021 Budgeted Amounts Original & Final Revenues: Sales taxes Intergovernmental Charges for services Other Investment earnings Total revenues $ 871,254 2,578,272 200,000 31,000 24,000 3,704,526 Actual $ 1,079,813 2,584,538 15,507 2,798 734 3,683,390 Variance with Final Budget Positive (Negative) $ 208,559 6,266 (184,493) (28,202) (23,266) (21,136) Expenditures: Current Public works Total expenditures 5,120,819 5,120,819 4,356,971 4,356,971 763,848 763,848 Excess (deficiency) of revenues over expenditures (1,416,293) (673,581) 742,712 200,000 200,000 200,000 (5,078) 194,922 (5,078) (5,078) Changes in fund balances (1,216,293) (478,659) 737,634 Fund balances, beginning of year 1,652,546 1,652,546 Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses) Fund balances, end of year $ 436,253 $ 1,173,887 See accompanying notes to this schedule. Page 71 $ 737,634 TOWN OF FOUNTAIN HILLS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GRANTS YEAR ENDED JUNE 30, 2021 Budgeted Amounts Original Revenues: Intergovernmental Investment earnings Total revenues $ 1,308,800 Final $ 1,303,800 3,006,715 388 3,007,103 64,693 2,893,126 24,455 2,982,274 736,807 1,338,500 801,500 2,893,126 37,000 3,731,626 Excess (deficiency) of revenues over expenditures (29,700) (2,427,826) 24,829 2,452,655 Other financing sources (uses): Transfer in Total other financing sources (uses) 29,700 29,700 29,700 29,700 41,532 41,532 11,832 11,832 (2,398,126) 66,361 2,464,487 (66,361) (66,361) 1,308,800 Expenditures: Current General government Public safety Capital outlay Total expenditures 1,338,500 Changes in fund balances (66,361) Fund balances (deficits), beginning of year Fund balances (deficits), end of year $ (66,361) $ 1,303,800 Actual (2,464,487) See accompanying notes to this schedule. Page 72 $ Variance with Final Budget Positive (Negative) $ $ 1,702,915 388 1,703,303 12,545 749,352 $ 2,464,487 TOWN OF FOUNTAIN HILLS, ARIZONA NOTE TO REQUIRED SUPPLEMENTARY INFORMATION JUNE 30, 2021 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 73 (This page intentionally left blank) Page 74 COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES Page 75 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING BALANCE SHEET - ALL NON-MAJOR GOVERNMENTAL FUNDS - BY FUND TYPE JUNE 30, 2021 Debt Service Special Revenue ASSETS Cash and investments Intergovernmental receivable Taxes receivable Interest receivable Prepaid items Total assets $ $ $ 1,607,915 17,971 28 449 375 1,626,738 $ LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: $ Accounts payable Accrued wages and benefits Total liabilities 107,096 5,251 112,347 $ $ 1,457,119 202,621 $ 1,457,119 78 $ 78 27,012 Fund balances: Restricted Committed Assigned Total fund balances Page 76 170,774 31,847 Deferred inflows of resources: Unavailable revenues - property taxes Total liabilities, deferred inflows of resources and fund balances Capital Projects 23,572 1,125,438 365,381 1,514,391 $ 1,626,738 $ 175,531 1,457,119 175,531 1,457,119 202,621 $ 1,457,119 Total Non-Major Governmental Funds $ $ $ 3,235,808 17,971 31,875 449 375 3,286,478 107,174 5,251 112,425 27,012 1,656,222 1,125,438 365,381 3,147,041 $ 3,286,478 Page 77 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, 2021 Debt Service Special Revenue Revenues: Property taxes Sales taxes Licenses and permits Intergovernmental Other Fines and forfeitures Investment earnings Total revenues $ Expenditures: Current General government Public works Culture and recreation Capital outlay Debt service Principal retirement Interest on long-term debt Fiscal charges Total expenditures 6,468 539,906 40,330 47,653 30,422 28,309 3,405 696,493 $ Capital Projects 420,919 $ 398,458 98 421,017 509 398,967 277,572 445,564 166,883 84,527 10 974,546 400,000 7,044 500 407,554 40,000 Excess (deficiency) of revenues over expenditures (278,053) 13,463 358,967 Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses) 358,713 (733,713) (375,000) Changes in fund balances (653,053) 13,463 358,967 Fund balances, beginning of year 2,167,444 162,068 1,098,152 Fund balances, end of year Page 78 $ 1,514,391 40,000 $ 175,531 $ 1,457,119 Total Non-Major Governmental Funds $ 427,387 539,906 438,788 47,653 30,422 28,309 4,012 1,516,477 277,572 445,564 206,883 84,537 400,000 7,044 500 1,422,100 94,377 358,713 (733,713) (375,000) (280,623) 3,427,664 $ 3,147,041 Page 79 (This page intentionally left blank) Page 80 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. Debt Service Funds General Obligation Debt Service Fund – accounts for the Town’s property tax revenues received to pay the debt service of the Town’s general obligation bonds. Eagle Mountain Debt Service Fund – accounts for the property tax revenues restricted to pay the debt service of the Eagle Mountain Community Facilities District. Municipal Property Corporation Debt Service Fund – accounts for the revenues received to pay the debt service on MPC revenue bonds. 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 81 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING BALANCE SHEET - NON-MAJOR SPECIAL REVENUE FUNDS JUNE 30, 2021 Downtown Strategy ASSETS Cash and investments Intergovernmental receivable Taxes receivable Interest receivable Prepaid items Total assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable Accrued wages and benefits Total liabilities $ Page 82 Tourism $ 147,714 13,934 $ 126,994 375 127,369 449 $ 450,891 $ 161,648 $ $ 1,123 $ $ 1,123 501 4,728 5,229 449,768 156,419 124,129 449,768 156,419 124,129 Fund balances: Restricted Committed Assigned Total fund balances Total liabilities and fund balances 446,959 3,483 Economic Development $ 450,891 $ 161,648 $ 2,717 523 3,240 127,369 Local Court Enhancement Environmental Cottonwoods Maintenance $ $ $ 394,568 554 467,638 24,042 Totals $ 28 $ 395,122 $ $ 467,638 $ 24,070 $ $ 102,257 $ 498 $ 102,257 498 23,572 365,381 365,381 $ 395,122 Page 83 $ 467,638 23,572 $ 24,070 107,096 5,251 112,347 23,572 1,125,438 365,381 1,514,391 395,122 395,122 1,607,915 17,971 28 449 375 1,626,738 $ 1,626,738 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NON-MAJOR SPECIAL REVENUE FUNDS YEAR ENDED JUNE 30, 2021 Downtown Strategy Revenues: Property taxes Sales taxes Licenses and permits Intergovernmental Other Fines and forfeitures Investment earnings Total revenues $ Expenditures: Current General government Public works Culture and recreation Capital outlay Total expenditures Economic Development $ Tourism $ 107,981 431,925 22,000 7,083 47,653 1,339 2,858 132,839 59 439,067 46 49,038 50,091 227,481 166,883 49,475 99,566 227,481 166,883 33,273 211,586 (117,845) Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses) (575,000) (575,000) (158,713) (158,713) 158,713 Changes in fund balances (541,727) 52,873 40,868 Fund balances, beginning of year 991,495 103,546 83,261 Excess (deficiency) of revenues over expenditures Fund balances, end of year Page 84 158,713 $ 449,768 $ 156,419 $ 124,129 Local Court Enhancement Environmental Cottonwoods Maintenance $ $ $ 6,468 Totals $ 40,330 28,309 169 28,478 260 40,590 13 6,481 440,666 4,898 35,052 35,052 440,666 4,898 277,572 445,564 166,883 84,527 974,546 (6,574) (400,076) 1,583 (278,053) 200,000 358,713 (733,713) (375,000) 200,000 $ 6,468 539,906 40,330 47,653 30,422 28,309 3,405 696,493 (6,574) (200,076) 1,583 (653,053) 401,696 565,457 21,989 2,167,444 395,122 Page 85 $ 365,381 $ 23,572 $ 1,514,391 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, 2021 Downtown Strategy Budget Revenues: Property taxes Sales taxes Licenses and permits Intergovernmental Other Fines and forfeitures Investment earnings Total revenues $ Variance Positive (Negative) Actual $ 87,120 $ 107,981 20,861 22,000 22,000 1,260 88,380 2,858 132,839 1,598 44,459 53,400 50,091 3,309 45,000 98,400 49,475 99,566 (4,475) (1,166) Excess (deficiency) of revenues over expenditures (10,020) 33,273 43,293 Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses) (575,000) (575,000) (575,000) (575,000) Changes in fund balances (585,020) (541,727) Fund balances, beginning of year 991,495 991,495 Expenditures: Current General government Public works Culture and recreation Capital outlay Total expenditures Fund balances, end of year Page 86 $ 406,475 $ 449,768 43,293 $ 43,293 Economic Development Budget $ Variance Positive (Negative) Actual $ 348,504 $ Tourism Budget $ $ 431,925 83,421 7,083 7,083 240 348,744 59 439,067 (181) 90,323 251,270 227,481 23,789 Variance Positive (Negative) Actual $ $ 55,000 47,653 1,339 (7,347) 1,339 180 55,180 46 49,038 (134) (6,142) 208,264 166,883 41,381 251,270 227,481 23,789 208,264 166,883 41,381 97,474 211,586 114,112 (153,084) (117,845) 35,239 158,713 158,713 (158,713) (158,713) (158,713) (158,713) 158,713 158,713 (61,239) 52,873 114,112 5,629 40,868 103,456 103,546 90 83,261 83,261 42,217 $ 156,419 $ 114,202 $ 88,890 $ 124,129 35,239 $ 35,239 (Continued) Page 87 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, 2021 Local Court Enhancement Budget Revenues: Property taxes Sales taxes Licenses and permits Intergovernmental Other Fines and forfeitures Investment earnings Total revenues $ Actual $ 49,000 900 49,900 Expenditures: Current General government Public works Culture and recreation Capital outlay Total expenditures Variance Positive (Negative) $ 28,309 169 28,478 (20,691) (731) (21,422) 24,800 24,800 35,500 60,300 35,052 35,052 448 25,248 (10,400) (6,574) 3,826 Changes in fund balances (10,400) (6,574) 3,826 Fund balances, beginning of year 401,696 401,696 Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses) Fund balances, end of year Page 88 $ 391,296 $ 395,122 $ 3,826 Environmental Budget $ $ Cottonwoods Maintenance Variance Positive (Negative) Actual $ $ Budget $ 6,642 Variance Positive (Negative) Actual $ 6,468 $ (174) 40,330 40,330 2,400 2,400 260 40,590 (2,140) 38,190 72 6,714 13 6,481 (59) (233) 666,904 440,666 226,238 5,131 4,898 233 666,904 440,666 226,238 5,131 4,898 233 (664,504) (400,076) 264,428 1,583 1,583 200,000 200,000 200,000 200,000 (464,504) (200,076) 264,428 1,583 1,583 565,457 565,457 21,989 21,989 100,953 $ 365,381 $ 264,428 $ 23,572 $ 23,572 $ (Continued) Page 89 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, 2021 Totals Budget Revenues: Property taxes Sales taxes Licenses and permits Intergovernmental Other Fines and forfeitures Investment earnings Total revenues 49,000 5,052 551,318 Expenditures: Current General government Public works Culture and recreation Capital outlay Total expenditures 329,470 672,035 208,264 80,500 1,290,269 277,572 445,564 166,883 84,527 974,546 51,898 226,471 41,381 (4,027) 315,723 Excess (deficiency) of revenues over expenditures (738,951) (278,053) 460,898 Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses) 358,713 (733,713) (375,000) 358,713 (733,713) (375,000) Changes in fund balances (1,113,951) (653,053) 460,898 Fund balances, beginning of year 2,167,354 2,167,444 90 Page 90 6,642 435,624 Actual 6,468 539,906 40,330 47,653 30,422 28,309 3,405 696,493 Fund balances, end of year $ Variance Positive (Negative) $ 55,000 $ 1,053,403 $ 1,514,391 $ $ (174) 104,282 40,330 (7,347) 30,422 (20,691) (1,647) 145,175 460,988 (This page intentionally left blank) Page 91 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING BALANCE SHEET - NON-MAJOR DEBT SERVICE FUNDS JUNE 30, 2021 ASSETS Cash and investments Taxes receivable Total assets General Obligation Debt Service Eagle Mountain Debt Service Municipal Property Corporation Debt Service $ $ 9,455 4,835 14,290 $ 11,027 $ 11,027 78 78 $ $ 150,292 27,012 177,304 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: $ Accounts payable Total liabilities $ Deferred inflows of resources: Unavailable revenues - property taxes 27,012 Fund balances: Restricted Total fund balances 150,292 150,292 Total liabilities, deferred inflows of resources and fund balances Page 92 $ $ 177,304 14,212 14,212 $ 14,290 11,027 11,027 $ 11,027 Totals $ $ $ 170,774 31,847 202,621 78 78 27,012 175,531 175,531 $ 202,621 Page 93 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NON-MAJOR DEBT SERVICE FUNDS YEAR ENDED JUNE 30, 2021 Revenues: Property taxes Investment earnings Total revenues General Obligation Debt Service Eagle Mountain Debt Service Municipal Property Corporation Debt Service $ $ $ 26,014 59 26,073 Expenditures: Capital outlay Debt service Principal retirement Interest on long-term debt Fiscal charges Total expenditures 394,905 39 394,944 10 400,000 7,044 407,044 500 510 Changes in fund balances 26,073 (12,100) (510) Fund balances, beginning of year 124,219 26,312 11,537 Fund balances, end of year Page 94 $ 150,292 $ 14,212 $ 11,027 Totals $ 420,919 98 421,017 10 400,000 7,044 500 407,554 13,463 162,068 $ 175,531 Page 95 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL NON-MAJOR DEBT SERVICE FUNDS YEAR ENDED JUNE 30, 2021 General Obligation Debt Service Budget Revenues: Property taxes Investment earnings Total revenues Actual $ $ 1,200 1,200 26,014 59 26,073 Expenditures: Capital outlay Debt service Principal retirement Interest on long-term debt Fiscal charges Total expenditures 350 350 Changes in fund balances 850 26,073 124,219 124,219 Fund balances, beginning of year Fund balances, end of year Page 96 $ Variance Positive (Negative) 125,069 $ 26,014 (1,141) 24,873 350 350 $ 150,292 25,223 $ 25,223 Eagle Mountain Debt Service Budget $ $ 400,000 240 400,240 Municipal Property Corporation Debt Service Variance Positive (Negative) Actual $ 394,905 39 394,944 400,000 7,040 200 407,240 400,000 7,044 $ (5,095) (201) (5,296) Budget Variance Positive (Negative) Actual $ $ $ 840 840 (840) (840) 10 (10) 407,044 (4) 200 196 1,010 1,010 500 510 510 500 (7,000) (12,100) (5,100) (170) (510) (340) 26,312 26,312 11,537 11,537 19,312 $ 14,212 $ (5,100) $ 11,367 $ 11,027 $ (340) (Continued) Page 97 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL NON-MAJOR DEBT SERVICE FUNDS YEAR ENDED JUNE 30, 2021 Totals Budget Revenues: Property taxes Investment earnings Total revenues Expenditures: Capital outlay Debt service Principal retirement Interest on long-term debt Fiscal charges Total expenditures $ 400,000 2,280 402,280 Variance Positive (Negative) Actual $ 420,919 98 421,017 $ 20,919 (2,182) 18,737 10 (10) 400,000 7,040 1,560 408,600 400,000 7,044 500 407,554 (4) 1,060 1,046 Changes in fund balances (6,320) 13,463 19,783 Fund balances, beginning of year 162,068 162,068 Fund balances, end of year Page 98 $ 155,748 $ 175,531 $ 19,783 TOWN OF FOUNTAIN HILLS, ARIZONA BALANCE SHEET - NON-MAJOR CAPITAL PROJECTS FUND JUNE 30, 2021 Development Fees ASSETS Cash and investments Total assets LIABILITIES AND FUND BALANCES Fund balances: Restricted Total fund balances Total liabilities and fund balances Page 99 $ $ 1,457,119 1,457,119 $ 1,457,119 1,457,119 $ 1,457,119 TOWN OF FOUNTAIN HILLS, ARIZONA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NON-MAJOR CAPITAL PROJECTS FUND YEAR ENDED JUNE 30, 2021 Development Fees Revenues: Licenses and permits Investment earnings Total revenues $ 398,458 509 398,967 Expenditures: Current Culture and recreation Total expenditures 40,000 40,000 Changes in fund balances 358,967 1,098,152 Fund balances, beginning of year Fund balances, end of year Page 100 $ 1,457,119 (This page intentionally left blank) Page 101 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, 2021 Capital Projects Budget Revenues: Sales taxes Licenses and permits Intergovernmental Other Investment earnings Total revenues $ 904,152 Variance Positive (Negative) Non-GAAP Actual $ 995,192 $ 91,040 17,500 78,995 61,495 19,200 940,852 14,790 1,088,977 (4,410) 148,125 Expenditures: Current General government Public works Culture and recreation Capital outlay Total expenditures 2,800 3,293 (493) 5,514,598 5,517,398 4,514,294 4,517,587 1,000,304 999,811 Excess (deficiency) of revenues over expenditures (4,576,546) (3,428,610) 1,147,936 575,000 (229,700) 345,300 2,486,383 (241,532) 2,244,851 1,911,383 (11,832) 1,899,551 Changes in fund balances (4,231,246) (1,183,759) 3,047,487 Fund balances, beginning of year 4,488,812 4,488,812 Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses) Fund balances, end of year Page 102 $ 257,566 $ 3,305,053 $ 3,047,487 Facilities Replacement Fund $ Variance Positive (Negative) Non-GAAP Actual Budget $ Development Fees $ $ Budget $ Variance Positive (Negative) Actual $ $ 679,311 398,458 (280,853) 7,200 686,511 509 398,967 (6,691) (287,544) 7,200 7,200 14,877 679 15,556 14,877 (6,521) 8,356 819,144 431,944 387,200 40,000 40,000 819,144 2,222 434,166 (2,222) 384,978 40,000 40,000 (811,944) (418,610) 393,334 646,511 358,967 (287,544) (811,944) (418,610) 393,334 646,511 358,967 (287,544) 1,610,915 1,610,915 1,098,152 1,098,152 798,971 $ 1,192,305 $ 393,334 $ 1,744,663 $ 1,457,119 $ (287,544) (Continued) Page 103 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, 2021 Totals Budget Revenues: Sales taxes Licenses and permits Intergovernmental Other Investment earnings Total revenues $ 33,600 1,634,563 995,192 398,458 78,995 14,877 15,978 1,503,500 Expenditures: Current General government Public works Culture and recreation Capital outlay Total expenditures 2,800 819,144 40,000 5,514,598 6,376,542 3,293 431,944 40,000 4,516,516 4,991,753 998,082 1,384,789 Excess (deficiency) of revenues over expenditures (4,741,979) (3,488,253) 1,253,726 575,000 (229,700) 345,300 2,486,383 (241,532) 2,244,851 1,911,383 (11,832) 1,899,551 Changes in fund balances (4,396,679) (1,243,402) 3,153,277 Fund balances, beginning of year 7,197,879 7,197,879 Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses) Fund balances, end of year Page 104 $ 904,152 679,311 17,500 Variance Positive (Negative) Non-GAAP Actual 2,801,200 $ $ 5,954,477 $ 91,040 (280,853) 61,495 14,877 (17,622) (131,063) (493) 387,200 $ 3,153,277 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 105 Town of Fountain Hills, Arizona Net Position by Component Last Ten Fiscal Years (accrual basis of accounting) Fiscal Year ended June 30 2012 Governmental activities: Net investment in capital assets Restricted Unrestricted Total governmental activities net position 2014 2015 $ 92,006,103 $ 89,800,560 $ 89,713,260 $ 95,325,824 5,951,416 5,721,744 5,480,867 6,310,810 21,064,267 20,612,758 19,186,823 15,180,582 $ 119,021,786 $ 116,135,062 $ 114,380,950 $ 116,817,216 Source: The source of this information is the Town's financial records. Page 106 2013 Fiscal Year ended June 30 2016 2017 $ 95,647,990 $ 94,909,703 4,530,239 4,471,661 17,232,506 17,578,068 $ 117,410,735 $ 116,959,432 Page 107 2018 2019 2020 2021 $ 96,777,854 $ 104,781,328 $ 104,004,331 $ 103,822,185 4,589,526 3,646,449 2,766,041 2,610,178 16,244,169 15,258,797 17,388,168 21,318,351 $ 117,611,549 $ 123,686,574 $ 124,158,540 $ 127,750,714 Town of Fountain Hills, Arizona Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) Fiscal Year Ended June 30 2012 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 $ 3,119,113 1,442,613 5,820,136 4,718,047 2,754,731 779,576 $ 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 2015 $ 2,479,365 2,074,611 6,816,152 4,963,979 2,822,954 698,542 18,634,216 19,702,089 20,493,302 19,855,603 272,469 322,984 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 1,307,738 144,570 337,655 693,670 86,641 236,706 339,158 1,431,017 2,874,796 3,736,450 2,640,940 2,865,105 5,999,643 (14,897,766) (17,061,149) (17,628,197) (13,855,960) 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 - 904,660 8,983,049 352,673 5,713,235 150,358 188,251 - 14,355,805 15,027,058 15,874,085 16,292,226 (541,961) $ (2,034,091) $ (1,754,112) $ Source: The source of this information is the Town's financial records. Page 108 2013 2,436,266 Fiscal Year Ended June 30 2016 $ $ 2,516,966 2,253,208 7,178,890 6,476,688 3,124,523 241,694 2017 $ 3,142,722 1,364,378 7,563,898 7,904,577 3,375,414 178,749 2018 $ 3,431,752 1,460,967 7,567,012 7,380,663 3,311,648 118,552 2019 $ 3,318,477 867,725 8,142,069 10,263,244 3,767,996 57,054 2020 $ 3,470,936 825,884 9,003,452 9,961,306 3,490,447 881 2021 $ 3,793,915 968,808 9,214,615 10,175,540 3,601,870 7,544 21,791,969 23,529,738 23,270,594 26,416,565 26,752,906 27,762,292 298,737 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 91,245 310,411 693,161 104,726 355,619 435,432 4,733,757 135,525 4,013,435 4,858,722 4,359,892 4,709,286 3,883,012 6,768,631 (17,778,534) (18,671,016) (18,910,702) (21,707,279) (22,869,894) (20,993,661) 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 - 402,481 15,657,292 426,260 7,787,184 49,665 262,953 - 18,372,053 18,219,713 19,562,819 27,782,304 23,341,860 24,585,835 593,519 $ Page 109 (451,303) $ 652,117 $ 6,075,025 $ 471,966 $ 3,592,174 Town of Fountain Hills, Arizona Fund Balances — Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year ended June 30 2012 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 2014 2015 $ 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 $ 6,975 10,655 2,634,923 1,872,492 4,369,457 $ 7,229,860 $ 7,696,822 $ 7,997,952 $ 8,894,502 $ 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 - $ 1,645,000 656 10,066,786 1,079,780 5,444,124 - $ 17,281,523 $ 16,840,874 $ 14,716,601 $ 18,236,346 Source: The source of this information is the Town's financial records. Page 110 2013 Fiscal Year ended June 30 2016 2017 $ 9,272 4,123 2,652,357 1,701,086 5,853,806 $ $ 10,220,644 $ 7,177,642 $ 5,055 4,500,044 1,366,081 5,943,364 - $ $ 11,814,544 $ 14,794,195 Page 111 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 2021 $ 7,117 20,170 3,387,433 1,085,667 10,958,643 $ 15,459,030 - $ - $ - $ - $ 474 4,432,710 4,571,263 3,579,891 2,708,883 2,541,894 8,576,250 7,248,890 5,868,386 6,068,810 4,430,491 1,784,761 2,340,683 2,592,343 2,402,244 1,845,901 (66,361) $ 14,160,836 $ 12,040,620 $ 11,113,576 $ 8,818,286 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 2012 Revenues Taxes Licenses and permits Leases and rents Intergovernmental Charges for services Other Fines and forfeitures Investment earnings $ Total revenues Expenditures Current: General government Development services Public safety Public works Culture and recreation Capital outlay Debt service: Principal Interest Other debt service Total expenditures Excess (deficiency) of revenues over (under) expenditures 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 2013 9,577,321 194,976 206,018 6,035,448 405,663 178,393 223,673 88,877 $ 2014 9,713,445 570,904 213,871 6,323,047 162,086 300,899 187,251 69,998 $ 2015 10,271,737 891,782 252,584 6,677,518 161,376 134,114 170,995 123,311 $ 10,240,382 1,043,382 269,753 9,770,048 176,541 188,251 186,456 150,358 16,910,369 17,541,501 18,683,417 22,025,171 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 2,275,124 2,073,990 6,675,874 1,275,779 1,962,585 8,799,068 1,965,000 639,135 55,752 2,280,000 554,860 12,183 2,415,000 460,811 12,188 1,850,000 454,957 243,585 16,572,025 17,515,188 20,506,560 25,610,962 338,344 26,313 (1,823,143) (3,585,791) 2,470,027 (2,470,027) - 1,279,397 (1,279,397) - 1,838,453 (1,838,453) - 2,519,774 (2,519,774) 4,180,000 7,565,000 342,086 (4,085,000) - - - 8,002,086 Total other financing sources (uses) Net change in fund balances $ 338,344 $ 26,313 $ (1,823,143) $ 4,416,295 Expenditures for capitalized assets $ 1,333,785 $ 467,691 $ 2,385,168 9,067,254 Debt service as a percentage of noncapital expenditures 17.5% Source: The source of this information is the Town's financial records. Page 112 16.7% 15.9% $ 15.4% Fiscal Year Ended June 30 2016 $ 2017 2018 2019 2020 2021 12,299,285 1,372,045 258,165 7,559,436 197,109 147,662 209,380 219,058 $ 12,069,714 1,310,973 284,090 7,917,651 351,476 153,438 257,727 55,127 $ 13,019,341 2,004,386 282,531 8,266,028 254,122 207,697 182,997 158,860 $ 14,342,801 2,040,622 280,801 8,401,676 181,105 347,141 130,483 554,549 $ 15,694,054 835,731 286,391 8,920,296 222,947 387,225 281,704 545,983 $ 16,510,939 1,293,172 264,621 12,713,449 99,090 320,291 239,191 49,654 22,262,140 22,400,196 24,375,962 26,279,178 27,174,331 31,490,407 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 3,620,293 954,667 8,906,428 6,321,814 2,726,748 4,758,067 4,260,000 308,106 2,005 2,675,000 244,986 2,180 2,720,000 185,164 1,805 2,635,000 123,871 1,600 2,310,000 67,301 1,998 400,000 7,044 500 27,357,799 22,463,548 25,015,670 28,276,029 26,395,724 27,695,561 (5,095,659) (63,352) (639,708) (1,996,851) 778,607 3,794,846 562,044 (562,044) - 5,194,138 (5,194,138) - 4,543,728 (4,543,728) - 3,672,532 (3,672,532) - 1,928,978 (1,928,978) 418,585 - 3,086,628 (3,136,628) - - - - - 418,585 (50,000) $ (5,095,659) $ $ 6,394,346 (63,352) $ $ 1,696,612 21.8% Page 113 14.1% $ (639,708) $ (1,996,851) $ 1,197,192 $ 3,744,846 4,293,214 4,465,837 2,689,270 $ 4,758,055 14.0% $ 11.6% $ 10.0% 1.8% 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 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Property Tax 1,457,702 1,421,615 1,463,056 904,660 2,543,298 2,287,444 2,286,081 2,427,730 2,086,769 427,387 Sales Tax 7,779,219 7,957,162 8,459,267 8,983,050 9,391,267 9,419,551 10,311,578 11,491,124 13,172,389 15,657,292 Franchise Tax 332,130 334,668 349,414 352,673 360,320 367,119 421,682 423,947 434,896 426,260 Source: The source of this information is the Town's financial records. Page 114 Total 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 16,510,939 Town of Fountain Hills, Arizona Assessed Value and Estimated Actual Value of Taxable Property Last Ten Fiscal Years Fiscal Year 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Net Assessed Taxable Value* 452,236,007 377,816,392 365,963,182 403,330,477 402,223,763 423,688,665 444,639,625 466,895,716 494,576,905 520,103,815 Total Direct Tax Rate** 0.2258 0.2657 0.2773 0.1151 0.5246 0.4472 0.4259 0.4257 0.3382 - Estimated Actual Taxable Value* 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 4,909,183,626 Net Assessed Taxable Value as a Percentage of Estimated Actual Taxable Value 11.04% 11.04% 10.89% 10.83% 10.74% 10.68% 10.67% 10.66% 10.62% 10.59% 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 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; No town-wide taxes levied in FY21. Page 115 Town of Fountain Hills, Arizona Principal Property Taxpayers June 30, 2021 and 2012 2021 Net Limited Assessed Value Rank 4,025,340 1 3,908,993 2 2,739,776 3 2,366,546 4 1,962,401 5 1,406,296 6 1,377,551 7 1,370,318 8 1,294,092 9 1,251,036 10 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 FPACP4 Ridgeview LLC Fountain Hills Invest Co., LLC Palisades Resorts LLC Smith's Food & Drug Centers Inc. Inland Western Fountain Hills Four Peaks LLC Chapparal City Water Company J & R Holdings XX LLC Qwest Corporation EN LLC Sun Tech Development LLC Firerock LLC Arizona State Land Department Totals $ 2012 Percentage of Total Net Limited Assessed Value 0.77% 0.75% 0.53% 0.46% 0.38% 0.27% 0.26% 21,702,349 Rank Percentage of Total Net Full Cash Assessed Value 2,177,727 3 0.48% 1,889,956 5 0.42% 3,353,109 3,177,001 1,921,863 1,647,941 1,444,647 1,320,356 1,317,707 1,260,640 1 2 4 6 7 8 9 10 0.74% 0.70% 0.42% 0.36% 0.32% 0.29% 0.29% 0.28% 0.25% 0.24% 3.91% Source: The source of this information is the Maricopa County Assessor's Office. 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. Page 116 Net Full Cash Assessed Value $ 19,510,947 4.30% Town of Fountain Hills, Arizona Property Tax Levies and Collections Last Ten Fiscal Years Fiscal Year 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Total Tax Levy 1,446,076 1,429,285 1,449,884 892,104 2,532,115 2,278,728 2,272,027 2,404,250 2,092,340 397,416 Current Tax Collections 1,414,482 1,401,654 1,426,612 881,170 2,502,995 2,241,482 2,230,328 2,369,262 2,044,210 392,363 Percent of Current Taxes Collected 97.8% 98.1% 98.4% 98.8% 98.8% 98.4% 98.2% 98.5% 97.7% 98.7% Delinquent Tax Collections 19,984 18,563 18,215 6,903 18,913 29,002 31,197 20,016 37,618 - Total Tax Collections 1,434,466 1,420,217 1,444,827 888,073 2,521,908 2,270,484 2,261,525 2,389,278 2,081,828 392,363 Source: The source of this information is the Maricopa County Treasurer's Office. Page 117 Ratio of Total Tax Collections to Total Tax Levy 99.2% 99.4% 99.7% 99.5% 99.6% 99.6% 99.5% 99.4% 99.5% 98.7% Town of Fountain Hills, Arizona Taxable Sales by Category Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year Ended June 30 2012 Sales category: Construction Transportation/utilities Wholesale/retail Restaurants/bars Real estate, rental & leasing Services Other Total 2013 2015 $ 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 $ 935,694 1,405,768 4,214,119 682,180 617,348 604,618 523,323 $ 7,779,219 $ 7,957,162 $ 8,459,267 $ 8,983,050 Note: Other includes all state and local sales tax audit adjustments. Source: The source of this information is the Town's financial records. Page 118 2014 Fiscal Year Ended June 30 2016 2017 2018 2019 2020 2021 $ 918,717 1,327,441 4,815,582 742,540 552,856 779,753 254,378 $ 730,164 1,288,153 4,982,218 811,985 636,834 852,675 117,523 $ 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 $ 1,990,383 1,529,268 8,956,208 1,062,172 993,228 1,125,753 280 $ 9,391,267 $ 9,419,551 $ 10,311,578 $ 11,491,124 $ 13,172,389 $ 15,657,292 Page 119 Town of Fountain Hills, Arizona Direct and Overlapping Sales Tax Rates Last Ten Fiscal Years Fiscal Year Ended June 30 2012 2013 2014 2015 2016 2017 2018 2019 2020* 2021 Town Rate 2.60% 2.60% 2.60% 2.60% 2.60% 2.60% 2.60% 2.60% 2.90% 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% 5.60% 5.60% 5.60% 5.60% 5.60% 5.60% 5.60% 5.60% 5.60% Total Tax Rate 9.90% 8.90% 8.90% 8.90% 8.90% 8.90% 8.90% 8.90% 9.20% 9.20% * 0.3% Town rate increase effective 11/1/2019 Source: The source of this information is the Arizona Department of Revenue. Page 120 Town of Fountain Hills, Arizona Ratios of Outstanding Debt by Type Last Ten Fiscal Years Governmental Activities Fiscal Year Ended June 30 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 General Obligation Bonds* 3,755,000 2,900,000 2,000,000 9,517,086 7,678,669 5,680,252 3,631,835 1,683,417 - Community Facilities District Bonds** 3,090,000 2,800,000 2,495,000 2,300,000 1,935,000 1,560,000 1,180,000 795,000 400,000 - Municipal Property Corporation Bonds* 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 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 - Debt Per Capita 611 503 394 651 461 338 223 111 16 - Source: The source of this information is the Town's financial records and the U.S. Bureau of Economic Analysis. * All bond amounts presented include amortization of original issuance discounts and premiums. ** 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. Population data can be found in the Schedule of Demographic and Economic Statistics. Page 121 Town of Fountain Hills, Arizona Ratios of General Bonded Debt Outstanding Last Ten Fiscal Years Percentage of General Less: Amounts Net General Estimated Actual Estimated Actual Fiscal Obligation Restricted for Obligation Taxable Value of Year 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Bonds* 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 - Principal 94,380 82,184 87,949 420,782 576,281 343,697 83,185 146,100 171,807 191,594 Bonds 6,750,620 5,617,816 4,407,051 11,396,304 9,037,388 6,896,555 4,728,650 2,332,317 228,193 - Property 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 4,909,183,626 Net General Net General Municipal Obligation Obligation Bonded Property Taxable Value of Bonded Debt Debt per Net Limited Corporation Property 0.16% 0.16% 0.13% 0.31% 0.24% 0.17% 0.11% 0.05% 0.005% per Capita 297 244 189 483 378 282 192 93 9 - Assessed Valuation 1.49% 1.49% 1.20% 2.83% 2.25% 1.63% 1.06% 0.50% 0.05% Bonds* 4,300,489 3,561,814 2,721,933 1,764,338 1,088,117 860,437 664,484 287,694 - Source: The source of this information is the Department of Revenue and the Town's financial records. * 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 Population data can be found in the Schedule of Demographic and Economic Statistics. 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 122 Net Municipal Property Total Corporation Revenues-All Debt per Capita 189 154 117 75 46 35 27 12 - Sources 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 Town of Fountain Hills, Arizona Direct and Overlapping Governmental Activities Debt as of June 30, 2021 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 184,715,000 640,695,000 6,735,000 1.14% $ 1.14% 1.14% 2.30% 96.38% Total Overlapping Debt 2,105,751 7,303,923 6,491,193 15,900,867 Direct: Town of Fountain Hills, Arizona* General Obligation Bonds Revenue Bonds Eagle Mountain Community Facilities District** - Total Direct Debt Total direct and overlapping debt $ 15,900,867 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 123 Town of Fountain Hills, Arizona Legal Debt Margin Information Last Ten Fiscal Years Fiscal Year Ended June 30 2012 2013 2014 2015 6% Debt Limit Debt limit Total net debt applicable to limit $ 27,134,160 $ 22,668,984 $ 21,957,791 $ 24,199,829 - Legal debt margin $ 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 $ 90,447,201 3,755,000 $ 75,563,278 2,900,000 $ 73,192,636 2,000,000 $ 80,666,095 9,175,000 Legal debt margin $ 86,692,201 $ 72,663,278 $ 71,192,636 $ 71,491,095 4% 4% 3% 11% Total debt applicable to the limit as a percentage of debt limit 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 124 Fiscal Year Ended June 30 2016 2017 2018 2019 2020 2021 $ 28,325,296 $ - 30,651,126 $ - 31,459,192 $ - 32,400,042 $ - 33,907,227 $ - 35,603,580 - $ 28,325,296 30,651,126 31,459,192 32,400,042 33,907,227 35,603,580 $ - $ - $ - $ - - $ - $ 94,417,653 7,405,000 $ 102,170,422 5,475,000 $ 104,863,974 3,495,000 $ 108,000,140 1,615,000 $ 113,024,089 $ 118,678,601 - $ 87,012,653 $ $ 101,368,974 $ 106,385,140 $ 113,024,089 8% Page 125 96,695,422 5% 3% 1% - $ 118,678,601 - Town of Fountain Hills, Arizona Calculation of Legal Debt Margin as of June 30, 2021 Net full cash assessed valuation 593,393,005 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 118,678,601 118,678,601 All Other General Obligation Bonds Debt limit - 6% of net full cash assessed valuation Net debt applicable to limit 35,603,580 - 6% legal debt margin Total legal debt margin 35,603,580 $ 154,282,181 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 126 Town of Fountain Hills Revenue Bond Coverage Last Ten Fiscal Years Municipal Facilities Corporation Revenue Bonds Fiscal Year Ended June 30 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Principal 1,085,000 1,150,000 1,225,000 2,545,000 480,000 370,000 360,000 370,000 300,000 - Interest 327,312 285,287 234,176 184,500 32,740 22,680 16,686 10,854 4,860 - Total 1,412,312 1,435,287 1,459,176 2,729,500 512,740 392,680 376,686 380,854 304,860 - Source: The source of this information is the Town's financial records. Page 127 Pledged Revenues 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 24,001,082 Coverage 9.2 9.3 9.8 5.7 31.7 42.8 48.3 51.9 68.4 100.0 Town of Fountain Hills, Arizona Demographic and Economic Statistics Last Ten Calendar Years Calendar Year 2011 22,741 Population Per capita personal income Median age $ 44,660 2012 23,070 $ 47,260 2013 23,318 $ 48,244 2014 23,573 $ 46,619 2015 23,899 $ 48,240 2016 24,482 $ 50,162 2017 24,583 $ 60,531 2018 24,987 $ 54,936 2019 25,200 $ 57,468 2020* 23,820 $ 59,791 53.9 53.9 53.0 53.7 53.8 53.7 53.5 57.5 58.8 59.4 Public school enrollment 1,981 1,886 1,820 1,692 1,619 1,506 1,444 1,380 1,338 1,314 Town of Fountain Hills unemployment rate 6.7% 5.6% 6.0% 5.4% 2.4% 1.9% 1.6% 3.9% 8.7% 4.9% Land use Total acres Total square miles Vacant lots 13,005.7 20.32 1,218 13,005.7 20.32 1,209 13,005.7 20.32 1,196 13,005.7 20.32 1,165 13,005.7 20.32 1,247 13,005.7 20.32 1,209 13,005.7 20.32 1,175 13,005.7 20.32 1,172 13,005.7 20.32 1,052 13,005.7 20.32 1,158 Number of units Housing Lodging Restaurants Shopping centers 12,990 4 56 20 12,977 4 56 20 12,991 4 54 20 12,981 4 43 20 13,002 4 46 20 13,130 4 50 20 13,176 4 52 20 13,558 4 54 20 13,749 4 55 20 13,875 4 55 20 4 4 1 3 6 1 3 7 1 3 7 1 3 7 1 3 7 1 3 7 1 1 3 5 1 1 3 5 1 2 3 5 1 2 Schools Public Preschool Charter Vocational - - - - - 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. Note: N/A indicates the information is not available. * Information obtained is based on calendar years; therefore, the latest information obtained was from 2020. Page 128 - 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 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 and 2021 was not available. Page 129 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 Town of Fountain Hills, Arizona Authorized Full-time Equivalent Government Employees by Function Last Ten Fiscal Years Fiscal Year Ended June 30 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Municipal court 5.00 5.00 4.00 3.63 3.63 3.63 3.63 3.63 3.63 3.63 Administration 11.58 11.68 10.56 11.33 11.63 12.25 13.45 13.70 15.20 15.00 9.80 9.80 10.80 12.43 12.43 Public works Development services 20.25 18.75 16.25 16.30 16.30 7.50 8.50 7.50 9.00 9.00 Community services 21.53 21.18 20.18 21.06 20.76 20.76 20.56 20.56 20.56 22.01 Total 58.36 56.61 50.99 52.32 52.32 53.94 55.94 56.19 60.82 62.07 Source: The source of this information is the Town's financial records. Page 130 Town of Fountain Hills, Arizona Operating Indicators by Function Last Ten Fiscal years Fiscal Year Ended June 30 Function/Program Municipal Court Cases filed Hearings/Trials held 2012 2013 2014 2015 2016 2017 2018 2,173 731 1,740 703 1,649 1,665 1,738 1,585 1,593 1,564 2,014 1,844 1,277 676 891 801 2,237 568 1,324 1,430 Administration FTEs per 1,000 residents Registered voters - general election Voter turnout - general election 2.6 16,074 34% 2.5 none none 2.2 N/A N/A 2.2 16,213 38% 2.2 none none 2.2 16,387 41% 2.3 none none 2.2 16,775 51% 2.4 none none 2.6 18,415 91% Development Services Building permits issued Building inspections conducted Number of code violation cases Number of zoning cases 346 1,257 804 7 457 1,395 746 10 445 2,131 716 41 443 2,448 752 65 410 2,129 713 72 509 2,704 669 50 468 3,707 654 41 576 4,795 655 11 547 4,069 690 7 575 3,652 497 21 Community Services Number of Community Center bookings Number of participants in recreational programs Number of Senior Services members Number of home delivered meals 3,236 1,833 1,208 8,419 3,196 1,789 1,118 6,941 3,383 2,291 1,189 4,799 3,439 2,249 1,273 4,035 3,124 2,910 1,326 3,497 3,764 3,773 1,335 3,920 4,395 3,794 1,220 3,093 3,857 3,489 1,313 3,562 3,169 1,830 1,265 5,215 1,675 2,892 1,360 4,402 Law Enforcement (contracted) Physical arrests Traffic violations 522 1,366 545 1,296 743 1,379 445 1,539 220 1,215 220 1,803 214 1,053 67 1,248 86 2,618 56 2,745 Fire & Emergency Medical (contracted) Total incident responses Average response time (in minutes) 3,082 3:46 3,136 3:50 2,956 3:53 3,166 3:37 3,191 3:57 3,425 3:25 3,659 3:33 4,073 3:32 3,896 3:51 4,215 4:50 Source: The source of this information is the Town's financial records. Note: N/A indicates that the information is not available. Page 131 2019 2020 2021 Town of Fountain Hills, Arizona Capital Assets Statistics by Function Last Ten Fiscal Years Fiscal Year Ended June 30 Function/Program 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Public safety Number of fire stations 2 2 2 2 2 2 2 2 2 2 Public works Streets (centerline miles) Streets (lane miles) Pedestrian lighting Traffic signals 178.9 390 34 13 178.9 390 34 13 178.9 390 34 13 178.9 390 85 13 178.9 390.5 91 13 178.9 390.5 91 13 180.0 391.5 91 13 180.0 391.5 91 13 180.0 391.5 91 13 180.0 391.5 91 13 Parks and recreation Acreage-developed parks Playgrounds Baseball/softball diamonds Soccer/football fields Community centers Preserve acreage Miles of trails 116 7 6 7 1 740 4.3 116 7 6 7 1 740 10.43 116 7 6 7 1 740 10.43 119 7 6 7 1 807.2 15.8 119 7 6 7 1 807.2 15.8 119 7 6 7 1 807.2 18.5 119 7 6 7 1 807.2 18.5 119 9 6 7 1 889.2 18.5 119 9 6 7 1 913.2 18.5 119 9 6 7 1 913.2 18.5 Source: The source of this information is the Town's facilities records. Note: N/A indicates the information is not available. Page 132 Town of Fountain Hills 16705 E. Avenue of the Fountains Fountain Hills, Arizona 85268 480-816-5100 www.fountainhillsaz.gov - linkedin.com/company/town-of-fountain-hills - facebook.com/TownofFountainHills - twitter.com/fhazgov Page 133