Town of Fountain Hills, Arizona Annual Comprehensive Financial Report For the Fiscal Year Ended June 30, 2023 TOWN OF FOUNTAIN HILLS, ARIZONA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2023 Issued by: Administration Department Finance Division TOWN OF FOUNTAIN HILLS, ARIZONA TABLE OF CONTENTS INTRODUCTORY SECTION Page Letter of Transmittal 1 List of Elected and Appointed 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 72 Highway User Revenue Fund 73 Grants Fund 74 Note to Required Supplementary Information 75 COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES Governmental Funds: Combining Balance Sheet – All Non-Major Governmental Funds – By Fund Type 78 Combining Statement of Revenues, Expenditures and Changes in Fund Balances – All Non-Major Governmental Funds – By Fund Type 80 Special Revenue Funds: Combining Balance Sheet 84 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 86 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual 88 Debt Service Funds: Combining Balance Sheet 94 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 96 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 98 Capital Projects Fund: Combining Balance Sheet 101 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 102 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual 104 STATISTICAL SECTION Financial Trends: Net Position by Component 108 Changes in Net Position 110 Fund Balances – Governmental Funds 112 Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds 114 Revenue Capacity: Governmental Activities – Tax Revenues by Source 116 Assessed Value and Estimated Actual Value of Taxable Property 117 Principal Property Taxpayers 118 Property Tax Levies and Collections 119 Taxable Sales by Category 120 Direct and Overlapping Sales Tax Rates 122 TOWN OF FOUNTAIN HILLS, ARIZONA TABLE OF CONTENTS STATISTICAL SECTION – continued Page Debt Capacity: Ratios of Outstanding Debt by Type 123 Ratios of General Bonded Debt Outstanding 124 Direct and Overlapping Governmental Activities Debt 125 Legal Debt Margin Information 126 Calculation of Legal Debt Margin 128 Revenue Bond Coverage 129 Demographic and Economic Information: Demographic and Economic Statistics 130 Principal Employers 131 Operating Information: Authorized Full-Time Equivalent Government Employees by Function 132 Operating Indicators by Function 133 Capital Assets Statistics by Function 134 (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 8, 2023 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, 2023. 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, 2023, 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, 2023, 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.fountainhillsaz.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 23,785 in 2023. 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 the safety and well-being of its residents and visitors;  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 68 full-time equivalent (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, Capital Projects Funds, and Proprietary Fund. 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 on July 1st. 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 residents. 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 between departments; however, all 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’s Auditor General 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 require Town Manager approval, and all inter-fund transfers 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, Streets Fund, and Grants Fund 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 exceeded the budgeted expectations. Sales tax revenues continued to grow during the fiscal year, and state shared revenues were mostly in line with expectations, with a slight slowdown in state-wide fuel taxes. With the possibility of a recession in the coming fiscal year, the Town will be closely monitoring these revenue sources and make adjustments accordingly. Page 5 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, the largest category of sales tax revenue, experienced a 7% increase over the prior year. Restaurant/Bar and Services revenue exceeded pre-pandemic levels with an increase of 5% and 14%, respectively, compared to FY22. Construction sales tax, a one-time revenue source, is driven entirely by development activity in the community and increased substantially compared to the prior year. This was primarily due to the sale of a commercial development that was subject to speculative builder taxes. The Transportation/Communication/Utility category also increased slightly during the year. Construction activity provides revenue to the Town through sales taxes based on the value of the project, 50% of these proceeds are utilized for general operations and the other 50% for capital expenditures. Since this funding source is rarely enough to meet capital project needs, the Town must find additional funds to pay for necessary infrastructure projects. 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 0.40%). State shared income tax revenue is based on personal and corporate earnings from two years ago. Revenue from this category increased by 42.7% in fiscal year 2022-23 due to delayed tax collections from COVID. State shared sales tax has increased over the past several years, and this year continued the trend by increasing revenue by 4.3% compared to the prior year. Other local activity has remained fairly consistent during the period. 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 61% of the General Fund revenues. On November 1, 2019 the Town’s TPT rate went up 0.3% to the current rate of 2.9%. Hospitality-related collections are the most susceptible to changes in economic conditions. Construction TPT is also highly tied to the health of the economy and 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. Ultimately, each of these revenue sources will be negatively affected by inflation, as well as the Federal Reserve’s fight against it. Streets Fund (HURF) – 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. The resulting loss must be replaced by the General Fund, which increases the pressure to maintain operations across the Town. 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 and the years that have followed. This policy continues to require the Town to retain 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 cover approximately 60 days of General Fund expenditures 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 2020, 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. However, the pandemic delayed this effort. Subsequently, Strategic Plan 2022 was built upon the foundation of four Strategic Priorities, eleven Signature Strategies, and twentythree Supporting Tasks. Based on citizen input, the Strategic Plan is designed to guide our future decisions grounded on these common priorities: 1. Targeted Collaborative Economic Development 2. Promote the Long-Term Financial Sustainability of Town Infrastructure, Environmental, and Social Resources 3. Continue to Improve the Public Health, Well-Being, and Safety of Our Town 4. Maintain Current Infrastructure While Preparing the Town for Emerging Trends that Increase Public Safety and Quality of Life MAJOR INITIATIVES, SERVICE EFFORTS AND ACCOMPLISHMENTS The Town of Fountain Hills’ adopted budget for fiscal year 2022-23 reflected a cautious approach to the continued recovery from the pandemic and increasing inflation. Due to the uncertain economic conditions ahead, the Town approached revenue projections cautiously and kept expenditure levels low as well. At the start of FY22, the American Rescue Plan Act (ARPA) provided resources to local governments through the State of Arizona. These resources allowed the Town to save $4.2M 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 same amount was received in FY23 and was used for the same purpose. This will result in a total of $8.4M of General Fund savings over the two fiscal years. As Pavement Management has been a priority for many years, Council decided that the General Fund savings discussed above should be used toward that purpose. As a result, $4.2M was transferred to the Streets Fund in FY23 and another $4.2M in FY24. Although these infusions will not resolve all of the pavement issues in Town, it will provide some relief while other options are researched and implemented. 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 2022-23 goals attained are summarized within this list of accomplishments:         Page 9 Community Services awarded the Gold Medal for Excellence in Park and Recreation Management by the National Recreation and Park Association Recognized as a Dementia Friendly community, the 10th in Arizona Continued park improvements at Desert Vista Park, including renovation and expansion of the skate park and the addition of a pump track Over 5,400 meals provided through the Home Delivered Meal program Completed storm drain improvements throughout the Town Implemented “See, Click, Fix” portal on Town’s website to simplify resident reporting 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, 2022. This was the twenty-seventh 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 2023 Certificate. In addition, the government received the GFOA’s Distinguished Budget Presentation Award for its annual budget for the fiscal year beginning July 1, 2022. 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 twentieth 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. 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, Rachael Goodwin Town Manager Page 10 TOWN OF FOUNTAIN HILLS, ARIZONA LIST OF PRINCIPAL OFFICIALS JUNE 30, 2023 ELECTED OFFICIALS Ginny Dickey, Mayor Peggy McMahon, Vice-Mayor Gerry Friedel, Councilmember Sharron Grzybowski, Councilmember Brenda Kalivianakis, Councilmember Allen Skillicorn, Councilmember Hannah Toth, Councilmember TOWN MANAGER & DIRECTORS Rachael Goodwin, Interim Town Manager David Trimble, Deputy Town Manager/Administrative Services Director Linda Mendenhall, Town Clerk Kevin Snipes, Interim Community Services Director John Wesley, Development Services Director Amanda Jacobs, Economic Development Director David Pock, Chief Financial Officer Justin Weldy, Public Works Director Aaron Arnson, Pierce Coleman PLLC, Town Attorney Mark Iacovino, The Law Office of Mark Iacovino, Town Prosecutor Captain Larry Kratzer, Maricopa County Sheriff’s Office, District Commander Robert Melton, Presiding Judge Captain Dave Ott, Rural Metro Corporation, Fire Chief Page 11 Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to Town of Fountain Hills Arizona For its Annual Comprehensive Financial Report For the Fiscal Year Ended June 30, 2022 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, 2023, 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, 2023, 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. Change in Accounting Principle As described in Note 1, the Town implemented the provisions of the GASB Statement No. 96, Subscription-Based Information Technology Arrangements, for the year ended June 30, 2023, which represents a change in accounting principle. Our opinion is not modified with respect to this matter. 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. Page 17 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. 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 Page 18 financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Supplementary 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 8, 2023, 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 8, 2023 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, 2023 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, 2023. 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 $9.3 million to $143.4 million, representing a 6.9 percent increase of the total net position.  General revenues from governmental activities accounted for $31.5 million in revenue, or 77 percent of all revenues from governmental activities. Program specific revenues in the form of charges for services and grants and contributions accounted for $9.4 million or 23 percent of total governmental activities revenues.  The Town had $31.6 million in expenses related to governmental activities, an increase of 10.2 percent from the prior fiscal year, primarily due to increased costs associated with public works and construction services.  Among the major governmental funds, the General Fund had $28.3 million in current fiscal year revenues, which consisted primarily of transaction privilege (sales) tax and intergovernmental revenues. The total expenditures of the General Fund were $15.5 million. The General Fund’s fund balance increased $2.9 million to $17.4 million at the end of the current fiscal year. OVERVIEW OF FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the Town’s basic financial statements. The Town’s basic financial statements comprise three components: 1) governmentwide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Page 23 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2023 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. Internal service fund. This type of fund is classified as a proprietary fund, and it is used to report activity in the Technology Replacement 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. Page 24 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2023 OVERVIEW OF FINANCIAL STATEMENTS – continued 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. 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. 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 major 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 its 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, 2023 GOVERNMENT-WIDE FINANCIAL ANALYSIS – continued Analysis of Net Position. Over time, net position may serve as a useful indicator of a government’s financial position. In the case of the Town, assets related to governmental activities exceeded liabilities by $134.4 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. As the Town does not currently have any outstanding debt, the reported amount represents the total invested in capital assets. 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, 2023 and June 30, 2022. Governmental Activities As of June 30, 2023 $ 46,708,494 101,838,463 148,546,957 As of June 30, 2022 $ 37,056,421 102,346,737 139,403,158 Current and other liabilities Long-term liabilities Total liabilities 3,087,313 284,016 3,371,329 2,873,943 297,878 3,171,821 Deferred outflows 1,734,697 2,124,397 101,838,463 9,646,597 31,955,871 143,440,931 102,346,737 5,749,726 26,010,477 $ 134,106,940 Current and other assets Capital assets, net Total assets Net position Net investment in capital assets Restricted Unrestricted Total net position $ 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, 2023 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 $40.9 million. The total cost of all programs and services was $31.6 million. The following table presents a summary of the changes in net position for the fiscal years ended June 30, 2023 and June 30, 2022. Governmental Activities Fiscal Fiscal Year Ended Year Ended June 30, 2023 June 30, 2022 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 Total expenses Changes in net position Net position, beginning Net position, ending Page 27 $ 2,415,721 6,729,883 259,266 $ 2,830,516 6,381,580 161,751 9,854 20,586,294 382,948 8,039,448 1,182,243 1,099,525 226,049 $40,931,231 9,728 17,660,758 399,007 6,541,023 1,180,100 (419,006) 280,140 $ 35,025,597 $ 4,890,912 1,206,991 9,930,356 10,792,078 4,776,903 31,597,240 9,333,991 134,106,940 $143,440,931 $ 4,333,863 1,068,260 9,487,150 9,780,920 3,999,178 28,669,371 6,356,226 127,750,714 $134,106,940 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2023 GOVERNMENT-WIDE FINANCIAL ANALYSIS – continued The charts below compare the governmental expenses from fiscal years 2022-23 and 2021-22. Page 28 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2023 GOVERNMENT-WIDE FINANCIAL ANALYSIS – continued The following items are significant current year transactions that have had an impact on the change of net position.  Revenues from sales tax collections and state-shared sources increased substantially for the fiscal year and accounted for approximately $4.7 million more than the prior fiscal year. The Town received its final American Rescue Plan Act (ARPA) payment during the fiscal year, which will result in a significant decrease of federal intergovernmental funding in fiscal year 2024.  Expenditures were up 10.2 percent across all governmental functions, with the highest percentage increase seen within the Culture and Recreation function. Multiple park improvements were completed during the fiscal year to increase accessibility and functionality of the Town’s parks.  Investment income reversed from negative mark-to-market returns reported in the prior fiscal year to over $1.1 million earned in the current fiscal year. As investments matured, the Town benefited from higher bond yields with durations from one to three years. 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 by each of these functions. Governmental Activities General government Development services Public safety Public works Culture and recreation Total expenses Year Ended June 30, 2023 Total Net (Expense)/ Expenses Revenue Year Ended June 30, 2022 Total Net (Expense)/ Expenses Revenue $ 4,890,912 1,206,991 9,930,356 10,792,078 4,776,903 $ 31,597,240 $ 4,333,863 1,068,260 9,487,150 9,780,920 3,999,178 $ 28,669,371 $ (3,751,754) (444,062) (5,523,668) (8,504,075) (3,968,811) $ (22,192,370) $ (3,617,651) (120,829) (5,137,429) (7,243,437) (3,176,178) $ (19,295,524)  The cost of all governmental activities this year was $31.6 million.  Federal, State, county, and tribal governments and charges for services subsidized certain governmental programs with revenues of $9.4 million.  The net cost of the Town’s governmental activities was $22.2 million, which was funded primarily by general revenues. General revenues consist of $20.6 million in sales taxes and $9.2 million in State-shared revenues. Page 29 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2023 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 $9.6 million in the combined fund balance from $32.2 million to $41.8 million. The General Fund comprises 41.6 percent of the total fund balance. Approximately $11.6 million, or 67.0 percent, of the General Fund’s fund balance is unassigned. The General Fund is the principal operating fund of the Town. The fund balance increased by $2.9 million to $17.4 million as of fiscal year end. General Fund revenues increased $3.6 million primarily due to increased local sales tax collections. General Fund expenditures increased slightly from $13.9 million to $15.5 million. The Highway User Revenue Fund comprises 17.5 percent of total fund balance. The fund balance increased $3.4 million from the prior year and will continue to be used to fund the pavement management program in the next fiscal year. The Capital Projects Fund comprises 29.8 percent of the total fund balance. All of the fund balance is committed or assigned to capital projects. The fund balance increased $2.5 million due to a yearend transfer from the General Fund and unfinished projects that will be carried-over to FY24. The Grants Fund was utilized during the year primarily to account for the American Rescue Plan Act (ARPA) funding made available by the Department of the Treasury. This is federal funding was provided to assist state, county, and local governments after the pandemic. The fund balance increased $106,156 due to earned but unspent miscellaneous grants. The Technology Replacement Fund is the Town’s sole proprietary fund. Unrestricted net position of this fund at the end of the fiscal year amounted to $160,181. This was an increase of $41,453 that was due to internal charges to other governmental funds. Page 30 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2023 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 $7.0 million as a result of budget transfers to the Grants Fund to pay public safety costs using ARPA funding and to the Streets Fund for pavement maintenance. 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 $3.3 million in overall revenues is primarily due to increased local sales tax collections.  The favorable total expenditures variance of $2.5 million is due primarily to lowered expenditures throughout all departments. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets. As of the end of the current fiscal year, the Town had invested $101.8 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 completed capital projects for the storm water system and park infrastructure. Total depreciation expense for the current fiscal year was $5.0 million. The following schedule presents a summary of capital asset balances for the fiscal years ended June 30, 2023 and June 30, 2022. Capital assets – non-depreciable Capital assets – depreciable, net Total Governmental Activities As of As of June 30, 2023 June 30, 2022 $ 36,231,449 $ 34,894,320 65,607,014 67,452,417 $101,838,463 $102,346,737 The estimated construction commitments amount is $838,200. 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, 2023 CAPITAL ASSETS AND DEBT ADMINISTRATION – continued Debt Administration. The Town does not currently have any outstanding debt. Therefore, there were not any town-wide taxes levied in fiscal year 2023. 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 $134.1 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 $40.2 million. Additional information on the Town’s long-term debt can be found in Note 7 in the notes to the financial statements. 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, 2023 Governmental Activities ASSETS Current assets: Cash and investments Accounts receivable Intergovernmental receivable Taxes receivable Leases 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 43,366,214 374,391 1,035,253 26,444 1,762,077 84,324 12,923 46,868 46,708,494 36,231,449 65,607,014 101,838,463 148,546,957 LIABILITIES Current liabilities: Accounts payable Accrued wages and benefits Other liabilities Customer deposits Compensated absences payable Unearned revenues Total current liabilities 2,082,927 228,927 759 169,241 355,898 249,561 3,087,313 Noncurrent liabilities: Non-current portion of long-term liabilities Total noncurrent liabilities Total liabilities 284,016 284,016 3,371,329 DEFERRED INFLOWS OF RESOURCES Leases 1,734,697 NET POSITION Net investment in capital assets Restricted for: Public works Capital outlay Debt service Unrestricted Total net position 101,838,463 $ 7,288,954 2,145,462 212,181 31,955,871 143,440,931 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, 2023 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 Total governmental activities Expenses $ $ 4,890,912 $ 1,206,991 9,930,356 10,792,078 4,776,903 31,597,240 $ Charges for Services Operating Grants and Contributions 516,373 $ 762,929 136,082 359,972 640,365 2,415,721 $ Capital Grants and Contributions 622,785 $ 4,270,606 1,779,359 57,133 6,729,883 $ Governmental Activities $ 148,672 110,594 259,266 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 9,854 20,586,294 382,948 8,039,448 1,182,243 1,099,525 226,049 31,526,361 Changes in net position 9,333,991 134,106,940 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 (3,751,754) (444,062) (5,523,668) (8,504,075) (3,968,811) (22,192,370) $ 143,440,931 (This page intentionally left blank) Page 38 FUND FINANCIAL STATEMENTS Page 39 TOWN OF FOUNTAIN HILLS, ARIZONA BALANCE SHEET - GOVERNMENTAL FUNDS JUNE 30, 2023 General ASSETS Cash and investments Accounts receivable Intergovernmental receivable Taxes receivable Leases receivable Interest receivable Inventory, at cost Prepaid items Total assets $ 17,167,897 111,440 718,791 $ 1,762,077 31,122 12,923 44,542 19,848,792 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: $ Accounts payable Accrued wages and benefits Other liabilities Customer deposits Unearned revenues Total liabilities 342,051 198,934 759 169,241 17,373 728,358 Deferred inflows of resources: Unavailable revenues - property taxes Unavailable revenues - other Leases Total deferred inflows of resources Highway User Revenue $ 7,698,249 27,805 262,379 $ 327,341 235,146 26,351 $ 7,988,433 $ 588,838 $ 606,205 21,172 $ 18,343 193 1,734,697 1,734,890 Fund balances: Nonspendable Restricted Committed Assigned Unassigned Total fund balances 627,377 232,188 250,531 27,789 223,710 27,789 223,710 6,922,858 114,597 57,465 4,044,890 1,639,184 11,644,005 17,385,544 Total liabilities, deferred inflows of resources and fund balances $ 19,848,792 410,409 7,333,267 $ 7,988,433 The notes to the basic financial statements are an integral part of this statement. Page 40 Grants 114,597 $ 588,838 Capital Projects Non-Major Governmental Funds Total Governmental Funds $ $ $ 13,466,860 4,545,686 5,472 22,260 26,444 51,687 1,515 $ 13,524,019 $ $ 1,047,933 $ 1,047,933 2,326 4,598,231 68,395 8,821 $ $ 77,216 26,334 $ 5,692,029 6,784,057 12,476,086 4,494,681 13,524,019 Page 41 $ 4,598,231 2,082,927 228,927 759 169,241 249,561 2,731,415 26,334 251,692 1,734,697 2,012,723 26,334 2,326 2,331,309 1,766,428 394,618 43,206,033 374,391 1,035,253 26,444 1,762,077 84,324 12,923 46,868 46,548,313 59,791 9,368,764 11,503,347 9,228,268 11,644,005 41,804,175 $ 46,548,313 (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, 2023 Total governmental fund balances Amounts reported for governmental activities in the Statement of Net Position are different because: $ 41,804,175 Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. Governmental capital assets Less accumulated depreciation $ 239,951,412 (138,112,949) 101,838,463 26,334 251,692 278,026 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. (639,914) 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. 160,181 Net position of governmental activities The notes to the basic financial statements are an integral part of this statement. Page 43 $ 143,440,931 TOWN OF FOUNTAIN HILLS, ARIZONA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2023 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 $ 16,732,052 382,948 1,140,759 355,607 8,456,527 212,774 374,877 211,773 387,670 28,254,987 Grants $ 1,419,744 2,606,929 3,664 15,855 4,605,125 197,804 4,243,996 95,056 4,700,181 Expenditures: Current General government Development services Public safety Public works Culture and recreation Capital outlay Debt service Fiscal charges Total expenditures 15,454,489 5,014,025 4,594,025 Excess (deficiency) of revenues over expenditures 12,800,498 (770,029) 106,156 Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses) (9,875,527) (9,875,527) 4,200,000 Changes in fund balances 2,924,971 3,429,971 106,156 Fund balances, beginning of year 14,460,573 3,903,296 8,441 Fund balances, end of year 4,024,863 1,210,967 5,404,843 1,311,745 3,292,151 209,920 385,875 4,208,150 4,988,349 25,676 4,200,000 $ 17,385,544 $ 7,333,267 The notes to the basic financial statements are an integral part of this statement. Page 44 $ 114,597 Capital Projects Non-Major Governmental Funds Total Governmental Funds $ $ $ 1,724,626 8,778 709,872 383,519 140,284 110,594 4,000 268,398 2,137,308 8,573 29,071 145,230 1,395,637 1,215 285,728 841,627 401,015 291,320 4,697,681 1,210,967 9,612,993 7,542,736 3,583,471 4,498,734 4,263,138 $ 8,778 20,586,294 382,948 1,524,278 355,607 15,919,459 216,438 403,305 240,844 1,094,158 40,732,109 5,105,980 98 978,161 98 31,146,680 (2,968,672) 417,476 9,585,429 5,450,527 10,247,867 (10,247,867) 5,450,527 597,340 (372,340) 225,000 2,481,855 642,476 9,585,429 9,994,231 3,852,205 32,218,746 12,476,086 Page 45 $ 4,494,681 $ 41,804,175 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, 2023 Changes in fund balances - total governmental funds $ 9,585,429 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 $ 4,497,424 (4,976,937) (479,513) 1,076 221,440 222,516 (28,761) (7,133) (35,894) Some revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds. Property taxes Other Some expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Loss on disposal of assets Compensated absences 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 41,453 $ 9,333,991 TOWN OF FOUNTAIN HILLS, ARIZONA STATEMENT OF NET POSITION PROPRIETARY FUNDS JUNE 30, 2023 Governmental Activities: Internal Service Funds ASSETS Current assets: Cash and investments Total current assets Total assets NET POSITION Unrestricted Total net position $ $ 160,181 160,181 160,181 160,181 160,181 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, 2023 Governmental Activities: Internal Service Funds Operating revenues: Other Charges for services Total operating revenues $ 5 65,017 65,022 Operating expenses: Cost of services Total operating expenses 28,936 28,936 Operating income (loss) 36,086 Nonoperating revenues (expenses): Investment earnings Total nonoperating revenues (expenses) 5,367 5,367 Changes in net position 41,453 Total net position, beginning of year 118,728 Total net position, end of year $ 160,181 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, 2023 Governmental Activities: Internal Service Funds Increase/Decrease in Cash and Cash Equivalents Cash flows from operating activities: Cash received from charges for services Cash received from other sources Cash payments to suppliers for goods and services $ Net cash provided by/used for operating activities 65,017 5 (28,936) 36,086 Cash flows from investing activities: Investment income 5,367 Net cash provided by/used for investing activities 5,367 Net increase/decrease in cash and cash equivalents 41,453 Cash and cash equivalents, beginning of year 118,728 Cash and cash equivalents, end of year $ 160,181 $ 160,181 0 $ 160,181 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, 2023 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. During the year ended June 30, 2023, the Town implemented the provisions of GASB Statement No. 96, Subscription-Based Information Technology Arrangements (SBITAs). This Statement increases the usefulness of the financial statements by requiring the recognition of certain assets and liabilities for SBITAs. This Statement also requires a government to disclose essential information about the arrangement. The Town’s analysis of SBITAs in effect at the beginning of the year resulted in no changes to beginning balances reported in the financial statements due to the implementation of this standard. 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. Page 50 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2023 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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. 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. Page 51 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2023 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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. 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. Page 52 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2023 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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. 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 and investments in the State Treasurer’s Local Government Investment Pool. Cash and investments 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. Page 53 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2023 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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. 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. 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. 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. Page 54 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2023 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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. The cost of such inventories is recorded as expenditures/expenses when consumed rather than when purchased. 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. The cost of prepaid items is recorded as expenditures/expenses when consumed rather than when purchased. J. Capital Assets Capital assets, which include land and improvements, artwork, buildings and improvements, vehicles, machinery, and equipment, construction in progress, infrastructure assets, and intangible right-to-use 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. Page 55 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2023 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 assets 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 assets 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. 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. Page 56 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2023 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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. 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. Page 57 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2023 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Q. Leases As lessor, the Town recognizes lease receivables with an initial, individual value of $50,000 or more. If there is no stated rate in the lease contract (or if the stated rate is not the rate the Town charges the lessee) and the implicit rate cannot be determined, the Town uses its own estimated incremental borrowing rate as the discount rate to measure lease receivables. The Town’s estimated incremental borrowing rate was determined based on the prevailing federal funds rate at the beginning of the lease term, since the Town does not have outstanding debt. This rate reflects the low risk of renting these facilities over a long lease period with multiple renewals. 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 58 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2023 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 $3,980,307, reported as a committed fund balance at June 30, 2023. 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 59 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2023 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 Page 60 $ Highway User Revenue Fund 12,923 $ 44,542 Capital Projects Fund Grants Fund $ $ Non-Major Governmental Funds $ $ 2,326 15,338 185,847 6,922,858 114,597 2,130,124 3,980,307 64,583 625,922 591,811 133,017 5,692,029 415,678 6,784,057 1,639,184 11,644,005 $ 17,385,544 $ 410,409 7,333,267 $ 114,597 $ 12,476,086 $ Total 12,923 46,868 15,338 185,847 7,037,455 2,130,124 3,980,307 64,583 625,922 591,811 133,017 5,692,029 415,678 6,784,057 394,618 394,618 2,049,593 11,644,005 4,494,681 $ 41,804,175 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2023 NOTE 3 – CASH AND 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 $790,602 and the bank balance was $1,594,390. At year end, $1,094,390 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. 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, 2023, 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 Page 61 $42,574,912 790,602 700 $43,366,214 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2023 NOTE 3 – CASH AND INVESTMENTS At year end, the Town’s investments consisted of the following: Investment Maturities (in Years) Investment Type U.S. Government and Agency Notes Supra-National Notes Federal Agency Notes Corporate and Foreign Bonds Asset Backed Securities Certificates of Deposit US Bank Money Market Funds Category Level 1 Level 1 Level 1 Level 2 Level 2 Level 2 Level 1 Fair Value $ 8,728,324 496,329 249,256 2,820,786 809,904 126,926 18,916 Less than 1 1-5 $ 243,555 $ 8,484,769 181,099 315,230 249,256 2,820,786 4,073 805,831 126,926 $ State Treasurer’s Investment Pool 7 Total Not applicable Credit Rating S&P AA+ AAA AA+ BBB+ to AA AAA, NR AAn/a Moody’s Aaa Aaa Aaa A3 - Aa2 Aaa, NR Aa3 n/a 428,727 $12,802,798 29,324,471 37 days average maturities $42,574,912 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 62  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, 2023 NOTE 3 – CASH AND INVESTMENTS Credit Risk. Credit risk is the risk of default of debt by an issuer or counterparty to an investment. The Town will limit credit risk by limiting investments in the Town’s portfolio to the asset classes designated as acceptable in ARS §35-323. When possible, analysis of the credit worthiness of all individual debt issuers held in the portfolio should be conducted on an annual basis in an effort to guard against investing in a weak or deteriorating credit situation. Additionally, the Town will pre-qualify financial institutions, brokers/dealers, and investment advisers with which the Town will do business. 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 Supra-National 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 63 Fair Value 8,728,324 496,329 249,256 2,820,786 809,904 126,926 18,916 29,324,471 $ 42,574,912 $ Percent of Town Investments 20.5% 1.2% 0.6% 6.6% 1.9% 0.3% 0.0% 68.9% TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2023 NOTE 4 – RECEIVABLES Receivable balances, net of allowance for uncollectibles, have been disaggregated by type and presented separately in the financial statements with the exception of intergovernmental receivables. Intergovernmental receivables, net of allowance for uncollectibles, as of year-end for the Town’s individual major funds consisted entirely of receivables due from the State. NOTE 5 – LEASES RECEIVABLE The Town has cell tower land agreements and a fire station ambulance bay usage agreement that fall under the provisions of contracts classified as leases. The related receivables under the lease agreements have been recorded at the present value of their future minimum lease payments as of the implementation date. Lease revenue of $178,866 and related interest revenue of $24,051 are recorded as leases and rents in the General Fund. Future minimum lease payments to be received under the lease agreements at year end are summarized as follows: Year ending June 30: 2024 2025 2026 2027 2028 2029-33 2034-38 2039-43 2044-45 Total Page 64 $ $ 122,997 123,613 125,580 129,538 136,549 645,705 234,781 184,398 58,916 1,762,077 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2023 NOTE 6 – CAPITAL ASSETS A summary of capital asset activity at year end is as follows: Beginning Ending Governmental Activities Balance Increase Decrease Balance Capital assets, not being depreciated: $ 29,690,368 $ $ $ 29,690,368 Land 2,608,900 2,608,900 Artwork 2,595,052 4,325,010 2,987,881 3,932,181 Construction in progress 34,894,320 4,325,010 2,987,881 36,231,449 Total capital assets, not being depreciated Capital assets, being depreciated: 155,359,694 297,000 155,656,694 Infrastructure 23,421,289 13,193 23,434,482 Buildings and building improvements 16,977,148 2,627,699 19,604,847 Improvements other than buildings 4,989,483 222,403 187,946 5,023,940 Vehicles, machinery and equipment 200,747,614 3,160,295 187,946 203,719,963 Total capital assets being depreciated Less accumulated depreciation for: (111,275,396) (3,277,816) (114,553,212) Infrastructure (7,465,337) (499,594) (7,964,931) Buildings and building improvements (12,361,959) (789,288) (13,151,247) Improvements other than buildings (2,192,505) (410,239) (159,185) (2,443,559) Vehicles, machinery and equipment (133,295,197) (4,976,937) (159,185) (138,112,949) Total accumulated depreciation Total capital assets, being depreciated, net Governmental activities capital assets, net 67,452,417 $ 102,346,737 (1,816,642) $ 2,508,368 28,761 $ 3,016,642 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 65 $ 223,912 16,721 317,363 3,231,075 1,187,866 $ 4,976,937 65,607,014 $ 101,838,463 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2023 NOTE 6 – CAPITAL ASSETS Construction Commitments – At June 30, 2023, the Town has the following active construction commitments. The resources for these commitments have been accumulated in the Capital Projects Fund. Governmental Activities Remaining Spent-to-Date Commitment Project Stormwater Infrastructure Rehabilitation Golden Eagle Park Field Lights Shea Boulevard Widening - Palisades to Technology TS – Palisades at Eagle Ridge Total commitments $ $ 246,391 690,137 305,257 104,643 1,346,428 $ $ 57,793 690,137 40,316 49,954 838,200 NOTE 7 – CHANGES IN LONG-TERM LIABILITIES Long-term liability activity for the current fiscal year was as follows: Beginning Balance Governmental activities: Compensated absences payable $ Governmental activity long-term $ Liabilities Additions Ending Balance Reductions Due Within One Year 632,781 $ 408,620 $ 401,487 $ 639,914 $ 355,898 632,781 $ 408,620 $ 401,487 $ 639,914 $ 355,898 NOTE 8 – INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS At year end, interfund balances were as follows: Interfund transfers: At year end, interfund transfers were as follows: Transfers in Highway User Revenue Fund Capital Projects Fund Non-Major Governmental Funds Total Page 66 Transfers out Non-Major Governmental General Funds Total Fund $ 4,200,000 $ $ 4,200,000 5,450,527 5,450,527 225,000 372,340 597,340 $ 9,875,527 $ 372,340 $10,247,867 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2023 NOTE 8 – INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS The General Fund transferred $5,175,527 to the Capital Projects Fund for future projects, as required by the Town’s financial policies; $4,200,000 to Highway User Revenue Fund for additional pavement maintenance projects; and $500,000 to Environmental Fund for continued storm drain and wash maintenance. The Economic Development Fund transferred $97,340 to the Tourism Fund to provide funding for operating costs of the tourism program. The Development Fee Fund transferred $275,000 to the Capital Projects Fund for expansion of the Fountain Park splash pad. NOTE 9 – 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 10 – 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 67 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2023 NOTE 10 – 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 11 – 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, 2023, was $4,764,951 The Town’s total payroll was $5,541,914. 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. Page 68 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2023 NOTE 11 – RETIREMENT PLANS An employee that leaves the employment of the Town is entitled to his or her contributions and the vested portion of the Town’s contributions, plus interest earned. During the fiscal year, the Town’s required and actual contributions amounted to $514,245. The employees’ contributions totaled $514,245. 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 $128,170 to that plan. The Town contributed $9,743 for the contract employee’s 457 account. No pension provision changes occurred during the year that affected the required contributions to be made by the Town or its employees. The ICMA Retirement Corporation held no securities of the Town or other related parties during the fiscal year 2022-23 or as of the close of the fiscal year. Page 69 (This page intentionally left blank) Page 70 REQUIRED SUPPLEMENTARY INFORMATION Page 71 TOWN OF FOUNTAIN HILLS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL YEAR ENDED JUNE 30, 2023 Budgeted Amounts Final Original Actual Variance with Final Budget Positive (Negative) Revenues: Sales taxes Franchise taxes Licenses and permits Leases and rents Intergovernmental Charges for services Other Fines and forfeitures Investment earnings Total revenues 14,426,223 325,000 782,092 299,872 8,393,328 343,475 105,265 205,000 25,240 24,905,495 14,426,233 325,000 782,092 299,872 8,393,328 343,475 105,265 205,000 25,240 24,905,505 16,732,052 382,948 1,140,759 355,607 8,456,527 212,774 374,877 211,773 387,670 28,254,987 Expenditures: Current General government Mayor and council Administration Non departmental Municipal court Total general government 76,619 2,672,360 5,141,607 446,749 8,337,335 76,619 2,794,360 2,144,305 446,749 5,462,033 70,280 2,724,710 802,928 426,945 4,024,863 6,339 69,650 1,341,377 19,804 1,437,170 Development services 1,359,678 1,359,678 1,210,967 148,711 Public safety Fire and emergency Law enforcement Total public safety 4,402,834 5,456,036 9,858,870 1,036,314 4,614,406 5,650,720 830,650 4,574,193 5,404,843 205,664 40,213 245,877 Public works 1,497,800 1,511,800 1,311,745 200,055 Culture and recreation 3,719,221 3,744,221 3,292,151 452,070 Capital outlay Total expenditures 209,300 24,982,204 245,602 17,974,054 209,920 15,454,489 35,682 2,519,565 (76,709) 6,931,451 12,800,498 5,869,047 (9,875,527) (9,875,527) (9,875,527) (9,875,527) (4,006,480) Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses): Changes in fund balances Fund balances, beginning of year Fund balances (deficits), end of year $ (76,709) 6,931,451 2,924,971 14,460,573 14,460,573 14,460,573 14,383,864 $ 21,392,024 See accompanying notes to this schedule. Page 72 $ 17,385,544 $ $ 2,305,819 57,948 358,667 55,735 63,199 (130,701) 269,612 6,773 362,430 3,349,482 (4,006,480) TOWN OF FOUNTAIN HILLS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL HIGHWAY USER REVENUE YEAR ENDED JUNE 30, 2023 Budgeted Amounts Original Revenues: Sales taxes Intergovernmental Charges for services Other Investment earnings Total revenues $ 1,197,552 2,679,005 100,000 31,000 10,000 4,017,557 Expenditures: Current Public works Capital outlay Total expenditures 5,908,110 Excess (deficiency) of revenues over expenditures Final $ 1,197,552 2,679,005 100,000 31,000 10,000 4,017,557 Actual $ 1,419,744 2,606,929 3,664 15,855 197,804 4,243,996 5,908,110 4,549,761 44,324 4,594,085 (1,890,553) (5,590,553) (770,029) 4,820,524 4,200,000 4,200,000 4,200,000 4,200,000 9,020,524 (1,890,553) (5,590,553) 3,429,971 Fund balances, beginning of year 3,903,296 3,903,296 3,903,296 2,012,743 $ (1,687,257) See accompanying notes to this schedule. Page 73 222,192 (72,076) (96,336) (15,145) 187,804 226,439 4,988,349 25,676 5,014,025 Changes in fund balances $ $ 9,538,110 70,000 9,608,110 Other financing sources (uses): Transfer in Total other financing sources (uses) Fund balances (deficits), end of year Variance with Final Budget Positive (Negative) $ 7,333,267 $ 9,020,524 TOWN OF FOUNTAIN HILLS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GRANTS YEAR ENDED JUNE 30, 2023 Variance with Final Budget Positive (Negative) Budgeted Amounts Original Revenues: Intergovernmental Investment earnings Total revenues $ 11,190,000 11,129,535 Expenditures: Current General government Public safety Total expenditures 981,850 4,208,150 5,190,000 5,129,535 4,208,150 9,337,685 385,875 4,208,150 4,594,025 4,743,660 Changes in fund balances 6,000,000 1,791,850 106,156 (1,685,694) 8,441 8,441 8,441 Fund balances, end of year $ 6,008,441 $ Actual 4,605,125 95,056 4,700,181 Fund balances, beginning of year 11,190,000 Final $ 11,129,535 1,800,291 See accompanying notes to this schedule. Page 74 $ $ 114,597 $ (6,524,410) 95,056 (6,429,354) 4,743,660 $ (1,685,694) TOWN OF FOUNTAIN HILLS, ARIZONA NOTE TO REQUIRED SUPPLEMENTARY INFORMATION JUNE 30, 2023 NOTE 1 – BUDGETARY BASIS OF ACCOUNTING The Town budget is prepared on a basis consistent with accounting principles generally accepted in the United States of America. 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 departments. 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 75 (This page intentionally left blank) Page 76 COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES Page 77 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING BALANCE SHEET - ALL NON-MAJOR GOVERNMENTAL FUNDS - BY FUND TYPE JUNE 30, 2023 Special Revenue ASSETS Cash and investments Intergovernmental receivable Taxes receivable Interest receivable Prepaid items Total assets $ Debt Service $ $ 2,229,588 22,260 149 1,515 2,326 2,255,838 $ LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: $ Accounts payable Accrued wages and benefits Total liabilities 68,307 8,821 77,128 $ $ 2,130,124 212,269 $ 2,130,124 88 $ 88 26,334 Fund balances: Nonspendable Restricted Committed Assigned Total fund balances Page 78 185,974 26,295 Deferred inflows of resources: Unavailable revenues - property taxes Total liabilities, deferred inflows of resources and fund balances Capital Projects 2,326 15,338 1,766,428 394,618 2,178,710 $ 2,255,838 $ 185,847 2,130,124 185,847 2,130,124 212,269 $ 2,130,124 Total Non-Major Governmental Funds $ $ $ 4,545,686 22,260 26,444 1,515 2,326 4,598,231 68,395 8,821 77,216 26,334 2,326 2,331,309 1,766,428 394,618 4,494,681 $ 4,598,231 Page 79 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, 2023 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 Debt service Fiscal charges Total expenditures 8,778 709,872 2,556 110,594 8,573 29,071 60,409 929,853 Debt Service Capital Projects $ $ 380,963 78,997 459,960 5,824 5,824 285,728 401,015 291,320 978,063 98 98 Excess (deficiency) of revenues over expenditures (48,210) 5,726 Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses) 597,340 (97,340) 500,000 Changes in fund balances 451,790 5,726 184,960 1,726,920 180,121 1,945,164 Fund balances, beginning of year Fund balances, end of year Page 80 $ 2,178,710 459,960 (275,000) (275,000) $ 185,847 $ 2,130,124 Total Non-Major Governmental Funds $ 8,778 709,872 383,519 110,594 8,573 29,071 145,230 1,395,637 285,728 401,015 291,320 98 978,161 417,476 597,340 (372,340) 225,000 642,476 3,852,205 $ 4,494,681 Page 81 (This page intentionally left blank) Page 82 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 83 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING BALANCE SHEET - NON-MAJOR SPECIAL REVENUE FUNDS JUNE 30, 2023 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 84 $ 581,029 17,379 Tourism $ 149,064 $ 1,195 150,259 1,515 $ 627,429 $ $ 1,507 $ 1,507 Fund balances: Nonspendable Restricted Committed Assigned Total fund balances Total liabilities and fund balances 621,569 4,345 Economic Development $ 1,131 599,539 884 5,713 6,597 $ 12,939 3,108 16,047 1,131 1,195 625,922 591,811 133,017 625,922 592,942 134,212 627,429 $ 599,539 $ 150,259 Local Court Enhancement Environmental Cottonwoods Maintenance $ $ $ 415,142 536 445,932 16,852 Totals $ 149 $ 415,678 $ $ 445,932 $ 17,001 $ $ 51,314 $ 1,663 $ 51,314 1,663 415,678 394,618 394,618 $ 415,678 Page 85 $ 445,932 15,338 $ 17,001 68,307 8,821 77,128 2,326 15,338 1,766,428 394,618 2,178,710 15,338 415,678 2,229,588 22,260 149 1,515 2,326 2,255,838 $ 2,255,838 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NON-MAJOR SPECIAL REVENUE FUNDS YEAR ENDED JUNE 30, 2023 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 Total expenditures Excess (deficiency) of revenues over expenditures Economic Development $ Tourism $ 141,974 567,898 4,501 4,058 110,594 14 15,480 161,955 16,190 588,146 8,637 119,245 54,623 215,176 54,623 215,176 291,320 291,320 107,332 372,970 (172,075) Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses) 97,340 (97,340) (97,340) 97,340 Changes in fund balances 107,332 275,630 (74,735) Fund balances, beginning of year 518,590 317,312 208,947 Fund balances, end of year Page 86 $ 625,922 $ 592,942 $ 134,212 Local Court Enhancement Environmental Cottonwoods Maintenance $ $ $ 8,778 Totals $ 2,556 29,071 161 29,232 19,387 21,943 554 9,332 393,664 7,351 15,929 393,664 7,351 285,728 401,015 291,320 978,063 13,303 (371,721) 1,981 (48,210) 15,929 500,000 597,340 (97,340) 500,000 500,000 $ 8,778 709,872 2,556 110,594 8,573 29,071 60,409 929,853 13,303 128,279 1,981 451,790 402,375 266,339 13,357 1,726,920 415,678 Page 87 $ 394,618 $ 15,338 $ 2,178,710 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, 2023 Downtown Strategy Budget Revenues: Property taxes Sales taxes Licenses and permits Intergovernmental Other Fines and forfeitures Investment earnings Total revenues $ Variance Positive (Negative) Actual $ 119,755 $ 141,974 22,219 4,501 4,501 1,260 121,015 15,480 161,955 14,220 40,940 65,200 54,623 10,577 65,200 54,623 10,577 55,815 107,332 51,517 Changes in fund balances 55,815 107,332 51,517 Fund balances, beginning of year 518,590 518,590 Expenditures: Current General government Public works Culture and recreation Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses) Fund balances (deficits), end of year Page 88 $ 574,405 $ 625,922 $ 51,517 Economic Development Budget $ Variance Positive (Negative) Actual $ 479,021 $ Tourism $ $ 567,898 88,877 4,058 4,058 240 479,261 16,190 588,146 15,950 108,885 246,320 215,176 31,144 246,320 215,176 232,941 372,970 (97,340) (97,340) (97,340) (97,340) 135,601 275,630 317,312 317,312 452,913 $ 592,942 Budget Actual $ $ 125,465 110,594 14 (14,871) 14 180 125,645 8,637 119,245 8,457 (6,400) 31,144 317,179 317,179 291,320 291,320 25,859 25,859 140,029 (191,534) (172,075) 19,459 97,340 97,340 97,340 97,340 (94,194) (74,735) 208,947 208,947 140,029 $ Variance Positive (Negative) 140,029 $ 114,753 $ 134,212 19,459 $ 19,459 (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, 2023 Local Court Enhancement Budget Revenues: Property taxes Sales taxes Licenses and permits Intergovernmental Other Fines and forfeitures Investment earnings Total revenues $ Variance Positive (Negative) Actual $ $ 49,000 900 49,900 29,071 161 29,232 (19,929) (739) (20,668) 89,850 15,929 73,921 89,850 15,929 73,921 (39,950) 13,303 53,253 Changes in fund balances (39,950) 13,303 53,253 Fund balances, beginning of year 402,375 402,375 Expenditures: Current General government Public works Culture and recreation Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses) Fund balances (deficits), end of year Page 90 $ 362,425 $ 415,678 $ 53,253 Environmental Budget $ $ Cottonwoods Maintenance Variance Positive (Negative) Actual $ $ Budget $ 8,670 Variance Positive (Negative) Actual $ 8,778 $ 108 2,556 2,556 2,400 2,400 19,387 21,943 16,987 19,543 72 8,742 554 9,332 482 590 627,100 393,664 233,436 12,388 7,351 5,037 627,100 393,664 233,436 12,388 7,351 5,037 (624,700) (371,721) 252,979 (3,646) 1,981 5,627 500,000 500,000 500,000 500,000 (624,700) 128,279 752,979 (3,646) 1,981 5,627 266,339 266,339 13,357 13,357 (358,361) $ 394,618 $ 752,979 $ 9,711 $ 15,338 $ 5,627 (Continued) Page 91 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, 2023 Totals Budget Revenues: Property taxes Sales taxes Licenses and permits Intergovernmental Other Fines and forfeitures Investment earnings Total revenues 49,000 5,052 786,963 Expenditures: Current General government Public works Culture and recreation Total expenditures 401,370 639,488 317,179 1,358,037 285,728 401,015 291,320 978,063 115,642 238,473 25,859 379,974 Excess (deficiency) of revenues over expenditures (571,074) (48,210) 522,864 Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses) 97,340 (97,340) 597,340 (97,340) 500,000 500,000 Changes in fund balances (571,074) 451,790 1,022,864 Fund balances, beginning of year 1,726,920 1,726,920 Page 92 8,670 598,776 Actual 8,778 709,872 2,556 110,594 8,573 29,071 60,409 929,853 Fund balances (deficits), end of year $ Variance Positive (Negative) $ 125,465 $ 1,155,846 $ 2,178,710 $ 108 111,096 2,556 (14,871) 8,573 (19,929) 55,357 142,890 500,000 $ 1,022,864 (This page intentionally left blank) Page 93 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING BALANCE SHEET - NON-MAJOR DEBT SERVICE FUNDS JUNE 30, 2023 ASSETS Cash and investments Taxes receivable Total assets General Obligation Debt Service Eagle Mountain Debt Service Municipal Property Corporation Debt Service $ $ 19,234 $ 11,427 $ 19,234 $ 11,427 $ 88 88 $ $ 155,313 26,295 181,608 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: $ Accounts payable Total liabilities Deferred inflows of resources: Unavailable revenues - property taxes 26,334 Fund balances: Restricted Total fund balances 155,274 155,274 Total liabilities, deferred inflows of resources and fund balances Page 94 $ 181,608 19,146 19,146 $ 19,234 11,427 11,427 $ 11,427 Totals $ $ $ 185,974 26,295 212,269 88 88 26,334 185,847 185,847 $ 212,269 Page 95 TOWN OF FOUNTAIN HILLS, ARIZONA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NON-MAJOR DEBT SERVICE FUNDS YEAR ENDED JUNE 30, 2023 Revenues: Investment earnings Total revenues General Obligation Debt Service Eagle Mountain Debt Service Municipal Property Corporation Debt Service $ $ $ 4,712 4,712 Expenditures: Debt service Fiscal charges Total expenditures Changes in fund balances Fund balances, beginning of year Fund balances, end of year Page 96 $ 710 710 402 402 88 88 10 10 4,712 622 392 150,562 18,524 11,035 155,274 $ 19,146 $ 11,427 Totals $ 5,824 5,824 98 98 5,726 180,121 $ 185,847 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, 2023 General Obligation Debt Service Budget Revenues: Property taxes Investment earnings Total revenues Variance Positive (Negative) Actual $ $ 1,200 1,200 $ 4,712 4,712 Expenditures: Debt service Fiscal charges Total expenditures 350 350 Changes in fund balances 850 4,712 150,562 150,562 Fund balances, beginning of year Fund balances, end of year Page 98 $ 151,412 3,512 3,512 350 350 $ 155,274 3,862 $ 3,862 Eagle Mountain Debt Service Budget $ $ 1,380 100 1,480 Municipal Property Corporation Debt Service Variance Positive (Negative) Actual 710 710 (1,380) 610 (770) 14,200 14,200 88 88 (12,720) 622 18,524 18,524 5,804 $ $ $ 19,146 $ Budget Variance Positive (Negative) Actual $ $ $ 100 100 402 402 302 302 14,112 14,112 1,010 1,010 10 10 1,000 1,000 13,342 (910) 392 1,302 11,035 11,035 13,342 $ 10,125 $ 11,427 $ 1,302 (Continued) Page 99 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, 2023 Totals Budget Revenues: Property taxes Investment earnings Total revenues $ 1,380 1,400 2,780 Variance Positive (Negative) Actual $ 5,824 5,824 $ (1,380) 4,424 3,044 Expenditures: Debt service Fiscal charges Total expenditures 15,560 15,560 98 98 15,462 15,462 Changes in fund balances (12,780) 5,726 18,506 Fund balances, beginning of year 180,121 180,121 Fund balances, end of year Page 100 $ 167,341 $ 185,847 $ 18,506 TOWN OF FOUNTAIN HILLS, ARIZONA BALANCE SHEET - NON-MAJOR CAPITAL PROJECTS FUND JUNE 30, 2023 Development Fees ASSETS Cash and investments Total assets LIABILITIES AND FUND BALANCES Fund balances: Restricted Total fund balances Total liabilities and fund balances Page 101 $ $ 2,130,124 2,130,124 $ 2,130,124 2,130,124 $ 2,130,124 TOWN OF FOUNTAIN HILLS, ARIZONA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NON-MAJOR CAPITAL PROJECTS FUND YEAR ENDED JUNE 30, 2023 Development Fees Revenues: Licenses and permits Investment earnings Total revenues $ 380,963 78,997 459,960 Excess (deficiency) of revenues over expenditures 459,960 Other financing sources (uses): Transfer out Total other financing sources (uses) (275,000) (275,000) Changes in fund balances 184,960 1,945,164 Fund balances, beginning of year Fund balances, end of year Page 102 $ 2,130,124 (This page intentionally left blank) 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, 2023 Capital Projects Budget Revenues: Sales taxes Licenses and permits Intergovernmental Other Investment earnings Total revenues $ 1,141,951 Variance Positive (Negative) Non-GAAP Actual $ 1,724,626 $ 582,675 70,000 140,284 70,284 10,000 1,221,951 132,283 1,997,193 122,283 775,242 Expenditures: Current General government Public works Capital outlay Total expenditures 2,800 307,148 6,439,092 6,749,040 1,215 59,648 4,263,138 4,324,001 1,585 247,500 2,175,954 2,425,039 Excess (deficiency) of revenues over expenditures (5,527,089) (2,326,808) 3,200,281 275,000 3,950,527 3,675,527 275,000 3,950,527 3,675,527 Changes in fund balances (5,252,089) 1,623,719 6,875,808 Fund balances, beginning of year 4,068,310 4,068,310 Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses) Fund balances (deficits), end of year Page 104 $ (1,183,779) $ 5,692,029 $ 6,875,808 Facilities Replacement Fund $ Variance Positive (Negative) Non-GAAP Actual Budget $ Development Fees $ $ Budget $ Actual $ $ 459,007 380,963 (78,044) 3,000 462,007 78,997 459,960 75,997 (2,047) 462,007 459,960 (2,047) 1,000 1,000 4,000 136,115 140,115 4,000 135,115 139,115 1,050,000 781,979 268,021 1,050,000 781,979 268,021 (1,049,000) (641,864) 407,136 1,500,000 1,500,000 1,500,000 1,500,000 (275,000) (275,000) (275,000) (275,000) (1,049,000) 858,136 1,907,136 187,007 184,960 5,925,921 5,925,921 1,945,164 1,945,164 4,876,921 $ 6,784,057 $ 1,907,136 $ Variance Positive (Negative) 2,132,171 $ 2,130,124 (2,047) $ (2,047) (Continued) Page 105 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, 2023 Totals Budget Revenues: Sales taxes Licenses and permits Intergovernmental Other Investment earnings Total revenues $ 14,000 1,684,958 1,724,626 380,963 140,284 4,000 347,395 2,597,268 Expenditures: Current General government Public works Capital outlay Total expenditures 2,800 1,357,148 6,439,092 7,799,040 1,215 841,627 4,263,138 5,105,980 1,585 515,521 2,175,954 2,693,060 Excess (deficiency) of revenues over expenditures (6,114,082) (2,508,712) 3,605,370 275,000 (275,000) 5,450,527 (275,000) 5,175,527 5,175,527 8,780,897 Other financing sources (uses): Transfer in Transfer out Total other financing sources (uses) 1,141,951 459,007 70,000 Variance Positive (Negative) Non-GAAP Actual $ Changes in fund balances (6,114,082) 2,666,815 Fund balances, beginning of year 11,939,395 11,939,395 Fund balances (deficits), end of year Page 106 $ 5,825,313 $ 14,606,210 $ 582,675 (78,044) 70,284 4,000 333,395 912,310 5,175,527 $ 8,780,897 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 107 Town of Fountain Hills, Arizona Net Position by Component Last Ten Fiscal Years (accrual basis of accounting) 2014 Governmental activities: Net investment in capital assets Restricted Unrestricted Total governmental activities net position $ 89,713,260 5,480,867 19,186,823 $ 114,380,950 Source: The source of this information is the Town's financial records. Page 108 Fiscal Year ended June 30 2015 2016 $ 95,325,824 6,310,810 15,180,582 $ 116,817,216 $ 95,647,990 4,530,239 17,232,506 $ 117,410,735 2017 $ 94,909,703 4,471,661 17,578,068 $ 116,959,432 2018 2019 $ 96,777,854 4,589,526 16,244,169 $ 117,611,549 $ 104,781,328 3,646,449 15,258,797 $ 123,686,574 Page 109 Fiscal Year ended June 30 2020 2021 $ 104,004,331 2,766,041 17,388,168 $ 124,158,540 $ 103,822,185 2,610,178 21,318,351 $ 127,750,714 2022 2023 $ 102,346,737 5,749,726 26,010,477 $ 134,106,940 $ 101,838,463 9,646,597 31,955,871 $ 143,440,931 Town of Fountain Hills, Arizona Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) Fiscal Year Ended June 30 2014 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 $ 2,432,965 1,237,717 6,958,056 6,630,875 2,760,690 472,999 20,493,302 2015 $ 2,479,365 2,074,611 6,816,152 4,963,979 2,822,954 698,542 19,855,603 2016 $ 2,516,966 2,253,208 7,178,890 6,476,688 3,124,523 241,694 21,791,969 2017 $ 3,142,722 1,364,378 7,563,898 7,904,577 3,375,414 178,749 23,529,738 215,943 531,193 74,887 250,421 340,353 1,307,738 144,570 2,865,105 337,655 693,670 86,641 236,706 339,158 1,431,017 2,874,796 5,999,643 298,737 1,257,492 90,345 48,688 321,189 1,615,973 381,011 4,013,435 837,163 1,062,094 155,454 216,724 393,028 1,699,931 494,328 4,858,722 Net (Expenses)/Revenues (17,628,197) (13,855,960) (17,778,534) (18,671,016) 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 1,449,646 8,459,267 349,414 5,326,332 123,311 166,115 15,874,085 904,660 8,983,049 352,673 5,713,235 150,358 188,251 16,292,226 2,569,504 9,395,667 360,320 5,813,678 219,058 13,826 18,372,053 2,296,199 9,415,151 367,119 6,057,278 55,127 28,839 18,219,713 $ (1,754,112) $ 2,436,266 Changes in Net Position Governmental activities Source: The source of this information is the Town's financial records. Page 110 $ 593,519 $ (451,303) Fiscal Year Ended June 30 2018 $ $ 3,431,752 1,460,967 7,567,012 7,380,663 3,311,648 118,552 23,270,594 2019 $ 3,318,477 867,725 8,142,069 10,263,244 3,767,996 57,054 26,416,565 2020 $ 3,470,936 825,884 9,003,452 9,961,306 3,490,447 881 26,752,906 2021 $ 6,687,041 968,808 6,321,489 10,175,540 3,601,870 7,544 27,762,292 2022 $ 4,333,863 1,068,260 9,487,150 9,780,920 3,999,178 28,669,371 2023 $ 4,890,912 1,206,991 9,930,356 10,792,078 4,776,903 31,597,240 295,716 1,314,915 155,973 52,465 497,914 1,737,958 304,951 4,359,892 280,312 1,143,871 90,774 10,214 1,151,500 1,850,676 181,939 4,709,286 533,189 608,892 100,444 131,750 409,651 2,007,841 91,245 3,883,012 310,411 693,161 104,726 355,619 435,432 4,733,757 135,525 6,768,631 498,242 947,431 89,140 654,434 641,269 6,381,580 161,751 9,373,847 516,373 762,929 136,082 359,972 640,365 6,729,883 259,266 9,404,870 (18,910,702) (21,707,279) (22,869,894) (20,993,661) (19,295,524) (22,192,370) 2,263,623 10,311,577 421,682 6,396,667 158,860 10,410 19,562,819 2,476,546 11,491,123 423,947 6,514,470 554,549 202,969 6,118,700 27,782,304 2,077,368 13,172,390 434,896 6,874,771 545,983 236,452 23,341,860 402,481 15,657,292 426,260 7,787,184 49,665 262,953 24,585,835 9,728 17,660,758 399,007 7,721,123 (419,006) 280,140 25,651,750 9,854 20,586,294 382,948 9,221,691 1,099,525 226,049 31,526,361 652,117 Page 111 $ 6,075,025 $ 471,966 $ 3,592,174 $ 6,356,226 $ 9,333,991 Town of Fountain Hills, Arizona Fund Balances — Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year ended June 30 2014 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 $ $ $ $ 14,358 18,348 1,345,200 1,647,193 4,972,853 7,997,952 $ 1,973,067 997 3,505,590 2,089,361 7,147,586 14,716,601 $ Source: The source of this information is the Town's financial records. Page 112 2015 2016 2017 6,975 10,655 2,634,923 1,872,492 4,369,457 8,894,502 $ 9,272 4,123 2,652,357 1,701,086 5,853,806 $ 10,220,644 $ 1,645,000 656 10,066,786 1,079,780 5,444,124 $ 18,236,346 $ $ $ 5,055 4,500,044 1,366,081 5,943,364 $ 11,814,544 $ 5,872 16,868 2,714,135 1,743,768 2,696,999 7,177,642 474 4,432,710 8,576,250 1,784,761 $ 14,794,195 Fiscal Year ended June 30 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 $ - $ 4,571,263 3,579,891 7,248,890 5,868,386 2,340,683 2,592,343 $ 14,160,836 $ 12,040,620 Page 113 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 - $ 2,708,883 6,068,810 2,402,244 (66,361) $ 11,113,576 $ 2022 $ 14,845 36,464 3,664,240 1,278,191 9,466,833 $ 14,460,573 2023 $ 12,923 44,542 4,044,890 1,639,184 11,644,005 $ 17,385,544 - $ - $ 4,253 2,326 2,541,894 5,701,067 9,368,764 4,430,491 5,511,281 7,458,457 1,845,901 6,541,572 7,589,084 8,818,286 $ 17,758,173 $ 24,418,631 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 2015 2016 2014 Revenues Taxes Licenses and permits Leases and rents Intergovernmental Charges for services Other Fines and forfeitures Investment earnings Total revenues $ 10,271,737 891,782 252,584 6,677,518 161,376 134,114 170,995 123,311 18,683,417 $ 10,240,382 1,043,382 269,753 9,770,048 176,541 188,251 186,456 150,358 22,025,171 $ 12,299,285 1,372,045 258,165 7,559,436 197,109 147,662 209,380 219,058 22,262,140 2017 $ 12,069,714 1,310,973 284,090 7,917,651 351,476 153,438 257,727 55,127 22,400,196 Expenditures Current: General government Development services Public safety Public works Culture and recreation Capital outlay Debt service: Principal Interest Other debt service Total expenditures 2,194,845 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 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 2,415,000 460,811 12,188 20,506,560 1,850,000 454,957 243,585 25,610,962 4,260,000 308,106 2,005 27,357,799 2,675,000 244,986 2,180 22,463,548 Excess (deficiency) of revenues over (under) expenditures (1,823,143) (3,585,791) (5,095,659) (63,352) Other Financing Sources (Uses) Transfers in Transfers out Proceeds from sale of capital assets Issuance of refunding bonds Issuance of long-term debt Bond Premium Payment to refunded bonds escrow agent Total other financing sources (uses) 1,838,453 (1,838,453) - 2,519,774 (2,519,774) 4,180,000 7,565,000 342,086 (4,085,000) 8,002,086 562,044 (562,044) - 5,194,138 (5,194,138) - Net change in fund balances $ (1,823,143) $ 4,416,295 $ (5,095,659) $ (63,352) Expenditures for capitalized assets $ 2,385,168 9,067,254 $ 6,394,346 1,696,612 Debt service as a percentage of noncapital expenditures 15.9% Source: The source of this information is the Town's financial records. Page 114 $ 15.4% 21.8% $ 14.1% 2018 $ Fiscal Year Ended June 30 2020 2021 2019 2022 2023 13,019,341 2,004,386 282,531 8,266,028 254,122 207,697 182,997 158,860 24,375,962 $ 14,342,801 2,040,622 280,801 8,401,676 181,105 347,141 130,483 554,549 26,279,178 $ 15,694,054 835,731 286,391 8,920,296 222,947 387,225 281,704 545,983 27,174,331 $ 16,510,939 1,293,172 264,621 12,713,449 99,090 320,291 239,191 49,654 31,490,407 $ 18,071,247 $ 20,978,020 2,039,349 1,524,278 333,946 355,607 14,124,324 15,919,459 171,157 216,438 431,838 403,305 223,964 240,844 (419,224) 1,094,158 34,976,601 40,732,109 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 6,513,419 954,667 8,906,428 6,321,814 2,726,748 4,758,067 4,105,257 1,041,531 9,180,108 5,712,452 3,166,526 3,828,699 4,697,681 1,210,967 9,612,993 7,542,736 3,583,471 4,498,734 2,720,000 185,164 1,805 25,015,670 2,635,000 123,871 1,600 28,276,029 2,310,000 67,301 1,998 26,395,724 400,000 7,044 500 30,588,687 598 27,035,171 98 31,146,680 (639,708) (1,996,851) 778,607 901,720 7,941,430 9,585,429 4,543,728 (4,543,728) - 3,672,532 (3,672,532) - 1,928,978 (1,928,978) 418,585 418,585 3,086,628 (3,136,628) (50,000) 11,962,153 (11,962,153) - 10,247,867 (10,247,867) - $ (639,708) $ (1,996,851) $ 1,197,192 $ 851,720 $ 7,941,430 $ 9,585,429 $ 4,293,214 2,689,270 $ 4,758,055 $ 3,890,700 $ 4,497,424 14.0% Page 115 $ 4,465,837 11.6% $ 10.0% 1.8% 0.0% 0.0% 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 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Property Tax 1,463,056 904,660 2,543,298 2,287,444 2,286,081 2,427,730 2,086,769 427,387 11,482 8,778 Sales Tax 8,459,267 8,983,050 9,391,267 9,419,551 10,311,578 11,491,124 13,172,389 15,657,292 17,660,758 20,586,294 Franchise Tax 349,414 352,673 360,320 367,119 421,682 423,947 434,896 426,260 399,007 382,948 Source: The source of this information is the Town's financial records. Page 116 Total 10,271,737 10,240,383 12,294,885 12,074,114 13,019,341 14,342,801 15,694,054 16,510,939 18,071,247 20,978,020 Town of Fountain Hills, Arizona Assessed Value and Estimated Actual Value of Taxable Property Last Ten Fiscal Years Fiscal Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Net Assessed Taxable Value* 365,963,182 403,330,477 402,223,763 423,688,665 444,639,625 466,895,716 494,576,905 520,103,815 546,532,825 575,824,127 Total Direct Tax Rate** 0.2773 0.1151 0.5246 0.4472 0.4259 0.4257 0.3382 - Estimated Actual Taxable Value* 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 5,164,740,322 5,453,898,649 Net Assessed Taxable Value as a Percentage of Estimated Actual Taxable Value 10.89% 10.83% 10.74% 10.68% 10.67% 10.66% 10.62% 10.59% 10.58% 10.56% 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 since FY20. Page 117 Town of Fountain Hills, Arizona Principal Property Taxpayers June 30, 2022 and 2014 2022 Net Limited Assessed Value Rank 4,104,443 1 4,014,150 2 2,664,494 3 2,484,873 4 1,917,085 5 1,579,590 6 1,446,429 7 1,438,833 8 1,435,594 9 1,315,948 10 Taxpayer RCS-Park Place 1 LLC EPCOR - Chaparral City Water Company Hunter Retail LLC FFI Fountain View Owner LLC Whitestone Fountain Hills, LLC Strathmore Company LLC Fountain Hills Apartments LLC Fountain Hills Invest Co., LLC Target Corporation Palisades Resorts LLC Chapparal City Water Company Inland Western Fountain Hills Four Peaks LLC WSL Fountain View Investors V, LLC Firerock LLC Smith's Food & Drug Qwest Corporation EN LLC Fountain Hills Hotel Developers LLC Totals $ 22,401,439 2014 Percentage of Total Net Limited Assessed Value 0.75% 0.73% 0.49% 0.45% 0.35% 0.29% 0.26% 0.26% 0.26% 0.24% 4.08% 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. Note: 2023 data was unavailable from the Maricopa County Assessor's Office. 2022 data used instead. Page 118 Net Full Cash Assessed Value $ $ Rank Percentage of Total Net Full Cash Assessed Value 1,738,782 3 0.48% 1,585,664 5 0.43% 3,314,550 2,868,437 1,681,860 1,340,312 1,261,980 1,193,858 1,491,136 1,062,651 1 2 4 6 7 8 9 10 0.91% 0.78% 0.46% 0.37% 0.34% 0.33% 0.41% 0.29% 17,539,230 4.80% Town of Fountain Hills, Arizona Property Tax Levies and Collections Last Ten Fiscal Years Fiscal Year Total Tax Levy Current Tax Collections Percent of Current Taxes Collected 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 1,449,884 892,104 2,532,115 2,278,728 2,272,027 2,404,250 2,092,340 397,416 6,381 8,669 1,426,612 881,170 2,502,995 2,241,482 2,230,328 2,369,262 2,044,210 392,363 6,326 8,669 98.4% 98.8% 98.8% 98.4% 98.2% 98.5% 97.7% 98.7% 99.1% 100.0% Delinquent Tax Collections Total Tax Collections Ratio of Total Tax Collections to Total Tax Levy 18,215 6,903 18,913 29,003 30,908 19,709 37,403 5,064 55 - 1,444,827 888,073 2,521,908 2,270,485 2,261,236 2,388,971 2,081,613 397,427 6,381 8,669 99.7% 99.5% 99.6% 99.6% 99.5% 99.4% 99.5% 100.0% 100.0% 100.0% Source: The source of this information is the Maricopa County Treasurer's Office. Page 119 Town of Fountain Hills, Arizona Taxable Sales by Category Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year Ended June 30 2015 2016 2014 Sales category: Construction Transportation/utilities Wholesale/retail Restaurants/bars Real estate, rental & leasing Services Other Total $ $ 783,064 1,375,623 3,653,181 655,654 782,453 342,079 867,213 8,459,267 $ $ 935,694 1,405,768 4,214,119 682,180 617,348 604,618 523,323 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 120 $ $ 918,717 1,327,441 4,815,582 742,540 552,856 779,753 254,378 9,391,267 2017 $ $ 730,164 1,288,153 4,982,218 811,985 636,834 852,675 117,523 9,419,552 2018 2019 1,408,332 1,309,928 5,235,992 829,857 745,171 747,834 34,464 $ 10,311,578 $ 1,932,716 1,290,585 5,464,247 893,595 842,233 1,025,548 42,200 $ 11,491,124 $ Page 121 Fiscal Year Ended June 30 2020 2021 $ 1,910,021 1,405,005 7,031,474 892,210 965,124 916,769 51,786 $ 13,172,389 $ 1,990,383 1,529,268 8,956,208 1,062,172 993,228 1,125,753 280 $ 15,657,292 2022 2023 $ 1,780,123 1,501,600 9,834,924 1,446,971 1,103,241 1,992,955 946 $ 17,660,760 $ 3,449,250 1,576,570 10,500,903 1,517,063 1,258,009 2,278,723 5,776 $ 20,586,294 Town of Fountain Hills, Arizona Direct and Overlapping Sales Tax Rates Last Ten Fiscal Years Fiscal Year Ended June 30 2014 2015 2016 2017 2018 2019 2020* 2021 2022 2023 Town Rate 2.60% 2.60% 2.60% 2.60% 2.60% 2.60% 2.90% 2.90% 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 5.60% 5.60% 5.60% 5.60% 5.60% 5.60% 5.60% 5.60% 5.60% 5.60% Total Tax Rate 8.90% 8.90% 8.90% 8.90% 8.90% 8.90% 9.20% 9.20% 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 122 Town of Fountain Hills, Arizona Ratios of Outstanding Debt by Type Last Ten Fiscal Years Fiscal Year Ended June 30 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 General Obligation Bonds* Community Facilities District Bonds** 2,000,000 9,517,086 7,678,669 5,680,252 3,631,835 1,683,417 - 2,495,000 2,300,000 1,935,000 1,560,000 1,180,000 795,000 400,000 - Governmental Activities Municipal Highway Property User Corporation Revenue Bonds* Bonds 4,695,000 3,525,000 1,400,000 1,030,000 670,000 300,000 - Special Assessment Bonds - Total Outstanding Debt - Debt Per Capita 9,190,000 15,342,086 11,013,669 8,270,252 5,481,835 2,778,417 400,000 - 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 123 398 665 477 358 238 120 17 - Town of Fountain Hills, Arizona Ratios of General Bonded Debt Outstanding Last Ten Fiscal Years Percentage of Net General Net General Municipal Net Municipal Obligation Obligation Bonded Property Property General Less: Amounts Net General Estimated Actual Estimated Actual Fiscal Obligation Restricted for Obligation Taxable Value of Year Bonds* Principal Bonds Property Property per Capita Assessed Valuation 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 4,495,000 11,817,086 9,613,669 7,240,252 4,811,835 2,478,417 400,000 - 4,407,051 11,396,304 9,037,388 6,896,555 4,728,650 2,332,317 228,193 - 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 5,436,380,244 5,453,898,649 0.13% 0.31% 0.24% 0.17% 0.11% 0.05% 0.01% 189 483 378 282 192 93 9 - 1.20% 2.83% 2.25% 1.63% 1.06% 0.50% 0.05% 87,949 420,782 576,281 343,697 83,185 146,100 171,807 191,594 194,344 200,754 - - Bonds* 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 124 Total Taxable Value of Bonded Debt Debt per Net Limited Corporation Corporation Debt Revenues-All per Capita 117 75 46 35 27 12 - Sources 18,891,967 22,161,316 22,262,139 22,400,196 24,375,962 26,279,178 27,586,011 31,354,466 35,025,597 40,931,231 Town of Fountain Hills, Arizona Direct and Overlapping Governmental Activities Debt as of June 30, 2023 Outstanding Debt Governmental Unit Overlapping: Maricopa County Special Healthcare District $ 600,335,000 Maricopa County Community College District 135,585,000 East Valley Institute of Technology Fountain Hills Unified School District 5,655,000 Total Overlapping Debt Direct: Town of Fountain Hills, Arizona* General Obligation Bonds Revenue Bonds Eagle Mountain Community Facilities District** Total Direct Debt Estimated Share of Overlapping Debt Estimated Percentage Applicable 1.11% $ 1.11% 2.25% 96.47% Total direct and overlapping debt 6,663,719 1,504,994 5,455,379 13,624,092 $ 13,624,092 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 125 Town of Fountain Hills, Arizona Legal Debt Margin Information Last Ten Fiscal Years Fiscal Year Ended June 30 2014 2015 2016 2017 6% Debt Limit Debt limit Total net debt applicable to limit Legal debt margin $ 21,957,791 $ 21,957,791 $ 24,199,829 $ 24,199,829 $ 28,325,296 $ 28,325,296 Total debt applicable to the limit as a percentage of debt limit - - - - 20% Debt Limit Debt limit Total net debt applicable to limit Legal debt margin $ 73,192,636 2,000,000 $ 71,192,636 $ 80,666,095 9,175,000 $ 71,491,095 $ 94,417,653 7,405,000 $ 87,012,653 $ 102,170,422 5,475,000 $ 96,695,422 Total debt applicable to the limit as a percentage of debt limit 3% 11% 8% 5% 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 126 $ $ 30,651,126 30,651,126 2018 $ $ 2019 31,459,192 31,459,192 $ $ - 32,400,042 32,400,042 $ $ - $ 104,863,974 3,495,000 $ 101,368,974 3% Page 127 Fiscal Year Ended June 30 2020 2021 $ $ 33,907,227 33,907,227 - 108,000,140 1,615,000 106,385,140 1% $ $ 113,024,089 113,024,089 $ $ 35,603,580 35,603,580 2022 $ $ - $ 118,678,601 $ 118,678,601 - 37,800,780 37,800,780 2023 $ $ - $ $ 126,002,599 126,002,599 - 40,238,671 40,238,671 - $ $ 134,128,903 134,128,903 - Town of Fountain Hills, Arizona Calculation of Legal Debt Margin as of June 30, 2023 Net full cash assessed valuation 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 670,644,516 $ 134,128,903 134,128,903 All Other General Obligation Bonds Debt limit - 6% of net full cash assessed valuation Net debt applicable to limit 6% legal debt margin Total legal debt margin 40,238,671 40,238,671 $ 174,367,574 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 128 Town of Fountain Hills Revenue Bond Coverage Last Ten Fiscal Years Municipal Facilities Corporation Revenue Bonds Fiscal Year Ended June 30 Principal Interest Total Pledged Revenues Coverage 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 1,225,000 2,545,000 480,000 370,000 360,000 370,000 300,000 - 234,176 184,500 32,740 22,680 16,686 10,854 4,860 - 1,459,176 2,729,500 512,740 392,680 376,686 380,854 304,860 - 14,313,158 15,583,484 16,250,673 16,815,224 18,194,833 19,765,936 20,862,372 24,001,082 26,453,550 30,620,545 9.8 5.7 31.7 42.8 48.3 51.9 68.4 100.0 100.0 100.0 Source: The source of this information is the Town's financial records. Page 129 Town of Fountain Hills, Arizona Demographic and Economic Statistics Last Ten Calendar Years Calendar Year 2014 2015 2013 Population Per capita personal income 23,318 $ 48,244 23,573 $ 46,619 2016 23,899 $ 48,240 2017 24,482 $ 50,162 24,583 $ Calendar Year 2019 2020 2018 60,531 24,987 $ 54,936 25,200 $ 57,468 2021 23,820 $ 59,791 2022* 23,906 $ 57,550 23,785 $ 60,707 53 53.7 53.8 53.7 53.5 57.5 58.8 59.4 58.6 62.0 Public school enrollment 1,820 1,692 1,619 1,506 1,444 1,380 1,338 1,314 1,267 1,192 Town of Fountain Hills unemployment rate 6.0% 5.4% 2.4% 1.9% 1.6% 3.9% 8.7% 4.9% 4.4% 2.8% Land use Total acres Total square miles Vacant lots 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 13,005.7 20.32 1,158 13,005.7 20.32 1,030 Number of units Housing Lodging Restaurants Shopping centers 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 13,876 4 57 20 14,101 4 57 20 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 3 5 3 5 Median age 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, 2022 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 wa from 2022. Page 130 - 1 1 Town of Fountain Hills, Arizona Principal Employers Prior Fiscal Year and Nine Years Ago 2012 2021* Employer Fountain Hills Unified School District No. 98 Safeway Stores Fountain View Village Rural Metro Corporation Firerock Country Club Fry's Food Stores Target Stores Eagle Mountain Golf Club Fountain Hills Family Practice PC Fountain Hills Medical Center Town of Fountain Hills Golf International Inc Quotemedia Inc Sunridge Canyon Golf Course United States Postal Service Bashas Holiday Inn Totals Total Town employment Percentage Number of of Total Town Employees Rank Employment 270 130 120 110 100 80 70 70 70 70 70 60 60 60 60 60 1,460 1 2 3 4 5 6 7 7 7 7 7 8 8 8 8 8 Number of Employees 4.4% 2.1% 2.0% 1.8% 1.6% 1.3% 1.2% 1.2% 1.2% 1.2% 1.2% 1.0% 1.0% 1.0% 1.0% 1.0% 335 87 136 111 100 105 100 70 1 6 2 3 5 4 5 8 60 10 59 11 63 80 9 7 24.2% 1,306 6,070 5,102 Source: The source of this information is the Maricopa Association of Governments and Town records. Note: MAG data includes employers with 5+ employees and is rounded to nearest 10. * Data for 2022 was not available. Page 131 Rank Town of Fountain Hills, Arizona Authorized Full-time Equivalent Government Employees by Function Last Ten Fiscal Years 2014 2015 2016 Fiscal Year Ended June 30 2017 2018 2019 2020 2021 2022 2023 Municipal court 4.00 3.63 3.63 3.63 3.63 3.63 3.63 3.63 3.63 4.63 Administration 10.56 11.33 11.63 12.25 13.45 13.70 15.20 15.00 16.00 16.24 Public works n/a n/a n/a 9.80 9.80 10.80 12.43 12.43 12.00 13.00 Development services 16.25 16.30 16.30 7.50 8.50 7.50 9.00 9.00 9.00 10.00 Community services 20.18 21.06 20.76 20.76 20.56 20.56 20.56 22.01 24.02 24.52 Total 50.99 52.32 52.32 53.94 55.94 56.19 60.82 62.07 64.65 68.39 Source: The source of this information is the Town's financial records. Page 132 Town of Fountain Hills, Arizona Operating Indicators by Function Last Ten Fiscal years Function/Program 2014 2015 2016 Fiscal Year Ended June 30 2017 2018 2019 2020 Municipal Court Cases filed Hearings/Trials held 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 1,586 1,378 1,823 1,216 Administration FTEs per 1,000 residents Registered voters - general election Voter turnout - general election 2.2 N/A N/A 2.2 16,213 40% 2.2 none none 2.2 16,387 40% 2.3 none none 2.2 16,775 50% 2.4 none none 2.6 18,415 90% 2.7 none none 2.9 18,423 80% Development Services Building permits issued Building inspections conducted Number of code violation cases Number of zoning cases 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 21 620 1,911 586 73 730 5,460 656 95 Community Services Number of Community Center bookings/permits* Number of participants in recreational programs Number of Senior Services members Number of home delivered meals 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 1033* 4,110 1,175 4,581 316** 5,244 1,290 5,449 Law Enforcement (contracted) Physical arrests Traffic violations 743 1,379 445 1,539 220 1,215 220 1,803 214 1,053 67 1,248 86 2,618 56 2,745 49 2,568 67 3,349 Fire & Emergency Medical (contracted) Total incident responses Average response time (in minutes) 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 4,268 4:38 4,709 4:44 Source: The source of this information is the Town's financial records. Note: N/A indicates that the information is not available. *The Community Center was closed from 7/1/22 until 10/3/22 for renovations. **Beginning in 2023, individual bookings were replaced by single day and recurring permits only. Page 133 2021 2022 2023 Town of Fountain Hills, Arizona Capital Assets Statistics by Function Last Ten Fiscal Years Function/Program Public safety Number of fire stations 2014 2015 Fiscal Year Ended June 30 2017 2018 2019 2020 2016 2021 2022 2023 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 85 13 178.9 391 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 13 180.0 391.5 95 13 180.0 391.5 95 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 10.43 119 7 6 7 1 807 15.80 119 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 18.5 119 9 6 7 1 913.2 23.0 119 9 6 7 1 913.2 23.0 Source: The source of this information is the Town's facilities records. Note: N/A indicates the information is not available. Page 134 Town of Fountain Hills 16705 E. Avenue of the Fountains Fountain Hills, Arizona 85268 480-816-5100 www.fountainhillsaz.gov - facebook.com/TownofFountainHills - twitter.com/fhazgov