Town of Fountain Hills, Arizona Popular Annual Financial Report for fiscal year 2016-2017 ending June 30, 2017 Page 3 Page 5 Page 8 Page 10 Page 12 Community Profile 2016-2017 Financial Overview Net Position Property Taxes Awards Page 2 2016-2017 Popular Annual Financial Report The height of desert living. Welcome The Town of Fountain Hills is pleased to present its Popular Annual Financial Report for the fiscal year ended June 30, 2017. This report is intended to present an accessible overview of the Town’s financial position and policies, and its commitment to providing responsive services and programs in a fiscally responsible manner. We share with you details of how the Town’s revenue is generated, where the dollars are spent, and how the local economy impacts Fountain Hills’ overall financial status. Above all, our goal is to provide you with an opportunity to better understand the many financial Members of the Finance Division and staff aspects that affect your local government. across the organization are proud to serve this fine community. We hope that the 2016-2017 The financial information provided here is Popular Annual Financial Report serves its drawn from detailed information found within purpose and helps assure you that every effort the fiscal year 2016-2017 Comprehensive An- is made to manage the community’s resources nual Financial Report (CAFR). The financial wisely for the benefit of all. statements were prepared in conformance with accounting principles generally accepted in the United States of America (GAAP) and audited by an independent accounting firm, receiving an unmodified (or clean) opinion. The numbers contained within the CAFR were obtained by employing the basis of accounting as prescribed by the Governmental Accounting Craig Rudolphy CPA, CPFO, CGFM Standards Board (GASB). Finance Director While the numbers in this Popular Report come from an audited source, they are presented in an abridged, unaudited non-GAAP format. Citizens who wish to review audited GAAP-basis financial statements can refer to the Town’s 2016-2017 CAFR, which is available online at www.fh.az.gov/CAFR. The height of desert living. 2016-2017 Popular Annual Financial Report Page 3 Profile of Fountain Hills, Arizona The Town of Fountain Hills is a master planned offers recreational and cultural programs and community established in 1970 by McCulloch services that contribute to a high quality of life Properties (now MCO Properties, Inc.). Prior to for its residents. The community consists of pri1970, the area was a cattle ranch and was part marily residential property and open space; of of one of the largest land and cattle holdings in the total 20.32 square miles of land, only 2.5% Arizona. The land was purchased by Robert of the total is zoned commercial and/or industriMcCulloch in the late 1960s and the community al, 23.3% is preserved as open space and 51.0% designed by Charles Wood, Jr. (designer of Dis- is residential. neyland in southern California). The centerpiece of Fountain Hills is one of the world's The Town of Fountain Hills is an Arizona Mutallest man-made fountains, a focal point that nicipal Corporation, acting as a general law attracts thousands of visitors each year. town as prescribed in the Arizona Revised Statutes. The Town was incorporated on DecemLocated on 13,006 acres of land, Fountain Hills ber 5, 1989, with the governmental and adminis surrounded by the McDowell Mountains and istrative affairs of the Town operating under the Scottsdale on the west, the Fort McDowell Ya- Council-Manager form of government. The vapai Nation on the east, the Salt River Pima- Mayor is a member of the Town Council who is Maricopa Indian Community on the south, and directly elected by the voters and chairs the by the McDowell Mountain Regional Park on Town Council meetings. The members of the the north. The elevation is 1,520 feet at the Council are elected at large and serve four-year fountain, 3,000 feet on Golden Eagle Boule- overlapping terms. The Town Council is revard, and is approximately 500 feet above sponsible for the adoption of local ordinances, Phoenix. budget adoption, appointment of residents to citizen advisory committees and hiring the Over the past twenty plus years, Fountain Hills Town Manager. The Town Manager is responhas grown from 10,190 residents to a town of sible for implementation of the policies of the 23,899 in 2015. On June 5, 2006, the Town of Town Council and overall management of the Fountain Hills became twenty square miles and Town through department directors and approxabout ten percent larger by annexing 1,300 imately 54 FTE employees. The Presiding acres of State Trust Land. The process to annex Judge, Town Attorney and Town Prosecutor are the State Trust Land occurred over a two and under the direction of the Town Council. one-half year period and development of the land will occur over the next decade. Annexing This Popular Annual Financial Report may be this property into the Town ensures that its fu- accessed on the Town’s website, at ture development will be of the highest quality www.fh.azgov/PAFR. under such Town’s standards as the cut-and-fill ordinance and strict zoning regulations. The Town offers a wide range of living accommodations, from small condominium complexes to large custom homes. Fountain Hills also Page 4 2016-2017 Popular Annual Financial Report The height of desert living. The Government of Fountain Hills, Arizona The Town provides or administers a full range are included in the financial report of the of services including public safety (law en- Town. forcement, fire, animal control); development services (code enforcement, planning and zon- The annual budget serves as the foundation for ing); public works (including construction and the Town of Fountain Hills’ financial planning maintenance of streets and infrastructure); mu- and control. The Town Council formally nicipal court; recreational activities; communi- adopts the budget and appropriates funding for ty center; senior services and cultural events. the General Fund, Excise Tax Funds, Special The Town does not maintain utility or other Revenue Funds, Debt Service Funds, and Capoperations that require the establishment of ital Projects Funds. Therefore, these funds enterprise funds. have appropriated budgets. On or before the second Town Council meeting in April, the Town Manager submits to the Town Council a proposed budget for the fiscal year commencing the following July 1. The budget includes proposed expenditures and the means of fi- nancing them. The Town Council is then required to hold public hearings on the proposed The financial reporting entity (the Town) in- budget and to adopt a final budget by June 30, cludes all the funds of the primary government the close of the Town’s fiscal year. The budget (i.e., the Town of Fountain Hills as legally de- is legally enacted through passage of a resolufined) as well as all of its component units. tion and is prepared by fund and department. The component units consist of legally sepa- The resolution sets the limit for total expendirate entities for which the primary government tures during the fiscal year. The Town Managis financially accountable. Blended component er may authorize transfers from and within perunits, although legally separate entities, are, in sonnel and from operating capital to services substance, part of the primary government’s or supplies within a department. Additional operations and are included as part of the pri- expenditures may be authorized for expendimary government. Accordingly, the Cotton- tures directly necessitated by a natural or manwoods Maintenance District, the Eagle Moun- made disaster as prescribed in the State Constitain Community Facilities District, and the tution, Article 9, Section 20. Fountain Hills Municipal Property Corporation The height of desert living. 2016-2017 Popular Annual Financial Report Page 5 2016-2017 Financial Overview In this section, we present an overview of monies in and monies out for the Town of Fountain Hills for the fiscal year ended June 30, 2017. MONIES IN As a governmental entity, the Town uses fund acTYPE DEFINITIONS counting, or self-balancing sets of accounts segregated REVENUE Taxes - Sales - the Town char ges a local for specific activities. Governmental funds are used to sales tax of 2.6% on most goods purchased in account for tax supported activities and the Town re- the Town. This tax is in addition to the State of ceives the funding it needs to provide services to the Arizona rate of 5.6% and the Maricopa County community from a variety of sources. The table below rate of .7%, for a total sales tax rate of 8.9%. Taxes - Property - the Town does not presents a summary of governmental revenues by pri- charge a primary property tax, only a secondmary type for fiscal years 2016-2017, 2015-2016 and ary property tax. The secondary tax is for debt 2014-2015, in order to present a picture of typical rev- repayment on voter approved bonds enues from year to year. The improving national and (specifically open space, the Library/Museum, local economy contributed to an increase in revenues and Saguaro Boulevard). in 2015 and 2016, and only a slight increase in 2017 of Taxes - Franchise - r evenue r eceived fr om utility (telecommunications) companies for the $138,056 or .6%. Intergovernmental revenue includes right to operate within the Town. income and sales tax shared from the State and distrib- Licenses and Permits - includes building uted based on population. This revenue figure in- permit fees, business and animal license fees, creased over 2016. Charges for services increased fire inspections, etc. from prior years, but revenue from investment earn- Leases and Rents - r ental fees for use of the Center as well as fees from leases ings was significantly lower. The Property tax figure Community for cellular telephone towers. was also reduced. Intergovernmental - these ar e r evenues r e- ceived from other governments or entities, including state shared sales tax, state shared income tax, fire insurance premium tax, vehicle license tax, and state grants. Charges for Services - these are revenues received from services and/or programs provided by the Town such as recreation programs. Other - these are revenues that do not fit under another classification. Fines and Forfeitures - these ar e r evenues received from court fines. Investment Earnings - revenue received from interest on invested monies. Page 6 2016-2017 Popular Annual Financial Report The height of desert living. 2016-2017 Financial Overview - continued MONIES OUT The three-year comparison for Town expenditures shows a decrease in the overall cost of operations. Overall, 2017 total Governmental Fund expenditures were $4,894,251, or 17.9% less than in 2016. The Town contracts for law enforcement and fire and emergency medical services—these contracts include automatic negotiated increases which are reflected in the Public Safety category. Public Works, a new category for 2017, includes Streets and Highways expenditures, which increased due to pavement maintenance. Debt Service includes the annual principal and interest payment for outstanding bonds. Capital Outlay decreased in 2016 due to the completion of the Shea Boulevard Widening project and the Saguaro Boulevard Reconstruction project, and decreased even further in 2017 due to fewer approved projects and purchases. FY 2017 Expenditures Culture and Recreation 11.1% Debt Service 13.0% Capital Outlay 7.5% Public Works 17.6% General Government 12.1% Public Safety 33.0% Development Services 5.7% The height of desert living. 2016-2017 Popular Annual Financial Report Page 7 2016-2017 Financial Overview - continued EXPENDITURE TYPE DEFINITIONS  General Government - functions serving Town operations as a whole, including: Town Council, Town Manager, Town Clerk, Finance, Administrative Services, Information Technology, Town Attorney, and Town Prosecutor.  Public Safety - encompasses the contracted services for Law Enforcement and Fire and Emergency Medical Services departments.  Public Works - represents the Street division and Facilities.  Culture and Recreation - encompasses the services, programs and facilities provided by Parks & Recreation, Community Center and Senior Services.  Development Services - encompasses Engineering, Planning, Building Safety, Code Compliance and Mapping and Graphics divisions.  Capital Outlay - expenditures on the Town’s Capital Improvement Program projects and Facilities Replacement.  Debt Service - interest and other related costs affiliated with the Town’s issuance of debt to support various capital improvement activities. Operating Funds Expenditures Budget and Actual Last Five Fiscal Years (In Millions) $15 Millions $14 $13 $12 Budget $11 Actual $10 2017 2016 2015 Years 2014 2013 Page 8 2016-2017 Popular Annual Financial Report The height of desert living. The Town’s Net Position The Statement of Net Position presents information on all the Town’s assets and liabilities, with the difference between the two reported as net position. Over time, increases and decreases in net position may serve as a useful indicator of whether the financial position of the Town is improving or deteriorating. Net position is categorized by activity type. Governmental activities include services largely funded through revenues such as sales tax and charges for services. ASSETS r epr esent what the Town owns. Curr ent and other assets include cash, investments, and receivables (money due to the Town). Capital assets are land, buildings, infrastructure, vehicles, machinery, and equipment. Capital assets are further broken down as nondepreciable (land, art, and construction in progress) and depreciable (all other capital assets). LIABILITIES represent what the Town owes. Current and other liabilities consist of payables (money due from the Town to pay what it owes). Long-term liabilities represent debt that the Town must pay back and is broken out into the current year and future years. NET POSITION may ser ve, over time, as useful indicator s of a gover nment’s financial position and consist of three components. The largest portion (81%) reflects the Town’s investment in capital assets (land, buildings, infrastructure, vehicles, machinery and equipment), less any outstanding related debt used to acquire those assets. An additional portion of the Town’s net position (4%) represents resources subject to restrictions on how they may be used. These legal restrictions are imposed by outside entities such as federal or state governments. An example of such a restriction is the gasoline tax. The State of Arizona charges the gasoline tax and shares some of it with communities. These revenues are legally restricted by the State to be used only for expenditure on street projects. Portions of net assets are also restricted to pay debt service and fund capital projects. The remainder (15%) of net position is unrestricted as to purpose. The height of desert living. 2016-2017 Popular Annual Financial Report Page 9 Fund Accounting Millions Revenues by Category State and local governLast Five Fiscal Years ments, such as the Town, employ fund accounting whereby as$25 sets and liabilities are grouped according to $20 Other the purpose for which they are to be used. Charges for Services Each grouping, or fund, $15 Investment Revenue operates as a separate Fines and Forfeitures self-balancing set of ac$10 Leases and Rents counts. The General Licenses and Permits Fund is the chief operat$5 ing fund of the Town Intergovernmental and General Fund acTaxes counts for 32.7% of the $total fund balance. Capi2017 2016 2015 2014 2013 tal project funds account Years for the acquisition or construction of major capital facilities as well as facilities replacement. These intended uses can be demonstrated by viewing the components of govHURF General ernmental fund balances. The Fund Balances 10.5% Obligation fund balance is an important as of June 30, 2017 Debt Service component of fiscal planning and 1.2% factors into the Town’s debt ratEagle ing, and has been maintained Mountain General during the Great Recession due Debt Service Fund to the Town Council’s commit0.2% 32.7% ment to fund on-going services Non-Major with on-going revenues. Government al Funds 8.8% Capital Projects Fund 45.9% Municipal Property Corporation Debt Service 0.8% Page 10 The height of desert living. 2016-2017 Popular Annual Financial Report Property Taxes One of the biggest bills resiProperty Tax Levy - Fiscal Year 2016-2017 dents face each year is tied to Entity Primary Rate Secondary Rate the property they own. ProperMaricopa County $ 1.4009 $ ty tax in Fountain Hills is adEducation/Schools 3.3700 1.4745 ministered by Maricopa Coun0.1792 ty, and is based on property Maricopa County Flood Control District Maricopa County Library District 0.0556 value (ad valorem) and typicalFire District Assistance 0.0102 ly included with the resident’s 0.1400 monthly mortgage payment. As Central Arizona Water Conservation 0.2851 the table indicates, only a small Maricopa Special Health District 0.9836 portion (5.1%) of your proper- Fountain Hills Sanitary District Town of Fountain Hills 0.4259 ty taxes go to the Town of Fountain Hills—this portion Total $ 4.7709 $ 3.5541 pays for the annual payment on the bonds approved by voters for open space, the library/museum building and Saguaro Boulevard. The majority of the tax supports Fountain Hills schools, Fountain Hills Sanitary District, and various Maricopa County districts. Currently, property taxes represent one of the most stable sources of revenue for the Town at 10.2% of total revenues. A primary property tax revenue pays for the basic operating costs of government and schools. The Town does not have a primary property tax which can be used for operations. Revenue from the secondary property tax pays for the annual debt service payment on bonds that have been approved by voters and special taxing districts such as the Sanitary District; the rate is set by the County. The rate is calculated using 10% of the assessed valuation of property (assigned by the County), dividing by 100 and multiplying by the tax rate. For example, a residential property with an assessed value of $350,000 Town of Fountain Hills would pay approxFountain Hills Sanitary District imately $2,914 in Maricopa Special Health District taxes ($350,000 x 10% divided by Central Arizona Water Conservation 100 x 8.325). Fire District Assistance Maricopa County Library District Maricopa County Flood Control District Education/Schools Maricopa County $- $1.00 $2.00 Composition of Property Tax $3.00 $4.00 $5.00 $6.00 The height of desert living. 2016-2017 Popular Annual Financial Report Page 11 Capital Investments HOW CAPITAL INVESTMENTS ARE FUNDED The Town’s capital outlay consists of investments in our roads, equipment, public facilities, and parks. Every year, the Town prepares and adopts an on-going Five-Year Capital Improvement Plan that provides for an annual amount of infrastructure improvement projects. Town Council and staff review and update the plan each year as part of the budget process. The projects are funded using a combination of grants and existing funds. DEBT POLICY The Town’s Debt Policy provides a set of criteria to help determine when it is best to fund capital projects using existing revenues, issuing bonds or seeking loans. The Town has an Aa2 bond rating from Moody’s Investors Service for the general obligation bonds. This rating allows the Town to receive very competitive interest rates when issuing debt. Two Year Debt Summary All Funds Debt Type 2017 General Obligation Bonds $ 7,035,000 $ Revenue Bonds 1,030,000 Premium 205,252 Total Debt $ 2016 9,340,000 1,400,000 273,669 DEBT TYPE DEFINITIONS General Obligation Bonds - long-term debt that is repaid from the Town’s available resources. Revenue Bonds - long-term debt with repayment to come from a pledged Town revenue stream. 8,270,252 $ 11,013,669 DEBT MARGIN The State imposes certain debt limitations of REPAYMENT OF OUTSTANDING DEBT 20% and 6% of the net assessed secondary valuation of the Town. For projects involving water, Year ending June 30 Principal Interest sewer, artificial lighting, parks, open space, pub2018 $ 2,720,000 $ 185,092 lic safety, law enforcement, fire and emergency 2019 2,635,000 123,872 facilities, street and transportation facilities and 2020 2,310,000 67,302 recreation facilities, the Town can issue GO 2021 400,000 7,040 bonds up to 20%. For any other general purpose 2022 - improvements, the Town may issue bonds up to Total $ 8,065,000 $ 383,306 the 6% limit. The Town’s available debt margin is $73.0 million in the 20% capacity and $24.1 million in the The repayment of debt is funded using secondary 6% capacity. The Town is currently using only property tax and general fund revenues. 9% of the 20% capacity and none of the 6% capacity. Page 12 2016-2017 Popular Annual Financial Report The height of desert living. Awards Fountain Hills has had its share of accolades. Financial Report (PAFR). The Award for OutThe Arizona Parks and Recreation Association standing Achievement in Popular Annual Finan(APRA) bestowed cial Reporting is a prestigious national award a Sports Program recognizing conformance with the highest standAward on the ards for preparation of state and local governTown for NERF ment popular reports. The requirements are Wars, and a Facilibased on an evaluation of creativity, presentaty Award for the tion, understandability, and reader appeal. This Musical Instrument award is for the Town’s 5th submission of its Park. IFEA/Haas & PAFR. Wilkerson (International FesTwo hundred fifty-eight communities, including tivals & Events Fountain Hills, earned recognition from national Association) awarded six of their coveted Pinna- non-profit KaBOOM! as 2017 Playful City USA cle Awards to the Town. Also, the Fountain Hills communities honoring citTheater was presented with quite a number of ies and towns that ensure ariZoni awards. These honors make us proud, kids get the balanced and and we continually strive to make our communi- active play they need to ty an even better place to live. thrive. From forty-four states and the District of The Government Finance Officers Association Columbia, the Playful City USA honorees range (GFOA) awarded a Certificate of Achievement from eleven-time honorees to first-time recipifor Excellence in Financial Reporting to the ents. In its 10th year, Playful City USA is a naTown of Fountain Hills for its Comprehensive tional recognition program that honors cities and Annual Financial Report (CAFR) for the fiscal towns for taking bold steps to create more play year ended June 30, 2016. This was the 21st con- opportunities for all kids. secutive year that the government has received this prestigious award. The Arizona Office of Tourism recogIn addition, the government also received the nized the Town’s GFOA’s Distinguished Budget Presentation tourism staff with Award for its annual budget for the fiscal year the award for Outbeginning July 1, 2016. In order to qualify for standing Marketing the Distinguished Budget Presentation Award, Campaign for 2017 the government’s budget document was judged for its “Get Out of to be proficient in several categories, including the Valley and into as a policy document, a financial plan, an opera- the Hills!” camtions guide, and a communications device. This paign. The camis the 15th consecutive year that the Town has paign encouraged received the award. visitors to Arizona for major events such as the Waste Management Open, Spring Training Also, the GFOA recognized the Town for its Games, and the Final Four game. June 30, 2016, submission of its Popular Annual The height of desert living. 2016-2017 Popular Annual Financial Report Page 13 Awards - continued The Government Finance Officers Association of the United States and Canada has given an Award for Outstanding Achievement in Popular Annual Financial Reporting to the Town of Fountain Hills, Arizona for its Popular Annual Financial Report for the fiscal year ending June 30, 2016. The Award for Outstanding Achievement in Popular Annual Financial Reporting is a prestigious national award recognizing conformance with the highest standards for preparation of state and local government popular reports. Page 14 The height of desert living. 2016-2017 Popular Annual Financial Report Town of Fountain Hills, Arizona TOWN COUNCIL Mayor Linda M. Kavanagh Vice Mayor Alan Magazine Councilmember Dennis Brown Councilmember Nick DePorter Councilmember Henry Leger Councilmember Art Tolis Councilmember Cecil Yates This Popular Annual Financial Report is intended to summarize the financial information appearing in the fiscal year 2016-2017 Comprehensive Annual Financial Report (CAFR). Copies of the CAFR can be viewed on the Town’s website at www.fh.az.gov/CAFR. The data included in this review is not prepared in accordance with GAAP as only a portion of the Town’s financial statements are presented. TOWN MANAGER Grady E. Miller DEPARTMENT DIRECTORS Finance Director Craig Rudolphy Administrative Services Director David Trimble Community Services Director Rachael Goodwin Development Services Director Robert Rodgers Public Works Director Justin Weldy Presiding Judge Robert Melton Fire Chief Captain David Ott, Rural Metro Corporation District Commander Captain Henry Brandimarte, Maricopa County Sheriff’s Office District Commander U.S. Congress—District 6 Town Prosecutor Mark Iacovino The Law Offices of Mark Iacovino -twitter.com/fhazgov Interim Town Attorney Fredda Bisman, Dickinson Wright TOWN HALL 16705 E. Avenue of the Fountains Fountain Hills, Arizona 85268 Arizona Legislature—District 23 -facebook.com/townoffountainhills -linkedin.com/company/town-of-fountain-hills Telephone: 480-816-5100 Fax: 480-837-3145 Website: www.fh.az.gov