Town of Fountain Hills, Arizona Popular Annual Financial Report for fiscal year 2017-2018 ended June 30, 2018 Page 3 Page 5 Page 8 Page 10 Page 12 Community Profile 2016-2017 Financial Overview Net Position Property Taxes Awards & Community Page 2 2017-2018 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, 2018. 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 2017-2018 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 2017-2018 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 2017-2018 CAFR, which is available online at www.fh.az.gov/CAFR. The height of desert living. 2017-2018 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% was designed by Charles Wood, Jr. (designer of is residential. Disneyland 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 56 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 2017-2018 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 The finan- Town Manager submits to the Town Council a cial report- proposed budget for the fiscal year commencing entity ing the following July 1. The budget includes (the Town) proposed expenditures and the means of fiincludes all 2017 the funds of Principal Employers the primary Fountain Hills Unified School 149 government District No. 98 (i.e., the Fountain View Village 120 Town of Rural Metro Corporation 111 Fountain Firerock Country Club 100 Hills as le98 gally de- Target Stores fined) as nancing them. The Town Council is then rewell as all quired to hold public hearings on the proposed of its com- budget and to adopt a final budget by June 30, ponent the close of the Town’s fiscal year. The budget units. The is legally enacted through passage of a resolucomponent units consist of legally separate tion and is prepared by fund and department. entities for which the primary government is The resolution sets the limit for total expendifinancially accountable. Blended component tures during the fiscal year. The Town Managunits, although legally separate entities, are, in er may authorize transfers from and within persubstance, part of the primary government’s sonnel and from operating capital to services operations and are included as part of the pri- or supplies within a department. Additional mary government. Accordingly, the Cotton- expenditures may be authorized for expendiwoods Maintenance District, the Eagle Moun- tures directly necessitated by a natural or mantain Community Facilities District, and the made disaster as prescribed in the State ConstiFountain Hills Municipal Property Corporation tution, Article 9, Section 20. The height of desert living. 2017-2018 Popular Annual Financial Report Page 5 2017-2018 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, 2018. 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 2017-2018, 2016-2017 and ary property tax. The secondary tax is for debt 2015-2016, 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 Community Cenlocal economy contributed to an increase in revenues ter, and Saguaro Boulevard). of $1,975,766 or 8.8% compared to 2017. Intergovern- Taxes - Franchise - r evenue r eceived fr om utility (telecommunications) companies for the mental revenue includes income and sales tax shared right to operate within the Town. from the State and distributed based on population. Licenses and Permits - includes building This revenue figure again increased in 2018. Charges permit fees, business and animal license fees, for services decreased from prior years, but revenue fire inspections, etc.. Note that animal license from investment earnings was significantly higher. fees are reverted to the County for upcoming years. The Property tax figure had very little change, but oth- fiscal Leases and Rents - r ental fees for use of the er taxes increased more dramatically. Community Center as well as fees from leases Governmental Funds Three Year Revenues Summary by Type 2018 2017 Revenues Taxes: Sales Property Franchise Licenses and Permits Leases and Rents Intergovernmental Charges for Services Other Fines and Forfeitures Investment Earnings Total Revenues $ 10,311,578 2,286,081 421,682 2,004,386 282,531 8,266,028 254,122 207,697 182,997 158,860 $ 24,375,962 $ 9,415,151 2,287,444 367,119 1,310,973 284,090 7,917,651 351,476 153,438 257,727 55,127 $ 22,400,196 for cellular telephone towers. Intergovernmental - these ar e r evenues r e- 2016 $ 9,395,667 2,543,298 360,320 1,372,045 258,165 7,559,436 197,109 147,662 209,380 219,058 $ 22,262,140 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 2017-2018 Popular Annual Financial Report The height of desert living. 2017-2018 Financial Overview - continued MONIES OUT The three-year comparison for Governmental Funds Town expenditures shows an inThree Year Expenditures Summary by Type crease in the overall cost of oper2018 2017 2016 ations. Overall, 2018 total Gov- Expenditures ernmental Fund expenditures General Government $ 3,195,936 $ 2,713,548 $ 2,324,026 were greater than 2017 by Development Services 1,397,249 1,275,147 2,217,814 $2,552,122, or 11.7%. The Town Public Safety 7,402,227 7,420,032 7,034,887 contracts for law enforcement Public Works 3,420,317 3,954,450 2,498,714 and fire and emergency medical Culture and Recreation 2,375,758 2,484,940 2,240,865 services—these contracts include Debt Service 2,906,969 2,922,166 4,570,111 automatic negotiated increases 4,317,214 1,693,265 6,471,382 which are reflected in the Public Capital Outlay Total Expenditures $ 25,015,670 $ 22,463,548 $ 27,357,799 Safety category. Public Works includes Streets and Highways expenditures, which increased in prior years due to pavement maintenance, but decreased in 2018. Debt Service includes the annual principal and interest payment for outstanding bonds. Capital Outlay increased in 2018 due in a large part to construction work on the new fire station and the Adero Canyon Trail. FY 2018 Expenditures Debt Service Culture and 13.0% Recreation 11.1% Public Works 17.6% Capital Outlay 7.5% General Government 12.1% Public Safety 33.0% Development Services 5.7% The height of desert living. 2017-2018 Popular Annual Financial Report Page 7 2017-2018 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, including Engineering.  Culture and Recreation - encompasses the services, programs and facilities provided by Parks & Recreation, Community Center and Senior Services.  Development Services - encompasses 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 2018 2017 2016 Years 2015 2014 Page 8 The height of desert living. 2017-2018 Popular Annual Financial Report The Town’s Net Position Statement of Net Position ASSETS Current and Other Assets Capital Assets, net Total Assets LIABILITIES Current and Other Liabilities Long-Term Liabilities Total Liabilities NET POSITION Net Investment in Capital Assets Restricted Unrestricted Total Net Position 2018 2017 2016 $ 23,821,565 102,259,689 126,081,254 $ 24,037,642 103,179,955 127,217,597 $ 23,190,907 106,661,659 129,852,566 5,475,597 2,994,108 8,469,705 4,588,747 5,669,418 10,258,165 4,025,377 8,416,454 12,441,831 96,777,854 4,589,526 16,244,169 94,909,703 4,471,661 17,578,068 95,647,990 4,530,239 17,232,506 $ 117,611,549 $ 116,959,432 $ 117,410,735 such as sales tax and charges for services. 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 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 (82%) 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 (14%) of net position is unrestricted as to purpose. The height of desert living. 2017-2018 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 assets and lia$25 bilities are grouped according to the purpose for which they are to be $20 Other used. Each grouping, or Charges for Services fund, operates as a sepa$15 Investment Revenue rate self-balancing set of Fines and Forfeitures accounts. The General $10 Fund is the chief operatLeases and Rents ing fund of the Town Licenses and Permits and General Fund ac$5 Intergovernmental counts for 33.6% of the Taxes total fund balance. Capi$tal project funds account 2018 2017 2016 2015 2014 for the acquisition or Years construction of major capital facilities as well as facilities replacement. These intended uses can be demonstrated by viewing the components of governmental fund balances. The fund balFund Balances ance is an important as of June 30, 2018 component of fiscal planning and factors into the Town’s debt rating, and has been maintained during the General Great Recession due to Fund HURF the Town Council’s 15.9% 33.6% commitment to fund onDebt Service going services with onFunds going revenues. Capital 0.4% Projects Non-Major Governmental Fund 40.3% Funds 9.9% Page 10 The height of desert living. 2017-2018 Popular Annual Financial Report Property Taxes Property Tax Levy - Fiscal Year 2017-2018 One of the biggest bills residents face each year is tied to Entity Primary Rate Secondary Rate the property they own. Property Maricopa County $ 1.4009 $ tax in Fountain Hills is admin- Education/Schools 3.3554 1.3933 istered by Maricopa County, Maricopa County Flood Control District 0.1792 and is based on property value Maricopa County Library District 0.0556 (ad valorem) and typically in- Fire District Assistance 0.0107 cluded with the resident’s Central Arizona Water Conservation 0.1400 monthly mortgage payment. As Maricopa Special Health District 0.2941 the table indicates, only a small Fountain Hills Sanitary District 0.9815 portion (5.2%) of your property Town of Fountain Hills 0.4257 taxes go to the Town of Foun$ 4.7563 $ 3.4801 tain Hills—this portion pays for Total the annual payment on the bonds approved by voters for open space, the Community Center 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 Town of Fountain Hills $300,000 would Fountain Hills Sanitary District pay approxiMaricopa Special Health District mately $2,471 in taxes ($300,000 Central Arizona Water Conservation x 10% divided Fire District Assistance by 100 x Maricopa County Library District 8.2364). 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. 2017-2018 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 DEBT TYPE DEFINITIONS All Funds General Obligation Bonds - long-term debt that is repaid Debt Type 2018 2017 from the Town’s available resources. General Obligation Bonds $ 4,675,000 $ 7,035,000 Revenue Bonds - long-term debt with repayment to come Revenue Bonds 670,000 1,030,000 from a pledged Town revenue stream. 136,835 205,252 Premium Total Debt $ 5,481,835 $ 8,270,252 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, rec2019 $ 2,635,000 $ 123,872 reation facility improvements, public safety, law 2020 2,310,000 67,302 enforcement, fire and emergency facilities, and 400,000 7,040 2021 street and transportation facilities, the Town can Total $ 5,345,000 $ 198,214 issue GO bonds up to 20%. For any other general purpose improvements, the Town may issue The repayment of debt is funded using secondary bonds up to the 6% limit. property tax and general fund revenues. The Town’s available debt margin is $101.4 million in the 20% capacity and $31.5 million in the 6% capacity. The Town is currently using only 3% of the 20% capacity and none of the 6% capacity. Page 12 2017-2018 Popular Annual Financial Report The height of desert living. Awards & Community Fountain Hills has had its share of accolades. standing Achievement in Popular Annual FinanIFEA/Haas & Wilkercial Reporting is a prestigious national award son (International Festirecognizing conformance with the highest standvals & Events Associaards for preparation of state and local governtion) awarded three of ment popular reports. The requirements are their coveted Pinnacle based on an evaluation of creativity, presentaAwards to the Town, tion, understandability, and reader appeal. This including Best Single award is for the Town’s sixth submission of its Digital/Social Ad PAFR. (Gold), Best Emergency Preparedness and Risk On June 16, 2018, MCSO District 7 deputies and Management Plan for command staff took part in “Coffee with a Cop” an Event (Gold), and Best Single Magazine Dis- at the new Fountain Hills Starbucks. The event play Ad (Silver). Also, the Fountain Hills Thea- was standing room only with members of the ter was presented with quite a number of ariZoni public talking awards. These honors make us proud, and we to deputies continually strive to make our community an and asking even better place to live. law enforcement related The Government Finance Officers Association questions. The (GFOA) awarded a Certificate of Achievement community for Excellence in Financial Reporting to the was given tips Town of Fountain Hills for its Comprehensive regarding Annual Financial Report (CAFR) for the fiscal crime prevenyear ended June 30, 2017. This was the 22nd tion and given consecutive year that the government has re- insight into the daily operations of the Maricopa ceived this prestigious award. County Sheriff’s Office. In all, it was a successful turnout for the Fountain Hills community and In addition, the government also received the many questions were answered. GFOA’s Distinguished Budget Presentation Award for its annual budget for the fiscal year The Town of Fountain Hills encourages involvebeginning July 1, 2017. In order to qualify for ment in government through volunteerism. Many the Distinguished Budget Presentation Award, community members volunteer their time and the government’s budget document was judged efforts to the Town of Fountain Hills and thereto be proficient in several categories, including by enrich the community every as a policy document, a financial plan, an opera- day. Volunteers work within the tions guide, and a communications device. This Town reducing the cost to delivis the 16th consecutive year that the Town has er services to its residents all received the award. while having fun, meeting others and enjoying new challenges! Also, the GFOA recognized the Town for its Annually, Volunteers are recogJune 30, 2017 submission of its Popular Annual nized at the Volunteer of the Financial Report (PAFR). The Award for Out- Year Awards Ceremony. The height of desert living. 2017-2018 Popular Annual Financial Report Page 13 Awards & Community - 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, 2017. 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 2017-2018 Popular Annual Financial Report The height of desert living. Town of Fountain Hills, Arizona TOWN COUNCIL Mayor Linda M. Kavanagh Vice Mayor Dennis Brown Councilmember Nick DePorter Councilmember Henry Leger Councilmember Alan Magazine Councilmember Art Tolis Councilmember Vacant This Popular Annual Financial Report is intended to summarize the financial information appearing in the fiscal year 2017-2018 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 Economic Development Director Scott Cooper Public Works Director Justin Weldy Town Clerk Elizabeth Burke Fire Chief Captain David Ott, Rural Metro CorpoArizona Legislature—District 23 ration District Commander U.S. Congress—District 6 Captain Henry Brandimarte, Maricopa County -facebook.com/townoffountainhills Sheriff’s Office District Commander -twitter.com/fhazgov Robert Melton -linkedin.com/company/town-of-fountain-hills Mark Iacovino The Law Offices of Mark Iacovino Presiding Judge Town Prosecutor Interim Town Attorney TOWN HALL Mitesh Patel, Dickinson Wright PLLC 16705 E. Avenue of the Fountains Fountain Hills, Arizona 85268 Telephone: 480-816-5100 Fax: 480-837-3145 Website: www.fh.az.gov