CITY OF MESA, AZ Comprehensive Annual ITY MESA, AZ Financial CReport of COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED | JUNE 30, 2018 CITY OF MESA, AZ Comprehensive Annual Financial Report District District District 4 District 1 District 5 2 3 District Mayor John Giles Councilmember Mark Freeman – District 1 Councilmember Jeremy Whittaker – District 2 Councilmember Francisco Heredia – District 3 Councilmember Christopher Glover – District 4 Vice Mayor David Luna – District 5 Councilmember Kevin Thompson – District 6 Chris Brady, City Manager Kari Kent, Assistant City Manager John Pombier, Assistant City Manager Prepared by: Financial Services Department P.O. Box 1466 Mesa, Arizona 85211-1466 (480) 644-2275 www.mesaaz.gov 6 Citizens of Mesa Mayor and City Council City Clerk DeeAnn Mickelsen City Court Matt Tafoya CITY MANAGER Chris Brady City Attorney Jim Smith City Auditor Jennifer Ruttman Advisory Boards and Committees Economic Development Bill Jabjiniak Assistant City Manager Kari Kent Development Services Christine Zielonka Energy Resources Frank McRae Engineering Beth Huning Assistant City Manager John Pombier Deputy City Manager Scott J. Butler Deputy City Manager Natalie Lewis Office of Management and Budget Candace Cannistraro Transit Jodi Sorrell Falcon Field Corinne Nystrom Fire & Medical Department Mary Cameli Mayor and City Council Support Arts & Culture Cindy Ornstein Information Technology Travis Cutright Mesa Counts on College Library Heather Wolf Fleet Services Pete Scarafiotti Grants Community Services Ruth Giese Human Resources Gary Manning Federal and State Affairs Downtown Coordination, DMA Financial Services Irma Ashworth Parks, Recreation & Community Facilities Marc Heirshberg Business Services Ed Quedens Transportation RJ Zeder Enterprise Resource Planning (ERP) Water Resources Jake West Police Department Ramon Batista Chief Financial Officer Michael Kennington U.S. Conference of Mayors/ National League of Cities Regional Initiatives, Maricopa Association of Governments Public Information & Communications Steve Wright Environmental Management & Sustainability Scott Bouchie CITY OF MESA, AZ Comprehensive Annual FinancialINTRODUCTORY Report SECTION C O M P R E H E N S I V E A N N UA L FINANCIAL REPORT 2018 P I O N E E R PA R K TABLE OF CONTENTS Exhibit Page SECTION I – INTRODUCTORY SECTION Table of Contents Letter of Transmittal Certificate of Achievement for Excellence in Financial Reporting I V X SECTION II - FINANCIAL SECTION Independent Auditors’ Report 1 Management’s Discussion and Analysis 4 Basic Financial Statements Government-wide Financial Statements Statement of Net Position Statement of Activities A-1 A-2 16 17 A-3 19 A-4 A-5 20 21 A-6 22 A-7 A-8 A-9 23 25 27 A-10 29 Fund Financial Statements Governmental Funds Financial Statements Balance Sheet Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position Statement of Revenues, Expenditures and Changes in Fund Balances Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities Proprietary Funds Financial Statements Statement of Net Position Statement of Revenues, Expenses and Changes in Net Position Statement of Cash Flows Fiduciary Funds Financial Statements Statement of Fiduciary Assets and Liabilities I TABLE OF CONTENTS (Continued) Exhibit Page Notes to the Financial Statements Note 1 – Summary of Significant Accounting Policies Note 2 – Reconciliation of Governmental Fund Financial Statements to Government-wide Financial Statements Note 3 – Fund Balance Note 4 – Pooled Cash and Investments Note 5 – Accounts Receivable and Due from Other Governments Note 6 – Interfund Receivables, Payables and Transfers Note 7 – Capital Assets Note 8 – Long-term Obligations Note 9 – Refunded, Refinanced and Defeased Obligations Note 10 – Self-Insurance Internal Service Fund Note 11 – Commitments and Contingent Liabilities Note 12 – Net Position Note 13 – Enterprise Activities Operations Detail Note 14 – Joint Ventures Note 15 – Retirement and Pension Plans Note 16 – Post-Employment Benefits Note 17 – Subsequent Events 30 40 47 48 53 54 56 59 71 72 73 73 74 74 77 93 93 Required Supplementary Information Schedule of the City’s Proportionate Share of Net Pension Liability Cost-Sharing Pension Plan Schedule of Changes in the City’s Net Pension/OPEB Liability and Related Ratios Agent Plans Schedule of City Pension Contributions Notes to Pension Plan Schedules Schedule of Changes in the City’s Total OPEB Liability Budgetary Comparison Schedule – General Fund Notes to Budgetary Comparison Schedules II B-1 94 B-2 B-3 95 98 100 101 102 103 B-4 B-5 TABLE OF CONTENTS (Continued) Exhibit Page C-1 104 C-2 108 C-3 C-4 C-5 112 113 114 C-6 115 D-1 D-2 D-3 D-4 D-5 D-6 D-7 D-8 D-9 116 117 118 119 120 121 122 123 124 Combining Statements Non-Major Governmental Funds Combining Balance Sheet Combining Statement of Revenues, Expenditures and Changes in Fund Balances Internal Service Funds Combining Statement of Net Position Combining Statement of Revenues, Expenses and Changes in Net Position Combining Statement of Cash Flows Agency Fund Statement of Changes in Assets and Liabilities Supplemental Information Budgetary Comparison Schedules – Other Non-major Funds Budgetary Comparison Schedule – Community Facilities District Budgetary Comparison Schedule – Environmental Compliance Budgetary Comparison Schedule – Grants and Special Programs Budgetary Comparison Schedule – Highway User Revenue Budgetary Comparison Schedule – Mesa Housing Authority Budgetary Comparison Schedule – Quality of Life Sales Tax Budgetary Comparison Schedule – Street Sales Tax Budgetary Comparison Schedule – General Capital Projects Budgetary Comparison Schedule – Streets III TABLE OF CONTENTS (Concluded) Exhibit Page I II 125 127 III 133 IV 135 V VI 137 139 VII VIII IX X XI 140 142 143 144 146 XII XIII 148 149 XIV XV XVI 150 152 154 SECTION III – STATISTICAL SECTION Financial Trends Net Position by Components – Last Ten Fiscal Years (Accrual Basis of Accounting) Changes in Net Position – Last Ten Fiscal Years (Accrual Basis of Accounting) Fund Balance, Governmental Funds – Last Ten Fiscal Years (Modified Accrual Basis of Accounting) Changes in Fund Balance, Governmental Funds – Last Ten Fiscal Years (Modified Accrual Basis of Accounting) Revenue Capacity Sales Tax Collections by Category – Last Ten Fiscal Years Direct and Overlapping Sales Tax Rates – Last Ten Fiscal Years Debt Capacity Ratios of Outstanding Debt by Type – Last Ten Fiscal Years Ratios of General Bonded Debt Outstanding – Last Ten Fiscal Years Direct and Overlapping Governmental Activities Debt Legal Debt Margin Information – Last Ten Fiscal Years Pledged-Revenue Coverage – Last Ten Fiscal Years Demographic and Economic Information Demographic and Economic Statistics – Last Ten Fiscal Years Principal Employers – Current Year and Ten Years Ago Operating Information Full-Time Equivalent City Government Employees by Function/Program – Last Ten Fiscal Years Operating Indicators by Function/Program – Last Ten Fiscal Years Capital Asset Statistics by Function/Program – Last Ten Fiscal Years IV Financial Services Department November 29, 2018 To the Citizens, Honorable Mayor, City Council and City Manager: The Comprehensive Annual Financial Report of the City of Mesa (the “City”) for the fiscal year ended June 30, 2018 is hereby submitted. Prepared by the Financial Services Department, this report consists of management’s representations concerning the finances of the City of Mesa. 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 City 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 City’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 City’s comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from 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 City’s financial statements have been audited by CliftonLarsonAllen, LLP, a firm of licensed certified public accountants. The goal of the independent audit was to provide reasonable assurance that the basic financial statements of the City for the fiscal year ended June 30, 2018, 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 auditor concluded, based upon the audit that there was a reasonable basis for rendering an unmodified opinion that the City’s financial statements for the fiscal year ended June 30, 2018, 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. The independent audit of the financial statements of the City was part of a broader, federally mandated “Single Audit” designed to meet the special needs of federal grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the audited government’s internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of federal awards. These reports are available in the City’s separately issued Single Audit Report. Accounting principles generally accepted in the United 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) and should be read in V conjunction with it. The City’s MD&A can be found immediately following the report of the independent auditors. Profile of the City The City was founded in 1878 and incorporated July 15, 1883 with an approximate population of 300 and an area of one square mile. Today, the City’s estimated population is 501,137 compared with the 2010 decennial census count of 439,041, within an incorporated area of approximately 141 square miles. Total land area encompasses 138 square miles. The City is the 36th largest city in the United States and is the third largest city in the State of Arizona. Mesa is located 16 miles east of Phoenix, the State Capitol. The City operates under a charter form of government with citizens electing a Mayor and six Councilmembers to set policy for the City. City Councilmembers are elected from districts and serve terms of four years, with three members being elected every two years. The Mayor is elected at-large every four years. The Mayor and Council are elected on a non-partisan basis, and the Vice Mayor is selected by the City Council. The Mayor and City Council are responsible for appointing the City Manager, City Attorney, City Auditor, City Clerk and the Presiding City Magistrate. The City Manager has full responsibility for carrying out City Council policies and administering City operations and is responsible for the hiring of City employees. Additionally, City employees are hired under merit system procedures as specified in the City Charter. An allocated staff of 3,908 full-time (equivalent) City employees working within 27 different City departments undertakes the various functions of Mesa’s city government and its operation. The City provides a full range of municipal services, including police and fire protection, parks and recreation, library, transportation, health and certain social services and general administration; and, the City owns and operates enterprises including operations of electric, gas, water, wastewater, solid waste, airport and a golf course. The Mesa Art Center, which includes 212,755 square feet of performing arts, visual arts and art education facilities, is the largest comprehensive arts campus in the Southwest. The Mesa Art Center was awarded the Venue Excellence Award by the International Association of Venue Managers. This prestigious award recognizes venues such as stadiums, convention centers, arenas, performing arts centers, and academic institutions that demonstrate excellence in the following four criteria: service to the community, team building/professional development, safety and security, and operational excellence. The annual budget serves as the foundation for the City’s financial planning and control. Historical data is analyzed during the creation of a multi-year financial forecast which provides a framework to assist Mesa’s elected officials and executive team in making important decisions about the direction of the City. The City Council sets the City’s long-term strategic direction and provides staff with budget priorities for the upcoming fiscal year. A proposed budget is presented to the City Council for review and discussion in mid spring with the final adoption of the operating budget by resolution in late spring. The City of Mesa begins the fiscal year on July 1st. Legal control over the budget derives from State statutes that prohibit the City from exceeding its adopted budget in total, and from the resolution itself that sets the limit. The residents of Mesa VI approved a Home Rule exemption to the State of Arizona’s expenditure limitation requirement. The City can determine the budget level as long as the City can identify resources to cover the expenses. The budget appropriated by the City Council consists of all planned expenditures and the associated resources to cover them. While the State does not require trust fund expenditures to be appropriated, the City chooses to include them in order to fully represent City activity. 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 City operates. Local Economy The City’s economic indicator for residential construction in fiscal year (FY) 2018 is up 7% from FY 2017 and over 120% from FY 2014. The corresponding increase in dollar valuation associated with the residential construction in FY 2018 over the prior fiscal year was approximately $60 million. Commercial construction increased 33% over the past five years beginning in FY 2014. This represents an increase of approximately $128 million in commercial valuation. During FY 2018 the City issued 2,765 permits for new residential construction. This is 13% more than the previous fiscal year. Activity levels for residential constructions continues to be a strength and continues to increase year over year. The increase in construction activity was accompanied by an increase in sales tax revenues. For the year ending June 30, 2018, retail sales tax was up 5.9% while overall sales tax revenues were up 5.5%. Tourism also increased as evidenced by an 8.1% increase in the transient lodging (‘bed’) tax. Other financial resources followed the economy’s continuation of a slow and steady recovery. The City incorporated this in the preparation of the FY 2019 budget. Conservative budget practices and willingness to respond to economic indicators continues to allow the City to maintain unrestricted fund balance reserve levels as established in the City’s financial policies. The FY 2019 budget continues the City’s fiscally conservative approach and reinforces the City’s effort to invest in economic development, improve public safety and attract and retain excellent employees. All fund balances were maintained at or above the levels prescribed by financial policy and prudent practice. Major Initiatives During the year, various major accomplishments were realized. Some of these were: • On January 5th, Governor Doug Ducey announced that the Phoenix-Mesa Gateway Airport will be home to SkyBridge Arizona, the nation’s first international air cargo hub to house both Mexican and United States customs. The hub will enable E-commerce companies, manufacturers and other commercial interests conducting business in Mexico and VII throughout Latin America to more efficiently and cost-effectively transport goods between countries, while ensuring proper inspections and safety controls. • On February 26th, the Mesa City Council approved the first step (the intergovernmental agreement) in bringing Arizona State University to downtown Mesa. The university plans to grow its film and media programs in Mesa, agreeing to bring a minimum of 750 students and 40 faculty and staff members. • On March 7th, EdgeCore conducted a groundbreaking ceremony in Mesa’s Elliot Road Technology Corridor for their 180,000 square-foot building that will help EdgeCore offer cloud-connected data center solutions to large cloud users like Microsoft, Amazon and Google. When it is eventually built out, the Mesa Data Center Campus will have seven buildings totaling more than 1.25 million square feet. • The City of Mesa had 11 census tracts approved as Opportunity Zones by the U.S. Department of Treasury. This federal program is meant to spur investment in low-income areas by providing tax benefits to investors who reinvest capital gains into Opportunity Zones. • Piper Plastics, Inc, a global provider of high-performance polymer material, precision molding, and machined plastic components and assemblies, announced in June that it will build its 90,000 square-foot, North American Research and Development Tech Center in the Falcon Field District. Piper Plastics will invest $10 million to build the facility and will begin operations with 130 employees and ramp up to more than 175 over the next three years. • AQST Space Systems announced in May that the company will be moving its headquarters from Puerto Rico to the Falcon Field District in Mesa, Arizona. The company manufactures and assembles rockets for small satellites. AQST expects to hire up to 125 employees. • The Church of Jesus Christ of Latter-Day Saints announced dramatic plans to transform 4.5 acres along Main Street in Mesa next to the Mesa temple. The redevelopment includes mostly housing, a mix of rental apartments and townhomes. Approximately 12,500 squarefeet of retail space along with an underground parking garage are also included in the plans. The project is expected to be completed by late 2020 or early 2021. • Cognizant, a Fortune 500 digital technology firm, opened its newest U.S. regional center in Mesa. Cognizant will invest $4.5 million this year in the Mesa facility and bring more than 500 new jobs to the site to serve companies in 15 sectors. • The Signal Butte Water Treatment Plant was completed with the capacity to treat 24 million gallons of water per day (mgd) with the option to reach 48 mgd in the future. The treatment plant incorporates safe and reliable water treatment technology with automation and quality monitoring systems to protect the public health for the fast-growing southeastern portion of Mesa. VIII X CITY OF MESA, AZ Comprehensive Annual FINANCIAL Financial Report SECTION C O M P R E H E N S I V E A N N UA L FINANCIAL REPORT 2018 R I V E R V I E W PA R K CliftonLarsonAllen LLP CLAconnect.com INDEPENDENT AUDITORS’ REPORT The Honorable Mayor and Members of City Council City of Mesa, Arizona Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the businesstype activities, each major fund, and the aggregate remaining fund information of the City of Mesa, Arizona (City) as of and for the year ended June 30, 2018, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. (1) The Honorable Mayor and Members of City Council City of Mesa, Arizona Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Mesa, Arizona as of June 30, 2018, 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. Emphasis of a Matter During the fiscal year ended June 30, 2018, the City adopted the provisions of Governmental Accounting Standards Board Statement (GASBS) No. 75, Accounting and Financial Reporting for Postemployment Benefits Other than Pensions. As a result of the implementation of GASBS No. 75, the City reported a restatement for the change in accounting principle (see Note 16). Our auditors’ opinion was not modified with respect to the restatement. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, the Schedule of the City’s Proportionate Share of Net Pension Liability, Schedule of Changes in the City’s Net Pension/OPEB Liability and Related Ratios, Schedule of City Pension Contributions, Schedule of Changes in the City’s Total OPEB Liability, and the budgetary comparison information, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Supplementary and Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The combining and individual fund financial statements and schedules and the introductory and statistical sections are presented for purposes of additional analysis and are not a required part of the basic financial statements. (2) The Honorable Mayor and Members of City Council City of Mesa, Arizona The combining and individual fund financial statements and schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual fund financial statements and schedules are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 29, 2018, on our consideration of the City’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 result of that testing, and not to provide an opinion on the effectiveness of the City’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 the City’s internal control over financial reporting and compliance. a Phoenix, Arizona November 29, 2018 (3) MANAGEMENT’S DISCUSSION AND ANALYSIS As management of the City of Mesa, Arizona (the City), we offer this discussion and analysis of the financial activities of the City for the fiscal year ended June 30, 2018. This discussion and analysis is designed to 1) assist the reader in focusing on significant financial issues, 2) provide an overview of the City’s financial activities, 3) identify changes in the City’s financial position, 4) identify any material deviations from the financial plan (the approved annual budget), and 5) identify individual fund issues and concerns. The management’s discussion and analysis should be read in conjunction with the transmittal letter presented on pages V-IX, as well as the financial statements beginning on page 16 and the accompanying notes to the financial statements. FINANCIAL HIGHLIGHTS  The City’s total revenues increased by $56.2 million from $943.8 million to $1 billion. The increase is from four primary sources Charges for Services, Contributions, Sales Taxes and Unrestricted Intergovernmental revenues.  As of the end of fiscal year 2018, the City’s governmental funds reported a combined ending fund balance of $304.5 million, a $47.0 million increase from the previous year. The increase is due to an increase in Sales Taxes, Intergovernmental Revenues, and Transfers In; combined with a decrease in Capital Outlay expenditures.  The City’s beginning Net Position was restated by ($205.6) million due to the implementation of GASB 75 which relates to the recording of other postemployment benefits (OPEB) liabilities. OVERVIEW OF THE FINANCIAL STATEMENTS This management discussion and analysis serves as an introduction to the City’s basic financial statements. The City’s basic financial statements are comprised of three components: government-wide financial statements, fund financial statements, and notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements. Government-Wide Financial Statements The government-wide financial statements (pages 16-18) are designed to provide a broad overview of the City’s finances in a manner similar to private businesses. All the activities of the City, except fiduciary activities, are included in these statements. The statement of net position, Exhibit A-1, presents information on all the City’s assets, deferred outflows of resources, liabilities, and deferred inflows of resources with the difference being 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 City is improving or deteriorating. The statement of activities, Exhibit A-2, presents information showing how the City’s net position changed over the most recent fiscal year. All changes to net position are reported at the time that the underlying event giving rise to the change occurs, regardless of the timing of the related cash flows. This is the accrual basis of accounting. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods. Both the Statement of Net Position and the Statement of Activities divide the functions of the City that are principally supported by taxes and intergovernmental revenues (Governmental Activities) from other 4 functions that are intended to recover all or a significant portion of their cost through user fees and charges (Business-Type Activities):  The governmental activities include the City’s basic services including general government (administration), public safety, community environment and cultural-recreational. Taxes and general revenues generally support these activities.  The business-type activities include private sector type activities such as the City-owned electric, gas, water, wastewater, and solid waste systems, as well as the City-owned airport, golf course, stadiums, convention center, and district cooling. These activities are primarily supported by user charges and fees. Government-Wide Financial Statement Analysis The following tables, graphs and analysis discuss the financial position and changes to the financial position for the City as a whole as of and for the years ending June 30, 2018 and 2017. Net Position - As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. The City’s net position, the amounts by which assets plus deferred outflows of resources, exceeded liabilities plus deferred inflows of resources, was $755.8 million at the end of fiscal year 2018. The following table summarizes Exhibit A-1, the Statement of Net Position. Condensed Statement of Net Position As of June 30 (In thousands of dollars) Cash and Other Assets Capital Assets Total Assets Deferred Amounts on Refunding Deferred Outflows on Pensions & OPEB Total Deferred Amounts Governmental Activities 2017, 2018 As Restated $ 736,077 $ 636,195 1,440,294 1,436,952 2,176,371 2,073,147 Business-Type Activities 2017, 2018 As Restated $ 541,346 $ 568,374 1,522,043 1,455,419 2,063,389 2,023,793 Total Government 2017, 2018 As Restated $ 1,277,423 $ 1,204,569 2,962,337 2,892,371 4,239,760 4,096,940 8,946 162,477 171,423 10,112 204,338 214,450 29,430 9,168 38,598 30,843 12,881 43,724 38,376 171,645 210,021 40,955 217,219 258,174 Non-Current Liabilities Outstanding Net Pension & OPEB Liability Other Liabilities Total Liabilities 513,972 1,399,889 117,008 2,030,869 524,287 1,402,664 139,028 2,065,979 1,336,240 141,767 109,471 1,587,478 1,307,566 147,382 94,069 1,549,017 1,850,212 1,541,656 226,479 3,618,347 1,831,853 1,550,046 233,097 3,614,996 Deferred Inflows on Pensions & OPEB 67,124 56,283 8,526 6,905 75,650 63,188 1,019,888 88,305 (858,392) $ 249,801 986,354 88,721 (909,740) $ 165,335 266,012 40,440 199,531 $ 505,983 247,598 43,046 220,951 $ 511,595 1,285,900 128,745 (658,861) $ 755,784 1,233,952 131,767 (688,789) $ 676,930 Net Investment in Capital Assets Restricted Net Position Unrestricted Net Position Total Net Position 5 The largest portion of net position, $1.3 billion, reflects the City’s investment in capital assets (land, buildings, equipment, infrastructure, etc.) less any outstanding related debt used to acquire those assets. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. The restricted portion of the City's net position, $128.7 million, represents resources that are subject to external restrictions on how they may be used. Such restrictions include debt service payments, transportation programs, other capital projects and required reserves. The unrestricted net position of ($658.9) million is primarily due to the impact of the long-term liability associated with pensions and OPEB ($1.5 billion). Capital Assets – The following table provides a breakdown of the City’s capital assets at June 30, 2018 and 2017: Capital Assets (net of accumulated depreciation/amortization) As of June 30 (In thousands of dollars) Governmental Activities 2017 2018 Land $ 391,527 $ 388,552 Infrastructure - Nondepr 3,585 3,612 Buildings 237,881 237,651 Other Improvements 85,980 85,004 M achinery & Equipment 62,444 64,552 Intangibles 2,959 6,712 Infrastructure 537,986 540,808 Construction-in-Progress 117,932 110,061 Total $ 1,440,294 $ 1,436,952 Business-Type Activities 2018 2017 $ 50,700 $ 50,717 17,666 17,666 76,139 77,927 75,016 78,738 38,098 37,081 4,800 5,685 1,031,096 1,007,923 228,528 179,682 $ 1,522,043 $ 1,455,419 Total Government 2018 2017 $ 442,227 $ 439,269 21,251 21,278 314,020 315,578 160,996 163,742 100,542 101,633 7,759 12,397 1,569,082 1,548,731 346,460 289,743 $ 2,962,337 $ 2,892,371 The City’s investment in capital assets for its governmental and business-type activities amounts to $3.0 billion (net of accumulated depreciation/amortization) as of June 30, 2018. This net investment in capital assets includes land, buildings, other improvements, machinery and equipment, intangibles, and infrastructure. Infrastructure assets are items that are normally immovable and have value only to the City, such as streets, street lighting systems, and storm drainage systems. As noted in the above table, the City’s total capital asset balances at June 30, 2018 were overall consistent with prior year balances. However, there were increases in Infrastructure assets ($20.4 million) and Construction-in-progress ($56.7 million). The most significant Infrastructure additions in fiscal year 2018 were arterial streets, water mains, wells, and water treatment system infrastructure at the Northwest Water Reclamation Plant. The largest current year project expenditure ($36.7 million) continued to be for the Signal Butte Water Treatment Plant, which had its grand opening subsequent to year end. The next largest project expenditure ($26.3 million) was related to the Greenfield Wastewater Plant Expansion. The remaining project expenditures were primarily related to street overlay, transportation projects, Gilbert Road Light Rail Expansion, water and wastewater projects. Additional information on the City’s capital assets can be found in Note 7 of the notes to the basic financial statements. 6 Debt Administration – The following schedule shows the outstanding long-term debt of the City as of June 30, 2018 and 2017. Outstanding Long-term Debt As of June 30 (In thousands of dollars) Governmental Activities 2018 2017 General Obligation Bonds $ 365,519 $ 374,443 Utility System Revenue Bonds Highway User Revenue Fund Bonds 76,620 84,995 Excise Tax Obligations Special Assessment Bonds with Governmental Commitment 1,005 1,340 Community Facility District 28,813 19,172 Notes Payable Total $ 471,957 $ 479,950 Business-Type Activities 2018 2017 $ 236 $ 312 1,227,355 1,161,755 49,025 94,060 Total Government 2018 2017 $ 365,755 $ 374,755 1,227,355 1,161,755 76,620 84,995 49,025 94,060 1,714 $ 1,278,330 1,005 28,813 1,714 $ 1,750,287 1,851 $ 1,257,978 1,340 19,172 1,851 $ 1,737,928 At the end of the current fiscal year, the City had total outstanding debt was $1.75 billion, which is an increase of $12.4 million. Of this amount, $414.8 million comprises debt backed by the full faith and credit of the City and $1.3 billion represents bonds secured by specified revenue sources (i.e., Utility System Revenue and Highway User Revenue). The City’s outstanding long-term debt (considering new borrowings, debt retirements, and defeasance) increased $12.4 million. The change in debt includes new borrowings during the fiscal year totaling $138.9 million, defeasance of $15.2 million, and principal payments of $111.2 million. An additional amount of $29.8 million are Special Assessment and Community Facility District bonds. Special Assessment revenues are collected to make the annual Special Assessment and Community Facility District bond debt payments. The City has no liability for the Community Facility District bonds. However, the City is contingently liable in the event that the Special Assessment revenues are insufficient to satisfy the Special Assessment Bond debt payments. The City’s current bond ratings are as follows: General Obligation Bonds Highway User Revenue Bonds Utility Systems Revenue Bonds Standard and Poor’s Corporation Moody’s Investors Service AAAA AA- Aa2 A2 Aa2 Under the provisions of the Arizona Constitution, outstanding general obligation bonded debt for combined water, sewer, light, parks, open space preserves, playgrounds, recreational facilities, public safety, law enforcement, fire emergency, streets and transportation may not exceed 20% of a City’s full cash net assessed valuation, nor may outstanding general obligation bonded debt for all other purposes exceed 6% of a City’s full cash net assessed valuation. The City’s total debt margin available at June 30, 2018 was $182.2 million in the 6% capacity and $244.7 million in the 20% capacity. Additional information on the City’s long-term obligations can be found in Note 8 of the notes to the basic financial statements and Table X in the Statistical Section. 7 Changes in Net Position The following table shows the revenues and expenses of the City for the fiscal years ended June 30, 2018 and 2017. Changes in Net Position Year Ended June 30 (In thousands of dollars) Governmental Activities 2018 2017 Program Revenues: Charges for Services $ Operating Grants & Contributions Capital Grants & Contributions General Revenues: Sales Taxes Property Taxes Occupancy Taxes Unrestricted Intergovernmental Contributions Unrestricted Investment Income Gain on Disposal of Capital Asset M iscellaneous Total Revenues 78,756 34,446 23,618 $ Business-Type Activities 2017 2018 Total Government 2018 2017 72,703 26,955 24,451 $ 371,794 2,406 23,474 $ 359,060 158 28,711 $ 450,550 36,852 47,092 $ 431,763 27,113 53,162 169,024 35,571 2,628 167,540 80,312 1,912 (2,462) 5,418 596,763 159,735 34,684 2,536 158,916 46,817 448 (1,411) 11,161 536,995 1,192 1,691 261 1,915 402,733 1,085 983 16,364 466 406,827 169,024 35,571 3,820 167,540 80,312 3,603 (2,201) 7,333 999,496 159,735 34,684 3,621 158,916 46,817 1,431 14,953 11,627 943,822 101,301 379,505 104,173 55,739 19,279 Governmental Activities Expenses: General Government Public Safety Community Environment Cultural-Recreational Interest on Long-Term Debt Business-Type Activities: Electric Gas Water Wastewater Solid Waste Airport Golf Course Convention Center Hohokam Stadium/Fitch Complex Cubs Stadium District Cooling Total Expenses 105,140 334,905 113,916 54,828 19,514 101,301 379,505 104,173 55,739 19,279 - - - - 105,140 334,905 113,916 54,828 19,514 628,303 659,997 25,573 31,636 101,005 74,157 37,988 5,308 1,965 4,481 3,174 5,870 1,181 292,338 26,561 37,109 95,608 71,782 37,911 5,125 2,028 4,711 3,687 6,042 1,268 291,832 25,573 31,636 101,005 74,157 37,988 5,308 1,965 4,481 3,174 5,870 1,181 920,641 26,561 37,109 95,608 71,782 37,911 5,125 2,028 4,711 3,687 6,042 1,268 951,829 Increase (Decrease) in Net Position Before Transfers Transfers (31,540) 116,006 (123,002) 106,607 110,395 (116,006) 114,995 (106,607) 78,855 - (8,007) - Change in Net Position 84,466 (16,395) (5,611) 8,388 78,855 (8,007) Total Net Position - As Adjusted 165,335 181,730 511,594 503,206 676,929 684,936 249,801 $ 165,335 $ 505,983 $ 511,594 $ 755,784 Net Position - Ending $ 8 $ 676,929 Governmental Activities As presented in the following two graphs, the largest funding sources, including transfers, for the governmental activities are taxes (29%), Unrestricted Intergovernmental (25%), Transfers (16%), and Charges for Services (11%). The largest users of resources for the governmental activities are Public Safety (53%), Community Environment (18%), and General Government (17%). Revenues by Source Including Transfers – Governmental Activities For the Fiscal Year Ended June 30, 2018 Taxes 29% Capital Grants & Contributions 3% Operating Grants & Contributions 5% Unrestricted Contributions 11% Charges for Services 11% Transfers 16% Unrestricted InterGovernmental 25% Functional Expenses – Governmental Activities For the Fiscal Year Ended June 30, 2018 Public Safety 53% Community Environment 18% General Government 17% Interest on Long-Term Debt 3% CulturalRecreational 9% 9 Governmental Activities Revenues For Fiscal Years 2018 and 2017 (In thousands of dollars) $250,000 $200,000 $150,000 $100,000 $50,000 $0 Program Revenues Taxes Unrestricted Intergovernmental 2017 Contributions 2018 Governmental Activities Functional Expenses For Fiscal Years 2018 and 2017 (In thousands of dollars) $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 General Government Public Safety Community Environment 2017 10 2018 Cultural-Recreational Interest on Long-term Debt The graphs on the previous page compare governmental activities revenues and expenses from fiscal year 2018 to fiscal year 2017. Total governmental activities revenues increased $59.8 million from $537.0 million to $596.8 million. Total governmental expenses decreased by $31.2 million from $660.0 million to $628.8 million. Key factors in this change include:  The largest increase in revenues were in Contributions ($33.5 million) due to the Gilbert Road Light Rail extension. The cost of construction on the Gilbert Road Light Rail extension continued in current year and was substantially paid for/contributed by Valley Metro Rail Inc. (VMRI), which increased the City’s Equity share in the VMRI joint venture.  Sales Taxes and Unrestricted Intergovernmental revenues increased in current year by $9.3 million and $8.6 million, respectively. Overall sales tax increased by 5.8%, with most of the increase being in the retail sales category. Unrestricted Intergovernmental revenue increases were in all three categories (Urban Revenue Sharing, State Shared Sales Tax, and Highway User Tax). The City’s revenues in taxes and unrestricted intergovernmental revenues has followed the national economy’s slow and steady recovery.  The decrease in governmental expenditures is primarily due to Public Safety expenditures decreasing by $44.6 million. Decrease was due to a decrease in pension expense per the annual actuarial report. Business-type Activities As presented in the following two graphs, the largest revenue source is from Charges for Services from Water, Wastewater, Solid Waste, Gas, and Electric. Revenues by Source – Business-type Activities Grants & Contributions 7% General Revenue 1% Charges for Services 92% 11 Revenues by Utility – Business-type Activities 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 - Electric Gas Water 2018 Wastewater Solid Waste 2017 Total business-type activities program and general revenues decreased by $4.0 million from $406.8 million to $402.8 million. Decrease is primarily attributed to gain on sale of assets. In fiscal year 2018, total Gain on Disposal of Capital Assets was $261 thousand, down $16.1 million as compared to fiscal year 2017. Charges for Service increased by $12.8 million from $359.0 million to $371.8 million. Increase was predominately in the Water and Wastewater due to increase in rates. Net (Expenses) Revenue – Business-Type Activities 120,000 100,000 80,000 60,000 40,000 20,000 - Electric Gas Water 2018 2017 12 Wastewater Solid Waste Fund Financial Statements The fund financial statements are presented in Exhibits A-3 through A-10 beginning on page 19 of this report. 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 City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements as well as for managerial control to demonstrate fiduciary responsibility over the assets of the City. Traditional fund financial statements are presented for Governmental Funds (Exhibits A-3 through A-6), Proprietary Funds (Exhibits A-7 through A-9), and Fiduciary Funds (Exhibit A-10). 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 governmentwide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources as well as on balances of spendable resources available at the end of the fiscal year. Such information is useful in evaluating the City’s near-term financing requirements. Since the governmental fund financial statements focus on near-term spendable resources, while the governmental activities on the government-wide financial statements have a longer-term focus, a reconciliation of the differences between the two is provided with the fund financial statements and also in Note 2 to the basic financial statements. Proprietary funds – The City maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. Internal service funds are used to accumulate and allocate costs internally among the City’s various functions. The City uses internal service funds to account for its fleet support; materials and supplies; printing and graphics; property and public liability; workers’ compensation; and employee benefits self-insurance programs. Since the primary customers of the internal service funds are the governmental activities, the assets and liabilities of those funds are included in the governmental activities column of the government-wide statement of net position. The costs of internal service funds are allocated to the various user functions on the government-wide statement of activities. The proprietary fund financial statements are prepared on the same long-term focus as the government-wide financial statements. The enterprise funds provide the same information as the government-wide financial statements, only with more detail. The internal service funds are combined into a single column on the proprietary funds statements. Additional detail of the internal service funds can be found in the combining statements (Exhibits C-3 through C-5). Fiduciary funds – Fiduciary funds are used to account for resources held for the benefit of others outside the City government. Fiduciary funds are not reflected in the government-wide financial statements because the resources are not available to support the City’s programs. The fiduciary fund financial statement is prepared on the same basis as the government-wide and proprietary fund financial statements. Notes to the financial statements – The notes to the financial statements provide additional information that is essential to the full understanding of the data provided in the government-wide and fund financial statements and should be read with the financial statements. Other information – Governments have an option of including the budgetary comparisons statements for the General Fund as either part of the fund financial statements within the basic financial statements or as required supplementary information after the notes to the financial statements. The City has chosen to present the budgetary statements as required supplementary information beginning on page 94. 13 Fund Financial Statement Analysis As previously mentioned, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. The following is a brief discussion of the financial highlights from the fund financial statements. Governmental Funds - The focus of the City’s governmental funds is to provide information on near-term inflows, outflows and balances of spendable resources. Such information is useful in assessing the City’s financing requirements. Unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. The increase of $47.0 million in the governmental funds is the net result of the increase in Sales Taxes and Intergovernmental Revenue and a decrease in Capital Outlay expenditures. The General Fund is the chief operating fund of the City and accounts for many of the major functions of the government including general government, public safety, community environment and culturalrecreational. At the end of the current fiscal year, total fund balance of the General Fund was $130.4 million, while unassigned fund balance was $89.3 million. Total fund balance of the City’s General Fund increased by $16.0 million during the current fiscal year from $114.4 million to $130.4 million. This is primarily due to an increase in Sales Taxes and Intergovernmental Revenues. Proprietary Funds - The City’s Enterprise Fund provides the same type of information as the governmentwide financial statements, except in more detail. The total net position of the Enterprise Fund decreased by $5.6 million during the current fiscal year from $511.6 million (restated) to $506.0 million. The decrease in current year is primarily related to an increase in operating expenses for wastewater. The unrestricted net position of the Enterprise Fund amounted to $199.5 million. Budgetary Highlights The City’s annual budget is the legally adopted expenditure control document of the City. Budgetary comparison schedules are required for the General Fund and can be found in Exhibit B-5. This schedule compares the original adopted budget, the budget as amended throughout the year, and the actual expenditures prepared on a budgetary basis. Amendments to the adopted budget may occur throughout the year in a legally permissible manner (see Note 1.f. of the notes to the financial statements for more information on budget policies). No amendments increasing the City’s total adopted budget of $1.7 billion occurred during fiscal year 2018. General Fund revenues of $308.9 million, on a budgetary basis, were less than the budgeted revenues of $312.3 million. Decrease in revenues, compared to budgeted, was primarily due to the City receiving less Intergovernmental revenues than budgeted. Expenditures of $383.1 million were less than the budgeted expenditures of $424.8 million. Savings were primarily in general government, followed by capital outlay. 14 ECONOMIC FACTORS In June 2018, the City Council approved a $1.8 billion budget, which is an increase of $80 million compared to prior year’s budget. The fiscal year 2019 budget includes $1.6 billion for operations and $206.4 million for scheduled bond capital improvements. The adopted fiscal year 2019 budget continues the City’s fiscally conservative approach and reinforces the City’s effort to invest in economic development, improve public safety and attract and retain excellent employees. Conservative budget practices and willingness to respond to economic indicators continues to allow the City to maintain unrestricted fund balance reserve levels as established in the City’s financial policies. REQUESTS FOR INFORMATION This financial report is designed to provide a general overview of the City of Mesa, Arizona’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the City of Mesa Finance Director, P.O. Box 1466, Mesa, Arizona, 85211-1466. 15 CITY OF MESA, AZ Comprehensive Annual FINANCIAL FinancialBASIC Report SECTION C O M P R E H E N S I V E A N N UA L FINANCIAL REPORT 2018 H O H O K A M S TA D I U M CITY OF MESA, ARIZONA EXHIBIT A-1 STATEMENT OF NET POSITION JUNE 30, 2018 (in thousands) ASSETS Pooled Cash and Investments Accounts Receivable, Net Accrued Interest Receivable Due from Other Governments Internal Balances Inventory Prepaid Costs Deposits Restricted Assets: Pooled Cash and Investments Cash with Fiscal Agent Cash with Trustee Accounts Receivable, Net Due from Other Governments Customer Deposits Joint Venture Construction Deposits Investment in Joint Ventures Capital Assets, Not Being Depreciated Capital Assets, Being Depreciated, Net Total Assets Primary Government Governmental Activities Business-Type Activities $ $ DEFERRED OUTFLOWS OF RESOURCES Debt Refunding Pensions and OPEB Total Deferred Outflows of Resources LIABILITIES Accounts Payable and Accrued Liabilities Claims Payable Customer and Defendant Deposits Liabilities Payable from Restricted Assets Noncurrent Liabilities, Due Within One Year Noncurrent Liabilities, Due in More Than One Year Net Pension and OPEB Liability Total Liabilities DEFERRED INFLOWS OF RESOURCES Pensions and OPEB Total Deferred Inflows of Resources NET POSITION Net Investment in Capital Assets Restricted For: Bond Indentures Construction Debt Service Public Safety Transportation Programs Other Programs Unrestricted Total Net Position $ 359,534 5,770 991 35,819 (876) 6,079 3,186 69 98,801 36,852 920 2,647 876 2,172 45 Total $ 458,335 42,622 1,911 38,466 6,079 5,358 114 7,001 42,651 12,527 1,265 262,061 513,044 927,250 2,176,371 124,753 57,680 98 4,281 3,716 208,505 296,894 1,225,149 2,063,389 131,754 100,331 98 12,527 1,265 4,281 3,716 470,566 809,938 2,152,399 4,239,760 8,946 162,477 171,423 29,430 9,168 38,598 38,376 171,645 210,021 24,358 37,029 7,190 48,431 41,741 472,231 1,399,889 2,030,869 9,722 99,749 36,352 1,299,888 141,767 1,587,478 34,080 37,029 7,190 148,180 78,093 1,772,119 1,541,656 3,618,347 67,124 67,124 8,526 8,526 75,650 75,650 1,019,888 266,012 1,285,900 25,490 5,369 54,265 3,181 (858,392) 249,801 29,505 3,716 7,219 199,531 505,983 29,505 3,716 32,709 5,369 54,265 3,181 (658,861) 755,784 The accompanying notes are an integral part of the financial statements. 16 $ $ CITY OF MESA, ARIZONA EXHIBIT A-2 STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED JUNE 30, 2018 (in thousands) Functions/Programs: Governmental Activities: General Government Public Safety Community Environment Cultural-Recreational Interest on Long-Term Debt Total Governmental Activities Expenses $ Business-type Activities: Electric Gas Water Wastewater Solid Waste Airport Golf Course Convention Center Hohokam Stadium/Fitch Complex Cubs Stadium District Cooling Total Business-type Activities Total Government Charges for Services 105,140 334,905 113,916 54,828 19,514 628,303 $ 25,573 31,636 101,005 74,157 37,988 5,308 1,965 4,481 3,174 5,870 1,181 292,338 $ 920,641 14,618 32,893 18,894 12,351 78,756 Program Revenues Operating Grants and Contributions Capital Grants and Contributions $ $ 31,425 39,171 147,667 83,078 60,522 3,983 1,635 2,809 51 238 1,215 371,794 $ 450,550 1,186 6,685 26,431 144 34,446 166 258 1,451 530 1 2,406 $ 36,852 200 741 10,884 8,530 575 2,244 200 100 23,474 $ General Revenues: Sales Taxes Property Taxes Occupancy Taxes Unrestricted Intergovernmental Revenues Contributions Not Restricted to Specific Programs Investment Income Gain (Loss) on Sale of Capital Assets Miscellaneous Revenues (Expenses) Transfers Total General Revenues and Transfers Change in Net Position Total Net Position - As Previously Reported Change in Accounting Principle Net Position - Beginning Net Position - Ending The notes to the financial statements are an integral part of this statement. 17 20,043 954 2,581 40 23,618 47,092 EXHIBIT A-2 (Continued) Net (Expense) Revenue and Changes in Net Position Primary Government Governmental Business-type Activities Activities Total * * $ $ (69,293) (294,373) (66,010) (42,293) (19,514) (491,483) $ - $ (69,293) (294,373) (66,010) (42,293) (19,514) (491,483) - 6,218 8,534 58,997 17,981 23,110 919 (330) (1,472) (3,023) (5,632) 34 105,336 6,218 8,534 58,997 17,981 23,110 919 (330) (1,472) (3,023) (5,632) 34 105,336 (491,483) 105,336 (386,147) 169,024 35,571 2,628 167,540 80,312 1,912 (2,462) 5,418 116,006 575,949 1,192 1,691 261 1,915 (116,006) (110,947) 169,024 35,571 3,820 167,540 80,312 3,603 (2,201) 7,333 465,002 84,466 (5,611) 78,855 363,708 (198,373) 165,335 518,804 (7,210) 511,594 882,512 (205,583) 676,929 249,801 $ 505,983 $ 755,784 18 CITY OF MESA, ARIZONA EXHIBIT A-3 BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2018 (in thousands) ASSETS Pooled Cash and Investments Accounts Receivable, Net Accrued Interest Receivable Due from Other Governments Due from Other Funds Prepaid Costs Restricted Assets: Pooled Cash and Investments Cash with Fiscal Agent Accounts Receivable Due from Other Governments Total Assets LIABILITIES Accounts Payable and Accrued Liabilities Due to Other Funds Advances from Other Funds Customer and Defendant Deposits Payable from Restricted Assets: Accrued Interest Payable Unearned Revenue Matured Bonds Payable Total Liabilities General Fund Non-major Governmental Funds Total Governmental Funds $ $ $ $ $ DEFERRED INFLOWS OF RESOURCES Unavailable Revenue Total Deferred Inflows of Resources FUND BALANCES Nonspendable Restricted Committed Assigned Unassigned Total Fund Balances Total Liabilities, Deferred Inflows of Resources and Fund Balances $ 120,293 3,254 361 20,427 1,262 2,304 147,901 11,961 876 234 $ $ 170,055 1,751 396 15,392 135 7,001 42,651 12,527 1,265 251,173 10,307 1,262 6,956 $ $ 290,348 5,005 757 35,819 1,262 2,439 7,001 42,651 12,527 1,265 399,074 22,268 1,262 876 7,190 3,160 16,231 9,382 1,513 34,376 63,796 9,382 4,673 34,376 80,027 1,296 1,296 13,293 13,293 14,589 14,589 2,304 10,377 28,346 89,347 130,374 135 132,462 41,641 22 (176) 174,084 2,439 132,462 52,018 28,368 89,171 304,458 147,901 $ The accompanying notes are an integral part of the financial statements. 19 251,173 $ 399,074 CITY OF MESA, ARIZONA EXHIBIT A-4 RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION JUNE 30, 2018 (in thousands) Fund Balances - total governmental funds $ 304,458 Amounts reported for governmental activities in the statement of net position are different because (also see Note 2 to the basic financial statements): Capital assets used in governmental activities are not financial resources and therefore not reported in the governmental funds. 1,437,912 Other assets used in governmental activities are not financial resources and therefore not reported in the governmental funds. 262,061 Deferred outflows related to deferred amounts on refunding and pensions are not financial resources and therefore not reported in the funds. 169,373 Long-term liabilities, including bonds payable and net pension liabilities are not due and payable in the current period and therefore not reported in the governmental funds. (1,881,408) Deferred inflows relating to pensions represent a future acquisition of net position that is not reported in the funds. Also, because the focus of governmental funds is on short term financing, some assets will not be available to pay for current period expenditures. Those assets are offset by unavailable revenue in the funds. (50,633) Internal service funds are used by management to charge the costs of certain activities to individual funds. 8,038 Net position of the governmental activities - statement of net position The accompanying notes are an integral part of the financial statements. 20 $ 249,801 CITY OF MESA, ARIZONA EXHIBIT A-5 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 (in thousands) REVENUES Sales Taxes Property Taxes Occupancy Taxes Special Assessments Licenses and Permits Intergovernmental Charges for Services Fines and Forfeitures Investment Income Contributions Miscellaneous Revenue Total Revenues General Fund Non-major Governmental Funds Total Governmental Funds $ $ $ EXPENDITURES Current: General Government Public Safety Community Environment Cultural-Recreational Debt Service: Principal Interest on Bonds Service Charges Cost of Issuance Capital Outlay Total Expenditures 116,024 25 20,103 138,177 24,033 8,155 208 75 1,768 308,568 53,000 35,616 2,603 1,174 5,016 85,623 16,189 2,281 1,400 354 3,779 207,035 169,024 35,616 2,628 1,174 25,119 223,800 40,222 10,436 1,608 429 5,547 515,603 80,860 237,902 15,705 38,358 9,349 28,557 57,699 7,785 90,209 266,459 73,404 46,143 13,261 386,086 34,738 18,477 14 1,023 63,018 220,660 34,738 18,477 14 1,023 76,279 606,746 Excess (Deficiency) of Revenues Over (Under) Expenditures (77,518) (13,625) (91,143) OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Face Amount of Bonds Issued Premium on Issuance of Bonds (Net) Total Other Financing Sources (Uses) 120,095 (26,629) 93,466 56,477 (39,579) 26,745 1,063 44,706 176,572 (66,208) 26,745 1,063 138,172 Net Change in Fund Balances 15,948 31,081 47,029 114,426 143,003 257,429 Fund Balance - Beginning Fund Balances - Ending $ 130,374 $ The accompanying notes are an integral part of the financial statements. 21 174,084 $ 304,458 CITY OF MESA, ARIZONA EXHIBIT A-6 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED JUNE 30, 2018 (in thousands) Net change in fund balances - total governmental funds $ 47,029 Amounts reported for governmental activities in the statement of activities are different because (also see Note 2 to the basic financial statements): Revenues in the statement of activities that do not provide current financial resources are not reported in the governmental funds. (3,490) 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. (111,992) Current-year pension contributions are reclassified to deferred outflows of resources and therefore not reported as expenditures in governmental funds. 63,382 Governmental funds report capital outlays as expenditures. However, in the statement of activities, the costs of those assets are allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlay $73,370 exceeded depreciation ($66,102) in the current period. 7,268 The net effect of miscellaneous transactions involving capital assets (e.g., donations, transfers and disposals) is to increase net position. 9,130 Change in equity in Joint Venture 58,235 The issuance of long-term debt (e.g., bonds and capital leases) provides current financial resources to governmental funds, while the repayment of principal of long-term debt consumes financial resources of governmental funds. Neither transaction has any effect on net position. 7,993 Governmental funds report the effect of premiums and deferred amounts related to refunding when the new debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. 34 Internal service funds are used by management to charge the costs of certain activities to individual funds. The net revenue (expense) of certain internal service funds is reported with governmental activities. 6,877 Change in net position of the governmental activities - statement of activities The accompanying notes are an integral part of the financial statements. 22 $ 84,466 CITY OF MESA, ARIZONA EXHIBIT A-7 STATEMENT OF NET POSITION PROPRIETARY FUNDS JUNE 30, 2018 (in thousands) ASSETS Current Assets: Pooled Cash and Investments Accounts Receivable (Net of Allowances) Accrued Premiums Receivable Accrued Interest Receivable Due from Other Governments Advances to Other Funds Inventory Prepaid Costs Deposits Restricted Assets: Pooled Cash and Investments Cash with Fiscal Agents Cash with Trustees Customer Deposits Joint Venture Construction Deposits Total Current Assets Business-type Activities Enterprise Fund Governmental Activities Internal Service Funds $ $ Noncurrent Assets: Investment in Joint Ventures Capital Assets, Not Being Depreciated Captial Assets, Being Depreciated, Net Total Noncurrent Assets Total Assets DEFERRED OUTFLOWS OF RESOURCES Refundings Pensions and OPEB Total Deferred Outflows of Resources Total Assets and Deferred Outflows of Resources $ 98,801 36,852 920 2,647 876 2,172 45 124,753 57,680 98 4,281 3,716 332,841 77,080 208,505 296,894 1,225,149 1,730,548 61 2,321 2,382 2,063,389 79,462 29,430 9,168 38,598 2,050 2,050 2,101,987 The accompanying notes are an integral part of the financial statements. 23 69,186 592 173 234 6,079 747 69 $ 81,512 (Continued) CITY OF MESA, ARIZONA EXHIBIT A-7 (Continued) STATEMENT OF NET POSITION PROPRIETARY FUNDS JUNE 30, 2018 (in thousands) LIABILITIES Current Liabilities-Payable From Current Assets: Accounts Payable and Accrued Liabilities Claims Payable Current Liabilities-Payable From Restricted Assets: Accounts Payable and Accrued Liabilities Interest Payable Unearned Revenue Matured Bonds Payable Customer Deposits and Prepayments Current Portion of Long-Term Liabilities: Current Portion of Bonds Payable Current Portion of Notes Payable Current Portion of Compensated Absences Total Current Liabilities Business-type Activities Enterprise Fund Governmental Activities Internal Service Funds $ $ Long-Term Liabilities: Bonds Payable Notes Payable Compensated Absences Net Pension and OPEB Liability Total Long-Term Liabilities Total Liabilities DEFERRED INFLOWS OF RESOURCES Pensions and OPEB Total Deferred Inflows of Resources NET POSITION Net Investment in Capital Assets Restricted For: Bond Indentures Construction Debt Service Unrestricted Total Net Position $ 9,722 8,081 26,614 285 31,431 33,338 - 35,571 140 641 145,823 144 39,263 1,294,630 1,574 3,684 141,767 1,441,655 696 31,613 32,309 1,587,478 71,572 8,526 8,526 1,902 1,902 266,012 2,382 29,505 3,716 7,219 199,531 505,983 5,656 8,038 The accompanying notes are an integral part of the financial statements. 24 2,090 37,029 $ CITY OF MESA, ARIZONA EXHIBIT A-8 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION PROPRIETARY FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 (in thousands) Operating Revenues: Electric Sales Pledged as Security for Revenue Bonds Gas Sales Pledged as Security for Revenue Bonds Water Sales Pledged as Security for Revenue Bonds Wastewater Charges Pledged as Security for Revenue Bonds Solid Waste Charges Pledged as Security for Revenue Bonds Airport Fees Golf Course Fees Convention Center Fees Hohokam Stadium/Fitch Complex Fees Cubs Stadium Fees District Cooling Charges Charges For Services Self-Insurance Contributions Other Revenue Total Operating Revenues Business-type Activities Enterprise Fund Governmental Activities Internal Service Funds $ $ 31,425 39,171 147,667 83,078 60,522 3,983 1,635 2,809 51 238 1,215 371,794 27,261 90,541 5,122 122,924 Operating Expenses: Electric Gas Water Wastewater Solid Waste Airport Golf Course Convention Center Hohokam Stadium/Fitch Complex Cubs Stadium District Cooling Warehouse, Maintenance & Services Self-Insurance Total Operating Expenses 20,542 22,757 45,149 48,392 34,729 3,516 1,820 4,169 1,463 1,989 761 185,287 26,691 90,005 116,696 Operating Income (Loss) Before Depreciation and Amortization 186,507 6,228 (65,618) (368) 120,889 5,860 (Continued) Depreciation and Amortization Operating Income (Loss) The accompanying notes are an integral part of the financial statements. 25 CITY OF MESA, ARIZONA EXHIBIT A-8 (Continued) STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION PROPRIETARY FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 (in thousands) Business-type Activities Enterprise Fund Governmental Activities Internal Service Funds Nonoperating Revenues (Expenses): Investment Income Pledged as Security for Revenue Bonds Investment Income Unpledged Intergovernmental Interest Expense: Bonds Notes Payable and Other Long-Term Obligations Bond Administrative Costs Gain/(Loss) on Disposal of Capital Assets Net Gain from Joint Venture Utility Development Fees Bond Issuance Costs Occupancy Tax Miscellaneous Revenue Total Nonoperating Revenues (Expenses) 475 1,216 2,406 304 - (52,041) (13) (39) (5,619) 9,109 16,261 (560) 1,192 4,026 (23,587) (20) 284 Income before Transfers and Capital Contributions 97,302 6,144 Capital Contributions Transfers In Transfers Out 7,451 (110,364) 733 - Change in Net Position (5,611) 6,877 Total Net Position - Beginning Change in Accounting Principle 518,804 (7,210) 9,958 (8,797) Total Net Position - As Restated 511,594 1,161 Total Net Position - Ending $ The accompanying notes are an integral part of the financial statements. 26 505,983 $ 8,038 CITY OF MESA, ARIZONA EXHIBIT A-9 STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 (in thousands) Business-type Activities Cash Flows From Operating Activities: Cash Received from Customers Cash Received from Users Cash Payments to Suppliers Cash Payments to Employees Other Non-Operating Revenue Enterprise Fund Governmental Activities Internal Service Funds $ $ 375,796 (126,509) (57,661) 4,026 122,865 (108,808) (11,230) - Net Cash Provided By (Used For) Operating Activities 195,652 2,827 Cash Flows From Noncapital Financing Activities: Intergovernmental Transient Occupancy Tax Investment in Joint Ventures Transfers Out to Other Funds 1,982 1,192 1 (110,364) - Net Cash Used For Noncapital Financing Activities (107,189) - Cash Flows From Capital and Related Financing Activities: Proceeds from Bond Sales Payment to Refunded Bond Escrow Agent Proceeds From Sale of Capital Assets Acquisition and Construction of Capital Assets Principal Paid on Bonds, Leases and Notes Maturities Interest Paid on Bonds, Leases and Notes Bond Issuance Costs Developer Contributions and Capital Grants 125,051 (17,066) 322 (144,986) (59,135) (51,836) (560) 20,500 (97) - Net Cash Used For Capital and Related Financing Activities (127,710) (97) Cash Flows From Investing Activities: Interest Received on Investments 1,491 214 Net Cash Provided By Investing Activities 1,491 214 Net Change in Pooled Cash and Investments (37,756) 2,944 Total Cash and Investments at Beginning of Year 319,088 66,242 Total Cash and Investments at End of Year $ The accompanying notes are an integral part of the financial statements. 27 281,332 - $ 69,186 (Continued) CITY OF MESA, ARIZONA EXHIBIT A-9 (Continued) STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 (in thousands) Reconciliation of Operating Income to Net Cash Provided By (Used For) Operating Activities: Operating Income Business-type Activities Enterprise Fund Governmental Activities Internal Service Funds $ $ Adjustments to Reconcile Operating Income to Net Cash Provided By Operating Activities: Depreciation and Amortization Miscellaneous Revenue Changes in Assets and Liabilities: (Increase)/Decrease in Receivables (Increase)/Decrease in Inventory (Increase)/Decrease in Deposits and Prepaid Costs Increase/(Decrease) in Accounts Payable Increase/(Decrease) in Unearned Revenue Increase/(Decrease) in Pension and OPEB Liability Increase (Decrease) in Deferred Outflows Increase (Decrease) in Deferred Inflows Increase/(Decrease) in Other Accrued Expenses Total Adjustments Net Cash Provided By (Used For) Operating Activities Noncash Transactions Affecting Financial Position: Contributions of Capital Assets Gain (Loss) on Disposal of Capital Assets Amortization of Deferred Amounts on Refunding Amortization of Premiums 5,860 65,618 4,026 368 - (2,600) 5,330 2,510 59 (3,220) 1,317 1,621 102 (60) (131) 11 (1,611) (722) 369 353 (1,610) 74,763 (3,033) $ 195,652 $ 2,827 $ 3,212 (5,619) (3,314) 4,711 $ (733) (20) - The accompanying notes are an integral part of the financial statements. 28 120,889 CITY OF MESA, ARIZONA EXHIBIT A-10 STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES FIDUCIARY FUNDS JUNE 30, 2018 (in thousands) Payroll Agency ASSETS Pooled Cash and Investments $ 10,789 Due from Others 84 Total Assets $ 10,873 LIABILITIES Accounts Payable Accrued Payroll Payable Total Liabilities $ $ 23 10,850 10,873 The accompanying notes are an integral part of the financial statements. 29 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 The City of Mesa, Arizona, (the City) was incorporated July 15, 1883 with an approximate population of 300 and an area of one square mile. Today, the City’s estimated population is 501,137 within an area of approximately 141 square miles. The City’s charter was adopted August 18, 1967 providing for a CouncilManager form of government. The City provides a full range of municipal services including police and fire protection, parks and recreation, library, transportation, health and certain social services and general administration. In addition, the City owns and operates an enterprise whose activities include operations of electricity, gas, water, wastewater, and solid waste utilities, an airport, golf course, convention center, two stadiums and district cooling. 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) as applied to governmental units. The Governmental Accounting Standards Board (“GASB”) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The City’s other significant accounting policies are described below: a. Reporting Entity The accompanying financial statements include the City and its blended component units, Eastmark and Cadence Community Facilities Districts, collectively referred to as “the financial reporting entity”. In accordance with GASB Statement No. 14, and as amended by GASB Statements No. 61 and No. 80, the component units discussed below have been included in the City’s reporting entity because of the significance of their operational or financial relationship with the City. Community Facilities District (“Districts”) The City has two municipal corporation political subdivisions of the State of Arizona that are organized to provide a vehicle for financing certain public infrastructure that is necessary for development of the land within the boundaries of the Districts. The City Council serves as the board of directors of the Districts and the City Manager of the City currently serves as the Manager of the Districts. Although they are legally separate from the City, the Districts are reported as if they are part of the primary government because the District’s governing body is substantively the same as the governing body of the City and management of the City has operational responsibility for the Districts. Separate financial statements for Eastmark Community Facilities District can be obtained from the City’s Finance Department, through Accounting Services at 20 E. Main Street, 3rd Floor, Mesa, Arizona 85211. Separate financial statements for Cadence Community Facilities District are not prepared. b. Jointly Governed Organizations Phoenix – Mesa Gateway Airport Authority (“PMGAA”) is a Joint-Powers Airport Authority established and funded by the City, the City of Phoenix, the Towns of Gilbert and Queen Creek, and the Gila River Indian Community. The purpose of the entity is the redevelopment of Williams Air Force Base that was closed in September of 1993 to become PMGAA. The Board of Directors consists of the mayors for the respective municipalities and the governor of the tribal community. The City contributed $1.7 million to the PMGAA operating and capital budget during this fiscal year. Regional Public Transportation Authority (“RPTA”) is a voluntary association of local governments, including the cities of Mesa, Tempe, Scottsdale, Glendale, Phoenix and Maricopa County. Its purpose is to create a regional public transportation plan for Maricopa County. The 30 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Board of Directors consists of the mayors of those cities and a member of the County Board of Supervisors. Arizona Municipal Water Users Association (“AMWUA”) is a nonprofit corporation established and funded by cities in Maricopa County for the development of an urban water policy and to represent the cities’ interests before the Arizona legislature. AMWUA performs certain accounting, administrative and support services for the cities who are jointly using a multi-city sanitary sewer system. c. Basic Financial Statements Government-wide Financial Statements: The government-wide financial statements (the statement of net position and the statement of activities) report on the City as a whole, excluding fiduciary activities. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for services. The government-wide focus is more on the sustainability of the City as an entity and the change in aggregate financial position resulting from the activities of the fiscal period. For the most part, the effect of interfund activity has been removed from the government-wide financial statements. Net interfund activity and balances between governmental activities and business-type activities are shown in the government-wide financial statements. Certain charges between the Enterprise Fund’s utility systems and the various functional activities are not eliminated, as this would distort the direct costs and program revenues reported for the various functions concerned. The government-wide statement of net position reports all financial and capital resources of the City, excluding fiduciary funds. It is presented in a format of assets plus deferred outflows of resources less liabilities plus deferred inflows of resources equals net position, with the assets and liabilities shown in order of their relative liquidity. Net position is required to be presented in three components: net investment in capital assets, restricted and unrestricted. Net investment in capital assets is capital assets net of accumulated depreciation and reduced by outstanding balances of bonds, capital leases, notes or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. Restricted net position are those with constraints placed on their use externally either imposed by creditors (such as bond covenants), grantors, contributors, laws or regulations of other governments or imposed by law through constitutional provisions or enabling legislation. Unrestricted net position are those not otherwise classified as restricted, and are shown as unrestricted. Generally, the City would first apply restricted resources when an expense is incurred for purposes for which both restricted and unrestricted net position is available. The government-wide statement of activities demonstrates the degree to which the direct expenses of the various functional activities and segments of the City are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific functional activity (General Government, Public Safety, Cultural-Recreational, etc.) or segment. Expenses reported for the various functional activities or segments include indirect expenses, such as overhead costs. Interest on long-term debt is not allocated to the various functions in the governmental activities. Program revenues include charges to customers or applicants who directly benefit from goods, services or privileges provided by a given function or segment. Program revenues also include grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment, including special assessments. Taxes and other items not properly included as 31 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 program revenues are reported as general revenues. The general revenues support the net costs of the functions and segments not covered by program revenues. Fund Financial Statements: The fund financial statements are, in substance, very similar to the financial statements presented in the previous model. Separate financial statements are provided for governmental funds, proprietary funds and fiduciary funds. However, the fiduciary funds are not included in the government-wide financial statements. The focus of the fund financial statements is on major funds, as defined by GASB Statement No. 34. Major individual governmental funds are reported as separate columns in the fund financial statements. The City has only one enterprise fund, which is reported as a major fund. Non-major governmental funds, as well as the internal service funds, are summarized into a single column on the fund financial statements and are detailed in combining statements included as supplementary information after the basic financial statements. d. 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 the liability is incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenues as soon as all eligibility requirements imposed by the provider have been met. Governmental Fund Financial Statements: The governmental fund financial statements are reported using the current financial resources measurement focus and modified accrual basis of accounting. Revenues are recognized in the accounting period in which they become susceptible to accrual, i.e., measurable and available to finance the City’s operations. Available means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. The City considers revenues to be available if they are collected within 60 days of the end of the current period. Principal revenue sources considered to be susceptible to accrual are City sales taxes, property taxes, intergovernmental revenues and interest on investments. In applying the susceptible to accrual concept to intergovernmental revenues pursuant to GASB Statement No. 33, receivables and revenues are recognized when all the applicable eligibility requirements, including time requirements, have been met. Resources transmitted before the eligibility requirements are met are reported as unearned revenue. Expenditure-driven grants are recognized as revenue when the qualifying expenditures have been incurred and all other grant requirements have been met. City sales taxes, State shared revenues, including sales and income taxes, highway user and auto lieu taxes, and lottery distributions for transportation assistance, which are collected and held by the State at year-end, on behalf of the City, are also recognized as revenue. Special assessments are recognized as revenue only to the extent that individual installments are considered current assets. Annual installments not currently receivable are reflected as unavailable revenue. Licenses and permits, charges for services and miscellaneous revenues are recorded as revenue when received as cash because they are generally not available until actually received. Changes in the fair value of investments are recognized in revenue at the end of each year. Expenditures are generally recognized when the related fund liability is incurred, as under accrual accounting. 32 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Since the governmental fund financial statements are presented on a different measurement focus and basis of accounting than the government-wide financial statements, a reconciliation is presented on the page following each governmental fund financial statement, which briefly explains the adjustments necessary to transform the fund-based financial statements into the governmental activities column of the government-wide financial statements. Additional reconciliations are also provided in Note 2. Proprietary Funds Financial Statements: The financial statements of the proprietary fund are reported using the economic resources measurement focus and accrual basis of accounting, similar to the government-wide financial statements described above. The proprietary fund financial statements 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. All revenues and expenses not meeting this definition, such as investment income and interest expense are reported as non-operating revenues and expenses. Internal service funds of the City, which provide services primarily to the other funds of the City, are presented in summary form as part of the proprietary fund financial statements. Since the principal users of internal services are the City’s governmental activities, financial statements of the internal service funds are consolidated into the governmental activities column when presented at the government-wide level. The costs of these services are reflected in the appropriate functional activity on the government-wide statement of activities and the revenues and expenses within the internal service funds are eliminated from the government-wide financial statements to avoid any doubling up effect of these revenues and expenses. Fiduciary Funds Financial Statements: The City’s fiduciary fund is presented in the fund financial statements. The City’s fiduciary fund is an agency fund, which is custodial in nature and does not involve measurement of results of operations. The agency fund is accounted for on the accrual basis of accounting. Since by definition these assets are being held for the benefit of a third party and cannot be used to address activities or obligations of the City, these funds are not incorporated into the government-wide financial statements. e. Fund Accounting The financial transactions of the City are recorded in individual funds. Each fund is accounted for by providing a separate set of self-balancing accounts that comprises its assets, liabilities, reserves, fund equity, revenues and expenditures/expenses. The various funds are reported by generic classification within the fund financial statements. GASB Statement No. 34 sets forth minimum criteria for the determination of major funds. The non-major funds are combined in a column in the fund financial statements and detailed in the combining section. The City reports the following major governmental fund: The General Fund is the general operating fund of the City. It is used to account for all financial resources except those required to be accounted for in another fund. The City reports the following non-major governmental funds: Ten non-major Special Revenue Funds are used to account for specific revenues that are legally restricted to expenditures for specific purposes. 33 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Five non-major Capital Project Funds are used to account for the acquisition and construction of major capital facilities other than those financed by proprietary funds. Five non-major Debt Service Funds are used to account for the accumulation of resources for the payment of long-term obligation principal, interest and service charges. The City reports the following major proprietary fund: The Enterprise Fund has been established to account for all enterprise functions. This includes the City-owned electric, gas, water, wastewater and solid waste systems, as well as the City-owned airport, golf course, convention center, stadiums and district cooling. Additionally, the City reports the following fund types: The Internal Service Funds are used to account for operations that provide services to other departments of the government on a cost-reimbursement basis. These services include fleet support, materials and supply, printing and graphics, self-insurance for property and public liability, workers’ compensation and employee benefit programs. The Agency Fund is used to account for assets being held by the City as an agent in a temporary custodial capacity. The Payroll Agency Fund accounts for all payroll transactions. f. Budgets and Budgetary Accounting Each year the City Manager issues a budget calendar giving specific completion dates for various phases of the budget preparation process. The final adoption of the operating budget is by ordinance. Prior to June 1, the City Manager submits a proposed operating budget to the City Council for the fiscal year commencing the following July 1. The operating budget includes proposed expenditures and the means of financing them. Public hearings are conducted by the City to obtain citizen comments. Prior to June 30, the budget for the ensuing year is legally adopted through passage of an ordinance; these appropriations lapse at the end of each fiscal year. Legal control over the budget derives from State statutes that prohibit the City from exceeding its adopted budget in total and from the resolution itself that limits expenditures by fund and by departmental groupings. Transfers of sums within a specific fund or departmental group may be made upon City Manager approval. The legally adopted budget consists of all funds except the Agency Fund. Capital Projects are budgeted as one item and governmental debt service expenditures are budgeted in the Special Revenue Funds or Debt Service Funds. A budget schedule for the General Fund is presented in the Required Supplementary Information Section, and the other funds are located in the Supplementary Information Section. 34 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 On June 3, 1980, the voters of Arizona approved an expenditure limitation for all local governments. This limitation restricts the growth of expenditures to a percentage determined by population and inflation, with certain expenditures excluded from the limitation. The State Economic Estimates Commission determines and publishes, prior to April 1st of each year, the expenditure limitation for the following fiscal year for each governmental unit. Fiscal year 1979-80 is the base year for calculations. Budgets for all funds are adopted in accordance with the requirements of the Arizona Constitution, Arizona Revised Statutes and the Mesa City Charter. There are certain differences between the basis used for budgetary purposes and that used for reporting in accordance with generally accepted accounting principles. For additional detail, see the notes to budgetary comparison schedule. Budgeted amounts are as originally adopted by the City Council on May 22, 2017. g. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make a number of estimates and assumptions that affect the reported amounts of assets, deferred outflows of resources, liabilities, deferred inflows of resources and net position, the disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses/expenditures during the reporting period. Actual results could differ from those estimates. h. Pooled Cash and Investments The City maintains an invested pool that is available for use by all City funds. Each fund’s portion of this pool is reported on the financial statements as “pooled cash and investments”. Assets related to long-term investments of the invested pool are held by a single master custodian. In addition, certain cash deposits and short-term investments are held separately in State of Arizona Local Government Investment Pools (LGIP), and FDIC Insured Cash Sweep accounts with one local bank. The City considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Investments are recorded at fair value in accordance with GASB Statement No. 72, Fair Value Measurement and Application. Accordingly, the change in fair value of investments is recognized as an increase or decrease to investment assets and investment income. Interest income from investments is recorded as revenue within the fund that made the investment, with the exception of the Capital Projects and Agency Funds. Income from investments within these funds is recorded in the General or Enterprise Fund based upon their general governmental or enterprise related function. i. Inventories Inventories consist of expendable supplies held for consumption. The warehouse inventory is valued at the lower of average cost or market, while fleet support services inventory is valued at cost on a first-in, first out (FIFO) basis. The cost of inventory is reported as an expenditure at the time individual items are consumed. 35 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 j. Capital Assets Capital assets, including infrastructure (streets, sidewalks, street lighting, storm drainage and other assets that are immovable and of value only to the City) are defined as assets with an initial cost of $5,000 or more and an estimated useful life of more than one year. Intangible assets for the City include goodwill, right of way, easements and computer software. The City has elected to capitalize software with an initial cost of $100,000 or more. All capital assets, whether owned by governmental activities or business-type activities, are required to be recorded and depreciated in the government-wide financial statements. Capital assets are recorded at cost or estimated historical cost if purchased or constructed. Contributions of assets are stated at fair market value based on appraisals or engineering estimates of acquisition value at the time of receipt. When assets are retired or sold, the costs of the assets and the related accumulated depreciation are eliminated from the accounts, and any resultant gain or loss is charged to income or expense. Depreciation has been provided using the straight-line method based on the estimated useful lives of the assets. The estimated useful lives are as follows: Buildings Other Improvements Machinery and Equipment Intangibles Infrastructure 15-50 Years 5-50 Years 3-30 Years 6-15 Years 5-50 Years Capital assets transferred between funds are transferred at their net book value (cost less accumulated depreciation) or net realizable value, if lower, as of the date of the transfer. k. Compensated Absences Vacation, compensatory time and sick leave benefits are accrued as liabilities as employees earn the benefits to the extent that they meet both of the following criteria: 1) the City’s obligation is attributable to employees’ services already rendered; and 2) it is probable that the City will compensate the employees for the benefits through paid time off or some other means, such as cash. For governmental funds a liability for vacation, compensatory time and sick leave are reported only if they have matured, for example, as a result of employee resignations and retirements. The entire amount of accumulated unpaid vested vacation pay, compensatory time and an estimated amount for sick leave related to the proprietary funds is included as a liability in the fund financial statements. The remaining long-term balances related to governmental activities are included in the government-wide financial statement. l. Reserve for Loss and Loss Adjustment Expenses The Property and Public Liability, Workers’ Compensation and Employee Benefits Internal Service Funds establish claim liabilities based on actuarial estimates of the ultimate cost of claims (including future claim adjustment expenses) that have been reported but not settled, and of claims that have been incurred but not reported. Adjustments to claim liabilities are charged or credited to expenses in the periods in which they are made. 36 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 m. Long-Term Obligations In the government-wide financial statements and the proprietary fund financial statements, longterm debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund statement of net position. Bond premiums and discounts are amortized over the life of the bonds using the straight-line method. Bonds payable are reported net of the applicable bond premium or discount. In the fund financial statements, governmental fund types recognize bond premiums and discounts 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 issuance are reported as other financing uses. n. Pension and Postemployment Benefits For purposes of measuring the net pension and other postemployment benefits (OPEB) liabilities, deferred outflows of resources and deferred inflows of resources related to pensions and OPEB, and pension and OPEB expense, information about the plans’ fiduciary net position and additions to/deductions from the plans’ fiduciary net position have been determined on the same basis as they are reported by the plans. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. o. Fund Balance Policies In the fund financial statements, fund balance is reported in classifications that comprise a hierarchy based on the extent to which the City is bound to honor constraints on the specific purposes for which amounts in those funds can be spent. The classifications of fund balance are Nonspendable, Restricted, Committed, Assigned, and Unassigned. Nonspendable and Restricted fund balances represent restricted classifications and Committed, Assigned, and Unassigned represent unrestricted classifications. Nonspendable fund balance includes amounts that cannot be spent because either 1) it is not in a spendable form, such as inventory or prepaid items or 2) it is legally or contractually required to be maintained intact. Restricted fund balance has externally (outside the City) enforceable limitations imposed by creditors, grantors, contributors, laws and regulations of other governments, or laws through constitutional provisions or enabling legislation (changes in City Charter). Committed fund balance has self-imposed limitations imposed at the highest level of decision making authority, namely, Mayor and Council. Mayor and Council approval is required by resolution to commit resources or to rescind the commitment. Assigned fund balance represents limitations imposed by management. Assigned fund balance requests are submitted to the Chief Financial Officer for approval/nonapproval. City Charter authorizes the City Manager or Designee the authority to perform all financial transactions. The City Manager has authorized the Chief Financial Officer this responsibility. Unassigned fund balance represents the residual net resources in excess of the other classifications. The General Fund is the only fund that can report a positive unassigned fund balance and any governmental fund can report a negative unassigned fund balance. When both restricted and unrestricted resources are available for specific expenditures, restricted resources are considered spent before unrestricted resources. Within unrestricted resources, committed and assigned are considered spent (if available) before unassigned amounts. 37 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 p. Statement of Cash Flows A statement of cash flows classifies cash receipts and payments according to whether they stem from operating, non-capital financing, capital and related financing, or investing activities. For purposes of the statements of cash flows, the City considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. This includes repurchase agreements and all monies in the State Treasurer’s Local Government Investment Pool since the City may deposit or withdraw cash at any time without prior notice or penalty. q. Contingency Services The principal purpose of a contingency is to cover any unforeseen expenditures that may arise after the budget is adopted, and to cover expenditures resulting from prior year encumbrances. It is impossible to estimate revenues exactly or to determine in a prior year the exact expenditure of each program or activity for the ensuing year. Thus, a contingency is essential for budgetary purposes. Any balance of a contingency appropriation not used during one fiscal year is available to help finance the following year’s budget. The contingency applications are reflected in the budget basis financial statements for the fiscal year ended June 30, 2018 and are made in accordance with State Statutes. r. Property Taxes The City’s secondary property tax is levied each year on or before the third Monday in August based on the previous January 1 full cash value as determined by the Maricopa County Assessor. Levies are due and payable in two installments, on October 1 and March 1, and become delinquent after November 1 and after May 1, respectively. A lien attaches to the property on the first day of January preceding the assessment and levy of taxes. Delinquent amounts bear interest at the rate of 16.0%. Maricopa County, at no charge to the taxing entities, bills and collects all property taxes. Public auctions of properties which have delinquent real estate taxes are held in February. Secondary property taxes are levied to pay principal and interest on bonded indebtedness. The dollar amount of the secondary property tax is “unlimited” and the actual full cash value of property is used in determining the tax rate. In fiscal year 2017-2018, current property tax collections were $33,009,244 or 98.76% of the tax levy, and were recognized as revenue when received. At fiscal year end, the delinquent property tax is recorded as a receivable. Revenue is recognized for those payments expected to be collected within 60 days and the remaining balance is reported as unavailable revenue. The receivable at June 30, 2018 was $854,611 of which $418,382 was recorded as revenue and $436,229 as unavailable revenue. 38 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 s. New Accounting Pronouncements GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, improves accounting and financial reporting by governments for postemployment benefits other than pensions. It also improves information provided by governmental employers about financial support for OPEB that is provided by other entities. This Statement replaces the requirements of Statements No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, as amended, and No. 57, OPEB Measurements by Agent Employers and Agent Multiple-Employer Plans, for OPEB. This Statement is effective for fiscal years beginning after June 15, 2017. The City has implemented this Statement in fiscal year 2018. See Note 15 and Note 16 for the current year effect of implementing GASB Statement No. 75. GASB Statement No. 83, Certain Asset Retirement Obligations, addresses accounting and financial reporting for certain asset retirement obligations, or legally enforceable liabilities associated with the retirement of a tangible capital asset. The requirements of this Statement are effective for reporting periods beginning after June 15, 2018. The City will implement this Statement in fiscal year 2019. GASB Statement No. 84, Fiduciary Activities, establishes criteria for identifying fiduciary activities of all state and local governments. The requirements of this Statement are effective for reporting periods beginning after December 15, 2018. The City will implement this Statement in fiscal year 2020. GASB Statement No. 85, Omnibus, addresses practice issues that have been identified during implementation and application of certain GASB Statements. The requirements of this Statement are effective for reporting periods beginning after June 15, 2017. The City has implemented this Statement in fiscal year 2018 with no effect. GASB Statement No. 87, Leases, provides new guidance for recognition of operating leases and the related assets. The requirements of this Statement are effective for reporting periods beginning after December 15, 2019. The City will implement this Statement in fiscal year 2021. GASB Statement No. 89, Accounting for Interest Costs Incurred before the End of a Construction Period, establishes accounting requirements for interest cost incurred before the end of a construction period. The requirements of this Statement are effective for reporting periods beginning after December 15, 2019. The City has implemented this Statement in fiscal year 2018 with no effect. Implementation Guide No. 2017-1, Implementation Guidance Update – 2017, provides guidance that clarifies, explains or elaborates on GASB Statements and Interpretations and amends, removes, supersedes, or adds questions not originally contained in Implementation Guide No. 2015-1 and 2016-1. The requirements of this Implementation Guide are effective for reporting periods beginning after June 15, 2017. The requirements of this Implementation Guide were implemented by the City in fiscal year 2018 with no effect. Although expected to be significant, the City has not fully determined the effects that implementation of Statement No. 87 will have on the City’s financial statements. 39 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 2. RECONCILIATION OF GOVERNMENTAL FUND FINANCIAL STATEMENTS TO GOVERNMENT-WIDE FINANCIAL STATEMENTS The governmental fund financial statements are presented on a current financial resources measurement focus and modified accrual accounting basis while the government-wide financial statements are prepared on a long-term economic resources measurement focus and accrual accounting basis. Reconciliations briefly explaining the adjustments necessary to transform the fund financial statements into the governmental activities column of the government-wide financial statements immediately follow each governmental fund financial statement. 40 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Reconciliation of the Governmental Funds Balance Sheet to the government-wide Statement of Net Position (in thousands): Asse ts Pooled Cash and Investments Account and Misc Receivables, Net Accrued Interest Receivable Due from Other Governments Due from Other Funds Advances to Other Funds Inventory Prepaid Costs Deposits Restricted Assets: Pooled Cash and Investments Cash with Fiscal Agent Cash with T rustee Accounts Receivable Due from Other Governments Investment in Joint Ventures Capital Assets T otal Assets T otal Governmental Funds Long-term Assets/ Liabilities (1) Internal Service Funds (2) Reclassifications and Eliminations Statement of Net Position T otal $ $ $ $ 7,001 42,651 12,527 1,265 399,074 262,061 1,437,912 1,699,973 $ 69,186 765 234 6,079 747 69 2,382 79,462 - 8,946 160,427 169,373 2,050 2,050 $ 399,074 $ 1,869,346 $ 81,512 $ 22,268 1,262 876 7,190 9,382 4,673 34,376 80,027 $ $ De fe rre d O utflows of Re source s Deferred Amounts on Refunding Pensions and OPEB T otal Deferred Outflows of Resources T otal Assets and Deferred Outflows of Resources Liabilitie s Accounts Payable and Accrued Liabilities Claims Payable Due T o Other Funds Advances from Other Funds Customer and Defendant Deposits Restricted Bond Interest Payable Restricted Unearned Revenue Matured Bonds Payable Pension and OPEB Long-term Liabilities T otal Liabilities Deferred Inflows of Resources Unavailable Revenue Pension Total Deferred Inflows of Resources Fund Balance /Ne t Position T otal Fund Balance/Net Position T otal Liabilities and Fund Balance/Net Position $ 290,348 5,005 757 35,819 1,262 2,439 - - 1,368,276 513,132 1,881,408 2,090 37,029 31,613 840 71,572 (1,262) (876) - 359,534 5,770 991 35,819 (876) 6,079 3,186 69 (2,138) 7,001 42,651 12,527 1,265 262,061 1,440,294 2,176,371 - 8,946 162,477 171,423 $ (2,138) $ 2,347,794 $ (1,262) (876) (2,138) $ 24,358 37,029 7,190 9,382 4,673 34,376 1,399,889 513,972 2,030,869 14,589 14,589 (14,589) 65,222 50,633 1,902 1,902 - 67,124 67,124 304,458 (62,695) 8,038 - 249,801 399,074 $ 1,869,346 $ 81,512 (2,138) $ 2,347,794 41 $ (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 (1) Investment in joint ventures that are to be used in governmental activities are also reported in the governmental funds as expenditures as constructed. These assets are included in the statement of net position for the City as a whole. Investment in joint ventures $ 262,061 When capital assets (land, buildings, equipment, etc.) that are to be used in governmental activities are purchased or constructed, the costs of those assets are reported as expenditures in governmental funds, and thus a reduction in fund balance. However, the statement of net position includes those capital assets among the assets of the City as a whole. Costs of capital assets Accumulated depreciation Total $ $ 2,427,498 (989,586) 1,437,912 Long-term liabilities applicable to the City’s governmental activities are not due and payable in the current period, and accordingly are not reported as fund liabilities in the governmental fund statement. Bonds payable Compensated absences Post-employment benefits Unamortized bond premiums Pension liability Total $ $ 471,957 26,360 605,491 14,815 762,785 1,881,408 Deferred outflows consist of items that will consume net position in a future reporting period(s) and do not meet the definition of an asset. Deferred amounts on refunding res ult from the difference between the carrying value of refunded debt and its reacquisition price. The pension-related amounts result from differences between expected and actual experience, changes of assumptions or other inputs, the difference between projected and actual investment earnings, and contributions made to the pension plan from the employer subsequent to the measurement date of the net pension liability and before the end of the reporting period. Deferred charge on refunding Pensions and OPEB Total $ $ 8,946 160,427 169,373 Deferred inflows relating to pensions represent a future acquisition of net position that is not reported in the funds. Deferred Inflows – Pensions & OPEB 42 $ 65,222 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Unavailable revenues shown on the governmental fund statements are not deferred on the statement of net position. Unavailable property tax revenues Unavailable special assessment revenue Receivables not yet collected Total $ $ 436 12,522 1,631 14,589 (2) Internal service funds are used by management to charge the costs of certain activities, such as fleet support, materials and supplies, printing and graphics, and self-insurance, to the individual funds. The assets, liabilities, deferred inflows and deferred outflows of the internal service funds are included in the governmental activities in the statement of net position, but are not included on the governmental funds balance sheet. Internal Service Funds total 43 $ 8,038 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balance to the Government-wide Statement of Activities (in thousands): Re ve nue s and O the r Source s Revenues: Sales T axes Property T axes Occupancy T axes Special Assessments Licenses and Permits Intergovernmental Charges for Services Fines and Forfeitures Investment Income Contributions Miscellaneous Other Sources: T ransfers In Face Amount of Bonds Issued Premiums on Issuance of Bonds T otal Revenue and Other Sources Expe nditure s/Expe nse s and O the r Financing Use s Expenditures/Expenses: Current: General Government Public Safety Community Environment Cultural-Recreational Debt Service: Principal Interest on Bonds Service Charge Cost of Issuance Capital Outlay Other Financing Uses: T ransfers Out Pmt to Ref Bond Escrow Agent T otal Expenditures\Expenses & Other Financing Uses Net Change for the Year T otal Governmental Funds Long-term Revenues/ Expenses(1) $ $ $ $ $ Capital Related Items(2) Internal Service Funds(3) $ (3,490) 60,038 5,880 $ 65,918 $ 27,074 (26,745) (1,063) $ (27,808) 90,209 266,459 73,404 46,143 (207) 49,223 (65) (341) 7,746 11,849 39,122 8,609 9,075 7,469 2,663 990 (1,097) - 34,738 18,477 14 1,023 76,279 - (76,279) - 66,208 - - 238 - 672,954 48,610 (52,100) 169,024 35,616 2,628 1,174 25,119 223,800 40,222 10,436 1,608 429 5,547 176,572 26,745 1,063 719,983 47,029 $ $ (45) 1,805 (5,250) $ 304 21,648 5,122 Long-term Debt (4) Eliminations (5) $ $ - $ 169,024 35,571 2,628 2,979 25,119 223,800 40,222 10,436 1,912 82,115 5,419 (66,208) (66,208) 116,244 $ 715,469 - $ 105,726 335,000 115,124 55,401 (34,738) - - 18,477 14 1,023 - - - (66,208) - 238 - (8,715) 20,197 (35,835) (66,208) 631,003 $ 74,633 $ 6,877 - $ 84,466 44 $ - Statement of Activities 8,027 $ $ $ (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 (1) Revenues in the statement of activities that do not provide current financial resources include unavailable revenues. Revenues that are “unavailable” and do not provide current financial resources are not reported in the governmental funds. However, the subsequent collection of these revenues in the governmental funds will reduce the amount reported in the statement of activities. Property tax revenue Special assessment revenue Unavailable revenue Total $ (45) 1,805 (5,250) (3,490) $ 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. Accrual of long-term compensation absences $ OPEB Expense Pension Expense Total $ 1,319 (29,272) (84,039) (111,992) Current-year pension contributions are reclassified to deferred outflows of resources, and therefore are not reported as expenditures in governmental funds. Deferral of current year pension & OPEB Contributions $ 63,382 (2) When capital assets that are to be used in the governmental activities are purchased or constructed the resources expended for those assets are reported as expenditures in governmental funds. However, in the statement of activities, the cost of those assets is allocated over their useful lives and reported as depreciation expense. As a result, fund balance decreases by the amount of the financial resources expended, whereas net position decreases by the amount of depreciation expense charged for the year. Capital outlay for capital assets Depreciation expense Total $ $ 73,370 (66,102) 7,268 The net effect of miscellaneous transactions involving capital assets (donations, transfers and disposals) and investment in joint venture activity is to increase net position. Change in equity interest for joint venture Donated capital and transfers Loss on Disposal Total 45 $ $ 58,235 11,593 (2,462) 67,366 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 (3) Internal service funds are used by management to charge the costs of certain activities, such as fleet support, materials and supplies, printing and graphics, and self-insurance, to the individual funds. The adjustments for internal service funds “close” those funds by charging the additional amounts to participating governmental activities to completely cover the internal service funds’ costs for the year. Revenue and other sources Expenditures and other uses Change in net position $ $ 27,074 (20,197) 6,877 (4) Bond and note proceeds are reported as financing sources and the repayment of principal consumes financial resources in the governmental funds. Neither transaction has any effect on the statement of activities. New debt issued (including refunded debt): General Obligation bond proceeds Community Facilities District Bonds Principal repayments Total $ $ (16,120) (10,625) 34,738 7,993 Governmental funds report bond premiums and deferred amounts relating to refunding when first issued. In the statement of activities these amounts are amortized. Amortization of deferred refunding amounts Amortization of bond premiums Premiums on bonds Total $ $ (1,166) 2,263 (1,063) 34 (5) Interfund transfers between governmental activities, other than Internal Service Funds, are eliminated in the consolidation of these activities for the statement of activities. The elimination is reflected as a reduction of transfers in and transfers out to eliminate the doubling up effect of these transactions within the governmental activities. Elimination of transfers to/from the Internal Service Funds is netted into the results of the Internal Service Funds in (3) above. Transfers out Transfers in Total 46 $ $ (66,208) 66,208 - (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 3. FUND BALANCE As of June 30, 2018, the fund balance details by classification are listed below (in thousands): Fund Balances: Nonspendable: Prepaid Costs Nonspendable Sub-total General Fund $ 2,304 2,304 Non-Major Governmental Funds Total Governmental Funds $ $ 135 135 2,439 2,439 Restricted: Capital Projects Community Facility District Court Debt Service Fire Housing Library Police Transportation Programs Restricted Sub-total - 57,420 33 1,931 12,532 3,362 911 306 2,007 53,960 132,462 57,420 33 1,931 12,532 3,362 911 306 2,007 53,960 132,462 Committed To: Arts & Culture Capital Projects Cemetery Economic Development Environmental Compliance Fire Parks & Recreation Police Technology Vehicle Replacement Committed To Sub-total 780 97 4,350 5,150 10,377 954 14,236 7,233 12,715 53 1,103 5,347 41,641 954 14,236 8,013 97 12,715 4,350 53 5,150 1,103 5,347 52,018 Assigned To: Development Services Economic Development Fire General Government Parks & Recreation Police Sustainability Transit Assigned To Sub-total 123 2,010 42 19,089 609 6,349 87 37 28,346 22 22 123 2,010 42 19,111 609 6,349 87 37 28,368 Unassigned 89,347 (176) 89,171 Total Fund Balances $ 130,374 $ 174,084 $ 304,458 The Mayor and Council has established a minimum fund balance policy for the General Fund of eight to ten percent of budgeted expenditures. The fund balance in the General Fund as of June 30, 2018 as reported in Exhibit B-5 is 35.3% of General Fund expenditures budgeted for fiscal year 2017-2018. 47 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 4. POOLED CASH AND INVESTMENTS Total Pooled City Cash and Investments at fair value are as follows (in thousands): Cash on Hand Carrying Amount of City Deposits Investment in Insured Cash Sweep Accounts Investments in Local Govt Invest Pool Cash with Trustee (1) Cash with Fiscal Agent (2) Long-Term Investments Pooled Cash and Investments Less: Cash in Agency Fund Total City Pooled Cash and Investments $ $ 143 24,036 15,266 117,933 98 100,331 443,500 701,307 (10,789) 690,518 (1) Represents bond and note proceeds held with trustee in compliance with bond/note agreements. Proceeds are invested in the Local Govt Investment Pool and are used by the City for authorized capital projects. (2) Represents cash sent by the City to fiscal agents on June 30, 2018 for debt service payments due to bondholders on July 1, 2018. Deposits At year-end, the City’s cash totaled $24,179,232 which included $143,005 of petty cash. The carrying amount of the City’s deposits was $24,036,227 and the bank balance was $25,867,319. The difference of $1,831,092 represents outstanding checks and deposits in transit. Custodial Risk Cash deposits are subject to custodial risk. Custodial risk is the risk that in the event of bank failure, the city’s deposits may not be returned. To mitigate this risk, on July 1, 2014 Arizona House Bill 2619 Arizona Revised Statute (§35-1201 et. seq.) went into effect establishing a pooled collateral program for public deposits and creating a Statewide Collateral Pool Administrator (the “Administrator”) in the State Treasurer’s Office. The purpose of this Bill is to ensure that public deposits of governmental entities placed with participating banks are backed with collateral of 102% of the amount on deposit less applicable FDIC Deposit Insurance. The Administrator will monitor, audit and report on each bank’s compliance. Collateral under this program is pledged in the name of the Administrator and the City’s current bank is a participant in this program. The City’s cash balances on deposit as of June 30, 2018 are covered under House Bill 2619. Investments The City’s Investment Policy is consistent with the City Charter which authorizes the investment of City funds in accordance with Arizona Revised Statute §35-313. These investments include obligations of the U.S. Treasury and U.S. agencies, certificates of deposit in eligible depositories, repurchase agreements, obligations of the State of Arizona or any of its counties or incorporated cities, towns or duly organized school districts, improvement districts in this state, State Treasurer’s Investment Pool, 48 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 and investment grade corporate bonds, debentures, notes and other evidence of indebtedness issued or guaranteed by solvent U.S. corporations which are not in default as to principal or interest. Interest Rate Risk The City’s investment policy for limiting its exposure from rising interest rates complies with Arizona Revised Statute §35-323, which limits investments of public monies to maturities of five years or less. Credit Risk The City’s investment policy for credit risk complies with Arizona Revised Statute §35-323. The City’s portfolio is primarily invested in securities issued by the U.S. Treasury and by U.S. Government agencies that carry a minimum “A” or better rating, at the time of purchase, from Moody’s or Standard & Poor’s or other nationally recognized rating agency. The City’s portfolio also invests in Corporate Notes rated “A” or better by Moody’s or Standard & Poor’s and participates in the State Treasurer’s Investment Pool (LGIP), which is overseen according to Arizona State Statute by the State Board of Investment. Within the State Treasurer’s Investment Pools, the City participates in Investment Pool 7. Pool 7 is a short-term fund which invests only in products backed by the full faith and credit of the United States Government. The Pool carries a weighted average credit rating of AAA. The City also maintains short-term investments in FDIC Insured Cash Sweep Accounts held by one local bank. The City’s investment in their own Special Improvement District bonds have no credit rating. Fair Value of Investments The City measures and records its investments using fair value measurement guidelines established by generally accepted accounting principles. These guidelines recognize a three-tiered fair value hierarchy, as follows: • • • Level 1: Quoted prices for identical investments in active markets; Level 2: Observable inputs other than quoted market prices; and, Level 3: Unobservable inputs. 49 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 At June 30, 2018, the City had the following recurring fair value measurements (in thousands): Fair Value Measurements Using: Investment by Fair Value Level Debt Securities U.S. Treasuries U.S. Agencies: Federal Home Loan Bank Federal Home Loan Mortgage Corp. Federal National Mortgage Assn Corporate Notes American Express Credit American Honda Finance Corp. Apple, Inc. Bank of New York Mellon Inc. Bank of America BB&T Caterpillar Financial Charles Schwab Corp Chevron Corp Cisco Systems Inc. Walt Disney Exxon Mobil Goldman Sachs Home Depot Inc. HSBC USA IBM Intel John Deere JP Morgan Chase & Co Microsoft Morgan Stanley National Rural Utility Coop. Paccar Financial Pepsico Inc. Pfizer Inc. Toyota Motor Credit United Parcel Service Visa Inc Wal-Mart Stores Inc. Fair Value 6/30/2018 Level 1 Level 2 Level 3 $ $ - $ 257,266 $ - 25,529 24,985 43,076 257,266 25,529 24,985 43,076 3,298 2,279 1,494 990 1,686 3,035 2,493 1,240 3,122 345 3,383 836 2,895 1,571 988 3,355 1,698 2,322 3,345 2,170 2,615 715 874 816 946 3,324 1,346 836 3,819 50 3,298 2,279 1,494 990 1,686 3,035 2,493 1,240 3,122 345 3,383 836 2,895 1,571 988 3,355 1,698 2,322 3,345 2,170 2,615 715 874 816 946 3,324 1,346 836 3,819 - (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Fair Value Measurements Using: Investment by Fair Value Level Debt Securities (continued) Negotiable Certificates of Deposit Bank of Montreal Chicago Bank of Nova Scotia Houston Bank of Tokyo Misubishi NY Credit Suisse NY Royal Bank of Canada NY Skandinaviska Enskilda Banken NY Sumitomo Bitsui Bank UBS AG Stamford CT Wells Fargo & Co City of Mesa Special Improvement District Bonds Total Debt Securities at Fair Value Fair Value 6/30/2018 Level 2 Level 3 - 6,787 2,614 1,707 1,725 1,939 6,791 6,771 1,731 3,337 - 6,787 2,614 1,707 1,725 1,939 6,791 6,771 1,731 3,337 $ Investments Measured at Fair Value Arizona State Treasurers Investment Pool: State of Arizona Pool 7 Total Investments Measured At Fair Value Level 1 1,073 443,167 $ 1,073 $ 443,167 $ 117,933 $ 561,100 Amortized Cost Securities FDIC Insured Cash Sweep Money Market Funds $ 15,266 Debt securities classified in Level 2 are valued using quoted prices for similar securities in active markets. Investments valued using the net asset value (NAV) per share (or its equivalent) are City investments in Arizona State Treasurers Investment Pool (LGIP) and unlike more traditional investments, generally do not have readily obtainable market values. Investments valued at NAV utilized Net Asset Values as provided by State of Arizona Treasurer’s Office at June 30, 2018. 51 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 The City’s investments at June 30, 2018 are as follows (in thousands): Investment M aturities (in Years) Investment Type Fair Value Less Than 1 U.S. Treasuries U.S. Agencies: Federal Home Loan Bank Federal Home Loan M ortgage Corp. Federal National M ortgage Assn Corporate Notes American Express Credit American Honda Finance Corp. Apple, Inc. Bank of America Bank of New York M ellon Inc. BB&T Caterpillar Charles Schwab Chevron Corp Cisco Systems Inc. Walt Disney Exxon M obil Goldman Sachs Home Depot Inc. HSBC IBM Intel John Deere JP M organ Chase & Co M icrosoft M organ Stanley National Rural Utility Coop. Paccar Financial Pepsico Inc. Pfizer Inc. Toyota M otor Credit Corp United Parcel Service Visa Inc. Wal-M art Stores Inc Wells Fargo & Co Negotiable Certificates of Deposit Bank of M ontreal Chicago Bank of Nova Scotia Houston Bank of Tokyo M isubishi NY Credit Suisse NY Royal Bank of Canada NY Skandinaviska Enskilda Banken NY Sumitomo Bitsui Bank UBS AG Stamford CT City of M esa Special Improvement District Bonds Wells Fargo M M F Total $ 257,266 $ 25,529 24,985 43,076 3,298 2,279 1,494 1,686 990 3,035 2,493 1,240 3,122 345 3,383 836 2,895 1,571 988 3,355 1,698 2,322 3,345 2,170 2,615 715 874 816 946 3,324 1,346 836 3,819 3,337 M ore than 3 1-2 2-3 9,550 $ 106,079 $ 141,637 6,821 8,372 4,959 18,708 16,613 28,589 9,528 3,298 1,564 1,494 715 990 - 3,035 2,493 1,240 - 3,122 - 1,093 - 2,374 345 3,383 836 2,895 1,571 988 3,355 1,698 2,049 2,170 1,638 6,787 2,614 1,707 1,725 1,939 6,791 6,771 1,731 6,787 - 1,073 333 $ 443,500 369 333 50,551 977 715 874 816 946 2,266 - 2,614 1,707 1,725 58.01% - 5.76% 5.63% 9.71% 1,686 - 0.74% 0.51% 0.34% 0.38% 0.22% 0.68% 0.56% 0.28% 0.70% 0.08% 0.76% 0.19% 0.65% 0.35% 0.22% 0.76% 0.38% 0.52% 0.75% 0.49% 0.59% 0.16% 0.20% 0.18% 0.21% 0.75% 0.30% 0.19% 0.86% 0.75% - 273 - 950 1,346 836 1,553 3,337 - 2,252 - - - 1,939 6,791 6,771 - - 356 $ 169,759 $ 3,938 1,731 $ 52 348 $ 219,252 Concentration of Credit Risk % 1.53% 0.59% 0.38% 0.39% 0.44% 1.53% 1.53% 0.39% 0.24% 0.08% 100.00% (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 At June 30, 2018 the following investments had callable dates: Corporate Notes American Express Credit Bank of America Bank of New York Mellon BB&T Exxon Mobil Goldman Sachs JP Morgan Chase & Co Visa Inc. Date 9/30/2019 10/1/2020 7/17/2020 12/15/2019 2/6/2020 11/13/2019 2/22/2019 11/14/2020 Market Value $ 3,298 1,686 990 3,035 836 1,658 1,093 836 5. ACCOUNTS RECEIVABLE AND DUE FROM OTHER GOVERNMENTS Accounts receivable are recorded in the various funds and displayed in the financial statements net of an allowance for uncollectible accounts as follows (in thousands): Fund Governmental Activities: General Fund: Courts Other Customers Due from Other Governments: State Shared Revenues Other Non-Major Governmental Funds: Other Customers Restricted-Spec. Assessments Restricted-Other Restricted-Due from Other Governments Due from Other Governments Internal Service Funds Premiums Other Customers Total Governmental Activities Receivables Allowance 1,227 5,691 (3,664) 1,227 2,027 9,628 12,299 (1,500) 9,628 10,799 1,751 12,522 5 1,265 15,392 - 1,751 12,522 5 1,265 15,392 173 592 60,545 (5,164) 173 592 $ 55,381 (884) (482) (1,366) $ 34,603 2,249 2,647 $ 39,499 $ Business-Type Activities: Utility Customers Other Customers Due from Other Governments Total Business-type Activities $ $ 53 35,487 2,731 2,647 40,865 $ $ $ Net (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Unbilled Accounts Receivable Unbilled utility service receivables are recorded in the year in which the services are provided. At June 30, 2018, unbilled utility service receivables are recorded in the Enterprise Fund as follows (in thousands): $ 2,237 Electric Gas 1,042 Water 8,217 Wastewater 4,067 Solid Waste 2,570 $ 18,133 Governmental funds report unavailable revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Additionally, governmental funds record unearned revenue when resources have been received, but not yet earned. At the end of the current fiscal year, the various components of unavailable and unearned revenue reported in the governmental funds were as follows (in thousands): Unearned Revenue Mesa Arts Center advanced ticket sales Grants received prior to meeting all eligibility requirements Amounts paid in advance Unavailable Revenue Receivables not yet collected Delinquent Property Taxes Special Assessments not yet due General Fund $ 1,326 Non-Major Funds $ 39 1,834 $ 3,160 $ 1,379 95 1,513 General Fund $ 1,296 $ 1,296 Non-Major Funds $ 335 436 12,522 $ 13,293 6. INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS The following interfund activities are included in the fund financial statements at June 30, 2018 (in thousands): Due from Other Funds $ 1,262 $ 1,262 Fund General Fund Non-major Governmental Funds Total Governmental Funds 54 Due to Other Funds $ 1,262 $ 1,262 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Interfund balances at June 30, 2018 are short-term loans used to cover temporary cash deficits in various funds and are expected to be repaid within one year. The following advances are included in the fund financial statements at June 30, 2018 (in thousands): Advances to Other Funds Fund Governmental Funds: General Fund Total Governmental Funds Proprietary Funds: Enterprise Fund Total $ $ Advances from Other Funds - 876 876 $ 876 876 876 $ The Advances at June 30, 2018 are an advance from the Enterprise Fund to the General Fund for property acquisition. The advances outstanding at June 30, 2018 are not expected to be repaid within one year. The following interfund transfers are reflected in the fund financial statements for the year ended June 30, 2018 (in thousands): Fund Governmental Funds: General Fund Non-major Governmental Funds Total Governmental Funds Proprietary Funds: Enterprise Fund Total Transfers Out $ $ 26,629 39,579 66,208 110,364 176,572 Transfers In $ $ 120,095 56,477 176,572 176,572 Transfers from business-type activities to governmental activities on the government-wide statement of activities include a $110,364,000 operational subsidy from the Enterprise Fund to the General Fund. The remaining interfund transfers generally fall within one of the two following categories: 1) debt service payments made from a debt service fund but funded from an operating fund; and 2) subsidy transfers. In addition to the cash transfers, the City had capital asset transfers out of the business-type activities to the governmental activities in the amount of $5,880,000 and capital asset transfers from the governmental activities to the business-type activities in the amount of $237,800. 55 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 7. CAPITAL ASSETS A summary of capital asset activity, for the government-wide financial statements, for the year ended June 30, 2018 follows (in thousands): Balance July 1, 2017 Governmental Activities: Non-depreciable Assets: Land Infrastructure Construction-in-Progress Total Non-depreciable Assets Depreciable Assets: Buildings Other Improvements Machinery & Equipment Intangibles Infrastructure Total Depreciable Assets Less Accumulated Depreciation for: Buildings Other Improvements Machinery & Equipment Intangibles Infrastructure Total Accum. Depreciation Total Depreciable Assets, net Governmental Activities Capital Assets, net $ 388,552 3,612 110,061 502,225 Additions Retirements Transfers Balance June 30, 2018 $ $ $ $ 3,938 66,129 70,067 (963) (27) (58,020) (59,010) (238) (238) 391,527 3,585 117,932 513,044 339,951 190,315 203,742 23,251 1,117,803 1,875,062 8,664 7,620 8,589 29,990 54,863 (1,583) (1,163) (4,130) (3,370) (10,246) 5,733 5,880 347,032 196,772 208,348 23,251 1,150,156 1,925,559 (102,300) (105,311) (139,190) (16,539) (576,995) (940,335) 934,727 (7,647) (6,259) (10,566) (3,753) (38,245) (66,470) (11,607) 796 778 3,852 3,070 8,496 (1,750) 5,880 (109,151) (110,792) (145,904) (20,292) (612,170) (998,309) 927,250 $1,436,952 $ 58,460 $ (60,760) $ 5,642 $ 1,440,294 147 Depreciation and Amortization expense was charged to governmental functions in the governmentwide financial statements as follows (in thousands): General Government Public Safety Community Environment Cultural-Recreational Capital assets held by the City's Internal Service funds are charged to the various functions based on their usage of assets 56 $ 7,182 11,754 39,130 8,036 368 $66,470 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Business-type Activities: Non-depreciable Assets: Land Water Rights Collections of Art Construction-in-Progress Total Non-depreciable Assets Depreciable Assets: Buildings Other Improvements Machinery & Equipment Intangibles Infrastructure Total Depreciable Assets Less Accumulated Depreciation for: Buildings Other Improvements Machinery & Equipment Intangibles Infrastructure Total Accum. Depreciation Total Depreciable Assets, net Business-type Activities Capital Assets, net Balance July 1, 2017 Additions Retirements Transfers Balance June 30, 2018 $ $ $ $ $ 50,717 17,560 106 179,682 248,065 39 137,785 137,824 (56) (83,059) (83,115) (5,880) (5,880) 50,700 17,560 106 228,528 296,894 107,723 133,057 92,408 27,549 1,812,246 2,172,983 421 893 8,303 73,806 83,423 (57) (3,761) (430) (4,248) 238 238 108,144 133,893 96,950 27,549 1,885,860 2,252,396 (29,796) (54,319) (55,327) (21,864) (804,323) (965,629) 1,207,354 (2,209) (4,596) (7,127) (885) (50,801) (65,618) 17,805 38 3,602 360 4,000 (248) 238 (32,005) (58,877) (58,852) (22,749) (854,764) (1,027,247) 1,225,149 $1,455,419 $155,629 $ (83,363) $(5,642) $ 1,522,043 Depreciation and Amortization expense was charged to enterprise functions in the government-wide financial statements as follows (in thousands): Electric Gas Water Wastewater Solid Waste Airport Golf Course Convention Center Hohokam Stadium/Fitch Complex Cubs Stadium District Cooling $ $ 57 3,589 4,569 26,433 19,753 3,020 1,792 138 312 1,711 3,881 420 65,618 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Construction in progress and related construction commitments are composed of the following (in thousands): Governmental Activities General Government Public Safety Community Environment Cultural-Recreational Warehouse, Maintenance & Services Total Business-type Activities Electric Gas Water Wastewater Solid Waste Airport Convention Center Spring Training Total Construction in Progress Commitments $ $ $ $ 22,555 460 299 145 23,459 Construction in Progress Commitments $ $ $ 58 66,013 2,091 46,217 3,550 61 117,932 2,376 11,774 170,195 31,264 2,694 9,137 312 776 228,528 $ 371 671 16,085 7,592 1,911 886 4 175 27,695 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 8. LONG-TERM OBLIGATIONS a. Changes in Long-Term Obligations The following is a summary of changes in long-term obligations (in thousands). Governmental Activities: Bonds Payable: General Obligation Bonds Highway User Revenue Bonds Special Assessment Bonds with Governmental Commitment Community Facility District Total Bonds Payable Beginning Balances Additions Reductions $ $ $ 374,443 84,995 16,120 - (25,044) (8,375) Ending Balances $ 365,519 76,620 Amounts Due Within One Year $ 28,104 8,715 1,340 19,172 479,950 10,625 26,745 (335) (984) (34,738) 1,005 28,813 471,957 335 813 37,967 16,015 28,322 524,287 1,063 23,468 51,276 (2,263) (24,590) (61,591) $ 14,815 27,200 513,972 3,774 41,741 (46,520) (76) (45,035) (91,631) $ 1,227,355 236 49,025 1,276,616 (137) (4,711) (3,835) (100,314) 1,714 53,585 4,325 $ 1,336,240 Unamortized Premiums Compensated Absences Governmental Activities Total $ Business-type Activities: Bonds Payable: Revenue Bonds General Obligation Bonds Excise Tax Revenue Obligations Total Bonds Payable $ 1,161,755 312 94,060 1,256,127 Notes Payable Unamortized Bond Premiums Compensated Absences Business-type Activities Total 1,851 45,365 4,223 $ 1,307,566 $ $ $ 112,120 112,120 12,931 3,937 128,988 $ $ $ $ $ $ 35,525 46 35,571 140 641 36,352 Internal service funds predominantly serve the governmental funds. Accordingly, long-term liabilities for internal service funds are included as part of the above totals for governmental activities. At year-end, $840,000 of internal service funds compensated absences are included in the above amounts. For governmental activities, compensated absences are generally liquidated by the general fund. 59 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 b. Bonds Payable At June 30, 2018, long-term bonds payable consisted of: Classified in Governmental Activities on the government-wide financial statements: General Obligation Bonds Bonds Outstanding (In Thousands) $9,710,000 2006 general obligation serial bonds, (partially refunded by 2016 general obligation refunding bonds), due in annual installments ranging from $135,000 to $4,225,000, plus semi-annual interest ranging from 4.40 percent to 5.0 percent through July 1, 2020. $ 1,400 $15,915,000 2007 general obligation serial bonds, (partially refunded by 2016 general obligation refunding bonds), due in annual installments ranging from $615,000 to $5,500,000, plus semi-annual interest ranging from 4.125 percent to 6.0 percent through July 1, 2022. 2,815 $15,450,000 2008 general obligation serial bonds, (partially refunded by 2017 general obligation refunding bonds), due in annual installments ranging from $375,000 to $6,675,000, plus semi-annual interest ranging from 4.25 percent to 5.0 percent through July 1, 2021. 1,875 $61,830,000 2009 general obligation serial bonds, (partially refunded by 2017 general obligation refunding bonds), due in annual installments ranging from $1,750,000 to $10,125,000, plus semi-annual interest ranging from 4.0 percent to 4.625 percent through July 1, 2019. 2,620 $30,865,000 2010 general obligation bonds due in annual installments ranging from $1,115,000 to $13,225,000, plus semi-annual interest ranging from 4.75 percent to 5.85 percent through July 1, 2030. 30,865 $29,320,000 2011 general obligation serial bonds due in annual installments ranging from $800,000 to $6,825,000, plus semi-annual interest ranging from 2 percent to 4.25 percent through July 1, 2031. 20,425 $27,290,000 2012 general obligation serial bonds due in annual installments ranging from $840,000 to $8,550,000, plus semi-annual interest ranging from 2 percent to 4 percent through July 1, 2032. 22,025 $31,148,160 2012 general obligation refunding serial bonds due in annual installments ranging from $419,601 to $7,350,252, plus semi-annual interest ranging from 2 percent to 4 percent through July 1, 2022. 8,544 $8,915,000 2013 general obligation refunding serial bonds due in annual installments ranging from $30,000 to $3,250,000, plus semi-annual interest ranging from .7 percent to 5 percent through July 1, 2024. 8,765 60 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 $59,960,000 2013 general obligation serial bonds due in annual installments ranging from $1,635,000 to $12,675,000, plus semi-annual interest ranging from 1.5 percent to 4 percent through July 1, 2023. $ 50,250 $37,550,000 2014 general obligation serial bonds due in annual installments ranging from $1,050,000 to $5,575,000, plus semi-annual interest ranging from 2 percent to 3.6 percent through July 1, 2034. 28,675 $13,690,000 2015 general obligation serial bonds due in annual installments ranging from $250,000 to $6,700,000, plus semi-annual interest ranging from 2 percent to 5 percent through July 1, 2035. 6,465 $37,700,000 2016 general obligation serial bonds due in annual installments ranging from $825,000 to $2,775,000, plus semi-annual interest ranging from 2 percent to 4 percent through July 1, 2036. 35,500 $20,475,000 2016 general obligation refunding serial bonds due in annual installments ranging from $60,000 to $5,300,000, plus semi-annual interest ranging from 2 percent to 4 percent through July 1, 2027. 20,355 $22,829,500 2016 taxable general obligation refunding serial bonds due in annual installments ranging from $1,000,000 to $3,565,000, plus semiannual interest ranging from .85 percent to 30 percent through July 1, 2029. 20,525 $47,180,000 2017 general obligation serial bonds due in annual installments ranging from $1,500,000 to $5,725,000, plus semi-annual interest ranging from 3 percent to 3.25 percent through July 1, 2037. 41,455 $47,450,000 2017 general obligation refunding serial bonds due in annual installments ranging from $50,000 to $9,920,000, plus semi-annual interest ranging from 2 percent to 4 percent through July 1, 2029. 46,840 $16,120,000 2018 general obligation serial bonds due in annual installments ranging from $275,000 to $8,795,000, plus semi-annual interest ranging from 3 percent to 4 percent through July 1, 2038. Total General Obligation Bonds $ 16,120 $ 365,519 Street and Highway User Revenue Bonds $9,585,000 2004 street and highway user revenue bonds (partially refunded by street and highway user revenue refunding bonds, series 2005), due in annual principal installments ranging from $100,000 to $225,000, plus semi-annual interest ranging from 4.00 percent to 5.00 percent through July 1, 2022. $23,800,000 2005 street and highway user revenue refunding bonds, due in annual principal installments ranging from $25,000 to $8,000,000, plus semi-annual interest ranging from 2.75 percent to 5.0 percent through July 1, 2023. 61 $ 650 23,750 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 $10,225,000 2005 street and highway user revenue bonds, due in annual principal installments ranging from $50,000 to $8,500,000, plus semiannual interest ranging from 4.0 percent to 5.0 percent through July 1, 2023. $ 675 $11,675,000 2006 street and highway user revenue bonds, due in annual installments ranging from $850,000 to $9,850,000, plus semi-annual interest ranging from 4.50 percent to 5.25 percent through July 1, 2024. 1,825 $10,675,000 2007 street and highway user revenue bonds, due in annual principal installments ranging from $1,000,000 to $3,900,000, plus semiannual interest ranging from 4.25 percent to 5.0 percent through July 1, 2025. 3,000 $36,090,000 2012 street and highway user revenue refunding bonds, due in annual installments ranging from $665,000 to $9,700,000, plus semiannual interest ranging from 3.0 percent to 5.0 percent through July 1, 2022. 20,665 $8,500,000 2013 street and highway user revenue refunding bonds, due in one installment of $8,500,000 plus semi-annual interest of 5 percent through July 1, 2024. 8,500 $17,555,000 2015 street and highway user revenue refunding bonds, due in annual installments ranging from $15,000 to $9,880,000 plus semiannual interest of 3 to 5 percent through July 1, 2027. $ 17,555 Total Street and Highway User Revenue Bonds $ 76,620 Special Assessment Bonds (payable from special assessments levied on the benefited properties) $5,025,000 2005 special assessment district bonds, due in annual principal installments of $335,000, plus semi-annual interest of 5.80 percent, through January 1, 2021. $ 1,005 $ 2,248 Community Facilities District $2,712,000 2013 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) Assessment District No. 1 Special Assessment Revenue Bonds, due in annual principle installments ranging from $62,000 to $95,000, plus semi-annual interest ranging from 4.6 percent to 5.3 percent through July 1, 2038. $3,250,000 2014 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) General Obligation Bonds, due in annual principle installments ranging from $65,000 to $225,000, plus semi-annual interest ranging from 4.8 percent to 5.3 percent through July 15, 2038. 62 2,935 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 $3,367,000 2014 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) Assessment District No. 2 Special Assessment Revenue Bonds, due in annual principle installments ranging from $85,000 to $225,000, plus semi-annual interest ranging from 2 percent to 5.375 percent through July 1, 2039. $ 2,947 $1,942,000 2015 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) Assessment District No. 3 Special Assessment Revenue Bonds, due in annual principle installments ranging from $52,000 to $135,000, plus semi-annual interest ranging from 2.3 percent to 5.2 percent through July 1, 2039. 1,819 $6,800,000 2015 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) General Obligation Bonds, due in annual principle installments ranging from $165,000 to $680,000, plus semi-annual interest ranging from 4 percent to 5 percent through July 15, 2039. 6,255 $970,000 2015 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) Assessment District No. 4 Special Assessment Revenue Bonds, due in annual principle installments ranging from $25,000 to $65,000, plus semi-annual interest ranging from 2.4 percent to 5 percent through July 1, 2040. 816 $1,060,000 2016 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) Assessment District No. 5 Special Assessment Revenue Bonds, due in annual principle installments ranging from $30,000 to $70,000, plus semi-annual interest ranging from 1.85 percent to 4.75 percent through July 1, 2040. 987 $502,000 2017 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) Assessment District No. 6 Special Assessment Revenue Bonds, due in annual principle installments ranging from $7,000 to $35,000, plus semi-annual interest ranging from 3.5 percent to 5.25 percent through July 1, 2041. 494 $8,160,000 2017 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) General Obligation Bonds, due in annual principle installments ranging from $215,000 to $510,000, plus semi-annual interest ranging from 2 percent to 5 percent through July 15, 2042. 7,850 $1,326,500 2017 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) Assessment District No. 7 Special Assessment Revenue Bonds, due in annual principle installments ranging from $36,500 to $85,000, plus semi-annual interest ranging from 2 percent to 4.5 percent through July 1, 2042. 1,327 $770,000 2018 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) Assessment District No. 8 Special Assessment Revenue Bonds, due in annual principle installments ranging from $21,000 to $49,000, plus semi-annual interest ranging from 2.5 percent to 4.5 percent through July 1, 2042. 767 63 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 $368,000 2018 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) Assessment District No. 9 Special Assessment Revenue Bonds, due in annual principle installments ranging from $8,000 to $24,000, plus semi-annual interest ranging from 2.85 percent to 4.75 percent through July 1, 2042. Total Community Facilities District Bonds Total bonds payable recorded in governmental activities $ 368 $ 28,813 $ 471,957 Classified in Business-type Activities on the government-wide financial statements: General Obligation Bonds $516,840 2012 general obligation refunding serial bonds, due in annual principal installments ranging from $15,399 to $269,748, plus semiannual interest ranging from 2 percent to 4 percent through July 1, 2022. 141 $105,501 2016 general obligation refunding serial bonds, due in annual principal installments ranging from $4,600 to $16,399, plus semi-annual interest ranging from .85 percent to 3 percent through July 1, 2029. 95 Total General Obligation Bonds $ 236 Utility Systems Revenue Bonds $64,625,000 2004 utility systems revenue serial bonds, (partially refunded by 2006 (Series 2) and 2016 utility systems revenue refunding bonds), due in annual principal installments ranging from $1,125,000 to $11,000,000, plus semi-annual interest ranging from 5.00 percent to 6.00 percent through July 1, 2022. $ 2,250 $40,345,000 2004 utility systems revenue refunding serial bonds, due in annual principal installments ranging from $20,000 to $21,010,000, plus semi-annual interest ranging from 3.50 percent to 5.00 percent through July 1, 2019. 21,010 $91,200,000 2005 utility systems revenue serial bonds, (partially refunded by 2006, 2012 & 2016 utility systems revenue refunding bonds), due in annual principal installments ranging from $750,000 to $24,000,000, plus semi-annual interest ranging from 4.125 percent to 5.0 percent through July 1, 2023. 10,750 $105,400,000 2006 utility systems revenue serial bonds, (partially refunded by 2006 (Series 2), 2016 and 2017 utility systems revenue refunding bonds), due in annual principal installments ranging from $8,650,000 to $36,750,000, plus semi-annual interest ranging from 4.375 percent to 5.0 percent through July 1, 2024. 7,595 64 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 $61,300,000 2006 utility systems revenue refunding serial bonds, due in annual principal installments ranging from $2,075,000 to $18,000,000, plus semi-annual interest ranging from 4.0 percent to 5.0 percent through July 1, 2021. $ 45,775 $127,260,000 2006 (Series 2) utility systems revenue refunding serial bonds, (partially refunded by 2017 utility systems revenue refunding bonds), due in annual principal installments ranging from $50,000 to $25,845,000, plus semi-annual interest ranging from 4.0 percent to 5.25 percent through July 1, 2024. 54,005 $65,550,000 2007 utility systems revenue serial bonds, (partially refunded by 2016 and 2017 utility systems revenue refunding bonds), due in annual principal installments ranging from $2,500,000 to $41,800,000, plus semiannual interest ranging from 4.25 percent to 6.25 percent through July 1, 2025. 6,315 $52,875,000 2008 utility systems revenue serial bonds, (partially refunded by 2016 utility systems revenue refunding bonds), due in annual principal installments ranging from $700,000 to $44,675,000, plus semi-annual interest ranging from 4.875 percent to 5.25 percent through July 1, 2029. 2,125 $59,900,000 2009 utility systems revenue serial bonds, due in annual principal installments ranging from $900,000 to $48,250,000, plus semiannual interest ranging from 5.875 percent to 6.375 percent through July 1, 2033. 59,900 $50,380,000 2010 utility systems revenue serial bonds, due in one principal installment, plus semi-annual interest of 6.10 percent through July 1, 2034. 50,380 $53,950,000 2011 utility systems revenue serial bonds, due in one principal installment, plus semi-annual interest of 5.0 percent through July 1, 2035. 53,950 $67,300,000 2012 utility systems revenue serial bonds, due in one principal installment, plus semi-annual interest of 4.0 percent through July 1, 2036. 67,300 $31,580,000 2012 utility systems revenue refunding serial bonds, (partially refunded by 2017 utility systems revenue refunding bonds), due in annual principal installments ranging from $7,440,000 to $9,150,000, plus semi-annual interest ranging from 4.0 percent to 4.826 percent through July 1, 2021. 14,905 $80,295,000 2012 taxable utility systems revenue refunding serial bonds, due in annual principal installments ranging from $3,225,000 to $9,150,000, plus semi-annual interest ranging from 3.269 percent to 5.048 percent through July 1, 2035. 80,295 65 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 $47,290,000 2013 utility systems revenue bonds, due in one principal installment plus semi-annual interest of 4.0 percent through July 1, 2037. $ 47,290 $36,385,000 2014 utility systems revenue bonds, due in two principal installments of $20,000,000 and $16,385,000, plus semi-annual interest of 4.0 percent through July 1, 2038. 36,385 $102,945,000 2014 utility systems revenue refunding serial bonds, due in annual principal installments ranging from $475,000 to $22,955,000, plus semi-annual interest ranging from 2 percent to 4 percent through July 1, 2030. 96,940 $30,220,000 2015 utility systems revenue bonds, due in principal installments ranging from $1,000,000 to $2,375,000, plus semi-annual interest of 2 percent to 5 percent through July 1, 2039. 30,220 $90,500,000 2016 utility systems revenue serial bonds, due in annual principal installments ranging from $1,000,000 to $22,550,000, plus semiannual interest ranging from 3 percent to 5 percent through July 1, 2040. 90,500 $138,035,000 2016 utility systems revenue refunding serial bonds, due in annual principal installments ranging from $3,375,000 to $44,890,000, plus semi-annual interest ranging from 4 percent to 5 percent through July 1, 2032. 138,035 $123,875,000 2017 utility systems revenue serial bonds, due in annual principal installments ranging from $2,000,000 to $18,900,000, plus semiannual interest ranging from 3 percent to 5 percent through July 1, 2041. 123,875 $74,435,000 2017 utility systems revenue refunding serial bonds, due in annual principal installments ranging from $885,000 to $26,565,000, plus semi-annual interest of 4 percent through July 1, 2028. 75,435 $112,120,000 2018 utility systems revenue refunding serial bonds, due in annual principal installments ranging from $3,000,000 to $12,825,000, plus semi-annual interest ranging from 3 percent to 5 percent through July 1, 2042. 112,120 Total Utility Systems Revenue Bonds $ 1,227,355 Excise Tax Revenue Obligations $94,060,000 2013 excise tax revenue obligation, due in annual principal installments ranging from $6,620,000 to $10,785,000, plus semi-annual interest of 5.0 percent through July 1, 2032. $ Total bonds payable recorded in business-type activities $ 1,276,616 66 49,025 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 The following tables summarize the City’s debt service requirements to maturity for its long-term bonds payable at June 30, 2018 (in thousands). The deferred amounts on refundings are not included. Governmental Activities General Obligation Bonds Fiscal Year 2019 2020 2021 2022 2023 2024-28 2029-33 2034-38 Principal $ 28,104 19,170 19,767 20,461 21,140 123,332 108,140 25,405 Interest $ 12,745 11,753 11,097 10,434 9,759 36,974 14,398 1,780 TOTALS $ 365,519 $ 108,940 Highway User Revenue Bonds Total 40,849 30,923 30,864 30,895 30,899 160,306 122,538 27,185 Fiscal Year 2019 2020 2021 2022 2023 2024-28 2029-33 2034-38 $ 474,459 TOTALS $ $ Principal 8,715 9,155 9,645 10,075 10,000 29,030 - $ 76,620 S pecial Assessment Bonds Fiscal Year 2019 2020 2021 2022 2023 2024-28 2029-33 2034-38 2039-42 TOTALS Principal $ 335 335 335 - Interest $ 48 29 10 - $ $ 1,005 87 $ $ 16,426 $ Total 12,378 12,398 12,441 12,390 11,812 31,627 - $ 93,046 Community Facilities District Total 383 364 345 - Fiscal Year 2019 2020 2021 2022 2023 2024-28 2029-33 2034-38 2039-42 1,092 TOTALS $ Interest $ 3,663 3,243 2,796 2,315 1,812 2,597 - $ Principal 813 846 884 912 950 5,366 6,690 8,485 3,867 $ 28,813 Interest $ 1,302 1,276 1,249 1,219 1,185 5,324 3,995 2,240 394 $ 18,184 $ $ Total 2,115 2,122 2,133 2,131 2,135 10,690 10,685 10,725 4,261 46,997 Business-type Activities General Obligation Bonds Fiscal Year 2019 2020 2021 2022 2023 2024-28 2029-33 2034-38 2039-42 TOTALS Principal $ 46 40 43 44 5 53 5 $ 236 Interest Revenue Bonds Total $ 7 6 5 3 2 6 - $ 53 46 48 47 7 59 5 - Fiscal Year 2019 2020 2021 2022 2023 2024-28 2029-33 2034-38 2039-42 $ 29 $ 265 TOTALS 67 Principal 35,525 33,425 36,700 41,165 41,935 232,155 298,270 355,705 152,475 Interest $ 54,044 51,975 50,429 48,674 46,657 203,258 149,664 71,841 12,058 $ 1,227,355 $ 688,600 $ $ Total 89,569 85,400 87,129 89,839 88,592 435,413 447,934 427,546 164,533 $ 1,915,955 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Excise Tax Revenue Obligations Fiscal Year 2019 2020 2021 2022 2023 2024-28 2029-33 TOTALS Principal $ 8,875 40,150 $ 49,025 $ $ Interest 2,451 2,451 2,451 2,451 2,451 12,256 5,143 29,654 $ $ Total 2,451 2,451 2,451 2,451 2,451 21,131 45,293 78,679 General Obligation Bonds The general obligation bonds are backed by the ultimate taxing power and general revenues of the City; however, $236,418 of these bonds at June 30, 2018 is carried as a liability of the Enterprise Fund to reflect the intention of retirement from resources of that fund. All bonds, except Special Assessment Bonds, are callable by the City at various dates and at various premiums. The Arizona Constitution provides that the general obligation bonded indebtedness of a city for general municipal purposes may not exceed 6 percent of the secondary assessed valuation of the taxable property in that city. In addition to the 6 percent limitation for general municipal purpose bonds, cities may issue general obligation bonds up to an additional 20 percent of the secondary assessed valuation for supplying such city with water, artificial light or sewers, and for the acquisition and development of land for open space preserves, parks, playgrounds and recreation facilities, public safety, law enforcement, fire and emergency services facilities and streets and transportation facilities. General obligation bonds of community facilities districts are not subject to or included in this calculation. The total debt margin available July 1, 2018 is (in thousands): 6% Bonds 20% Bonds Total Available $ 182,210 244,748 $ 426,958 Special Assessment Bonds The City acts as trustee for Special Assessment districts whereby it collects special assessments levied against owners of property within established districts and disburses the amounts collected to retire bonds issued to finance improvements. The improvement bonds are collateralized by these properties. In the event of default by the property owner, the City may enforce an auction sale to satisfy the debt service requirements of the improvement bonds. The City is contingently liable on special assessment bonds to the extent that proceeds from auction sales are insufficient to retire outstanding bonds. Special assessment revenues collected by the City are pledged to repay $9.1 million of improvement bonds issued since 2005. Proceeds from the bonds are used to finance improvements that property owners have agreed to pay. In the event of default by the property owner, an auction sale may be enforced by the City. If collections and auction proceeds are not sufficient to retire outstanding bonds, the City is contingently liable. These bonds are payable through 2021. Annual 68 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 principal and interest payments on the bonds are expected to be covered 100% with collections from the property owners. The total principal and interest remaining to be paid on the bonds is $1,092,435. Principal and interest paid for the current year and total assessments collected were $403,005, and $288,680, respectively. Community Facilities Districts Special Assessment and General Obligation Bonds Community Facilities District Special Assessment and General Obligation Bonds are issued by Community Facilities Districts (CFDs), which are special purpose districts created specifically to acquire and improve public infrastructure in specified land areas. The City has no liability for CFD bonds. CFD general obligation bonds are repaid by ad valorem taxes levied directly by the districts and collected by the county. Property owners in the districts are assessed for district taxes and thus for all costs associated with the districts. As of June 30, 2018, total principal and interest outstanding for CFD general obligation bonds was $27,741,500. CFD special assessment bonds are collateralized by properties within established districts. In the event of default by the property owner, the CFD may enforce an auction sale to satisfy the debt service requirements of the assessment bonds. At June 30, 2018, the special assessments receivable for CFDs, together with amounts paid in advance and interest to be received over the life of the assessment period, is adequate for the scheduled maturities of the bonds payable and the related interest. The total principal and interest remaining to be paid on the bonds is $19,255,050. Principal and interest paid for the current year and total assessments collected were $913,353, and $885,289 respectively. Utility System Revenue Bonds City revenue bond indenture ordinances require that the net amount of revenues of the electric, gas, water, wastewater and solid waste systems (total revenues less operations and maintenance expenses) equal 120 percent of the principal and interest requirement in each fiscal year. The above covenant and all other bond covenants have been met. Pursuant to the provisions of the Bond Resolution of the City of Mesa Utility System Revenue and Refunding bonds, Replacement and Reserve Funds are required to be established, into which a sum equal to 2 percent of the gross revenues – as determined on a modified accrual basis – must be deposited until a sum equal to 2 percent of all tangible assets of the Utility System is accumulated. As of June 30, 2018, the amount provided in the Replacement and Extension Funds equaled $29,665,942 which is in compliance with the bond provisions. c. Notes Payable Business Type Activities The City entered into four separate loan agreements with the Water Infrastructure Finance Authority of Arizona. The purposes of the loans are to make improvements and upgrades to existing water and wastewater projects. The loans utilize funds from the United States Environmental Protection Agency pursuant to the federal American Reinvestment and Recovery Act of 2009. Subject to the City meeting the required specifications of the loan documents, two of the loans include a combined interest and fee rate subsidy and the two remaining loans include a principal forgiveness portion. Total principal (without principal forgiveness) is $3,486,902 and the loans have a 20-year repayment period. The total principal forgiveness is $626,000. Total interest over the 20 years with principal forgiveness and the combined interest and fee rate subsidy is $635,736. 69 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 The following table reflects the annual requirements to amortize all notes outstanding as of June 30, 2018 (in thousands): Fiscal Year 2019 2020 2021 2022 2023 2024-28 2029-33 TOTALS Business-type Activities Interest Principal & Fees Total $ 140 $ 38 $ 178 143 35 178 146 31 177 149 28 177 153 25 178 815 73 888 168 4 172 $ 1,714 $ 234 $ 1,948 d. Short-term Debt The City had no short-term debt activity for the fiscal year ended June 30, 2018. e. Series 2012 Special Activity Revenue Bonds PMGAA issued $19,220,000 in special facility Revenue Bonds on February 29, 2012. The City has entered into a memorandum of understanding (MOU) with PMGAA and Able Engineering and Component Services for the development, construction and lease of an aircraft maintenance repair and overhaul facility at Phoenix-Mesa Gateway Airport. In general, the MOU addresses PMGAA issuing Special Facility Revenue Bonds, constructing the facility and leasing the facility to the City. The City, in turn, will sublease the facility to Able Engineering. The City pledged a portion of its excise taxes as security for payment of the base rent. The pledge of such excise taxes will be a junior lien subordinate to certain outstanding senior obligations. The bonds are payable from the future revenues from the City through 2038. During that time frame, total principal and interest to be paid on the bonds will be $35,216,300. The bonds are not considered the debt of the City. f. Pledged Revenues Utility System Revenue Bonds The City has pledged future utility customer revenues, net of specified operating expenses, to repay approximately $1.9 billion in utility system revenue bonds issued since 2004. Proceeds from the bonds provided financing for the construction of various utility related projects including new gas pipelines and water and wastewater treatment plants. The bonds are payable solely from utility customer net revenues and are payable through 2042. Annual principal and interest payments on the bonds were 43.0 percent of net revenues. The total principal and interest remaining to be paid on the bonds is $1.9 billion. Principal and interest paid for the current year and total customer net revenues were $82,093,317 and $190,294,000 respectively. 70 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Highway User Revenue Bonds The City has pledged future Highway User Taxes Revenue to repay $188.2 million in highway user revenue bonds issued since 2002. Proceeds from the bonds provided financing for streets projects. The bonds are payable solely from the state shared Highway User Tax revenues and are payable through 2027. Annual principal and interest payments on the bonds were 31.5 percent of eligible revenues. The total principal and interest remaining to be paid on the bonds is $93,045,975. Principal and interest paid for the current year and total highway user tax revenues were $12,455,013 and $39,476,838, respectively. 9. REFUNDED, REFINANCED AND DEFEASED OBLIGATIONS On April 26, 2018, the City called for the early redemption of $15,165,000 in utility revenue bonds from existing resources of the City to reduce the City’s Utility System Revenue Bond principal balance that is currently outstanding. This defeasance was funded with Utility Systems Impact fees of $17,065,686 provided to a defeasance escrow agent for the purchase of United States Government securities, and Utility Systems Net Revenues of $42,089 to cover transaction costs. The securities were deposited to an irrevocable trust to provide for all future debt service payments of the defeased bonds totaling $20,559,444. As a result, the liability for the defeased bonds has been removed from the debt of the City. Liabilities to be Paid from Assets Held in Escrow Liabilities to be paid from assets held in escrow include bonded debt of the City that has been provided for through an Advanced Refunding Bond Issue. Under an advanced refunding arrangement, refunding bonds are issued and the net proceeds, plus additional resources that may be required, are used to purchase securities issued or guaranteed by the United States Government. These securities are then deposited in an irrevocable trust under an escrow agreement which provides that all proceeds from the trust will be used to fund the principal and interest payments of the previously issued bonded debt being refunded. The trust deposits have been computed so that the securities in the trust, along with future cash flow generated by the securities, will be sufficient to service the previously issued bonds. In accordance with GASB Statement No. 7, the refunded debt outstanding at June 30, 2018 as reflected below is not included in the City’s financial statements (in thousands). Utility System Revenue Bond Issue dated February 1, 2003 $ 1,000 Utility System Revenue Bond Issue dated June 1, 2004 3,875 Utility System Revenue Bond Issue dated June 1, 2005 2,750 Utility System Revenue Bond Issue dated June 28, 2006 10,055 Utility System Revenue Bond Issue dated May 30, 2007 1,685 Utility System Revenue Bond Issue dated May 29, 2008 3,975 Utility System Revenue Refunding Bond Issue dated September 25, 2014 5,530 General Obligation Bond Issue dated May 27, 2009 35,875 Total Refunded and Defeased Bonds Outstanding 71 $ 64,745 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 10. SELF-INSURANCE INTERNAL SERVICE FUND The Property and Public Liability, Workers’ Compensation and Employee Benefits Internal Service Funds have been established to account for the costs of claims incurred by the City under self-insurance programs. The City is fully self-insured for all public liability risks, up to a maximum of $3,000,000 per occurrence, for the current policy year under the Property and Public Liability Insurance program. In addition, the City carries full property insurance with a $50,000 per occurrence deductible. Under the Workers’ Compensation Program, the City is subject to a maximum deductible of $1,000,000 liability per occurrence. In the Employee Benefits Fund, the City has excess insurance coverage when an individual’s claims exceed $225,000 per contract year. There were no changes in insurance coverage during this fiscal year for any of the three Self-Insurance Funds. The Workers’ Compensation Fund does not have a stop loss receivable at June 30, 2018. Over the past three fiscal years the Fund has received settlements in excess of insurance coverage of $479,716 with $150,030 received this fiscal year. The Fund has not received any settlements in excess of insurance coverage this past year. The Property and Public Liability Fund does not have a stop loss receivable at June 30, 2018, and the Fund has not received any settlements in excess of insurance coverage over the past three fiscal years. The Employee Benefits Fund does not have stop loss receivable at June 30, 2018. Over the past three fiscal years the Fund has received settlements in excess of insurance coverage of $3,519,353 with $270,667 received this current fiscal year. The various funds of the City include, as expenditures, amounts contributed to each of the selfinsurance funds during the fiscal year. The estimated liability for claims outstanding is determined by a yearly actuarial study in the Property and Public Liability Fund and the Workers Compensation Fund. The claims liability in the Employee Benefits Fund is generated by a third-party claims processing company. Changes in the balances of claims liabilities during the past two fiscal years are as follows (in thousands): Property & Public Workers' Employee Liability Compensation Benefits Total Unpaid Claims, 6/30/16 Adjustments to Reserves-FY 16-17 Claim Payments-FY 16-17 $12,599 (894) (366) Unpaid Claims, 6/30/17 $ 23,153 347 (254) $ 2,696 69,643 (68,087) $38,448 69,096 (68,707) 11,339 23,246 4,252 38,837 Adjustments to Reserves-FY 17-18 Claim Payments-FY 17-18 (1,587) (496) 216 245 69,923 (70,109) 68,552 (70,360) Unpaid Claims, 6/30/18 $ 9,256 23,707 $ 4,066 $37,029 $ All unpaid claims are reported as current liabilities in the Statement of Net Position as the change in these amounts have already been expensed in the statement of activities. 72 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 11. COMMITMENTS AND CONTINGENT LIABILITIES a. Pending Litigation The City is subject to a number of lawsuits, investigations, and other claims (some of which involve substantial amounts) that are incidental to the ordinary course of its operations, including those related to wrongful death and personal injury matters. Although the City Attorney does not currently possess sufficient information to reasonably estimate the amounts of the liabilities to be recorded upon the settlement of such claims and lawsuits, some claims could be significant to the City’s operations. While the ultimate resolution of such lawsuits, investigations, and claims cannot be determined at this time, in the opinion of City management, based on the advice of the City Attorney, the resolution of these matters will not have a material adverse effect on the City’s financial position. b. Sick Leave Benefits Sick leave benefits provided for ordinary sick pay are not vested with the employee. Fifty percent of unused benefits are payable only upon retirement of an employee. In accordance with the criteria, sick leave paid within 60 days of the year-end has been recorded as a liability in the governmental fund financial statements. Long-term liabilities of governmental funds are not shown on the fund financial statements. In the government-wide financial statements as well as the proprietary fund financial statements, an amount of estimated sick leave payable to employees has been expensed and the liability is shown in the appropriate funds. These amounts have been calculated based on the vested method. The total sick leave balance recorded as a liability at June 30, 2018, is $9,596,606. 12. NET POSITION a. Restricted Net Position The government-wide statement of net position reports $128.7 million of restricted net position, of which $55.0 million is restricted by enabling legislation. b. Designated Net Position The net position in the Employee Benefits Self Insurance Fund is designated for anticipated future losses and is a result of excess premiums charged to increase the fund balance specifically for this purpose. c. Deficit Net Position The deficit in the Worker’s Compensation Self-Insurance Fund consists of prior years’ deficit where claims expenses exceeded revenues received and other postemployment benefit charges and pension expense. The City’s funding plan calls for yearly contributions from various funds to equal the years estimated claims and claim related expenses. Future claim liabilities are not considered in determining funding for each year. The deficit in the Property and Public Liability Fund was a result of other post-employment benefit charges and pension expense. The City’s funding plan calls for yearly contributions from the 73 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 general fund to equal the years estimated claims and claim related expenses. Post-employment benefit charges and pension expense are not considered in determining funding for each year. The deficit in the Warehouse, Maintenance and Services fund was a result of other postemployment benefit charges and pension expense. The City’s funding plan calls for Charges for Services to cover operational expenses. Post-employment benefit charges and pension expense are not considered in determining Charges for Services. 13. ENTERPRISE ACTIVITIES OPERATIONS DETAIL The Enterprise Fund includes operations of electricity, gas, water, wastewater, solid waste, airport, golf course, convention center, stadiums and district cooling. Although the City’s Enterprise Fund does not meet the requirements for disclosing segment information, the services provided by the City are of such significance as to warrant certain additional disclosures. Operating revenue, expenses and operating income (loss) for the year ended June 30, 2018 for these services are as follows (in thousands): Functions Electric Gas Water Wastewater Solid Waste Airport Golf Course Convention Center Hohokam /Fitch Complex Cubs Stadium District Cooling Total Operating Expenses Depreciation and Amortization Other $ 3,589 $ 20,542 4,569 22,757 26,433 45,149 19,753 48,392 3,020 34,729 1,792 3,516 138 1,820 312 4,169 1,711 1,463 3,881 1,989 420 761 $ 65,618 $ 185,287 Operating Revenues $ 31,425 39,171 147,667 83,078 60,522 3,983 1,635 2,809 51 238 1,215 $ 371,794 Operating Income (Loss) $ 7,294 11,845 76,085 14,933 22,773 (1,325) (323) (1,672) (3,123) (5,632) 34 $ 120,889 14. JOINT VENTURES The City currently participates in five joint ventures. The Greenfield Water Reclamation Plant and TOPAZ Regional Wireless Cooperative are managed by the City of Mesa, while the Subregional Operating Group, the Val Vista Water Treatment Plant, and Valley Metro Rail, Inc. are managed externally. 74 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 The City's investment in these Joint Ventures as of June 30, 2018, is as follows (in thousands): Valley Metro Rail Inc. TOPAZ Regional Wireless Cooperative Subregional Operating Group Val Vista Water Treatment Plant Greenfield Water Reclamation Plant Joint Ventures Construction Deposits Total Investment in Joint Ventures Governmental Activities $ 255,994 6,067 $ 262,061 Business-Type Activities $ 86,631 49,787 72,087 3,716 $ 212,221 Total $ 255,994 6,067 86,631 49,787 72,087 3,716 $ 474,282 Valley Metro Rail, Inc. “VMRI” The City currently participates in the Central Phoenix/East Valley Light Rail Transit (LRT) along with the cities of Phoenix, Tempe and Glendale. Valley Metro Rail, Inc. (VMRI) is the management agency that was incorporated to administer the joint agreement between the cities and has oversight responsibility for the planning, design, construction and operation of the system. The agreement provides voting rights for members of the representative cities, including passage of an annual budget. The City has ongoing financial responsibility as a result of the joint agreement including participation in the cost to construct and to operate the light rail project less any Federal reimbursements and operating fares. A total of $1,399,637,191 has been spent on this project through the fiscal year ended June 30, 2018, of which the City’s share and equity interest is $255,993,664. The City has received and accrued $64.6 million of funding from the Federal Transit Administration (FTA), Congestion Mitigation Air Quality (CMAQ) and Public Transit Funds (PTF) related to this project. In May 2011, the City entered into an agreement with VMRI for a developmental study to further extend the LRT system an additional two miles from Mesa Drive to Gilbert Road. Construction started fall of 2016. The extension is expected to open in late 2018. Separate financial statements for the activity can be obtained through Valley Metro Rail Inc. at 101 North First Avenue, Suite 1300, Phoenix, Arizona, 85003. TOPAZ Regional Wireless Cooperative The City of Mesa currently participates with the City of Apache Junction, Superstition Fire and Medical, the Town of Gilbert, the Town of Queen Creek and Rio Verde Fire District (the Parties) in an intergovernmental agreement to plan, design, construct, operate, maintain and finance the TOPAZ Regional Wireless Cooperative Network (TOPAZ). TOPAZ is a 700/800 MHz Network procured and built by the City of Mesa. The City acts as the lead agency and is responsible for the planning, budgeting, construction, operation and maintenance of the network. As lead agent, the City provides all management personnel and financing arrangements. The Parties participate in ownership of the network and are charged for operating and capital expenses based on six month rolling average of airtime. The City’s equity in the joint venture is $6,066,969 and is reflected in the governmental funds financial statements. Separate financial statements are not prepared. 75 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Total investment in the joint venture as of June 30, 2018, is (in thousands): TOPAZ Regional Wireless Cooperative City of Mesa $ 6,067 Town of Gilbert 1,412 City of Apache Junction 492 Superstition Fire and Medical 162 Town of Queen Creek 111 Rio Verde Fire District 13 Fort McDowell 21 Total Joint Venture $ 8,278 Wastewater Subregional Operating Group The City participates with the cities of Phoenix, Glendale, Scottsdale and Tempe in the Subregional Operating Group (SROG). SROG was formed pursuant to the Joint Exercise of Powers Agreement (JEPA) in order to govern the construction, operation and maintenance of a multi-city sanitary sewer system (the “System”). The System includes the 91st Avenue Wastewater Treatment Plant, the Salt River Outfall Sewer, the Southern Avenue Interceptor and related transportation facilities. The City of Phoenix acts as the lead agency in SROG and is responsible for the planning, budgeting, construction, operation and maintenance of the plant in addition to providing all management personnel and financing arrangements. The various cities participate in ownership of the plant and are charged for operating expenses based on gallons of flow. The different agencies participate in each facility at varying rates depending on their needs at the time each facility was constructed. The City’s equity in the joint venture is $86,630,964 and is reflected in the proprietary funds financial statements. SROG has no bonded debt outstanding. Separate financial statements for the activity under the joint venture agreement can be obtained through the AMWUA office at 3003 N. Central Avenue, Suite 1550, Phoenix, Arizona, 85012. Greenfield Water Reclamation Project Construction of a joint water reclamation plant with the Towns of Gilbert and Queen Creek was completed on December 2, 2006. An expansion of the plant is expected to be completed in 2020. The City acts as the lead agency and is responsible for the planning, budgeting, construction, operation and maintenance of the plant. As lead agent, the City provides all management personnel and financing arrangements. Mesa, Gilbert and Queen Creek participate in ownership of the plant and are charged for operating expenses based on gallons of flow. The City’s equity in the joint venture is $72,086,878 and is reflected in the proprietary funds financial statements. Separate financial statements are not prepared. Total investment in the joint venture as of June 30, 2018, is (in thousands): Greenfield Water Reclamation Project Mesa's Share $ 72,087 Gilbert's Share 60,739 Queen Creek's Share 24,575 Total Joint Venture $ 157,401 76 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Water Val Vista Water Treatment Plant The City also participates with the City of Phoenix in the Val Vista Water Treatment Plant and Transmission Line. The City of Phoenix is responsible for the planning, budgeting, construction, operation and maintenance of the plant. As lead agency, Phoenix provides all management personnel and financing arrangements. Phoenix and Mesa participate in ownership of the plant and are charged for operating expenses based on gallons of water treated. The City’s investment in the joint venture is $49,787,082 and is reflected in the proprietary funds financial statements. The water treatment plant has no bonded debt outstanding. Separate financial statements for the activity can be obtained through the City of Phoenix, Finance Department, Financial Accounting and Reporting Division at 251 W. Washington Street, 9th Floor, Phoenix, Arizona, 85003. 15. PENSIONS AND OTHER POSTEMPLOYMENT BENEFITS All benefitted employees of the City are covered by one of three pension systems. The Arizona State Retirement System (ASRS) is for the benefit of the employees of the state and certain other governmental jurisdictions. All benefited City employees, except sworn fire and police personnel and the Mayor and City Council Members, are included in the plan that is a multiple-employer cost-sharing defined benefit pension plan. All sworn fire and police personnel participate in the Public Safety Personnel Retirement System that is an agent plan. The Mayor and City Council Members contribute to the State’s Elected Officials Retirement Plan that is also a multiple-employer cost-sharing pension plan. The Elected Officials Retirement Plan is not described below because of its relative insignificance to the financial statements. In addition, eligible employees are covered by other postemployment benefit plans. All sworn fire and police personnel participate in the Public Safety Personnel Retirement System (PSPRS) that is an agent multiple-employer defined benefit health insurance premium benefit (OPEB) plan. Eligible City employees also participate in the City’s OPEB plan. Eligible City employees covered by Arizona State Retirement System also participate in the ASRS OPEB plan. The ASRS OPEB plan is not described below because of its relative insignificance to the financial statements. At June 30, 2018, the City reported the following aggregate amounts related to pensions for all plans to which it contributes (in thousands): Statement of Net Position and Statement of Activities Net Pension and OPEB Liabilities Deferred Outflows of Resources related to pensions and OPEB Deferred Inflows of Resources related to pensions and OPEB Pension and OPEB Expense Governmental Activities $ 1,399,889 Business-Type Activities $ 141,767 Total $ 1,541,656 162,477 9,168 171,645 67,124 114,636 8,526 5,910 75,650 120,546 77 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Arizona State Retirement System Defined Benefit Plan: a. Plan Description All the City’s eligible benefitted general employees participate in the Arizona State Retirement System (“ASRS”), a multiple-employer, cost-sharing defined benefit pension plan. ASRS was established by the State of Arizona to provide pension benefits for employees of the state and employees of participating political subdivisions and school districts. ASRS is administered by the ASRS Governing Board in accordance with Title 38, Chapter 5 Articles 2 and 2.1 of the Arizona Revised Statutes (“A.R.S.”). ASRS provides for retirement, disability, and death and survivor benefits. ASRS issues a publicly available financial report that includes financial statements and required supplementary information. The report may be obtained by writing to the Arizona State Retirement System, P.O. Box 33910, Phoenix, Arizona, 85067-3910 or by calling 1-800-621-3778. b. Benefits Provided The ASRS provides retirement, health insurance premium supplement, long-term disability, and survivor benefits. State statute establishes benefit terms. Retirement benefits are calculated on the basis of age, average monthly compensation, and service credit as follows: Retirement Initial Membership Date: Before On or After July 1, 2011 July 1, 2011 Years of service and age Sum of years and age equals 80 30 years, age 55 required to receive benefit 10 years, age 62 25 years, age 60 5 years, age 50* 10 years, age 62 any years, age 65 5 years, age 50* any years, age 65 Final average salary is based on Highest 36 consecutive Highest 60 consecutive months of last 120 months months of last 120 months 2.1% to 2.3 % 2.1% to 2.3 % Benefit percentage per year of service * With actuarially reduced benefits. Retirement benefits for members who joined the ASRS prior to September 13, 2013, are subject to automatic cost-of-living adjustments based on excess investment earnings. Members with a membership date on or after September 13, 2013, are not eligible for cost-of-living adjustments. Survivor benefits are payable upon a member’s death. For retired members, the survivor benefit is determined by the retirement benefit option chosen. For all other members, the beneficiary is entitled to the member’s account balance that includes the member’s contributions and employer’s contributions, plus interest earned. 78 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Contributions The A.R.S. provide statutory authority for determining the employees’ and employers’ contribution amounts as a percentage of covered payroll. Employers are required to contribute at the same rate as employees. The combined active member and employer contribution rates are expected to finance the costs of benefits employees earn during the year, with an additional amount to finance any unfunded accrued liability. For the year ended June 30, 2018, covered employees were required by state statute to contribute at the actuarially determined rate of 11.5% (11.34% pension plus 0.16% long-term disability) of the members’ annual covered payroll, and the City was required by statute to contribute at the actuarially determined rate of 11.5% (10.9% for retirement, 0.44% for the health insurance premium benefit, and 0.16% for long-term disability) of the active members’ annual covered payroll. The City’s contributions to the System for the year ending June 30, 2018 was $17,649,613, 74.70% paid from governmental funds, 4.64% paid from internal service funds, and 20.66% paid from enterprise funds. Additionally, the City is required by Statute to pay an ASRS Alternate Contribution Rate (ACR) for retired members who return to work on or after July 1, 2012, in any capacity and in a position ordinarily filled by an employee of the City to mitigate the potential impact that retired members who return to work may have on the ASRS Trust Fund. The contribution rate for the year ended June 30, 2018 was 9.49% (9.26% retirement, 0.10% health, 0.13% long-term disability). The City’s ACR contributions to the System for the year ending June 30, 2018 were $104,653. c. Pension Liability At June 30, 2018, the City reported a liability of $255,729,281 for its proportionate share of the ASRS’ net pension liability. The net pension liability was measured as of June 30, 2017. The total pension liability used to calculate the net pension liability was determined using update procedures to roll forward the total pension liability from an actuarial valuation as of June 30, 2016, to the measurement date of June 30, 2017. The total pension liability as of June 30, 2017, reflects a change in actuarial assumption for a decrease in loads for future potential permanent benefit increases. The City’s proportion of the net pension liability was based on the City’s actual contributions to the plan relative to the total of all participating employers’ contributions for the year ended June 30, 2017. The City’s proportion measured as of June 30, 2017, was 1.64160%, which was a decrease of 0.0189% from its proportion measured as of June 30, 2016. The net pension liability measured as of June 30, 2018 will reflect changes of actuarial assumptions based on the results of an actuarial experience study for the 5-year period ended June 30, 2016. The change in the City’s net pension liability as a result of these changes is not known. 79 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 d. Pension Expense and Deferred Outflows/Inflows of Resources For the year ended June 30, 2018, the City recognized pension expense for ASRS of $8,082,437. At June 30, 2018, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources (in thousands): Differences between expected and actual experience Changes of assumptions Net difference between projected and actual earnings on pension plan investments Changes in proportion and differences between City contributions City contributions subsequent to the measurement date Total Deferred Outflows of Resources $ 11,107 Deferred Inflows of Resources $ 7,668 7,647 1,836 - 1,360 17,650 31,953 2,126 $ 17,441 $ The $17,649,613 reported as deferred outflows of resources related to ASRS pensions resulting from City contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2019. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to ASRS pensions will be recognized in pension expense as follows (in thousands): Year Ended June 30, 2018 $ (10,089) 2019 9,893 2,940 2020 2021 (5,882) $ (3,138) e. Actuarial Assumptions The significant actuarial assumptions used to measure the total pension liability are as follows: Actuarial Valuation Date Actuarial Roll Forward Date Actuarial Cost Method Investment Rate of Return Projected Salary Increases Inflation Permanent Benefit Increase Mortality Rates 80 June 30, 2016 June 30, 2017 Entry Age Normal 8% 3 - 6.75% 3 - 3.25% Included 1994 GAM Scale BB (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Actuarial assumptions used in the June 30, 2016 valuation were based on the results of an actuarial study for the 5-year period ended June 30, 2012. The long-term expected rate of return on ASRS pension plan investments was determined to be 8.7% using a building block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected arithmetic rate of return by weighing the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Target Allocation 58% 25% 2% 10% 5% 100% Real Return Arithmetic Basis 6.73% 3.70% 3.84% 4.25% 3.41% Asset Class Equity Fixed Income Commodities Real Estate Multi-asset class Total Inflation Expected arithmetic nominal return f. Long-Term Expected Real Rate of Return 3.87% 0.91% 0.08% 0.42% 0.17% 5.45% 3.25% 8.70% Discount Rate The discount rate used to measure the ASRS total pension liability was 8%, which is less than the long-term expected rate of return of 8.7%. The projection of cash flows used to determine the discount rate assumed that contributions from participating employers will be made based on the actuarially determined rates based on the ASRS Board’s funding policy, which establishes the contractually required rate under Arizona statutes. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. g. Sensitivity of the City’s Proportionate Share of the ASRS Net Pension Liability to Changes in the Discount Rate The following table presents the City’s proportionate share of the net pension liability calculated using the discount rate of 8 %, as well as what the City’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower (7 %) or 1 percentage point higher (9 %) than the current rate (in thousands): City's proportionate share of the net pension liability 1% Decrease 7% Current Discount Rate 8% 1% Increase 9% $ $ $ 195,146 328,233 81 255,729 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 h. Pension Plan Fiduciary Net Position Detailed information about the pension plan’s fiduciary net position is available in the separately issued ASRS financial report. Public Safety Personnel Retirement System: a. Plan Description All sworn fire and police personnel regularly assigned hazardous duty are eligible to participate in the Public Safety Personnel Retirement System (“PSPRS”). The PSPRS administers agent and cost-sharing multiple-employer defined benefit pension plan and agent and cost-sharing multipleemployer defined benefit health insurance premium benefit (OPEB) plan. The PSPRS is jointly administered by a nine-member board known as the Board of Trustees, and the participating local boards according to the provisions of A.R.S. Title 38, Chapter 5, Article 4. Employees who were PSPRS members before July 1, 2017, participate in the agent plans. The PSPRS issues a publicly available financial report that includes financial statements and required supplementary information. This report is available on the PSPRS website at www.psprs.com. b. Benefits Provided The PSPRS provides retirement, health insurance premium supplement, disability, and survivor benefits. State statute establishes benefits terms. Retirement, disability, and survivor benefits are calculated on the basis of age, average monthly compensation, and service credit as follows: 82 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Initial Membership Date Before January 1, 2012 On or after January 1, 2012 and before July 1, 2017 Years of service 20 years of service, any age 25 years of service or 15 years and age required to receive benefit 15 years of service, age 62 of credited service, age 52.5 Final average salary is based on Highest 36 consecutive Highest 60 consecutive months months of last 20 years of last 20 years or last 15 years 50% less 2.0% for each year of credited service less than 20 years OR plus 2.0% to 2.5% for each year of credited service, not to exceed 80% 1.5% to 2.5% for each year of credited service not to exceed 80% Retirement and Disability Benefit percentage Normal Retirement (80% max) Accidental Disability Retirement 50% or normal retirement, whichever is greater Catastrophic Disability Retirement 90% for the first 60 months then reduced to either 62.5% or normal retirement, whichever is greater Ordinary Disability Retirement Normal retirement calculated with actual years of credited service or 20 years of credited service, whichever is greater, multiplied by years of credited service (not to exceed 20 years) divided by 20 Survivor Benefit Retired Members 80% to 100% of retired member's pension benefit Active Members 80% to 100% of accidental disability retirement benefit or 100% of average monthly compensation if death was the result of injuries received on the job Retirement and survivor benefits are subject to automatic cost-of-living adjustments based on inflation. In addition, the Legislature may enact permanent one-time benefit increases after a Joint Legislative Budget Committee analysis of the increase’s effects on the plan. PSPRS also provides temporary disability benefits of 50 percent of the member’s compensation for up to 12 months. Health insurance premium benefits are available to retired or disabled members with 5 years of credited service. The benefits are payable only with respect to allowable health insurance premiums for which the member is responsible. Benefits range from $150 per month to $260 per month depending on the age of the member and dependents. The PSPRS-Fire OPEB plan is not presented because of its relative insignificance to the financial statements. 83 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Employees Covered by Benefit Terms At June 30, 2018, the following employees were covered by the agent plans’ benefit terms: PSPRS Fire PSPRS Police Pension Pension Health 240 537 537 58 376 674 143 756 1,436 55 756 1,348 Inactive employees or beneficiaries currently receiving benefits Inactive employees entitled to but not yet receiving benefits Active employees Total c. Contributions and annual OPEB Cost State statutes establish the pension contribution requirements for active PSPRS employees. In accordance with state statutes, annual actuarial valuations determine employer contribution requirements for PSPRS pension and health insurance premium benefits. The combined active member and employer contribution rates are expected to finance the costs of benefits employees earn during the year, with an additional amount to finance any unfunded accrued liability. Contribution rates for the year ended June 30, 2018, are indicated below. Rates are a percentage of active members’ annual covered payroll. PSPRS - Fire PSPRS - Police PSPRS Tier 3 - Fire PSPRS Tier 3 - Police Active Member Pension 7.65% - 11.65% 7.65% - 11.65% 10.59% 10.02% City Pension 43.67% 45.00% 10.59% 10.02% City OPEB 0.37% 1.17% 0.25% 0.21% Also, statute required the City to contribute a legacy cost of pension unfunded liability at the actuarially determined rate expressed as a percent of annual covered payroll of 28.93% for City police employees who were PSPRS Tier 3 members, in addition to the City’s required contributions to the PSPRS Tier 3 Risk Pool for these City police employees. The City’s contributions to the plans for the year ended June 30, 2018, were: PSPRS - Fire PSPRS - Police PSPRS Tier 3 - Police $ Pension 10,479,094 21,607,876 118,307 OPEB $ 733,111 38,484 A court decision resulted in refunds of excess member contributions to certain fire and police members. The City received a credit memo from PSPRS that equaled the amount of the refunds. The City used the credit memo to reduce its contribution to the plan for the year ended June 30, 2018. The City is also required to pay a PSPRS Alternate Contribution Rate (ACR) for retired members who return to work in any capacity and in a position ordinarily filled by an employee of the City, 84 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 unless the retired member is required to participate in another state retirement system and the retired member returned to work before July 20, 2011. The ACR rate is equal to the portion of the total required contribution that is applied to the amortization of the unfunded actuarial accrued liability for the fiscal year beginning July 1, based on the actuarial calculation of the total required contribution for the preceding fiscal year ended on June 30. The contribution rate for the year ended June 30, 2018 was 28.93% for both fire and police. The City’s ACR contributions for the year ending June 30, 2018 were $0 for fire and $46,544 for police. d. Liability At June 30, 2018, the City reported the following pension liabilities of $193,863,669 and $377,891,929 for fire and police, respectively. The City also reported an OPEB liability of $8,457,302 for police. The net liabilities were measured as of June 30, 2017, and the total liability used to calculate the net liability was determined by an actuarial valuation as of that date. The total liabilities as of June 30, 2017, reflect changes of actuarial assumptions based on the results of an actuarial experience study for the 5-year period ended June 30, 2016, including decreasing the investment rate of return from 7.5 % to 7.4 %, decreasing the wage inflation from 4 % to 3.5 %, and updating mortality, withdrawal, disability, and retirement assumptions. The total pension liabilities for PSPRS also reflect changes of benefit terms for legislation that changed benefit eligibility and multipliers for employees who became members on or after January 1, 2012, and before July 1, 2017, and a court decision that decreased the contribution rates for employees who became members before July 20, 2011. The court decision will also affect the PSPRS net pension liabilities measured as of June 30, 2018, because of refunds of excess member contributions. The change in the City’s PSPRS net pension liabilities as a result of the refunds is not known. e. Pension/OPEB Expense and Deferred Outflows/Inflows of Resources For the year ended June 30, 2018, the City recognized pension expense of $24,251,275 and $53,757,450 for fire and police, respectively. City also recognized OPEB expense of $803,662 for police. At June 30, 2018, the City reported deferred outflows of resources and deferred inflows of resources related to pensions and OPEB from the following sources (in thousands): PSPRS - Fire Pension Differences between expected and actual experience Changes in assumptions Net difference between projected and actual earnings on pension plan investments City contributions subsequent to the measurement date Total 85 Deferred Outflows of Resources $ 30,119 Deferred Inflows of Resources $ 10,803 - 2,430 - 10,479 43,028 $ 10,803 $ (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 PSPRS - Police Differences between expected and actual experience Changes in assumptions Net difference between projected and actual earnings on plan investments City contributions subsequent to the measurement date Total Pension Deferred Deferred Outflows of Inflows of Resources Resources $ 302 $ 7,729 49,357 3,887 21,726 75,272 $ OPEB Deferred Deferred Outflows of Inflows of Resources Resources $ 261 $ 279 - $ 7,729 - $ 772 1,033 334 $ 613 The amounts reported as deferred outflows of resources related to pensions and OPEB resulting from City contributions subsequent to the measurement date will be recognized as a reduction of the net liability in the year ended June 30, 2019. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions and OPEB will be recognized in pension expense as follows (in thousands): Year Ended June 30, 2019 2020 2021 2022 2023 Thereafter f. PSPRS Fire Pension $ 4,677 6,300 4,962 783 2,029 2,995 $ 21,746 PSPRS Police Pension $ 13,846 16,574 8,525 3,977 2,895 $ 45,817 PSPRS Police OPEB (87) (87) (87) (87) (4) $ (352) Actuarial Methods and Assumptions The significant actuarial assumptions used to measure the total pension/OPEB liability are as follows: Actuarial Assumptions: Actuarial Valuation Date Actuarial Cost Method Investment Rate of Return Wage Inflation Price Inflation Assumed Future Permanent Benefit Increase Mortality Rates for Pension and OPEB Healthcare cost trend rate June 30, 2017 Entry Age Normal 7.4% for contribution rates, 7.4% for liability 3.5%, N/A for OPEB 2.5%, N/A for OPEB Included, N/A for OPEB RP-2014 mortality table using MP-2016 improvement scale adjustments to match current experience. N/A Actuarial assumptions used in the June 30, 2017 valuation were based on the results of an actuarial experience study for the 5-year period ended June 30, 2016. 86 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 The long-term expected rate of return on PSPRS plan investments was determined was determined to be 7.4 % using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of plan investment expenses and inflation) are developed for each major asset class. The target allocation and best estimates of geometric real rates of return for each major asset class are summarized in the following table: Target Allocation 2% 2% 4% 5% 9% 10% 10% 12% 16% 14% 16% 100% Asset Class Short Term Investments Absolute Return Risk Parity Fixed Income Real Assets GTAA Real Estate Private Credit Credit Opportunities Non-U.S. Equity U.S. Equity Total Long-Term Expected Geometric Real Rate of Return 0.25% 3.75% 5.00% 1.25% 4.52% 3.96% 3.75% 6.75% 5.83% 8.70% 7.60% g. Discount Rate A discount rate of 7.40% was used to measure the total pension/OPEB liability. This was a decrease of 0.10% from the discount rated used at June 30, 2016. The projection of cash flows used to determine this discount rate assumed that plan member contributions will be made at the current contribution rate and that employer contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on these assumptions, the plans’ fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on plan investments was applied to all periods of projected benefit payments to determine the total pension/OPEB liability. h. Changes in the Net Pension/OPEB Liability The following tables present changes in the City’s net pension/OPEB liability for the PSPRS – Fire and Police plans as follows (in thousands): 87 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Total Pension Liability $ 347,180 Plan Fiduciary Net Position $ 162,137 Net Position Liability $ 185,043 7,724 25,687 2,125 - 7,724 25,687 2,125 (2,670) 12,613 - 13,558 3,923 19,308 (2,670) 12,613 (13,558) (3,923) (19,308) (17,095) 28,384 375,564 (17,095) (174) 43 19,563 $ 181,700 174 (43) 8,821 $ 193,864 Total Pension Liability $ 642,638 Plan Fiduciary Net Position $ 284,432 Net Position Liability $ 358,206 Total OPEB Liability $ 18,592 Plan Fiduciary Net Position $ 9,946 15,841 47,572 5,718 - 15,841 47,572 5,718 213 1,356 35 - 365 - 365 312 - 19,037 - 26,819 7,693 34,221 19,037 (26,819) (7,693) (34,221) (335) - 639 1,141 (32,522) 56,011 698,649 (32,522) (306) 420 36,325 $ 320,757 306 (420) 19,686 $ 377,892 (1,239) 342 $ 18,934 (1,239) (10) 531 10,477 Fire Balance at June 30, 2017 Changes for the Year: Service Cost Interest on the Total Liability Changes of Benefit Terms Differences Between Expected & Actual Experience in the M easurement of the Liability Changes of Assumptions / Other Inputs Contributions - Employer Contributions - Employee Net Investment Income Benefit Payments, Including Refunds of Employee Contributions Administrative Expenses Other Changes Net Changes Balances as of June 30, 2018 Police Balance at June 30, 2017 Changes for the Year: Service Cost Interest on the Total Liability Changes of Benefit Terms Differences Between Expected & Actual Experience in the M easurement of the Liability Changes of Assumptions / Other Inputs Contributions - Employer Contributions - Employee Net Investment Income Benefit Payments, Including Refunds of Employee Contributions Administrative Expenses Other Changes Net Changes Balances as of June 30, 2018 $ $ 88 $ Net OPEB Liability $ 8,646 213 1,356 35 312 (335) (639) (1,141) 10 (189) $ 8,457 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 i. Sensitivity of the City’s Net Pension/OPEB Liability to Changes in the Discount Rate The following table presents the City’s net pension/ OPEB liabilities calculated using the discount rates noted above, as well as what the City’s net pension/OPEB liability would be if it were calculated using a discount rate that is 1 percentage point lower or 1 percentage point higher than the current rate (in thousands): Fire Net Pension Liability Police Net Pension Liability Police OPEB Liability 1% Decrease 6.40% $ 244,101 476,633 10,549 Current Discount Rate 7.40% $ 193,864 377,892 8,457 1% Increase 8.40% $ 152,710 297,795 6,707 Regarding the sensitivity of the net OPEB liability to changes in the healthcare cost trend rates, note that trend rates are not applied in the valuation due to the nature of the benefit provided. j. Plan Fiduciary Net Position Detailed information about the pension/OPEB plan’s fiduciary net position is available in the separately issued PSPRS financial report. City of Mesa OPEB: a. Plan Description The City provides post-employment medical care (OPEB) for retired employees through a singleemployer defined benefit medical plan. The plan provides medical benefits for eligible retirees, their spouses and dependents through the City’s self-insurance health insurance plan which covers both active and retired members. The benefits, benefit levels and contribution rates are determined annually by the City’s Benefits Advisory Board and approved by the Mesa City Council. The plan is not accounted for as a trust fund, and an irrevocable trust has not been established to account for the plan. b. Benefits Provided The City provides post-employment medical care benefits to its retirees. To be eligible for benefits, an employee must qualify for retirement under one of the state retirement plans for public employees and be covered under the City’s medical plan during their active status. Employees must enroll in a City plan immediately after they retire or their eligibility for this benefit ceases. All medical care benefits are provided through the City’s self-insured health plan. The benefit levels are the same as those afforded to active employees. Upon a retiree’s death, the retiree’s dependents are no longer eligible for City coverage. To receive maximum benefits an employee must meet the following: • • • • Ten years of service for employees hired prior to January 1, 2001 Fifteen years of service for employees hired at January 1, 2001 but before January 1, 2006. Twenty years of service for employees hired on or after January 1, 2006. As of January 1, 2009, new hires are no longer eligible for benefits. 89 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Employees Covered by Benefit Terms As of July 1, 2017 (Date of most recent valuation), membership consisted of: Active Employees Retirees Spouses Total 3,308 2,029 1,279 6,616 c. OPEB Liability The plan operates on a pay-as-you-go basis and thus has no assets. The total OPEB liability measured as of June 30, 2017 is $705,713,533. The June 30, 2016 liability is based on a no gain/loss rollback of the June 30,2017 valuation results. The impact of changes from the June 30, 2016 results include the following: • Change in the S&P Municipal Bond 20 Year High Grade Rate Index. The discount rate, based on this index, changed from 2.71% at June 30, 2016 to 3.13% at June 30, 2017. The impact on OPEB liability from this change was a decrease of $46,955,496. d. OPEB Expense and Deferred Outflows/Inflows of Resources For the year ended June 30, 2018, the City recognized OPEB expense of $33,650,778. At June 30, 2018, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources (in thousands): Differences between expected and actual experience Changes of assumptions Net difference between projected and actual earnings on pension plan investments City contributions subsequent to the measurement date Total 90 Deferred Outflows of Resources $ - Deferred Inflows of Resources $ 39,064 20,358 20,358 $ 39,064 $ (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 The amounts reported as deferred outflows of resources resulting from City contributions subsequent to the measurement date will be recognized as a reduction of the net liability in the year ended June 30, 2019. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions and OPEB will be recognized in pension expense as follows (in thousands): Year Ended June 30, 2019 $ (7,892) 2020 (7,892) 2021 (7,892) 2022 (7,892) 2023 (7,496) $ (39,064) e. Actuarial Methods and Assumptions Projections of benefits are based on the substantive plan (the plan understood by the employer and plan members) and include the type of benefits in force at the valuation date and the pattern of sharing benefits between the City and the plan members at that point. Actuarial calculations reflect a long-term perspective and employ methods and assumptions that are designed to reduce shortterm volatility in actuarial accrued liabilities and the actuarial value of assets. Significant methods and assumptions used for this fiscal year valuation were as follows: Actuarial Assumptions: Actuarial Valuation Date Measurement Date Actuarial Cost Method Discount Rate Consumer Price Index Projected Salary Increases Mortality Rates June 30, 2017 June 30, 2017 Entry Age Normal 3.13% 3.00% 2.70 - 7.50% Based on the rates used for the June 30, 2017 valuations of the ASRS Plan and the PSPRS Plan. Health care cost trend rate: Medical, Drugs 4.50 -7.50% Dental, Mental Health, Vision 4.50% Actuarial assumptions used in the June 30, 2017 valuation were projected on an on-going plan basis. This assumption does not necessarily imply that an obligation to continue the plan actually exists. 91 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 f. Discount Rate The discount rate at the measurement date is 3.13%. Benefit payments are funded on a pay-as-you go basis. The discount rate is based on the S&P Municipal Bond 20 Year High Grade Rate Index as of June 30, 2017. g. Changes in OPEB Liability The below table outlines the changes in OPEB Liability for the fiscal year ending June 30, 2018 (in thousands): OPEB Liability at Beginning of Year, as restated Service Cost Interest Changes in Benefit Terms Differences between Expected and Actual Experience Changes in Assumptions Employer contributions * Net Change in Total OPEB Liability OPEB Liability at End of Year $ $ 730,139 21,431 20,112 (46,955) (19,013) (24,425) 705,714 * Because the City funds OPEB benefits on a “pay-as-you-go” basis, employer contributions are equal to benefit payments. h. Sensitivity of the City’s OPEB Liability to Changes in the Discount Rate and the Healthcare Cost Trend Rates The following table presents the City’s net OPEB liabilities calculated using the municipal bond rates and healthcare cost trend rates noted above, as well as what the City’s net OPEB liability would be if it were calculated using rate that is 1 percentage point lower or 1 percentage point higher than the current rate (in thousands): 1% Decrease City OPEB Plan $ 829,496 Current Municipal Bond Rate $ 705,714 1% Increase $ 607,519 1% Decrease City OPEB Plan $ 602,799 Current Healtchare Trend Rate $ 705,714 1% Increase $ 845,324 92 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 16. RESTATEMENT OF BEGINNING NET POSITION For the fiscal year ending June 30, 2018, GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions was implemented. The implementation of the statement resulted in the City removing the previous GASB 45 liability and recording the GASB 75 liabilities. The City’s government-wide net position, proprietary fund net position, and internal service fund net position as of June 30, 2017, have been restated as follows (in thousands): Net Position at 06/30/17, as Previously Reported Removal of GASB 45 Liability GASB Statement No. 75 adjustment Net Position at 07/01/17, as Restated Governmental Activities $ 363,708 Business-type Activities $ 518,804 Governmental Activities Internal Service * $ 9,958 431,158 (629,531) 82,392 (89,602) 11,115 (19,912) $ 165,335 $ 511,594 $ 1,161 * Internal Service fund balances are reflected in the Governmental Activties balance. 17. SUBSEQUENT EVENTS On November 8, 2018, the Eastmark Community Facility District issued 2018 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) General Obligation Bonds in the amount of $10,830,000. These bonds are due in annual principal installments ranging from $240,000 to $1,240,000, plus semiannual interest ranging from 3.75 % to 5 % through July 15, 2043. On November 15, 2018, the Eastmark Community Facility District issued 2018 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) Special Assessment District 11 Special Assessment Bonds in the amount of $969,000. These bonds are due in annual principal installments ranging from $24,000 to $295,000, plus semi-annual interest ranging from 3% to 5% through July 1, 2043. 93 (Concluded) CITY OF MESA, AZ Comprehensive Annual REQUIRED FinancialSUPPLEMENTARY Report INFORMATION C O M P R E H E N S I V E A N N UA L FINANCIAL REPORT 2018 R E E D S K AT E PA R K CITY OF MESA, ARIZONA EXHIBIT B-1 REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF THE CITY'S PROPORTIONATE SHARE OF NET PENSION LIABILITY COST-SHARING PENSION PLAN JUNE 30, 2018 (in thousands) Arizona State Retirement System City's Proportion of the Net Pension Liability City's Proportionate Share of the Net Pension Liability City's Covered Payroll City's Proportionate Share of the Net Pension Liability as a Percentage of its Covered Payroll Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 2015 (2014) 1.6341% $ 241,792 Reporting Fiscal Year* (Measurement Date) 2016 2017 (2015) (2016) 1.6393% 1.6605% $ 255,337 $ 268,013 2018 (2017) 1.6416% $ 255,729 $ 147,402 $ 151,154 $ 164.04% 168.93% 171.95% 160.88% 69.49% 68.35% 67.06% 69.92% See accompanying notes to pension plan schedules. *2014 through 2009 Information not available 94 $ 155,868 158,958 CITY OF MESA, ARIZONA EXHIBIT B-2 REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES IN THE CITY'S NET PENSION/OPEB LIABILITY AND RELATED RATIOS AGENT PLANS JUNE 30, 2018 (in thousands) Public Safety Personnel Retirement System - Fire Reporting Fiscal Year * (Measurement Date) 2016 2017 (2015) (2016) 2015 (2014) Total Pension Liability Service Cost Interest on the Total Pension Liability Changes of Benefit Terms Differences Between Expected and Actual Experience in the Measurement of the Pension Liability Changes of Assumptions or Other Inputs Benefit Payments, Including Refunds of Employee Contributions Net Change in Total Pension Liability Total Pension Liability - Beginning Total Pension Liability - Ending (a) $ 6,281 20,708 4,044 $ 6,127 23,086 - $ 6,439 23,654 21,380 2018 (2017) $ 7,724 25,687 2,125 (6,961) 23,097 (3,518) - (4,423) 11,970 (2,670) 12,613 (16,309) 30,860 268,821 299,681 (17,323) 8,372 299,681 308,053 (19,893) 39,127 308,053 347,180 (17,095) 28,384 347,180 375,564 Plan Fiduciary Net Position Contributions - Employer Contributions - Employee Net Investment Income Benefit Payments, Including Refunds of Employee Contributions Administrative Expense Other Changes Net Change in Plan Fiduciary Net Position Plan Fiduciary Net Position - Beginning Plan Fiduciary Net Position - Ending (b) 9,157 3,488 19,840 9,828 3,847 5,878 12,735 4,396 954 13,558 3,923 19,308 (16,309) (160) (113) 15,903 146,061 161,964 (17,323) (144) 45 2,131 161,964 164,095 (19,893) (138) (12) (1,958) 164,095 162,137 (17,095) (174) 43 19,563 162,137 181,700 City's Net Pension Liability - Ending (a) - (b) $ 137,717 $ 143,958 185,043 $ 193,864 Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 54.05% 53.27% 46.70% 48.38% City's Covered Payroll $ City's Net Pension Liability as a Percentage of its Covered Payroll 30,782 447.39% See accompanying notes to pension plan schedules. *2014 through 2009 Information not available 95 $ 31,661 454.69% $ $ 32,453 570.18% $ 32,941 588.51% CITY OF MESA, ARIZONA EXHIBIT B-2 (continued) REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES IN THE CITY'S NET PENSION/OPEB LIABILITY AND RELATED RATIOS AGENT PLANS JUNE 30, 2018 (in thousands) Public Safety Personnel Retirement System - Police Pension Reporting Fiscal Year * (Measurement Date) 2016 2017 (2015) (2016) 2015 (2014) Total Pension Liability Service Cost Interest on the Total Liability Changes of Benefit Terms Differences Between Expected and Actual Experience in the Measurement of the Liability Changes of Assumptions or Other Inputs Benefit Payments, Including Refunds of Employee Contributions Net Change in Total Pension Liability Total Pension Liability - Beginning Total Pension Liability - Ending (a) $ 12,481 36,514 8,728 $ 12,216 41,908 - $ 12,438 43,573 34,005 2018 (2017) $ 15,841 47,572 5,718 (11,331) 51,228 (2,173) - (4,001) 23,614 365 19,037 (27,566) 70,054 472,691 542,745 (29,998) 21,953 542,745 564,698 (31,689) 77,940 564,698 642,638 (32,522) 56,011 642,638 698,649 Plan Fiduciary Net Position Contributions - Employer Contributions - Employee Net Investment Income Benefit Payments, Including Refunds of Employee Contributions Administrative Expense Other Changes Net Change in Plan Fiduciary Net Position Plan Fiduciary Net Position - Beginning Plan Fiduciary Net Position - Ending (b) 17,443 6,784 33,360 19,680 7,613 10,065 24,067 8,157 1,667 26,819 7,693 34,221 (27,566) (269) 288 30,040 244,906 274,946 (29,998) (246) 28 7,142 274,946 282,088 (31,689) (240) 382 2,344 282,088 284,432 (32,522) (306) 420 36,325 284,432 320,757 City's Net Pension Liability - Ending (a) - (b) $ 267,799 $ 282,610 358,206 $ 377,892 Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 50.66% 49.95% 44.26% 45.91% City's Covered Payroll $ City's Net Pension Liability as a Percentage of its Covered Payroll 59,688 448.66% See accompanying notes to pension plan schedules. *2014 through 2009 Information not available 96 $ 62,461 452.46% $ $ 61,211 585.20% $ 64,740 583.70% CITY OF MESA, ARIZONA EXHIBIT B-2 (concluded) REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES IN THE CITY'S NET PENSION/OPEB LIABILITY AND RELATED RATIOS AGENT PLANS JUNE 30, 2018 (in thousands) Public Safety Personnel Retirement System - Police OPEB Reporting Fiscal Year (Measurement Date) 2018 (2017) Total Liability Service Cost Interest on the Total Liability Changes of Benefit Terms Differences Between Expected and Actual Experience in the Measurement of the Liability Changes of Assumptions or Other Inputs Benefit Payments, Including Refunds of Employee Contributions Net Change in Total OPEB Liability Total OPEB Liability - Beginning Total OPEB Liability - Ending (a) $ 312 (335) (1,239) 342 18,592 18,934 Plan Fiduciary Net Position Contributions - Employer Contributions - Employee Net Investment Income Benefit Payments, Including Refunds of Employee Contributions Administrative Expense Other Changes Net Change in Plan Fiduciary Net Position Plan Fiduciary Net Position - Beginning Plan Fiduciary Net Position - Ending (b) City's Net OPEB Liability - Ending (a) - (b) 639 1,141 (1,239) (10) 531 9,946 10,477 $ Plan Fiduciary Net Position as a Percentage of the Total OPEB Liability City's Covered Payroll 213 1,356 35 8,457 55.33% $ City's Net OPEB Liability as a Percentage of its Covered Payroll 64,740 13.06% *2017 through 2009 Information not available 97 CITY OF MESA, ARIZONA EXHIBIT B-3 REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CITY PENSION CONTRIBUTIONS JUNE 30, 2018 (in thousands) Arizona State Retirement System Statutorily Required Contribution City's Contribution in Relation to the Statutorily Required Contribution City's Contribution Deficiency (Excess) City's Covered Payroll City's Contributions as a Percentage of Covered Payroll 2014 $ 15,750 $ 15,750 - 2015 $ 16,146 $ 16,146 - 2016 $ 16,955 $ 16,955 - 2017 $ 17,423 $ 2018 17,650 17,423 - $ 17,650 - $ 160,986 $ $ 147,402 $ 151,154 $ 155,868 $ 158,958 10.68% 10.67% 10.88% 10.96% 10.96% Public Safety Personnel Retirement System - Fire Pension Actuarially Determined Contribution City's Contribution in Relation to the Actuarially Determined Contribution City's Contribution Deficiency (Excess) ** City's Covered Payroll City's Contributions as a Percentage of Covered Payroll $ 2014 9,157 $ 2015 9,827 $ 2016 11,197 $ 2017 13,490 $ 2018 14,289 $ 9,157 - $ 9,827 - $ 12,735 (1,538) $ 13,490 - $ 10,479 3,810 $ 30,782 $ 31,661 $ 32,453 $ 32,941 $ 32,446 29.75% 31.04% See accompanying notes to plan schedules. * 2013 through 2009 Information not available ** Differences in 2018 are due to PSPRS credits utilized by the City 98 39.24% 40.95% 32.30% CITY OF MESA, ARIZONA EXHIBIT B-3 (concluded) REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CITY PENSION CONTRIBUTIONS JUNE 30, 2018 (in thousands) Public Safety Personnel Retirement System - Police Pension Actuarially Determined Contribution City's Contribution in Relation to the Actuarially Determined Contribution City's Contribution Deficiency (Excess)** City's Covered Payroll City's Contributions as a Percentage of Covered Payroll 2014 $ 17,443 2015 $ 19,680 $ 2018 29,048 17,443 - $ 19,680 - $ 24,067 (2,370) $ 26,809 - $ 21,726 7,322 $ 59,688 $ 62,461 $ 61,211 $ 64,740 $ 63,003 29.22% 31.51% ** Differences in 2018 are due to PSPRS credits utilized by the City Public Safety Personnel Retirement System - Police OPEB City's Covered Payroll City's Contributions as a Percentage of Covered Payroll 2017 $ 26,809 $ *2013 through 2009 Information not available Actuarially Determined Contribution City's Contribution in Relation to the Actuarially Determined Contribution City's Contribution Deficiency (Excess) 2016 $ 21,697 $ 2017 641 $ 2018 772 $ 641 - $ 772 - $ 64,740 $ 62,842 0.99% 1.23% See accompanying notes to plan schedules. *2016 through 2009 Information not available 99 39.32% 41.41% 34.48% CITY OF MESA, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION NOTES TO PENSION PLAN SCHEDULES JUNE 30, 2018 (in thousands) Note 1 - Actuarially determined contribution rates Actuarially determined contribution rates for PSPRS are calculated as of June 30 two years prior to the end of the fiscal year in which contributions are made. The actuarial methods and assumptions used to establish the contribution requirements are as follows: Actuarial Cost Method Amortization Method Remaining Amortization Period Asset Valuation Method Actuarial Assumptions: Investment Rate of Return Projected Salary Increases Wage Growth Retirement Age Mortality Entry age normal Level percent of payroll, closed 21 years for unfunded actuarial accrued liability, 20 years for excess 7-year smoothed market value; 80%/120% market PSPRS members with initial membership date before July 1, 2017: In the 2016 actuarial valuation, the investment rate of return was decreased from 7.85% to 7.5%. In the 2013 actuarial valuation, the investment rate of return was decreased from 8.0% to 7.85%. PSPRS members with initial membership on or after July 1, 2017: 7% In the 2014 actuarial valuation, projected salary increases were decreased from 4.5%–8.5% to 4.0%–8.0%. In the 2013 actuarial valuation, projected salary increases were decreased from 5.0%–9.0% to 4.5%–8.5%. In the 2014 actuarial valuation, wage growth was decreased from 4.5% to 4.0%. In the 2013 actuarial valuation, wage growth was decreased from 5.0% to 4.5%. Experience-based table of rates that is specific to the type of eligibility condition. Last updated for the 2012 valuation pursuant to an experience study of the period July 1, 2006-June 30, 2011. RP-2000 mortality table (adjusted by 105% for both males and females) Note 2 - Factors that affect trends Arizona courts have ruled that provisions of a 2011 law that changed the mechanism for funding permanent pension benefit increases and increased employee pension contribution rates were unconstitutional or a breach of contract because those provisions apply to individuals who were members as of the law’s effective date. As a result, the PSPRS changed benefit terms to reflect the prior mechanism for funding permanent benefit increases for those members and revised actuarial assumptions to explicitly value future permanent benefit increases. PSPRS also reduced those members’ employee contribution rates. These changes are reflected in the plans’ pension liabilities for fiscal year 2015 (measurement date 2014) for members who were retired as of the law’s effective date and fiscal year 2018 (measurement date 2017) for members who retired or will retire after the law’s effective date. These changes also increased the PSPRS required pension contributions beginning in fiscal year 2016 for members who were retired as of the law’s effective date. These changes will increase the PSPRS required contributions beginning in fiscal year 2019 for members who retired or will retire after the law’s effective date. Also, the City refunded excess employee contributions to PSPRS. PSPRS allowed the City to reduce its actual employer contributions for the refund amounts. As a result, the City’s pension contributions were less than the actuarially or statutorily determined contributions for 2018. 100 CITY OF MESA, ARIZONA EXHIBIT B-4 REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES IN THE CITY'S TOTAL OPEB LIABILITY 2018 Total Liability Service Cost Interest on the Total Liability Changes of Benefit Terms Differences Between Expected and Actual Experience in the Measurement of the Liability Changes of Assumptions or Other Inputs Benefit Payments, Including Refunds of Employee Contributions ** Net Change in Total OPEB Liability Total OPEB Liability - Beginning Total OPEB Liability - Ending (a) $ 21,431 20,112 (46,955) $ ** Because the City funds OPEB benefits on a “pay-as-you-go” basis, employer contributions are equal to benefit payments. *2017 through 2009 Information not available 101 (19,013) (24,425) 730,139 705,714 CITY OF MESA, ARIZONA EXHIBIT B-5 REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE GENERAL FUND FOR THE FISCAL YEAR ENDED JUNE 30, 2018 (in thousands) Budgeted Amounts Original Revenues: Sales Taxes Occupancy Taxes Licenses and Permits Intergovernmental Charges for Services Fines and Forfeitures Investment Income Contributions Miscellaneous Revenues Total Revenues $ Actual Budgetary Basis Final 111,585 25 16,959 149,262 22,917 9,337 951 1,285 312,321 $ 111,585 25 16,959 149,262 22,917 9,337 951 1,285 312,321 $ 116,024 25 20,469 138,876 24,055 8,298 (622) 75 1,738 308,938 Variance with Final Budget $ 4,439 3,510 (10,386) 1,138 (1,039) (1,573) 75 453 (3,383) Expenditures: Current: General Government Public Safety Community Environment Cultural-Recreational Capital Outlay Total Expenditures 96,846 243,233 18,503 39,728 26,565 424,875 97,235 242,375 18,523 39,886 26,809 424,828 80,749 235,173 15,560 38,393 13,261 383,136 16,486 7,202 2,963 1,493 13,548 41,692 Excess (Deficiency) of Revenues Over (Under) Expenditures (112,554) (112,507) (74,198) 38,309 Other Financing Sources (Uses): Transfers In Transfers Out Total Other Financing Sources (Uses) 140,344 (43,749) 96,595 140,344 (78,550) 61,794 120,095 (26,629) 93,466 (20,249) 51,921 31,672 Net Change in Fund Balances (15,959) (50,713) 19,268 69,981 Fund Balance - Beginning 113,627 113,627 130,813 17,186 Fund Balance - Ending $ 97,668 See accompanying note to budgetary comparison schedule. 102 $ 62,914 $ 150,081 $ 87,167 CITY OF MESA, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION NOTES TO BUDGETARY COMPARISON SCHEDULE JUNE 30, 2018 (in thousands) The financial statements for the City are prepared in accordance with generally accepted accounting principles – “GAAP basis”. Since Mesa, like most other Arizona cities, prepares its annual budget on a modified cash basis that differs from the “GAAP basis”, additional schedules of revenues and expenditures are presented for the General Fund to provide a meaningful comparison of actual results to budget on the “budget basis”. Adjustments necessary to convert the results of operations of the General Fund for the year ended June 30, 2018 on the “GAAP basis” to the “budget basis” as follows: Net Change in Fund Balance-Budget Basis Exhibit B-6 $ 19,268 Basis Differences: Compensated Absences Bad Debt Payroll Accrual Unavailable Revenue Unrealized Gain on Investments Net Change in Fund Balance-GAAP Basis Exhibit A-5 (145) (2,449) (356) (1,201) 831 $ 15,948 103 CITY OF MESA, AZ Comprehensive Annual COMBINING Financial Report STATEMENTS C O M P R E H E N S I V E A N N UA L FINANCIAL REPORT 2018 E A S T M A R K PA R K NON-MAJOR GOVERNMENTAL FUNDS Special Revenue Funds Special Revenue Funds are used to account for specific revenues that are legally restricted to expenditures for particular purposes. Cemetery is designed to provide an accumulation of monies from which the interest earnings will provide perpetual care of the Cemetery. Community Facilities District accounts for the operations of the Eastmark and other Community Facilities District which are paid from special assessments levied against the benefited properties. Development Impact Fees is designed to provide a balance of monies to ensure that new development bears a proportionate share of the cost of improvements to the City’s parks, cultural facilities, libraries, fire facilities and equipment, police facilities and equipment, general government facilities and storm sewers. These funds are provided through the collection of development impact fees. Environmental Compliance accounts for expenditures that are a result of federal and state environmental requirements. Financing for this fund is derived from a monthly environmental compliance fee that is charged to each utility customer. Grants and Special Programs accounts for federal and state grant expenditures and other City programs. The principle financing source is federal and state grant revenues. Highway User Revenue accounts for capital projects and maintenance of the City’s streets and highways, as mandated by the Arizona Revised Statutes. Financing for this fund is provided by the state shared fuel taxes. Mesa Arts Center Restoration is designed to provide an accumulation of monies to be used to replace or refurbish the Mesa Arts Center facilities. These funds are provided through a fee on all ticketed events at the facility. Mesa Housing Authority accounts for expenditures of the City’s housing assistance programs that provide rent subsidy payments to private sector owners of dwelling units. Financing for this fund is derived from grants from the United States Department of Housing and Urban Development. Quality of Life Sales Tax accounts for expenditures of the voter-approved sales tax to improve the quality of life for Mesa residents. Street Sales Tax accounts for expenditures of the voter-approved sales tax that is used as the City match for the MAG Proposition 400 sales tax funds and also provides a local revenue source that is dedicated for street programs. Capital Projects Funds Capital Projects Funds are used to account for the acquisition and construction of major capital facilities other than those financed by proprietary funds and special revenue funds. Community Facilities District accounts for the costs of construction of drains, basins, channels and other storm sewer improvements and street improvements in the Eastmark and other Community Facilities District. General Capital Projects accounts for the costs of general City construction projects and for expenditures related to the acquisition of replacement vehicles for the City’s governmental funds. The funds are provided through transfers from the City’s General Fund Parks accounts for the costs of park facilities and improvements. Public Safety accounts for the cost of public safety facilities. Streets accounts for the cost of right-of-way acquisitions and street improvements. Debt Service Funds These funds are established to account for the accumulation of resources for, and the payment of, principal and interest not serviced by the Enterprise Fund. Community Facilities District accumulates monies for the payment of Eastmark and other Community Facilities District Bonds that are issued to finance the costs of improvements which are to be paid from special assessments levied against the benefited properties. General Obligation Bonds accumulates monies for the payment of principal and interest requirements of the City’s General Obligation Bonds. Highway Project Advancement Notes accumulates monies for the payment of principal and interest requirements of the Highway Project Advancement Notes. Highway User Revenue Bonds accumulates monies for the payment of principal and interest requirements of the City’s Highway User Revenue Bonds. Special Assessment Bonds accumulates monies for the payment of the Special Assessment Bonds that are issued to finance the costs of improvements which are to be paid from special assessments levied against the benefited properties. CITY OF MESA, ARIZONA EXHIBIT C-1 COMBINING BALANCE SHEET NON-MAJOR GOVERNMENTAL FUNDS JUNE 30, 2018 (in thousands) ASSETS Pooled Cash and Investments Accounts Receivable, Net Accrued Interest Receivable Due from Other Governments Prepaid Costs Restricted Assets: Pooled Cash and Investments Cash with Fiscal Agent Accounts Receivable Due from Other Governments Total Assets LIABILITIES Accounts Payable and Accrued Liabilities Due to Other Funds Customer and Defendant Deposits Payable from Restricted Assets: Accrued Interest Payable Unearned Revenue Matured Bonds Payable Total Liabilities Special Revenue Funds Cemetery Community Facilities District Development Impact Fees Environmental Compliance $ $ $ $ $ $ DEFERRED INFLOWS OF RESOURCES Unavailable Revenue Total Deferred Inflows of Resources FUND BALANCES Nonspendable Restricted Committed Assigned Unassigned Total Fund Balances Total Liabilities, Deferred Inflows of Resources and Fund Balances $ 7,197 14 23 7,234 - $ $ 115 115 2 - $ $ 5,778 26 5,804 - $ $ 13,169 2 40 1 13,212 496 - - 80 82 - 496 1 1 - - - 7,233 7,233 33 33 5,804 5,804 1 12,715 12,716 7,234 $ 104 115 $ 5,804 $ 13,212 EXHIBIT C-1 (Continued) Special Revenue Funds Grants and Special Programs $ $ $ $ Highway User Revenue Mesa Arts Center Restoration Mesa Housing Authority Quality of Life Sales Tax 7,544 331 21 1,669 8 $ 11,327 34 3,600 - $ $ 944 286 1,155 - $ 9,573 $ 14,961 $ 2,385 1,059 - $ $ 2,468 - 1,055 9 1,064 71 - $ $ 737 - Street Sales Tax Total Special Revenue Funds 2,035 - $47,955 1,118 154 2,441 35 $ 95,084 1,751 307 10,900 44 $ 2,035 $51,703 $108,086 $ 1,262 - $ 2,940 6,956 $ 7,773 1,262 6,956 642 1,701 2,468 39 110 737 1,474 1,262 9,896 1,498 17,489 29 29 - - - - 305 305 335 335 8 6,833 1,156 22 (176) 7,843 12,493 12,493 954 954 911 911 773 773 35 41,467 41,502 44 68,314 22,058 22 (176) 90,262 9,573 $ 14,961 2,385 $ 2,035 $51,703 $108,086 $ 1,064 $ 105 CITY OF MESA, ARIZONA EXHIBIT C-1 COMBINING BALANCE SHEET NON-MAJOR GOVERNMENTAL FUNDS JUNE 30, 2018 (in thousands) ASSETS Pooled Cash and Investments Accounts Receivable, Net Accrued Interest Receivable Due from Other Governments Prepaid Costs Restricted Assets: Pooled Cash and Investments Cash with Fiscal Agent Accounts Receivable Due from Other Governments Total Assets LIABILITIES Accounts Payable and Accrued Liabilities Due to Other Funds Customer and Defendant Deposits Payable from Restricted Assets: Accrued Interest Payable Unearned Revenue Matured Bonds Payable Total Liabilities Capital Projects Funds Community Facilities District General Capital Projects Parks Public Safety Streets Total Capital Projects Funds $ - $20,417 29 91 $ 3,881 - $ 3,201 - $47,472 45 4,492 - $74,971 74 4,492 91 - $20,537 $ 3,881 $ 3,201 $52,009 $79,628 - $ $ $ $ 497 - $ 2,534 - $ $ 863 - 938 - 236 - - 863 938 236 497 2,534 DEFERRED INFLOWS OF RESOURCES Unavailable Revenue Total Deferred Inflows of Resources - - - - - - FUND BALANCES Nonspendable Restricted Committed Assigned Unassigned Total Fund Balances - 91 19,583 19,674 2,943 2,943 2,965 2,965 51,512 51,512 91 57,420 19,583 77,094 - $20,537 $ 3,881 $ 3,201 $52,009 $79,628 Total Liabilities, Deferred Inflows of Resources and Fund Balances $ 106 EXHIBIT C-1 (Concluded) Community Facilities District Debt Service Funds Highway Highway General Project User Obligation Advancement Revenue Bonds Bonds Notes Special Assessment Bonds Total Debt Service Funds Total Nonmajor Governmental Funds $ $ $ $ $ $ $ $ 4 2,295 645 11,808 8 14,760 - $ $ 11 4,590 31,591 1,257 37,449 - $ $ $ - $ - - 10,415 $ 10,415 $ - $ $ - 116 719 835 - 15 - 7,001 42,651 12,527 1,265 $63,459 $ $ $ - 170,055 1,751 396 15,392 135 7,001 42,651 12,527 1,265 251,173 10,307 1,262 6,956 728 15 957 1,700 6,585 25,044 31,629 - 2,040 8,375 10,415 29 29 9,382 15 34,376 43,773 9,382 1,513 34,376 63,796 11,803 11,803 436 436 - - 719 719 12,958 12,958 13,293 13,293 1,257 1,257 5,384 5,384 - - 87 87 6,728 6,728 135 132,462 41,641 22 (176) 174,084 - $ 10,415 835 $63,459 14,760 $ 37,449 $ 107 $ $ 251,173 CITY OF MESA, ARIZONA EXHIBIT C-2 COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NON-MAJOR GOVERNMENTAL FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 (in thousands) Revenues: Sales Taxes Property Taxes Occupancy Taxes Special Assessments Licenses and Permits Intergovernmental Charges for Services Fines and Forfeitures Investment Income Contributions Miscellaneous Revenues Total Revenues Special Revenue Funds Cemetery Community Facilities District Development Impact Fees Environmental Compliance $ $ $ $ Expenditures: Current: General Government Public Safety Community Environment Cultural-Recreational Debt Service: Principal Retirement Interest on Bonds Service Charges Cost of Issuance Capital Outlay Total Expenditures 94 143 9 246 108 20 5 133 3,758 89 3,847 7 15,780 95 15,882 - 116 - - 1,148 67 4,606 6,551 - 2 118 52 52 829 13,201 246 15 3,795 2,681 - (5) (5) (2,625) (2,625) - Net Change in Fund Balances 246 10 1,170 2,681 Fund Balances - Beginning 6,987 23 4,634 10,035 Excess (Deficiency) of Revenues Over (Under) Expenditures Other Financing Sources (Uses): Transfers In Transfers Out Face Amount of Bonds Issued Premium on Issuance of Bonds (Net) Total Other Financing Sources (Uses) Fund Balances - Ending $ 7,233 $ 108 33 $ 5,804 $ 12,716 EXHIBIT C-2 (Continued) Special Revenue Funds Grants and Special Programs Highway User Revenue Mesa Arts Center Restoration Mesa Housing Authority $ $ $ $ $ 2,603 656 5,633 7 1,068 54 86 2,285 12,392 39,477 83 62 39,622 453 34 487 Quality of Life Sales Tax Street Sales Tax Total Special Revenue Funds 22,134 295 22,429 $ 24,097 107 24,204 $ 28,903 495 321 308 188 891 31,106 $ 53,000 108 2,603 5,016 67,572 16,189 1,521 981 106 3,252 150,348 3,152 4,183 163 1,234 15,477 - - 20 18,953 - 356 23,939 - 4,557 368 18,500 - 9,349 28,557 57,699 7,785 3,066 11,798 6,811 22,288 491 491 3,236 22,209 24,295 8,163 31,588 2 22,648 126,040 594 17,334 (4) 220 (91) (482) 24,308 10 10 (12,459) (12,459) - - - - 10 (15,089) (15,079) 604 4,875 (4) 220 (91) (482) 9,229 7,239 7,618 958 691 864 41,984 81,033 7,843 $ 12,493 773 $ 41,502 $ 90,262 $ 954 $ 911 $ 109 CITY OF MESA, ARIZONA EXHIBIT C-2 COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NON-MAJOR GOVERNMENTAL FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 (in thousands) Capital Projects Funds Revenues: Sales Taxes Property Taxes Occupancy Taxes Special Assessments Licenses and Permits Intergovernmental Charges for Services Fines and Forfeitures Investment Income Contributions Miscellaneous Revenues Total Revenues Community Facilities District General Capital Projects Parks Public Safety Streets Total Capital Projects Funds $ $ $ $ $ $ 248 248 37 150 187 79 4 83 75 75 11,262 170 373 11,805 11,262 361 248 527 12,398 Expenditures: Current: General Government Public Safety Community Environment Cultural-Recreational Debt Service: Principal Retirement Interest on Bonds Service Charges Cost of Issuance Capital Outlay Total Expenditures - - - - - - 870 10,360 11,230 13,192 13,192 110 11,437 11,547 1,767 1,767 43 3,614 3,657 1,023 40,370 41,393 Excess (Deficiency) of Revenues Over (Under) Expenditures (10,982) (13,005) (11,464) (1,692) 8,148 (28,995) Other Financing Sources (Uses): Transfers In Transfers Out Face Amount of Bonds Issued Premium on Issuance of Bonds (Net) Total Other Financing Sources (Uses) 5 (30) 10,417 590 10,982 26,556 (6,000) 20,556 11,590 40 11,630 - 14,729 (3,731) 4,530 15 15,543 41,290 (9,761) 26,537 645 58,711 Net Change in Fund Balances - 7,551 166 (1,692) 23,691 29,716 Fund Balances - Beginning - 12,123 2,777 4,657 27,821 47,378 - $ 19,674 $ 2,943 $ 2,965 $ 51,512 $ 77,094 Fund Balances - Ending $ 110 EXHIBIT C-2 (Concluded) Community Facilities District Debt Service Funds Highway Highway General Project User Advancement Revenue Obligation Bonds Notes Bonds Special Assessment Bonds Total Debt Service Funds Total Nonmajor Governmental Funds $ $ $ $ $ $ 1,383 885 2 2,270 34,125 560 760 26 35,471 $ 6,229 27 6,256 $ - 289 3 292 35,508 1,174 6,789 760 58 44,289 53,000 35,616 2,603 1,174 5,016 85,623 16,189 2,281 1,400 354 3,779 207,035 - - - - - - 9,349 28,557 57,699 7,785 984 1,197 2 2,183 25,044 13,132 6 38,182 - 8,375 4,080 4 12,459 335 68 403 34,738 18,477 12 53,227 34,738 18,477 14 1,023 63,018 220,660 87 (2,711) 6,256 (12,459) (111) (8,938) (13,625) 30 208 238 2,688 418 3,106 (14,729) (14,729) 12,459 12,459 - 15,177 (14,729) 208 418 1,074 56,477 (39,579) 26,745 1,063 44,706 325 395 (8,473) - (111) (7,864) 31,081 932 4,989 8,473 - 198 14,592 143,003 1,257 $ 5,384 $ - $ - 111 $ 87 $ 6,728 $ 174,084 INTERNAL SERVICE FUNDS Internal Service Funds are used to account for the financing of goods or services provided by one department or agency to other departments or agencies of the government and to other government units, on a cost reimbursement basis. Warehouse, Maintenance and Services Fund was established to finance and account for services and commodities furnished by Fleet Support, Materials and Supply, and Printing and Graphics. Property and Public Liability Self-Insurance Fund was established to account for the cost of claims incurred by the City under a self-insurance program. Workers’ Compensation Self-Insurance Fund was established to account for the costs of maintaining a self-insurance program for industrial insurance at the City. Employee Benefits Self-Insurance Fund was established to account for the costs of maintaining the City’s self-insurance health program. CITY OF MESA, ARIZONA EXHIBIT C-3 INTERNAL SERVICE FUNDS COMBINING STATEMENT OF NET POSITION JUNE 30, 2018 (in thousands) ASSETS Current Assets: Pooled Cash and Investments Accounts Receivable Accrued Premiums Receivable Accrued Interest Receivable Inventory Prepaid Costs Deposits Total Current Assets Warehouse, Maintenance and Services Property and Public Liability Self Insurance Workers' Compensation Self Insurance $ $ $ Noncurrent Assets: Capital Assets, Not Being Depreciated Captial Assets, Being Depreciated, Net Total Noncurrent Assets Total Assets DEFERRED OUTFLOWS OF RESOURCES Pensions and OPEB Total Deferred Outflows of Resources Total Assets and Deferred Outflows of Resources LIABILITIES Current Liabilities Accounts Payable and Accrued Liabilities Claims Payable Current Portion of Compensated Absences Total Current Liabilities Long-Term Liabilities Compensated Absences Net Pension and OPEB Liability Total Long-Term Liabilities Total Liabilities DEFERRED INFLOWS OF RESOURCES Pensions and OPEB Total Deferred Inflows of Resources NET POSITION Net Investment in Capital Assets Unrestricted Total Net Position $ 606 569 5 6,079 8 7,267 9,717 44 532 10,293 Employee Benefits Self Insurance Total 8,708 24 201 8,933 $ 50,155 23 173 161 6 69 50,587 $ 69,186 592 173 234 6,079 747 69 77,080 61 2,147 2,208 - - 174 174 61 2,321 2,382 9,475 10,293 8,933 50,761 79,462 1,484 1,484 222 222 137 137 207 207 2,050 2,050 10,959 10,515 9,070 50,968 81,512 787 95 882 2 9,256 10 9,268 48 23,707 4 23,759 1,253 4,066 35 5,354 2,090 37,029 144 39,263 557 22,735 23,292 66 3,406 3,472 16 2,183 2,199 57 3,289 3,346 696 31,613 32,309 24,174 12,740 25,958 8,700 71,572 1,369 1,369 205 205 131 131 197 197 1,902 1,902 2,208 (16,792) (14,584) (2,430) (2,430) (17,019) (17,019) 174 41,897 $ 42,071 2,382 5,656 8,038 $ 112 $ $ CITY OF MESA, ARIZONA EXHIBIT C-4 INTERNAL SERVICE FUNDS COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION FOR THE FISCAL YEAR ENDED JUNE 30, 2018 (in thousands) Operating Revenues: Charges For Services: Warehouse Fleet Support Services Printing and Graphics Self-Insurance Contributions: Employee City State Retirement System Other Total Operating Revenues Warehouse, Maintenance and Services Property and Public Liability Self Insurance Workers' Compensation Self Insurance Employee Benefits Self Insurance $ $ $ $ 6,948 19,383 930 - - - Total $ 6,948 19,383 930 27,261 5,579 5,579 3,787 233 4,020 17,136 59,527 4,512 4,889 86,064 17,136 68,893 4,512 5,122 122,924 6,693 19,065 933 - - - 6,693 19,065 933 26,691 1,156 2,407 3,563 1,113 4,438 5,551 6,858 74,033 80,891 9,127 80,878 116,696 Operating Income (Loss) Before Depreciation 570 2,016 (1,531) 5,173 6,228 Depreciation (234) - - (134) (368) Operating Income (Loss) 336 2,016 (1,531) 5,039 5,860 Nonoperating Revenues (Expense): Investment Income Gain/(Loss) on Disposal of Capital Assets Total Nonoperating Revenues (Expenses) 1 (20) (19) 9 9 52 52 242 242 304 (20) 284 Income (Loss) Before Capital Contributions 317 2,025 (1,479) 5,281 6,144 Capital Contributions 733 - - - 733 Change in Net Position 1,050 2,025 (1,479) 5,281 6,877 Total Net Position - As Previously Reported Change in Accounting Principle (9,856) (5,778) (3,392) (1,063) (14,580) (960) 37,786 (996) 9,958 (8,797) Total Net Position - Beginning (15,634) (4,455) (15,540) 36,790 1,161 Operating Expenses: Warehouse, Maintenance & Services: Warehouse Fleet Support Services Printing and Graphics Self-Insurance: Administrative Costs Claims and Premiums Paid Total Operating Expenses Total Net Position - Ending $ (14,584) $ 113 (2,430) $ (17,019) $ 42,071 $ 8,038 CITY OF MESA, ARIZONA EXHIBIT C-5 INTERNAL SERVICE FUNDS COMBINING STATEMENT OF CASH FLOWS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 (in thousands) Cash Flows from Operating Activities: Cash Received from Users Cash Payments to Suppliers Cash Payments to Employees Net Cash Provided by (Used For) Operating Activities Warehouse, Maintenance and Services Property and Public Liability Self Insurance Workers' Compensation Self Insurance $ $ $ 27,221 (17,329) (9,701) 5,580 (5,509) (79) Employee Benefits Self Insurance Total 4,020 (4,567) (465) $ 86,044 (81,403) (985) $ 122,865 (108,808) (11,230) 191 (8) (1,012) 3,656 2,827 - - - - - - - - - - (104) - - - 7 - (97) - (104) - - 7 (97) Cash Flows from Investing Activities: Interest Received on Investments Net Cash Provided by Investing Activities 1 1 (11) (11) 38 38 186 186 214 214 Net Change in Cash and Cash Equivalents 88 (19) (974) 3,849 2,944 Pooled Cash and Investments at Beginning of Year 518 9,736 9,682 46,306 66,242 Cash Flows From Noncapital Financing Activities: Operating Transfers-In From Other Funds Net Cash Provided By (Used For) Noncapital Financing Activities Cash Flows from Capital and Related Financing Activities: Acquisition and Construction of Capital Assets Proceeds from the Sale of Capital Assets Contributions Net Cash Provided By (Used For) Capital and Related Financing Activities Pooled Cash and Investments at End of Year $ 606 $ 9,717 $ 8,708 $ 50,155 $ 69,186 $ 336 $ 2,016 $ (1,531) $ $ 5,860 Reconciliation of Operating Income (Loss) to Net Cash Provided by Operating Activities: Operating Income (Loss) 5,039 Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided by Operating Activities: Depreciation Changes in Assets and Liabilities: (Increase)/Decrease in Receivables (Increase)/Decrease in Inventory (Increase)/Decrease in Deposits and Prepaid Costs (Decrease)/Increase in Accounts Payable (Decrease)/Increase in Pension and OPEB Liability Increase (Decrease) in Deferred Outflows Increase (Decrease) in Deferred Inflows (Decrease)/Increase in Other Accrued Expenses 234 - - 134 368 (40) (131) 11 (175) (522) 226 242 10 (8) (1) (79) 34 37 (2,007) 7 (34) (49) 84 30 481 (20) 1 (1,401) (72) 25 44 (94) (60) (131) 11 (1,611) (722) 369 353 (1,610) Total Adjustments (145) (2,024) 519 (1,383) (3,033) Net Cash Provided by (Used for) Operating Activities $ 191 $ (8) $ (1,012) $ 3,656 $ 2,827 Noncash Transactions Affecting Financial Position: Contributions of Capital Assets Gain/(Loss) on Disposal of Capital Assets $ (733) (20) $ - $ - $ - $ (733) (20) 114 AGENCY FUND The Agency Fund accounts for assets held by the City in a custodial capacity for the benefit of a third party and cannot be used to address activities or obligations of the City. The Payroll Agency Fund accounts for all payroll transactions. CITY OF MESA, ARIZONA EXHIBIT C-6 AGENCY FUND STATEMENT OF CHANGES IN ASSETS AND LIABILITIES FOR THE FISCAL YEAR ENDED JUNE 30, 2018 (in thousands) Balance July 1, 2017 Additions PAYROLL AGENCY FUND Assets: Pooled Cash and Investments Due from Others Total Assets Liabilities: Accounts Payable Accrued Payroll Payable Total Liabilities $ $ $ $ 8,257 33 8,290 $ 2,559 5,731 8,290 $ $ $ Deductions Balance June 30, 2018 803,639 164 803,803 $ 801,107 113 801,220 $ 10,343 599,142 609,485 $ 12,879 594,023 606,902 $ 115 $ $ $ $ 10,789 84 10,873 23 10,850 10,873 CITY OF MESA, AZ Comprehensive Annual FinancialSUPPLEMENTAL Report INFORMATION C O M P R E H E N S I V E A N N UA L FINANCIAL REPORT 2018 D E S E R T T R A I L S PA R K CITY OF MESA, ARIZONA EXHIBIT D-1 SUPPLEMENTAL INFORMATION BUDGETARY COMPARISON SCHEDULE COMMUNITY FACILITIES DISTRICT FOR THE FISCAL YEAR ENDED JUNE 30, 2018 (in thousands) Budgeted Amounts Original Revenues: Property Taxes Contributions Miscellaneous Revenues Total Revenues $ Final 111 137 248 $ Variance with Final Budget Actual 111 137 248 $ 108 268 5 381 $ (3) 268 (132) 133 Expenditures: Current: General Government Service Charges Cost of Issuance Capital Outlay Total Expenditures 4,066 750 10,432 15,248 2,943 2 880 11,283 15,108 116 2 870 10,360 11,348 2,827 10 923 3,760 Excess (Deficiency) of Revenues Over (Under) Expenditures (15,000) (14,860) (10,967) 3,893 Other Financing Uses: Transfers In Transfers Out Face Amount of Bonds Issued Premium on Issuance of Bonds Total Other Financing Uses 15,000 15,000 15,000 15,000 5 (35) 10,417 590 10,977 5 (35) 4,583 (590) 3,963 - 140 10 (130) 371 76 23 (53) Net Change in Fund Balances Fund Balance - Beginning Fund Balance - Ending $ 371 $ 216 Note: Includes both the Special Revenue and the Capital Projects Funds 116 $ 33 $ (183) CITY OF MESA, ARIZONA EXHIBIT D-2 SUPPLEMENTAL INFORMATION BUDGETARY COMPARISON SCHEDULE ENVIRONMENTAL COMPLIANCE FOR THE FISCAL YEAR ENDED JUNE 30, 2018 (in thousands) Budgeted Amounts Original Revenues: Intergovernmental Charges for Services Investment Income Total Revenues $ 15,617 45 15,662 Final $ 15,617 45 15,662 Actual $ 7 15,780 95 15,882 Variance with Final Budget $ 7 163 50 220 Expenditures: Current: General Government Public Safety Community Environment Cultural-Recreational Capital Outlay Total Expenditures 1,354 64 6,960 6,871 5,184 20,433 1,384 67 5,819 6,871 6,844 20,985 1,148 67 4,606 6,551 829 13,201 236 1,213 320 6,015 7,784 Excess (Deficiency) of Revenues Over (Under) Expenditures (4,771) (5,323) 2,681 8,004 Net Change in Fund Balances (4,771) (5,323) 2,681 8,004 Fund Balances - Beginning 10,080 10,127 10,035 (92) Fund Balance - Ending $ 5,309 $ 4,804 117 $ 12,716 $ 7,912 CITY OF MESA, ARIZONA EXHIBIT D-3 SUPPLEMENTAL INFORMATION BUDGETARY COMPARISON SCHEDULE GRANTS AND SPECIAL PROGRAMS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 (in thousands) Budgeted Amounts Original Revenues: Occupancy Taxes Licenses and Permits Intergovernmental Charges for Services Fines and Forfeitures Investment Income Contributions Miscellaneous Revenues Total Revenues $ Final 2,348 429 15,973 1,057 352 1,945 22,104 $ Variance with Final Budget Actual 2,348 429 15,973 1,057 352 1,945 22,104 $ 2,603 656 5,633 7 1,068 54 86 2,285 12,392 $ 255 227 (10,340) 7 11 54 (266) 340 (9,712) Expenditures: Current: General Government Public Safety Community Environment Cultural-Recreational Capital Outlay Total Expenditures 3,108 13,027 491 1,326 7,300 25,252 3,638 12,683 491 1,829 8,357 26,998 3,152 4,183 163 1,234 3,066 11,798 486 8,500 328 595 5,291 15,200 Excess (Deficiency) of Revenues Over (Under) Expenditures (3,148) (4,894) 594 5,488 Other Financing Sources (Uses): Transfers In Total Other Financing Uses - - 10 10 10 10 Net Change in Fund Balances (3,148) (4,894) 604 5,498 Fund Balances - Beginning 6,226 7,428 7,239 (189) Fund Balance - Ending $ 3,078 $ 2,534 118 $ 7,843 $ 5,309 CITY OF MESA, ARIZONA EXHIBIT D-4 SUPPLEMENTAL INFORMATION BUDGETARY COMPARISON SCHEDULE HIGHWAY USER REVENUE FOR THE FISCAL YEAR ENDED JUNE 30, 2018 (in thousands) Budgeted Amounts Original Revenues: Intergovernmental Investment Income Miscellaneous Revenues Total Revenues $ 39,498 163 39,661 Final $ 39,498 163 39,661 Actual $ 39,477 83 62 39,622 Variance with Final Budget $ (21) (80) 62 (39) Expenditures: Current: Community Environment Capital Outlay Total Expenditures 15,819 18,971 34,790 15,866 18,971 34,837 15,477 6,811 22,288 389 12,160 12,549 Excess (Deficiency) of Revenues Over (Under) Expenditures 4,871 4,824 17,334 12,510 Other Financing Uses: Transfers Out Total Other Financing Uses (12,455) (12,455) (12,460) (12,460) (12,459) (12,459) 1 1 Net Change in Fund Balances (7,584) (7,636) 4,875 12,511 Fund Balances - Beginning 23,762 17,730 7,618 (10,112) Fund Balance - Ending $ 16,178 $ 10,094 119 $ 12,493 $ 2,399 CITY OF MESA, ARIZONA EXHIBIT D-5 SUPPLEMENTAL INFORMATION BUDGETARY COMPARISON SCHEDULE MESA HOUSING AUTHORITY FOR THE FISCAL YEAR ENDED JUNE 30, 2018 (in thousands) Budgeted Amounts Original Revenues: Intergovernmental Investment Income Total Revenues $ Expenditures: Current: General Government Community Environment Capital Outlay Total Expenditures Final 32,263 93 32,356 $ Actual 32,263 93 32,356 $ 22,134 295 22,429 Variance with Final Budget $ (10,129) 202 (9,927) 25 28,269 4,062 32,356 25 27,869 4,462 32,356 20 18,953 3,236 22,209 5 8,916 1,226 10,147 Excess (Deficiency) of Revenues Over (Under) Expenditures - - 220 220 Net Change in Fund Balances - - 220 220 1,069 1,060 691 (369) Fund Balances - Beginning Fund Balance - Ending $ 1,069 $ 1,060 120 $ 911 $ (149) CITY OF MESA, ARIZONA EXHIBIT D-6 SUPPLEMENTAL INFORMATION BUDGETARY COMPARISON SCHEDULE QUALITY OF LIFE SALES TAX FOR THE FISCAL YEAR ENDED JUNE 30, 2018 (in thousands) Budgeted Amounts Original Revenues: Sales Taxes Licenses and Permits Investment Income Total Revenues $ Expenditures: Current: General Government Public Safety Total Expenditures 23,247 7 23,254 Final $ Variance with Final Budget Actual 23,247 7 23,254 $ 24,097 107 24,204 $ 850 107 (7) 950 382 23,254 23,636 382 24,294 24,676 356 23,939 24,295 26 355 381 Excess (Deficiency) of Revenues Over (Under) Expenditures (382) (1,422) (91) 1,331 Net Change in Fund Balances (382) (1,422) (91) 1,331 Fund Balances - Beginning 795 868 864 (4) Fund Balance - Ending $ 413 $ (554) 121 $ 773 $ 1,327 CITY OF MESA, ARIZONA EXHIBIT D-7 SUPPLEMENTAL INFORMATION BUDGETARY COMPARISON SCHEDULE STREET SALES TAX FOR THE FISCAL YEAR ENDED JUNE 30, 2018 (in thousands) Budgeted Amounts Original Revenues: Sales Taxes Licenses and Permits Intergovernmental Charges for Services Investment Income Miscellaneous Revenues Total Revenues $ 27,896 92 438 20 350 28,796 Final $ 27,896 92 438 20 350 28,796 Actual $ 28,903 495 321 308 188 891 31,106 Variance with Final Budget $ 1,007 403 321 (130) 168 541 2,310 Expenditures: Current: General Government Public Safety Community Environment Capital Outlay Total Expenditures 3,045 360 25,720 21,574 50,699 3,051 369 24,146 24,320 51,886 4,557 368 18,500 8,163 31,588 (1,506) 1 5,646 16,157 20,298 Excess (Deficiency) of Revenues Over (Under) Expenditures (21,903) (23,090) (482) 22,608 Net Change in Fund Balances (21,903) (23,090) (482) 22,608 Fund Balances - Beginning 29,067 32,740 41,984 9,244 Fund Balance - Ending $ 7,164 $ 9,650 122 $ 41,502 $ 31,852 CITY OF MESA, ARIZONA EXHIBIT D-8 SUPPLEMENTAL INFORMATION BUDGETARY COMPARISON SCHEDULE GENERAL CAPITAL PROJECTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 (in thousands) Budgeted Amounts Original Final Actual Variance with Final Budget Revenues: Investment Income Miscellaneous Revenues Total Revenues 223 223 223 223 37 150 187 37 (73) (36) Expenditures: Current: General Government Public Safety Community Environment Cultural-Recreational Capital Outlay Total Expenditures 81 (16) 74 27,206 27,345 491 (100) (30) 33,112 33,473 13,192 13,192 491 (100) (30) 19,920 20,281 Excess (Deficiency) of Revenues Over (Under) Expenditures (27,122) (33,250) (13,005) 20,245 Other Financing Sources (Uses): Transfers In Transfers Out Total Other Financing Uses 13,836 13,836 13,836 7,260 21,096 26,556 (6,000) 20,556 (12,720) 13,260 540 Net Change in Fund Balances (13,286) (12,154) 7,551 19,705 Fund Balances - Beginning 15,013 12,177 12,123 (54) Fund Balance - Ending $ 1,727 $ 23 123 $ 19,674 $ 19,651 CITY OF MESA, ARIZONA EXHIBIT D-9 SUPPLEMENTAL INFORMATION BUDGETARY COMPARISON SCHEDULE STREETS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 (in thousands) Budgeted Amounts Original Revenues: Intergovernmental Investment Income Miscellaneous Revenues Total Revenues $ 4,685 4,685 Final $ 4,685 4,685 Actual $ 11,262 170 373 11,805 Variance with Final Budget $ 6,577 170 373 7,120 Expenditures: Cost of Issuance Capital Outlay Total Expenditures 294 36,182 36,476 294 36,182 36,476 43 3,614 3,657 251 32,568 32,819 Excess (Deficiency) of Revenues Over (Under) Expenditures (31,791) (31,791) 8,148 39,939 Other Financing Sources (Uses): Transfers In Transfers Out Face Amount of Bonds Issued Premium on Issuance of Bonds (Net) Total Other Financing Uses 17,667 17,667 (3,731) 23,713 19,982 14,729 (3,731) 4,530 15 15,543 (14,729) 19,183 (15) 4,439 Net Change in Fund Balances (14,124) (11,809) 23,691 35,500 Fund Balances - Beginning 31,253 28,145 27,821 (324) Fund Balance - Ending $ 17,129 $ 124 16,336 $ 51,512 $ 35,176 CITY OF MESA, AZ Comprehensive Annual STATISTICAL Financial Report SECTION C O M P R E H E N S I V E A N N UA L FINANCIAL REPORT 2018 R E D M O U N TA I N PA R K STATISTICAL SECTION This part of the City of Mesa’s comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City’s overall financial health. Contents Page Financial Trends These schedules contain trend information to help the reader understand how the City’s financial performance and well-being have changed over time. 125 Revenue Capacity These schedules contain information to help readers assess the City’s most significant local revenue source, the sales tax. 137 Debt Capacity These schedules present information to help the reader assess the affordability of the City’s current level of outstanding debt and the City’s ability to issue additional debt in the future. 140 Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the City’s financial activities take place. 148 Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the City’s financial report relates to the services the City provides and the activities it performs. 150 Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. CITY OF MESA, ARIZONA TABLE I NET POSITION BY COMPONENTS LAST TEN FISCAL YEARS (accrual basis of accounting) (in thousands) 2008-09 GOVERNMENTAL ACTIVITIES Net Investment in Capital Assets Restricted Unrestricted 2009-10 2010-11 2011-12 $ 791,523 92,533 91,363 $ 844,777 86,955 3,651 $ 872,302 39,296 (6,376) $ 913,702 41,257 (96,986) $ 975,419 $ 935,383 $ 905,222 $ 857,973 $ 413,944 82,697 278,892 $ 434,814 47,011 271,706 $ 430,436 55,873 258,131 $ 412,016 69,739 254,189 Total Business-type Activities $ 775,533 $ 753,531 $ 744,440 $ 735,944 PRIMARY GOVERNMENT Net Investment in Capital Assets Restricted Unrestricted $ 1,205,467 175,230 370,255 $ 1,279,591 133,966 275,357 $ 1,302,738 95,169 251,755 $ 1,325,718 110,996 157,203 Total Primary Government $ 1,750,952 $ 1,688,914 $ 1,649,662 $ 1,593,917 Total Governmental Activities Net Position BUSINESS-TYPE ACTIVITIES Net Investment in Capital Assets Restricted Unrestricted 125 TABLE I (Concluded) 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 $ 902,397 56,719 (184,355) $ 866,332 60,555 (120,803) $ 932,660 72,170 (666,758) $ 965,148 81,941 (666,986) $ 986,354 88,721 (711,367) $ 1,019,888 88,305 (858,392) $ 774,761 $ 806,084 $ 338,072 $ 380,103 $ 363,708 $ 249,801 $ 346,352 37,795 271,619 $ 393,720 43,023 178,702 $ 327,743 47,576 160,934 $ 302,521 49,139 158,756 $ 247,598 43,046 228,160 $ 266,012 40,440 199,531 $ 655,766 $ 615,445 $ 536,253 $ 510,416 $ 518,804 $ 505,983 $ 1,248,749 94,514 87,264 $ 1,260,052 103,578 57,899 $ 1,260,403 119,746 (505,824) $ 1,267,669 131,080 (508,230) $ 1,233,952 131,767 (483,207) $ 1,285,900 128,745 (658,861) $ 1,430,527 $ 1,421,529 $ $ $ $ 874,325 890,519 126 882,512 755,784 CITY OF MESA, ARIZONA TABLE II CHANGES IN NET POSITION LAST TEN FISCAL YEARS (accrual basis of accounting) (in thousands) EXPENSES 2008-09 2009-10 2010-11 2011-12 2012-13 GOVERNMENTAL ACTIVITIES: General Government Public Safety Community Environment Cultural-Recreational Interest on Long-term Debt $ 54,226 290,928 121,736 67,039 18,659 $ 54,863 288,929 104,096 54,010 20,013 $ 59,552 273,320 106,434 54,550 21,078 $ 57,472 287,918 97,593 57,171 21,631 $ 105,410 287,451 129,164 61,717 23,443 Total Governmental Activities Expenses 552,588 521,911 514,934 521,785 607,185 BUSINESS-TYPE ACTIVITIES: Electric Gas Water Wastewater Solid Waste Airport Golf Course Convention Center Hohokam Stadium/Fitch Complex Cubs Stadium District Cooling Interest on Long-term Debt 27,634 35,992 68,956 80,349 31,953 3,703 3,083 4,558 976 - 27,106 35,466 80,915 70,228 31,504 3,944 2,715 4,158 7,408 1,000 - 26,817 36,020 82,378 63,613 31,462 3,972 2,679 3,849 8,324 15 965 - 29,751 34,275 74,162 68,540 32,485 3,737 2,589 3,486 8,525 54 974 - 28,897 35,653 103,432 91,739 33,694 4,300 3,353 3,946 9,094 1,081 3,653 Total Business-type Activities Expenses 257,204 264,444 260,094 258,578 318,842 Total Primary Government Expenses $ 809,792 $ 786,355 $ 775,028 $ 780,363 $ 926,027 127 TABLE II (Continued) 2013-14 $ 103,819 277,614 125,700 49,275 24,431 2014-15 $ 102,396 302,633 101,531 52,430 23,939 $ 2015-16 2016-17 2017-18 96,860 305,376 117,120 54,967 20,424 $ 101,301 379,505 104,173 55,739 19,279 $ 105,140 334,905 113,916 54,828 19,514 580,839 582,929 594,747 659,997 628,303 30,044 35,020 93,871 65,637 32,908 4,343 2,555 3,060 2,879 6,201 1,153 - 28,495 32,104 101,863 71,161 36,979 2,863 2,210 3,715 1,200 8,581 885 4,124 27,647 31,549 95,574 73,877 36,586 4,865 2,575 4,252 2,913 5,271 1,182 - 26,561 37,109 95,608 71,782 37,911 5,125 2,028 4,711 3,687 6,042 1,268 - 25,573 31,636 101,005 74,157 37,988 5,308 1,965 4,481 3,174 5,870 1,181 - 277,671 294,180 286,291 291,832 292,338 877,109 $ 881,038 $ 951,829 $ 920,641 $ 858,510 $ 128 CITY OF MESA, ARIZONA TABLE II (Continued) CHANGES IN NET POSITION LAST TEN FISCAL YEARS (accrual basis of accounting) (in thousands) PROGRAM REVENUES GOVERNMENTAL ACTIVITIES: Charges for services: Licenses and Permits Charges for Services Fines and Forfeitures Other activities Operating Grants and Contributions Capital Grants and Contributions Total Governmental Activities Program Revenues 2008-09 $ BUSINESS-TYPE ACTIVITIES: Charges for services: Electric Gas Water Wastewater Solid Waste Airport Golf Course Convention Center Hohokam Stadium/Fitch Complex Cubs Stadium District Cooling Economic Investment Operating Grants and Contributions Capital Grants and Contributions Total Business-type Activities Program Revenues 13,426 24,740 10,215 78 63,055 35,436 146,950 2009-10 $ 35,313 41,708 95,995 54,720 46,762 2,959 2,310 2,687 834 101 31,222 314,611 11,824 20,419 10,135 9 72,812 30,343 145,542 2010-11 $ 33,079 38,924 98,806 57,699 46,685 3,125 2,265 1,971 5,837 984 210 17,782 307,367 12,577 20,304 11,820 8 65,284 31,461 141,454 2011-12 $ 33,138 41,370 102,215 59,659 47,538 3,318 2,250 2,826 6,161 52 945 25 10,774 310,271 34,625 39,139 113,418 64,544 47,631 3,271 2,169 2,122 6,074 825 1,092 2,126 15,814 332,850 Total Primary Government Program Revenues $ 461,561 $ 452,909 $ NET (EXPENSE)/REVENUE Governmental Activities Business-type Activities $ (405,638) 57,407 $ (376,369) 42,923 $ (373,480) 50,177 $ (387,477) 74,272 Total Primary Government Net Expense $ (348,231) $ (333,446) $ (323,303) $ (313,205) 129 451,725 13,359 25,779 11,294 18 60,355 23,503 134,308 $ 467,158 TABLE II (Continued) 2012-13 $ 17,693 27,675 9,885 2,945 55,312 25,049 138,559 2013-14 $ 31,075 39,125 111,933 64,413 47,369 3,484 1,472 2,597 5,496 975 148 9,401 7,997 325,485 18,797 32,106 9,890 400 29,514 20,714 111,421 2014-15 $ 31,198 38,600 112,003 66,457 47,452 3,813 1,622 2,057 36 174 1,142 9,056 17,331 330,941 20,892 36,260 10,505 5,741 26,418 75,907 175,723 2015-16 $ 33,601 39,422 121,205 77,172 52,748 3,454 1,737 2,475 2 202 1,274 157 18,107 351,556 23,254 38,178 11,049 9,385 26,361 35,925 144,152 2016-17 $ 32,254 38,962 130,674 79,523 55,354 3,623 1,645 2,798 63 201 1,234 267 16,929 363,527 23,152 38,348 9,873 1,330 26,955 24,451 124,109 2017-18 $ 25,119 40,222 10,436 2,979 34,446 23,618 136,820 33,534 39,752 138,335 79,056 58,117 3,846 1,545 3,299 54 291 1,231 158 28,711 387,929 31,425 39,171 147,667 83,078 60,522 3,983 1,635 2,809 51 238 1,215 2,406 23,474 397,674 $ 464,044 $ 442,362 $ 527,279 $ 507,679 $ 512,038 $ 534,494 $ (468,626) 6,643 $ (469,418) 53,270 $ (407,206) 57,376 $ (450,595) 77,236 $ (535,888) 96,097 $ (491,483) 105,336 $ (461,983) $ (416,148) $ (349,830) $ (373,359) $ (439,791) $ (386,147) 130 CITY OF MESA, ARIZONA TABLE II (Continued) CHANGES IN NET POSITION LAST TEN FISCAL YEARS (accrual basis of accounting) (in thousands) GENERAL REVENUES AND OTHER CHANGES IN NET POSITION GOVERNMENTAL ACTIVITIES: Sales Taxes Property Taxes Occupancy Taxes Unrestricted Intergovernmental Revenues Contributions Not Restricted to Specific Programs Investment Income Miscellaneous Gain (Loss) on Sale of Capital Assets Transfers 2008-09 $ 126,520 1,808 117,543 14,741 1,896 15,849 2009-10 $ 121,557 14,318 1,581 104,580 14,757 261 13,846 2010-11 $ 2011-12 96,599 65,433 121,046 14,244 2,148 92,613 15,610 617 7,060 83,334 $ 126,644 14,234 2,019 86,103 17,171 1,503 8,939 83,615 Total Governmental Activities 374,956 336,333 336,672 340,228 BUSINESS-TYPE ACTIVITIES: Occupancy Taxes Investment Income Gain (Loss) on Sale of Capital Assets Miscellaneous Transfers 1,894 407 (96,599) 508 (65,433) 839 (83,334) 850 (83,615) Total Business-type Activities (94,298) (64,925) (82,495) (82,765) Total Primary Government $ 280,658 $ 271,408 $ 254,177 $ 257,463 Change in Net Position Governmental Activities Business-type Activities $ (30,682) (36,891) $ (40,036) (22,002) $ (36,808) (32,318) $ (47,249) (8,493) Total Primary Government $ (67,573) $ (62,038) $ (69,126) $ (55,742) 131 TABLE II (Concluded) 2012-13 $ 137,280 14,354 1,903 104,462 49,569 1,692 7,424 83,615 2013-14 $ 140,567 22,549 1,919 135,075 88,646 966 5,550 109,520 2014-15 $ 146,337 33,241 2,081 145,266 47,761 1,786 7,844 94,427 2015-16 $ 151,826 33,825 2,331 149,350 44,928 2,210 6,008 102,148 2016-17 $ 2017-18 159,735 34,684 2,536 158,916 46,817 448 11,161 (1,411) 106,607 $ 169,024 35,571 2,628 167,540 80,312 1,912 5,418 (2,462) 116,006 400,299 504,792 478,743 492,626 519,493 575,949 825 860 (83,615) 851 1,453 18,697 288 (109,520) 999 1,141 5,157 233 (94,427) 1,161 3,020 (6,145) 1,039 (102,148) 1,085 983 16,364 466 (106,607) 1,192 1,691 261 1,915 (116,006) (81,930) (88,231) (86,897) (103,073) (87,709) (110,947) $ 318,369 $ 416,561 $ 391,846 $ 389,553 $ 431,784 $ 465,002 $ (68,327) (75,287) $ 35,374 (34,961) $ 71,537 (29,521) $ 42,031 (25,837) $ (16,395) 8,388 $ 84,466 (5,611) $ (143,614) $ 413 $ 42,016 $ 16,194 $ (8,007) $ 78,855 132 CITY OF MESA, ARIZONA TABLE III FUND BALANCE, GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (modified accrual basis of accounting) (in thousands) 2008-09 GENERAL FUND Reserved (1)(2) Unreserved Nonspendable Restricted Committed Assigned Unassigned Total General Fund ALL OTHER GOVERNMENTAL FUNDS Reserved Unreserved, Reported in: Special Revenue Funds Capital Project Funds Nonspendable Restricted (3)(4) Committed Assigned Unassigned Total All Other Governmental Funds 2009-10 2010-11 2011-12 $ 51,862 74,711 - $ 4,048 92,187 - $ 405 1,992 4,898 93,875 $ 754 2,012 4,992 78,035 $ 126,573 $ 96,235 $ 101,170 $ 85,793 $ 17,013 $ 53,674 $ $ - 24,816 28,442 $ 70,271 $ - 31,871 15,724 - 2,906 112,538 19,166 - 84 211,279 16,360 (1) 101,269 $ 134,610 $ 227,722 (1) During fiscal Year 1998-99, a voter-approved 1/2 percent increase to sales tax was enacted. This additional tax is restricted to fund improvements to quality of life projects and is reported as reserved fund balance in the General Fund. (2) During FY 2006-07, a quarter percent portion of the sales tax increase described in (1) above to fund capital improvements to quality of life projects expired and was not renewed. Also during FY 2006-07, a voter-approved 1/2 percent increase to sales tax was enacted. This additional tax is restricted to fund street improvements and is reported as restricted fund balance in the General Fund. (3) Effective with fiscal year 2010-11 the fund balance related to the sales tax for street improvements was moved to the Special Revenue funds. (4) Effective with fiscal year 2011-12 the fund balance related to the sales tax for Quality of Life projects was moved to the Special Revenue funds. 133 TABLE III (Concluded) 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 $ 1,724 284 1,185 50,426 $ 2,956 188 1,484 72,683 $ 3,490 184 126 74,145 $ 4,035 184 227 10,703 79,657 $ 2,145 146 528 19,367 92,240 $ 2,304 10,377 28,346 89,347 $ 53,619 $ 77,311 $ 77,945 $ 94,806 $ 114,426 $ 130,374 $ - $ - $ - $ - $ $ 135 132,462 41,641 22 (176) $ 174,084 55 243,831 23,005 (1,177) $ 265,714 $ 23 190,609 21,379 (675) 138 172,316 30,092 (31) 77 95,701 28,580 6 (155) 37 112,105 30,928 2 (69) 211,336 $ 202,515 $ 124,209 $ 143,003 134 CITY OF MESA, ARIZONA TABLE IV CHANGES IN FUND BALANCE, GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (modified accrual basis of accounting) (in thousands) 2008-09 REVENUES Sales Taxes (1)(2) $ 126,520 Property Taxes Occupancy Taxes 1,808 Special Assessments 806 Licenses and Permits 13,426 Intergovernmental 191,085 Charges for Services 24,343 Fines and Forfeitures 10,215 Investment Income 2,018 Contributions Miscellaneous 14,755 Total Revenues 384,976 EXPENDITURES Current General Government Public Safety Community Environment Cultural-Recreational Debt Service Principal Interest Service Charges Cost of Issuance Capital Outlay Total Expenditures 2009-10 $ 121,557 13,886 1,581 923 11,824 190,731 20,419 10,135 191 13,675 384,922 2010-11 $ 121,046 14,274 2,148 1,069 12,577 174,781 20,304 11,820 587 7,417 366,023 2011-12 $ 126,644 14,323 2,019 996 13,359 168,433 25,779 11,294 1,284 7,573 371,704 36,507 230,864 72,647 53,171 40,113 216,026 72,081 40,150 38,843 215,166 68,463 42,191 41,083 226,429 64,404 43,904 36,906 18,845 28 77,899 526,867 34,846 21,186 9 539 82,530 507,480 31,690 21,211 10 29 60,173 477,776 25,513 22,643 8 870 66,951 491,805 Excess of Revenues Under Expenditures (141,891) (122,558) (111,753) (120,101) OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Face Amount of Bonds Issued Face Amount of Notes Issued Premium on Issuance of Bonds (Net) Premium on Issuance of Notes Proceeds from Capital Leases Issuance of Refunding Bonds Payment to Refunding Bond Agent Total Other Financing Sources (Uses) 155,697 (59,106) 61,830 437 158,858 149,437 (66,654) 30,865 45,000 402 869 159,919 128,065 (44,418) 29,320 360 113,327 121,459 (38,136) 27,290 77,835 8,027 8,250 67,238 (74,127) 197,836 Net Change in Fund Balances Debt Service as a percentage of Noncapital Expenditures $ 16,967 $ 12.42% 37,361 13.19% $ 1,574 12.67% (1) During fiscal year 1998-99, a voter approved one-half percent increase to sales tax was enacted. (2) During fiscal year 2006-07, a voter approved one-half percent increase to sales tax was enacted. In addition, a quarter percent portion of the sales tax described in (1) above expired and was not renewed by the voters. 135 $ 77,735 11.34% TABLE IV (Concluded) 2012-13 $ $ 137,280 14,404 1,903 897 17,693 184,823 27,675 9,885 1,501 2,264 5,940 404,265 2013-14 $ 140,567 22,500 1,919 1,062 18,797 185,303 32,106 9,890 589 1,212 4,524 418,469 2014-15 $ 146,337 34,022 2,081 1,264 20,892 185,529 36,260 10,505 1,793 1,344 6,587 446,614 2015-16 $ 151,826 34,765 2,331 1,433 23,254 191,360 38,178 11,049 1,483 961 3,994 460,634 2016-17 $ 2017-18 159,735 34,675 2,536 2,125 23,152 200,820 38,348 9,873 331 360 4,348 476,303 $ 169,024 35,616 2,628 1,174 25,119 223,800 40,222 10,436 1,608 429 5,547 515,603 74,596 226,677 55,197 37,787 75,077 231,364 56,573 38,788 81,066 243,570 60,512 40,365 79,448 254,528 65,559 43,651 86,360 261,892 68,403 43,744 90,209 266,459 73,404 46,143 31,519 23,433 10 1,448 91,537 542,204 71,015 23,704 727 102,657 599,905 28,367 23,269 13 657 74,150 551,969 107,383 18,905 14 1,505 91,784 662,777 32,587 17,994 15 1,271 82,062 594,328 34,738 18,477 14 1,023 76,279 606,746 (137,939) (181,436) (105,355) (202,143) (118,025) (91,143) 147,818 (64,203) 62,672 3,681 17,415 (19,889) 147,494 141,909 (32,389) 40,800 430 150,750 123,044 (45,324) 18,999 2,952 17,555 (20,058) 97,168 122,572 (24,298) 46,530 2,283 43,304 (49,693) 140,698 139,516 (31,931) 47,682 4,613 47,450 (50,891) 156,439 176,572 (66,208) 26,745 1,063 138,172 9,555 12.20% $ (30,686) 19.05% $ (8,187) 10.81% $ (61,445) 22.12% 136 $ 38,414 9.88% $ 47,029 10.03% CITY OF MESA, ARIZONA TABLE V SALES TAX COLLECTIONS BY CATEGORY LAST TEN FISCAL YEARS (in thousands) 2008-09 2009-10 2010-11 2011-12 Utilities Communications Publishing Printing & Advertising Contracting Retail Sales Restaurants & Bars Amusements Rentals Miscellaneous $ 9,654 3,749 1,402 280 15,263 63,230 10,956 1,363 20,514 107 $ 9,757 3,809 1,102 175 10,913 63,469 10,948 1,176 20,123 84 $ 11,104 4,456 999 342 8,388 60,266 11,165 1,433 22,219 674 $ Total $ 126,518 $ 121,555 $ 121,046 $ 126,645 $ 137,279 1.75% 1.75% 1.75% City Direct Tax Rate 1.75% 1.75% 11,878 4,483 934 336 9,962 62,191 11,864 1,434 22,968 595 2012-13 $ 12,549 4,651 866 434 12,402 66,789 12,577 1,432 24,847 732 Note: Amounts shown include penalties and interest. Occupancy tax not included. (1) During FY 2006-07, 1/4 percent of the 1/2 percent voter-approved sales tax increase that was enacted in August 1998 to fund capital improvements to quality of life projects expired and was not renewed. Also during FY 2006-07, a voter-approved 1/2 percent increase to sales tax was enacted and is restricted to fund street improvements. Source: City of Mesa Tax & Licensing Division 137 TABLE V (Concluded) 2013-14 $ 2014-15 2015-16 2016-17 2017-18 12,344 4,230 830 455 13,794 69,276 12,972 1,469 24,374 823 $ 13,111 4,796 747 461 14,103 71,996 13,708 1,542 25,102 771 $ 13,251 4,229 688 428 14,623 76,160 14,240 1,561 25,578 1,068 $ 13,575 4,432 526 446 16,806 79,715 15,002 1,581 26,340 1,313 $ 14,199 3,876 362 413 18,856 84,640 16,065 1,624 28,003 986 $ 140,567 $ 146,337 $ 151,826 $ 159,736 $ 169,024 1.75% 1.75% 1.75% 1.75% 138 1.75% CITY OF MESA, ARIZONA TABLE VI DIRECT AND OVERLAPPING SALES TAX RATES LAST TEN FISCAL YEARS Fiscal Year City Direct Rate Maricopa County 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 1.75% 1.75% 1.75% 1.75% 1.75% 1.75% 1.75% 1.75% 1.75% 1.75% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% State of Arizona 5.60% 6.60% * 6.60% 6.60% 5.60% 5.60% 5.60% 5.60% 5.60% 5.60% Source: City of Mesa Tax & Licensing Office *Note: The State of Arizona increased its tax to 6.60% effective 6/1/10 for a 3 year period 139 CITY OF MESA, ARIZONA TABLE VII RATIOS OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS (in thousands) 2008-09 Governmental Activities General Obligation Bonds Municipal Development Corporation Bonds Highway User Revenue Bonds Special Assessment Bonds Community Facilities District Capital Leases Notes Payable $ Business-type Activities Utility System Revenue Bonds General Obligation Bonds Excise Tax Revenue Obligation Bonds Municipal Development Corporation Bonds Notes Payable Capital Leases Total Primary Government $ 273,869 134,545 6,550 5,406 45,000 2010-11 $ 281,514 128,515 5,806 2,166 45,000 2011-12 $ 288,669 121,395 5,062 822 122,835 817,530 2,957 333 158 857,435 2,691 2,964 - 898,800 2,221 2,731 - 952,500 1,601 2,493 - $ 1,245,330 $ 1,328,460 $ 1,366,753 $ 1,495,377 11.03% 11.49% 13.06% 14.10% Percentage of Personal Income (1) Per Capita (1) 267,063 140,265 7,294 9,730 - 2009-10 $ 2,677 (1) Information on personal income and population is presented on Table XII. 140 $ 2,843 $ 3,101 $ 3,390 TABLE VII (Concluded) 2012-13 $ 327,265 120,942 4,318 2,712 140 129,435 2013-14 $ 346,860 112,882 3,574 5,897 72 83,610 2014-15 $ 338,401 106,740 2,830 11,012 82,785 2015-16 $ 350,593 98,743 2,085 19,300 - 2016-17 $ 374,443 84,995 1,340 19,172 - 2017-18 $ 365,519 76,620 1,005 28,813 - 973,670 887 105,079 2,370 - 987,454 605 104,499 2,244 - 996,705 474 103,919 2,116 - 1,062,871 390 103,339 1,985 - 1,161,755 236 94,060 1,851 - 1,243,390 236 57,144 1,714 - $ 1,666,818 $ 1,647,697 $ 1,644,982 $ 1,639,306 $ 1,737,852 $ 1,774,441 16.09% 15.42% 14.53% 13.91% 13.74% 13.12% $ 3,747 $ 3,621 $ 3,561 $ 3,451 141 $ 3,525 $ 3,542 CITY OF MESA, ARIZONA TABLE VIII RATIOS OF GENERAL BONDED DEBT OUTSTANDING LAST TEN FISCAL YEARS (in thousands) Secondary Assessed Value (1) Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 $ 4,793,082 4,749,617 4,094,037 3,164,277 2,770,422 2,559,634 2,821,173 2,757,913 2,888,291 3,048,893 General Obligation Bonds Less: Amounts Available in Debt Service Fund $ $ 259,895 276,560 283,735 290,270 328,152 347,465 338,875 350,983 374,755 365,755 134 1 138 372 3,584 2,618 4,989 5,384 Total $ 259,895 276,560 283,601 290,269 328,014 347,093 335,291 348,365 369,766 360,371 Source: (1) Maricopa County Finance Department Assessor's Office. (2) Population figures are found on Table XII. 142 Percentage of Secondary Assessed Value 5.42% 5.82% 6.93% 9.17% 11.84% 13.56% 11.88% 12.63% 12.80% 11.82% Per Capita (2) $ 559 592 645 658 739 765 726 733 750 719 CITY OF MESA, ARIZONA TABLE IX DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT (1) JUNE 30, 2018 (in thousands) Governmental Unit Debt repaid with property taxes Maricopa County Community College District Maricopa Special Health Care District Mesa Unified School District No. 4 Gilbert Unified School District No. 41 Queen Creek Unified School District No. 95 Higley Unified School District No. 60 Tempe Union High School District No. 213 Tempe Elementary School District No. 3 Eastmark Community Facilities District Debt Outstanding (2) $ Other Debt: Maricopa County Estimated Percentage Applicable to City of Mesa Percent (2)(4) Amount 445,570 112,000 270,360 99,795 100,485 115,040 91,995 131,875 17,610 7.97% 7.97% 86.36% 25.94% 30.50% 0.82% 0.32% 0.79% 100.00% 245,330 7.97% $ 35,512 233,483 25,887 30,648 943 294 1,042 17,610 19,553 Subtotal, overlapping debt 364,972 City direct debt (3) 486,772 Total Direct and Overlapping Debt $ (1) Does not include debt issued by the Salt River Project Agricultural Improvement and Power District, which is considered self-supporting from earnings of the district or special assessment debt issued by City of Mesa, which is considered a junior lien. (2) Source: Hilltop Securities, Inc. (3) Includes: General Obligation Bonds, Highway User Revenue Bonds, Special Assesment Bonds, Community Facilities District Bonds, Deferred Amounts on Refundings, Capital Leases, Highway Project Advancement Notes, and Unamortized Bond Premiums. (4) Proportion applicable to the City is computed on the ratio of secondary assessed valuation for fiscal year 2017/2018 Note: Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the City. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of the City of Mesa. This process recognizes that, when considering the City's ability to issue and repay long-term debt, the entire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt of each overlapping government. 143 851,744 CITY OF MESA, ARIZONA TABLE X LEGAL DEBT MARGIN INFORMATION LAST TEN FISCAL YEARS (in thousands) 2008-09 2009-10 2010-11 2011-12 $ 287,585 $ 284,977 $ 245,642 $ 189,857 13,569 6,064 5,326 1,370 Margin Available for Future General Obligation Bond Issues for 6% Bonds $ 274,016 $ 278,913 $ 240,316 $ 188,487 Total Net Debt Applicable to the 6% Limit as a Percentage of the 6% Legal Debt Limitation 4.72% 2.13% 2.17% 0.72% $ 958,616 $ 949,923 $ 818,807 $ 632,855 246,326 270,496 278,409 288,900 Margin Available for Future General Obligation Bond Issues for 20% Bonds $ 712,290 $ 679,427 $ 540,398 $ 343,955 Total Net Debt Applicable to the 20% Limit as a Percentage of the 20% Legal Debt Limitation 25.70% 28.48% 34.00% 45.65% $ 986,306 $ 958,340 $ 780,714 $ 532,442 6% Limitation Legal Debt Limitation Equal to 6% of Assessed Valuation Total Net Debt Applicable to 6% Limit 20% Limitation Legal Debt Limitation Equal to 20% of Assessed Valuation Total Net Debt Applicable to 20% Limit Total Margin Available (1) Under Arizona law, cities can issue General Obligation Bonds for general municipal purposes up to an amount not exceeding 6 percent of assessed secondary valuation. (2) Under Arizona law, cities can issue General Obligation Bonds for purposes of water, artificial light or sewers, land for open space preserves, parks, playgrounds and recreational facilities, public safety, fire, streets and transportation up to an amount not exceeding 20 percent of assessed secondary valuation. 144 TABLE X (Concluded) Secondary Assessed Value Legal Debt Margin Calculation for Fiscal Year 2017-18 $ 3,048,893 Legal Debt Limitation Debt Applicable to Limit: General Obligation Bonds Total Net Debt Applicable to Limit Margin Available for Future General Obligation Bond Issues 6% Bonds (1) $ 182,934 20% Bonds (2) $ 609,779 724 724 365,031 365,031 $ 182,210 Total Margin Available 2012-13 $ 166,225 2013-14 $ 175 $ 166,050 $ 0.11% $ 554,084 $ 300,735 $ 253,349 $ 54.28% $ 419,399 $ 2014-15 153,578 $ 169,270 605 1,275 152,973 $ 167,995 0.39% 0.75% 511,927 $ 564,235 344,040 343,370 167,887 $ 220,865 67.20% 60.86% 320,860 $ 388,860 2015-16 $ 165,475 164,428 $ 551,583 $ 201,680 $ 366,108 145 173,297 2017-18 $ 172,451 577,658 $ 203,749 $ 376,200 182,210 0.40% $ 609,779 365,031 $ 64.73% $ 182,934 724 373,909 63.44% $ 426,958 0.49% 349,903 $ $ 846 0.63% $ 244,748 2016-17 1,047 $ $ 244,748 59.86% $ 426,958 CITY OF MESA, ARIZONA TABLE XI PLEDGED-REVENUE COVERAGE LAST TEN FISCAL YEARS (in thousands) Operating Revenues (1) 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 $ 274,497 275,193 283,921 299,356 293,915 295,710 311,506 323,099 348,794 361,863 Operating Expenses $ 197,992 194,159 190,441 180,296 241,128 203,187 209,677 218,706 225,257 171,569 Utility System Revenue Bonds Net Revenue Available for Debt Debt Service Service Principal Interest $ 76,505 81,034 93,480 119,060 52,787 92,523 101,829 104,393 123,537 190,294 $ 9,815 10,475 12,585 21,365 21,630 22,550 21,860 25,800 13,885 31,354 $ Coverage Ratio 37,225 40,380 42,814 43,465 46,412 51,927 46,423 44,794 47,187 50,739 Highway User Revenue Fund Revenue Bonds Highway User Fund Revenues 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 $ 34,260 31,791 32,053 27,825 30,046 30,923 33,952 35,383 38,048 39,477 Debt Service Principal Interest $ 2,025 5,720 6,030 3,290 6,145 6,945 6,305 7,390 7,900 8,375 $ 6,823 6,691 6,365 5,563 5,627 5,472 5,158 4,844 4,473 4,080 Coverage Ratio 3.87 2.56 2.59 3.14 2.55 2.49 2.96 2.89 3.08 3.17 (1) Includes electric, gas, water, wastewater and solid waste systems. (2) Excise tax revenues include city use and sales taxes, unrestricted license, fees and permits, fines and forfeitures, state-shared sales tax, state revenue sharing, and state shared vehicle license tax. Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. 146 1.63 1.59 1.69 1.84 0.78 1.24 1.49 1.48 2.02 2.32 TABLE XI (Concluded) Special Assessment Bonds Special Assessment Collections Debt Service Principal Interest $ $ 1,202 923 1,088 996 897 861 827 790 1,041 289 752 744 744 744 744 744 744 745 745 335 $ Community Facility District Bonds Community Facility District Collections Debt Service Principal Interest $ $ Coverage Ratio 417 377 337 297 257 217 178 138 98 68 1.03 0.82 1.01 0.96 0.90 0.90 0.90 0.89 1.23 0.72 Municipal Development Corporation Bonds Excise Tax Revenues (2) Debt Service Principal Interest $ $ 203,198 - 9,970 - $ 17 - 65 232 489 645 984 $ 7 131 456 832 914 1,197 0.99 0.98 1.00 1.03 1.04 Highway Project Advancement Notes Excise Tax Revenues (2) Debt Service Principal Interest $ $ Coverage Ratio 20.35 - 195 672 1,320 1,612 2,261 Coverage Ratio 147 208,547 200,873 199,949 213,309 221,355 234,183 242,020 - 77,835 - $ 449 1,576 4,312 5,404 4,790 3,892 324 - Coverage Ratio 464.30 127.48 46.37 39.47 46.21 60.17 3.10 - CITY OF MESA, ARIZONA TABLE XII DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS Year Population (1) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 465,272 467,355 440,677 441,160 444,856 454,981 462,376 475,274 493,089 501,137 Sources: (1) (2) (3) Personal Income (in thousands) Per Capita Personal Income (1) $ $ 11,288,895 11,563,297 10,465,197 10,603,281 10,361,141 10,687,959 11,321,276 11,783,944 12,644,774 13,522,180 24,263 24,742 23,748 24,035 23,291 23,491 24,485 24,794 25,644 26,983 Median Age (1) Public School Enrollment (2) Unemployment Rate (3) 33.3 33.6 32.6 34.3 34.4 35.3 35.5 35.7 36.0 36.2 70,297 67,749 66,144 65,662 64,892 64,932 64,532 65,049 63,779 67,025 8.0% 8.7% 9.0% 7.5% 7.2% 6.5% 5.4% 5.3% 4.5% 4.3% 2007-2010 Claritas, 2011-2013 SitesUSA, 2014-2016 ESRI Community Analyst Arizona Department of Education AZ Dept of Economic Security. Data is Phoenix-Mesa-Scottsdale Metropolitan Area. Beginning in 2011 unemployment rate is not seasonally adjusted. 148 CITY OF MESA, ARIZONA TABLE XIII PRINCIPAL EMPLOYERS CURRENT YEAR AND NINE YEARS AGO 2018 Employer Employees Rank 8,469 8,275 3,642 3,582 1,276 1,200 1,029 1,020 827 820 - 1 2 3 4 5 6 7 8 9 10 Mesa Public Schools Banner Health The Boeing Company City of Mesa Drivetime Automotive Group, Inc 24-7 Intouch Gilbert Unified School District Maricopa County State of Arizona Mountain Vista Medical Center Mesa Community College Wal-Mart Empire Southwest Machinery Rural/Metro Ambulance Bashas' Total 30,140 Source: City of Mesa Office of Economic Development 149 2009 Percentage of Total City Employment Employees 5.25% 5.13% 2.26% 2.22% 0.79% 0.74% 0.64% 0.63% 0.51% 0.51% 0.00% 0.00% 0.00% 0.00% 0.00% 10,000 8,650 4,000 3,601 1,150 2,150 2,100 1,500 1,100 1,000 18.70% 35,251 Rank 1 2 3 4 8 5 6 7 9 10 Percentage of Total City Employment 5.19% 4.49% 2.08% 1.87% 0.00% 0.00% 0.00% 0.60% 0.00% 0.00% 1.12% 1.09% 0.78% 0.57% 0.52% 18.30% CITY OF MESA, ARIZONA TABLE XIV FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS 2008-09 2009-10 2010-11 2011-12 Function/Program General Government Police Fire Community Environment Cultural-Recreational Energy Resources Water Resources Environmental Management & Sustainability Airport 838 1,282 470 189 335 140 213 126 10 835 1,240 455 184 329 122 232 124 10 824 1,163 457 189 334 116 230 120 9 870 1,158 473 184 332 115 233 117 9 Total 3,603 3,531 3,442 3,491 Source: City of Mesa Office of Management and Budget and Human Resources 150 TABLE XIV (Concluded) 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 864 1,163 479 183 313 117 229 127 10 880 1,173 482 178 317 117 238 125 10 876 1,154 503 182 338 116 240 127 10 860 1,155 492 189 599 116 238 138 11 811 1,189 518 194 289 118 249 147 11 826 1,189 522 195 315 120 257 148 11 3,485 3,520 3,545 3,798 3,526 3,582 151 CITY OF MESA, ARIZONA TABLE XV OPERATING INDICATORS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS Function/Program Police Major Crimes Traffic Accidents Fire Fires Rescue or Emergency False Alarms Hazardous Conditions Other Calls Libraries Number of Registered Borrowers Total Attendance Access to Electronic Resources Electric Connections Gas Connections Water Connections Average Daily Consumption (mgd)* Peak Daily Consumption (mg)** Wastewater Connections Average Daily Sewage Treatment (mgd)* Solid Waste Customers Served Refuse Collected (tons) Recyclables Collected (tons) Green Waste Collected (tons) Falcon Field Average Number of Aircraft Based Aircraft Operations (annual) 2008-09 2009-10 2010-11 2011-12 18,482 6,256 17,345 5,890 16,623 5,952 16,740 6,047 1,165 32,478 2,125 663 11,923 1,048 34,079 1,478 701 12,819 981 38,788 1,478 478 11,840 1,012 42,925 1,292 446 11,192 306,427 1,348,555 3,661,261 14,546 51,911 352,607 1,367,667 2,542,927 14,738 52,832 220,812 1,095,196 1,691,966 15,064 53,434 142,943 1,143,718 1,566,775 15,841 55,828 132,771 79.72 108.68 133,701 72.67 111.14 134,072 76.23 114.30 135,138 81.60 122.30 116,721 36.00 117,831 33.60 118,413 33.70 119,615 33.40 112,832 234,709 37,841 18,936 113,079 217,295 36,490 18,588 115,811 223,217 35,486 19,149 118,949 209,116 34,443 17,882 873 283,336 841 248,381 789 221,910 749 222,650 * mgd - millions of gallons per day ** mg - millions of gallons 152 TABLE XV (Concluded) 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 16,149 6,186 14,561 6,107 14,795 6,622 13,208 6,968 13,151 6,966 12,347 6,599 929 43,416 1,255 454 11,803 1,075 44,885 1,176 477 9,403 1,083 45,832 1,106 534 8,964 1,053 49,743 1,083 507 10,613 1,153 50,024 989 488 14,034 1,144 53,183 1,087 471 11,536 166,492 1,178,137 1,515,299 13,815 55,544 196,020 1,166,560 1,541,323 16,460 58,011 125,336 1,166,131 1,549,150 16,703 59,214 122,810 1,157,394 1,345,977 16,854 60,383 121,340 1,067,207 1,272,859 16,724 62,010 119,489 1,061,875 1,131,101 17,066 63,969 136,640 81.03 115.68 137,910 80.85 117.13 139,560 79.55 113.45 141,824 78.55 116.62 144,276 79.78 120.35 146,172 81.84 122.51 120,953 33.60 122,623 33.10 124,142 33.30 126,359 34.60 128,782 34.28 130,343 34.06 119,142 215,463 34,616 19,878 121,674 217,745 34,629 18,854 122,552 233,754 35,541 21,151 127,517 236,849 35,499 20,602 129,479 232,812 35,546 19,639 131,991 232,756 32,367 16,688 700 190,605 729 276,731 702 241,848 663 270,702 689 289,801 717 288,122 153 CITY OF MESA, ARIZONA TABLE XVI CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS Function/Program Police Stations Stations Vehicular Patrol Units Fire Stations Libraries Parks and Recreation Developed Parks (acres) Undeveloped Acres Swimming Pools Recreation Facilities Community Environment Streets (miles) Paved Unpaved Storm Sewers (miles) Gas Mains (miles) Water Mains (miles) Storage Capacity (millions of gallons) Wastewater Mains (miles) Treatment Capacity (millions of gallons per day) Solid Waste Collection Trucks Golf Courses 2008-09 2009-10 2010-11 2011-12 4 330 17 3 4 289 18 3 4 290 18 4 5 267 19 4 1,180 1,251 12 6 1,154 1,078 12 6 1,154 1,074 13 6 1,553 705 9 6 1,182 12 316 1,223 1,184 12 321 1,243 1,190 12 329 1,247 1,303 1 438 1,240 2,104 125 2,127 125 2,136 125 2,270 125 1,598 60 1,606 60 1,613 60 1,652 60 69 2 69 2 69 2 70 1 Note: The decrease in water storage capacity is due to Reservoir FFR6 being decommissioned in FY 16/17. 154 TABLE XVI (Concluded) 2012-13 2013-14 2014-15 2015-16 2016-17 6 267 20 4 8 291 20 4 8 292 20 4 8 287 20 4 8 281 20 4 8 281 20 4 1,177 1,104 9 6 1,232 1,157 9 4 1,901 633 9 4 1,901 633 9 4 2,300 475 9 5 1,929 861 9 5 1,307 1 432 1,256 1,418 1 440 1,256 1,427 1 423 1,311 1,427 1 423 1,311 1,387 82 394 1,325 1,476 82 397 1,346 2,284 125 2,315 125 2,364 112 2,364 112 2,398 109 2,401 112 1,677 60 1,677 60 1,781 60 1,781 60 1,778 60 1,784 60 72 1 72 1 74 1 73 1 75 1 77 1 155 2017-18 CITY OF MESA, AZ Comprehensive Annual Financial Report Financial Services Department P.O. Box 1466 Mesa, Arizona, 85211-1466 (480) 644-2275 www.mesaaz.gov W E L C O M E TO M E S A