~ mesa-az CI TY OF M ESA , A Z COMPREHENSIVE ANNUAL FINANCIAL REPORT FO R T H E F I SCA L Y EA R ENDED | J UNE 30, 2 019 DISTRICT MAP ~ COM PREHENS I VE ANNUAL FI NA NCI AL RE PORT 2 019 mesa-az District District District 4 District 1 District 5 2 3 District Mayor John Giles Vice Mayor Mark Freeman – District 1 Councilmember Jeremy Whittaker – District 2 Councilmember Francisco Heredia – District 3 Councilmember Jen Duff – 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 I I I City Clerk DeeAnn Mickelsen City Court Matt Tafoya CITY MANAGER Chris Brady I I I City Attorney Jim Smith City Auditor Jennifer Ruttman Advisory Boards C ~ and Committees I Economic Development Bill Jabjiniak I Assistant City Manager Kari Kent I Assistant City Manager John Pombier I Development Services Christine Zielonka Deputy City Manager/ Chief Financial Officer Michael Kennington Deputy City Manager Scott J. Butler Deputy City Manager Natalie Lewis Energy Resources Frank McRae 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 Teri Overbey Federal and State Affairs Downtown Coordination, DMA Engineering Beth Huning 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 U.S. Conference of Mayors/ National League of Cities Regional Initiatives, Maricopa Association of Governments Police Department Ken Cost - Interim Public Information & Communications Steve Wright Environmental Management & Sustainability Scott Bouchie ~ mesa-az INTRODUCTORY SECTION COM PREHENS I VE ANNUAL FI NA NCI AL RE PORT 2 019 --- -- HOU S E H O L D H A Z A RD O US M ATE RI ALS FACI L I TY | DI STRI CT 1 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 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 I TABLE OF CONTENTS (Continued) Exhibit 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 – Pensions and Other Postemployment Benefits Note 16 – Subsequent Events Page 29 38 45 46 51 53 54 57 70 72 73 73 74 74 77 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 (Non-GAAP Basis) – General Fund Notes to Budgetary Comparison Schedules II B-1 94 B-2 B-3 95 98 102 103 104 105 B-4 B-5 TABLE OF CONTENTS (Continued) Combining Statements Exhibit Page C-1 106 C-2 110 C-3 C-4 C-5 114 115 116 D-1 D-2 D-3 D-4 D-5 D-6 D-7 D-8 D-9 117 118 119 120 121 122 123 124 125 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 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) SECTION III – STATISTICAL SECTION Exhibit Page I II 126 128 III 134 IV 136 V VI 138 140 VII VIII IX X XI 141 143 144 145 147 XII XIII 149 150 XIV XV XVI 151 153 155 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 Nine 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 ~ mesa-az Financial Services Department December 2, 2019 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, 2019 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 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, 2019, 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, 2019, 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 511,334 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 35th 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 4,013 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. The forecast provides a framework to assist Mesa’s elected officials and executive team make 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) 2019 is up 7% from FY 2018 and over 90% from FY 2015. The corresponding increase in dollar valuation associated with the residential construction in FY 2019 over the prior fiscal year was approximately $60 million. Commercial construction increased 54% from FY 2018. This represents an increase of approximately $274 million in commercial valuation. During FY 2019 the City issued 2,155 permits for new residential construction. This is 49% more than the FY 2015 levels. Activity levels for residential constructions continues to be a strength. The increase in construction activity was accompanied by an increase in sales tax revenues. In November of 2018, a majority of Mesa voters approved an increase to the transaction privilege tax from 1.75% to 2.00% specifically for public safety related use. The increase in tax rate was effective March 1, 2019. For the year ending June 30, 2019, retail sales tax was up 13.3% while overall sales tax revenues were up 12.4%. Tourism also increased as evidenced by a 7.6% 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 2020 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 2020 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. VII Major Initiatives During the year, various major accomplishments were realized. Some of these were: • Mesa’s strong financial position was recognized as S&P raised its long-term rating to AA with stable outlook from AA- on the City’s general obligation bonds and reaffirmed their AA- rating on the City’s utility revenue bonds. S&P Global states that an issuer with an AA rating has a ‘very strong’ capacity to meet its financial commitments. • Mesa placed third nationally for Government Experience and was one of four winners of the Government Experience Innovation Award. The Government Experience Award honors U.S. governments that are offering citizens increasingly sophisticated digital user experiences. The award recognized Mesa for its citizen engagement and transparency efforts through the use of various interactive social media platforms, such as: utilizing the Mesa Now Mobile app to deliver City services, providing on-demand streaming of City Council meetings, developing an Open Data Portal to view City expenditures and department datasets, creating Mesa en Español to outreach to our Spanish speaking residents, as well as developing digital communication efforts to seek citizen feedback through Imagine Mesa and other interactive survey instruments. In addition, Mesa was recognized for the development and implementation of the Smart City Master Plan that uses the latest technologies and data-driven insights to improve the quality of life, civic engagement, economic development, service delivery, and community vibrancy for citizens, businesses, and visitors. The Government Experience Innovation Award was awarded to the City for the work of the Chief Digital Officer and his efforts in focusing on the digital behaviors of the City’s followers and in monitoring and responding to communication channels to ensure the followers have a positive interaction with the City. • The City of Mesa, known for its aerospace industry, tech corridor, and emerging innovation district, was named among the “best run” cities in America, according to an in-depth analysis by online personal finance giant, WalletHub. For the study, WalletHub analyzed data from 150 most populated cities to find the best and worst across six categories: financial stability, education, health, safety, economy, and infrastructure and pollution. Data from two dozen sources was analyzed including the U.S. Census Bureau, Bureau of Labor Statistics, Moody’s Investors Service, County Health Rankings, Centers for Disease Control and Prevention, National Highway Traffic Safety Administration, and the U.S. Environmental Protection Agency. • Phoenix-Mesa Gateway Airport was named the Arizona Department of Transportation’s Airport of the Year for 2019, winning the award for the third time. The airport is currently the 32nd busiest airport in the nation with 288,000 takeoffs and departures a year. • To help meet the growing demand for IT professionals, the Maricopa County Community College District (MCCCD) IT Institute at Mesa added an AppleCare course, incorporated Amazon cloud computing into the IT Institute’s pre-established blockchain courses and enhanced several Adobe-focused courses. The AppleCare courses for Apple computer VIII hardware repair will lead to an industry certification. Adobe classes will focus on digital animation and digital imaging. Currently, students may earn industry certifications in Adobe Foundations and app development using Swift and Xcode. • Davcon Aviation, LLC and Mesa Hangar, LLC announced a 23-acre development of large aircraft hangars with office and manufacturing space at Mesa’s Falcon Field Airport. The phased project will include more than 340,000 square feet of new large aircraft hangar space in addition to ancillary office space, aircraft staging ramp and vehicle parking areas. Falcon Field is the hub of Mesa’s Falcon Business District. It is in an opportunity zone designated by the U.S. Treasury Department to spur investment. The entire project will be designed and phased based on business needs and is expected to be complete by November 2021. • The Mesa Artspace Lofts celebrated its grand opening on January 23rd. This $15.8M arts development in downtown Mesa includes 50 units of fully leased housing where artists and their families live and work. • In May, the end of the light rail line extended 1.9 miles further east to Gilbert Road. This increased the light rail length to 28 miles running through Phoenix, Tempe and Mesa. The $186 million extension took nearly three years of construction which included bus bays and a park-and-ride. • In May, Commercial Metals Company (CMC) completed construction and commissioning of a 63,000 square foot expansion and manufacturing line to produce spooled rebar at CMC Steel Arizona, an environmentally responsible micro mill in southeast Mesa. • On July 1st, the Mesa City Council approved a development agreement with the multinational technology and Internet services giant, Google. The agreement outlines a potential project which would include a data center and ancillary office facilities. • In July, Lincoln Property Company-Harvard Investments Development announced a significant Class A office project called Union. It will include four buildings ranging from four to eight stories and from 232,000 to 450,000 square feet per building on 28.2 acres of city-owned land. Union will live in the heart of the Riverview District, just east of Sloan Park, the Chicago Cubs’ spring training facility. When completed, the project will total 1.35 million square feet of Class A office space designed to attract and retain premier, market-leading companies and their employees. • In July, AT&T opened their renovated, 97,000 square foot call center. AT&T invested nearly $7.6 million into the renovation and hired 500 full time employees for the call center. • In September, Marwest Enterprises announced a new complex, Landing 202, a 605,000square-foot Class A industrial product on approximately 45 acres in southeast Mesa. The new industrial development site is located just north of the Phoenix-Mesa Gateway Airport and within one of Mesa's newly announced, federally designated opportunity zones. IX Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to City of Mesa Arizona For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2018 Executive Director/CEO mesa-az ~ mesa-az FINANCIAL SECTION COM PREHENS I VE ANNUAL FI NA NCI AL RE PORT 2 019 DA N A PA RK | DI STRI CT 2 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, 2019, 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, 2019, 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. 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. 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. (2) The Honorable Mayor and Members of City Council City of Mesa, Arizona 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 them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 2, 2019, 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 December 2, 2019 (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, 2019. 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 $71.4 million from $1 billion to $1.07 billion. The increase is from four primary sources Sales Taxes, Unrestricted Intergovernmental revenues, Gains on Sale of Assets and Investment earnings.  At June 30, 2019, the City’s governmental funds reported a combined ending fund balance of $354.6 million, a $50.1 million increase from the previous year. Approximately 54.4 percent of the total governmental fund balance amount, or $192.8 million, is designated by the City as committed, assigned and unassigned. The remaining 45.6 percent or $161.8 million is designated as non-spendable or restricted.  At June 30, 2019, total fund balance for the General Fund was $135.9 million, which represents an increase of $5.5 million over prior year. Although general fund expenditures exceeded revenues, the transfer from the Enterprise fund contributed to the overall increase in fund balance.  At June 30, 2019, the City’s enterprise fund reported combined total net position of $568.3 million, which represents an increase of $62 million over prior year as revenues continued to exceed expenses. In addition, Gains on Sale of Assets of $44 million contributed to the current year increase. 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 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 4 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 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, 2019 and 2018. 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 $876.4 million at the end of fiscal year 2019. 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 2019 2018 $ 844,824 $ 736,077 1,452,714 1,440,294 2,297,538 2,176,371 Business-Type Activities 2019 2018 $ 692,000 $ 541,346 1,498,916 1,522,043 2,190,916 2,063,389 Total Government 2019 2018 $ 1,536,824 $ 1,277,423 2,951,630 2,962,337 4,488,454 4,239,760 7,964 172,454 180,418 8,946 162,477 171,423 34,583 11,064 45,647 29,430 9,168 38,598 42,547 183,518 226,065 38,376 171,645 210,021 Non-Current Liabilities Outstanding Net Pension & OPEB Liability Other Liabilities Total Liabilities 523,677 1,440,768 140,505 2,104,950 513,972 1,399,889 117,008 2,030,869 1,419,458 143,356 95,183 1,657,997 1,336,240 141,767 109,471 1,587,478 1,943,135 1,584,124 235,688 3,762,947 1,850,212 1,541,656 226,479 3,618,347 Deferred Inflows on Pensions & OPEB 64,930 67,124 10,276 8,526 75,206 75,650 1,038,928 103,164 (834,016) $ 308,076 1,019,888 88,305 (858,392) $ 249,801 170,427 47,857 350,006 $ 568,290 266,012 40,440 199,531 $ 505,983 1,209,355 151,021 (484,010) $ 876,366 1,285,900 128,745 (658,861) $ 755,784 Net Investment in Capital Assets Restricted Net Position Unrestricted Net Position Total Net Position 5 The largest portion of net position, $1.2 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, $151 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 ($484.0) million is primarily due to the impact of the long-term liability associated with pensions and OPEB ($1.6 billion). Capital Assets – The following table provides a breakdown of the City’s capital assets at June 30, 2019 and 2018: Capital Assets (net of accumulated depreciation/amortization) As of June 30 (In thousands of dollars) Governmental Activities 2019 2018 $ 391,527 $ 391,527 Land Infrastructure - Nondepr 3,585 3,585 Buildings 235,341 237,881 Other Improvements 94,070 85,980 M achinery & Equipment 62,762 62,444 Intangibles 177 2,959 Infrastructure 527,116 537,986 Construction-in-Progress 138,136 117,932 Total $ 1,452,714 $ 1,440,294 Business-Type Activities 2019 2018 $ 32,234 $ 50,700 17,666 17,666 87,608 76,139 73,335 75,016 37,500 38,098 4,152 4,800 1,100,685 1,031,096 145,736 228,528 $ 1,498,916 $ 1,522,043 Total Government 2019 2018 $ 423,761 $ 442,227 21,251 21,251 322,949 314,020 167,405 160,996 100,262 100,542 4,329 7,759 1,627,801 1,569,082 283,872 346,460 $ 2,951,629 $ 2,962,337 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, 2019. 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, 2019 were overall consistent with prior year balances. Increases in Infrastructure assets ($58.7 million) were offset by decreases in Construction-in-progress ($62.6 million). The most significant Infrastructure addition in fiscal year 2019 was the Signal Butte Water Treatment Plant. 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, 2019 and 2018. Outstanding Long-term Debt As of June 30 (In thousands of dollars) Governmental Activities 2019 2018 General Obligation Bonds $ 370,479 $ 365,519 Utility System Revenue Bonds Highway User Revenue Fund Bonds 67,905 76,620 Excise Tax Obligations Special Assessment Bonds with Governmental Commitment 438 1,005 Community Facility District 40,631 28,813 Notes Payable Total $ 479,453 $ 471,957 Business-Type Activities 2019 2018 $ 191 $ 236 1,279,020 1,227,355 49,025 49,025 Total Government 2019 2018 $ 370,670 $ 365,755 1,279,020 1,227,355 67,905 76,620 49,025 49,025 1,574 $ 1,329,810 438 40,631 1,574 $ 1,809,263 1,714 $ 1,278,330 1,005 28,813 1,714 $ 1,750,287 At the end of the current fiscal year, the City had total outstanding debt was $1.8 billion. Of this amount, $419.7 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 $59 million. The change in debt includes new borrowings during the fiscal year totaling $274.4 million, refundings of $144.3 million, defeasance of $10 million, and principal payments of $61.1 million. The City’s total outstanding debt includes $41.1 million in 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 AA AA 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, 2019 was $196.2 million in the 6% capacity and $285.4 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, 2019 and 2018. Changes in Net Position Year Ended June 30 (In thousands of dollars) 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 Assets M iscellaneous Total Revenues Governmental Activities 2019 2018 $ 81,303 25,326 13,780 $ 78,756 34,446 23,618 Business-Type Activities 2019 2018 $ Total Government 2019 2018 375,654 2,316 19,692 $ 371,794 2,406 23,474 $ 456,957 27,642 33,472 $ 450,550 36,852 47,092 189,871 36,013 3,246 175,278 65,189 13,729 (27) 11,531 615,239 169,024 35,571 2,628 167,540 80,312 1,912 (2,462) 5,418 596,763 1,602 8,004 44,056 4,290 455,614 1,192 1,691 261 1,915 402,733 189,871 36,013 4,848 175,278 65,189 21,733 44,029 15,821 1,070,853 169,024 35,571 3,820 167,540 80,312 3,603 (2,201) 7,333 999,496 119,819 355,752 119,506 58,345 18,078 105,140 334,905 113,916 54,828 19,514 - - - - 119,819 355,752 119,506 58,345 18,078 105,140 334,905 113,916 54,828 19,514 671,500 628,303 22,475 33,124 103,821 57,468 38,524 5,029 2,117 4,413 2,748 7,867 1,186 278,772 25,573 31,636 101,005 74,157 37,988 5,308 1,965 4,481 3,174 5,870 1,181 292,338 22,475 33,124 103,821 57,468 38,524 5,029 2,117 4,413 2,748 7,867 1,186 950,272 25,573 31,636 101,005 74,157 37,988 5,308 1,965 4,481 3,174 5,870 1,181 920,641 Increase (Decrease) in Net Position Before Transfers Transfers (56,261) 114,535 (31,540) 116,006 176,842 (114,535) 110,395 (116,006) 120,582 - 78,855 - Change in Net Position 58,275 84,466 62,307 (5,611) 120,582 78,855 Net Position - Beginning 249,801 165,335 505,983 511,594 755,784 676,929 308,076 $ 249,801 568,290 $ 505,983 $ 876,366 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 Net Position - Ending $ 8 $ $ 755,784 Governmental Activities As presented in the following two graphs, the largest funding sources, including transfers, for the governmental activities are taxes (32%), Unrestricted Intergovernmental (25%), Transfers (16%), and Charges for Services (12%). The largest users of resources for the governmental activities are Public Safety (53%), Community Environment (18%), and General Government (18%). Revenues by Source Including Transfers – Governmental Activities For the Fiscal Year Ended June 30, 2019 Taxes 32% Capital Grants & Contributions 2% Operating Grants & Contributions 4% Charges for Services 12% Unrestricted Contributions 9% Transfers 16% Unrestricted InterGovernmental 25% Functional Expenses – Governmental Activities For the Fiscal Year Ended June 30, 2019 Public Safety 53% General Government 18% Interest on Long-Term Debt 3% CulturalRecreational 8% 9 Community Environment 18% Governmental Activities Revenues For Fiscal Years 2019 and 2018 (In thousands of dollars) $250,000 $200,000 $150,000 $100,000 $50,000 $0 Program Revenues Taxes Unrestricted Intergovernmental 2019 Contributions 2018 Governmental Activities Functional Expenses For Fiscal Years 2019 and 2018 (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 2019 10 2018 Cultural-Recreational Interest on Long-term Debt The graphs on the previous page compare governmental activities revenues and expenses from fiscal year 2019 to fiscal year 2018. Total governmental activities revenues increased $18.5 million from $596.8 million to $615.2 million. Total governmental expenses increased by $43.2 million from $628.3 million to $671.5 million. Key factors in this change include:  Sales Taxes revenues increased in current year by $20.8 million. Overall sales tax increased by 12.3% primarily due to a new Public Safety Sales Tax of 0.25% effective March 1, 2019 which accounts for $8.6 million of the current year increase. The remaining increase $12.2 million (7.4%) is due to the continued strength in sales tax revenue, specifically in retail sales.  Unrestricted Intergovernmental revenues increased in current year by $7.7 million. Unrestricted Intergovernmental revenue increases were related to State Shared Sales Tax, and Highway User Tax. Unrestricted intergovernmental revenues have continued to increase at a modest amount (3% - 5%) for the last few years.  The increase in governmental expenditures is primarily due to an increase in Public Safety and General Government expenditures by $20.8 million and $14.7 million, respectively. The increase in expenditures is related to a $14 million increase in health benefit claims and increases in salary and related benefits. 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 General Revenue 13% Grants & Contributions 5% Charges for Services 82% 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 2019 Total business-type activities program and general revenues increased by $52.8 million from $402.8 million to $455.6 million. Increase is primarily attributed to gain on sale of assets of $44 million. Charges for Service increased by $3.9 million due to utility rate increases and investment earnings increased by $7.7 million. Net (Expenses) Revenue – Business-Type Activities 120,000 100,000 80,000 60,000 40,000 20,000 - Electric Gas Water 2018 2019 12 Wastewater Solid Waste Fund Financial Statements The fund financial statements are presented in Exhibits A-3 through A-9 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) and Proprietary Funds (Exhibits A-7 through A-9). 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). 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 on page 104. 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 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 $135.9 million, while unassigned fund balance was $90.2 million. Total fund balance of the City’s General Fund increased by $5.5 million during the current fiscal year from $130.4 million to $135.9 million. This is primarily due to an increase in Sales Taxes and Transfers in from the Enterprise Fund. 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 increased by $62.3 million during the current fiscal year from $506 million to $568.3 million. The increase in current year is primarily related to Gain on Sale of Assets of $44 million and Gain on Joint Venture activity of $51 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 $1.82 billion occurred during fiscal year 2019. General Fund revenues of $326.2 million, on a budgetary basis, were more than the budgeted revenues of $325 million. Increase in revenues, compared to budgeted, was primarily due to the City receiving more sales tax and investment income than budgeted. Expenditures of $408.5 million were less than the budgeted expenditures of $451 million. Savings were primarily in general government, followed by capital outlay. 14 ECONOMIC FACTORS On May 20, 2019, the City Council approved a $1.83 billion budget, which is an increase of $10 million compared to prior year’s budget. The fiscal year 2020 budget includes $1.57 billion for operations and $264 million for scheduled bond capital improvements. The adopted fiscal year 2020 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 BASIC FINANCIAL SECTION COM PREHENS I VE ANNUAL FI NA NCI AL RE PORT 2 019 D O B SO N RA N CH GOL F COURS E | DI STRI CT 3 CITY OF MESA, ARIZONA EXHIBIT A-1 STATEMENT OF NET POSITION JUNE 30, 2019 (in thousands) ASSETS Pooled Cash and Investments Accounts Receivable, Net Accrued Interest Receivable Due from Other Governments Inventory Prepaid and 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 395,657 16,617 1,413 46,841 6,736 2,714 190,247 37,207 1,288 1,483 3,870 Total $ 585,904 53,824 2,701 48,324 6,736 6,584 7,746 45,675 14,646 913 305,866 533,248 919,466 2,297,538 143,704 46,577 101 4,269 6,421 256,833 195,636 1,303,280 2,190,916 151,450 92,252 101 14,646 913 4,269 6,421 562,699 728,884 2,222,746 4,488,454 7,964 172,454 180,418 34,583 11,064 45,647 42,547 183,518 226,065 LIABILITIES Accounts Payable and Accrued Liabilities Claims Payable Customer and Defendant Deposits Liabilities Payable from Restricted Assets Noncurrent Liabilities: Due Within One Year Due in More Than One Year Net Pension and OPEB Liability Total Liabilities 34,555 46,022 7,768 52,160 8,072 87,111 42,627 46,022 7,768 139,271 50,068 473,609 1,440,768 2,104,950 37,097 1,382,361 143,356 1,657,997 87,165 1,855,970 1,584,124 3,762,947 DEFERRED INFLOWS OF RESOURCES Pensions and OPEB Total Deferred Inflows of Resources 64,930 64,930 10,276 10,276 75,206 75,206 1,038,928 170,427 1,209,355 27,551 15,009 57,081 3,523 (834,016) 308,076 33,588 6,421 7,848 350,006 568,290 33,588 6,421 35,399 15,009 57,081 3,523 (484,010) 876,366 NET POSITION Net Investment in Capital Assets Restricted For: Bond Indentures Construction Debt Service Public Safety Transportation Programs Other Programs Unrestricted Total Net Position $ 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, 2019 (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 119,819 355,752 119,506 58,345 18,078 671,500 $ 22,475 33,124 103,821 57,468 38,524 5,029 2,117 4,413 2,748 7,867 1,186 278,772 $ 950,272 14,661 33,582 19,106 13,954 81,303 Program Revenues Operating Grants and Contributions Capital Grants and Contributions $ $ 29,986 43,547 144,896 84,220 62,432 4,339 1,608 3,153 75 250 1,148 375,654 $ 456,957 539 6,774 17,865 148 25,326 160 244 1,394 518 2,316 $ 27,642 315 965 8,192 8,930 492 773 17 8 19,692 $ 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 - Beginning Net Position - Ending The notes to the financial statements are an integral part of this statement. 17 11,642 680 1,334 124 13,780 33,472 EXHIBIT A-2 (Continued) Net (Expense) Revenue and Changes in Net Position Primary Government Governmental Business-type Activities Activities Total * * $ $ (92,977) (314,716) (81,201) (44,119) (18,078) (551,091) $ - $ (92,977) (314,716) (81,201) (44,119) (18,078) (551,091) - 7,986 11,632 50,661 36,200 24,400 83 (509) (1,243) (2,665) (7,617) (38) 118,890 7,986 11,632 50,661 36,200 24,400 83 (509) (1,243) (2,665) (7,617) (38) 118,890 (551,091) 118,890 (432,201) 189,871 36,013 3,246 175,278 65,189 13,729 (27) 11,531 114,535 609,365 1,602 8,004 44,056 4,290 (114,535) (56,583) 189,871 36,013 4,848 175,278 65,189 21,733 44,029 15,821 552,782 58,275 62,307 120,582 249,801 505,983 755,784 308,076 $ 568,290 $ 876,366 18 CITY OF MESA, ARIZONA EXHIBIT A-3 BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2019 (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 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 $ 127,107 3,435 452 29,627 278 794 161,693 21,980 425 $ $ 200,441 12,375 645 17,214 1,196 7,746 45,675 14,646 913 300,851 9,783 278 7,343 $ $ 327,548 15,810 1,097 46,841 278 1,990 7,746 45,675 14,646 913 462,544 31,763 278 7,768 2,755 25,160 9,327 1,177 38,901 66,809 9,327 3,932 38,901 91,969 638 638 15,344 15,344 15,982 15,982 794 26 14,016 30,869 90,190 135,895 1,196 159,745 57,432 459 (134) 218,698 1,990 159,771 71,448 31,328 90,056 354,593 161,693 $ The accompanying notes are an integral part of the financial statements. 19 300,851 $ 462,544 CITY OF MESA, ARIZONA EXHIBIT A-4 RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION JUNE 30, 2019 (in thousands) Fund Balances - total governmental funds $ 354,593 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. 1,450,216 Other assets used in governmental activities are not financial resources and therefore not reported in the governmental funds. 305,866 Deferred outflows related to deferred amounts on refunding and pensions are not financial resources and therefore not reported in the funds. 178,001 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. (1,932,296) 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. (46,704) Internal service funds are used by management to charge the costs of certain activities to individual funds. (1,600) Net position of the governmental activities - statement of net position The accompanying notes are an integral part of the financial statements. 20 $ 308,076 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, 2019 (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 124,487 23 18,690 138,512 26,207 8,383 3,561 108 4,105 324,076 65,384 36,005 3,223 1,274 5,122 74,539 17,007 2,455 7,279 147 2,583 215,018 189,871 36,005 3,246 1,274 23,812 213,051 43,214 10,838 10,840 255 6,688 539,094 88,060 247,848 18,715 40,659 9,949 29,465 57,908 7,977 98,009 277,313 76,623 48,636 12,579 407,861 39,511 18,185 19 874 80,058 243,946 39,511 18,185 19 874 92,637 651,807 Excess (Deficiency) of Revenues Over (Under) Expenditures (83,785) (28,928) (112,713) OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Face Amount of Bonds Issued Premium on Issuance of Bonds (Net) Total Other Financing Sources (Uses) 118,448 (29,142) 89,306 29,142 (3,913) 47,008 1,305 73,542 147,590 (33,055) 47,008 1,305 162,848 Net Change in Fund Balances 5,521 44,614 50,135 130,374 174,084 304,458 Fund Balance - Beginning Fund Balances - Ending $ 135,895 $ The accompanying notes are an integral part of the financial statements. 21 218,698 $ 354,593 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, 2019 (in thousands) Net change in fund balances - total governmental funds $ 50,135 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. 1,378 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. (125,351) Current-year pension contributions are reclassified to deferred outflows of resources and therefore not reported as expenditures in governmental funds. 77,153 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 $78,614 exceeded depreciation ($65,825) in the current period. 12,789 The net effect of miscellaneous transactions involving capital assets (e.g., donations, transfers and disposals) is to increase net position. 15,804 Change in equity in Joint Venture 43,806 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. (7,497) 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. (305) 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. (9,638) Change in net position of the governmental activities - statement of activities The accompanying notes are an integral part of the financial statements. 22 $ 58,275 CITY OF MESA, ARIZONA EXHIBIT A-7 STATEMENT OF NET POSITION PROPRIETARY FUNDS JUNE 30, 2019 (in thousands) ASSETS Current Assets: Pooled Cash and Investments Accounts Receivable (Net of Allowances) Accrued Premiums Receivable Accrued Interest Receivable Due from Other Governments 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 $ 190,247 37,207 1,288 1,483 3,825 45 68,109 630 177 316 6,736 655 69 143,704 46,577 101 4,269 6,421 435,167 76,692 256,833 195,636 1,303,280 1,755,749 329 2,169 2,498 2,190,916 79,190 34,583 11,064 45,647 2,417 2,417 2,236,563 $ 81,607 (Continued) The accompanying notes are an integral part of the financial statements. 23 CITY OF MESA, ARIZONA EXHIBIT A-7 (Continued) STATEMENT OF NET POSITION PROPRIETARY FUNDS JUNE 30, 2019 (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 $ 8,072 6,033 25,081 289 21,496 34,212 - 36,390 143 564 132,280 114 48,928 1,376,997 1,431 3,933 143,356 1,525,717 702 31,333 32,035 1,657,997 80,963 10,276 10,276 2,244 2,244 170,427 2,498 33,588 6,421 7,848 350,006 568,290 (4,098) (1,600) The accompanying notes are an integral part of the financial statements. 24 2,792 46,022 $ 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, 2019 (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 $ $ 29,986 43,547 144,896 84,220 62,432 4,339 1,608 3,153 75 250 1,148 375,654 28,842 90,803 5,638 125,283 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 17,678 24,895 50,841 74,584 35,259 3,403 1,978 4,120 1,055 2,150 768 216,731 28,004 109,542 137,546 Operating Income (Loss) Before Depreciation and Amortization 158,923 (12,263) (61,918) (357) 97,005 (12,620) Depreciation and Amortization Operating Income (Loss) (Continued) 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, 2019 (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) 5,427 2,577 3,090 2,889 - (49,916) (38) (13) 44,056 51,033 16,416 (1,189) 1,602 4,290 77,335 2,889 Income before Transfers and Capital Contributions 174,340 (9,731) Capital Contributions Transfers Out 2,502 (114,535) 93 - Change in Net Position 62,307 (9,638) Total Net Position - Beginning 505,983 8,038 Total Net Position - Ending $ The accompanying notes are an integral part of the financial statements. 26 568,290 $ (1,600) CITY OF MESA, ARIZONA EXHIBIT A-9 STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 (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 $ $ 376,189 (156,660) (61,759) 4,290 125,241 (118,508) (10,237) - Net Cash Provided By (Used For) Operating Activities 162,060 (3,504) Cash Flows From Noncapital Financing Activities: Intergovernmental Transient Occupancy Tax Repayments of Advances to Other Funds Transfers Out to Other Funds 4,254 1,602 876 (114,535) - Net Cash Used For Noncapital Financing Activities (107,803) - 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 and Notes Maturities Interest Paid on Bonds and Notes Bond Issuance Costs Developer Contributions and Capital Grants 266,183 (163,418) 62,958 (58,097) (31,570) (54,737) (1,189) 17,274 (380) - Net Cash Used For Capital and Related Financing Activities 37,404 (380) Cash Flows From Investing Activities: Interest Received on Investments 7,636 2,807 Net Cash Provided By Investing Activities 7,636 2,807 Net Change in Pooled Cash and Investments 99,297 (1,077) Total Cash and Investments at Beginning of Year 281,332 69,186 Total Cash and Investments at End of Year $ 380,629 - $ 68,109 (Continued) The accompanying notes are an integral part of the financial statements. 27 CITY OF MESA, ARIZONA EXHIBIT A-9 (Continued) STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 (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 Bond Premium Amortization of Deferred Amounts on Refunding (12,620) 61,918 4,290 357 - (355) (767) (1,650) 4 1,589 (1,896) 1,750 172 (42) (657) 92 702 (280) (367) 342 8,969 65,055 9,116 $ 162,060 $ (3,504) $ 1,644 44,056 7,232 3,995 $ - The accompanying notes are an integral part of the financial statements. 28 97,005 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 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 511,334 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 29 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 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 30 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 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. 31 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 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. 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: Eleven non-major Special Revenue Funds are used to account for specific revenues that are legally restricted to expenditures for specific purposes. 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. Four 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. 32 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 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. 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. 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. 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 21, 2018. 33 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 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. 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. 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. 34 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 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. 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. 35 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 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. 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. 36 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 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 fund 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, 2019 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 February limited property values 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 tax liens on 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 limited property value is used in determining the tax rate. In fiscal year 2018-2019, current property tax collections were $32,820,491 or 98.72% 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, 2019 was $900,016 of which $455,639 was recorded as revenue and $444,377 as unavailable revenue. s. New Accounting Pronouncements 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 has implemented this Statement in fiscal year 2019 with no effect. 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 has implemented this Statement in fiscal year 2019 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. 37 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 GASB Statement No. 88, Certain Disclosures Related to Debt, including Direct Borrowings and Direct Placements, defines debt for purposes of disclosure in notes to financial statements and establishes additional financial statement note disclosure requirements related to debt obligations of governments, including direct borrowings. The requirements of this Statement are effective for reporting periods beginning after June 15, 2018. The City has implemented this Statement in fiscal year 2019 with no effect. GASB Statement No. 90, Majority Equity Interest, modifies previous guidance for reporting a government’s majority interest in a legally separate organization. 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. Implementation Guide No. 2018-1, Implementation Guidance Update – 2018, 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, 2016-1 and 2017-1. The requirements of this Implementation Guide are effective for reporting periods beginning after June 15, 2018. The requirements of this Implementation Guide were implemented by the City in fiscal year 2019 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. 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. 38 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 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 Inventory Prepaid Costs Deposits Restricted Assets: Pooled Cash and Investments Cash with Fiscal Agent 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 $ $ $ $ 7,746 45,675 14,646 913 462,544 305,866 1,450,216 1,756,082 $ 68,109 807 316 6,736 655 69 2,498 79,190 - 7,964 170,037 178,001 2,417 2,417 $ 462,544 $ 1,934,083 $ 81,607 $ (278) $ 2,477,956 $ 31,763 278 7,768 9,327 3,932 38,901 91,969 $ $ $ (278) (278) $ 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 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 $ 327,548 15,810 1,097 46,841 278 1,990 - - 1,409,435 522,861 1,932,296 2,792 46,022 31,333 816 80,963 (278) - 395,657 16,617 1,413 46,841 6,736 2,645 69 (278) 7,746 45,675 14,646 913 305,866 1,452,714 2,297,538 - 7,964 172,454 180,418 34,555 46,022 7,768 9,327 3,932 38,901 1,440,768 523,677 2,104,950 15,982 15,982 (15,982) 62,686 46,704 2,244 2,244 - 64,930 64,930 354,593 (44,917) (1,600) - 308,076 462,544 $ 1,934,083 $ 81,607 (278) $ 2,477,956 39 $ (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 (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 $ 305,866 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 $ $ 2,501,820 (1,051,604) 1,450,216 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 $ $ 479,453 29,270 639,875 14,138 769,560 1,932,296 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 result 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 $ $ 7,964 170,037 178,001 Deferred inflows relating to pensions represent a future acquisition of net position that is not reported in the funds. Deferred Inflows – Pensions & OPEB 40 $ 62,686 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 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 $ $ (444) (14,702) (836) (15,982) (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 41 $ (1,600) (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 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) Long-term Debt (4) Eliminations (5) $ $ $ $ $ $ $ $ $ 189,871 36,005 3,246 1,274 23,812 213,051 43,214 10,838 10,840 255 6,688 1,378 45,139 $ 45,139 $ 29,655 (47,008) (1,305) $ (48,313) 98,009 277,313 76,623 48,636 (1,988) 51,409 (509) (715) 5,758 12,780 38,312 8,527 18,077 14,273 5,047 1,896 - 39,511 18,185 19 874 92,637 - (92,637) - 33,055 - - - 684,862 48,198 (46,820) 147,590 47,008 1,305 734,997 50,135 $ $ 8 2,165 (795) - $ 189,871 36,013 3,246 3,439 23,812 213,051 43,214 10,838 13,729 66,522 11,531 (33,055) (33,055) 114,535 $ 729,801 - $ 119,856 355,775 119,473 58,345 (39,511) (1,000) - - 17,185 19 874 - - - (33,055) - - (27,260) 39,293 (40,511) (33,055) 671,527 $ 72,399 $ (9,638) - $ 58,275 42 2,889 21,128 5,638 $ - Statement of Activities (7,802) $ $ $ (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 (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 $ 8 2,165 (795) 1,378 $ 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 $ (2,913) (32,264) (90,174) (125,351) 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 $ 77,153 (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 $ $ 78,614 (65,825) 12,789 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 43 $ $ 43,806 15,830 (27) 59,609 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 (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 $ $ 29,655 (39,293) (9,638) (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. General Obligation bond proceeds Community Facilities District Bonds Principal repayments Total $ $ (33,065) (13,943) 39,511 (7,497) 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 $ $ (982) 1,982 (1,305) (305) (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 44 $ $ (33,055) 33,055 - (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 3. FUND BALANCE As of June 30, 2019, the fund balance details by classification are listed below (in thousands): Fund Balances: Nonspendable: Prepaid Costs Nonspendable Sub-total General Fund $ 794 794 Non-Major Governmental Funds Total Governmental Funds $ $ 1,196 1,196 1,990 1,990 Restricted: Capital Projects Community Facility District Court Debt Service Fire Housing Library Police Transportation Programs Restricted Sub-total 26 26 71,842 79 1,865 12,405 6,542 1,167 385 8,467 56,993 159,745 71,842 105 1,865 12,405 6,542 1,167 385 8,467 56,993 159,771 Committed To: Arts & Culture Capital Projects Cemetery Economic Development Environmental Compliance Fire Parks & Recreation Police Technology Vehicle Replacement Committed To Sub-total 804 94 5,959 7,159 14,016 1,310 24,504 7,561 15,745 40 1,465 6,807 57,432 1,310 24,504 8,365 94 15,745 5,959 40 7,159 1,465 6,807 71,448 Assigned To: Development Services Economic Development Fire General Government Parks & Recreation Police Sustainability Transit Assigned To Sub-total 187 2,010 86 27,370 775 269 110 62 30,869 459 459 187 2,010 86 27,829 775 269 110 62 31,328 Unassigned 90,190 (134) 90,056 Total Fund Balances $ 135,895 $ 218,698 $ 354,593 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, 2019 as reported in Exhibit B-5 is 32.5% of General Fund expenditures budgeted for fiscal year 2018-2019. 45 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 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 Total City Pooled Cash and Investments $ $ 143 99,278 15,588 162,312 101 92,252 460,033 829,707 (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, 2019 for debt service payments due to bondholders on July 1, 2019. Deposits At year-end, the City’s cash totaled $99,420,974 which included $143,105 of petty cash. The carrying amount of the City’s deposits was $99,277,869 and the bank balance was $101,127,690. The difference of $1,849,821 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, 2019 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 §35-323. 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, 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. 46 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 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 Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. 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 invests in its own Special Improvement District bonds that have no credit rating. Associated with credit risk is concentration of credit risk and custodial credit risk. Concentration of credit risk is the risk of loss attributed to the magnitude of a government’s investment in a single issuer. Custodial credit risk is the risk that in the event of the failure of the counterparty to a transaction, a government will not be able to recover the value of investment or collateral securities that are in the possession of an outside party. The City's investments had the following credit risk structure as of June 30, 2019 (in thousands): Investment Type U.S. Treasuries U.S. Agencies Corporate Notes Corporate Notes Corporate Notes Corporate Notes Corporate Notes Corporate Notes Corporate Notes Negotiable Certificate of Deposit Negotiable Certificate of Deposit Negotiable Certificate of Deposit Negotiable Certificate of Deposit Money Market Fund Total S&P Fair value Rating AA+ $ 301,895 AA+ 54,570 AA+ 4,488 A13,671 A 25,638 AA11,035 A+ 12,604 AA 5,716 BBB+ 10,186 A 6,778 A-1 6,084 AA1,963 A+ 4,477 AAAm 475 $ 459,580 47 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 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. At June 30, 2019, the City had the following recurring fair value measurements (in thousands): Investment by Fair Value Level Debt Securities U.S. Treasuries U.S. Agencies: Federal Home Loan Bank Federal National Mortgage Assn Corporate Notes 3M American Express Credit American Honda Finance Corp. Apple, Inc. Bank of New York Mellon Inc. Bank of America BB&T Blackrock Boeing Caterpillar Financial Charles Schwab Corp Chevron Corp Cisco Systems Inc. Citigroup Walt Disney Exxon Mobil Goldman Sachs Home Depot Inc. HSBC USA Intel John Deere JP Morgan Chase & Co Merck & Co. Inc Morgan Stanley National Rural Utility Coop. Paccar Financial Pfizer Inc. Proctor & Gamble Target Toyota Motor Credit Fair Value 6/30/2019 Level 1 Level 2 Level 3 $ $ - $ 301,895 $ - 35,712 18,858 301,895 35,712 18,858 1,267 4,537 5,647 2,975 1,005 2,222 2,600 2,373 2,260 3,710 1,259 1,136 1,988 1,137 3,387 1,512 1,262 2,265 1,000 1,719 3,099 5,458 1,008 3,250 729 5,048 1,993 1,156 1,278 3,399 48 - - - 1,267 4,537 5,647 2,975 1,005 2,222 2,600 2,373 2,260 3,710 1,259 1,136 1,988 1,137 3,387 1,512 1,262 2,265 1,000 1,719 3,099 5,458 1,008 3,250 729 5,048 1,993 1,156 1,278 3,399 - - - (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 Investment by Fair Value Level Debt Securities (continued) Corporate Notes (continued) Unilever United Parcel Service US Bancorp Visa Inc Wal-Mart Stores Inc. Wells Fargo Negotiable Certificates of Deposit Bank of Montreal Chicago Bank of Nova Scotia Houston Credit Agricole SA Credit Suisse NY MUFG Bank Ltd Royal Bank of Canada NY Sumitomo Mitsui Bank UBS AG Stamford CT City of Mesa Special Improvement District Bonds Total Debt Securities at Fair Value Fair Value 6/30/2019 Level 1 1,176 2,283 2,377 851 1,579 3,391 - 2,240 2,622 2,237 1,730 2,259 1,963 4,519 1,733 $ Investments Measured at Fair Value Arizona State Treasurers Investment Pool 7 Wells Fargo MMF Total Investments Measured At Fair Value Fair Value Measurements Using: 454 459,558 - Level 3 1,176 2,283 2,377 851 1,579 3,391 - 2,240 2,622 2,237 1,730 2,259 1,963 4,519 1,733 - 454 $ 459,558 - $ Level 2 - - $ - 162,312 454 $ 622,324 Amortized Cost Securities FDIC Insured Cash Sweep Money Market Funds $ 15,588 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, 2019. The City’s investments at June 30, 2019 are as follows (in thousands): 49 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 Investment Maturities (in Years) Investment T ype Fair Value Less T han 1 U.S. T reasuries U.S. Agencies: Federal Home Loan Bank Federal National Mortgage Assn Corporate Notes 3M American Express Credit American Honda Finance Corp. Apple, Inc. Bank of America Bank of New York Mellon Inc. BB&T Blackrock Boeing Caterpillar Charles Schwab Chevron Corp Cisco Systems Inc. Citigroup Walt Disney Exxon Mobil Goldman Sachs Home Depot Inc. HSBC Intel John Deere JP Morgan Chase & Co Merck Morgan Stanley National Rural Utility Coop. Paccar Financial Pfizer Inc. Proctor & Gamble T arget T oyota Motor Credit Corp Unilever United Parcel Service US Bancorp Visa Inc. Wal-Mart Stores Inc Wells Fargo & Co Negotiable Certificates of Deposit Bank of Montreal Chicago Bank of Nova Scotia Houston Credit Agricole SA Credit Suisse NY MUFG Bank Ltd Royal Bank of Canada NY Sumitomo Mitsui Bank UBS AG Stamford CT City of Mesa Special Imp District Bonds Wells Fargo MMF T otal $ 301,895 $ 16,852 35,712 18,858 1,267 4,537 5,647 2,975 2,222 1,005 2,600 2,373 2,260 3,710 1,259 1,136 1,988 1,137 3,387 1,512 1,262 2,265 1,000 1,719 3,099 5,458 1,008 3,250 729 5,048 1,993 1,156 1,278 3,399 1,176 2,283 2,377 851 1,579 3,391 2,240 2,622 2,237 1,730 2,259 1,963 4,519 1,733 454 475 $ 460,033 1-2 2-3 More than 3 Concentration of Credit Risk % $ 182,681 $ 81,494 $ 20,868 65.62% 9,671 35,712 9,187 - 7.76% 4.10% 1,267 2,252 5,647 2,975 2,222 - 2,285 - 1,005 2,551 1,259 2,600 2,373 2,260 1,159 1,136 1,988 1,137 3,387 1,594 1,000 1,719 679 - - - 278 1,002 729 890 - 968 1,378 1,512 1,262 671 - 2,142 2,299 1,008 2,248 3,159 - 4,158 1,993 1,278 2,431 1,176 905 2,377 1,156 - 851 1,579 3,391 2,240 - - 2,259 1,963 4,519 - - 231 $ 223,967 $ 178,869 $ 25,183 2,622 2,237 1,730 $ 1,733 223 475 32,014 50 0.28% 0.99% 1.23% 0.65% 0.48% 0.22% 0.57% 0.52% 0.49% 0.81% 0.27% 0.25% 0.43% 0.25% 0.74% 0.33% 0.27% 0.49% 0.22% 0.37% 0.67% 1.19% 0.22% 0.71% 0.16% 1.10% 0.43% 0.25% 0.28% 0.74% 0.26% 0.50% 0.52% 0.18% 0.34% 0.74% 0.49% 0.57% 0.49% 0.38% 0.49% 0.43% 0.98% 0.38% 0.10% 0.10% 100.00% (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 At June 30, 2019 the following investments had callable dates: Date Market Value 3M 2/1/2022 $ American Express Credit 4/20/2022 2,252 Bank of America 10/1/2020 2,222 Bank of New York Mellon Chevron Cisco Systems Citigroup Exxon Mobil Goldman Sachs US Bancorp United Parcel Service Visa Inc. 7/17/2020 2/3/2022 8/20/2021 11/8/2021 1/6/2022 4/26/2021 2/15/2022 4/16/2022 11/14/2020 1,005 1,136 1,988 1,137 1,512 1,262 2,377 905 851 Corporate Notes 717 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: Taxes 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 1,179 6,218 (3,962) 1,179 2,256 8,623 22,352 (1,348) 8,623 21,004 2,071 10,304 14,645 1 913 17,214 - 2,071 10,304 14,645 1 913 17,214 177 630 84,327 (5,310) 177 630 $ 79,017 (850) (167) (1,017) $ 28,607 8,600 1,483 $ 38,690 $ Business-Type Activities: Utility Customers Other Customers Due from Other Governments Total Business-type Activities $ $ 51 29,457 8,767 1,483 39,707 $ $ $ Net (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 Unbilled Accounts Receivable Unbilled utility service receivables are recorded in the year in which the services are provided. At June 30, 2019, unbilled utility service receivables are recorded in the Enterprise Fund as follows (in thousands): Electric $ 2,358 Gas 1,208 Water 9,062 Wastewater 4,281 Solid Waste 2,968 $ 19,877 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 and business-type 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 were as follows (in thousands): Unearned Revenue Advance 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 Governmental Activities General Non-Major Fund Funds $ 1,015 $ 61 1,740 $ 2,755 $ General Fund $ 638 $ 638 Non-Major Funds $ 198 444 14,702 $ 15,344 52 1,042 74 1,177 Business Type Activities Enterprise Funds $ 128 $ 40 121 289 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 6. INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS The following interfund activities are included in the fund financial statements at June 30, 2019 (in thousands): Fund General Fund Non-major Governmental Funds Total Governmental Funds Due from Other Funds $ 278 $ 278 Due to Other Funds $ 278 $ 278 Interfund balances at June 30, 2019 are short-term loans used to cover temporary cash deficits in various funds and are expected to be repaid within one year. Transfers In The following interfund transfers are reflected in the fund financial statements for the year ended June 30, 2019 (in thousands): Transfers Out Non-major General Governmental Enterprise Fund Total Fund Funds Fund General Fund $ $ 3,913 $ 114,535 $ 118,448 Non-major Governmental Funds 29,142 29,142 Enterprise Fund Total $ 29,142 $ 3,913 $ 114,535 $ 147,590 The transfer from business-type activities to governmental activities on the government-wide statement of activities is a $114,535,000 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. 53 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 7. CAPITAL ASSETS A summary of capital asset activity, for the government-wide financial statements, for the year ended June 30, 2019 follows (in thousands): 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 Balance July 1, 2018 $ 391,527 3,585 117,932 513,044 Additions Retirements Balance June 30, 2019 $ $ $ 72,373 72,373 (52,169) (52,169) 391,527 3,585 138,136 533,248 347,032 196,772 208,348 23,251 1,150,156 1,925,559 4,717 14,680 12,373 146 26,966 58,882 (856) (2,625) (823) (4,304) 351,749 210,596 218,096 23,397 1,176,299 1,980,137 (109,151) (110,792) (145,904) (20,292) (612,170) (998,309) 927,250 (7,257) (6,587) (11,916) (2,928) (37,494) (66,182) (7,300) 853 2,486 481 3,820 (484) (116,408) (116,526) (155,334) (23,220) (649,183) (1,060,671) 919,466 $1,440,294 $ 65,073 $ (52,653) $ 1,452,714 Depreciation expense was charged to governmental functions in the government-wide 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 54 $ 5,721 12,757 38,820 8,527 357 $66,182 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 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, 2018 Balance June 30, 2019 Additions Retirements $ 50,700 17,560 106 228,528 296,894 $ 56,918 56,918 $ (18,466) (139,710) (158,176) 108,144 133,893 96,950 27,549 1,885,860 2,252,396 13,663 2,714 5,993 118,328 140,698 (1,519) (2,855) (4,374) 121,807 136,607 101,424 27,549 2,001,333 2,388,720 (32,005) (58,877) (58,852) (22,749) (854,764) (1,027,247) 1,225,149 (2,194) (4,395) (6,569) (648) (48,112) (61,918) 78,780 1,497 2,227 3,724 (650) (34,199) (63,272) (63,924) (23,397) (900,649) (1,085,441) 1,303,280 $1,522,043 $135,698 $ (158,826) $ 1,498,916 $ 32,234 17,560 106 145,736 195,636 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 55 $ $ 3,521 4,304 24,574 18,530 2,980 1,626 134 293 1,693 3,845 418 61,918 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 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 Golf Course Convention Center Spring Training Total Construction in Progress Commitments $ $ $ $ 34,157 245 36 818 35,256 Construction in Progress Commitments $ $ $ 56 78,602 7,872 46,628 4,704 329 138,136 4,387 20,687 50,404 56,622 3,857 8,838 494 447 145,736 $ 2,188 6,422 11,078 6,648 6,383 358 235 31 4 33,348 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 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 $ $ $ 365,519 76,620 33,065 - (28,105) (8,715) Ending Balances $ 370,479 67,905 Amounts Due Within One Year $ 35,870 9,155 1,005 28,813 471,957 13,943 47,008 (567) (2,125) (39,512) 438 40,631 479,453 219 1,158 46,402 14,815 27,200 513,972 1,304 28,839 77,151 (1,981) (25,953) (67,446) $ 14,138 30,086 523,677 3,666 50,068 (175,720) (45) (175,765) $ 1,279,020 191 49,025 1,328,236 (140) (7,232) (4,203) (187,340) 1,574 85,151 4,497 $ 1,419,458 Unamortized Premiums Compensated Absences Governmental Activities Total $ Business-type Activities: Bonds Payable: Revenue Bonds General Obligation Bonds Excise Tax Revenue Obligations Total Bonds Payable $ 1,227,355 236 49,025 1,276,616 Notes Payable Unamortized Bond Premiums Compensated Absences Business-type Activities Total 1,714 53,585 4,325 $ 1,336,240 $ $ $ 227,385 227,385 38,798 4,375 270,558 $ $ $ $ $ $ 36,350 40 36,390 143 564 37,097 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, $816,000 of internal service funds compensated absences are included in the above amounts. For governmental activities, compensated absences are generally liquidated by the general fund. 57 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 b. Bonds Payable At June 30, 2019, 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. $ 700 $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. 2,200 $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. 1,250 $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. 18,575 $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. 21,100 $31,665,000 2012 general obligation refunding serial bonds due in annual installments ranging from $270,000 to $7,620,000, plus semi-annual interest ranging from 2 percent to 4 percent through July 1, 2022. 6,507 $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. 8,180 $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, 2033. 48,025 $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. 27,450 58 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 $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. $ 6,190 $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. 34,050 $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. 20,295 $22,935,000 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 0.85 percent to 3 percent through July 1, 2029. 17,962 $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. 39,955 $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. 46,785 $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. 7,325 $33,065,000 2019 general obligation serial bonds due in annual installments ranging from $640,000 to $16,700,000, plus semi-annual interest ranging from 2 percent to 4 percent through July 1, 2039. Total General Obligation Bonds $ 33,065 $ 370,479 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. 59 $ 525 16,000 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 $10,225,000 2005 street and highway user revenue bonds, partially refunded by street and highway users revenue refunding bond series 2013, due in annual principal installments ranging from $50,000 to $8,500,000, plus semi-annual interest ranging from 4.0 percent to 5.0 percent through July 1, 2023. $ 500 $11,675,000 2006 street and highway user revenue bonds, partially refunded by street and highway users revenue refunding bond series 2015, 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, partially refunded by street and highway users revenue refunding bond series 2015, due in annual principal installments ranging from $1,000,000 to $3,900,000, plus semi-annual 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. 20,000 $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 $ 67,905 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 $219,000, plus semi-annual interest of 5.80 percent, through January 1, 2021. $ 438 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 principal installments ranging from $62,000 to $180,000, plus semi-annual interest ranging from 2 percent to 5.25 percent through July 1, 2038. 60 $ 2,165 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 $3,250,000 2014 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) General Obligation Bonds, due in annual principal installments ranging from $65,000 to $225,000, plus semi-annual interest ranging from 3 percent to 5 percent through July 15, 2038. $ 2,845 $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 principal installments ranging from $85,000 to $225,000, plus semi-annual interest ranging from 2 percent to 5.375 percent through July 1, 2039. 2,846 $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 principal 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. 1,765 $6,800,000 2015 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) General Obligation Bonds, due in annual principal installments ranging from $165,000 to $680,000, plus semi-annual interest ranging from 4 percent to 5 percent through July 15, 2039. 6,075 $970,000 2015 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) Assessment District No. 4 Special Assessment Revenue Bonds, due in annual principal installments ranging from $15,000 to $65,000, plus semi-annual interest ranging from 2 percent to 5 percent through July 1, 2040. 788 $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 principal 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. 958 $502,000 2017 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) Assessment District No. 6 Special Assessment Revenue Bonds, due in annual principal 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. 479 $8,160,000 2017 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) General Obligation Bonds, due in annual principal installments ranging from $215,000 to $510,000, plus semi-annual interest ranging from 2 percent to 5 percent through July 15, 2042. 7,635 $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 principal installments ranging from $36,500 to $85,000, plus semi-annual interest ranging from 2 percent to 4.5 percent through July 1, 2042. 1,290 61 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 $770,000 2018 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) Assessment District No. 8 Special Assessment Revenue Bonds, due in annual principal 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. $ 738 $368,000 2018 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) Assessment District No. 9 Special Assessment Revenue Bonds, due in annual principal 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. 360 $10,830,000 2018 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) General Obligation Bonds, due in annual principal installments ranging from $240,000 to $1,240,000, plus semi-annual interest ranging from 3.75 percent to 5.0 percent through July 15, 2043. 9,590 $969,000 2018 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) Assessment District No. 11 Special Assessment Revenue Bonds, due in annual principal installments ranging from $24,000 to $65,000, plus semi-annual interest ranging from 3.00 percent to 5.00 percent through July 1, 2043. 969 $1,883,000 2019 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) Assessment District No. 10 Special Assessment Revenue Bonds, due in annual principal installments ranging from $48,000 to $130,000, plus semi-annual interest ranging from 2.75 percent to 5.20 percent through July 1, 2043. 1,883 $261,000 2019 Cadence Community Facilities District (City of Mesa, Arizona) General Obligation Bonds, due in annual principal installments ranging from $5,000 to $16,000, plus semi-annual interest ranging from 2.00 percent to 5.00 percent through July 15, 2043. Total Community Facilities District Bonds Total bonds payable recorded in governmental activities $ 245 $ 40,631 $ 479,453 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. $ $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. Total General Obligation Bonds 83 $ 62 108 191 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 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 $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), 2014, 2016, 2017 and 2018 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 $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. 35,000 $127,260,000 2006 (Series 2) utility systems revenue refunding serial and term 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. 53,840 $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 and 2018 utility systems revenue refunding bonds), due in annual principal installments ranging from $700,000 to $44,675,000, plus semiannual interest ranging from 4.875 percent to 5.25 percent through July 1, 2029. 2,125 $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 63 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 $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 5 percent through July 1, 2021. 14,905 $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, (partially refunded by 2018 utility systems revenue refunding bonds) due in annual principal installments ranging from $475,000 to $31,345,000, plus semi-annual interest ranging from 2 percent to 4 percent through July 1, 2030. 96,365 $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 $75,435,000 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 serial and term 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. 109,120 64 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 $93,825,000 2019A utility systems revenue serial and term bonds, due in annual principal installments ranging from $850,000 to $13,455,000, plus semi-annual interest of 5 percent through July 1, 2043. $ 93,825 $54,225,000 2019B utility systems revenue refunding serial bonds, due in annual principal installments ranging from $200,000 to $42,420,000, plus semi-annual interest 3 percent to 5 percent through July 1, 2033. 54,225 $79,335,000 2019C utility systems revenue refunding serial bonds, due in annual principal installments ranging from $2,950,000 to $7,800,000 plus semi-annual interest of 5 percent through July 1, 2035. Total Utility Systems Revenue Bonds $ 79,335 $ 1,279,020 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 $ 1,328,236 65 49,025 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 The following tables summarize the City’s debt service requirements to maturity for its long-term bonds payable at June 30, 2019 (in thousands). The deferred amounts on refundings are not included. Governmental Activities General Obligation Bonds Fiscal Year 2020 2021 2022 2023 2024 2025-2029 2030-2034 2035-2039 Principal $ 35,870 20,407 21,121 21,820 22,654 131,972 94,575 22,060 Interest $ 12,717 11,634 10,953 10,257 9,511 34,647 11,921 1,519 TOTALS $ 370,479 $ 103,159 Highway User Revenue Bonds Total 48,587 32,041 32,074 32,077 32,165 166,619 106,496 23,579 Fiscal Year 2020 2021 2022 2023 2024 2025-2029 2030-2034 2035-2039 $ 473,638 TOTALS $ $ Principal 9,155 9,645 10,075 10,000 10,490 18,540 - $ 67,905 S pecial Assessment Bonds Fiscal Year 2020 2021 2022 2023 2024 2025-2029 2030-2034 2035-2039 2040-2044 TOTALS Principal $ 219 219 - Interest $ 19 6 - $ $ 438 25 $ $ 12,763 $ Total 12,398 12,441 12,390 11,812 11,802 19,825 - $ 80,668 Community Facilities District Total 238 225 - Fiscal Year 2020 2021 2022 2023 2024 2025-2029 2030-2034 2035-2039 2040-2044 463 TOTALS $ Interest $ 3,243 2,796 2,315 1,812 1,312 1,285 - $ Principal 1,158 1,203 1,241 1,296 1,357 7,679 9,560 11,886 5,251 $ 40,631 Interest $ 1,831 1,792 1,751 1,704 1,655 7,392 5,524 3,025 568 $ 25,242 $ $ Total 2,989 2,995 2,992 3,000 3,012 15,071 15,084 14,911 5,819 65,873 Business-type Activities General Obligation Bonds Fiscal Year 2020 2021 2022 2023 2024 2025-2029 2030-2034 2035-2039 2040-2044 TOTALS Principal $ 40 43 44 5 5 54 $ 191 $ $ Interest 6 5 3 2 2 4 - $ 22 $ Revenue Bonds Total 46 48 47 7 7 58 - Fiscal Year 2020 2021 2022 2023 2024 2025-2029 2030-2034 2035-2039 2040-2044 213 TOTALS 66 Principal 36,350 39,680 44,200 44,735 42,990 261,670 321,985 348,130 139,280 Interest $ 55,061 53,312 51,355 49,135 46,909 202,250 143,419 68,294 12,408 $ 1,279,020 $ 682,143 $ $ Total 91,411 92,992 95,555 93,870 89,899 463,920 465,404 416,424 151,688 $ 1,961,163 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 Excise Tax Revenue Obligations Fiscal Year 2020 2021 2022 2023 2024 2025-2029 2030-2033 TOTALS Principal $ 18,190 30,835 $ 49,025 $ $ Interest 2,451 2,451 2,451 2,451 2,451 11,813 3,134 27,202 $ $ Total 2,451 2,451 2,451 2,451 2,451 30,003 33,969 76,227 General Obligation Bonds The general obligation bonds are backed by the ultimate taxing power and general revenues of the City; however, $190,831 of these bonds at June 30, 2019 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, 2019 is (in thousands): 6% Bonds 20% Bonds Total Available $ 196,160 285,441 $ 481,601 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 67 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 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 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 $463,475. Principal and interest paid for the current year and total assessments collected were $615,575, and $260,729, 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, 2019, total principal and interest outstanding for CFD general obligation bonds was $42,671,988. 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, 2019, 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 $23,202,748. Principal and interest paid for the current year and total assessments collected were $993,274, and $1,012,834 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. For the year ended June 30, 2019, the amount provided in the Replacement and Extension Funds equaled $7,416,934 which is in compliance with the bond provisions. As of June 30, 2019, the amount available is $ 33,588,000. 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 68 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 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. The following table reflects the annual requirements to amortize all notes outstanding as of June 30, 2019 (in thousands): Fiscal Year 2020 2021 2022 2023 2024 2025-2029 TOTALS Business-type Activities Interest Principal & Fees Total $ 143 $ 35 $ 178 146 31 177 149 28 177 153 25 178 156 22 178 827 55 882 $ 1,574 $ 196 $ 1,770 d. Short-term Debt The City had no short-term debt activity for the fiscal year ended June 30, 2019. 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 $1.3 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 2043. Annual principal and interest payments on the bonds were 44.6 percent of net revenues. The total principal and interest remaining to be paid on the bonds is $1.96 billion. Principal and interest paid for the current year and total customer net revenues were $72,145,492 and $161,824,000 respectively. 69 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 Highway User Revenue Bonds The City has pledged future Highway User Taxes Revenue to repay $67.9 million in highway user revenue bonds issued since 2004. 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 $80,667,713. Principal and interest paid for the current year and total highway user tax revenues were $12,378,263 and $42,405,521, respectively. 9. REFUNDED, REFINANCED AND DEFEASED OBLIGATIONS On April 16, 2019, the City called for the early redemption of $9,965,000 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 $10,232,861 provided to a defeasance escrow agent for the purchase of United States Government securities, and Utility Systems Net Revenues of $44,000 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 $10,279,675. As a result, the liability for the defeased bonds has been removed from the debt of the City. On May 23, 2019, the City issued $54,225,000 of utility revenue bonds with an original issue premium of $3,238,838 to advance refund $55,555,000 of outstanding utility revenue bonds. The refunding bonds were issued with an interest rate ranging from 3.0 to 5.0 percent. Net proceeds in the amount of $57,354,008 (after payment of $109,830 in underwriters’ fees) were provided to a refunding escrow agent to pay issuance costs of $202,508 for insurance premiums and other issuance costs with the remaining $57,151,500 used to provide cash and purchase United States Government securities. The cash and securities were deposited in an irrevocable trust to provide for all future debt service payments of the refunded bonds. As a result, the refunded bonds are considered to be defeased and the liability for those bonds has been removed from the debt of the City. The advanced refunding resulted in a difference between the reacquisition price and the net carrying amount of the old debt of $1,596,500. This difference, reported in the accompanying financial statements as a deferred outflow, is being charged to operations through the year 2033 using the effective interest method. The purpose of the refunding was to take advantage of lower interest rates and restructure debt service payments to achieve a more level debt retirement schedule. The refunding will decrease debt service payments by $6,656,697 over the next 14 years producing an economic gain (difference between the present value of old and new debt service payments) of $6,654,168. On May 23, 2019, the City issued $79,335,000 of utility revenue bonds with an original issue premium of $17,105,303 to advance refund $88,750,000 of outstanding utility revenue bonds. The refunding bonds were issued with an interest rate of 5.0 percent. Net proceeds in the amount of $96,286,300 (after payment of $154,003 in underwriters’ fees) were provided to a refunding escrow agent to pay issuance costs of $252,957 for insurance premiums and other issuance costs with the remaining $96,033,343 used to provide cash and purchase United States Government securities. The cash and securities were deposited in an irrevocable trust to provide for all future debt service payments of the refunded bonds. As a result, the refunded bonds are considered to be defeased and the liability for those bonds has been removed from the debt of the City. The advanced refunding resulted in a difference between the reacquisition price and the net carrying amount of the old debt of $7,283,343. This difference, reported in the accompanying financial 70 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 statements as a deferred outflow, is being charged to operations through the year 2035 using the effective interest method. The purpose of the refunding was to take advantage of lower interest rates and restructure debt service payments to achieve a more level debt retirement schedule. The refunding will decrease debt service payments by $10,157,727 over the next 16 years producing an economic gain (difference between the present value of old and new debt service payments) of $10,115,399. 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, 2019 as reflected below is not included in the City’s financial statements (in thousands). Utility System Revenue Bond Issue dated June 1, 2004 $ 2,750 Utility System Revenue Bond Issue dated June 1, 2005 2,000 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, Taxable Series 2012 80,295 Utility System Revenue Refunding Bond Issue dated September 25, 2014 5,395 Total Refunded and Defeased Bonds Outstanding 71 $ 106,155 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 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 Property and Public Liability, Workers’ Compensation and Employee Benefits Internal Service Funds do not have stop loss receivables at June 30, 2019 and did not received any settlements in excess of insurance coverage over the past three fiscal years. 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, 6/30/17 Adjustments to Reserves Claim Expense $ 11,339 (1,587) (496) Unpaid Claims, 6/30/18 9,256 Adjustments to Reserves Claims Expense 4,132 1,206 Unpaid Claims, 6/30/19 $ 14,594 $ $ 23,246 216 245 4,252 69,923 (70,109) $ 38,837 68,552 (70,360) 23,707 4,066 37,029 1,628 561 71,389 (69,923) 77,149 (68,156) 5,532 $ 46,022 25,896 $ $ 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, 2019 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, 2019, is $12,452,730. 12. NET POSITION a. Restricted Net Position The government-wide statement of net position reports $151 million of restricted net position, of which $67.3 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 in Net Position and Fund Balance 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, 2019 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. The Special Assessment Bonds Debt Service Fund’s deficit will be covered by future Special Assessment revenues. 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, 2019 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 $ 3,521 $ 17,678 4,304 24,895 24,574 50,841 18,530 74,584 2,980 35,259 1,626 3,403 134 1,978 293 4,120 1,693 1,055 3,845 2,150 418 768 $ 61,918 $ 216,731 Operating Revenues $ 29,986 43,547 144,896 84,220 62,432 4,339 1,608 3,153 75 250 1,148 $ 375,654 Operating Income (Loss) $ 8,787 14,348 69,481 (8,894) 24,193 (690) (504) (1,260) (2,673) (5,745) (38) $ 97,005 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, 2019 The City's investment in these Joint Ventures as of June 30, 2019, 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 $ 299,051 6,815 $ 305,866 Business-Type Activities $ 84,360 46,722 125,751 6,421 $ 263,254 Total $ 299,051 6,815 84,360 46,722 125,751 6,421 $ 569,120 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 $1,511,140,345 has been spent on this project through the fiscal year ended June 30, 2019, of which the City’s share and equity interest is $299,051,363. The City has received and accrued $45.5 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 opened May 2019. 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, Fort McDowell 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 $6,814,651 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, 2019 Total investment in the joint venture as of June 30, 2019, is (in thousands): TOPAZ Regional Wireless Cooperative City of Mesa $ 6,815 Town of Gilbert 1,612 City of Apache Junction 596 Superstition Fire and Medical 168 Town of Queen Creek 112 Fort McDowell 44 Rio Verde Fire District 13 Total Joint Venture $ 9,360 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 $84,359,726 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 $125,750,764 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, 2019, is (in thousands): Greenfield Water Reclamation Project Mesa's Share $ 125,751 Gilbert's Share 88,337 Queen Creek's Share 29,524 Total Joint Venture $ 243,612 76 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 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 $46,722,072 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, 2019, 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 $ 1,440,768 Business-Type Activities $ 143,356 Total $ 1,584,124 172,454 11,064 183,518 64,930 124,332 10,276 5,365 75,206 129,697 77 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 Arizona State Retirement System Defined Benefit Plan: a. Plan Description All of 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, 2019 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, 2019, covered employees were required by state statute to contribute at the actuarially determined rate of 11.8% (11.64% 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 11.8% (11.18% for retirement, 0.46% 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, 2019 was $19,123,970, 74.39% paid from governmental funds, 4.59% paid from internal service funds, and 21.02% 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, 2019 was 10.53% (10.41% retirement, 0.06% health, 0.06% long-term disability). The City’s ACR contributions to the System for the year ending June 30, 2019 were $130,679. c. Pension Liability At June 30, 2019, the City reported a liability of $227,232,800 for its proportionate share of the ASRS’ net pension liability. The net pension liability was measured as of June 30, 2018. 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, 2017, to the measurement date of June 30, 2018. The total liabilities as of June 30, 2019, reflect changes in actuarial assumptions based on the results of an actuarial experience study for the 5-year period ended June 30, 2016, including decreasing the discount rate from 8% to 7.5%, changing the projected salary increases from 3–6.75% to 2.7–7.2%, decreasing the inflation rate from 3% to 2.3%, and changing the mortality rates. 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, 2018. The City’s proportion measured as of June 30, 2018, was 1.62932%, which was a decrease of 0.0123% from its proportion measured as of June 30, 2017. d. Pension Expense and Deferred Outflows/Inflows of Resources For the year ended June 30, 2019, the City recognized pension expense for ASRS of $2,855,638. At June 30, 2019, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources (in thousands): 79 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 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 $ 6,260 6,013 Deferred Inflows of Resources $ 1,253 20,147 - 5,464 218 19,124 31,615 2,465 $ 29,329 $ The $19,123,970 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, 2020. 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, 2020 $ 399 2021 (6,497) 2022 (8,289) 2023 (2,451) $ (16,838) 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 June 30, 2017 June 30, 2018 Entry Age Normal 7.5% 2.7 - 7.2% 2.3% Included 2017 SRA Scale U-MP Actuarial assumptions used in the June 30, 2017 valuation were based on the results of an actuarial study for the 5-year period ended June 30, 2016. The long-term expected rate of return on ASRS pension plan investments was determined to be 7.5% 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 rate of return by weighting the expected future real rates of return by the target asset allocation percentage and 80 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 by adding expected inflation. The target allocation and best estimates of geometric real rates of return for each major asset class are summarized in the following table: Asset Class Equity Fixed Income Real Estate Total f. Long-Term Expected Geometric Real Rate of Return 5.50% 3.83% 5.85% Target Allocation 50% 30% 20% 100% Discount Rate The discount rate used to measure the ASRS total pension liability was 7.5%, which was a decrease of 0.5% from the discounted rate used as of June 30, 2017. 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 7.5 %, 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 (6.5%) or 1 percentage point higher (8.5 %) than the current rate (in thousands): City's proportionate share of the net pension liability 1% Decrease 6.5% Current Discount Rate 7.5% 1% Increase 8.5% $ $ $ 146,448 323,926 81 227,233 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 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, 2019 Initial Membership Date Before January 1, 2012 On or after January 1, 2012 and before July 1, 2017 20 years of service, any age 15 years of service, age 62 25 years of service or 15 years of credited service, age 52.5 15 years of credited service, age 52.5*; 15 or more years of service, age 55 Final average salary is based Highest 36 consecutive months on of last 20 years Highest 60 consecutive months of last 20 years Highest 60 consecutive months of last 15 years Retirement and Disability Years of service and age required to receive benefit Benefit percentage Normal Retirement 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% On or After July 1, 2017 1.5% to 2.5% for each year of credited service not to exceed 80% 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 M embers 80% to 100% of retired member's pension benefit Active M embers 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 * With actuarially reduced benefits Retirement and survivor benefits are subject to automatic cost-of-living adjustments based on inflation. 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 $100 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, 2019 Employees Covered by Benefit Terms At June 30, 2019, the following employees were covered by the agent plans’ benefit terms: PSPRS Inactive employees or beneficiaries currently receiving benefits Inactive employees entitled to but not yet receiving benefits Active employees Total PSPRS Police Pension Pension Health 245 574 574 74 355 674 161 709 1,444 58 709 1,341 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, 2019, are indicated below. Rates are a percentage of active members’ annual covered payroll. Active Member Pension PSPRS - Fire 7.65% - 11.65% PSPRS - Police 7.65% - 11.65% PSPRS Tier 3 - Fire 10.84% PSPRS Tier 3 - Police 10.23% City Pension 52.03% 50.33% 10.59% 10.02% City OPEB 0.37% 1.18% 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 32.51% and 32.70% for City police and fire employees respectively, who were PSPRS Tier 3 members. The City’s contributions to the plans for the year ended June 30, 2019, were: Pension PSPRS - Fire $ 16,321,539 PSPRS - Police 28,497,949 PSPRS Tier 3 - Fire 109,334 PSPRS Tier 3 - Police 816,222 OPEB $ 728,343 437,709 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, unless the retired member is required to participate in another state retirement system and the retired 84 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 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, 2019 was 36.25% for both fire and police. The City’s ACR contributions for the year ending June 30, 2019 were $0 for fire and $66,851 for police. d. Liability At June 30, 2019, the City reported the following pension liabilities of $203,637,607 and $396,877,345 for fire and police, respectively. The City also reported an OPEB liability of $9,562,512 for police. The net liabilities were measured as of June 30, 2018, and the total liability used to calculate the net liability was determined by an actuarial valuation as of that date. e. Pension/OPEB Expense and Deferred Outflows/Inflows of Resources For the year ended June 30, 2019, the City recognized pension expense of $28,799,007 and $59,993,731 for fire and police, respectively. City also recognized OPEB expense of $825,403 for police. At June 30, 2019, the City reported deferred outflows of resources and deferred inflows of resources related to pensions and OPEB from the following sources (in thousands): Deferred Outflows of Resources PSPRS - Fire Pension Differences between expected and actual experie $ 1,664 Changes in assumptions 23,739 Net difference between projected and actual earnings on pension plan investments 2,501 City contributions subsequent to the measurement date 16,431 Total $ 44,335 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 Deferred Inflows of Resources $ 8,450 $ 8,450 Pension Deferred Deferred Outflows of Inflows of Resources Resources $ 3,402 $ 4,870 33,808 4,066 29,314 70,590 $ 85 OPEB Deferred Deferred Outflows of Inflows of Resources Resources $ 601 $ 225 - $ 4,870 - $ 1,166 1,767 219 $ 444 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 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, 2020. 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, 2020 2021 2022 2023 2024 Thereafter f. PSPRS Fire Pension $ 6,767 5,429 1,250 2,496 2,295 1,217 $ 19,454 PSPRS Police Pension $ 17,589 9,540 4,993 3,911 373 $ 36,406 PSPRS Police OPEB 1 1 84 71 $ 157 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 Cost-of-living adjustment Mortality Rates for Pension and OPEB Healthcare cost trend rate June 30, 2018 Entry Age Normal 7.4% for contribution rates, 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 with adjustments to match current experience. N/A Actuarial assumptions used in the June 30, 2018 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, 2019 The long-term expected rate of return on PSPRS plan investments 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: Asset Class Short Term Investments Risk Parity Fixed Income Real Assets GTS Private Credit Real Estate Private Equity Non-U.S. Equity U.S. Equity Total Target Allocation 2% 4% 5% 9% 12% 16% 10% 12% 14% 16% 100% Long-Term Expected Geometric Real 0.25% 5.00% 1.25% 4.52% 3.96% 6.75% 3.75% 5.83% 8.70% 7.60% g. Discount Rate A discount rate of 7.40% for Tier 1 and Tier 2 members was used to measure the total pension/OPEB liability, which was the same as the discount rated used at June 30, 2017. A discount rate of 7.00% for Tier 3 members was used to measure the total Pension/OPEB Liability. 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. 87 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 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): Fire Total Pension Liability Plan Fiduciary Net Position Net Position Liability Balance - Beginning of Year $ 375,564 $ 181,700 $ 193,864 Service Cost 7,271 - 7,271 Interest on the Total Liability 27,446 - 27,446 - - - 1,951 - 1,951 Changes for the Year: Changes of Benefit Terms Differences Between Expected & Actual Experience in the M easurement of the Liability Changes of Assumptions / Other Inputs - - - Contributions - Employer - 16,733 (16,733) Contributions - Employee - 3,035 (3,035) Net Investment Income - 12,464 (12,464) Benefit Payments, Including Refunds (16,608) (16,608) - Hall/Parker Settlement of Employee Contributions - (5,150) 5,150 Administrative Expenses - (190) 190 Other Changes - 2 (2) Net Changes Balances - End of Year $ 20,060 10,286 9,774 395,624 $ 191,986 $ 203,638 88 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 Police Total Pension Liability Plan Fiduciary Net Position Net Position Liability Total OPEB Liability Plan Fiduciary Net Position Net OPEB Liability Balance - Beginning of Year $ 698,649 $ 320,757 $ 377,892 $ 18,934 $ $ Service Cost 13,826 - 13,826 190 - 190 Interest on the Total Liability 50,926 - 50,926 1,359 - 1,359 - - - - - - 3,862 - 3,862 472 - 472 Changes of Assumptions / Other Inputs - - - - - - Contributions - Employer - 31,596 (31,596) - 231 (231) Contributions - Employee - 6,058 (6,058) - - - Net Investment Income - 21,889 (21,889) - 695 (695) 10,477 8,457 Changes for the Year: Changes of Benefit Terms Differences Between Expected & - Actual Experience in the M easurement of the Liability Benefit Payments, Including Refunds (34,755) (34,754) (1) (1,325) (1,325) - Hall/Parker Settlement of Employee Contributions - (10,096) 10,096 - - - Administrative Expenses - (333) 333 - (11) 11 Other Changes - 514 (514) - - - Net Changes Balances - End of Year i. $ 33,859 14,874 18,985 696 732,508 $ 335,631 $ 396,877 $ 19,630 (410) $ 10,067 1,106 $ 9,563 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 (6.4%) or 1 percentage point higher (8.4%) than the current rate (in thousands): Fire Net Pension Liability Police Net Pension Liability Police OPEB Liability 1% Decrease $ 255,503 498,766 11,697 Current Discount Rate $203,638 396,877 9,563 1% Increase $ 161,104 314,113 7,773 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. 89 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 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. 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, 2018 is $746,815,618. The June 30, 2019 liability is based on a no gain/loss roll forward of the June 30, 2017 valuation. 90 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 The impact of changes from the June 30, 2017 results include the following: • The discount rate was decreased from 3.13% to 2.98% as of June 30, 2018. The 2.98% rate was selected based on the S&P Municipal Bond 20-Year High Grade Rate Index as of June 29, 2018. This caused an increase in liability of $41,102,085. d. OPEB Expense and Deferred Outflows/Inflows of Resources For the year ended June 30, 2019, the City recognized OPEB expense of $37,222,782. At June 30, 2019, 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 Deferred Outflows of Resources $ 14,162 Deferred Inflows of Resources $ 942 31,172 21,048 35,210 $ 32,114 $ 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, 2020. 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, 2020 $ (5,221) 2021 (5,221) 2022 (5,221) 2023 (4,826) 2024 2,537 $ (17,952) 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: 91 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 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, 2018 Entry Age Normal 2.98% 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. f. Discount Rate The discount rate at the measurement date is 2.98%. 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, 2018. g. Changes in OPEB Liability The below table outlines the changes in OPEB Liability for the fiscal year ending June 30, 2019 (in thousands): OPEB Liability at Beginning of Year 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 $ $ 705,714 19,997 22,447 (1,133) 17,023 (17,232) 41,102 746,816 * Because the City funds OPEB benefits on a “pay-as-you-go” basis, employer contributions are equal to benefit payments. 92 (Continued) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 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): 16. 1% Decrease City OPEB Plan $ 877,029 Current Municipal Bond Rate $ 746,816 1% Increase $ 643,513 1% Decrease City OPEB Plan $ 639,105 Current Healtchare Trend Rate $ 746,816 1% Increase $ 884,533 SUBSEQUENT EVENTS On July 10, 2019 the Cadence Community Facility District issued 2019 Cadence Community Facilities District (City of Mesa, Arizona) Special Assessment District No. 1 Special Assessment Bonds in the amount of $2,012,000. These bonds are due in annual principal installments ranging from $55,000 to $130,000, plus semi-annual interest ranging from 2.25% percent to 4.5% percent through July 1, 2043. On July 10, 2019 the Cadence Community Facility District issued 2019 Cadence Community Facilities District (City of Mesa, Arizona) Special Assessment District No. 2 Special Assessment Bonds in the amount of $287,000. These bonds are due in annual principal installments ranging from $7,000 to $20,000, plus semi-annual interest ranging from 2.3% percent to 4.5% percent through July 1, 2043. On September 5, 2019, the City called for the early redemption of $49,025,000 in Excise Tax Revenue Obligations from existing resources of the City to payoff the Excise Tax Revenue Obligation Bond principal balance that is currently outstanding. This defeasance was funded with City cash and provided to a defeasance escrow agent for the purchase of United States Government securities. The securities were deposited to an irrevocable trust to provide for all future debt service payments of the defeased bonds totaling $54,233,707. As a result, the liability for the defeased bonds will be removed from the debt of the City. On October 17, 2019, the Cadence Community Facility District issued 2019 Cadence Community Facilities District (City of Mesa, Arizona) General Obligation Bonds in the amount of $1,235,000. These bonds are due in annual principal installments ranging from $35,000 to $75,000, plus semi-annual interest ranging from 3 percent to 4 percent through July 15, 2044. On October 17, 2019, the Eastmark Community Facility District issued 2019 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) General Obligation Bonds in the amount of $14,120,000. These bonds are due in annual principal installments ranging from $285,000 to $835,000, plus semi-annual interest ranging from 3 percent to 4 percent through July 15, 2044. 93 (Concluded) REQUIRED SUPPLEMENTARY INFORMATION COM PREHENS I VE ANNUAL FI NA NCI AL RE PORT 2 019 GIL B E RT ROA D L I G H T RAI L EXTE NS I ON | DI STRI CT 4 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, 2019 (in thousands) Arizona State Retirement System City's Proportion of Net Pension Liability City's Proportionate Share of Net Pension Liability City's Covered Payroll City's Proportionate Share of Net Pension Liability as a Percentage of its Covered Payroll Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 2019 (2018) 1.6293% $ 227,233 Reporting Fiscal Year* (Measurement Date) 2018 2017 2016 (2017) (2016) (2015) 1.6416% 1.6605% 1.6393% $ 255,729 $ 268,013 $ 255,337 2015 (2014) 1.6341% $ 241,792 $ 162,089 $ 158,958 $ 155,868 $ 151,154 $ 147,402 140.19% 160.88% 171.95% 168.93% 164.04% 73.40% 69.92% 67.06% 68.35% 69.49% See accompanying notes to pension plan schedules. *2014 through 2010 Information not available 94 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, 2019 (in thousands) Public Safety Personnel Retirement System - Fire Total Pension Liability Service Cost Interest on the Total Pension Liability Changes of Benefit Terms Diff 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) Reporting Fiscal Year * (Measurement Date) 2018 2017 2016 (2017) (2016) (2015) 2019 (2018) $ 7,271 27,446 - $ 7,724 25,687 2,125 $ 6,439 23,654 21,380 $ 6,127 23,086 - 2015 (2014) $ 6,281 20,708 4,044 1,951 - (2,670) 12,613 (4,423) 11,970 (3,518) - (6,961) 23,097 (16,608) 20,060 375,564 395,624 (17,095) 28,384 347,180 375,564 (19,893) 39,127 308,053 347,180 (17,323) 8,372 299,681 308,053 (16,309) 30,860 268,821 299,681 Plan Fiduciary Net Position Contributions - Employer Contributions - Employee Net Investment Income Benefit Payments, Including Refunds of Employee Contributions Hall/Parker Settlement Administrative Expense Other Changes Net Change in Plan Fiduciary Net Position Plan Fiduciary Net Position - Beginning Plan Fiduciary Net Position - Ending (b) 16,733 3,035 12,464 13,558 3,923 19,308 12,735 4,396 954 9,828 3,847 5,878 9,157 3,488 19,840 (16,608) (5,150) (190) 2 10,286 181,700 191,986 (17,095) (174) 43 19,563 162,137 181,700 (19,893) (138) (12) (1,958) 164,095 162,137 (17,323) (144) 45 2,131 161,964 164,095 (16,309) (160) (113) 15,903 146,061 161,964 City's Net Pension Liability - Ending (a) - (b) $ 203,638 $ 193,864 $ 185,043 $ 143,958 $ 137,717 Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 48.53% 48.38% 46.70% 53.27% 54.05% $ 32,445 $ 32,941 $ 32,453 $ 31,661 $ 30,782 627.64% 588.52% 570.19% 454.69% 447.39% City's Covered Payroll City's Net Pension Liability as a Percentage of its Covered Payroll See accompanying notes to pension plan schedules. *2014 through 2010 Information not available 95 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, 2019 (in thousands) Public Safety Personnel Retirement System - Police Pension Total Pension Liability Service Cost Interest on the Total Liability Changes of Benefit Terms Diff 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) 2019 (2018) Reporting Fiscal Year * (Measurement Date) 2018 2017 2016 (2017) (2016) (2015) 2015 (2014) $ 13,826 50,926 - $ 15,841 47,572 5,718 $ 12,438 43,573 34,005 $ 12,216 41,908 - $ 12,481 36,514 8,728 3,862 - 365 19,037 (4,001) 23,614 (2,173) - (11,331) 51,228 (34,755) 33,859 698,649 732,508 (32,522) 56,011 642,638 698,649 (31,689) 77,940 564,698 642,638 (29,998) 21,953 542,745 564,698 (27,566) 70,054 472,691 542,745 Plan Fiduciary Net Position Contributions - Employer Contributions - Employee Net Investment Income Benefit Payments, Including Refunds of Employee Contributions Hall/Parker Settlement Administrative Expense Other Changes Net Change in Plan Fiduciary Net Position Plan Fiduciary Net Position - Beginning Plan Fiduciary Net Position - Ending (b) 31,596 6,058 21,889 26,819 7,693 34,221 24,067 8,157 1,667 19,680 7,613 10,065 17,443 6,784 33,360 (34,754) (10,096) (333) 514 14,874 320,757 335,631 (32,522) (306) 420 36,325 284,432 320,757 (31,689) (240) 382 2,344 282,088 284,432 (29,998) (246) 28 7,142 274,946 282,088 (27,566) (269) 288 30,040 244,906 274,946 City's Net Pension Liability - Ending (a) - (b) $ 396,877 $ 377,892 $ 358,206 $ 282,610 $ 267,799 Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 45.82% 45.91% 44.26% 49.95% 50.66% $ 63,003 $ 64,740 $ 61,211 $ 62,461 $ 59,688 629.93% 583.71% 585.20% 452.46% 448.66% City's Covered Payroll City's Net Pension Liability as a Percentage of its Covered Payroll See accompanying notes to pension plan schedules. *2014 through 2010 Information not available 96 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, 2019 (in thousands) Public Safety Personnel Retirement System - Police OPEB Reporting Fiscal Year * (Measurement Date) Total Liability Service Cost Interest on the Total Liability Changes of Benefit Terms Difference 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) 2019 (2018) $ Plan Fiduciary Net Position Contributions - Employer Net Investment Income Benefit Payments, Including Refunds of Employee Contributions Administrative Expense 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) $ Plan Fiduciary Net Position as a Percentage of the Total OPEB Liability City's Covered Payroll 190 1,359 - 2018 (2017) $ 472 - 312 (335) (1,325) 696 18,934 19,630 (1,239) 342 18,592 18,934 231 695 639 1,141 (1,325) (11) (410) 10,477 10,067 (1,239) (10) 531 9,946 10,477 9,563 $ 51.29% $ City's Net OPEB Liability as a Percentage of its Covered Payroll 63,003 15.18% 97 213 1,356 35 8,457 55.33% $ 64,740 13.06% 2017 through 2010 Information not available CITY OF MESA, ARIZONA EXHIBIT B-3 REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CITY PENSION CONTRIBUTIONS JUNE 30, 2019 (in thousands) Arizona State Retirement System Statutorily Required Contribution City's Contribution in Relation to the Statutorily Required Contribution City's Contribution (Deficiency) / Excess $ 2019 19,124 $ 2018 17,650 $ 2017 17,423 $ 19,124 - $ 17,650 - $ 17,423 - City's Covered Payroll $ 171,141 $ 160,986 $ 158,958 City's Contributions as a Percentage of Covered Payroll 11.18% 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 $ 2019 16,431 $ 2018 14,289 $ 2017 13,490 $ 16,431 - $ 15,509 1,220 $ 13,490 - City's Covered Payroll $ 34,136 $ 32,446 $ 32,941 City's Contributions as a Percentage of Covered Payroll 48.13% See accompanying notes to plan schedules. 98 47.80% 40.95% EXHIBIT B-3 (continued) $ 2016 16,955 $ 2015 16,146 $ 2014 15,750 $ 16,955 - $ 16,146 - $ 15,750 - $ 155,868 $ 151,154 $ 147,402 10.88% 10.67% 10.68% $ 2016 11,197 $ 2015 9,827 $ 2014 9,157 $ 12,735 1,538 $ 9,827 - $ 9,157 - $ 32,453 $ 31,661 $ 30,782 39.24% 31.04% 2013 through 2010 Information not available 2013 through 2010 Information not available 29.75% 99 CITY OF MESA, ARIZONA EXHIBIT B-3 REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CITY PENSION CONTRIBUTIONS JUNE 30, 2019 (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 $ 2019 29,314 $ 2018 29,048 $ 2017 26,809 $ 29,314 - $ 21,726 (7,322) $ 26,809 - City's Covered Payroll $ 63,808 $ 63,003 $ 64,740 City's Contributions as a Percentage of Covered Payroll 45.94% 34.48% 41.41% Public Safety Personnel Retirement System - Police OPEB Actuarially Determined Contribution City's Contribution in Relation to the Actuarially Determined Contribution City's Contribution (Deficiency) / Excess $ 2019 1,166 $ 1,166 - City's Covered Payroll $ 63,808 City's Contributions as a Percentage of Covered Payroll 1.83% See accompanying notes to plan schedules. *2016 through 2010 Information not available 100 $ 2017 641 $ 772 - $ 641 - $ 63,003 $ 64,740 $ 2018 772 1.23% 0.99% EXHIBIT B-3 (concluded) $ 2016 21,697 $ 2015 19,680 $ 2014 17,443 $ 24,067 2,370 $ 19,680 - $ 17,443 - $ 61,211 $ 62,461 $ 59,688 39.32% 31.51% 2013 through 2010 Information not available 29.22% 101 CITY OF MESA, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION NOTES TO PENSION PLAN SCHEDULES JUNE 30, 2019 (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 Amort 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 20 years for unfunded actuarial accrued liability, 20 years for excess 7-year smoothed market value; 80%/120% market corridor. PSPRS members with initial membership date before July 1, 2017: In the 2017 actuarial valuation, the investment rate of return was decreased from 7.5% to 7.4%. 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 2017 actuarial valuation, projected salary increases were decreased from 4.0%–8.0 to 3.5%–7.5%. 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 2017 actuarial valuation, wage growth was decreased from 4.0%–3.5%. In the 2014 actuarial valuation, projected salary increases were decreased from 4.5% to 4.0%. 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). In the 2017 actuarial valuation, changed to RP 2014 tables with 75% of MP 2016 fully generational projection scales. 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. 102 CITY OF MESA, ARIZONA EXHIBIT B-4 REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES IN THE CITY'S TOTAL OPEB LIABILITY 2019 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) $ $ 19,997 22,447 - 2018 $ 21,431 20,112 - (1,133) 17,023 (46,955) (17,232) 41,102 705,714 746,816 (19,013) (24,425) 730,139 $ 705,714 2017 through 2010 Information not available ** Because the City funds OPEB benefits on a “pay-as-you-go” basis, employer contributions are equal to benefit payments. 103 CITY OF MESA, ARIZONA EXHIBIT B-5 REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE (NON-GAAP BASIS) GENERAL FUND FOR THE FISCAL YEAR ENDED JUNE 30, 2019 (in thousands) Budgeted Amounts Revenues: Sales Taxes Occupancy Taxes Licenses and Permits Intergovernmental Charges for Services Fines and Forfeitures Investment Income Contributions Miscellaneous Revenues Total Revenues Original $ Actual Budgetary Basis Final 117,645 17,435 153,726 25,527 7,825 334 2,485 324,977 $ 117,645 17,435 153,726 25,527 7,825 334 2,410 324,902 $ 124,487 23 18,608 138,539 26,764 8,573 5,013 108 4,117 326,232 Variance with Final Budget $ 6,842 23 1,173 (15,187) 1,237 748 4,679 108 1,707 1,330 Expenditures: Current: General Government Public Safety Community Environment Cultural-Recreational Capital Outlay Total Expenditures 99,306 246,895 19,954 42,502 32,298 440,955 102,237 253,784 20,485 42,489 32,785 451,780 88,000 248,389 18,815 40,710 12,579 408,493 14,237 5,395 1,670 1,779 20,206 43,287 Excess (Deficiency) of Revenues Over (Under) Expenditures (115,978) (126,878) (82,261) 44,617 Other Financing Sources (Uses): Transfers In Transfers Out Total Other Financing Sources (Uses) 102,214 (7,876) 94,338 102,214 (92,484) 9,730 118,448 (29,142) 89,306 16,234 63,342 79,576 Net Change in Fund Balances (21,640) (117,148) 7,045 124,193 Fund Balance - Beginning 122,975 122,975 140,848 17,873 Fund Balance - Ending $ 101,335 See accompanying note to budgetary comparison schedule. 104 $ 5,827 $ 147,893 $ 142,066 CITY OF MESA, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION NOTES TO BUDGETARY COMPARISON SCHEDULE JUNE 30, 2019 (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, 2019 on the “GAAP basis” to the “budget basis” as follows: Net Change in Fund Balance-Budget Basis Exhibit B-5 $ 7,045 Basis Differences: Compensated Absences Payroll Accrual Unavailable Revenue Unrealized Gain on Investments Net Change in Fund Balance-GAAP Basis Exhibit A-5 176 456 (704) (1,452) $ 5,521 105 COMBINING STATEMENTS COM PREHENS I VE ANNUAL FI NA NCI AL RE PORT 2 019 FA L CO N F I EL D AI RPORT | DI STRI CT 5 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. Public Safety Sales Tax accounts for expenditures of the voter-approved sales tax dedicated to Public Safety. 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 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, 2019 (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 Grants and Special Programs $ $ $ $ 16,230 2 59 - $ 16,291 $ 10,617 $ $ 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 $ 7,518 13 31 7,562 - $ $ 150 1 151 2 - $ $ 6,678 27 6,705 - $ $ 546 - $ 8,030 654 31 1,902 - 960 - - 70 72 - 546 602 1,562 1 1 - - - 93 93 7,561 7,561 79 79 6,705 6,705 15,745 15,745 7,052 1,511 459 (60) 8,962 16,291 $ 10,617 7,562 $ 106 151 $ 6,705 $ EXHIBIT C-1 (Continued) Special Revenue Funds Quality of Life Sales Tax Highway User Revenue Mesa Arts Center Restoration Mesa Housing Authority Public Safety Tax $ 17,162 68 3,829 - $ $ 539 18 2,173 - $ 6,287 4 2,071 - $ 2,730 $ 8,362 $ 2,140 1,140 - $ $ $ 21,059 $ $ $ 2,343 - 1,358 11 1,369 61 65 440 1,580 - 278 - - - - - 88 88 182 182 18,716 18,716 1,304 1,304 1,150 1,150 8,362 8,362 1,862 1,862 17 38,277 38,294 17 82,203 26,121 459 (60) 108,740 2,730 $ 8,362 $ 2,140 $ 48,109 $125,095 1,369 $ - 278 - $108,064 1,730 434 14,850 17 $125,095 2,343 $ $ $ 44,112 1,043 203 2,734 17 $ 48,109 2,384 7,343 9,727 $ 21,059 4 - $ 2,140 - Street Sales Tax Total Special Revenue Funds 107 $ 7,379 278 7,343 1,173 16,173 CITY OF MESA, ARIZONA EXHIBIT C-1 COMBINING BALANCE SHEET NON-MAJOR GOVERNMENTAL FUNDS JUNE 30, 2019 (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 General Capital Projects Parks Public Safety $ 151 - $32,840 69 1,179 $11,104 13 - $ 8,035 9 - 151 $34,088 $11,117 - $ 1,598 - $ - 1,598 283 17 506 506 - - - - 16 16 16 16 151 151 1,179 31,311 32,490 10,834 10,834 8,027 8,027 52,830 52,830 1,179 71,842 31,311 104,332 151 $34,088 $11,117 $ 8,044 $ 53,352 $ 106,752 $ $ 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 Total Capital Projects Funds Community Facilities District $ 108 283 - Streets $ $ 8,044 $ 40,247 10,645 96 2,364 $ 53,352 $ $ $ 17 - 92,377 10,645 187 2,364 1,179 $ 106,752 2,404 2,404 EXHIBIT C-1 (Concluded) Community Facilities District Debt Service Funds Highway General User Revenue Obligation Bonds Bonds Special Assessment Bonds Total Debt Service Funds Total Nonmajor Governmental Funds $ $ $ $ 24 7,746 45,675 14,646 913 $ 69,004 $ $ $ 9 - $ 3,272 679 14,223 13 18,196 $ $ - $ $ 1,040 4 2,082 3,126 15 4,474 34,449 900 39,838 6,437 28,104 34,541 $ - 10,547 $ 10,547 $ 423 423 $ $ - - 1,832 8,715 10,547 18 18 - $ 200,441 12,375 645 17,214 1,196 7,746 45,675 14,646 913 300,851 9,783 278 7,343 9,327 4 38,901 48,232 9,327 1,177 38,901 66,809 14,223 14,223 444 444 - 479 479 15,146 15,146 15,344 15,344 847 847 4,853 4,853 - (74) (74) 5,700 (74) 5,626 1,196 159,745 57,432 459 (134) 218,698 39,838 $ 10,547 423 $ 69,004 18,196 $ $ 109 $ 300,851 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, 2019 (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 Grants and Special Programs $ $ $ $ $ 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 100 228 328 156 5 50 211 4,005 57 4,062 16,146 596 16,742 3,223 599 5,399 84 1,066 288 97 2,000 12,756 - 161 - - 1,031 52 4,870 6,630 3,398 3,928 137 1,347 - 4 165 - 1,130 13,713 2,837 11,647 328 46 4,062 3,029 1,109 - - (3,161) (3,161) - 10 10 Net Change in Fund Balances 328 46 901 3,029 1,119 Fund Balances - Beginning 7,233 33 5,804 12,716 7,843 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 $ 7,561 $ 110 79 $ 6,705 $ 15,745 $ 8,962 EXHIBIT C-2 (Continued) Special Revenue Funds Highway User Revenue Mesa Arts Center Restoration Mesa Housing Authority Public Safety Tax Quality of Life Sales Tax Street Sales Tax Total Special Revenue Funds $ $ $ 18,653 102 18,755 $ 8,569 32 8,601 $ 25,829 119 25,948 $ 30,986 399 1 677 1,733 443 34,239 $ 65,384 156 3,223 5,122 66,459 17,007 1,684 3,862 147 2,443 165,487 9,949 29,465 57,908 7,977 4 26,172 131,475 42,406 751 43,157 618 70 688 16,063 - - 20 17,445 - 239 - 24,859 - 8,488 24,551 338 338 1,051 18,516 239 24,859 5,339 387 19,393 12,328 37,447 18,606 350 239 8,362 1,089 (3,208) 34,012 (12,383) (12,383) - - - - - 10 (15,544) (15,534) 6,223 350 239 8,362 1,089 (3,208) 18,478 12,493 954 911 - 773 41,502 90,262 1,304 $ 1,150 $ 8,362 $ 1,862 $ 38,294 $ 108,740 $ 18,716 $ 111 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, 2019 (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 Capital Projects Funds Community Facilities District General Capital Projects Parks Public Safety Streets Total Capital Projects Funds $ $ $ $ $ $ - 734 140 874 137 137 136 136 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 - - - - 648 13,097 13,745 16,841 16,841 87 4,871 4,958 Excess (Deficiency) of Revenues Over (Under) Expenditures (13,745) (15,967) Other Financing Sources (Uses): Transfers In Transfers Out Face Amount of Bonds Issued Premium on Issuance of Bonds (Net) Total Other Financing Sources (Uses) 2 (28) 13,666 256 13,896 Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending $ 7,518 1,406 8,924 7,518 2,413 140 10,071 70 5,379 5,449 69 13,698 13,767 874 53,886 54,760 (4,821) (5,313) (4,843) (44,689) 28,783 28,783 12,675 37 12,712 10,345 30 10,375 (3,913) 10,045 29 6,161 28,785 (3,941) 46,731 352 71,927 151 12,816 7,891 5,062 1,318 27,238 - 19,674 2,943 2,965 51,512 77,094 151 $ 32,490 $ 10,834 $ 8,027 $ 52,830 $ 104,332 112 EXHIBIT C-2 (Concluded) Debt Service Funds Community Facilities District General Obligation Bonds Highway User Revenue Bonds Special Assessment Bonds Total Debt Service Funds Total Nonmajor Governmental Funds $ $ $ $ $ $ $ 1,997 1,013 95 3,105 33,852 562 771 907 36,092 - 261 2 263 35,849 1,274 562 771 1,004 39,460 65,384 36,005 3,223 1,274 5,122 74,539 17,007 2,455 7,279 147 2,583 215,018 2,125 1,690 3 3,818 28,104 12,783 7 40,894 8,715 3,663 5 12,383 567 49 616 - 9,949 29,465 57,908 7,977 39,511 18,185 15 57,711 39,511 18,185 19 874 80,058 243,946 (713) (4,802) (12,383) (353) (18,251) (28,928) 28 (2) 277 303 4,112 (794) 953 4,271 12,383 12,383 192 192 16,715 (796) 277 953 17,149 45,510 (20,281) 47,008 1,305 73,542 (410) (531) - (161) (1,102) 44,614 1,257 5,384 - 87 6,728 174,084 847 $ 4,853 $ - $ (74) $ 113 5,626 $ 218,698 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, 2019 (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 591 613 7 6,736 7,947 13,683 60 552 14,295 Employee Benefits Self Insurance Total 8,084 33 67 8,184 $ 45,751 17 177 216 36 69 46,266 $ 68,109 630 177 316 6,736 655 69 76,692 329 2,128 2,457 - - 41 41 329 2,169 2,498 10,404 14,295 8,184 46,307 79,190 1,752 1,752 252 252 164 164 249 249 2,417 2,417 12,156 14,547 8,348 46,556 81,607 LIABILITIES Current Liabilities Accounts Payable and Accrued Liabilities Claims Payable Current Portion of Compensated Absences Total Current Liabilities 1,198 87 1,285 8 14,594 8 14,610 60 25,896 5 25,961 1,526 5,532 14 7,072 2,792 46,022 114 48,928 Long-Term Liabilities Compensated Absences Net Pension and OPEB Liability Total Long-Term Liabilities 558 22,563 23,121 73 3,310 3,383 16 2,177 2,193 55 3,283 3,338 702 31,333 32,035 24,406 17,993 28,154 10,410 80,963 1,627 1,627 234 234 152 152 231 231 2,244 2,244 2,457 (16,334) (13,877) (3,680) (3,680) (19,958) (19,958) 41 35,874 $ 35,915 2,498 (4,098) $ (1,600) Total Assets DEFERRED OUTFLOWS OF RESOURCES Pensions and OPEB Total Deferred Outflows of Resources Total Assets and Deferred Outflows of Resources 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 $ $ 114 $ 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, 2019 (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 $ $ $ $ 7,686 20,256 900 - - - Total $ 7,686 20,256 900 28,842 7,605 7,605 3,325 380 3,705 16,481 58,745 4,647 5,258 85,131 16,481 69,675 4,647 5,638 125,283 7,336 19,828 840 - - - 7,336 19,828 840 28,004 922 8,436 9,358 1,152 5,829 6,981 6,909 86,294 93,203 8,983 100,559 137,546 Operating Income (Loss) Before Depreciation 838 (1,753) (3,276) (8,072) (12,263) Depreciation (224) - - (133) (357) Operating Income (Loss) 614 (1,753) (3,276) (8,205) (12,620) Nonoperating Revenues (Expense): Investment Income Total Nonoperating Revenues (Expenses) - 503 503 337 337 2,049 2,049 2,889 2,889 Income (Loss) Before Capital Contributions 614 (1,250) (2,939) (6,156) (9,731) Capital Contributions 93 - - - 93 Change in Net Position 707 (1,250) (2,939) (6,156) (9,638) (14,584) (2,430) (17,019) 42,071 8,038 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 - Beginning Total Net Position - Ending $ (13,877) $ 115 (3,680) $ (19,958) $ 35,915 $ (1,600) CITY OF MESA, ARIZONA EXHIBIT C-5 INTERNAL SERVICE FUNDS COMBINING STATEMENT OF CASH FLOWS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 (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 $ $ $ 28,798 (19,631) (8,800) 7,605 (4,030) (96) Employee Benefits Self Insurance Total 3,705 (4,235) (422) $ 85,133 (90,612) (919) $ 125,241 (118,508) (10,237) 367 3,479 (952) (6,398) (3,504) (380) - - - (380) (380) - - - (380) Cash Flows from Investing Activities: Interest Received on Investments Net Cash Provided By (Used For) Investing Activities (2) (2) 487 487 328 328 1,994 1,994 2,807 2,807 Net Change in Cash and Cash Equivalents (15) 3,966 (624) (4,404) (1,077) Pooled Cash and Investments at Beginning of Year 606 9,717 8,708 50,155 69,186 Cash Flows from Capital and Related Financing Activities: Acquisition and Construction of Capital Assets Net Cash Provided By (Used For) Capital and Related Financing Activities Pooled Cash and Investments at End of Year $ 591 $ 13,683 $ 8,084 $ 45,751 $ $ 614 $ (1,753) $ (3,276) $ (8,205) $ (12,620) 68,109 Reconciliation of Operating Income (Loss) to Net Cash Provided by Operating Activities: Operating Income (Loss) 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 (Decrease)/Increase in Deferred Outflows (Decrease)/Increase in Deferred Inflows (Decrease)/Increase in Other Accrued Expenses 224 - - 133 357 (44) (657) 8 411 (172) (268) 258 (7) (20) 6 (96) (30) 29 5,343 134 12 (6) (27) 21 2,190 2 (30) 273 (6) (42) 34 1,443 (42) (657) 92 702 (280) (367) 342 8,969 Total Adjustments (247) 5,232 2,324 1,807 9,116 Net Cash Provided by (Used for) Operating Activities $ 367 116 $ 3,479 $ (952) $ (6,398) $ (3,504) SUPPLEMENTAL INFORMATION COM PREHENS I VE ANNUAL FI NA NCI AL RE PORT 2 019 E AST M A R K PARK | DI STRI CT 6 CITY OF MESA, ARIZONA EXHIBIT D-1 SUPPLEMENTAL INFORMATION BUDGETARY COMPARISON SCHEDULE COMMUNITY FACILITIES DISTRICT FOR THE FISCAL YEAR ENDED JUNE 30, 2019 (in thousands) Budgeted Amounts Revenues: Property Taxes Investment Income Contributions Total Revenues Original $ Final 158 138 296 $ Variance with Final Budget Actual 158 138 296 $ 156 5 50 211 $ (2) 5 (88) (85) Expenditures: Current: General Government Service Charges Cost of Issuance Capital Outlay Total Expenditures 3,820 1,030 13,396 18,246 1,126 4 1,032 16,106 18,268 161 4 648 13,097 13,910 965 384 3,009 4,358 Excess (Deficiency) of Revenues Over (Under) Expenditures (17,950) (17,972) (13,699) 4,273 Other Financing Uses: Transfers In Transfers Out Face Amount of Bonds Issued Premium on Issuance of Bonds Total Other Financing Uses 17,950 17,950 (28) 17,950 17,922 2 (28) 13,666 256 13,896 2 4,284 (256) 4,030 - (50) 197 247 90 129 33 (96) Net Change in Fund Balances Fund Balance - Beginning Fund Balance - Ending $ 90 $ 79 Note: Includes both the Special Revenue and the Capital Projects Funds 117 $ 230 $ 151 CITY OF MESA, ARIZONA EXHIBIT D-2 SUPPLEMENTAL INFORMATION BUDGETARY COMPARISON SCHEDULE ENVIRONMENTAL COMPLIANCE FOR THE FISCAL YEAR ENDED JUNE 30, 2019 (in thousands) Budgeted Amounts Revenues: Charges for Services Investment Income Total Revenues Original $ 16,023 62 16,085 Final $ 16,023 62 16,085 Actual $ 16,146 596 16,742 Variance with Final Budget $ 123 534 657 Expenditures: Current: General Government Public Safety Community Environment Cultural-Recreational Capital Outlay Total Expenditures 1,226 66 7,102 7,293 5,604 21,291 1,226 66 5,759 7,293 6,947 21,291 1,031 52 4,870 6,630 1,130 13,713 195 14 889 663 5,817 7,578 Excess (Deficiency) of Revenues Over (Under) Expenditures (5,206) (5,206) 3,029 8,235 Net Change in Fund Balances (5,206) (5,206) 3,029 8,235 Fund Balances - Beginning 10,364 12,894 12,716 (178) Fund Balance - Ending $ 5,158 $ 7,688 118 $ 15,745 $ 8,057 CITY OF MESA, ARIZONA EXHIBIT D-3 SUPPLEMENTAL INFORMATION BUDGETARY COMPARISON SCHEDULE GRANTS AND SPECIAL PROGRAMS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 (in thousands) Budgeted Amounts Revenues: Occupancy Taxes Licenses and Permits Intergovernmental Charges for Services Fines and Forfeitures Investment Income Contributions Miscellaneous Revenues Total Revenues Original $ Final 2,430 508 12,377 1,005 4 5,591 21,915 $ Variance with Final Budget Actual 2,430 508 12,377 1,005 4 5,591 21,915 $ 3,223 599 5,399 84 1,066 288 97 2,000 12,756 $ 793 91 (6,978) 84 61 288 93 (3,591) (9,159) Expenditures: Current: General Government Public Safety Community Environment Cultural-Recreational Capital Outlay Total Expenditures 3,283 8,560 361 2,104 9,116 23,424 3,983 10,281 412 1,831 9,494 26,001 3,398 3,928 137 1,347 2,837 11,647 585 6,353 275 484 6,657 14,354 Excess (Deficiency) of Revenues Over (Under) Expenditures (1,509) (4,086) 1,109 5,195 Other Financing Sources (Uses): Transfers In Total Other Financing Uses - - 10 10 10 10 Net Change in Fund Balances (1,509) (4,086) 1,119 5,205 Fund Balances - Beginning 4,210 8,181 7,843 (338) Fund Balance - Ending $ 2,701 $ 4,095 119 $ 8,962 $ 4,867 CITY OF MESA, ARIZONA EXHIBIT D-4 SUPPLEMENTAL INFORMATION BUDGETARY COMPARISON SCHEDULE HIGHWAY USER REVENUE FOR THE FISCAL YEAR ENDED JUNE 30, 2019 (in thousands) Budgeted Amounts Revenues: Intergovernmental Investment Income Total Revenues Original $ Expenditures: Current: Community Environment Capital Outlay Total Expenditures 40,880 2 40,882 Final $ 40,880 2 40,882 Actual $ 42,406 751 43,157 Variance with Final Budget $ 1,526 749 2,275 16,748 24,859 41,607 16,920 24,896 41,816 16,063 8,488 24,551 857 16,408 17,265 Excess (Deficiency) of Revenues Over (Under) Expenditures (725) (934) 18,606 19,540 Other Financing Uses: Transfers Out Total Other Financing Uses (12,398) (12,398) (12,398) (12,398) (12,383) (12,383) 15 15 Net Change in Fund Balances (13,123) (13,332) 6,223 19,555 Fund Balances - Beginning 13,518 12,740 12,493 (247) Fund Balance - Ending $ 395 $ (592) 120 $ 18,716 $ 19,308 CITY OF MESA, ARIZONA EXHIBIT D-5 SUPPLEMENTAL INFORMATION BUDGETARY COMPARISON SCHEDULE MESA HOUSING AUTHORITY FOR THE FISCAL YEAR ENDED JUNE 30, 2019 (in thousands) Budgeted Amounts Revenues: Intergovernmental Investment Income Total Revenues Original $ Expenditures: Current: General Government Community Environment Capital Outlay Total Expenditures Final 30,152 190 30,342 $ Actual 30,152 190 30,342 $ 18,653 102 18,755 Variance with Final Budget $ (11,499) (88) (11,587) 25 28,205 2,112 30,342 25 28,130 2,419 30,574 20 17,445 1,051 18,516 5 10,685 1,368 12,058 Excess (Deficiency) of Revenues Over (Under) Expenditures - (232) 239 471 Net Change in Fund Balances - (232) 239 471 1,656 415 911 496 Fund Balances - Beginning Fund Balance - Ending $ 1,656 $ 183 121 $ 1,150 $ 967 CITY OF MESA, ARIZONA EXHIBIT D-6 SUPPLEMENTAL INFORMATION BUDGETARY COMPARISON SCHEDULE QUALITY OF LIFE SALES TAX FOR THE FISCAL YEAR ENDED JUNE 30, 2019 (in thousands) Budgeted Amounts Revenues: Sales Taxes Licenses and Permits Total Revenues Original $ Expenditures: Current: Public Safety Total Expenditures Final 24,509 24,509 $ Actual 24,509 24,509 $ 25,829 119 25,948 Variance with Final Budget $ 1,320 119 1,439 24,509 24,509 24,509 24,509 24,859 24,859 (350) (350) Excess (Deficiency) of Revenues Over (Under) Expenditures - - 1,089 1,089 Net Change in Fund Balances - - 1,089 1,089 1,053 777 773 (4) Fund Balances - Beginning Fund Balance - Ending $ 1,053 $ 777 122 $ 1,862 $ 1,085 CITY OF MESA, ARIZONA EXHIBIT D-7 SUPPLEMENTAL INFORMATION BUDGETARY COMPARISON SCHEDULE STREET SALES TAX FOR THE FISCAL YEAR ENDED JUNE 30, 2019 (in thousands) Budgeted Amounts Revenues: Sales Taxes Licenses and Permits Intergovernmental Charges for Services Investment Income Miscellaneous Revenues Total Revenues Original $ 29,411 77 275 163 350 30,276 Final $ 29,411 77 275 163 350 30,276 Actual $ 30,986 399 1 677 1,733 443 34,239 Variance with Final Budget $ 1,575 322 1 402 1,570 93 3,963 Expenditures: Current: General Government Public Safety Community Environment Capital Outlay Total Expenditures 3,301 369 25,747 32,881 62,298 3,301 397 24,672 33,946 62,316 5,339 387 19,393 12,328 37,447 (2,038) 10 5,279 21,618 24,869 Excess (Deficiency) of Revenues Over (Under) Expenditures (32,022) (32,040) (3,208) 28,832 Net Change in Fund Balances (32,022) (32,040) (3,208) 28,832 Fund Balances - Beginning 40,621 42,517 41,502 (1,015) Fund Balance - Ending $ 8,599 $ 10,477 123 $ 38,294 $ 27,817 CITY OF MESA, ARIZONA EXHIBIT D-8 SUPPLEMENTAL INFORMATION BUDGETARY COMPARISON SCHEDULE GENERAL CAPITAL PROJECTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 (in thousands) Budgeted Amounts Revenues: Investment Income Miscellaneous Revenues Total Revenues Original $ 223 223 Final $ Actual 223 223 $ 734 140 874 Variance with Final Budget $ 734 (83) 651 Expenditures: Current: General Government Public Safety Community Environment Cultural-Recreational Capital Outlay Total Expenditures 492 295 20 42,942 43,749 869 7 18 45,598 46,492 16,841 16,841 869 7 18 28,757 29,651 Excess (Deficiency) of Revenues Over (Under) Expenditures (43,526) (46,269) (15,967) 30,302 Other Financing Sources (Uses): Transfers In Total Other Financing Uses 22,350 22,350 22,350 22,350 28,783 28,783 (6,433) (6,433) Net Change in Fund Balances (21,176) (23,919) 12,816 36,735 Fund Balances - Beginning 22,900 19,794 19,674 (120) Fund Balance - Ending $ 1,724 $ (4,125) 124 $ 32,490 $ 36,615 CITY OF MESA, ARIZONA EXHIBIT D-9 SUPPLEMENTAL INFORMATION BUDGETARY COMPARISON SCHEDULE STREETS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 (in thousands) Budgeted Amounts Revenues: Intergovernmental Investment Income Total Revenues Original $ 17,917 17,917 Final $ 17,917 17,917 Actual $ 7,518 1,406 8,924 Variance with Final Budget $ (10,399) 1,406 (8,993) Expenditures: Debt Service: Cost of Issuance Capital Outlay Total Expenditures 425 48,932 49,357 425 48,932 49,357 69 13,698 13,767 356 35,234 35,590 Excess (Deficiency) of Revenues Over (Under) Expenditures (31,440) (31,440) (4,843) 26,597 Other Financing Sources (Uses): Transfers Out Face Amount of Bonds Issued Premium on Issuance of Bonds (Net) Total Other Financing Uses 26,963 26,963 (3,913) 26,963 23,050 (3,913) 10,045 29 6,161 16,918 (29) 16,889 Net Change in Fund Balances (4,477) (8,390) 1,318 9,708 Fund Balances - Beginning 39,876 13,811 51,512 37,701 Fund Balance - Ending $ 35,399 $ 125 5,421 $ 52,830 $ 47,409 STATISTICAL SECTION COM PREHENS I VE ANNUAL FI NA NCI AL RE PORT 2 019 FO R T H E F I SCA L Y EA R ENDED | J UNE 30, 2 019 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. 126 Revenue Capacity These schedules contain information to help readers assess the City’s most significant local revenue source, the sales tax. 138 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. 141 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. 149 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. 151 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) GOVERNMENTAL ACTIVITIES Net Investment in Capital Assets Restricted Unrestricted 2018-19 2017-18 $ 1,038,928 103,164 (834,016) $ 1,019,888 88,305 (858,392) $ 986,354 88,721 (711,367) $ 965,148 81,941 (666,986) Total Governmental Activities Net Position $ 308,076 $ 249,801 $ 363,708 $ 380,103 $ 170,427 47,857 350,006 $ 266,012 40,440 199,531 $ 247,598 43,046 228,160 $ 302,521 49,139 158,756 Total Business-type Activities $ 568,290 $ 505,983 $ 518,804 $ 510,416 PRIMARY GOVERNMENT Net Investment in Capital Assets Restricted Unrestricted $ 1,209,355 151,021 (484,010) $ 1,285,900 128,745 (658,861) $ 1,233,952 131,767 (483,207) $ 1,267,669 131,080 (508,230) Total Primary Government $ $ $ $ BUSINESS-TYPE ACTIVITIES Net Investment in Capital Assets Restricted Unrestricted 876,366 126 755,784 2016-17 882,512 2015-16 890,519 TABLE I (Concluded) 2014-15 2013-14 2012-13 2011-12 2010-11 2009-10 $ 932,660 72,170 (666,758) $ 866,332 60,555 (120,803) $ 902,397 56,719 (184,355) $ 913,702 41,257 (96,986) $ 872,302 39,296 (6,376) $ 844,777 86,955 3,651 $ 338,072 $ 806,084 $ 774,761 $ 857,973 $ 905,222 $ 935,383 $ 327,743 47,576 160,934 $ 393,720 43,023 178,702 $ 346,352 37,795 271,619 $ 412,016 69,739 254,189 $ 430,436 55,873 258,131 $ 434,814 47,011 271,706 $ 536,253 $ 615,445 $ 655,766 $ 735,944 $ 744,440 $ 753,531 $ 1,260,403 119,746 (505,824) $ 1,260,052 103,578 57,899 $ 1,248,749 94,514 87,264 $ 1,325,718 110,996 157,203 $ 1,302,738 95,169 251,755 $ 1,279,591 133,966 275,357 $ $ 1,421,529 $ 1,430,527 $ 1,593,917 $ 1,649,662 $ 1,688,914 874,325 127 CITY OF MESA, ARIZONA TABLE II CHANGES IN NET POSITION LAST TEN FISCAL YEARS (accrual basis of accounting) (in thousands) EXPENSES 2018-19 2017-18 2016-17 2015-16 2014-15 GOVERNMENTAL ACTIVITIES: General Government Public Safety Community Environment Cultural-Recreational Interest on Long-term Debt $ 119,819 355,752 119,506 58,345 18,078 $ 105,140 334,905 113,916 54,828 19,514 $ 101,301 379,505 104,173 55,739 19,279 $ 96,860 305,376 117,120 54,967 20,424 $ 102,396 302,633 101,531 52,430 23,939 Total Governmental Activities Expenses 671,500 628,303 659,997 594,747 582,929 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 22,475 33,124 103,821 57,468 38,524 5,029 2,117 4,413 2,748 7,867 1,186 - 25,573 31,636 101,005 74,157 37,988 5,308 1,965 4,481 3,174 5,870 1,181 - 26,561 37,109 95,608 71,782 37,911 5,125 2,028 4,711 3,687 6,042 1,268 - 27,647 31,549 95,574 73,877 36,586 4,865 2,575 4,252 2,913 5,271 1,182 - 28,495 32,104 101,863 71,161 36,979 2,863 2,210 3,715 1,200 8,581 885 4,124 Total Business-type Activities Expenses 278,772 292,338 291,832 286,291 294,180 Total Primary Government Expenses $ 950,272 $ 920,641 $ 951,829 $ 881,038 $ 877,109 128 TABLE II (Continued) 2013-14 2012-13 2011-12 2010-11 2009-10 $ 103,819 277,614 125,700 49,275 24,431 $ 105,410 287,451 129,164 61,717 23,443 $ 57,472 287,918 97,593 57,171 21,631 $ 59,552 273,320 106,434 54,550 21,078 $ 54,863 288,929 104,096 54,010 20,013 580,839 607,185 521,785 514,934 521,911 30,044 35,020 93,871 65,637 32,908 4,343 2,555 3,060 2,879 6,201 1,153 - 28,897 35,653 103,432 91,739 33,694 4,300 3,353 3,946 9,094 1,081 3,653 29,751 34,275 74,162 68,540 32,485 3,737 2,589 3,486 8,525 54 974 - 26,817 36,020 82,378 63,613 31,462 3,972 2,679 3,849 8,324 15 965 - 27,106 35,466 80,915 70,228 31,504 3,944 2,715 4,158 7,408 1,000 - 277,671 318,842 258,578 260,094 264,444 $ 858,510 $ 926,027 $ 780,363 $ 775,028 $ 786,355 129 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 2018-19 $ 23,812 43,214 10,838 3,439 25,326 13,780 120,409 2017-18 $ 25,119 40,222 10,436 2,979 34,446 23,618 136,820 2016-17 $ 23,152 38,348 9,873 1,330 26,955 24,451 124,109 2015-16 $ 23,254 38,178 11,049 9,385 26,361 35,925 144,152 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 29,986 43,547 144,896 84,220 62,432 4,339 1,608 3,153 75 250 1,148 2,316 19,692 397,662 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 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 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 Total Primary Government Program Revenues $ 518,071 $ 534,494 $ 512,038 $ 507,679 NET (EXPENSE) REVENUE Governmental Activities Business-type Activities $ (551,091) 118,890 $ (491,483) 105,336 $ (535,888) 96,097 $ (450,595) 77,236 Total Primary Government Net Expense $ (432,201) $ (386,147) $ (439,791) $ (373,359) 130 TABLE II (Continued) 2014-15 $ 20,892 36,260 10,505 5,741 26,418 75,907 175,723 2013-14 $ 18,797 32,106 9,890 400 29,514 20,714 111,421 2012-13 $ 17,693 27,675 9,885 2,945 55,312 25,049 138,559 2011-12 $ 13,359 25,779 11,294 18 60,355 23,503 134,308 2010-11 $ 12,577 20,304 11,820 8 65,284 31,461 141,454 2009-10 $ 11,824 20,419 10,135 9 72,812 30,343 145,542 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 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 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 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 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 $ 527,279 $ 442,362 $ 464,044 $ 467,158 $ 451,725 $ 452,909 $ (407,206) 57,376 $ (469,418) 53,270 $ (468,626) 6,643 $ (387,477) 74,272 $ (373,480) 50,177 $ (376,369) 42,923 $ (349,830) $ (416,148) $ (461,983) $ (313,205) $ (323,303) $ (333,446) 131 33,079 38,924 98,806 57,699 46,685 3,125 2,265 1,971 5,837 984 210 17,782 307,367 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 2018-19 2017-18 2016-17 2015-16 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 $ 189,871 36,013 3,246 175,278 65,189 13,729 11,531 (27) 114,535 $ 169,024 35,571 2,628 167,540 80,312 1,912 5,418 (2,462) 116,006 $ 159,735 34,684 2,536 158,916 46,817 448 11,161 (1,411) 106,607 $ 151,826 33,825 2,331 149,350 44,928 2,210 6,008 102,148 Total Governmental Activities 609,365 575,949 519,493 492,626 BUSINESS-TYPE ACTIVITIES: Occupancy Taxes Investment Income Gain (Loss) on Sale of Capital Assets Miscellaneous Transfers 1,602 8,004 44,056 4,290 (114,535) 1,192 1,691 261 1,915 (116,006) 1,085 983 16,364 466 (106,607) 1,161 3,020 (6,145) 1,039 (102,148) Total Business-type Activities (56,583) (110,947) (87,709) (103,073) Total Primary Government $ 552,782 $ 465,002 $ 431,784 $ 389,553 Change in Net Position Governmental Activities Business-type Activities $ 58,275 62,307 $ 84,466 (5,611) $ (16,395) 8,388 $ 42,031 (25,837) Total Primary Government $ 120,582 $ 78,855 $ $ 16,194 132 (8,007) TABLE II (Concluded) 2014-15 2013-14 2012-13 2011-12 2010-11 $ 146,337 33,241 2,081 145,266 47,761 1,786 7,844 94,427 $ 140,567 22,549 1,919 135,075 88,646 966 5,550 109,520 $ 137,280 14,354 1,903 104,462 49,569 1,692 7,424 83,615 $ 126,644 14,234 2,019 86,103 17,171 1,503 8,939 83,615 $ 121,046 14,244 2,148 92,613 15,610 617 7,060 83,334 478,743 504,792 400,299 340,228 336,672 336,333 999 1,141 5,157 233 (94,427) 851 1,453 18,697 288 (109,520) 825 860 (83,615) 850 (83,615) 839 (83,334) 508 (65,433) (86,897) (88,231) (81,930) (82,765) (82,495) (64,925) $ 391,846 $ 416,561 $ 318,369 $ 257,463 $ 254,177 $ 271,408 $ 71,537 (29,521) $ 35,374 (34,961) $ (68,327) (75,287) $ (47,249) (8,493) $ (36,808) (32,318) $ (40,036) (22,002) $ 42,016 $ $ (143,614) $ (55,742) $ (69,126) $ (62,038) 413 133 2009-10 $ 121,557 14,318 1,581 104,580 14,757 261 13,846 65,433 CITY OF MESA, ARIZONA TABLE III FUND BALANCE, GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (modified accrual basis of accounting) (in thousands) GENERAL FUND Reserved 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 (1)(2) Committed Assigned Unassigned Total All Other Governmental Funds 2018-19 2017-18 2016-17 2015-16 2014-15 $ $ $ $ $ 794 26 14,016 30,869 90,190 2,304 10,377 28,346 89,347 2,145 146 528 19,367 92,240 4,035 184 227 10,703 79,657 3,490 184 126 74,145 $ 135,895 $ 130,374 $ 114,426 $ 94,806 $ 77,945 $ $ $ $ $ 1,196 159,745 57,432 459 (134) $ 218,698 135 132,462 41,641 22 (176) $ 174,084 37 112,105 30,928 2 (69) $ 143,003 - - 77 95,701 28,580 6 (155) 138 172,316 30,092 (31) $ 124,209 $ 202,515 (1) Effective with fiscal year 2010-11 the fund balance related to the sales tax for street improvements was moved to the Special Revenue funds. (2) 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. 134 TABLE III (Concluded) 2013-14 2012-13 2011-12 2010-11 $ $ $ $ 2,956 188 1,484 72,683 1,724 284 1,185 50,426 754 2,012 4,992 78,035 2009-10 405 1,992 4,898 93,875 $ 4,048 92,187 - $ 77,311 $ 53,619 $ 85,793 $ 101,170 $ 96,235 $ $ $ $ $ 53,674 - - - - 23 190,609 21,379 (675) 55 243,831 23,005 (1,177) 84 211,279 16,360 (1) 2,906 112,538 19,166 - $ 211,336 $ 265,714 $ 227,722 $ 134,610 31,871 15,724 $ 135 101,269 CITY OF MESA, ARIZONA TABLE IV CHANGES IN FUND BALANCE, GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (modified accrual basis of accounting) (in thousands) 2018-19 2017-18 REVENUES Sales Taxes (1) $ 189,871 $ 169,024 Property Taxes 36,005 35,616 Occupancy Taxes 3,246 2,628 Special Assessments 1,274 1,174 Licenses and Permits 23,812 25,119 Intergovernmental 213,051 223,800 Charges for Services 43,214 40,222 Fines and Forfeitures 10,838 10,436 Investment Income 10,840 1,608 Contributions 255 429 Miscellaneous 6,688 5,547 Total Revenues 539,094 515,603 2016-17 2015-16 2014-15 $ 159,735 34,675 2,536 2,125 23,152 200,820 38,348 9,873 331 360 4,348 476,303 $ 151,826 34,765 2,331 1,433 23,254 191,360 38,178 11,049 1,483 961 3,994 460,634 $ 146,337 34,022 2,081 1,264 20,892 185,529 36,260 10,505 1,793 1,344 6,587 446,614 EXPENDITURES Current General Government Public Safety Community Environment Cultural-Recreational Debt Service Principal Interest Service Charges Cost of Issuance Capital Outlay Total Expenditures 98,009 277,313 76,623 48,636 90,209 266,459 73,404 46,143 86,360 261,892 68,403 43,744 79,448 254,528 65,559 43,651 81,066 243,570 60,512 40,365 39,511 18,185 19 874 92,637 651,807 34,738 18,477 14 1,023 76,279 606,746 32,587 17,994 15 1,271 82,062 594,328 107,383 18,905 14 1,505 91,784 662,777 28,367 23,269 13 657 74,150 551,969 Excess of Revenues Under Expenditures (112,713) (91,143) (118,025) (202,143) (105,355) 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) 147,590 (33,055) 47,008 1,305 162,848 176,572 (66,208) 26,745 1,063 138,172 139,516 (31,931) 47,682 4,613 47,450 (50,891) 156,439 122,572 (24,298) 46,530 2,283 43,304 (49,693) 140,698 123,044 (45,324) 18,999 2,952 17,555 (20,058) 97,168 $ 50,135 $ 47,029 $ 38,414 $ (61,445) 10.07% 9.98% 9.88% 22.12% Net Change in Fund Balances Debt Service as a percentage of Noncapital Expenditures (1) During fiscal year 2018-2019, the sales tax rate increased from 1.75% to 2.00%. 136 $ (8,187) 10.81% TABLE IV (Concluded) 2013-14 2012-13 2011-12 2010-11 $ 140,567 22,500 1,919 1,062 18,797 185,303 32,106 9,890 589 1,212 4,524 418,469 $ 137,280 14,404 1,903 897 17,693 184,823 27,675 9,885 1,501 2,264 5,940 404,265 $ 126,644 14,323 2,019 996 13,359 168,433 25,779 11,294 1,284 7,573 371,704 $ 121,046 14,274 2,148 1,069 12,577 174,781 20,304 11,820 587 7,417 366,023 75,077 231,364 56,573 38,788 74,596 226,677 55,197 37,787 41,083 226,429 64,404 43,904 38,843 215,166 68,463 42,191 40,113 216,026 72,081 40,150 71,015 23,704 727 102,657 599,905 31,519 23,433 10 1,448 91,537 542,204 25,513 22,643 8 870 66,951 491,805 31,690 21,211 10 29 60,173 477,776 34,846 21,186 9 539 82,530 507,480 (181,436) (137,939) (120,101) (111,753) (122,558) 141,909 (32,389) 40,800 430 150,750 147,818 (64,203) 62,672 3,681 17,415 (19,889) 147,494 121,459 (38,136) 27,290 77,835 8,027 8,250 67,238 (74,127) 197,836 128,065 (44,418) 29,320 360 113,327 149,437 (66,654) 30,865 45,000 402 869 159,919 9,555 $ 77,735 12.20% 11.34% $ (30,686) 19.05% $ $ 1,574 12.67% 2009-10 $ $ 121,557 13,886 1,581 923 11,824 190,731 20,419 10,135 191 13,675 384,922 37,361 13.19% 137 CITY OF MESA, ARIZONA TABLE V SALES TAX COLLECTIONS BY CATEGORY LAST TEN FISCAL YEARS (in thousands) 2018-19 2017-18 2016-17 2015-16 2014-15 Retail Sales Rentals Utilities Restaurants & Bars Communications Amusements Publishing Miscellaneous Printing & Advertising Contracting $ 95,806 31,754 14,964 17,961 4,365 1,941 408 943 507 21,222 $ 84,640 28,003 14,199 16,065 3,876 1,624 362 986 413 18,856 $ 79,715 26,340 13,575 15,002 4,432 1,581 526 1,313 446 16,806 $ 76,160 25,578 13,251 14,240 4,229 1,561 688 1,068 428 14,623 $ 71,996 25,102 13,111 13,708 4,796 1,542 747 771 461 14,103 Total $ 189,871 $ 169,024 $ 159,736 $ 151,826 $ 146,337 City Direct Tax Rate (1) 2.00% 1.75% 1.75% Note: Amounts shown include penalties and interest. Occupancy tax not included. (1) Mesa tax rate increased from 1.75% to 2.00% effective March 1, 2019. Source: City of Mesa Tax & Licensing Division 138 1.75% 1.75% TABLE V (Concluded) 2013-14 2012-13 2011-12 2010-11 2009-10 $ 69,276 24,374 12,344 12,972 4,230 1,469 830 823 455 13,794 $ 66,789 24,847 12,549 12,577 4,651 1,432 866 732 434 12,402 $ 62,191 22,968 11,878 11,864 4,483 1,434 934 595 336 9,962 $ 60,266 22,219 11,104 11,165 4,456 1,433 999 674 342 8,388 $ 63,469 20,123 9,757 10,948 3,809 1,176 1,102 84 175 10,913 $ 140,567 $ 137,279 $ 126,645 $ 121,046 $ 121,556 1.75% 1.75% 1.75% 1.75% 139 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 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 1.75% 1.75% 1.75% 1.75% 1.75% 1.75% 1.75% 1.75% 1.75% 2.00% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% State of Arizona 6.60% (1) 6.60% 6.60% 5.60% 5.60% 5.60% 5.60% 5.60% 5.60% 5.60% (2) Source: City of Mesa Tax & Licensing Office (1): The State of Arizona increased its tax to 6.60% effective 6/1/10 for a 3 year period (2): The City of Mesa increasted its tax to 2.00% effective 3/1/19 140 CITY OF MESA, ARIZONA TABLE VII RATIOS OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS (in thousands) Governmental Activities (1) General Obligation Bonds Highway User Revenue Bonds Special Assessment Bonds Community Facilities District Capital Leases Notes Payable Business-type Activities (1) Utility System Revenue Bonds General Obligation Bonds Excise Tax Revenue Obligation Bonds Notes Payable Total Primary Government 2018-19 $ $ 367,488 80,526 1,005 28,813 - 2016-17 $ 374,443 84,995 1,340 19,172 - 2015-16 $ 350,593 98,743 2,085 19,300 - 1,322,049 191 56,564 1,574 $ 1,866,003 1,243,390 236 57,144 1,714 $ 1,780,316 1,161,755 191 94,060 1,851 $ 1,737,807 1,062,871 390 103,339 1,985 $ 1,639,306 12.65% 13.17% 13.74% 13.91% Percentage of Personal Income (2) Per Capita (2) 373,636 70,135 438 41,416 - 2017-18 $ 3,652 (1) Presented net of original issuance discounts and premiums (2) Information on personal income and population is presented on Table XII. 141 $ 3,554 $ 3,525 $ 3,451 TABLE VII (Concluded) 2014-15 $ 338,401 106,740 2,830 11,012 82,785 2013-14 $ 346,860 112,882 3,574 5,897 72 83,610 2012-13 $ 327,265 120,942 4,318 2,712 140 129,435 2011-12 $ 288,669 121,395 5,062 822 122,835 2010-11 $ 281,514 128,515 5,806 2,166 45,000 2009-10 $ 273,869 134,545 6,550 5,406 45,000 996,705 474 103,919 2,116 $ 1,644,982 987,454 605 104,499 2,244 $ 1,647,697 973,670 887 105,079 2,370 $ 1,666,818 952,500 1,601 2,493 $ 1,495,377 898,800 2,221 2,731 $ 1,366,753 857,435 2,691 2,964 $ 1,328,460 14.53% 15.42% 16.09% 14.10% 13.06% 11.49% $ 3,561 $ 3,621 $ 3,747 $ 3,390 142 $ 3,101 $ 2,843 CITY OF MESA, ARIZONA TABLE VIII RATIOS OF GENERAL BONDED DEBT OUTSTANDING LAST TEN FISCAL YEARS (in thousands) Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Secondary Assessed Value (1) 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 3,277,965 General Obligation Bonds Less: Amounts Available in Debt Service Fund 276,560 283,735 290,270 328,152 347,465 338,875 350,983 374,755 365,755 373,827 134 1 138 372 3,584 2,618 4,989 5,384 4,853 Total 276,560 283,601 290,269 328,014 347,093 335,291 348,365 369,766 360,371 368,974 Source: (1) Maricopa County Finance Department Assessor's Office. (2) Population figures are found on Table XII. 143 Percentage of Secondary Assessed Value Per Capita (2) 5.82% 6.93% 9.17% 11.84% 13.56% 11.88% 12.63% 12.80% 11.82% 11.26% 592 645 658 739 765 726 733 750 719 722 CITY OF MESA, ARIZONA TABLE IX DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT (1) JUNE 30, 2019 (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 No. 1 Cadence Community Facilities District Debt Outstanding (2) $ Other Debt: Maricopa County Estimated Percentage Applicable to City of Mesa Percent (2)(4) Amount 380,740 497,125 288,035 135,180 115,565 109,455 87,580 167,175 27,870 261 8.11% 8.11% 86.56% 26.10% 31.32% 0.85% 0.32% 0.78% 100.00% 100.00% 30,875 40,312 249,336 35,289 36,200 929 284 1,311 27,870 261 122,185 8.11% 9,908 Subtotal, overlapping debt 432,575 City direct debt (3) 485,626 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, and Unamortized Bond Premiums. (4) Proportion applicable to the City is computed on the ratio of secondary assessed valuation for fiscal year 2018/2019. 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. 144 918,201 CITY OF MESA, ARIZONA TABLE X LEGAL DEBT MARGIN INFORMATION LAST TEN FISCAL YEARS (in thousands) 2018-19 2017-18 2016-17 2015-16 6% Limitation (1) Legal Debt Limitation General Obligation Bonds Outstanding $ 196,678 518 $ 182,934 724 $ 173,297 846 $ 165,475 1,047 Total Debt Margin Available $ 196,160 $ 182,210 $ 172,451 $ 164,428 Total Net Debt Applicable to the 6% Limit as A Percentage of the 6% Legal Debt Limitation 0.26% 0.40% 0.49% 0.63% 20% Limitation (2) Legal Debt Limitation General Obligation Bonds Outstanding $ 655,593 370,152 $ 609,779 365,031 $ 577,658 373,909 $ 551,583 349,903 Total Debt Margin Available $ 285,441 $ 244,748 $ 203,749 $ 201,680 Total Net Debt Applicable to the 20% Limit as A Percentage of the 20% Legal Debt Limitation 56.46% Total Margin Available $ 481,601 Secondary Assessed Value $ 3,277,965 59.86% $ 426,958 $ 3,048,893 64.73% $ 376,200 $ 2,888,291 (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. 145 63.44% $ 366,108 $ 2,757,913 TABLE X (Concluded) 2014-15 2013-14 2012-13 2011-12 2010-11 2009-10 $ 169,270 1,275 $ 153,578 605 $ 166,225 175 $ 189,857 1,370 $ 245,642 5,326 $ 284,977 6,064 $ 167,995 $ 152,973 $ 166,050 $ 188,487 $ 240,316 $ 278,913 0.75% 0.39% 0.11% 0.72% 2.17% 2.13% $ 564,235 343,370 $ 511,927 344,040 $ 554,084 300,735 $ 632,855 288,900 $ 818,807 278,409 $ 949,923 270,496 $ 220,865 $ 167,887 $ 253,349 $ 343,955 $ 540,398 $ 679,427 60.86% $ 388,860 $ 2,821,173 67.20% $ 320,860 $ 2,559,634 54.28% $ 419,399 $ 2,770,422 45.65% $ 532,442 $ 3,164,277 146 34.00% $ 780,714 $ 4,094,037 28.48% $ 958,340 $ 4,749,617 CITY OF MESA, ARIZONA TABLE XI PLEDGED-REVENUE COVERAGE LAST TEN FISCAL YEARS (in thousands) 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 Operating Revenues (1) Operating Expenses 275,193 283,921 299,356 293,915 295,710 311,506 323,099 348,794 361,863 365,081 194,159 190,441 180,296 241,128 203,187 209,677 218,706 225,257 228,933 257,166 Utility System Revenue Bonds Net Revenue Available for Debt Debt Service Service Principal Interest 81,034 93,480 119,060 52,787 92,523 101,829 104,393 123,537 132,930 107,915 10,475 12,585 21,365 21,630 22,550 21,860 25,800 13,885 31,354 21,450 Coverage Ratio 40,380 42,814 43,465 46,412 51,927 46,423 44,794 47,187 50,739 50,695 Highway User Revenue Fund Revenue Bonds Highway User Fund Revenues 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 31,791 32,053 27,825 30,046 30,923 33,952 35,383 38,048 39,477 42,406 Debt Service Principal Interest 5,720 6,030 3,290 6,145 6,945 6,305 7,390 7,900 8,375 8,715 6,691 6,365 5,563 5,627 5,472 5,158 4,844 4,473 4,080 3,663 Coverage Ratio 2.56 2.59 3.14 2.55 2.49 2.96 2.89 3.08 3.17 3.43 (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. 147 1.59 1.69 1.84 0.78 1.24 1.49 1.48 2.02 1.62 1.50 TABLE XI (Concluded) Special Assessment Bonds Special Assessment Collections 923 1,088 996 897 861 827 790 1,041 289 261 Debt Service Principal Interest 744 744 744 744 744 744 745 745 335 567 Community Facility District Bonds Coverage Ratio Community Facility District Collections 0.82 1.01 0.96 0.90 0.90 0.90 0.89 1.23 0.72 0.42 195 672 1,320 1,612 2,261 3,010 377 337 297 257 217 178 138 98 68 49 Highway Project Advancement Notes Excise Tax Revenues (2) 208,547 200,873 199,949 213,309 221,355 234,183 242,020 - Debt Service Principal Interest 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 - 148 Debt Service Principal Interest 65 232 489 645 984 2,125 7 131 456 832 914 1,197 1,690 Coverage Ratio 0.99 0.98 1.00 1.03 1.04 0.79 CITY OF MESA, ARIZONA TABLE XII DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS Year Population (1) Personal Income (in thousands) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 467,355 440,677 441,160 444,856 454,981 462,376 475,274 493,089 501,137 511,334 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 14,753,009 Sources: (1) (2) (3) Per Capita Personal Income (1) Median Age (1) Public School Enrollment (2) Unemployment Rate (3) 24,742 23,748 24,035 23,291 23,491 24,485 24,794 25,644 26,983 28,852 33.6 32.6 34.3 34.4 35.3 35.5 35.7 36.0 36.2 36.3 67,749 66,144 65,662 64,892 64,932 64,532 65,049 63,779 67,025 62,593 8.7% 9.0% 7.5% 7.2% 6.5% 5.4% 5.3% 4.5% 4.3% 4.6% 2007-2010 Claritas, 2011-2013 SitesUSA, 2014-2019 ESRI Community Analyst Arizona Department of Education Bureau of Labor Statistics Beginning in 2011 unemployment rate is not seasonally adjusted. 149 CITY OF MESA, ARIZONA TABLE XIII PRINCIPAL EMPLOYERS CURRENT YEAR AND NINE YEARS AGO 2019 Employer Employees Rank 8,321 8,184 4,492 4,336 2,455 1,422 1,400 1,338 1,276 1,137 1 2 3 4 5 6 7 8 9 10 Banner Health Mesa Public Schools City of Mesa The Boeing Company Wal-Mart Drivetime Automotive Group Inc 24-7 Intouch Frys Food Stores (The Kroger Company) AT&T The Home Depot Mesa Community College Bashas' TRW Vehicle Safey Systems Total 34,361 Source: City of Mesa Office of Economic Development 150 Percentage of Total City Employment 2010 Employees Rank Percentage of Total City Employment 5.19% 5.10% 2.80% 2.70% 1.53% 0.89% 0.87% 0.83% 0.80% 0.71% 0.00% 0.00% 0.00% 8,650 10,000 3,776 4,000 2,410 2 1 4 3 5 1,276 7 3.72% 4.30% 1.62% 1.72% 1.04% 0.00% 0.00% 0.55% 943 2,201 835 800 8 6 9 10 0.41% 0.95% 0.36% 0.34% 21.43% 34,891 15.01% CITY OF MESA, ARIZONA TABLE XIV FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS Function/Program General Government Police Fire Community Environment Cultural-Recreational Energy Resources Water Resources Environmental Management & Sustainability Airport Total 2018-19 2017-18 2016-17 2015-16 2014-15 2013-14 865 1,212 546 189 340 117 264 147 12 826 1,189 522 195 315 120 257 148 11 811 1,189 518 194 289 118 249 147 11 860 1,155 492 189 599 116 238 138 11 876 1,154 503 182 338 116 240 127 10 880 1,173 482 178 317 117 238 125 10 3,690 3,582 3,526 3,798 3,545 3,520 Source: City of Mesa Human Resources 151 TABLE XIV (Concluded) 2012-13 2011-12 2010-11 2009-10 864 1,163 479 183 313 117 229 127 10 870 1,158 473 184 332 115 233 117 9 824 1,163 457 189 334 116 230 120 9 835 1,240 455 184 329 122 232 124 10 3,485 3,491 3,442 3,531 152 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) 2018-19 2017-18 2016-17 2015-16 2014-15 11,559 6,637 12,347 6,599 13,151 6,966 13,208 6,968 14,795 6,622 1,004 54,139 1,373 505 14,337 1,144 53,183 1,087 471 11,536 1,153 50,024 989 488 14,034 1,053 49,743 1,083 507 10,613 1,083 45,832 1,106 534 8,964 117,974 1,129,706 1,155,869 17,018 65,993 119,489 1,061,875 1,131,101 17,066 63,969 121,340 1,067,207 1,272,859 16,724 62,010 122,810 1,157,394 1,345,977 16,854 60,383 125,336 1,166,131 1,549,150 16,703 59,214 157,000 78.66 117.77 146,172 81.84 122.51 144,276 79.78 120.35 141,824 78.55 116.62 139,560 79.55 113.45 127,000 34.50 130,343 34.06 128,782 34.28 126,359 34.60 124,142 33.30 134,777 241,307 32,227 20,236 131,991 232,756 32,367 16,688 129,479 232,812 35,546 19,639 127,517 236,849 35,499 20,602 122,552 233,754 35,541 21,151 752 326,255 717 288,122 689 289,801 663 270,702 702 241,848 * mgd - millions of gallons per day ** mg - millions of gallons 153 TABLE XV (Concluded) 2013-14 2012-13 2011-12 2010-11 2009-10 14,561 6,107 16,149 6,186 16,740 6,047 16,623 5,952 17,345 5,890 1,075 44,885 1,176 477 9,403 929 43,416 1,255 454 11,803 1,012 42,925 1,292 446 11,192 981 38,788 1,478 478 11,840 1,048 34,079 1,478 701 12,819 196,020 1,166,560 1,541,323 16,460 58,011 166,492 1,178,137 1,515,299 13,815 55,544 142,943 1,143,718 1,566,775 15,841 55,828 220,812 1,095,196 1,691,966 15,064 53,434 352,607 1,367,667 2,542,927 14,738 52,832 137,910 80.85 117.13 136,640 81.03 115.68 135,138 81.60 122.30 134,072 76.23 114.30 133,701 72.67 111.14 122,623 33.10 120,953 33.60 119,615 33.40 118,413 33.70 117,831 33.60 121,674 217,745 34,629 18,854 119,142 215,463 34,616 19,878 118,949 209,116 34,443 17,882 115,811 223,217 35,486 19,149 113,079 217,295 36,490 18,588 729 276,731 700 190,605 749 222,650 789 221,910 841 248,381 154 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 2018-19 2017-18 2016-17 2015-16 2014-15 8 287 20 4 8 281 20 4 8 281 20 4 8 287 20 4 8 292 20 4 1,929 861 9 6 1,929 861 9 5 2,300 475 9 5 1,901 633 9 4 1,901 633 9 4 1,882 1 398 1,363 1,476 82 397 1,346 1,387 82 394 1,325 1,427 1 423 1,311 1,427 1 423 1,311 2,435 112 2,401 112 2,398 109 2,364 112 2,364 112 1,788 60 1,784 60 1,778 60 1,781 60 1,781 60 77 1 77 1 75 1 73 1 74 1 Note: The decrease in water storage capacity is due to Reservoir FFR6 being decommissioned in FY 16/17. 155 TABLE XVI (Concluded) 2013-14 2012-13 2011-12 2010-11 2009-10 8 291 20 4 6 267 20 4 5 267 19 4 4 290 18 4 4 289 18 3 1,232 1,157 9 4 1,177 1,104 9 6 1,553 705 9 6 1,154 1,074 13 6 1,154 1,078 12 6 1,418 1 440 1,256 1,307 1 432 1,256 1,303 1 438 1,240 1,190 12 329 1,247 1,184 12 321 1,243 2,315 125 2,284 125 2,270 125 2,136 125 2,127 125 1,677 60 1,677 60 1,652 60 1,613 60 1,606 60 72 1 72 1 70 1 69 2 69 2 156 Financial Services Department P.O. Box 1466 Mesa, Arizona, 85211-1466 (480) 644-2275 www.mesaaz.gov FO R T H E F I SCA L Y EA R ENDED | J UNE 30, 2 019