CIT Y OF MESA, AZ ANNUAL COMPREHENSIVE FINANCIAL REPORT B ell B ank Park FOR THE FISCAL YEAR ENDED | JUNE 30, 2022 DISTRICT MAP MERIDIAN RD SIGNAL BUTTE RD CRISMON RD ELLSWORTH RD HAWES RD SOSSAMAN RD POWER RD RECKER RD HIGLEY RD GREENFIELD RD VAL VISTA DR LINDSAY RD GILBERT RD STAPLEY DR MESA DR COUNTRY CLUB DR ALMA SCHOOL RD DOBSON RD PRICE / 101 PIMA FRWY A N N UA L C OM P R E H E N SI V E F I NA N C IA L R E P O RT 2 0 2 2 THOMAS RD 5 MCDOWELL RD MCKELLIPS RD 1 BROWN RD UNIVERSITY DR MAIN ST 3 4 2 BROADWAY RD SOUTHERN AVE BASELINE RD o GUADALUPE RD ELLIOT RD 6 WARNER RD RAY RD WILLIAMS FIELD RD PECOS RD GERMANN RD Mayor John Giles Vice Mayor Jenn Duff – District 4 Councilmember Mark Freeman – District 1 Councilmember Julie Spilsbury – District 2 Councilmember Francisco Heredia – District 3 Councilmember David Luna – District 5 Councilmember Kevin Thompson – District 6 Chris Brady, 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 January 2022 Citizens of Mesa Mayor and City Council City Clerk DeeAnn Mickelsen City Court John Tatz CITY MANAGER Chris Brady City Attorney Jim Smith City Auditor Joe Lisitano Advisory Boards and Committees Downtown Transformation Jeff McVay Economic Development Bill Jabjiniak Diversity and Community Engagement Andrea Alicoate Assistant City Manager John Pombier Deputy City Manager Scott J. Butler Deputy City Manager/ Chief Financial Officer Michael Kennington Transportation RJ Zeder Office of Management and Budget Candace Cannistraro Transit Jodi Sorrell Financial Services Irma Ashworth Falcon Field Corinne Nystrom Business Services Ed Quedens Public Information & Communications Ana Pereira Enterprise Resource Planning (ERP) Valerie McBrien Public Defender Program Meg Leal Community Facilities Districts Mayor and Council Support, Intergovernmental Relations Grants Police Department Ken Cost Fire & Medical Department Mary Cameli Department of Innovation & Technology Travis Cutright Fleet Services Pete Scarafiotti Human Resources Teri Overbey Environmental Management & Sustainability Scott Bouchie Deputy City Manager Marc Heirshberg Deputy City Manager Natalie Lewis Water Resources Chris Hassert Development Services Nana Appiah Energy Resources Frank McRae Engineering Beth Huning Parks, Recreation & Community Facilities Andrea Moore Arts & Culture Cindy Ornstein Library Services Polly Bonnett Community Services Ruth Giese Code Compliance Ryan Russell Education Initiatives Vacant Operation Off the Streets Visit Mesa INTRODUCTORY SECTION A N N UA L C OM P R E H E N SI V E F I NA N C IA L R E P O RT 2 0 2 2 Gulf Stream Aerospace FOR THE FISCAL YEAR ENDED | JUNE 30, 2022 TABLE OF CONTENTS Page SECTION I – INTRODUCTORY SECTION Table of Contents Letter of Transmittal Certificate of Achievement for Excellence in Financial Reporting I V XII SECTION II - FINANCIAL SECTION Independent Auditors’ Report 1 Management’s Discussion and Analysis 5 Basic Financial Statements Government-wide Financial Statements Statement of Net Position Statement of Activities 17 18 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 20 21 22 23 Proprietary Funds Financial Statements Statement of Net Position Statement of Revenues, Expenses and Changes in Net Position Statement of Cash Flows I 24 26 28 TABLE OF CONTENTS (Concluded) Page Notes to the Financial Statements Note 1 – Summary of Significant Accounting Policies Note 2 – Reconciliation of Governmental Fund Financial Statements to Government-wide Financial Statements Note 3 – Fund Balance Note 4 – Pooled Cash and Investments Note 5 – Accounts Receivable and Due from Other Governments Note 6 – Interfund Receivables, Payables and Transfers Note 7 – Leases Note 8 – Capital Assets Note 9 – Long-term Obligations Note 10 – Refunded, Refinanced and Defeased Obligations Note 11 – Self-Insurance Internal Service Fund Note 12 – Commitments and Contingent Liabilities Note 13 – Net Position Note 14 – Enterprise Activities Operations Detail Note 15 – Joint Ventures Note 16 – Pensions and Other Postemployment Benefits Note 17 – Restatement of Beginning Net Position Note 18 – Subsequent Events 30 39 46 47 53 54 56 57 60 73 74 75 75 76 76 79 96 96 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) – Combined Governmental and Enterprise Fund Notes to Budgetary Comparison Schedules 97 99 104 108 109 110 111 Combining Statements Non-Major Governmental Funds Combining Balance Sheet Combining Statement of Revenues, Expenditures and Changes in Fund Balances 112 116 Internal Service Funds Combining Statement of Net Position Combining Statement of Revenues, Expenses and Changes in Net Position Combining Statement of Cash Flows II 120 121 122 TABLE OF CONTENTS (Concluded) Page Supplemental Information Budgetary Comparison Schedules – Other Non-major Funds Budgetary Comparison Schedule – Cadence Community Facility District Budgetary Comparison Schedule – Eastmark Community Facilities District #1 Budgetary Comparison Schedule – Eastmark Community Facilities District #2 123 124 125 SECTION III – STATISTICAL SECTION Financial Trends Net Position by Components – Last Ten Fiscal Years (Accrual Basis of Accounting) Changes in Net Position – Last Ten Fiscal Years (Accrual Basis of Accounting) Fund Balance, Governmental Funds – Last Ten Fiscal Years (Modified Accrual Basis of Accounting) Changes in Fund Balance, Governmental Funds – Last Ten Fiscal Years (Modified Accrual Basis of Accounting) 126 128 134 136 Revenue Capacity Sales Tax Collections by Category – Last Ten Fiscal Years Direct and Overlapping Sales Tax Rates – Last Ten Fiscal Years 138 140 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 141 143 144 145 147 Demographic and Economic Information Demographic and Economic Statistics – Last Ten Fiscal Years Principal Employers – Current Year and Nine Years Ago 149 150 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 III 151 153 155 Financial Services Department December 19, 2022 To the Citizens, Honorable Mayor, City Council and City Manager: The Annual Comprehensive Financial Report of the City of Mesa (the “City”) for the fiscal year ended June 30, 2022, 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, 2022, 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, 2022, 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 conjunction with it. The City’s MD&A can be found immediately following the report of the independent auditors. V 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, as measured by the US Census Bureau is 509,475 as compared with the 2020 decennial census count of 504,258. Total land area encompasses 138.7 square miles. The City is the 36th largest city in the United States and is the third largest city in the State of Arizona. Mesa is located 16 miles east of Phoenix, the State Capitol. The City operates under a charter form of government with citizens electing a Mayor and six Councilmembers to set policy for the City. City Councilmembers are elected from districts and serve terms of four years, with three members being elected every two years. The Mayor is elected at-large every four years. The Mayor and Council are elected on a non-partisan basis, and the Vice Mayor is selected by the City Council. The Mayor and City Council are responsible for appointing the City Manager, City Attorney, City Auditor, City Clerk and the Presiding City Magistrate. The City Manager has full responsibility for carrying out City Council policies and administering City operations and is responsible for the hiring of City employees. Additionally, City employees are hired under merit system procedures as specified in the City Charter. An allocated staff of 4,399 full-time (equivalent) City employees working within 28 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, and an airport. Since 1952, Mesa has hosted the Chicago Cubs for Spring Training baseball. In 2014, the Cubs moved into the newly constructed Sloan Park where they continue to lead Major League Baseball in Spring Training attendance, averaging nearly 14,000 fans per game. The Oakland A’s also call Mesa home for Spring Training, playing at the recently renovated Hohokam Stadium. 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 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 is annually appropriated for all funds and 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. VI Local Economy The City of Mesa continues to be on the path of full recovery from the historic health crisis and period of economic uncertainty. As the City of Mesa continues to prosper and grow, the City continues to push and support the services needed by businesses and citizens for today and the future. The City is committed to ensuring fiscal sustainability and providing essential services to assist with the community’s needs. During this past fiscal year, the financial position of the City has strengthened with a steady increase in local sales tax revenues due to unanticipated growth in retail and growth in development and construction activity. For the year ending June 30, 2022, local retail sales tax revenue was up 13.4% while local sales tax in contracting grew by 55.4%. Overall local sales tax revenue increased by 18.9%. In addition, tourism has rebounded from the prior year with a 60.7% increase in the transient lodging (‘bed’) tax. The City’s economic indicator for residential construction in fiscal year (FY) 21/22 is up 20% from FY 20/21. Commercial construction increased 27% in FY 21/22 over the previous year and up 150% from FY 19/20. The corresponding dollar valuation associated with all FY 21/22 permits increased approximately $432 million from the prior fiscal year and up 67% from FY 19/20. 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 2023 budget continues the City’s fiscally conservative approach and reinforces the City’s effort to invest in economic development, improve public safety and attract and retain excellent employees. All fund balances were maintained at or above the levels prescribed by financial policy and prudent practice. Major Initiatives During the year, various major accomplishments were realized. Some of these were: • Mesa’s strong and resilient financial position was recognized this year as Fitch Ratings reaffirmed the top rating of AAA to the City’s 2022 General Obligation (GO) bonds. S&P maintained their rating of AA for the City’s GO bonds and reaffirmed their A+ rating on the City’s utility revenue obligations. Moody’s maintained their Aa3 rating on the City’s utility revenue obligations. • At the end of 2021, work began at the site of the Mesa Arts District Lofts, a 335-unit multifamily development that will include close to 13,000 square feet of retail space. The project will have five buildings of three, four and five stories on approximately 10 acres along Main Street, east of Sirrine, on the former Brown and Brown auto dealership site. When completed, the Arts District Lofts will have a diverse mix of housing choices ranging from studios and courtyard-facing lofts to three-bedroom apartments and three-bedroom townhomes. The complex will include a state-of-the-art fitness center, clubhouse, swimming pool and spa, fire pit, bocce court, dog washing station and eight electric vehicle charging stations (with infrastructure in place to service an additional 78 electrical vehicles). The design also allows for two future midrise residential buildings. • At the beginning of 2022, the Federal Transit Administration awarded Mesa a $920,000 grant to conduct comprehensive Transit-Oriented Development (TOD) planning along a proposed 5-mile streetcar route in west Mesa. The Mesa streetcar route would connect four major economic activity centers within the City – Riverview Marketplace, Asian District, Fiesta District, and downtown Mesa. The City will use the grant funding to conduct comprehensive planning efforts, define design VII guidelines, and develop economic strategies. The Federal Transit Administration awarded Mesa the second-largest TOD grant in the country, after MARTA in Atlanta. • In January, Bell Bank Park opened as a 320-acre sports and entertainment center in Mesa. The park includes a mixture of softball fields, basketball courts, football fields, volleyball courts, arcades, fitness centers and a 20,000 square foot sports bar and restaurant. • In January, Wharton Industrial announced that it has acquired a 101-acre parcel of land in Mesa. The company plans to invest over $200M into the site to develop an 11-building, 1.5 million-square foot Class A industrial park. • In March, the Phoenix-Mesa Gateway Airport experienced the busiest month in their history with almost 240,000 people passing through. The airport offers 60 destinations over 5 airlines. • In March, the National League of Cities selected Mesa as the 2022 Cultural Diversity Awards winner for its two-day Día de los Muertos celebration. For almost two decades, thousands have gathered annually in Mesa to celebrate this rich Mexican tradition with electric musical and Ballet Folklórico performances, a bustling mercado, mouth-watering traditional foods, and a community alter featuring a local artist. • In April, Fujifilm Electronic Materials USA completed an $88M expansion of a factory in Mesa to supply the semiconductor industry. The development includes plans to create 120 positions in chemistry, manufacturing, engineering, maintenance, and warehousing by the completion date of 2024. The 80,000 square-foot expansion will increase the Mesa plant’s chemical manufacturing capacity, R&D, and warehousing. • In April, JX Nippon Mining & Metals USA, Inc., an industry leader in semiconductor materials, announced the completion of a $29M land acquisition deal in Mesa, Arizona. The 65-acre Greenfield site will serve as JX’s new base of operations for its semiconductor business serving the North American and European markets. Phase one is targeted to start operations in early 2024 and will be capable of more than double the production of JX’s existing Chandler Plant, which opened in 1991. It will include two manufacturing buildings and an adjacent office building, totaling approximately 240,000 and 27,000 square feet respectively. The project will also lead to the creation of more than 100 jobs by 2025. • In May, the City of Mesa purchased a 14,000 SF building that will be the future home to the ARPAfunded Downtown Restaurant and Food Business Incubator project. The final purchase price was $1.6M. Mesa will run the Downtown Restaurant Incubator in partnership with Local First Arizona. The Downtown Restaurant Incubator will provide programming that will support small, Mesa restaurant and food business development and expansion in response to the impacts of the Covid19 pandemic, which negatively impacted the restaurant industry. • In June, CO+HOOTS, a fast-growing coworking community, opened in downtown Mesa. CO+HOOTS Mesa is a private-public partnership involving the City of Mesa, Benedictine University and CO+HOOTS. It is part of the Downtown Mesa Innovation District, combining business startups, incubators and accelerators with a diverse population. CO+HOOTS is Arizona’s largest coworking space. It has been ranked number one by Inc.com as the most innovative coworking space and the fourth best coworking space in the nation. VIII • In June, a groundbreaking ceremony was held for Gateway Grand, a three-building industrial park totaling more than two million square feet, at the northwest corner of Sossaman and Pecos Roads in Mesa. The industrial park is expected to be completed in May 2023. It will be adjacent to the forthcoming Pecos Industrial Rail and Train Extension planned by Union Pacific Railroad, which will provide significant rail freight access to companies in the area. • In June, KP Aviation celebrated the grand opening of its new headquarters in the Mesa Gateway District. KP Aviation’s new facility in Mesa features more than 93,000 square feet, more than twice the size of its Reno operation, plus an additional 15,000 square feet for outdoor storage. KP Aviation qualified for the Inc. 5000 fastest growing privately owned companies for two consecutive years. • In July, Virgin Galactic, an aerospace and space travel company, announced a new final assembly manufacturing facility for its next generation Delta class spaceships. The facility will be capable of producing up to six spaceships per year and will bring hundreds of highly skilled aerospace engineering and manufacturing jobs to the area. The facility is expected to be fully operational by late 2023. • In July, Mekong Real Estate Investment Group broke ground on a more than 35,000-square foot expansion of Mekong Plaza. The $10M expansion project is expected to be completed by July 2023. The existing 100,000-square foot Mekong Plaza opened in 2008 with fewer than 10 Asianowned businesses. Today, at full capacity with 30 tenants, Mekong Plaza is well known across the state for its eclectic mix of Asian cuisine, groceries, shops, and service providers. • In July, Mesa City Council unanimously approved license agreements with Google Fiber, SiFi, Ubiquity and Wyyerd, allowing for more high-speed internet options to bridge the digital divide. This approval will bring high-speed internet to every premise in the City. • In August, after two and a half years of construction and a $100M investment by Mesa and ASU, the City and downtown businesses welcomed students to ASU's Media and Immersive eXperience Center (MIX). The state-of-the-art facility opened to hundreds of students in film, video production and digital technology and is expected to have a tremendous economic impact in downtown. Direct revenue to the City from ASU is estimated to be $7M annually, while indirect economic activity is expected to generate an estimated $9M annually. The MIX Center is part of the ASU at Mesa City Center complex, a collaboration between the City of Mesa and ASU. While students expand their knowledge and create new applications for film and digital technologies, The Studios, will be the public's front door to innovation. ASU and the City of Mesa will collaborate to foster business partnership and provide educational and professional training in entrepreneurship, digital literacy, future technology, and small business. The Plaza at Mesa City Center will create a major public civic space. It includes an interactive water feature, an iconic shade canopy over an area for the Merry Main Street ice rink and other events and a large lawn space to view movies and videos on an exterior high-resolution screen on the adjacent MIX Center. • In August, Phoenix-Mesa Gateway Airport put into service its new $30M Air Traffic Control Tower, naming it after John S. McCain III, the late U.S. Senator from Arizona. The new tower is 60 percent higher and twice as large as the existing tower. Senator McCain and Arizona’s IX Congressional Delegation were instrumental in efforts to remove the $2M federal funding cap for construction of contract air traffic control towers. • In September, Boeing announced a contract to produce 96 Apache helicopters for the Polish Armed Forces as the company scales up its manufacturing capabilities in Mesa. No terms have been released, but a recent deal between Boeing and the Australian government for 29 AH-64E Apache helicopters came in at $3.83B. In the same month, Boeing also opened the 155,000 square-foot Advanced Composition Fabrication Center, a $150M facility which will produce advanced composite components for future combat aircraft programs. • In October, Mesa was awarded the Golden Prospector Award for Economic Development Deal of the Year from the Arizona Association for Economic Development (AAED) for Mesa’s attraction of Meta’s 396-acre, 2.5 million-square-foot mission critical data center campus. The project is a capital investment of $1B and brings 2,000 constructions jobs and more than 200 high-tech operational jobs once finished. Based on industry assumptions over the first 10 years of operations, the Meta project is conservatively expected to generate more than $27M in construction sales tax and electricity sales tax for the City of Mesa. The most innovative component of the project is the unique approach to sustainability and water stewardship. Meta and the City of Mesa entered into a Sustainable Water Services Agreement, the first of its kind in the City of Mesa. This agreement allows Meta to transfer 1.79B gallons in LongTerm Water Storage Credits (LTSCs) to the City of Mesa to offset the Meta facility’s anticipated water use for the next 20 years. These credits allow Mesa to maintain its critical Certificate of Assured Water Supply with the Arizona Department of Water Resources, which is necessary to continue to develop and grow. The Golden Prospector Awards were established by AAED to encourage and recognize excellence, innovation, and creativity in economic development. • In November, Mesa made the top 10 list among cities with populations of 500,000 or more in the Center for Digital Government’s 2022 Digital Cities Survey and is the highest-ranked Arizona city in that category. For five consecutive years, Mesa has made the top 10 list in the category of 500,000 or more population. The annual survey recognizes cities using technology to tackle social challenges, enhance services, strengthen security and more. • In November, the Mesa Cemetery received a Community Greening Grant from NFL Green to plant 65 Italian Cypress trees in the Mesa Cemetery. This grant was used to replace the large number of trees lost in recent monsoon storms. The National Football League, Verizon, the Arizona Super Bowl LVII Host Committee, and APS have developed this community matching grant program to fund a variety of community “greening” projects including tree-planting, community gardens, habitat restoration, pollinator projects, and reforestation initiatives throughout Arizona. The Mesa Cemetery was established in 1891. The 72-acre property is rich with history. There is an area dedicated to Royal Air Force pilots who lost their lives while training to fight in World War II, and a section dedicated to those lost during the Great Depression. In addition to being the final resting place for thousands of people, famous individuals including Waylon Jennings and Mesa’s four “Founding Fathers” were laid to rest there. X Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to City of Mesa Arizona For its Annual Comprehensive Financial Report For the Fiscal Year Ended June 30, 2021 Executive Director/CEO XII FINANCIAL SECTION A N N UA L C OM P R E H E N SI V E F I NA N C IA L R E P O RT 2 0 2 2 Elec tra Meccanica FOR THE FISCAL YEAR ENDED | JUNE 30, 2022 CliftonLarsonAllen LLP CLAconnect.com INDEPENDENT AUDITORS’ REPORT The Honorable Mayor and Members of City Council City of Mesa, Arizona Mesa, Arizona Report on the Audit of the Financial Statements Opinions 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, 2022, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Mesa, Arizona, as of June 30, 2022, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Basis for Opinions We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Emphasis of Matters During the fiscal year ended June 30, 2022, the City ceased accounting for the Ambulance Transport activities as a Special Revenue Fund and began accounting for these activities within the General Fund. As a result, the beginning balances of the General Fund and Non-Major Governmental Funds were restated. See Note 17 for further information on the restatement. Our auditors’ opinion was not modified with respect to the restatement. As discussed in Note 1 to the financial statements, effective July 1, 2021, the City adopted new accounting guidance for leases. The guidance requires lessors to recognize a lease receivable and corresponding deferred inflow of resources and lessees to recognize a right to use asset and corresponding lease liability for all leases with lease terms greater than 12 months. Our opinion is not modified with respect to this matter. CLA (CliftonLarsonAllen LLP) is an independent network member of CLA Global. See CLAglobal.com/disclaimer. (1) The Honorable Mayor and Members of City Council City of Mesa, Arizona Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for 12 months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. Auditors’ Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with GAAS and Government Auditing Standards, we:  Exercise professional judgment and maintain professional skepticism throughout the audit.  Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.  Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, no such opinion is expressed.  Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.  Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for a reasonable period of time. (2) The Honorable Mayor and Members of City Council City of Mesa, Arizona We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit. 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 be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with GAAS, 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 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 nonmajor fund financial statements are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The 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 GAAS. In our opinion, the combining and individual nonmajor fund financial statements is fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Information Management is responsible for the other information included in the annual report. The other information comprises the introductory and statistical sections but does not include the basic financial statements and our auditors’ report thereon. Our opinions on the basic financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon. In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report. (3) The Honorable Mayor and Members of City Council City of Mesa, Arizona Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 19, 2022, 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 results 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. CliftonLarsonAllen LLP Phoenix, Arizona December 19, 2022 (4) Management Discussion and Analysis For the Fiscal Year Ended June 30, 2022 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, 2022. The reader is encouraged to consider the information presented here in conjunction with the transmittal letter presented on pages V - XI, as well as the financial statements beginning on page 17 and the accompanying notes to the financial statements. FINANCIAL HIGHLIGHTS • The City’s total revenues increased by $102 million from $1.22 billion to $1.32 billion. The increase in revenues is primarily from Sales Tax revenues ($48 million), Charges for Services ($59.4 million) and Capital Grants & Contributions ($50.2 million). • The City’s Relief Fund expenditures were $56 million as the City continued to respond to the COVID-19 pandemic. The City utilized Federal Funds from the American Rescue Plan Act (ARPA), Emergency Rental Assistance program (ERAP) and General Fund transfers to meet the needs of the community. • The City’s Governmental Funds reported a combined ending fund balance of $681.4 million, a $61.1 million increase from the previous year. Approximately 56 percent of the total governmental fund balance amount, or $380.7 million, is designated by the City as committed, assigned and unassigned. The remaining 44 percent or $300.7 million is designated as non-spendable or restricted. • Total fund balance for the General Fund was $331.8 million, which represents an increase of $46.4 million over prior year. The increase is a combination of an increase in Sales Tax and Intergovernmental revenues. • The City’s Enterprise Fund reported combined total net position of $444.9 million, which represents an increase of $24.6 million over prior year. The increase is primarily due to an increase in Charges for Services and Capital Contributions. 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: (1) Government-Wide Financial Statements, (2) Fund Financial Statements, and (3) Notes to the Financial statements. This report also contains other Supplementary Information in addition to the basic financial statements. Government-Wide Financial Statements The Government-Wide Financial Statements (pages 17-19) are designed to provide a broad overview of the City’s finances in a manner similar to private businesses. The Statement of Net Position presents information on all 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. 5 The Statement of Activities shows how the net position changed over the most recent fiscal year. All changes to net position are reported at the time that the underlying event giving rise to the change occurs, regardless of the timing of the related cash flows. This is the accrual basis of accounting. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods. Both the Government-Wide Financial Statements distinguish 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 of the City include general government, public safety, community environment and cultural-recreational. The Business-Type activities include private sector type activities such as the City-owned utilities (electric, gas, water, wastewater, solid waste and district cooling), as well as the City-owned airport. Fund Financial Statements The fund financial statements (pages 20-29) focus on individual parts of the City government, reporting the City’s operations in more detail than the Government Wide Financial Statements. They are used to maintain control over resources that have been segregated for specific activities or objectives and to ensure compliance with finance-related legal requirements. Fund financial statements are presented for Governmental Funds and Proprietary Funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the Government-Wide Financial Statements. However, unlike the Government-Wide Financial Statements, the Governmental Funds 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 in Note 2 to the basic financial statements. Proprietary funds are generally used to account for services for which the City charges customers (either outside customers, or internal departments of the City). Proprietary Funds provide the same type of information as shown in the Government-Wide Financial Statements only with more detail. Proprietary funds utilize the same method used by the private sector businesses, the accrual basis of accounting. The City maintains the following two types of Proprietary Funds: o Enterprise Funds are used to report the same functions as Business-Type Activities in the Government-Wide Financial Statements. The City uses separate funds to account for the operations of the City-owned utilities (electric, gas, water, wastewater, solid waste and district cooling), as well as the City-owned airport. The Utility fund is considered a major fund and the Airport is a nonmajor Enterprise Fund. o The Internal Service Funds are used to account for its fleet support; materials and supplies; printing and graphics; property and public liability; workers’ compensation; and employee benefits selfinsurance 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 Internal Service Funds are combined into a single column on the Proprietary Fund Financial Statements. Individual fund data for the Internal Service Funds can be found in the combining statements. 6 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. The notes to the financial statements can be found on pages 30-96 of this report. Required Supplementary Information (RSI) In addition to the financial statements and accompanying notes, this report presents certain required supplementary information including the city-wide budgetary comparison schedule, changes in net pension liability, employer pension contributions, and changes in other post-employment benefits (OPEB) liability. RSI and accompanying notes can be found on pages 97-111 of this report. GOVERNMENT-WIDE FINANCIAL 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, 2022, and 2021. Condensed Statement of Net Position As of June 30 (In thousands of dollars) Cash and Other Assets Capital Assets Total Assets Governmental Activities 2021 2022 $ 1,367,060 $ 1,212,196 1,680,031 1,611,328 3,047,091 2,823,524 Business-Type Activities 2021 2022 $ 788,135 $ 704,269 1,377,394 1,372,616 2,165,529 2,076,885 Total Government 2021 2022 $ 2,155,195 $ 1,916,465 3,057,425 2,983,944 5,212,620 4,900,409 Deferred Amounts on Refunding Deferred Outflows on Pensions & OPEB Total Deferred Amounts 5,128 295,552 300,680 6,062 314,399 320,461 22,896 22,457 45,353 25,771 26,708 52,479 28,024 318,009 346,033 31,833 341,107 372,940 Non-Current Liabilities, Due Within One Year Non-Current Liabilities, Due In More Than One Year Net Pension & OPEB Liability Other Liabilities Total Liabilities 53,565 55,935 52,483 48,701 106,048 104,636 515,214 1,694,472 271,002 2,534,253 507,280 1,789,600 223,508 2,576,323 1,368,213 133,955 137,524 1,692,175 1,356,669 178,972 122,230 1,706,572 1,883,427 1,828,427 408,526 4,226,428 1,863,949 1,968,572 345,738 4,282,895 151,757 54,791 206,548 21,140 21,140 17,239 56,517 73,756 2,397 2,397 168,996 111,308 280,304 23,537 23,537 1,246,582 249,626 (889,238) $ 606,970 1,184,908 203,284 (841,670) $ 546,522 24,204 95,840 324,907 444,951 30,965 70,940 318,490 420,395 1,270,786 345,466 (564,331) $ 1,051,921 1,215,873 274,224 (523,180) $ 966,917 Deferred Inflows on Pensions & OPEB Deferred Inflows on Leases Net Investment in Capital Assets Restricted Net Position Unrestricted Net Position Total Net Position 7 $ $ Changes in Net Position Year Ended June 30 (In thousands of dollars) Governmental Activities 2022 2021 Program Revenues: Charges for Services $ 125,132 Operating Grants & Contributions 105,858 Capital Grants & Contributions 44,369 General Revenues: Sales Taxes 301,862 Property Taxes 52,005 Occupancy Taxes 6,427 Unrestricted Intergovernmental 211,534 Utility Development Fees Contributions 7,771 Unrestricted Investment Income (loss) (29,788) Gain on Disposal of Capital Assets 1,856 M iscellaneous 14,758 Total Revenues 841,784 Business-Type Activities 2022 2021 439,343 452 30,888 $ 404,362 452 34,719 564,475 106,310 75,257 $ 505,109 101,375 45,415 253,825 47,247 3,990 206,397 19,052 2,308 17,229 21,315 783,729 21,021 (9,155) 1,199 483,748 45 192 439,770 301,862 52,005 6,427 211,534 21,021 7,771 (38,943) 1,856 15,957 1,325,532 253,825 47,247 3,990 206,397 19,052 2,353 17,229 21,507 1,223,499 183,242 416,563 195,594 86,824 14,720 175,608 409,549 172,840 66,020 18,201 - - 183,242 416,563 195,594 86,824 14,720 175,608 409,549 172,840 66,020 18,201 896,943 842,218 43,206 43,125 119,329 89,219 41,001 6,002 1,703 343,585 30,259 41,386 126,797 77,488 45,848 5,958 1,299 329,035 43,206 43,125 119,329 89,219 41,001 6,002 1,703 1,240,528 30,259 41,386 126,797 77,488 45,848 5,958 1,299 1,171,253 Increase (Decrease) in Net Position Before Transfers Transfers (55,159) 115,607 (58,489) 113,982 140,163 (115,607) 110,735 (113,982) 85,004 - 52,246 - Change in Net Position 60,448 55,493 24,556 (3,247) 85,004 52,246 Net Position - As Adjusted 546,522 491,029 420,395 423,642 966,917 914,671 $ 606,970 $ 546,522 444,951 $ 420,395 $ 1,051,921 $ 966,917 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 District Cooling Total Expenses Net Position - Ending $ 100,747 100,923 10,696 $ Total Government 2022 2021 $ 8 $ Analysis of Government-Wide Net Position The City’s overall Net Position increased $85 million from $967 million to $1.05 billion at the end of fiscal year 2022. The Restricted portion of the City's Net Position increased $67.8 million from $274.2 million to $342 million. Restricted Net Position represents resources that are subject to external restrictions on how they may be used. The restricted balances that increased in current year include restrictions for debt service, public safety, and transportation programs. The Unrestricted Net Position of ($561) million is primarily due to the impact of the long-term liability associated with pensions and OPEB of ($1.83 billion). Several factors contributed to the overall increase in Net Position: • Sales Tax revenues continued to come in strong, in all categories, increasing $48 million. Retail Sales Tax continues to be the largest contributor (increasing $19.2 million and 13.4%) as City residents continue to shop locally and on-line. Contracting Sales Tax increased $13.7 million (55.4%) due to the increase in construction (commercial, industrial, and residential). Restaurants and Bars increased 18% as residents enjoyed going out. • Program Revenues increased $114.5 million because of (1) Increase in Charges for Services by $59.3 million primarily due to Utility rate increases ($36 million), the expansion of Ambulance Transport services ($8 million); and ticket sales & event related revenues ($11 million) as fiscal year 2022 was the first full year that entertainment venues were open since COVID-19. (2) Operating and Capital Grants & Contributions increased $34.7 million due to ARPA and ERAP revenues and other federal/state grants. • General Government, Community Environment, Cultural Recreational all saw an increase in expenses in the current year. The increase can be attributed to ARPA and ERAP expenses. The overall increase in revenues in fiscal year 2022 offset this increase in expenses. Governmental Activities In fiscal year 2022, Governmental Activities increased their Net Position by $60.4 million from $546.5 million to $606.9 million. The increase in Net Position for the Governmental Activities is from the overall increase in revenues, as described above. As presented in the following two graphs, the largest funding sources for the governmental activities are Taxes (42%), Unrestricted Intergovernmental (25%) and Charges for Services (15%). The largest users of resources for the governmental activities are Public Safety (47%), Community Environment (22%) and General Government (21%). 9 Governmental Activities Revenues by Source Fiscal Year Ended June 30, 2022 Unrestricted Intergovernmental 25% Charges for Services 15% Operating Grants & Contributions 12% Unrestricted Contributions 1% Capital Grants & Contributions 5% Taxes 42% Governmental Activities Functional Expenses Fiscal Year Ended June 30, 2022 Public Safety 47% General Government 21% CulturalRecreational 10% Community Environment 22% 10 The following two graphs compare Governmental Activities revenues and expenses from fiscal year 2022 to fiscal year 2021. Governmental Activities - Revenues by Source Two Year Comparison (In thousands of dollars) $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 Program Revenues Taxes 2022 Unrestricted Intergovernmental 2021 Governmental Activities - Functional Expenses Two Year Comparison (In thousands of dollars) $450,000 $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 General Government Public Safety 2022 Community Environment 2021 11 Cultural-Recreational Fund Financial Statement Analysis The following is a brief discussion of some of the funds within the Governmental Activities. General Fund The General Fund is the primary 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. Total fund balance of the General Fund was $331.7 million, while unassigned fund balance was $152.5 million. Total fund balance of the City’s General Fund increased by $46.4 million during the current fiscal year from $285.3 million to $331.7 million. The increase is due to an increase in revenues see below for specifics: • • • Sales Tax revenues increased $28.7 million. As previously stated, sales tax related to Retail Sales, Restaurant and Bars and Contracting were the largest contributors. Intergovernmental Revenues increased $9.1 million due to increase in State Income Tax shared revenues. Charges for Services increased primarily due to large contributors. (1) expansion of Ambulance Transport Services ($8 million) and (2) the Mesa Arts Center, which was closed most of fiscal year 2021 ($6 million). A continued increase in permit revenue also contributed to the increase in charges for services. Relief Fund The Relief fund is used to account for the City’s response to the COVID-19 pandemic. In fiscal year 2022 the City received and expended federal funds from ARPA and ERAP. The Fund balance of the Relief Fund decreased $3 million primarily due to Investment Income loss. Although the net change in the fund balance (excluding investment loss) was minimal, there was a lot of activity in the Relief fund in the current year. The City recognized $55.8 million in federal funds; $25 million in ARPA funds and $30.8 million in ERAP funds. The Relief fund expenditures were $55.9 million. Specifically, the City spent funds on the following activities: • • • • $27.8 million in rental assistance $15.3 million in utility assistance $6.6 million in premium pay for essential city workers $2.4 million in public safety support for ambulances and Real Time Crime Center. Non-Major Governmental Funds The Non-Major Governmental Funds include Special Revenue, Capital Project and Debt Service funds. The fund balance of the Non-Major Governmental Funds was $352.3 million, with the majority classified as Restricted. Total fund balance of the Non-Major Governmental Funds increased by $17.7 million during the current fiscal year. The increase was primarily in the Special Revenue Funds. The Public Safety Tax, Quality of Life Sales Tax, and Highway User Revenue funds contributed to the $27 million increase in the Special Revenue Funds. Consistent with the General Fund, these funds saw an increase in Sales Tax Revenue and Intergovernmental Revenues. 12 Budgetary Highlights The City’s annual budget is the legally adopted expenditure control document of the City. The legally adopted budget is at a citywide level that includes all Governmental and Enterprise Funds. A budget schedule at the citywide level is presented in the Required Supplementary Information Section. The schedule compares the original adopted budget, the budget as amended throughout the year, and the actual expenditures prepared on a budgetary basis. Budgeted amounts may change within funds and between funds. Transfers between funds or departmental groups may be made upon City Manager approval and do not require council action (see Note 1.f. of the notes to the financial statements for more information on budget policies). There were no budget amendments that increased the overall City adopted budget during fiscal year 2022. Business-Type Activities The following graphs present utility revenues and expenses for fiscal year 2022. The City’s largest utility, Water, had a net revenue/expense gain of $44 million. Whereas the remaining Utilities saw a more moderate net revenue/expense gain. Utility Revenues Charges for Services and Program Expenses Fiscal Year 2022 180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 - Electric Gas Charges for Services Water Wastewater Solid Waste Program Expenses Total Business-Type Activities program and general revenues increased by $44 million from $439.8 million to $483.7 million. The increase is primarily related to an increase in utility rates, which increased Charges for Services by $35 million. 13 CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets The City’s investment in capital assets for its governmental and business-type activities amounts to $3.1 billion (net of accumulated depreciation/amortization) as of June 30, 2022. This net investment in capital assets includes land, buildings, other improvements, machinery and equipment, intangibles, infrastructure, and leases. 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. The following table provides a breakdown of the City’s capital assets on June 30, 2022, and 2021: Capital Assets (net of accumulated depreciation/amortization) As of June 30 (In thousands of dollars) Land Infrastructure - Nondepr Construction-in-Progress Buildings Other Improvements M achinery & Equipment Intangibles Infrastructure Leases Total Governmental Activities 2022 2021 $ 405,282 $ 403,086 3,597 3,597 204,782 198,056 280,976 278,040 127,795 122,980 86,160 75,047 97 1,181 548,012 529,341 23,332 $ 1,680,033 $ 1,611,328 Business-Type Activities 2022 2021 $ 28,715 $ 28,339 17,666 17,666 99,689 106,831 29,145 30,030 38,864 40,453 25,457 25,219 3,802 5,152 1,134,057 1,118,925 $ 1,377,395 $ 1,372,616 Total Government 2022 2021 $ 433,997 $ 431,425 21,263 21,263 304,471 304,887 310,121 308,070 166,659 163,433 111,617 100,266 3,899 6,333 1,682,069 1,648,266 23,332 $ 3,057,428 $ 2,983,944 The City’s total capital asset balances on June 30, 2022, increased slightly in comparison with prior year balances. Infrastructure assets increased $33.8 million, primarily due to Water and Streets Infrastructure projects. Machinery & Equipment increased $11.4 million due to various projects (HVAC, cooling, street sweeper purchases, and public safety equipment). Additional information on the City’s capital assets can be found in Note 8 of the notes to the basic financial statements. Debt Administration At the end of the fiscal year 2022, the City had total long-term bond obligations and notes payable outstanding of $1.8 billion. Of this amount, $319 million comprises debt backed by the full faith and credit of the City, $1.5 billion represents bonds secured by specified revenue sources (i.e., Utility System Revenue, Highway User Revenue, Sales Tax) and $23 million in lease liability. The City’s outstanding long-term debt (considering new borrowings, debt retirements, and defeasance) is substantially unchanged from prior year. The change in debt includes new borrowings during the fiscal year totaling $105 million, principal payments of $102 million. The City’s total outstanding debt includes $91.8 million in Community Facility District (CFD) bonds. Special Assessment revenues and secondary property tax are collected to make the annual Community 14 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 following schedule shows the outstanding long-term debt of the City as of June 30, 2022, and 2021. Outstanding Long-term Debt As of June 30 (In thousands of dollars) Governmental Activities 2022 2021 General Obligation Bonds $318,950 $ 334,377 Utility System Revenue Bonds 0 Utility Revenue Obligations Highway User Revenue Fund Bonds 39,030 49,105 Excise Tax Obligations 34,180 35,365 Community Facility District 91,816 83,948 Notes Payable Leases 23,025 Total $507,001 $ 502,795 Business-Type Activities 2022 2021 $ $ 28 1,227,750 1,275,640 84,795 14,015 1,135 1,285 $ 1,313,680 $ 1,290,968 Total Government 2022 2021 $ 318,950 $ 334,405 1,227,750 1,275,640 84,795 14,015 39,030 49,105 34,180 35,365 91,816 83,948 1,135 1,285 23,025 $ 1,820,681 $ 1,793,763 The City’s current bond ratings are as follows: Rating Agency General Obligation Bonds Highway User Revenue Bonds Utility Systems Revenue Bonds Standard and Poor’s Corporation AA AA AA- Moody’s Investors Service Aa2 A2 Aa2 Fitch Ratings AAA N/A N/A 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 on June 30, 2022, was $352.4 million in the 6% capacity and $859.6 million in the 20% capacity. Additional information on the City’s long-term obligations can be found in Note 9 of the notes to the basic financial statements and Table X in the Statistical Section. 15 ECONOMIC FACTORS AND NEXT YEAR’S BUDGET On May 16, 2022, the City Council approved a $2.3 billion budget, which is an increase of $200 million compared to prior year’s budget. The adopted fiscal year 2023 budget continues the City’s fiscally conservative approach. The Governmental Funds financial principles include 10%-15% fund balance over a 5-year forecasted period, sustainability of programs and services, competitive wages and benefits for employees, and investment in capital and lifecycle replacement projects. The Utility Fund financial principles includes 20% or higher reserve fund balance, and affordable utility services. The City’s 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 City plans to continue to utilize American Rescue Plan Act (ARPA) funds in fiscal year 2023. The main areas of focus continue to be Public Safety Support (9%); Households and Small Business Assistance (47%); Homeless Support Programs (26%); Premium Pay for Essential Workers (14%); and Cybersecurity (4%). As of September 2022, the non-seasonally adjusted unemployment rate for Mesa was 3.5%. The City’s current rate remains competitive locally, and sits below the state (3.9%), and national (3.7%) unemployment rates. The fiscal year 2022-23 assessed valuation increased 6% to $4.23 billion. On June 20, 2022, the City Council voted to decrease the City’ secondary property tax rate to $0.9157 from $1.1319 per $100 assessed valuation. 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. 16 BASIC FINANCIAL SECTION A N N UA L C OM P R E H E N SI V E F I NA N C IA L R E P O RT 2 0 2 2 Elliot Road Technolog y C or r idor FOR THE FISCAL YEAR ENDED | JUNE 30, 2022 City of Mesa, Arizona Statement of Net Position June, 30, 2022 (in thousands) Governmental Activities 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 $ Deferred Outflows of Resources Debt Refunding Pensions and OPEB Total Deferred Outflows of Resources 803,559 68,706 2,245 69,038 9,139 5,726 Primary Government Business-Type Activities $ 123,529 96,827 688 5,207 3,212 $ Total 927,088 165,533 2,933 74,245 9,139 8,938 14,263 58,228 695 22,281 1,407 311,773 613,659 1,066,372 3,047,091 180,846 74,809 3,918 14,588 284,511 146,070 1,231,324 2,165,529 195,109 133,037 695 22,281 1,407 3,918 14,588 596,284 759,729 2,297,696 5,212,620 5,128 295,552 300,680 22,896 22,457 45,353 28,024 318,009 346,033 54,282 46,810 10,287 97,184 62,439 10,986 126,538 65,268 46,810 10,287 97,184 188,977 Liabilities Accounts Payable and Accrued Liabilities Claims Payable Customer and Defendant Deposits Unearned Revenue Liabilities Payable from Restricted Assets Noncurrent Liabilities: Due Within One Year Due in More Than One Year: Lease Liability Bonds Payable Compensated Absences Net Pension and OPEB Liability Total Liabilities 53,565 52,483 106,048 21,932 462,638 30,644 1,694,472 2,534,253 1,364,455 3,758 133,955 1,692,175 21,932 1,827,093 34,402 1,828,427 4,226,428 Deferred Inflows of Resources Pensions and OPEB Leases Total Deferred Inflows of Resources 151,757 54,791 206,548 17,239 56,517 73,756 168,996 111,308 280,304 1,246,582 24,204 1,270,786 48,765 82,212 108,918 9,731 (889,238) 606,970 41,418 14,588 39,834 324,907 444,951 41,418 14,588 88,599 82,212 108,918 9,731 (564,331) 1,051,921 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. 17 $ $ City of Mesa, Arizona Statement of Activities For the Fiscal Year Ended June 30, 2022 (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 District Cooling Total Business-type Activities Total Government Charges for Services 183,242 416,563 195,594 86,824 14,720 896,943 $ 43,206 43,125 119,329 89,219 41,001 6,002 1,703 343,585 $ 1,240,528 27,380 55,333 21,567 20,852 125,132 Program Revenues Operating Grants and Contributions Capital Grants and Contributions $ $ 2,957 12,669 81,549 8,683 105,858 52,613 57,313 163,263 93,727 66,132 4,808 1,487 439,343 $ 564,475 452 452 $ 106,310 450 14,994 6,445 6,637 2,362 30,888 $ General Revenues: Sales Taxes Property Taxes Occupancy Taxes Unrestricted Intergovernmental Revenues Utility Development Fees Contributions Not Restricted to Specific Programs Investment Income (Loss) Gain on Sale of Asset Miscellaneous Revenues 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. 18 29,125 963 14,183 98 44,369 75,257 (Continued) Net (Expense) Revenue and Changes in Net Position Primary Government Governmental Business-type Activities Activities Total * * $ $ (123,780) (347,598) (78,295) (57,191) (14,720) (621,584) $ - $ (123,780) (347,598) (78,295) (57,191) (14,720) (621,584) - 9,857 29,182 50,379 11,145 25,131 1,620 (216) 127,098 9,857 29,182 50,379 11,145 25,131 1,620 (216) 127,098 (621,584) 127,098 (494,486) 301,862 52,005 6,427 211,534 7,771 (29,788) 1,856 14,758 115,607 682,032 21,021 (9,155) 1,199 (115,607) (102,542) 301,862 52,005 6,427 211,534 21,021 7,771 (38,943) 1,856 15,957 579,490 60,448 24,556 85,004 546,522 420,395 966,917 606,970 $ 444,951 $ 1,051,921 19 City of Mesa, Arizona Balance Sheet Governmental Funds June, 30, 2022 (in thousands) Assets Pooled Cash and Investments Accounts Receivable, Net Accrued Interest Receivable Due from Other Governments Due from Other Funds Advances to Other Funds Prepaid Costs Restricted Assets: Pooled Cash and Investments Cash with Fiscal Agent Cash with Trustee Accounts Receivable Due from Other Governments Total Assets Liabilities Accounts Payable and Accrued Liabilities Due to Other Funds Advances from Other Funds Customer and Defendant Deposits Unearned Revenue Payable from Restricted Assets: Accrued Interest Payable Matured Bonds Payable Total Liabilities General Fund Relief Fund Non-major Governmental Funds $ $ $ $ $ 320,457 66,100 907 27,243 9,522 3,185 427,414 29,403 1,760 1,966 5,432 $ $ 76,620 1 208 5,185 225 82,239 1,072 83,891 $ $ 348,264 1,890 976 36,610 1,760 498 14,263 58,228 695 22,281 1,407 486,872 20,390 8,403 8,321 7,861 Total Governmental Funds $ $ $ 745,341 67,991 2,091 69,038 9,522 1,760 3,908 14,263 58,228 695 22,281 1,407 996,525 50,865 8,403 1,760 10,287 97,184 38,561 84,963 9,550 52,889 107,414 9,550 52,889 230,938 Deferred Inflows of Resources Unavailable Revenue Deferred Inflows Related to Leases Total Deferred Inflows of Resources 2,295 54,791 57,086 - 27,142 27,142 29,437 54,791 84,228 Fund Balances Nonspendable Restricted Committed Assigned Unassigned Total Fund Balances 3,185 4,313 171,743 152,526 331,767 225 (2,949) (2,724) 498 296,748 25,677 39,153 (9,760) 352,316 3,908 296,748 29,990 210,896 139,817 681,359 Total Liabilities, Deferred Inflows of Resources and Fund Balances $ 427,414 $ The accompanying notes are an integral part of the financial statements. 20 82,239 $ 486,872 $ 996,525 City of Mesa, Arizona Reconciliation of the Balance Sheet of Governmental Funds To the Statement of Net Position June, 30, 2022 (in thousands) Fund Balances - total governmental funds $ 681,359 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. 1,677,650 Other assets used in governmental activities are not financial resources and therefore not reported in the governmental funds. 312,201 Deferred outflows related to deferred amounts on refunding and pensions are not financial resources and therefore not reported in the funds. 294,690 Long-term liabilities, including bonds payable, lease liabilities and net pension liabilities are not due and payable in the current period and therefore not reported in the governmental funds. (2,223,750) 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. (118,444) Internal service funds are used by management to charge the costs of certain activities to individual funds. (16,736) Net position of the governmental activities - statement of net position The accompanying notes are an integral part of the financial statements. 21 $ 606,970 City of Mesa, Arizona Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Fiscal Year Ended June 30, 2022 (in thousands) Revenues Sales Taxes Property Taxes Occupancy Taxes Special Assessments Licenses and Permits Intergovernmental Charges for Services Fines and Forfeitures Investment Income (Loss) Contributions Miscellaneous Revenue Total Revenues General Fund Relief Fund Non-major Governmental Funds $ $ $ Expenditures Current: General Government Public Safety Community Environment Cultural-Recreational Debt Service: Principal Interest Service Charges Cost of Issuance Capital Outlay Total Expenditures 181,277 1,937 39,363 176,137 45,768 7,689 (11,667) 5,105 445,609 55,848 (2,905) 52,943 120,585 51,926 4,490 1,830 9,211 115,593 20,152 1,983 (13,144) 1,081 2,227 315,934 Total Governmental Funds $ 301,862 51,926 6,427 1,830 48,574 347,578 65,920 9,672 (27,716) 1,081 7,332 814,486 99,480 305,069 13,783 50,513 39 6,578 45,062 61 11,089 54,240 68,792 11,968 110,608 365,887 127,637 62,542 1,058 464 20,117 490,484 4,225 55,965 52,974 18,819 12 540 143,286 361,720 54,032 19,283 12 540 167,628 908,169 Excess (Deficiency) of Revenues Over (Under) Expenditures (44,875) (3,022) (45,786) (93,683) Other Financing Sources (Uses) Transfers In Transfers Out Sale of Capital Asset Face Amount of Bonds Issued Premium on Issuance of Bonds (Net) Total Other Financing Sources (Uses) 116,674 (27,140) 1,773 91,307 - 27,140 (1,067) 231 34,155 3,059 63,518 143,814 (28,207) 2,004 34,155 3,059 154,825 Net Change in Fund Balances 46,432 (3,022) 17,732 61,142 285,335 298 334,584 620,217 Fund Balance - As Restated Fund Balances - Ending $ 331,767 $ The accompanying notes are an integral part of the financial statements. 22 (2,724) $ 352,316 $ 681,359 City of Mesa, Arizona 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, 2022 (in thousands) Net change in fund balances - total governmental funds $ 61,142 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. (1,966) 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. (55,357) 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/amortization expense. This is the amount by which capital outlay $116,243 exceeded depreciation/amortization ($71,258) in the current period. 44,985 The net effect of miscellaneous transactions involving capital assets (e.g., donations, transfers and disposals) is to decrease net position. (383) Change in equity in Joint Venture (5,577) The issuance of long-term debt and financing of 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. 19,877 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. 2,056 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. (4,329) Change in net position of the governmental activities - statement of activities The accompanying notes are an integral part of the financial statements. 23 $ 60,448 City of Mesa, Arizona Statement of Net Position Proprietary Funds June, 30, 2022 (in thousands) Utility Assets Current Assets: Pooled Cash and Investments Accounts Receivable (Net of Allowances) Accrued Premiums Receivable Accrued Interest Receivable Due from Other Governments Inventory Prepaid and Deposits Restricted Assets: Pooled Cash and Investments Cash with Fiscal Agents Customer Deposits Joint Venture Construction Deposits Total Current Assets Noncurrent Assets: Investment in Joint Ventures Capital Assets, Not Being Depreciated Capital Assets, Being Depreciated, Net Total Noncurrent Assets Total Assets $ 118,258 39,154 670 2,934 3,212 Non-Major Fund Airport $ 5,271 57,673 18 2,273 - Total $ 123,529 96,827 688 5,207 3,212 Internal Service Funds $ 58,218 504 211 154 9,139 1,390 180,846 74,809 3,918 14,588 - 180,846 74,809 3,918 14,588 - 438,389 65,235 503,624 69,616 284,511 137,470 1,211,489 8,600 19,835 284,511 146,070 1,231,324 11 2,370 1,633,470 28,435 1,661,905 2,381 2,071,859 93,670 2,165,529 71,997 22,896 21,930 44,826 527 527 22,896 22,457 45,353 5,990 5,990 94,197 $ 2,210,882 Deferred Outflows of Resources Refundings Pensions and OPEB Total Deferred Outflows of Resources Total Assets and Deferred Outflows of Resources Governmental Activities Business-type Activities $ 2,116,685 The accompanying notes are an integral part of the financial statements. 24 $ $ 77,987 (Continued) City of Mesa, Arizona Statement of Net Position Proprietary Funds June, 30, 2022 (in thousands) Utility LIABILITIES Current Liabilities-Payable From Current Assets: Accounts Payable and Accrued Liabilities Due to Other Funds Claims Payable Current Liabilities-Payable From Restricted Assets: Accounts Payable and Accrued Liabilities Interest Payable 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 $ Long-Term Liabilities: Bonds Payable Notes Payable Compensated Absences Net Pension and OPEB Liability Total Long-Term Liabilities Total Liabilities 10,723 - $ Non-Major Fund Airport $ 263 - Total $ 10,986 - Internal Service Funds $ 3,417 1,119 46,810 6,217 26,892 47,918 44,524 450 537 6,667 26,892 47,918 45,061 - 51,660 153 634 188,721 36 1,286 51,660 153 670 190,007 112 51,458 1,363,473 982 3,513 131,042 1,499,010 245 2,913 3,158 1,363,473 982 3,758 133,955 1,502,168 881 38,508 39,389 1,687,731 4,444 1,692,175 90,847 16,776 16,776 463 56,517 56,980 17,239 56,517 73,756 3,876 3,876 (4,231) 28,435 24,204 2,381 41,418 14,588 39,834 320,569 412,178 4,338 32,773 41,418 14,588 39,834 324,907 444,951 (19,117) (16,736) DEFERRED INFLOWS OF RESOURCES Pensions and OPEB Deferred Inflows Related to Leases Total Deferred Inflows of Resources NET POSITION Net Investment in Capital Assets Restricted For: Bond Indentures Construction Debt Service Unrestricted Total Net Position Governmental Activities Business-type Activities The accompanying notes are an integral part of the financial statements. 25 $ $ $ City of Mesa, Arizona Statement of Revenues, Expenditures and Changes in Net Position Proprietary Funds For the Fiscal Year Ended June 30, 2022 (in thousands) Operating Revenues: Electric Charges Gas Charges Water Sales Wastewater Charges Solid Waste Charges Airport Fees District Cooling Charges Charges For Services Self-Insurance Contributions Other Revenue Total Operating Revenues Business-type Activities Non-Major Fund Airport Utility Total $ 52,613 57,313 163,263 93,727 66,132 1,487 434,535 $ 4,808 4,808 $ 52,613 57,313 163,263 93,727 66,132 4,808 1,487 439,343 Governmental Activities Internal Service Funds $ 33,025 110,206 8,607 151,838 Operating Expenses: Electric Gas Water Wastewater Solid Waste Airport District Cooling Warehouse, Maintenance & Services Self-Insurance Total Operating Expenses 37,798 33,813 66,309 42,219 38,729 1,306 220,174 3,995 3,995 37,798 33,813 66,309 42,219 38,729 3,995 1,306 224,169 34,830 119,187 154,017 Operating Income (Loss) Before Depreciation and Amortization 214,361 813 215,174 (2,179) Depreciation and Amortization (62,910) (1,958) (64,868) (232) 151,451 (1,145) 150,306 (2,411) Operating Income (Loss) The accompanying notes are an integral part of the financial statements. 26 (Continued) City of Mesa, Arizona Statement of Revenues, Expenses and Changes in Net Position Proprietary Funds For the Fiscal Year Ended June 30, 2022 (in thousands) Nonoperating Revenues (Expenses): Investment Income Intergovernmental Lease Interest Interest Expense: Bonds Notes Payable Gain/(Loss) on Disposal of Capital Assets Net Gain from Joint Venture Utility Development Fees Bond Issuance Costs Miscellaneous Revenue Total Nonoperating Revenues (Expenses) Business-type Activities Non-Major Fund Airport Utility Total $ (9,155) 3,022 1,101 (45,009) (28) (333) (8,654) 21,021 (476) 49 (42,139) (49) 49 3,677 (45,009) (28) (382) (8,654) 21,021 (476) 98 (38,462) (2,072) Income before Transfers and Capital Contributions 109,312 2,532 111,844 (4,483) Capital Contributions Transfers Out 28,319 (115,607) - 28,319 (115,607) 154 - Change in Net Position 22,024 2,532 24,556 (4,329) Total Net Position - Beginning 390,154 30,241 420,395 (12,407) 32,773 $ 444,951 $ (8,917) 208 - 412,178 $ Internal Service Funds (238) 2,814 1,101 Total Net Position - Ending $ Governmental Activities $ The accompanying notes are an integral part of the financial statements. 27 $ $ (2,072) - (16,736) City of Mesa, Arizona Statement of Cash Flows Proprietary Funds For the Fiscal Year Ended June 30, 2022 (in thousands) 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 Net Cash Provided By (Used For) Operating Activities Business-type Activities Non-Major Fund Airport Utility Total $ 439,836 $ Governmental Activities Internal Service Funds 3,705 $ 443,541 $ (179,728) (42,660) 49 (2,647) (1,855) 50 (182,375) (44,515) 99 151,888 (133,524) (19,037) - 217,497 (747) 216,750 (673) 558 1,163 (115,607) (1,093) - Cash Flows From Noncapital Financing Activities: Intergovernmental Transfers In from Other Funds Transfers Out to Other Funds (115,607) 605 - Net Cash Provided by (Used For) Noncapital Financing Activities (115,049) 605 (114,444) (1,093) 75,495 92 (41,890) (41,947) (53,407) (2,651) - (476) 25,950 1,101 - 75,495 92 (44,541) (41,947) (53,407) 1,101 (476) 25,950 (65) (30) - Net Cash Used For Capital and Related Financing Activities (36,183) (1,550) (37,733) (95) Cash Flows From Investing Activities: Interest Received on Investments (9,037) (237) (9,274) (2,078) Net Cash Provided By Investing Activities (9,037) (237) (9,274) (2,078) Net Change in Pooled Cash and Investments 57,228 (1,929) 55,299 (3,939) Total Cash and Investments at Beginning of Year 316,685 7,200 323,885 62,157 Total Cash and Investments at End of Year $ 373,913 5,271 $ 379,184 Cash Flows From Capital and Related Financing Activities: Proceeds from Bond Sales 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 Contributions from Other Governments Interest on Leases Bond Issuance Costs Contributions and Capital Grants The accompanying notes are an integral part of the financial statements. 28 $ $ 58,218 (Continued) City of Mesa, Arizona Statement of Cash Flows Proprietary Funds For the Fiscal Year Ended June 30, 2022 (in thousands) Reconciliation of Operating Income to Net Cash Provided By (Used For) Operating Activities: Operating Income Business-type Activities Non-Major Fund Airport Utility Total $ 151,451 $ (1,145) $ 150,306 Governmental Activities Internal Service Funds $ (2,411) 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 62,910 49 1,958 50 64,868 99 232 - 936 25,134 2,301 (43,700) 4,149 14,436 (169) (57,620) 93 134 (1,317) 102 56,923 75 (56,684) 25,227 2,435 (45,017) 4,251 71,359 (94) 17 (498) (205) 481 156 (276) 3,359 (1,528) Total Adjustments 66,046 398 66,444 1,738 Net Cash Provided By (Used For) Operating Activities $ 217,497 $ (747) $ 216,750 $ (673) 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 $ 23,390 (382) 12,007 (2,875) $ (50) - 23,390 (432) 12,007 (2,875) $ 174 - The accompanying notes are an integral part of the financial statements. 29 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 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. The City’s population as of the 2020 census is 504,258 within an area of approximately 138 square miles. The City’s charter was adopted August 18, 1967 providing for a Council-Manager form of government. The City provides a full range of municipal services including police and fire protection, parks and recreation, library and transportation. In addition, the City owns and operates an airport and a utility whose activities include operations of electricity, gas, water, wastewater, solid waste 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 three 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 currently serves as the Manager of the Districts Although the Districts 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 #1 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 Eastmark Community Facilities District #2 and 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 30 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 Valley Metro Regional Public Transportation Authority (“the Authority”) 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 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. In addition, AMWUA performs certain accounting, administrative and support services for the cities who are jointly using the 91st Avenue Water Treatment Plant. 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. 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. As a general rule, the effect of interfund activity has been eliminated from the Government-Wide Financial Statements; the exception is any interfund activity between Governmental and Business-Type Activities, such as transfers. Interfund services provided and used are not eliminated. The Statement of Net Position reports all financial and capital resources of the City. It is presented in a format of assets plus deferred outflows of resources less liabilities less 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, 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 Statement of Activities demonstrates the degree to which the direct expenses of the various functional activities 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.). Expenses reported for the various functional activities 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. Program revenues also include grants and contributions that are restricted to meeting the operational or capital requirements of a particular function, including special assessments. Taxes and other items not properly included as program revenues are reported as general revenues. The general revenues support the net costs of the functions not covered by program revenues. 31 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 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 and proprietary funds. 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 two enterprise funds. The Utility Fund is reported as a major fund and the Airport Fund is a non-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. 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. 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 32 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 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 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, 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 on the following major Governmental Funds and Proprietary Funds: Major Governmental Funds: 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 Relief Fund is a special revenue fund that accounts for federal expenditures dedicated to supporting the City’s response to COVID-19. Major Proprietary (Enterprise) Fund: The Utility Fund has been established to account for all utility functions. This includes the City-owned electric, gas, water, wastewater and solid waste systems, plus district cooling. 33 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 Non-major Governmental Funds: Twelve Special Revenue Funds are used to account for specific revenues that are legally restricted to expenditures for specific purposes. Five Capital Project Funds are used to account for the acquisition and construction of major capital facilities other than those financed by proprietary funds. Four Debt Service Funds are used to account for the accumulation of resources for the payment of long-term obligation principal, interest, and service charges. Proprietary Funds: The Airport Fund is a Non-major Enterprise Fund and is used to account for the Cityowned airport. 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. 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. Transfers between funds or departmental groups may be made upon City Manager approval and do not require council action. The legally adopted budget is at a citywide level that includes all Governmental and Enterprise Funds. A budget schedule at the citywide level 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. Through a Home Rule option, any City can adopt its own alternative expenditure limitation if a majority of the qualified electors vote in favor of the issue at a regular election. On November 6, 2018, the City of Mesa voters approved to continue under Home Rule for the next four years. 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 17, 2021. 34 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 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). 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 and Prepaid Items 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 expense/expenditure at the time individual items are consumed. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both the government-wide and fund financial statements. The cost of prepaid items is recorded as expenditures/expenses when consumed rather than when purchased. j. Capital Assets Capital assets, 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 $10,000 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 acquisition value or engineering estimates of acquisition value 35 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 at the time of receipt. When assets are retired or sold, the costs of the assets and the related accumulated depreciation are eliminated from the accounts, and any resultant gain or loss is charged to income or expense. Depreciation has been provided using the straight-line method based on the estimated useful lives of the assets. Amortization of the leased assets has been provided using the straight-line method based on the shorter of the lease period or estimated useful life of the leased asset. 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, long-term 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 effective interest method. Bonds payable are reported net of the applicable bond premium or discount. 36 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 In the fund financial statements, governmental fund types recognize bond premiums and discounts during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuance are reported as other financing uses. n. Pension and Postemployment Benefits For purposes of measuring the net pension and other postemployment benefits (OPEB) liabilities, deferred outflows of resources and deferred inflows of resources related to pensions and OPEB, and pension and OPEB expense, information about the plans’ fiduciary net position and additions to/deductions from the plans’ fiduciary net position have been determined on the same basis as they are reported by the plans. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. o. Fund Balance Policies In the fund financial statements, fund balance is reported in classifications that comprise a hierarchy based on the extent to which the City is bound to honor constraints on the specific purposes for which amounts in those funds can be spent. The classifications of fund balance are Nonspendable, Restricted, Committed, Assigned, and Unassigned. Nonspendable and Restricted fund balances represent restricted classifications and Committed, Assigned, and Unassigned represent unrestricted classifications. Nonspendable fund balance includes amounts that cannot be spent because either 1) it is not in a spendable form, such as inventory or prepaid items or 2) it is legally or contractually required to be maintained intact. Restricted fund balance has externally (outside the City) enforceable limitations imposed by creditors, grantors, contributors, laws and regulations of other governments, or laws through constitutional provisions or enabling legislation (changes in City Charter). Committed fund balance has self-imposed limitations imposed at the highest level of decision making authority, namely, Mayor and Council. Mayor and Council approval is required by resolution to commit resources or to rescind the commitment. Assigned fund balance represents limitations imposed by management. Assigned fund balance requests are submitted to the Chief Financial Officer for approval/nonapproval. City Charter authorizes the City Manager or Designee the authority to perform all financial transactions. The City Manager has authorized the Chief Financial Officer this responsibility. Unassigned fund balance represents the residual net resources in excess of the other classifications. The General Fund is the only fund that can report a positive unassigned fund balance and any governmental fund can report a negative unassigned fund balance. When both restricted and unrestricted resources are available for specific expenditures, restricted resources are considered spent before unrestricted resources. Within unrestricted resources, committed and assigned are considered spent (if available) before unassigned amounts. 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 all monies 37 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 in the State Treasurer’s Local Government Investment Pools since the City may deposit or withdraw cash at any time without prior notice or penalty. q. Contingency Services The principal purpose of a contingency is to cover any unforeseen expenditures that may arise after the budget is adopted, and to cover expenditures resulting from prior year encumbrances. It is impossible to estimate revenues exactly or to determine in a prior year the exact expenditure of each program or activity for the ensuing year. Thus, a contingency is essential for budgetary purposes. Any balance of a contingency 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, 2022 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 levy is “unlimited” and the limited property value is used in determining the tax rate. In fiscal year 2021-2022, current property tax collections were $44,706,239 or 97.69% 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 on June 30, 2022 was $1,310,266 of which $711,757 was recorded as revenue and $598,509 as unavailable revenue. s. New Accounting Pronouncements 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 implemented this Statement in fiscal year 2022. GASB Statement No. 91, Conduit Debt Obligations. This Statement defines conduit debt obligations for accounting and financial reporting purposes and establishes related standards for recognition, measurement, and disclosure for issuers. The requirements of this Statement will take effect for reporting periods beginning after December 31, 2020. The City implemented this Statement in fiscal year 2022, with no effect. 38 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 Implementation Guide No. 2020-1, Implementation Guidance Update – 2020, provides guidance that clarifies, explains or elaborates on GASB Statements and Interpretations. The requirements of this Implementation Guide are effective for reporting periods beginning after June 15, 2021. The requirements of this Implementation Guide was implemented in fiscal year 2022, with no effect. GASB Statement No. 96 Subscription-Based Information Technology provides guidance on the accounting and financial reporting for subscription-based information technology arrangements (SBITAs) for government end users (governments). The requirements of this Statement are effective for reporting periods beginning after June 15, 2022. The City will implement this Statement in fiscal year 2023. Although expected to be significant, the City has not fully determined the effects that implementation of Statement No. 96 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. 39 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 Reconciliation of the Governmental Funds Balance Sheet to the Government-Wide Statement of Net Position (in thousands): Assets Pooled Cash and Investments Account and M isc Receivables, Net Accrued Interest Receivable Due from Other Governments Due from Other Funds Advances to Other Funds Inventory Prepaid and Deposits Restricted Assets: Pooled Cash and Investments Cash with Fiscal Agent Cash with Trustee Accounts Receivable Due from Other Governments Investment in Joint Ventures Capital Assets Total Assets Total Governmental Funds Long-term Assets/ Liabilities (1) Internal Service Funds (2) Reclassifications and Eliminations Statement of Net Position Total $ $ $ 58,218 715 154 $ $ Liabilities Accounts Payable and Accrued Liabilities Due To Other Funds Claims Payable Advances from Other Funds Customer and Defendant Deposits Unearned Revenue Liabilities Payable from Restricted Assets Pension and OPEB Long-term Liabilities Total Liabilities (9,522) (1,760) - 803,559 68,706 2,245 69,038 9,139 5,726 (11,282) 14,263 58,228 695 22,281 1,407 311,773 1,680,031 3,047,091 - 5,128 295,552 300,680 14,263 58,228 695 22,281 1,407 996,525 311,773 1,677,650 1,989,851 - 5,128 289,562 294,690 5,990 5,990 $ 996,525 $ 2,284,541 $ 77,987 $ (11,282) $ 3,347,771 $ 50,865 8,403 1,760 10,287 97,184 62,439 230,938 $ $ 3,417 1,119 46,810 38,508 993 90,847 $ (9,522) (1,760) (11,282) $ Deferred Inflows of Resources Unavailable Revenue Deferred Inflows Related to Leases Pension Total Deferred Inflows of Resources Fund Balance/Net Position Total Fund Balance/Net Position Total Liabilities and Fund Balance/Net Position 428 9,139 1,390 2,381 71,997 Deferred Outflows of Resources Deferred Amounts on Refunding Pensions and OPEB Total Deferred Outflows of Resources Total Assets and Deferred Outflows of Resources 745,341 67,991 2,091 69,038 9,522 1,760 3,908 $ 1,655,964 567,786 2,223,750 (29,437) - 54,282 46,810 10,287 97,184 62,439 1,694,472 568,779 2,534,253 29,437 54,791 84,228 147,881 118,444 3,876 3,876 - 54,791 151,757 206,548 681,359 (57,653) (16,736) - 606,970 996,525 $ 2,284,541 $ 77,987 (11,282) $ 3,347,771 $ 40 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 (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 $ 311,773 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 $ $ 2,980,285 (1,302,635) 1,677,650 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 Lease Liability Compensated absences Post-employment benefits Unamortized bond premiums Pension liability Total $ $ 483,976 23,025 33,728 868,489 27,057 787,475 2,223,750 Deferred outflows represent a consumption of net assets that applies to 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 $ $ 5,128 289,562 294,690 Deferred inflows relating to pensions represent acquisition of net assets that applies to future periods. Deferred Inflows – Pensions & OPEB $ 147,881 41 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 Prepaid expense consists of items that will consume net position in a future reporting period(s): Prepaid Cost of Issuance $ 428 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 $ $ (599) (22,297) (6,541) (29,437) (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 $ (16,736) 42 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 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 Sale of Capital Assets 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 Service Charge Cost of Issuance Capital Outlay Other Financing Uses: T ransfers Out 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) $ $ $ $ $ $ $ $ $ 301,862 51,926 6,427 1,830 48,574 347,578 65,920 9,672 (27,716) 1,081 7,332 143,814 2,004 34,155 3,059 997,518 79 (864) (1,181) - (2,072) 20,873 8,607 - Statement of Activities - $ 301,862 52,005 6,427 966 48,574 347,578 65,920 9,672 (29,788) 21,954 14,758 (28,207) (28,207) 115,607 1,856 $ 957,391 - $ 183,242 416,563 195,594 86,824 (1,966) $ (148) (148) $ 27,408 (34,155) (3,059) $ (37,214) $ 32,657 17,127 2,102 3,471 $ 26,475 20,550 62,070 19,360 $ 13,502 12,999 3,785 1,451 $ $ 54,032 19,283 12 540 167,628 - (167,628) - (54,032) (5,061) (54) - - 14,222 12 486 - 28,207 - - - - (28,207) - 936,376 55,357 (39,173) 31,737 (59,147) (28,207) 896,943 (57,323) $ 39,025 $ (4,329) 110,608 365,887 127,637 62,542 61,142 $ $ $ $ - 21,933 $ - $ 43 (Continued) 60,448 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 (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 $ 79 (864) (1,181) (1,966) $ 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 compensated absences OPEB Expense Pension Expense Total $ 4,261 68,435 (17,339) 55,357 $ (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/amortization expense. As a result, fund balance decreases by the amount of the financial resources expended, whereas net position decreases by the amount of depreciation/amortization expense charged for the year. Capital outlay for capital assets Depreciation expense Total $ 116,243 (71,258) 44,985 $ 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 Donations, transfers and disposals $ $ (5,577) (383) (5,960) (3) Internal service funds are used by management to charge the costs of certain activities, such as fleet support, materials and supplies, printing and graphics, and self-insurance, to the individual funds. The adjustments for internal service funds “close” those funds by charging the additional amounts to participating governmental activities to completely cover the internal service funds’ costs for the year. Revenue and other sources Expenditures and other uses Change in net position $ $ 27,408 (31,737) (4,329) 44 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 (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 (22,620) (11,535) 54,032 19,877 $ Governmental funds report bond premium, deferred amounts and prepaids relating to refunding when first issued. In the statement of activities these amounts are amortized. Amortization of deferred refunding amounts Premiums on bonds Amortization of bond issuance costs Prepaid bond issuance costs Amortization of bond premiums Total $ $ (934) (3,059) (20) 74 5,995 2,056 (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 $ $ (28,207) 28,207 - 45 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 3. FUND BALANCE As of June 30, 2022, the fund balance details by classification are listed below (in thousands): Fund Balances: Nonspendable: Prepaid Costs Nonspendable Sub-total General Fund $ Relief Fund 3,185 3,185 $ 225 225 Restricted: Capital Projects Community Facility District Court Debt Service Fire Housing Library Parks & Recreation Police Spring Training & Tourism Transportation Programs Restricted Sub-total - - Committed To: Arts & Culture Cemetery Environmental Compliance Fire Technology Committed To Sub-total Non-Major Governmental Funds Total Governmental Funds $ $ 498 498 3,908 3,908 - 72,455 334 2,262 25,869 26,434 634 230 100 55,778 6,171 106,481 296,748 72,455 334 2,262 25,869 26,434 634 230 100 55,778 6,171 106,481 296,748 2,671 1,642 4,313 - 517 3,615 18,703 2,842 25,677 517 6,286 18,703 1,642 2,842 29,990 Assigned To: Capital Projects Development Services Economic Development Fire General Government Parks & Recreation Police Sustainability Transit Vehicle Replacement Assigned To Sub-total 481 18,387 7,933 126,550 2,973 15,212 56 151 171,743 - 29,167 357 280 9,349 39,153 29,167 481 18,387 7,933 126,907 3,253 15,212 56 151 9,349 210,896 Unassigned 152,526 (2,949) (9,760) 139,817 Total Fund Balances $ 331,767 $ (2,724) $ 352,316 $ 681,359 46 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 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 Cash in a local bank Investments in Local Govt Invest Pools Cash with Custodian (1) Cash with Fiscal Agent (2) Cash with Trustee (3) Long-Term Investments Total City Pooled Cash and Investments $ $ 137 46,298 15,921 20,035 18,396 133,037 695 1,021,410 1,255,929 (1) Represents cash sent by the City to Custodian on June 30, 2022 for investing purposes. (2) Represents cash sent by the City to fiscal agents on June 30, 2022 for debt service payments due to bondholders on July 1, 2022. (3) Represents bond and note proceeds held with trustee in compliance with bond / note agreements. The excise tax obligation proceeds with UM B are invested in US Treasury obligations and a US government money market mutual fund. Deposits At year end, the City’s cash totaled $62,356,455 which included $15,920,798 in a local bank and $137,430 in petty cash. The carrying amount of the City’s deposits was $46,298,227 and the bank balance was $47,917,318. The difference of $1,619,091 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, 2022 are covered under House Bill 2619. 47 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 Investments The City’s Investment Policy is consistent with the City Charter. The investment policy 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. 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 two nationally recognized rating agencies. The City’s portfolio also invests in Corporate Notes rated “A” or better by two nationally recognized rating agencies 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. Pool 7 carries a weighted average credit rating of AAA. The City also maintains a short term checking account held by one local bank. 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. 48 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 The City's investments had the following credit risk structure as of June 30, 2022 (in thousands): Investment Type U.S. Treasuries U.S. Agencies U.S Agency Collateralized Mortgage Obligation Foreign Issues Corporate Notes Corporate Notes Corporate Notes Corporate Notes Corporate Notes Corporate Notes Corporate Notes Corporate Notes Negotiable Certificate of Deposit First American Gov't Obligation MM Fund Municipal Bonds Municipal Bonds Municipal Bonds Municipal Bonds Municipal Bonds Municipal Bonds Total S & P Rating AA+ AA+ AA+ AAA AA+ AA AAA+ AA AAA BBB+ A-1+ AAAm N/R* N/R** AA AAAA+ AAA Fair value 281,080 491,841 3,953 7,656 5,473 46,522 38,838 32,583 30,774 5,295 1,141 18,574 4,525 18,396 2,167 3,540 14,384 8,626 6,371 18,067 $ 1,039,806 $ *Rated Aaa by Moodys ** No Rating 49 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 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. On June 30, 2022, the City had the following recurring fair value measurements (in thousands): Fair Value Measurements Using: Investment by Fair Value Level Debt Securities U.S. Treasuries & Agencies Fair Value 6/30/2022 Level 1 Level 2 Level 3 $ $ - $ 772,921 $ 3,953 - $ 3,953 - Federal Agency Collateralized Mortgage Obligations Corporate Notes 772,921 - 179,200 - $ 179,200 - Negotiable Certificates of Deposit 4,525 - $ 4,525 - Foreign Issues 7,656 - $ 7,656 - - $ 53,155 $ 1,021,410 Municipal Bonds Total Debt Securities at Fair Value 53,155 $ 1,021,410 $ $ - Investments Measured at Fair Value Arizona State Treasurers Investment Pools $ First American Gov't Obligation MM Fund 20,035 18,396 Total Investments Measured At Fair Value $ 1,059,841 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 fair values. Investments valued at NAV utilized Net Asset Values as provided by State of Arizona Treasurer’s Office on June 30, 2022. 50 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 The City’s investment maturities on June 30, 2022 are as follows (in thousands): Investment M aturities (in Years) Investment Type Fair Value Less Than 1 U.S. Treasuries & Agencies $ 772,921 $ Federal Agency Collateralized M ortgage Obligations Corporate Notes 3,953 1-3 3-5 208,764 $ 373,423 $ 190,734 3,180 773 179,200 109,013 Concentration of Credit Risk % 74.33% 0.38% 70,187 17.23% Negotiable Certificates of Deposit 4,525 4,525 0.44% First American Gov't Obligation M M Fund 18,396 18,396 1.77% Foreign Issues 7,656 M unicipal Bonds Total 53,155 $1,039,806 $ 6,350 241,215 1,255 6,401 0.74% 17,045 $ 501,509 29,760 $ 297,082 5.11% 100.00% On June 30, 2022 the following investments had callable dates (in thousands): U.S. Treasuries & Agencies Date Fannie Mae Aug-22 Fannie Mae Sep-22 Fannie Mae Oct-22 Fannie Mae Nov-22 Federal Farm Credit Banks Sep-22 Federal Farm Credit Banks Mar-22 Federal Farm Credit Banks May-22 Federal Farm Credit Banks Continuous Federal Home Loan Banks Aug-21 Federal Home Loan Banks Sep-21 Federal Home Loan Banks Oct-22 Federal Home Loan Banks Dec-22 Federal Home Loan Banks Mar-23 Federal Home Loan Banks Apr-23 Federal Home Loan Banks Jun-23 Federal Home Loan Banks Continuous Federal Home Loan Mortgage Corp. Aug-22 Federal Home Loan Mortgage Corp. Sep-22 Federal Home Loan Mortgage Corp. Oct-22 Federal Home Loan Mortgage Corp. Open Total Foreign Issues Canada Gov't Date Continuous Fair Value $ 555 8,040 9,645 11,143 4,961 1,852 1,982 29,253 44,422 30,552 8,612 9,414 1,931 3,966 7,152 19,272 11,143 19,880 1,891 928 $ 226,594 Fair Value $ 1,255 51 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 Date Fair Value Abbott Laboratories Jun-25 $ Amazon.com Mar-27 980 American Express Jun-24 1,491 American Express American Express AstraZeneca Bank of America Bank of America Bank of NY Mellon Bank of NY Mellon BMW US Capital BMW US Capital Bristol Myers Squibb Brown-Forman Burlington Northern Sante Fe Charles Schwab Charles Schwab Citigroup Citigroup Comcast Corp DNB Bank ASA General Dynamics Goldman Sachs Hershey Home Depot Honeywell HSBC Holdings PLC JP Morgan Chase & Co JP Morgan Chase & Co Merck and Co Inc Microsoft Corp Mitsubishi Ufj Financial Group Morgan Stanley Morgan Stanley Morgan Stanley National Bank of Canada Nestle Northern Trust Pepsico Roche Holdings Inc State Street Corp State Street Corp Truist Financial UBS AG London United Health US Bank NA Cincinnati Wells Fargo & Co 52 Total Oct-26 Feb-27 Apr-26 Oct-23 Apr-24 Mar-25 Dec-25 Mar-25 Jan-26 Jun-24 Feb-25 Jan-25 Feb-24 Feb-27 May-23 Nov-24 Mar-24 Sep-24 Mar-25 Nov-25 May-25 Mar-27 Feb-27 May-24 Sep-23 Feb-24 Nov-24 Nov-24 Sep-23 May-24 Oct-24 Feb-25 Nov-23 Sep-23 Apr-27 Jan-25 Feb-25 Feb-25 Mar-25 Mar-26 Dec-24 Apr-26 Dec-22 May-24 1,360 930 1,354 1,144 2,821 1,413 900 478 1,194 641 996 1,085 1,429 931 1,470 547 1,504 907 947 1,471 927 721 888 1,963 1,509 924 1,135 1,141 1,614 2,234 921 1,123 1,345 3,071 1,508 1,083 1,250 427 971 899 1,408 4,089 1,124 876 60,760 Corporate/Bank Notes $ 1,616 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 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: Other Customers Leases Due from Other Governments: Relief Fund Other Customers Receivables Allowance 15,846 55,831 27,243 (5,577) - 10,269 55,831 27,243 1 5,185 - 1 5,185 2,940 22,281 1,407 (1,050) - 1,890 22,281 1,407 26,046 10,564 - 26,046 10,564 211 504 168,059 (6,627) 211 504 $ 161,432 (1,948) (51) (1,999) $ 39,154 71 57,602 5,207 $ 102,034 Due from Other Governments Non-Major Governmental Funds: Other Customers Restricted-Spec. Assessments Restricted-Due from Other Governments Due from Other Governments Sales Tax Revenues Other Internal Service Funds: Premiums Other Customers Total Governmental Activities $ Business-Type Activities: Utility Customers Other Customers Leases Due from Other Governments Total Business-type Activities $ $ 41,102 122 57,602 5,207 104,033 $ $ $ Net Unbilled Accounts Receivable Unbilled utility service receivables are recorded in the year in which the services are provided. At June 30, 2022, unbilled utility service receivables are recorded in the Enterprise Fund as follows (in thousands): Electric $ 2,941 Gas 1,666 Water 9,393 Wastewater 4,366 Solid Waste 2,822 $ 21,188 53 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 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 Unspent ABC Donations Amounts paid in advance Unavailable Revenue Receivables not yet collected Delinquent Property Taxes Special Assessments not yet due General Fund $ 3,958 Governmental Activities Relief Non-Major Fund Funds $ $ 240 1,474 $ 5,432 83,891 83,891 $ General Fund $ 2,295 $ 2,295 Non-Major Funds $ 4,246 599 22,297 $ 27,142 $ 1,902 185 5,534 7,861 Total $ 4,198 85,793 185 7,008 $ 97,184 Total $ 6,541 599 22,297 $ 29,437 6. INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS The following interfund activities are included in the fund financial statements on June 30, 2022 (in thousands): Due from Due to Fund Other Funds Other Funds General Fund $ 9,522 $ Non-major Governmental Funds 8,403 Proprietary Funds 1,119 Total $ 9,522 $ 9,522 Interfund balances on June 30, 2022 are short-term loans used to cover temporary cash deficits in various funds and are expected to be repaid within one year. 54 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 Fund Governmental Funds: General Fund Non-Major Governmental Fund: Public Safety Sales Tax Total Governmental Funds Advances to Other Funds Advances from Other Funds $ - $ 1,760 $ 1,760 1,760 $ 1,760 The Advances on June 30, 2022 are an advance from the Public Safety Sales Tax Fund to the General Fund for property acquisition. The advances outstanding at June 30, 2022 are not 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, 2022 (in thousands): Transfers Out Non-major General Governmental Enterprise Funds Fund Fund Fund Total General Fund $ $ 1,067 $ 115,607 $ 116,674 Non-major Governmental Funds 27,140 27,140 Total $ 27,140 $ 1,067 $ 115,607 $ 143,814 The transfer from business-type activities to governmental activities on the government-wide statement of activities is a $115,607,000 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. 55 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 7. LEASES City as Lessee The City, as a lessee, has entered into a lease agreement for a building located at a local commercial airport under a long-term, non-cancelable lease agreement. The City subleases this building to an aircraft parts engineering and maintenance company. This lease agreement provides for increases in future minimum annual rental payments based on defined increases in the consumer price index, subject to certain minimum increases. The total of the City’s lease assets is recorded at a cost of $24,082,754, less accumulated amortization of $750,631. Total future minimum lease payments under this lease agreement are as follows (in thousands): Governmental Activities Principal Interest 2023 $ 1,093 $ 442 2024 1,115 420 2025 1,138 397 2026 1,161 373 2027 1,182 350 2028-2032 6,276 1,375 Thereafter 11,060 762 Totals $ 23,025 $ 4,119 Total 1,535 1,535 1,535 1,534 1,532 7,651 11,822 $ 27,144 $ City as Lessor The City, as a lessor, has entered into lease agreements for land, air, buildings, and equipment under longterm, non-cancelable lease agreements. The building that is leased from a local commercial airport is subleased to an aircraft parts engineering and maintenance company. These leases expire at various dates through 2070 and provide for renewal options ranging from 1 to 50 years. During the year ended June 30, 2022, the City recognized $2,191,341 and $6,325,179 in lease revenue and interest revenue, respectively, pursuant to these contracts. 56 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 8. CAPITAL ASSETS A summary of capital asset activity, for the government-wide financial statements, for the year ended June 30, 2022 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 Leased Assets Buildings Total Leased Assets Less Accumulated Amortization for: Buildings Total Accum. Amortization Total Amortizable Assets, net Governmental Activities Capital Assets, net Restated Beginning Balance Additions $ $ 403,086 3,597 198,056 604,739 Ending Balance Retirements 2,196 127,337 129,533 $ (120,613) (120,613) 405,282 3,597 204,780 613,659 431,269 279,527 270,370 24,485 1,251,041 2,256,692 12,016 14,125 24,510 56,923 107,574 (2,214) (6,316) (148) (905) (9,583) 443,285 291,438 288,564 24,337 1,307,059 2,354,683 (153,229) (156,547) (194,384) (24,243) (721,701) (1,250,104) 1,006,588 (9,080) (9,308) (13,968) (145) (38,238) (70,739) 36,834 2,212 5,948 148 892 9,200 (382) (162,309) (163,643) (202,404) (24,240) (759,047) (1,311,643) 1,043,040 24,083 24,083 - - 24,083 24,083 24,083 (751) (751) (751) - (751) (751) 23,332 $ 1,635,410 $ 165,616 $ (120,995) $ 1,680,031 57 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 Depreciation and Amortization expense was charged to 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 Beginning 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 $ 28,339 17,560 106 106,831 152,836 $ 5,475 12,290 39,622 13,871 232 $ 71,490 Additions Retirements $ $ 376 57,399 57,775 (64,541) (64,541) Ending Balance $ 28,715 17,560 106 99,689 146,070 46,702 85,863 86,113 27,190 2,135,682 2,381,550 735 4,401 71,721 76,857 (17) (1,147) (16) (2,079) (3,259) 46,702 86,581 89,366 27,174 2,205,324 2,455,146 (16,672) (45,410) (60,894) (23,275) (1,015,519) (1,161,770) 1,219,780 (885) (2,324) (4,161) (113) (57,385) (64,868) 11,988 17 1,146 16 1,637 2,816 (442) (17,557) (47,717) (63,909) (23,372) (1,071,267) (1,223,822) 1,231,324 $ 1,372,616 $ 69,764 $ (64,983) $ 1,377,394 58 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 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 District Cooling $ $ 3,530 4,980 31,894 20,064 2,045 1,958 397 64,868 Construction in progress and related construction commitments are composed of the following (in thousands): Governmental Activities General Government Public Safety Community Environment Cultural-Recreational Total Construction in Progress Commitments $ $ $ Business-type Activities Electric Gas Water Wastewater Solid Waste Airport Total 197,582 2,050 3,853 1,295 204,780 $ 76,514 389 41 67 77,011 Construction in Progress Commitments $ $ $ 18,603 23,395 19,145 31,665 339 6,542 99,689 $ 1,245 2,410 22,396 10,821 1,758 536 39,166 59 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 9. 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 Excise Tax Revenue Obligations Community Facility District Total Bonds Payable Restated Beginning Balances Additions Reductions $ $ $ 334,377 49,105 35,365 83,948 502,795 Leases Unamortized Premiums Compensated Absences Governmental Activities Total 24,083 29,993 30,427 587,298 $ Business-type Activities: Bonds Payable: Utility Revenue Bonds Utility Revenue Obligations General Obligation Bonds Total Bonds Payable $ 1,275,640 14,015 28 1,289,683 Notes Payable Unamortized Bond Premiums Unamortized Obligation Premiums Compensated Absences Business-type Activities Total 1,285 109,880 4,522 $ 1,405,370 $ $ $ 22,620 - Ending Balances 11,535 34,155 (38,047) (10,075) (1,185) (3,667) (52,974) 3,059 35,790 73,004 (1,058) (5,995) (31,496) (91,523) $ (47,890) (28) (47,918) $ 1,227,750 84,795 1,312,545 (150) (11,738) (269) (4,756) (64,831) 1,135 98,142 4,446 4,428 $ 1,420,696 70,780 70,780 4,715 4,662 80,157 $ $ $ $ 318,950 39,030 34,180 91,816 483,976 23,025 27,057 34,721 568,779 Amounts Due Within One Year $ $ $ $ 33,995 10,000 1,245 3,155 48,395 1,093 4,077 53,565 47,935 3,725 51,660 153 670 52,483 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, $993,000 of internal service funds compensated absences are included in the above amounts. For governmental activities, compensated absences are generally liquidated by the general fund. 60 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 b. Bonds Payable On June 30, 2022, long-term bonds payable consisted of: Classified in Governmental Activities on the government-wide financial statements: General Obligation Bonds Bonds Outstanding (In Thousands) $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. $ 18,150 $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. 6,355 $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. 40,750 $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. 23,450 $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. 5,315 $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. 29,325 $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. 18,580 $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. 13,855 $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. 35,105 $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. 37,820 61 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 $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. $ 6,475 $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. 15,065 $22,075,000 2020 general obligation serial and term bonds due in annual installments ranging from $465,000 to $1,920,000, plus semi-annual interest ranging from 1.875 percent to 3 percent through July 1, 2040. 10,280 $23,390,000 2020 general obligation refunding serial bonds due in annual installments ranging from $730,000 to $12,480,000, plus semiannual interest ranging from 4 percent to 5 percent through July 1, 2030. 21,470 $19,030,000 2021 general obligation serial and term bonds due in annual installments ranging from $80,000 to $17,080,000, plus semi-annual interest ranging from 3 percent to 5 percent through July 1, 2041. 1,950 $14,495,000 2021 general obligation refunding serial bonds due in annual installments ranging from $665,000 to $6,380,000, plus semiannual interest ranging of 5 percent through July 1, 2031. 12,385 $22,620,000 2022 general obligation serial bonds due in annual installments ranging from $905,000 to $12,665,000, plus semi-annual interest of 5 percent through July 1, 2032. 22,620 Total General Obligation Bonds $ 318,950 Street and Highway User Revenue Bonds $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. 8,000 $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. 150 $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 62 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 $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 $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 $ 39,030 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. 1,918 $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. 2,550 $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. 2,540 $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. 1,548 $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. 5,495 $970,000 2015 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) Assessment District No. 4 Special Assessment Revenue 63 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 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. $ 700 $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. 855 $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. 430 $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. 6,955 $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. 1,152 $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. 663 $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. 311 $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. 8,840 $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. 945 885 64 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 $287,000 2019 Cadence Community Facilities District No. 1 (City of Mesa, Arizona) Assessment District No. 2 Special Assessment Revenue Bonds, due in annual principal installments ranging from $7,000 to $20,000, plus semi-annual interest ranging from 3.25 percent to 4.50 percent through July 1, 2043. $ 247 $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. 1,712 $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. 230 $2,012,000 2019 Cadence Community Facilities District No. 1 (City of Mesa, Arizona) Assessment District No. 1 Special Assessment Revenue Bonds, due in annual principal installments ranging from $55,000 to $130,000, plus semi-annual interest ranging from 2.25 percent to 4.50 percent through July 1, 2043. 1,804 $1,235,000 2019 Second Series, Cadence Community Facilities District (City of Mesa, Arizona) General Obligation Bonds, due in annual principal installments ranging from $35,000 to $350,000, plus semi-annual interest ranging from 3.00 percent to 4.00 percent through July 15, 2044. 1,130 $14,120,000 2019 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) General Obligation Bonds, due in annual principal installments ranging from $285,000 to $3,950,000, plus semi-annual interest ranging from 3.00 percent to 4.00 percent through July 15, 2044. 13,060 $707,000 2020 Eastmark Community Facilities District No. 2 (City of Mesa, Arizona) Assessment District "A" Special Assessment Revenue Bonds, due in annual principal installments ranging from $20,000 to $270,000, plus semi-annual interest ranging from 2.00 percent to 4.00 percent through July 1, 2044. 657 $2,803,000 2020 Cadence Community Facilities District No. 1 (City of Mesa, Arizona) Assessment District No. 3 Special Assessment Revenue Bonds, due in annual principal installments ranging from $78,000 to $170,000, plus semi-annual interest ranging from 1.50 percent to 4.00 percent through July 1, 2045. 2,637 $5,935,000 2020 Cadence Community Facilities District (City of Mesa, Arizona) General Obligation Bonds, due in annual principal installments ranging from $180,000 to $1,410,000, plus semi-annual interest ranging from 2.00 percent to 3.00 percent through July 15, 2044. 5,535 65 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 $14,000,000 2020 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) General Obligation Bonds, due in annual principal installments ranging from $425,000 to $3,250,000, plus semi-annual interest ranging from 2.00 percent to 4.00 percent through July 15, 2044. $ 12,875 $2,315,000 2020 Eastmark Community Facilities District No. 2 (City of Mesa, Arizona) General Obligation Bonds, due in annual principal installments ranging from $65,000 to $1,105,000, plus semi-annual interest ranging from 2.00 percent to 4.00 percent through July 15, 2044. 2,175 $4,469,000 2021 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) Assessment District No. 12 Special Assessment Revenue Bonds, due in annual principal installments ranging from $134,000 to $2,300,000, plus semi-annual interest ranging from 1.60 percent to 3.75 percent through July 1, 2045. 4,327 $1,580,000 2021 Cadence Community Facilities District (City of Mesa, Arizona) General Obligation Bonds, due in annual principal installments ranging from $10,000 to $41,000, plus semi-annual interest ranging from 3.00 percent to 4.00 percent through July 15, 2045. 1,475 $9,955,000 2021 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) General Obligation Bonds, due in annual principal installments ranging from $10,000 to $1,965,000, plus semi-annual interest of 4.00 percent through July 15, 2045. 9,110 Total Community Facilities District Bonds $ 91,816 Excise Tax Revenue Obligation $36,010,000 2020 excise tax revenue serial obligations, due in annual principal installments ranging from $645,000 to $2,595,000, plus semiannual interest ranging from 3.00 percent to 5.00 percent through July 1, 2040. $ 34,180 Total bonds payable recorded in governmental activities $ 483,976 66 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 Classified in Business-type Activities on the government-wide financial statements: Utility Systems Revenue Bonds $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. $ 9,250 $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 $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. 27,805 $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 $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 $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. 85,325 67 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 $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. $ 27,070 $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. 87,400 $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. 119,550 $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. 100,120 $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. 84,825 $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. 53,595 $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. 69,810 $71,070,000 2020 utility systems revenue serial bonds, due in annual principal installments ranging from $1,000,000 to $10,100,000, plus semiannual interest ranging from 3 percent to 5 percent through July 1, 2044. 67,880 $37,675,000 2020 utility systems revenue refunding serial bond due in a single principal installment of $37,675,000 plus semi-annual interest of 4 percent through July 1, 2034. 37,675 68 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 $34,685,000 2021 utility systems revenue serial and term bonds, due in annual principal installments ranging from $1,000,000 to $11,395,000 plus semi-annual interest ranging from 3 percent to 5 percent through July 1, 2045. $44,870,000 2021 utility systems revenue refunding serial bond due in a single principal installment of $44,870,000 plus semi-annual interest of 4 percent through July 1, 2035. Total Utility Systems Revenue Bonds $ 32,095 44,870 $ 1,227,750 Utility System Revenue Obligations $14,015,000 2021 utility revenue serial and term obligations, due in annual principal installments ranging from $1,000,000 to $4,780,000, plus semi-annual interest ranging from 4.00 percent to 5.00 percent through July 1, 2045. 14,015 $16,075,000 2022 utility revenue serial and term obligations, due in annual principal installments ranging from $2,660,000 to $7,845,000, plus semi-annual interest of 5.00 percent through July 1, 2046. 54,705 $54,705,000 2022 taxable utility revenue serial obligations, due in annual principal installments ranging from $2,630,000 to $2,725,000, plus semiannual interest ranging from 2.90 percent to 3.95 percent through July 1, 2028. 16,075 Total Utility Systems Revenue Obligations Total bonds payable recorded in business-type activities $ 84,795 $ 1,312,545 69 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 The following tables summarize the City’s debt service requirements to maturity for its long-term bonds payable at June 30, 2022 (in thousands). The deferred amounts on refundings are not included. Governmental Activities General Obligation Bonds Fiscal Year 2023 2024 2025 2026 2027 2028-2032 2033-2037 2038-2042 Principal $ 33,995 23,070 24,745 26,235 27,195 123,775 54,610 5,325 Interest $ 11,197 9,829 9,049 8,170 7,286 21,724 4,535 242 TOTALS $ 318,950 $ 72,032 Highway User Revenue Bonds Total 45,192 32,899 33,794 34,405 34,481 145,499 59,145 5,567 Fiscal Year 2023 2024 2025 2026 2027 2028-2032 2033-2037 2038-2042 $ 390,982 TOTALS $ $ Principal 10,000 10,490 10,880 3,755 3,905 - $ 39,030 Excise Tax Revenue Obligations Fiscal Year 2023 2024 2025 2026 2027 2028-2032 2033-2037 2038-2042 2043-2047 TOTALS Principal $ 1,245 1,305 1,375 1,440 1,515 8,780 10,965 7,555 - Interest $ 1,451 1,389 1,324 1,255 1,183 4,702 2,520 536 - $ $ 34,180 14,360 $ $ Interest $ 1,812 1,312 785 344 156 $ 4,409 $ Total 11,812 11,802 11,665 4,099 4,061 - $ 43,439 Community Facilities District Total 2,696 2,694 2,699 2,695 2,698 13,482 13,485 8,091 - Fiscal Year 2023 2024 2025 2026 2027 2028-2032 2033-2037 2038-2042 2043-2047 48,540 TOTALS $ Principal 3,155 3,239 3,343 3,427 3,535 19,234 22,323 23,468 10,092 $ 91,816 Interest $ 3,530 3,423 3,312 3,195 3,068 13,182 9,148 4,413 688 $ 43,959 $ Total 6,685 6,662 6,655 6,622 6,603 32,416 31,471 27,881 10,780 $ 135,775 Business-type Activities Revenue Bonds Fiscal Year 2023 2024 2025 2026 2027 2028-2032 2033-2037 2038-2042 2043-2047 Principal $ 47,935 49,390 50,840 52,185 54,655 314,185 341,960 272,905 43,695 TOTALS $ 1,227,750 $ Interest 50,737 48,351 45,891 43,612 41,337 170,384 103,491 39,241 2,851 $ 545,895 Utility Revenue Obligations Total 98,672 97,741 96,731 95,797 95,992 484,569 445,451 312,146 46,546 Fiscal Year 2023 2024 2025 2026 2027 2028-2032 2033-2037 2038-2042 2043-2047 $ 1,773,645 TOTALS $ $ $ Principal 3,725 3,705 3,690 3,670 3,655 16,340 9,360 6,800 33,850 84,795 Interest $ 4,011 3,799 3,666 3,524 3,379 14,483 10,885 9,819 4,122 $ 57,688 $ $ Total 7,736 7,504 7,356 7,194 7,034 30,823 20,245 16,619 37,972 142,483 70 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 General Obligation Bonds 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 June 30, 2022 is (in thousands): 6% Bonds 20% Bonds Total Available $ 352,449 859,573 $ 1,212,022 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, 2022, total principal and interest outstanding for CFD general obligation bonds was $101,516,144. 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. On June 30, 2022, 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 $34,259,316. Principal and interest paid for the current year and total assessments collected were $1,795,611, and $1,829,519 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, 2022, the amount provided in the Replacement and Extension Funds 71 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 equaled $8,718,213 which is in compliance with the bond provisions. As of June 30, 2022, the amount available is $41,418,415. c. Notes Payable Business Type Activities The City entered into four separate loan agreements with the Water Infrastructure Finance Authority of Arizona. The purposes of the loans are to make improvements and upgrades to existing water and wastewater projects. The loans utilize funds from the United States Environmental Protection Agency pursuant to the Federal American Reinvestment and Recovery Act of 2009. Subject to the City meeting the required specifications of the loan documents, two of the loans include a combined interest and fee rate subsidy and the two remaining loans include a principal forgiveness portion. Total principal (without principal forgiveness) is $3,486,902 and the loans have a 20-year repayment period. The total principal forgiveness is $626,000. Total interest over the 20 years with principal forgiveness and the combined interest and fee rate subsidy is $635,736. The following table reflects the annual requirements to amortize all notes outstanding as of June 30, 2022 (in thousands): Fiscal Year 2023 2024 2025 2026 2027 2028-2029 Totals Business-type Activities Interest Principal & Fees Total $ 153 $ 25 $ 178 156 22 178 159 18 177 163 15 178 167 11 178 337 11 348 $ 1,135 $ 102 $ 1,237 d. Short-term Debt The City had no short-term debt activity for the fiscal year ended June 30, 2022. 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. 72 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 f. Pledged Revenues Utility System Revenue Bonds The City has pledged future utility customer revenues, net of specified operating expenses, to repay approximately $1.23 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 2045. Annual principal and interest payments on the bonds were 48.9 percent of net revenues. The total principal and interest remaining to be paid on the bonds is $1.774 billion. Principal and interest paid for the current year and total customer net revenues were $101,359,208 and $211,826,242, respectively. Highway User Revenue Bonds The City has pledged future Highway User Taxes Revenue to repay $49.105 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 25.8 percent of eligible revenues. The total principal and interest remaining to be paid on the bonds is $43,439,500. Principal and interest paid for the current year and total highway user tax revenues were $12,389,663 and $47,988,669, respectively. 10. REFUNDED, REFINANCED AND DEFEASED OBLIGATIONS 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 or a Defeasance. 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. Under a Defeasance City resources 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 on June 30, 2022 as reflected below is not included in the City’s financial statements (in thousands). Utility System Revenue Bond Issue dated June 28, 2006 $ 10,055 Utility System Revenue Bond Issue dated May 30, 2007 1,685 Utility System Revenue Bond Issue dated May 29, 2008 3,975 Utility System Revenue Refunding Bond Issue dated September 25, 2014 4,980 Utility System Revenue Bond Issue Dated June 5, 2014 9,230 Total Refunded and Defeased Bonds Outstanding $ 29,925 73 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 11. 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 on June 30, 2022 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, 6/30/20 Adjustments to Reserves Claim Expense $ 15,568 (817) 190 Unpaid Claims, 6/30/21 14,941 Adjustments to Reserves Claims Expense (2,890) 359 Unpaid Claims, 6/30/22 $ 12,410 $ $ 26,267 2,062 194 2,826 70,965 (68,883) $ 44,661 72,210 (68,499) 28,523 4,908 48,372 (290) 322 71,902 (70,965) 68,722 (70,284) 5,845 $ 46,810 28,555 $ $ 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. 74 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 12. 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 on June 30, 2022, is $13,739,119. 13. NET POSITION a. Restricted Net Position The government-wide statement of net position reports $345,466,000 of restricted net position, of which $191,130,000 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 75 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 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 deficit in the Grants Special Revenue Fund will be covered by future revenues. 14. ENTERPRISE ACTIVITIES OPERATIONS DETAIL The Enterprise Fund includes operations of electricity, gas, water, wastewater, solid waste, airport 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, 2022 for these services are as follows (in thousands): Operating Expenses Functions Electric Gas Water Wastewater Solid Waste Airport District Cooling Total Operating Revenues $ 52,613 57,313 163,263 93,727 66,132 4,808 1,487 $ 439,343 Depreciation $ 3,530 4,980 31,894 20,064 2,045 1,958 397 $ 64,868 Other $ 37,798 33,813 66,309 42,219 38,729 3,995 1,306 $ 224,169 Operating Income (Loss) $ 11,285 18,520 65,060 31,444 25,358 (1,145) (216) $ 150,306 15. 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. 76 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 The City's investment in these Joint Ventures as of June 30, 2022, 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 $ 305,610 6,163 $ 311,773 Business-Type Activities $ 77,569 54,010 152,932 14,588 $ 299,099 Total $ 305,610 6,163 77,569 54,010 152,931 14,588 $ 610,871 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. The City’s equity in the joint venture is $305,610,269 and is reflected in the governmental activities. Separate financial statements 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 $6,162,821 and is reflected in the governmental activities. Separate financial statements are not prepared. Total investment in the joint venture as of June 30, 2022, is (in thousands): 77 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 TOPAZ Regional Wireless Cooperative City of Mesa $ 6,163 Town of Gilbert 1,483 City of Apache Junction 547 Superstition Fire and Medical 162 Town of Queen Creek 107 Fort McDowell 51 Rio Verde Fire District 12 Total Joint Venture $ 8,525 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 $77,569,071 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 The City of Mesa acts as the lead agency in a joint water reclamation plant with the Towns of Gilbert and Queen Creek 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 $152,931,466 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, 2022, is (in thousands): Greenfield Water Reclamation Project Mesa's Share $ 152,932 Gilbert's Share 99,988 Queen Creek's Share 30,221 Total Joint Venture $ 283,141 78 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 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 $54,010,470 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. 16. 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. On June 30, 2022, 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 Liabilities Deferred Outflows of Resources - Pension Deferred Inflows of Resources - Pension Pension Expense Net OPEB Liabilities Deferred Outflows of Resources - OPEB Deferred Inflows of Resources - OPEB OPEB Expense Governmental Activities $ 796,642 183,724 125,871 82,971 Business-Type Activities $ 44,171 11,319 14,734 3,562 Total $ 840,813 195,043 140,605 86,533 897,830 111,828 25,886 66,450 89,784 11,138 2,505 6,613 987,614 122,966 28,391 73,063 79 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 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 required to receive benefit Sum of years and age equals 80 30 years, age 55 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. 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 80 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 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, 2022, the city and covered employees were required by state statute to contribute at the actuarially determined rate of 12.41% (12.22% pension plus 0.19% long-term disability) of the active members’ annual covered payroll. The City’s contributions to the System for the year ending June 30, 2022 was $23,717,056, 74.4% paid from governmental funds, 4.40% paid from internal service funds, and 21.20% 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, 2022 was 10.22% (10.13% pension plus, 0.09% long-term disability). The City’s ACR contributions to the System for the year ending June 30, 2022 were $85,986. c. Pension Liability On June 30, 2022, the City reported a liability of $208,352,625 for its proportionate share of the ASRS’ net pension liability. The net pension liability was measured as of June 30, 2021. 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, 2020, to the measurement date of June 30, 2021. 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, 2021. The City’s proportion measured as of June 30, 2021, was 1.58569%, which was a decrease of 0.03306% from its proportion measured as of June 30, 2020. d. Pension Expense and Deferred Outflows/Inflows of Resources For the year ended June 30, 2022, the City recognized pension expense for ASRS of $16,802,648. On June 30, 2022, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources (in thousands): Differences between expected and actual experience Changes of assumptions Net difference between projected and actual earnings on pension plan investments Changes in proportion and differences between City contributions City contributions subsequent to the measurement date Total Deferred Outflows of Resources $ 3,176 27,119 Deferred Inflows of Resources $ - - 66,013 23,097 53,392 3,489 $ 69,502 $ 81 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 The $23,097,402 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 ending June 30, 2023. 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, 2023 $ (1,056) 2024 (850) 2025 (14,552) 2026 (22,749) $ (39,207) 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, 2020 June 30, 2021 Entry Age Normal 7.0% 2.9 - 8.4% 2.3% Included 2017 SRA Scale U-MP Actuarial assumptions used in the June 30, 2020 valuation were based on the results of an actuarial study for the 5-year period ended June 30, 2020. The long-term expected rate of return on ASRS pension plan investments was determined to be 7.0% 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 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 - Credit Fixed Income - Interest Rate Sensitive Real Estate Total Target Allocation 50% 20% 10% 20% 100% Long-Term Expected Geometric Real Rate of Return 4.90% 5.20% 0.70% 5.70% 82 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 f. Discount Rate The discount rate used to measure the ASRS total pension liability was 7.0%. The rate has been lowered in the roll forward from 7.5% which was used for the actuarial assumptions at the valuation date. 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 7.0 %, 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 (6.0%) or 1 percentage point higher (8.0 %) than the current rate (in thousands): City's proportionate share of the net pension liability 1% Decrease 6.0% Current Discount Rate 7.0% 1% Increase 8.0% $ $ $ 108,832 327,721 208,353 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, and those who became PSPRS members on or after July 1, 2017, participate in the cost-sharing plans (PSPRS Tier 3 Risk Pool). 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. 83 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 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: Initial Membership Date Before January 1, 2012 On or after January 1, 2012 and before July 1, 2017 Retirement and Disability Years of service and age required to receive benefit 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 on Highest 36 consecutive months of last 20 years Highest 60 consecutive months of last 20 years Highest 60 consecutive months of last 15 years 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 Active M embers 80% to 100% of retired member's pension benefit 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. 84 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 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. Employees Covered by Benefit Terms On June 30, 2022, the following employees were covered by the agent plans’ benefit terms: PSPRS Fire Pension Inactive employees or beneficiaries currently receiving benefits Inactive employees entitled to but not yet receiving benefits Active employees Total PSPRS Police Pension Health 289 660 660 93 375 757 243 690 1,593 112 690 1,462 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, 2022, 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 55.62% 55.54% 10.69% 10.13% City OPEB 0.55% 1.35% 0.15% 0.10% 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 40.42% and 41.72% for City fire and police employees respectively, who were PSPRS Tier 3 members. 85 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 The City’s required contributions to the plans for the year ended June 30, 2022, were: Pension PSPRS - Fire $ 17,038,866 PSPRS - Police 29,433,758 PSPRS Tier 3 - Fire 3,138,748 PSPRS Tier 3 - Police 8,023,743 OPEB $ 168,489 19,038 715,441 160,939 The City’s contribution to the system was paid from the general fund. 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 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, 2020 was 40.42% and 41.72% for fire and police, respectively. The City did not have any ACR contributions for the year ending June 30, 2021. d. Liability On June 30, 2022, the City reported the following pension liabilities of $213,314,058 and $419,146,680 for fire and police, respectively. The City also reported an OPEB liability of $9,576,678 for police. The net liabilities were measured as of June 30, 2021, 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, 2022, the City recognized pension expense of $22,309,364 and $47,421,558 for fire and police, respectively. City also recognized OPEB expense of $1,030,049 for police. On June 30, 2022, the City reported deferred outflows of resources and deferred inflows of resources related to pensions and OPEB from the following sources (in thousands): 86 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 PSPRS - Fire Pension Differences between expected and actual experience Changes in assumptions Net difference between projected and actual earnings on pension plan investments City contributions subsequent to the measurement date Total Deferred Outflows of Resources $ 14,222 12,050 Deferred Inflows of Resources $ 2,332 - - 24,558 27,797 54,069 $ 26,890 $ Pension 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 OPEB Deferred Outflows of Resources $ 20,719 13,491 Deferred Inflows of Resources $ 94 - - 44,119 - 1,049 53,372 87,582 $ 44,213 838 1,642 1,109 $ Deferred Outflows of Resources $ 567 237 $ Deferred Inflows of Resources $ 60 $ 87 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 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, 2023. 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, 2023 2024 2025 2026 2027 Thereafter f. PSPRS Fire Pension $ 1,287 1,087 (769) (4,409) 1,077 1,108 $ (619) PSPRS Police Pension $ 3,291 (247) (1,940) (11,460) 352 $ (10,004) PSPRS Police OPEB 36 23 (86) (295) 16 $ (306) Actuarial Methods and Assumptions The significant actuarial assumptions used to measure the total pension/OPEB liability are as follows: Actuarial Assumptions: Measurement Date 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, 2021 June 30, 2021 Entry Age Normal 7.3% for contribution rates, 3.5%, N/A for OPEB 2.5%, N/A for OPEB 1.75%, N/A for OPEB PubS-2010 tables N/A Actuarial assumptions used in the June 30, 2021 valuation were based on the results of an actuarial experience study for the 5-year period ended June 30, 2017. The long-term expected rate of return on PSPRS plan investments was determined to be 7.3 % 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: 88 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 Target Allocation 1% 2% 7% 10% 16% 20% 20% 24% 100% Asset Class Cash - Mellon Core Bonds Capital Appreciation Diversifying Strategies International Public Equity Global Private Equity Private Credit U.S. Public Equity Total Long-Term Expected Geometric Real -0.31% 0.42% 5.43% 3.99% 5.20% 7.67% 5.74% 4.08% g. Discount Rate A discount rate of 7.30% for Tier 1 and Tier 2 members was used to measure the total pension/OPEB liability. 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. h. 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 (6.3%) or 1 percentage point higher (8.3%) than the current rate (in thousands): 1% Decrease Fire Net Pension Liability $ 274,697 Police Net Pension Liability 539,969 Police OPEB Liability 11,818 Current Discount Rate $ 213,314 419,147 9,577 1% Increase $ 162,859 320,710 7,686 89 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 i. 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 $ 449,531 $ 202,690 $ 246,841 Service Cost 7,645 - 7,645 Interest on the Total Liability 32,539 - 32,539 - - - Changes for the Year: Changes of Benefit Terms Differences Between Expected & Actual Experience in the 7,760 - 7,760 Changes of Assumptions / Other Inputs M easurement of the Liability - - - Contributions - Employer - 21,601 (21,601) Contributions - Employee - 3,321 (3,321) Net Investment Income - 56,815 (56,815) (22,868) (22,868) - - (266) 266 Benefit Payments, Including Refunds of Employee Contributions Administrative Expenses Net Changes Balances - End of Year $ 25,076 58,603 (33,527) 474,607 $ 261,293 $ 213,314 90 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 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 $ 850,268 $ 362,771 $ 487,497 $ $ $ Service Cost 13,861 - 13,861 351 - 351 Interest on the Total Liability 61,557 - 61,557 1,511 - 1,511 - - - - - - 21,097 9,969 11,128 Changes for the Year: Changes of Benefit Terms Differences Between Expected & Actual Experience in the 2,112 - 2,112 100 - 100 Changes of Assumptions / Other Inputs M easurement of the Liability - - - - - - Contributions - Employer - 38,561 (38,561) - 853 (853) Contributions - Employee - 6,268 (6,268) - 88 (88) Net Investment Income - 101,528 (101,528) - 2,583 (2,583) Benefit Payments, Including Refunds of Employee Contributions (41,764) (41,764) - (1,494) (1,494) - - (477) 477 - (10) 10 Administrative Expenses Net Changes Balances - End of Year 35,766 104,116 (68,350) $ 886,034 $ 466,887 $ 419,147 468 $ 21,565 2,020 $ 11,989 (1,552) $ 9,576 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 benefits provided. j. Plan Fiduciary Net Position Detailed information about the pension/OPEB plan’s fiduciary net position is available in the separately issued PSPRS financial report. City of Mesa OPEB: a. Plan Description The City provides post-employment medical care (OPEB) for retired employees through a singleemployer defined benefit medical plan. The plan provides medical benefits for eligible retirees, their spouses and dependents through the City’s self-insurance health insurance plan which covers both active and retired members. The benefits, benefit levels and contribution rates are determined annually by the City’s Benefits Advisory Board and approved by the Mesa City Council. The plan is not accounted for as a trust fund, and an irrevocable trust has not been established to account for the plan. 91 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 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 June 30, 2021 (Date of most recent valuation), membership consisted of: Active Employees Retirees Spouses Total 3,383 2,377 1,415 7,175 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, 2022 is $978,037,396. d. OPEB Expense and Deferred Outflows/Inflows of Resources For the year ended June 30, 2022, the City recognized OPEB expense of $72,033,107. On June 30, 2022, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources (in thousands): Deferred Outflows of Resources Differences between expected and actual experience $ 38,051 Changes of assumptions 62,462 City benefit payments subsequent to the measurement date 20,811 Total $ 121,324 Deferred Inflows of Resources $ 2,036 25,246 $ 27,282 92 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 The amounts reported as deferred outflows of resources resulting from City benefit payments subsequent to the measurement date will be recognized as a reduction of the net liability in the year ended June 30, 2023. 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, 2023 $ 20,778 2024 28,142 2025 20,547 2026 2,971 2027 793 $ 73,231 e. Actuarial Methods and Assumptions Projections of benefits are based on the substantive plan (the plan understood by the employer and plan members) and include the type of benefits in force at the valuation date and the pattern of sharing benefits between the City and the plan members at that point. Actuarial calculations reflect a long-term perspective and employ methods and assumptions that are designed to reduce shortterm volatility in actuarial accrued liabilities and the actuarial value of assets. Significant methods and assumptions used for this fiscal year valuation were as follows: Actuarial Assumptions: Actuarial Valuation Date Measurement Date Actuarial Cost Method Discount Rate Consumer Price Index Projected Salary Increases Mortality Rates June 30, 2021 June 30, 2021 Entry Age Normal 2.18% 3.00% 2.90 - 7.50% Based on the rates used for the June 30, 2021 valuations of the ASRS Plan and the PSPRS Plan. Health care cost trend rate: Medical, Drugs Dental, Vision 4.50 -7.00% 4.50% Actuarial assumptions used in the June 30, 2021 valuation were projected on an on-going plan basis. This assumption does not necessarily imply that an obligation to continue the plan actually exists. 93 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 Future Salary Increase Consistent with the June 30, 2021, valuations of the Arizona State Retirement System (ASRS) Plan and the Arizona Public Safety Personnel Retirement System (PSPRS) Plan. The ASRS salary increase assumption has been updated since the prior valuation based on the 2021 ASRS experience study. Salary increases assumptions range from 2.9% to 7.50%, based on years of service and the applicable plan. Aging Factors The age morbidity curve was developed by Dale Yamamoto for the Society of Actuaries. This curve is used to measure the annual increases in per capita claim costs for each age as well as relative cost by gender, adjusting the male age 65 per capita claims cost. The factors range from 0.4612 to 1.6944, based on age and gender. Cost, Contribution and Premium Trend Rates Medical and prescription drug costs and administrative costs are assumed to increase according to the rates below. This assumption is consistent with the prior valuation. The initial medical trend rate was developed using our National Health Care Trend Survey. The survey gathers information of trend expectations for the coming year from various insurers and PBMs. These trends are broken out by drug and medical, as well as type of coverage (e.g. PPO, HMO, POS). The healthcare cost trend range is 4.0% to 7.0%. f. Discount Rate The discount rate at the measurement date is 2.18%. The discount rate decreased from 2.66% as of June 30,2020 to 2.18% as of June 30, 2021. 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, 2021. 94 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 g. Changes in OPEB Liability The below table outlines the changes in OPEB Liability for the fiscal year ending June 30, 2020 (in thousands): OPEB Liability at Beginning of Year Service Cost Interest Differences between Expected and Actual Experience Changes in Assumptions Employer contributions * Net Change in Total OPEB Liability OPEB Liability at End of Year $ $ 942,634 26,157 25,492 26,062 (21,298) (21,010) 35,403 978,037 * Because the City funds OPEB benefits on a “pay-as-you-go” basis, employer contributions are equal to benefit payments. The City’s benefit payments to the plan was paid 87.8% from governmental funds, 3.0% from internal service funds, and 9.2% from enterprise funds h. Sensitivity of the City’s OPEB Liability to Changes in the Discount Rate and the Healthcare Cost Trend Rates The following table presents the City’s net OPEB liabilities calculated using the municipal bond rates and healthcare cost trend rates noted above, as well as what the City’s net OPEB liability would be if it were calculated using rate that is 1 percentage point lower or 1 percentage point higher than the current rate (in thousands): 1% Decrease City OPEB Plan $ 1,157,179 Current Municipal Bond Rate $ 978,037 1% Increase $ 836,909 1% Decrease City OPEB Plan $ 839,246 Current Healtchare Trend Rate $ 978,037 1% Increase $ 1,155,012 95 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2022 17. RESTATEMENT OF BEGINNING FUND BALANCES As of July 1, 2021, the City changed its accounting policy in regard to its Ambulance Transport activities and ceased accounting for them as a Special Revenue Fund and began accounting for these activities within the General Fund. As a result, the beginning balances of the General Fund and Non-Major Governmental Funds were restated as follows: Beginning Fund Balance Adjustments: Ambulance Fund Balance General Fund $ 288,608 Non-Major Governmental Funds $ 331,312 (3,273) 3,273 Adjusted Beginning Fund Balance 18. $ 285,335 $ 334,585 SUBSEQUENT EVENTS On August 25, 2022, the City issued $57,655,000 of Series 2022C Utility System Revenue Refunding Bonds (refunding $67,300,000 of the Series 2012 Utility System Revenue Bonds and accrued interest). The purpose of the issuance was to take advantage of lower interest rates and reduce future payments. 96 (Concluded) REQUIRED SUPPLEMENTARY INFORMATION A N N UA L C OM P R E H E N SI V E F I NA N C IA L R E P O RT 2 0 2 2 B ell B ank Park FOR THE FISCAL YEAR ENDED | JUNE 30, 2022 City of Mesa, Arizona Schedule of the City's Proportionate Share Of Net Pension Liability Cost-Sharing Pension Plan June 30, 2022 (in thousands) Arizona State Retirement System Reporting Fiscal Year (Measurement Date) 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 See accompanying notes to pension plan schedules. 97 2022 (2021) 2021 (2020) 2020 (2019) $ 1.5857% 208,353 $ 1.6188% 280,473 $ 1.6209% 235,853 $ 178,405 $ 175,767 $ 169,900 116.79% 159.57% 138.82% 78.58% 69.33% 73.24% Reporting Fiscal Year (Measurement Date) 2019 (2018) 2018 (2017) 2017 (2016) 2016 (2015) 2015 (2014) 1.6293% $ 227,233 1.6416% $ 255,729 1.6605% $ 268,013 1.6393% $ 255,337 1.6341% $ 241,792 2014 through 2013 Information not available $ 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% 98 City of Mesa, Arizona Schedule of Changes in the City's Net Pension/OPEB Liability and Related Ratios Agent Plans June 30, 2022 (in thousands) Public Safety Personnel Retirement System - Fire Reporting Fiscal Year (Measurement Date) 2022 (2021) 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) 7,645 32,539 - 2021 (2020) $ 7,871 31,397 - 2020 (2019) $ 7,663 29,147 - 7,760 - (221) - 11,844 8,488 (22,868) 25,076 (23,473) 15,574 (18,809) 38,333 449,531 474,607 433,957 449,531 395,624 433,957 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 21,601 3,321 56,815 18,107 2,845 2,587 16,708 2,805 10,339 (22,868) (266) 58,603 (23,473) (211) 58 (87) (18,809) (181) 10,862 Plan Fiduciary Net Position - As Previously Reported Adjustment to Beginning Balance Plan Fiduciary Net Position - Beginning Plan Fiduciary Net Position - Ending (b) 202,690 202,690 261,293 202,777 202,777 202,690 191,986 (71) 191,915 202,777 City's Net Pension Liability - Ending (a) - (b) $ Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 213,314 $ 55.05% City's Covered Payroll $ City's Net Pension Liability as a Percentage of its Covered Payroll 34,198 623.76% See accompanying notes to pension plan schedules. 99 246,841 $ 45.09% $ 32,562 758.06% 231,180 46.73% $ 34,136 677.23% Reporting Fiscal Year (Measurement Date) 2019 (2018) $ $ 7,271 27,446 - 2018 (2017) $ $ 6,439 23,654 21,380 2016 (2015) $ 2015 (2014) 6,127 23,086 - $ 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 (17,095) 28,384 (19,893) 39,127 (17,323) 8,372 (16,309) 30,860 375,564 395,624 347,180 375,564 308,053 347,180 299,681 308,053 268,821 299,681 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 (17,095) (174) 43 19,563 (19,893) (138) (12) (1,958) (17,323) (144) 45 2,131 (16,309) (160) (113) 15,903 181,700 181,700 191,986 162,137 162,137 181,700 164,095 164,095 162,137 161,964 161,964 164,095 146,061 146,061 161,964 203,638 $ 48.53% $ 7,724 25,687 2,125 2017 (2016) 32,445 627.64% 193,864 $ 48.38% $ 32,941 588.52% 185,043 $ 46.70% $ 32,453 570.19% 143,958 $ 53.27% $ 31,661 454.69% 100 137,717 54.05% $ 30,782 447.39% 2014 through 2013 Information not available City of Mesa, Arizona Schedule of Changes in the City's Net Pension/OPEB Liability and Related Ratios Agent Plans June 30, 2022 (in thousands) Public Safety Personnel Retirement System - Police Pension Reporting Fiscal Year (Measurement Date) 2022 (2021) 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) 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 - As Previously Reported Adjustment to Beginning Balance Plan Fiduciary Net Position - Beginning Plan Fiduciary Net Position - Ending (b) City's Net Pension Liability - Ending (a) - (b) $ Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 13,861 61,557 - 2021 (2020) $ $ City's Net Pension Liability as a Percentage of its Covered Payroll 101 15,015 53,953 - 19,067 - 10,259 21,092 (41,764) 35,766 (36,572) 54,305 (36,864) 63,455 850,268 886,034 795,963 850,268 732,508 795,963 38,561 6,268 101,528 34,340 6,045 4,551 32,387 5,718 18,270 (41,764) (477) 104,116 (36,572) (371) (2) 7,991 (36,864) (319) 340 19,532 362,771 362,771 466,887 354,780 354,780 362,771 335,631 (383) 335,248 354,780 419,147 64,419 650.66% See accompanying notes to pension plan schedules. $ 2,112 - $ 52.69% City's Covered Payroll 14,016 57,794 - 2020 (2019) 487,497 $ 42.67% $ 63,232 770.97% 441,183 44.57% $ 63,993 689.42% Reporting Fiscal Year (Measurement Date) 2019 (2018) $ $ 13,826 50,926 - 2018 (2017) $ $ 12,438 43,573 34,005 2016 (2015) $ 2015 (2014) 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 (32,522) 56,011 (31,689) 77,940 (29,998) 21,953 (27,566) 70,054 698,649 732,508 642,638 698,649 564,698 642,638 542,745 564,698 472,691 542,745 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 (32,522) (306) 420 36,325 (31,689) (240) 382 2,344 (29,998) (246) 28 7,142 (27,566) (269) 288 30,040 320,757 320,757 335,631 284,432 284,432 320,757 282,088 282,088 284,432 274,946 274,946 282,088 244,906 244,906 274,946 396,877 $ 45.82% $ 15,841 47,572 5,718 2017 (2016) 63,003 629.93% 377,892 $ 45.91% $ 64,740 583.71% 358,206 $ 44.26% $ 61,211 585.20% 282,610 $ 49.95% $ 62,461 452.46% 102 267,799 50.66% $ 59,688 448.66% 2014 through 2013 Information not available City of Mesa, Arizona Schedule of Changes in the City's Net Pension/OPEB Liability and Related Ratios Agent Plans June 30, 2022 (in thousands) Public Safety Personnel Retirement System - Police OPEB Reporting Fiscal Year (Measurement Date) 2021 (2020) 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) 2021 (2020) 2020 (2019) 2019 (2018) 2018 (2017) Information $ 351 1,511 - $ 322 1,477 - $ 200 1,416 - $ 190 1,359 - $ 213 1,356 35 100 - 381 - 43 474 472 - 312 (335) (1,494) 468 21,097 21,565 (1,455) 725 20,372 21,097 (1,391) 742 19,630 20,372 (1,325) 696 18,934 19,630 (1,239) 342 18,592 18,934 Plan Fiduciary Net Position Contributions - Employer Contributions - Employee Net Investment Income Benefit Payments, Including Refunds of Employee Contributions Administrative Expense Net Change in Plan Fiduciary Net Position 853 88 2,583 934 46 123 736 14 530 231 695 639 1,141 (1,494) (10) 2,020 (1,455) (10) (362) (1,391) (9) (120) (1,325) (11) (410) (1,239) (10) 531 Plan Fiduciary Net Position - As Previously Reported Adjustment to Beginning Balance Plan Fiduciary Net Position - Beginning Plan Fiduciary Net Position - Ending (b) 9,969 9,969 11,989 10,331 10,331 9,969 10,067 384 10,451 10,331 10,477 10,477 10,067 9,946 9,946 10,477 City's Net OPEB Liability - Ending (a) - (b) $ 9,576 $ 11,128 $ 10,041 $ 9,563 $ 8,457 Plan Fiduciary Net Position as a Percentage of the Total OPEB Liability 55.59% 47.25% 50.71% 51.28% 55.33% $ 64,419 $ 63,232 $ 63,993 $ 63,003 $ 64,740 14.87% 17.60% 15.69% 15.18% 13.06% City's Covered Payroll City's Net OPEB Liability as a Percentage of its Covered Payroll 2017 through 2013 See accompanying notes to pension plan schedules. 103 not available City of Mesa, Arizona Schedule of City Pension Contributions June 30, 2022 (in thousands) Arizona State Retirement System Statutorily Required Contribution City's Contribution in Relation to the Statutorily Required Contribution City's Contribution (Deficiency) / Excess $ 2022 23,097 $ 2021 20,763 $ 2020 20,258 $ 2019 19,124 $ 23,097 - $ 20,763 - $ 20,258 - $ 19,124 - City's Covered Payroll $ 192,542 $ 178,405 $ 175,767 $ 169,900 11.64% 11.53% City's Contributions as a Percentage of Covered Payroll 12.00% 11.26% 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 $ 2022 20,178 $ 2021 19,617 City's Covered Payroll $ 27,797 7,619 $ 36,776 City's Contributions as a Percentage of Covered Payroll 75.58% See accompanying notes to plan schedules. 104 $ 2020 18,035 $ 19,617 - $ 34,198 57.36% $ 2019 16,431 $ 18,035 - $ 16,431 - $ 32,562 $ 34,136 55.39% 48.13% $ 2018 17,650 $ 2017 17,423 $ 2016 16,955 $ 2015 16,146 $ 17,650 - $ 17,423 - $ $ 162,089 $ $ 2014 15,750 16,955 - $ 16,146 - $ 15,750 - 158,958 $ 155,868 $ 151,154 $ 147,402 10.96% 10.88% 2013 Information not 10.89% $ 2018 14,289 $ 2017 13,490 $ 2016 11,197 $ 15,509 1,220 $ 13,490 - $ 32,446 $ 32,941 10.67% $ 2015 9,827 $ 12,735 1,538 $ 32,453 available 10.68% $ 2014 9,157 $ 9,827 - $ 9,157 - $ 31,661 $ 30,782 2013 Information not 47.80% 40.95% 39.24% 31.04% 29.75% 105 available City of Mesa, Arizona Schedule of City Pension Contributions June 30, 2022 (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 $ 2022 37,457 $ 53,372 15,915 $ 37,484 - City's Covered Payroll $ 68,471 $ 64,419 City's Contributions as a Percentage of Covered Payroll $ 2021 37,484 2020 $ 34,308 $ 34,308 - $ 63,232 77.95% 58.19% 54.26% $ 2021 713 2020 $ 815 $ 815 - $ 63,232 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 $ 2022 838 $ 838 - $ 713 - City's Covered Payroll $ 68,471 $ 64,419 City's Contributions as a Percentage of Covered Payroll 1.22% See accompanying notes to plan schedules. 106 1.11% 1.29% 2019 $ 29,314 2018 $ 29,048 $ 2017 26,809 $ 29,314 - $ 63,993 $ 2016 21,697 $ 21,726 (7,322) $ 63,003 $ 2015 19,680 $ 26,809 - $ 64,740 $ 2014 17,443 $ 24,067 2,370 $ 19,680 - $ 17,443 - $ 61,211 $ 62,461 $ 59,688 2013 Information not 45.81% 34.48% 41.41% 2019 $ 733 2018 $ 772 2017 641 $ 39.32% 2016 through 2013 Information not $ 733 - $ 63,993 1.15% $ 772 - $ 641 - $ 63,003 $ 64,740 1.23% available 0.99% 107 31.51% 29.22% available City of Mesa, Arizona Notes to Pension Plan Schedules June 30, 2022 (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 18 years for unfunded actuarial accrued liability, 18 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. 108 City of Mesa, Arizona Schedule of Changes in the City's Total OPEB Liability June 30, 2022 (in thousands) 2022 Total Liability Service Cost Interest on the Total Liability 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 City's Covered Payroll City's Contributions as a % of Covered Payroll $ 26,157 25,492 2021 $ 24,165 25,425 2020 $ 20,818 22,584 2019 $ 19,997 22,447 2018 $ 21,430 20,112 26,062 (21,298) (2,548) 18,858 34,022 92,823 (1,133) 17,023 (46,955) (21,010) 35,403 942,634 $ 978,037 (20,641) 45,259 897,375 $ 942,634 (19,687) 150,560 746,815 $ 897,375 (17,232) 41,102 705,713 $ 746,815 (19,013) (24,426) 730,139 $ 705,713 $ 277,022 $ 271,561 $ 268,029 $ 257,537 $ 256,639 7.6% 7.6% 7.3% 6.7% 7.4% * Because the City funds OPEB benefits on a “pay-as-you-go” basis, employer contributions are equal to benefit payments. 109 2017 through 2013 Information not available City of Mesa, Arizona Budgetary Comparison Schedule (Non-GAAP Basis) Combined Governmental & Enterprise Funds For the Fiscal Year Ended June 30, 2022 (in thousands) Budgeted Amounts Original City Total Resources $ City Total Expenditures Net Change in Fund Balances Fund Balance - Beginning Fund Balance - Ending $ Actual Budgetary Basis Final 2,100,000 $ 2,100,000 $ 1,565,825 Variance with Final Budget $ 534,175 2,100,000 2,100,000 1,438,307 661,693 - - 127,518 (127,518) 989,627 989,627 989,627 - 989,627 $ 989,627 $ 1,117,145 $ Note: The City of Mesa's legally adopted budget is at the Citywide level and includes all governmental and proprietary funds. Legal control over the budget derives from State statutes that prohibit the City from exceeding its adopted budget. Transfers between funds and departmental groups may be made upon City Manager approval and do not require Council action or approval. See accompanying note to budgetary comparison schedule. 110 (127,518) City of Mesa, Arizona Notes to Budgetary Comparison Schedule June 30, 2022 (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, 2022 on the “GAAP basis” to the “budget basis” as follows: Net Change in Fund Balance-Budget Basis - $ 127,518 Bond related Capital Related items Depreciation and Amortization Lease Related items Differences in Revenue Recognition Payroll and Other Accruals Pension and OPEB Expense Joint Ventures - Change in Equity Joint Venture enties budgeted but not GAAP Unrealized Gain on Investments Net Change in Fund Balance-GAAP Basis - 86,901 110,386 (136,359) 2,126 (30,552) (5,905) (29,011) (14,231) 20,335 (46,204) $ 85,004 111 COMBINING STATEMENTS A N N UA L C OM P R E H E N SI V E F I NA N C IA L R E P O RT 2 0 2 2 Gulf Stream Aerospace FOR THE FISCAL YEAR ENDED | JUNE 30, 2022 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 1, Eastmark 2 and Cadence Community Facilities Districts 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, libraries, fire facilities and equipment, police facilities and equipment, 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 accounts for federal and state grant expenditures. 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 federal expenditures of the City’s housing assistance programs that provide rent subsidy payments to private sector owners of dwelling units. 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. Restricted Programs Fund accounts for expenditures of legally imposed fees and taxes. 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 bond proceeds to be used for the costs of construction of drains, basins, channels and other storm sewer improvements and street improvements in the Eastmark 1, Eastmark 2 and Cadence Community Facilities Districts. 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 bonds, excise tax obligations and transfers from the City’s General Fund Parks accounts for the bond proceeds to be used for the costs of park facilities and improvements. Public Safety accounts for the bond proceeds to be used for the cost of public safety facilities. Streets accounts for the bond proceeds to be used 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 1, Eastmark 2 and Cadence 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. Excise Tax Obligation accumulates monies for the payment of principal and interest requirements of the City’s Excise Tax Obligation Bonds. 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. City of Mesa, Arizona Combining Balance Sheet Non-Major Governmental Funds June, 30, 2022 (in thousands) Assets Pooled Cash and Investments Accounts Receivable, Net Accrued Interest Receivable Due from Other Governments Advances to Other Funds Prepaid Costs Restricted Assets: Pooled Cash and Investments Cash with Fiscal Agent Cash with Trustee Accounts Receivable Due from Other Governments Total Assets Liabilities Accounts Payable and Accrued Liabilities Due to Other Funds Advances from Other Funds Customer and Defendant Deposits Unearned Revenue Payable from Restricted Assets: Accrued Interest Payable Matured Bonds Payable Rebatable Arbitrage Total Liabilities Special Revenue Funds Cemetery Community Facilities District Development Impact Fees Environmental Compliance $ $ $ $ $ $ Deferred Inflows of Resources Unavailable Revenue Total Deferred Inflows of Resources Fund Balances Nonspendable Restricted Committed Assigned Unassigned Total Fund Balances Total Liabilities, Deferred Inflows of Resources and Fund Balances $ 3,594 12 12 3,618 - $ $ 460 1 5 466 62 70 $ $ 15,008 15,008 8 - $ $ 19,446 45 54 12 19,557 842 - Grants $ $ $ 160 3,737 173 4,070 3,005 8,403 557 - 132 8 842 11,965 3 3 - - - 1,692 1,692 3,615 3,615 334 334 15,000 15,000 12 18,703 18,715 173 (9,760) (9,587) 3,618 $ 112 466 $ 15,008 $ 19,557 $ 4,070 (Continued) Highway User Revenue Mesa Arts Center Restoration Special Revenue Funds Quality Mesa Public of Life Housing Safety Sales Authority Sales Tax Tax $ 37,586 1 132 4,644 - $ $ $ 42,363 $ $ $ 1,367 - 842 2 2 846 Total Special Revenue Funds $ 68,255 925 193 8,241 51 $ $ 77,665 $ $ $ 1,768 86 1,069 - $ 45,300 129 6,564 1,760 39 $ 18,989 58 6,597 - 2,923 $ 53,792 $ 25,644 $ 15,968 430 42 213 $ 16,653 944 1,345 $ $ $ 1,367 239 2,289 544 - - - - - - 40,996 40,996 607 607 634 634 39.00 53,209 53,248 2,923 $ 53,792 $ 846 $ Street Sales Tax 793 235 1,028 $ 42,363 (1) 240 $ Restricted Funds $ 544 - - 3,380 8,309 - 227,216 1,661 623 31,070 1,760 275 262,605 10,936 8,403 8,317 2,447 11,689 30,103 114 114 440 440 2,249 2,249 25,644 25,644 12,122 2,752 637 15,511 51 65,485 65,536 275 213,424 25,677 637 (9,760) 230,253 $ 25,644 $ 16,653 $ 77,665 113 $ 262,605 City of Mesa, Arizona Combining Balance Sheet Non-Major Governmental Funds June, 30, 2022 (in thousands) Assets Pooled Cash and Investments Accounts Receivable, Net Accrued Interest Receivable Due from Other Governments Advances to Other Funds Prepaid Costs Restricted Assets: Pooled Cash and Investments Cash with Fiscal Agent Cash with Trustee Accounts Receivable Due from Other Governments Total Assets Liabilities Accounts Payable and Accrued Liabilities Due to Other Funds Advances from Other Funds Customer and Defendant Deposits Unearned Revenue Payable from Restricted Assets: Accrued Interest Payable Matured Bonds Payable Rebatable Arbitrage Total Liabilities Capital Projects Funds Public Safety Streets $ 6,815 7 - $ 10,410 26 - $ 59,998 183 180 5,540 2 $ 121,048 229 324 5,540 223 $ 6,822 $ 10,436 $ 65,903 695 $ 128,059 $ 4,867 - $ 1,846 - $ 712 - $ 2,029 5,414 $ 4,867 1,846 712 7,443 14,868 - - - - 1,997 1,997 1,997 1,997 306 306 221 988 38,516 39,725 4,976 4,976 9,724 9,724 2 56,461 56,463 223 72,455 38,516 111,194 306 $ 44,592 $ 6,822 $ 10,436 $ 65,903 $ 128,059 General Capital Projects $ 306 306 $ 43,519 46 111 221 695 $ 44,592 - $ $ 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 Parks Total Capital Projects Funds Community Facilities District $ 114 9,454 5,414 (Concluded) Debt Service Funds Community Facilities District $ $ $ $ 18 6,863 1,221 22,281 97 30,480 4 - Excise Tax Obligation General Obligation Bonds Highway User Revenue Bonds Total Debt Service Funds Total Nonmajor Governmental Funds $ $ $ $ $ $ $ 27 1,940 1,967 - $ $ 11 7,373 43,835 1,310 52,529 - - 29 - 11,232 $ 11,232 14,263 58,228 22,281 1,407 $ 96,208 $ $ $ $ - 4 - 348,264 1,890 976 36,610 1,760 498 14,263 58,228 695 22,281 1,407 486,872 20,390 8,403 8,321 7,861 1,850 3,582 5,436 755 1,185 1,940 5,788 38,047 43,835 1,157 10,075 11,232 9,550 52,889 62,443 9,550 52,889 107,414 22,297 22,297 - 599 599 - 22,896 22,896 27,142 27,142 2,747 2,747 27 27 8,095 8,095 - 10,869 10,869 498 296,748 25,677 39,153 (9,760) 352,316 52,529 $ 11,232 $ 96,208 30,480 $ 1,967 $ 115 $ 486,872 City of Mesa, Arizona Combining Statement of Revenues, Expenditures and Changes in Fund Balances Non-Major Governmental Funds For the Fiscal Year Ended June 30, 2022 (in thousands) Revenues: Sales Taxes Property Taxes Occupancy Taxes Special Assessments Licenses and Permits Intergovernmental Charges for Services Fines and Forfeitures Investment Income (Loss) Contributions Miscellaneous Revenues Total Revenues Cemetery Community Facilities District Development Impact Fees Environmental Compliance $ $ $ $ Expenditures: Current: General Government Public Safety Community Environment Cultural-Recreational Miscellaneous Expense Debt Service: Principal Retirement Interest on Bonds Service Charges Cost of Issuance Capital Outlay Total Expenditures 163 (158) 5 433 (19) 414 7,954 7,954 17,243 (709) 2 16,536 - 304 - - 1,315 71 5,258 7,261 - - 304 - 1,115 15,020 5 110 7,954 1,516 Other Financing Sources (Uses): Transfers In Transfers Out Sale of Capital Assets Face Amount of Bonds Issued Premium on Issuance of Bonds (Net) Total Other Financing Sources (Uses) (971) (971) - (3,343) (3,343) - Net Change in Fund Balances (966) 110 4,611 1,516 Fund Balances - Beginning 4,581 224 10,389 17,199 Excess (Deficiency) of Revenues Over (Under) Expenditures Fund Balances - Ending $ 3,615 $ 116 334 $ 15,000 $ 18,715 (Continued) Special Revenue Funds Grants $ 15,665 38 15,703 Public Safety Sales Tax Quality of Life Sales Tax 26,222 5 26,227 $ 37,659 (1,739) 35,920 $ 37,694 136 (797) 37,033 Highway User Revenue Mesa Arts Center Restoration Mesa Housing Authority $ $ $ 47,989 (1,793) 46,196 332 (29) 303 Restricted Funds Street Sales Tax Total Special Revenue Funds $ 4,490 827 5,300 556 914 (558) 166 1,601 13,296 $ 45,232 294 1,950 1,604 (2,590) 586 47,076 $ 120,585 433 4,490 9,211 97,126 19,566 1,246 (8,387) 166 2,227 246,663 608 2,214 71 3,523 - 17,475 - - 21 24,260 - 20,810 - 28,939 - 5,549 1,804 108 1,184 - 3,292 402 21,620 - 11,089 54,240 68,792 11,968 - 12,070 18,486 6,358 23,833 1,069 1,069 24,281 6,205 27,015 28,939 5,176 13,821 4,419 29,733 36,412 182,501 (2,783) 22,363 (766) 1,946 8,905 8,094 (525) 17,343 64,162 - (12,391) (12,391) - 8 8 - - 546 546 - 554 (16,705) (16,151) (2,783) 9,972 (766) 1,954 8,905 8,094 21 17,343 48,011 (6,804) 31,024 1,373 (1,320) 44,343 17,550 15,490 48,193 182,242 634 $ 53,248 $ 25,644 $ 15,511 $ 65,536 $ 230,253 $ (9,587) $ 40,996 $ 607 $ 117 City of Mesa, Arizona Combining Statement of Revenues, Expenditures and Changes in Fund Balances Non-Major Governmental Funds For the Fiscal Year Ended June 30, 2022 (in thousands) Revenues: Sales Taxes Property Taxes Occupancy Taxes Special Assessments Licenses and Permits Intergovernmental Charges for Services Fines and Forfeitures Investment Income (Loss) Contributions Miscellaneous Revenues Total Revenues Capital Projects Funds Community Facilities District General Capital Projects Parks Public Safety Streets Total Capital Projects Funds $ $ $ $ $ $ - 46 (1,522) (1,476) (139) (139) (388) (388) 18,467 540 (2,408) 915 17,514 18,467 586 (4,457) 915 15,511 Expenditures: Current: General Government Public Safety Community Environment Cultural-Recreational Miscellaneous Expense Debt Service: Principal Retirement Interest on Bonds Service Charges Cost of Issuance Capital Outlay Total Expenditures - - - - - - 379 12,654 13,033 52,320 52,320 81 14,825 14,906 67 7,895 7,962 13 19,180 19,193 540 106,874 107,414 Excess (Deficiency) of Revenues Over (Under) Expenditures (13,033) (53,796) (15,045) (8,350) (1,679) (91,903) Other Financing Sources (Uses): Transfers In Transfers Out Sale of Capital Assets Face Amount of Bonds Issued Premium on Issuance of Bonds (Net) Total Other Financing Sources (Uses) 11,535 1,507 13,042 23,712 231 23,943 11,310 775 12,085 32 (32) 9,426 646 10,072 (96) 1,884 129 1,917 23,744 (128) 231 34,155 3,057 61,059 Net Change in Fund Balances 9 (29,853) (2,960) 1,722 238 (30,844) Fund Balances - Beginning 297 69,578 7,936 8,002 56,225 142,038 306 $ 39,725 $ 4,976 $ 9,724 $ 56,463 $ 111,194 Fund Balances - Ending $ 118 (Concluded) Debt Service Funds Community Facilities District $ $ 5,557 1,830 (257) 7,130 Excise Tax Obligation General Obligation Bonds Highway User Revenue Bonds Total Debt Service Funds Total Nonmajor Governmental Funds $ $ $ $ $ - 45,936 737 (43) 46,630 - 51,493 1,830 737 (300) 53,760 120,585 51,926 4,490 1,830 9,211 115,593 20,152 1,983 (13,144) 1,081 2,227 315,934 - - - - - 11,089 54,240 68,792 11,968 - 3,667 3,446 6 7,119 1,185 1,483 2,668 38,047 11,576 4 49,627 10,075 2,314 2 12,391 52,974 18,819 12 71,805 52,974 18,819 12 540 143,286 361,720 11 (2,668) (2,997) (12,391) (18,045) (45,786) - 2,695 2,695 4,263 (741) 2 3,524 12,391 12,391 19,349 (741) 2 18,610 43,647 (17,574) 231 34,155 3,059 63,518 11 27 527 - 565 17,732 2,736 - 7,568 - 10,304 334,584 - $ 10,869 2,747 $ 27 $ 8,095 $ 119 $ 352,316 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 Internal Service Funds Combining Statement of Net Position June, 30, 2022 (in thousands) Assets Current Assets: Pooled Cash and Investments Accounts Receivable Accrued Premiums Receivable Accrued Interest Receivable Inventory Deposits and Prepaid Costs Total Current Assets Warehouse, Maintenance and Services Property and Public Liability Self Insurance Workers' Compensation Self Insurance $ $ $ Noncurrent Assets: Capital Assets, Not Being Depreciated Capital Assets, Being Depreciated, Net Total Noncurrent Assets 449 9,139 9 9,597 9,446 25 1,089 10,560 Employee Benefits Self Insurance Total 6,696 18 260 6,974 $ 42,076 55 211 111 32 42,485 $ 58,218 504 211 154 9,139 1,390 69,616 11 2,363 2,374 - - 7 7 11 2,370 2,381 11,971 10,560 6,974 42,492 71,997 4,463 4,463 461 461 306 306 760 760 5,990 5,990 16,434 11,021 7,280 43,252 77,987 Liabilities Current Liabilities Accounts Payable and Accrued Liabilities Claims Payable Due to Other Funds Current Portion of Compensated Absences Total Current Liabilities 1,011 1,119 76 2,206 36 12,410 18 12,464 50 28,555 6 28,611 2,320 5,845 12 8,177 3,417 46,810 1,119 112 51,458 Long-Term Liabilities Compensated Absences Net Pension and OPEB Liability Total Long-Term Liabilities 636 28,868 29,504 102 2,607 2,709 41 1,799 1,840 102 5,234 5,336 881 38,508 39,389 31,710 15,173 30,451 13,513 90,847 2,843 2,843 391 391 241 241 401 401 3,876 3,876 2,374 (20,493) (18,119) (4,543) (4,543) (23,412) (23,412) 7 29,331 $ 29,338 2,381 (19,117) $ (16,736) 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 $ $ 120 $ City of Mesa, Arizona Internal Service Funds Combining Statement of Revenues, Expenses and Changes in Net Position For the Fiscal Year Ended June 30, 2022 (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 $ $ $ $ 8,049 23,972 1,004 - - - Total $ 8,049 23,972 1,004 430 33,455 8,931 8,931 7,485 135 7,620 15,854 72,917 5,019 8,042 101,832 15,854 89,333 5,019 8,607 151,838 Operating Expenses: Warehouse, Maintenance & Services: Warehouse Fleet Support Services Printing and Graphics Self-Insurance: Administrative Costs Claims and Premiums Paid Total Operating Expenses 7,639 26,659 532 - - - 7,639 26,659 532 34,830 174 6,119 6,293 2,116 5,277 7,393 10,404 95,097 105,501 12,694 106,493 154,017 Operating Income (Loss) Before Depreciation (1,375) 2,638 227 (3,669) (2,179) (231) - - (1) (232) (1,606) 2,638 227 (3,670) (2,411) Nonoperating Revenues (Expense): Investment Income Gain/(Loss) on Disposal of Capital Assets Total Nonoperating Revenues (Expenses) (46) (46) (327) (327) (233) (233) (1,466) (1,466) (2,072) (2,072) Income (Loss) Before Capital Contributions (1,652) 2,311 (6) (5,136) (4,483) Capital Contributions Transfers In Transfers Out 154 - - - - 154 - Change in Net Position (1,498) 2,311 (6) (5,136) (4,329) Total Net Position - Beginning Change in Accounting Principle (16,621) - (6,854) - (23,406) - 34,474 - (12,407) - Total Net Position - Restated (16,621) (6,854) (23,406) 34,474 (12,407) 29,338 $ (16,736) Depreciation Operating Income (Loss) Total Net Position - Ending $ (18,119) $ 121 (4,543) $ (23,412) $ City of Mesa, Arizona Internal Service Funds Combining Statement of Cash Flows For the Fiscal Year Ended June 30, 2022 (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 $ $ $ Cash Flows From Noncapital Financing Activities: Operating Transfers-In From Other Funds Net Cash Provided By (Used For) Noncapital Financing Activities 33,433 (19,741) (12,458) 8,931 (8,618) (1,623) Employee Benefits Self Insurance Total 7,620 (6,732) (1,342) $ 101,904 (98,433) (3,614) $ 151,888 (133,524) (19,037) 1,234 (1,310) (454) (143) (673) (1,093) - - - (1,093) (1,093) - - - (1,093) Cash Flows from Capital and Related Financing Activities: Acquisition and Construction of Capital Assets Proceeds from the Sale of Capital Assets Contributions Net Cash Provided By (Used For) Capital and Related Financing Activities (65) (30) - - - (65) (30) (95) - - - (95) Cash Flows from Investing Activities: Interest Received on Investments Net Cash Provided By (Used For) Investing Activities (46) (46) (326) (326) (233) (233) (1,473) (1,473) (2,078) (2,078) Net Change in Cash and Cash Equivalents - (1,636) (687) (1,616) (3,939) Pooled Cash and Investments at Beginning of Year - 11,082 7,383 43,692 62,157 $ 42,076 $ 58,218 $ $ (2,411) Pooled Cash and Investments at End of Year $ - $ 9,446 $ 6,696 $ (1,606) $ 2,638 $ 227 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 (22) (498) (1) 426 479 (234) 2,460 (1) (216) (92) (1,623) 168 334 (2,519) (25) (58) (927) 97 203 29 Total Adjustments 2,840 (3,948) (681) 231 - - (3,670) 1 232 39 37 205 2,227 (307) 362 963 17 (498) (205) 481 156 (276) 3,359 (1,528) 3,527 1,738 Net Cash Provided by (Used for) Operating Activities $ 1,234 $ (1,310) $ (454) $ (143) $ (673) Noncash Transactions Affecting Financial Position: Contributions of Capital Assets Gain/(Loss) on Disposal of Capital Assets $ 174 - $ - $ - $ - $ 174 - 122 SUPPLEMENTAL INFORMATION A N N UA L C OM P R E H E N SI V E F I NA N C IA L R E P O RT 2 0 2 2 Elec tra Meccanica FOR THE FISCAL YEAR ENDED | JUNE 30, 2022 City of Mesa, Arizona Supplemental Information Budgetary Comparison Schedule (Non-GAAP Basis) Community Facilities Districts - Cadence For the Fiscal Year Ended June 30, 2022 (in thousands) Budgeted Amounts Original Revenues: Property Taxes Special Assessments Investment Income Contributions Total Revenues $ 625 372 75 1,072 Actual Budgetary Basis Variance with Final Budget $ $ Final $ 625 372 75 1,072 624 346 3 972 (2) (26) 3 (75) (100) Expenditures: Current: General Government Debt Service: Principal Retirement Interest on Bonds Service Charges Cost of Issuance Capital Outlay Total Expenditures 121 121 42 79 532 418 2 155 3,339 4,566 532 418 2 155 3,339 4,566 487 430 2 143 1,599 2,703 45 (13) 0 12 1,740 1,863 Excess (Deficiency) of Revenues Over (Under) Expenditures (3,494) (3,494) (1,731) 1,763 Other Financing Uses: Face Amount of Bonds Issued Premium on Issuance of Bonds Total Other Financing Uses 4,400 4,400 4,400 4,400 1,580 168 1,748 2,820 (168) 2,652 Net Change in Fund Balances 906 906 17 (889) Fund Balance - Beginning 461 461 461 - Fund Balance - Ending $ 1,367 $ 1,367 $ 479 $ (889) Note: Eastmark #1 is a blended component unit. Budget is approved by the Board at the District Level 123 City of Mesa, Arizona Supplemental Information Budgetary Comparison Schedule (Non-GAAP Basis) Community Facilities Districts - Eastmark 1 For the Fiscal Year Ended June 30, 2022 (in thousands) Budgeted Amounts Original Revenues: Property Taxes Special Assessments Investment Income Total Revenues $ 4,976 2,231 7,207 Actual Budgetary Basis Variance with Final Budget $ $ Final $ 4,976 2,231 7,207 4,980 1,434 30 6,444 4 (797) 30 (763) Expenditures: Current: General Government Debt Service: Principal Retirement Interest on Bonds Service Charges Cost of Issuance Capital Outlay Total Expenditures 360 360 205 155 3,020 3,821 6 450 20,044 27,700 3,020 3,821 6 450 20,044 27,700 3,097 2,909 4 236 11,055 17,507 (77) 912 2 214 8,989 10,194 Excess (Deficiency) of Revenues Over (Under) Expenditures (20,494) (20,494) (11,063) 9,431 Other Financing Uses: Face Amount of Bonds Issued Premium on Issuance of Bonds Total Other Financing Uses 23,500 23,500 23,500 23,500 9,955 1,338 11,293 13,545 (1,338) 12,207 Net Change in Fund Balances 3,006 3,006 230 (2,776) Fund Balance - Beginning 2,780 2,780 2,780 - Fund Balance - Ending $ 5,786 $ 5,786 $ 3,011 $ (2,776) Note: Eastmark #1 is a blended component unit. Budget is approved by the Board at the District Level 124 City of Mesa, Arizona Supplemental Information Budgetary Comparison Schedule (Non-GAAP Basis) Community Facilities Districts - Eastmark 2 For the Fiscal Year Ended June 30, 2022 (in thousands) Budgeted Amounts Original Revenues: Property Taxes Special Assessments Investment Income Contributions Total Revenues $ Actual Budgetary Basis Variance with Final Budget $ $ Final 385 341 70 796 $ 385 341 70 796 386 50 1 438 1 (291) 1 (70) (359) Expenditures: Current: General Government Debt Service: Principal Retirement Interest on Bonds Service Charges Cost of Issuance Capital Outlay Total Expenditures 803 803 57 746 274 424 1 250 6,744 8,496 274 424 1 250 6,744 8,496 83 107 0 247 191 317 0 250 6,744 8,249 Excess (Deficiency) of Revenues Over (Under) Expenditures (7,700) (7,700) 190 7,890 Other Financing Uses: Face Amount of Bonds Issued Total Other Financing Uses 7,700 7,700 7,700 7,700 - 7,700 7,700 - - 190 190 97 97 97 - Net Change in Fund Balances Fund Balance - Beginning Fund Balance - Ending $ 97 $ 97 $ 287 $ Note: Cadence is a blended component unit. Budget is approved by the Board at the District Level 125 190 STATISTICAL SECTION A N N UA L C OM P R E H E N SI V E F I NA N C IA L R E P O RT 2 0 2 2 Elliot Road Technolog y C or r idor FOR THE FISCAL YEAR ENDED | JUNE 30, 2022 STATISTICAL SECTION This part of the City of Mesa’s annual comprehensive 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 annual comprehensive 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) 2021-22 2020-21 2019-20 2018-19 GOVERNMENTAL ACTIVITIES Net Investment in Capital Assets Restricted Unrestricted $ 1,246,582 249,626 (889,238) $ 1,184,908 203,284 (841,670) $ 1,075,182 143,839 (833,300) $ 1,038,928 103,164 (834,016) Total Governmental Activities Net Position $ 606,970 $ 546,522 $ 385,721 $ 308,076 $ 24,204 95,840 324,907 $ 30,965 70,940 318,490 $ 213,576 63,113 252,261 $ 170,427 47,857 350,006 Total Business-type Activities $ 444,951 $ 420,395 $ 528,950 $ 568,290 PRIMARY GOVERNMENT Net Investment in Capital Assets Restricted Unrestricted $ 1,270,786 345,466 (564,331) $ 1,215,873 274,224 (523,180) $ 1,288,758 206,952 (581,039) $ 1,209,355 151,021 (484,010) Total Primary Government $ 1,051,921 $ $ $ BUSINESS-TYPE ACTIVITIES Net Investment in Capital Assets Restricted Unrestricted 126 966,917 914,671 876,366 Table I (Concluded) 2017-18 2016-17 2015-16 2014-15 2013-14 2012-13 $ 1,019,888 88,305 (858,392) $ 986,354 88,721 (711,367) $ 965,148 81,941 (666,986) $ 932,660 72,170 (666,758) $ 866,332 60,555 (120,803) $ 902,397 56,719 (184,355) $ 249,801 $ 363,708 $ 380,103 $ 338,072 $ 806,084 $ 774,761 $ 266,012 40,440 199,531 $ 247,598 43,046 228,160 $ 302,521 49,139 158,756 $ 327,743 47,576 160,934 $ 393,720 43,023 178,702 $ 346,352 37,795 271,619 $ 505,983 $ 518,804 $ 510,416 $ 536,253 $ 615,445 $ 655,766 $ 1,285,900 128,745 (658,861) $ 1,233,952 131,767 (483,207) $ 1,267,669 131,080 (508,230) $ 1,260,403 119,746 (505,824) $ 1,260,052 103,578 57,899 $ 1,248,749 94,514 87,264 $ $ $ $ $ 1,421,529 $ 1,430,527 755,784 882,512 890,519 874,325 127 City of Mesa, Arizona Table II Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) (in thousands) EXPENSES GOVERNMENTAL ACTIVITIES: General Government Public Safety Community Environment Cultural-Recreational Interest on Long-term Debt 2021-22 $ 183,241 416,563 195,594 86,824 14,720 2020-21 $ 175,608 409,549 172,840 66,020 18,201 2019-20 $ 2018-19 134,299 384,800 152,847 62,014 17,841 $ 119,819 355,752 119,506 58,345 18,078 Total Governmental Activities Expenses 896,942 842,218 751,801 671,500 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 43,206 43,125 119,329 89,219 41,001 6,002 1,703 - 30,259 41,386 126,797 77,488 45,848 5,958 1,299 - 25,028 29,096 128,244 80,548 41,719 6,004 1,233 4,150 2,615 408 1,163 - 22,475 33,124 103,821 57,468 38,524 5,029 2,117 4,413 2,748 7,867 1,186 - Total Business-type Activities Expenses 343,585 329,035 320,208 278,772 $ 1,240,527 $ 1,171,253 $ 1,072,009 $ 950,272 Total Primary Government Expenses 128 Table II (Continued) 2017-18 2016-17 2015-16 2014-15 2013-14 2012-13 $ 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 $ 103,819 277,614 125,700 49,275 24,431 $ 105,410 287,451 129,164 61,717 23,443 628,303 659,997 594,747 582,929 580,839 607,185 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 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 3,653 292,338 291,832 286,291 294,180 277,671 318,842 $ 920,641 $ 951,829 $ 881,038 $ 877,109 $ 858,510 $ 926,027 129 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 2021-22 $ 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 48,574 65,920 9,672 966 105,858 44,369 275,359 2020-21 $ 42,635 41,394 8,573 8,145 100,923 10,696 212,366 2019-20 $ 24,126 40,489 9,253 3,791 70,633 24,719 173,011 2018-19 $ 23,812 43,214 10,838 3,439 25,326 13,780 120,409 52,613 57,313 163,263 93,727 66,132 4,808 1,487 452 30,888 470,683 32,666 45,141 169,473 87,573 64,344 4,007 1,158 452 34,719 439,533 29,855 39,986 152,266 81,464 63,267 4,018 2,595 40 221 1,143 1,632 35,896 412,383 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 Total Primary Government Program Revenues $ 746,042 $ 651,899 $ 585,394 $ 518,071 NET (EXPENSE) REVENUE Governmental Activities Business-type Activities $ (621,583) 127,098 $ (629,852) 110,498 $ (578,790) 92,175 $ (551,091) 118,890 Total Primary Government Net Expense $ (494,485) $ (519,354) $ (486,615) $ (432,201) 130 Table II (Continued) 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 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 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 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 $ 534,494 $ 512,038 $ 507,679 $ 527,279 $ 442,362 $ 464,044 $ (491,483) 105,336 $ (535,888) 96,097 $ (450,595) 77,236 $ (407,206) 57,376 $ (469,418) 53,270 $ (468,626) 6,643 $ (386,147) $ (439,791) $ (373,359) $ (349,830) $ (416,148) $ (461,983) 131 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 2021-22 2020-21 2019-20 2018-19 GOVERNMENTAL ACTIVITIES: Sales Taxes Property Taxes Occupancy Taxes Unrestricted Intergovernmental Revenues Contributions Not Restricted to Specific Programs Investment Income (Loss) Miscellaneous Gain (Loss) on Sale of Capital Assets Transfers $ 301,862 52,005 6,427 211,534 7,771 (29,788) 14,758 1,856 115,607 $ 253,825 47,247 3,990 206,397 19,052 2,308 21,315 17,229 113,982 $ 219,932 45,068 2,564 183,189 36,912 16,002 16,374 136,394 $ 189,871 36,013 3,246 175,278 65,189 13,729 11,531 (27) 114,535 Total Governmental Activities 682,032 685,345 656,435 609,365 BUSINESS-TYPE ACTIVITIES: Occupancy Taxes Utility Development Fees Investment Income (Loss) Gain (Loss) on Sale of Capital Assets Miscellaneous Transfers 21,021 (9,155) 1,199 (115,607) 45 192 (113,982) 1,459 7,618 (801) (3,397) (136,394) 1,602 8,004 44,056 4,290 (114,535) Total Business-type Activities (102,542) (113,745) (131,515) (56,583) Total Primary Government $ 579,490 $ 571,600 $ 524,920 $ 552,782 Change in Net Position Governmental Activities Business-type Activities $ 60,448 24,556 $ 55,493 (3,247) $ 77,645 (39,340) $ 58,275 62,307 Total Primary Government $ 85,004 $ 52,246 $ 38,305 $ 120,582 132 Table II (Concluded) 2017-18 2016-17 2015-16 2014-15 2013-14 2012-13 $ 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 $ 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 83,615 575,949 519,493 492,626 478,743 504,792 400,299 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) 999 1,141 5,157 233 (94,427) 851 1,453 18,697 288 (109,520) 825 860 (83,615) (110,947) (87,709) (103,073) (86,897) (88,231) (81,930) $ 465,002 $ 431,784 $ 389,553 $ 391,846 $ 416,561 $ 318,369 $ 84,466 (5,611) $ (16,395) 8,388 $ 42,031 (25,837) $ 71,537 (29,521) $ 35,374 (34,961) $ (68,327) (75,287) $ 78,855 $ $ 16,194 $ 42,016 $ $ (143,614) (8,007) 133 413 City of Mesa, Arizona Table III Fund Balance, Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) (in thousands) 2021-22 2020-21 GENERAL FUND Nonspendable Restricted Committed Assigned Unassigned 3,185 4,313 171,743 152,526 2,680 18,529 79,024 188,375 Total General Fund $ 331,767 $ 288,608 723 296,748 25,677 39,153 (12,709) 928 274,623 66,679 897 (11,517) $ 349,592 $ 331,610 ALL OTHER GOVERNMENTAL FUNDS Nonspendable Restricted (1) Committed Assigned Unassigned Total All Other Governmental Funds 134 2019-20 $ 2,301 19,910 42,515 130,342 2018-19 $ 794 26 14,016 30,869 90,190 $ 195,068 $ 135,895 $ $ 576 184,980 63,866 786 (1,043) $ 249,165 1,196 159,745 57,432 459 (134) $ 218,698 Table III (Concluded) 2017-18 $ 2,304 10,377 28,346 89,347 2016-17 2014-15 2013-14 2012-13 2,145 146 528 19,367 92,240 $ 4,035 184 227 10,703 79,657 $ 3,490 184 126 74,145 $ 2,956 188 1,484 72,683 $ $ 130,374 $ 114,426 $ 94,806 $ 77,945 $ 77,311 $ 53,619 $ $ $ 77 95,701 28,580 6 (155) $ 138 172,316 30,092 (31) $ 23 190,609 21,379 (675) $ 135 132,462 41,641 22 (176) $ 174,084 $ 2015-16 37 112,105 30,928 2 (69) $ 143,003 $ 124,209 $ 202,515 $ 211,336 135 1,724 284 1,185 50,426 55 243,831 23,005 (1,177) $ 265,714 City of Mesa, Arizona Table IV Fund Balance, Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) (in thousands) 2021-22 2020-21 2019-20 2018-19 2017-18 $ 301,862 51,926 6,427 1,830 48,574 347,578 65,920 9,672 (27,716) 1,081 7,332 814,486 $ 253,825 47,253 3,990 1,832 42,635 316,871 41,394 8,573 2,287 130 7,036 725,826 $ 219,932 44,970 2,564 1,661 24,126 277,396 40,489 9,253 14,026 2,295 9,487 646,199 $ 189,871 36,005 3,246 1,274 23,812 213,051 43,214 10,838 10,840 255 6,688 539,094 $ 169,024 35,616 2,628 1,174 25,119 223,800 40,222 10,436 1,608 429 5,547 515,603 110,608 365,887 127,637 62,542 98,423 308,271 127,421 45,596 96,141 291,674 90,207 47,639 98,009 277,313 76,623 48,636 90,209 266,459 73,404 46,143 54,032 19,283 12 540 167,628 908,169 45,793 17,443 14 2,038 156,985 801,984 46,929 18,208 14 838 120,602 712,252 39,511 18,185 19 874 92,637 651,807 34,738 18,477 14 1,023 76,279 606,746 Excess of Revenues Under Expenditures (93,683) (76,158) (66,053) (112,713) (91,143) OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Sale of Capital Asset Face Amount of Bonds Issued Premium on Issuance of Bonds (Net) Issuance of Refunding Bonds Payment to Refunding Bond Agent Total Other Financing Sources (Uses) 143,814 (28,207) 2,004 34,155 3,059 154,825 185,897 (71,915) 21,597 106,637 20,193 38,395 (48,661) 252,143 163,801 (27,407) 18,361 938 155,693 147,590 (33,055) 47,008 1,305 162,848 176,572 (66,208) 26,745 1,063 138,172 $ 61,142 $ 175,985 89,640 $ 50,135 $ 47,029 9.26% 9.08% 10.39% 10.07% 10.03% REVENUES Sales Taxes (1) Property Taxes Occupancy Taxes Special Assessments Licenses and Permits Intergovernmental Charges for Services Fines and Forfeitures Investment Income Contributions Miscellaneous Total Revenues EXPENDITURES Current General Government Public Safety Community Environment Cultural-Recreational Debt Service Principal Interest Service Charges Cost of Issuance Capital Outlay Total Expenditures 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 $ Table IV (Concluded) 2016-17 2015-16 2014-15 2013-14 2012-13 $ 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 $ 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 86,360 261,892 68,403 43,744 79,448 254,528 65,559 43,651 81,066 243,570 60,512 40,365 75,077 231,364 56,573 38,788 74,596 226,677 55,197 37,787 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 71,015 23,704 727 102,657 599,905 31,519 23,433 10 1,448 91,537 542,204 (118,025) (202,143) (105,355) (181,436) (137,939) 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) 97,168 141,909 (32,389) 40,800 430 150,750 147,818 (64,203) 62,672 3,681 17,415 (19,889) 147,494 $ 38,414 $ (61,445) (8,187) $ (30,686) 9.88% 22.12% 10.81% 19.05% $ $ 9,555 12.20% 137 City of Mesa, Arizona Table V Sales Tax Collections by Category Last Ten Fiscal Years (in thousands) Retail Sales Rentals Utilities Restaurants & Bars Communications Amusements Publishing Miscellaneous Printing & Advertising Contracting Total City Direct Tax Rate (1) 2021-22 2020-21 2019-20 2018-19 162,691 47,574 18,412 25,615 4,026 2,354 943 1,127 553 38,567 $ 143,435 38,149 17,511 21,716 4,730 1,351 477 1,154 479 24,821 $ 115,525 35,885 16,287 19,345 5,162 1,755 463 1,131 495 23,867 $ 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 $ 79,716 26,340 13,575 15,002 4,432 1,581 526 1,313 446 16,806 $ 301,862 $ 253,823 $ 219,915 $ 189,871 $ 169,024 $ 159,737 2.00% 2.00% 2.00% (1) Mesa tax rate increased from 1.75% to 2.00% effective March 1, 2019. Note: Amounts shown include penalties and interest. Occupancy tax not included. Source: City of Mesa Tax & Licensing Division 138 2.00% 2017-18 1.75% 2016-17 1.75% Table V (Concluded) 2015-16 2014-15 2013-14 2012-13 $ 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 $ 69,276 24,374 12,344 12,972 4,230 1,469 830 823 455 13,794 $ 66,790 24,847 12,549 12,577 4,651 1,432 866 732 434 12,402 $ 151,826 $ 146,337 $ 140,567 $ 137,280 1.75% 1.75% 1.75% 1.75% 139 City of Mesa, Arizona Table VI Direct and Overlapping Sales Tax Rates Last Ten Fiscal Years Fiscal Year City Direct Rate Maricopa County State of Arizona 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 1.75% 1.75% 1.75% 1.75% 1.75% 1.75% 2.00% 2.00% 2.00% 2.00% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% 5.60% 5.60% 5.60% 5.60% 5.60% 5.60% 5.60% 5.60% 5.60% 5.60% (1) (1): The City of Mesa increased its tax to 2.00% effective 3/1/19 Source: City of Mesa Tax & Licensing Office 140 City of Mesa, Arizona Table VII Ratios of Outstanding Debt by Type Last Ten Fiscal Years (in thousands) - 2021-22 Governmental Activities General Obligation Bonds Highway User Revenue Bonds Excise Tax Revenue Obligation Bonds Special Assessment Bonds Community Facilities District Capital Leases Notes Payable Business-type Activities Utility System Revenue Bonds Utility Revenue Obligations General Obligation Bonds Notes Payable Total Primary Government $ $ 353,434 51,141 42,078 86,134 - 2019-20 $ 334,609 58,750 219 57,307 - 2018-19 $ 370,479 67,905 49,025 438 40,631 - 1,322,930 92,203 1,135 $ 1,927,300 1,382,558 16,977 28 1,285 $ 1,933,635 1,242,670 151 1,431 $ 1,695,137 1,279,020 191 1,574 $ 1,809,263 9.63% 12.06% 10.99% 12.26% Percentage of Personal Income (1) Per Capita (1) 335,174 40,420 40,245 95,193 - 2020-21 $ 3,442 $ (1) Information on personal income and population is presented on Table XII. 141 3,726 $ 3,298 $ 3,541 Table VII (Concluded) 2017-18 $ 365,519 76,620 4,902 1,005 28,813 - 2016-17 $ 374,443 84,995 94,060 1,340 19,172 - 2015-16 $ 350,560 92,895 94,060 2,085 19,315 - 2014-15 $ 336,716 100,285 94,060 2,830 10,974 77,835 2013-14 $ 344,040 107,705 94,060 3,574 5,897 72 77,835 2012-13 $ 324,682 114,650 94,060 4,318 2,712 140 122,835 1,227,355 236 1,714 $ 1,706,164 1,161,755 191 1,851 $ 1,737,807 1,063,710 390 1,985 $ 1,625,000 1,007,455 474 2,116 $ 1,632,745 991,995 605 2,244 $ 1,628,027 978,160 887 2,370 $ 1,644,814 12.62% 13.74% 13.79% 14.42% 15.23% 15.87% $ 3,406 $ 3,525 $ 3,421 $ 3,534 142 $ 3,578 $ 3,697 City of Mesa, Arizona Table VIII Ratios of General Bonded Debt Outstanding Last Ten Fiscal Years (in thousands) Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Secondary Assessed Value (1) 2,770,422 2,559,634 2,821,173 2,757,913 2,888,291 3,048,893 3,277,965 3,516,377 3,736,210 3,990,099 General Obligation Bonds Less: Amounts Available in Debt Service Fund 328,152 347,465 338,875 350,983 374,755 365,755 373,827 334,760 353,462 335,174 138 372 3,584 2,618 4,989 5,384 4,853 3,535 7,568 8,095 Total 328,014 347,093 335,291 348,365 369,766 360,371 368,974 331,225 345,894 327,079 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) 11.84% 13.56% 11.88% 12.63% 12.80% 11.82% 11.26% 9.42% 9.26% 8.20% 739 765 726 733 750 719 722 644 666 584 City of Mesa, Arizona Table IX Direct and Overlapping Governmental Activities Debt June 30, 2022 (in thousands) Debt Outstanding 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 Eastmark Community Facilities District No. 2 Cadence Community Facilities District $ Other Debt: Maricopa County Estimated Percentage Applicable to City of Mesa Percent (1) Amount 184,715 640,695 358,660 156,110 129,875 86,925 76,755 154,515 61,345 2,240 8,695 8.19% 8.17% 86.51% 27.23% 35.43% 1.88% 0.38% 0.90% 100.00% 100.00% 100.00% 15,127 52,346 310,261 42,509 46,021 1,637 293 1,385 61,345 2,240 8,695 106,715 8.19% 8,739 Subtotal, overlapping debt 550,598 City direct debt (2) 511,032 Total Direct and Overlapping Debt $ 1,061,630 (1) Proportion applicable to the City is computed on the ratio of net assessed limited property valuation for fiscal year 2021/2022. (2) Includes: General Obligation Bonds, Highway User Revenue Bonds, Excise Tax Revenue Obligations, Community Facilities District Bonds, and Unamortized Bond Premiums. Source: Hilltop Securities Inc. 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 City of Mesa, Arizona Table X Legal Debt Margin Information Last Ten Fiscal Years (in thousands) 2021-22 2020-21 2019-20 2018-19 6% Limitation (1) Legal Debt Limitation General Obligation Bonds Outstanding $ 353,301 852 $ 317,794 2,715 $ 285,114 450 $ 196,678 518 Total Debt Margin Available $ 352,449 $ 315,079 $ 284,664 $ 196,160 Total Net Debt Applicable to the 6% Limit as A Percentage of the 6% Legal Debt Limitation 0.24% 0.85% $ 1,059,313 331,690 $ 950,381 334,609 $ 655,593 370,152 $ $ 615,772 $ 285,441 20% Limitation (2) Legal Debt Limitation General Obligation Bonds Outstanding $ 1,177,671 318,098 Total Debt Margin Available $ 859,573 Total Net Debt Applicable to the 20% Limit as A Percentage of the 20% Legal Debt Limitation 727,623 27.01% 31.31% 0.16% 35.21% Total Margin Available $ 1,212,022 $ 1,042,702 $ Full Cash Net Assessed Value $ 5,888,354 $ 5,296,564 $ 4,751,903 900,436 (1) Under Arizona law, cities can issue General Obligation Bonds for general municipal purposes up to an amount not exceeding 6 percent of the full cash net 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 the full cash net valuation. 145 0.26% 56.46% $ 481,601 $ 4,329,347 Table X (Concluded) 2017-18 2016-17 2015-16 2014-15 2013-14 2012-13 $ 182,934 724 $ 173,297 846 $ 165,475 1,047 $ 169,270 1,275 $ 153,578 605 $ 166,225 175 $ 182,210 $ 172,451 $ 164,428 $ 167,995 $ 152,973 $ 166,050 0.40% 0.49% 0.63% 0.75% 0.39% 0.11% $ 609,779 365,031 $ 577,658 373,909 $ 551,583 349,903 $ 564,235 343,370 $ 511,927 344,040 $ 554,084 300,735 $ 244,748 $ 203,749 $ 201,680 $ 220,865 $ 167,887 $ 253,349 59.86% $ 426,958 $ 3,983,671 64.73% $ 376,200 $ 3,707,067 63.44% $ 366,108 $ 2,757,913 60.86% $ 388,860 $ 2,821,173 146 67.20% $ 320,860 $ 2,559,634 54.28% $ 419,399 $ 2,770,422 City of Mesa, Arizona Table XI Pledged-Revenue Coverage Last Ten Fiscal Years (in thousands) Debt Service Fiscal Year 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 Operating Revenues (1) 293,915 295,710 311,506 323,099 348,794 361,863 365,081 366,838 399,197 433,048 Operating Revenues (1) 433,048 Operating Expenses Net Available Revenue Principal Interest Coverage Ratio Utility System Revenue Bonds 241,128 52,787 21,630 203,187 92,523 22,550 209,677 101,829 21,860 218,706 104,393 25,800 225,257 123,537 13,885 228,933 132,930 31,354 257,166 107,915 21,450 285,610 81,228 36,350 273,305 125,892 41,770 281,381 151,667 47,890 46,412 51,927 46,423 44,794 47,187 50,739 50,695 55,061 51,098 53,469 0.78 1.24 1.49 1.48 2.02 1.62 1.50 0.89 1.36 1.50 Utility System Revenue Obligations Net Revenue Available Debt Service Operating for Debt Expenses Service Principal Interest 281,381 151,667 666 Coverage Ratio 227.73 (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. 147 Table XI (Concluded) Debt Service Revenues 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 Principal Interest Special Assessment Bonds 897 744 257 861 744 217 827 744 178 790 745 138 1,041 745 98 289 335 68 261 567 49 288 219 19 232 219 6 - Debt Service Coverage Ratio 0.90 0.90 0.90 0.89 1.23 0.72 0.42 1.21 1.03 - Revenues (2) Principal Interest Coverage Ratio Community Facility District Bonds 7 195 65 131 672 232 456 1,320 489 832 1,612 645 914 2,261 984 1,197 3,010 2,125 1,690 4,324 1,685 2,321 5,940 2,881 3,029 7,387 3,667 3,446 0.99 0.98 1.00 1.03 1.04 0.79 1.08 1.01 1.03 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 Highway Project Advancement Notes 199,949 4,312 46.37 213,309 5,404 39.47 221,355 4,790 46.21 234,183 3,892 60.17 242,020 77,835 324 3.10 - Excise Tax Revenue Obligations Series 2013 221,355 3,318 66.71 234,183 4,703 49.79 242,020 4,703 51.46 254,857 4,703 54.19 269,998 45,035 3,852 5.52 282,502 2,451 115.26 49,025 1,226 5.93 298,110 - 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 Highway User Revenue Fund Revenue Bonds 27,825 3,290 5,563 3.14 30,046 6,145 5,627 2.55 30,923 6,945 5,472 2.49 33,952 6,305 5,158 2.96 35,383 7,390 4,844 2.89 38,048 7,900 4,473 3.08 39,477 8,375 4,080 3.17 42,406 8,715 3,663 3.43 42,099 9,155 3,243 3.40 Excise Tax Revenue Obligations Series 2020 - 2020-21 2021-22 45,049 47,989 9,645 10,075 2,796 2,314 3.62 3.87 148 354,315 389,868 645 1,185 861 1,483 235.27 146.13 City of Mesa, Arizona Table XII Demographic and Economic Statistics Last Ten Fiscal Years Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Sources: (1) (2) Population 444,856 454,981 462,376 475,274 493,089 501,137 511,334 514,144 519,384 559,958 Personal Income (in thousands) Per Capita Personal Income Median Age Public School Enrollment (1) Unemployment Rate (2) 10,361,141 10,687,959 11,321,276 11,783,944 12,644,774 13,522,180 14,753,009 15,423,806 15,975,213 20,022,978 23,291 23,491 24,485 24,794 25,644 26,983 28,852 29,999 30,758 35,758 34.4 35.3 35.5 35.7 36.0 36.2 36.3 36.3 36.6 37.8 64,892 64,932 64,532 65,049 63,779 67,025 62,593 62,490 57,876 58,595 7.2% 6.5% 5.4% 5.3% 4.5% 4.3% 4.6% 9.7% 6.6% 3.4% Arizona Department of Education Bureau of Labor Statistics 149 City of Mesa, Arizona Table XIII Principal Employers Current Year and Nine Years Ago 2022 Employer Mesa Public Schools Banner Health The Boeing Company City of Mesa Walmart Frys Food Stores Drivetime Automotive Group Home Depot Maricopa County Community College Gilbert Public Schools Maricopa County Government Aviall Inc Total 2013 Employees Rank Percentage of Total City Employment 7,726 6,826 3,945 3,579 3,269 1,371 1,367 1,309 1,215 1,004 1 2 3 4 5 6 7 8 9 10 4.35% 3.84% 2.22% 2.02% 1.84% 0.77% 0.77% 0.74% 0.68% 0.57% Employees 8,770 9,573 4,086 3,485 2,533 1,210 1,951 1,087 2,644 842 31,611 17.80% Source: Maricopa Association of Governments 150 36,181 Rank Percentage of Total City Employment 2 1 3 4 6 8 4.46% 4.87% 2.08% 1.77% 1.29% 0.62% 7 9 5 10 0.99% 0.55% 1.34% 0.43% 18.40% City of Mesa, Arizona Table XIV Full-Time Equivalent City Government Employees by Function/Program Last Ten Fiscal Years 2021-22 2020-21 2019-20 2018-19 2017-18 Function/Program General Government Police Fire Community Environment Cultural-Recreational Energy Resources Water Resources Environmental Management & Sustainability Airport 870 1,294 639 180 345 121 261 158 13 854 1,263 619 194 313 116 265 148 11 848 1,290 580 187 320 116 271 147 11 865 1,212 546 189 340 117 264 147 12 826 1,189 522 195 315 120 257 148 11 Total 3,880 3,782 3,770 3,690 3,582 Source: City of Mesa Human Resources 151 Table XIV (Concluded) 2016-17 2015-16 2014-15 2013-14 2012-13 811 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 10 864 1,163 479 183 313 117 229 127 10 3,526 3,798 3,545 3,520 3,485 152 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) 2021-22 2020-21 2019-20 2018-19 11,491 9,597 12,132 6,402 11,716 6,267 11,559 6,637 1,184 62,249 1,435 546 13,848 1,428 55,878 1,190 543 12,464 1,113 54,478 1,210 518 15,520 1,004 54,139 1,373 505 14,337 77,688 473,261 1,149,289 17,573 72,182 85,827 116,499 980,380 17,558 70,281 106,062 671,069 1,073,373 17,026 68,624 117,974 1,131,120 1,159,536 17,018 65,993 156,290 84.93 122.48 153,586 84.66 124.77 151,634 89.77 118.93 148,877 78.66 117.77 132,412 34.60 130,775 32.40 127,763 33.60 127,000 34.50 141,110 254,442 35,734 14,337 137,537 245,542 40,176 10,921 136,739 244,697 39,697 13,643 134,777 241,307 32,227 20,236 797 319,892 821 336,631 724 349,300 752 326,255 * mgd - millions of gallons per day ** mg - millions of gallons 153 Table XV (Concluded) 2017-18 2016-17 2015-16 2014-15 2013-14 2012-13 12,347 6,599 13,151 6,966 13,208 6,968 14,795 6,622 14,561 6,107 16,149 6,186 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 1,075 44,885 1,176 477 9,403 929 43,416 1,255 454 11,803 119,489 1,061,875 1,131,101 17,066 63,969 121,340 1,067,207 1,272,859 16,991 62,010 122,810 1,157,394 1,345,977 16,854 60,384 125,336 1,166,131 1,549,150 16,702 59,216 196,020 1,166,560 1,541,323 16,461 58,012 166,492 1,178,137 1,515,299 16,095 56,941 146,172 79.26 122.51 144,276 78.59 120.35 141,824 78.55 116.62 139,560 79.55 113.45 137,910 80.85 117.13 136,640 81.03 115.68 130,343 34.60 128,782 34.10 126,359 34.30 124,142 33.30 122,623 33.10 120,953 33.60 131,991 232,756 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 21,151 121,674 217,745 34,629 18,854 119,142 215,463 34,616 19,878 717 288,122 689 289,801 663 270,702 702 241,848 729 276,731 700 190,605 154 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) (1) Wastewater Mains (miles) Treatment Capacity (millions of gallons per day) Solid Waste Collection Trucks Golf Courses 2021-22 2020-21 2019-20 2018-19 8 301 21 3 8 298 20 3 8 300 20 4 8 287 20 4 2,074 397 9 6 2,023 394 9 6 2,139 719 9 6 1,929 861 9 6 1,629 1 452 1,454 1,625 1 405 1,431 1,485 1 402 1,384 1,482 1 398 1,363 2,502 108 2,486 109 2,462 109 2,435 112 1,812 70 1,827 70 1,789 70 1,788 60 96 1 91 1 90 1 77 1 Note 1: The decrease in water storage capacity in FY 16/17 is due to Reservoir FFR6 being decommissioned 155 Table XVI (Concluded) 2017-18 2016-17 2015-16 2014-15 2013-14 2012-13 8 281 20 4 8 281 20 4 8 287 20 4 8 292 20 4 8 291 20 4 6 267 20 4 1,929 861 9 5 2,300 475 9 5 1,901 633 9 4 1,901 633 9 4 1,232 1,157 9 4 1,177 1,104 9 6 1,476 82 397 1,346 1,387 82 394 1,325 1,427 1 423 1,311 1,427 1 423 1,311 1,418 1 440 1,256 1,307 1 432 1,256 2,401 112 2,398 112 2,364 112 2,364 112 2,315 125 2,284 125 1,784 60 1,778 60 1,781 60 1,781 60 1,677 60 1,677 60 77 1 75 1 73 1 74 1 72 1 72 1 156 B ell B ank Park F I NA N C IA L SE RV IC E S D E PA RT M E N T P. O. B OX 1 4 6 6 M E S A , A R I Z O NA , 8 5 2 1 1 - 1 4 6 6 ( 4 8 0 ) 6 4 4 - 2 2 7 5 W W W. M E S A A Z . G OV