CI T Y O F M E S A , A Z ANNUAL COMPREHENSIVE FINANCIAL REPORT F O R T H E F I S C A L Y E A R E N D E D | J U N E 30, 2023 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 PRICE / 101 PIMA FRWY DOBSON RD THOMAS RD 5 MCDOWELL RD MCKELLIPS RD 1 BROWN RD UNIVERSITY DR MAIN ST 3 2 4 BROADWAY RD SOUTHERN AVE BASELINE RD o GUADALUPE RD ELLIOT RD DISTRICT MAP 6 WARNER RD RAY RD A N N UA L CO M P R E H E N S I V E F I N A N CI A L R E P O RT 2 0 2 3 WILLIAMS FIELD RD PECOS RD GERMANN RD Mayor John Giles Vice Mayor Francisco Heredia – District 3 Councilmember Mark Freeman – District 1 Councilmember Julie Spilsbury – District 2 Councilmember Jenn Duff – District 4 Councilmember Alicia Goforth – District 5 Councilmember Scott Somers – District 6 Chris Brady, City Manager Scott Butler, Assistant City Manager Prepared by: Financial Services Department P.O. Box 1466 Mesa, Arizona 85211-1466 | (480) 644-2275 | www.mesaaz.gov CITY OF MESA Organizational Chart Citizens of Mesa Mayor and City Council City Clerk Holly Moseley City Court John Tatz City Attorney Jim Smith City Manager Chris Brady Advisory Boards and Committees City Auditor Joe Lisitano Downtown Transformation Jeff McVay Economic Development Jaye O’Donnell Deputy City Manager Candace Cannistraro Deputy City Manager / Chief Financial Officer Michael Kennington Parks, Recreation & Community Facilities Andrea Moore Office of Management & Budget Brian Ritschel Transportation RJ Zeder Diversity and Community Engagement Andrea Alicoate Assistant City Manager Scott Butler Police Department Ken Cost Deputy City Manager Marc Heirshberg Deputy City Manager Natalie Lewis Water Resources Chris Hassert Development Services Nana Appiah Engineering Beth Huning Arts & Culture Vacant Fleet Services Pete Scarafiotti Library Services Polly Bonnett Solid Waste Sheri Collins Human Resources Teri Overbey Energy & Sustainability Scott Bouchie Code Compliance Corina Moreno Environmental Management & Sustainability Education & Workforce Dev. Sarah Tolar Major League Baseball Operation Off the Streets Fire & Medical Department Mary Cameli Financial Services Irma Ashworth Transit Jodi Sorrell Community Services Ruth Giese Falcon Field Airport Corinne Nystrom Public Defender Program Meg Leal Business Services Ed Quedens Department of Innovation & Technology Vacant Enterprise Resource Planning (ERP) Valerie McBrien Performance Excellence Community Facilities Districts Public Information & Communication Ana Pereira Mayor & Council Support, Intergovernmental Relations Grants Electric Vehicles Citywide Fiber Visit Mesa INTRODUCTORY SECTION A N N UA L CO M P R E H E N S I V E F I N A N CI A L R E P O RT F O R T H E F I S C A L Y E A R E N D E D | J U N E 30, 2023 TABLE OF CONTENTS Page SECTION I – INTRODUCTORY SECTION Table of Contents Letter of Transmittal Certificate of Achievement for Excellence in Financial Reporting I IV 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 (Continued) 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 – Subsequent Events 30 39 47 48 53 54 55 57 60 73 74 75 76 77 77 80 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 99 105 109 110 112 113 Combining Statements Non-Major Governmental Funds Combining Balance Sheet Combining Statement of Revenues, Expenditures and Changes in Fund Balances 114 118 Internal Service Funds Combining Statement of Net Position Combining Statement of Revenues, Expenses and Changes in Net Position Combining Statement of Cash Flows II 122 123 124 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 #2 125 126 127 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) 128 130 136 138 Revenue Capacity Sales Tax Collections by Category – Last Ten Fiscal Years Direct and Overlapping Sales Tax Rates – Last Ten Fiscal Years 140 142 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 143 145 146 147 149 Demographic and Economic Information Demographic and Economic Statistics – Last Ten Fiscal Years Principal Employers – Current Year and Nine Years Ago 151 152 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 153 155 157 Financial Services Department December 13, 2023 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, 2023, 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, 2023, 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, 2023, 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. IV 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 512,498 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 Council-Manager 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 4,620 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 13,700 fans per game. The Oakland A’s also call Mesa home for Spring Training, playing at the 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. V Local Economy The City of Mesa continues to prosper and grow along with experiencing historic growth throughout all parts of the City in both commercial and residential development. From its historic downtown to the Technology Corridor in the southeast, the City has established a plan for sustainable growth and the support of the services needed by businesses and citizens for today and the future. Construction activity provides for revenues that will deliver a variety of significant City capital projects. Job expansion and higher paying jobs continues to expand the City’s retail sales tax base which allows the City to support on-going operations. For the fiscal year (FY) ending June 30, 2023, local retail sales tax revenue was up 4.3% over last year while local sales tax in contracting grew by 38.8%. Overall local sales tax revenue increased by 9.7% over FY 21/22. In addition, tourism has grown from the prior year with a 14.3% increase in the transient lodging (‘bed’) tax. The City’s economic indicator for total value of construction in FY 22/23 is up 35.5% from FY 21/22. Commercial construction is driving this growth with an increase of 97% in FY 22/23 over the previous year and up 149% from FY 20/21. The corresponding dollar valuation associated with all FY 22/23 permits increased approximately $802 million from the prior fiscal year and up 68% from FY 20/21. 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 2024 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 2023 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 2022, developers broke ground on a 113-acre industrial park in southeast Mesa that will be home to more than 1.6M square feet of space across 10 buildings. It will be known as the Eastmark Center of Industry. • Also, at the end of 2022, Gulfstream Aerospace signed a major lease of a 58,741 square foot hangar space that is next to Phoenix Mesa Gateway Airport and is adjacent to the company’s new customer support center which will be completed in 2024. • In December of 2022, the City of Mesa opened up a new workforce center that will serve as a onestop shop for job seekers and will develop a pipeline for employers in need of workers in the East Valley. The workforce center was bought forward by a partnership between Mesa, A New Leaf Workforce Services and Maricopa County. It is located on the second floor of a 4,700-square-foot space. • At the beginning of the year, Logistics Property Co. broke ground on the 613,056 square foot logistics center. The Palm Gateway Logistics Center is a four-building development with buildings VI that will range from 92,847 to 289,203 square feet and will feature LED lighting systems, ESFR sprinklers and ample parking. • In an effort to address the nursing shortage seen across the country, Alverno College expanded its Master of Science in Nursing – Direct Entry (DEMSN) program in Mesa. Unlike a traditional nursing program, Alverno’s DEMSN is specifically designed for adults who have already earned a bachelor’s degree in a non-nursing field, and it can be completed in as few as 20 months. At full capacity, Alverno’s Mesa location will have an enrollment of more than 200 students, and the college is already forging impressive clinical relationships with Banner Health and the Mayo Clinic. While the college is well known for its undergraduate and graduate programs in its home state of Wisconsin, adding its name to the tallest building in the Phoenix East Valley marks an exciting time for Alverno as it expands its footprint. • This year, Cunningham Aviation began service at Falcon Field Airport. As a full-service fixedbase operator, they are offering Jet A and Avgas/100LL with truck service and a self-service Avgas Island. Other services include aircraft ground handling and parking (ramp or tie-down), hangars, hangar leasing/sales, and aircraft lavatory service. • In February, CCS Presentation Systems, one of the largest integrators of audiovisual equipment in the U.S. opened its new corporate headquarters in Mesa. The new 2-story 36,000 square foot building will now house CCS’s staff of nearly 100 design engineers, salespeople, installation and service technicians and C-level executives. • In March, Mesa became the first city in Arizona to receive Google’s internet service Google Fiber. Mesa residents also became the first customers to experience the new 8 Gig product. 8 Gig offers symmetrical uploads and downloads of up to 8000 Mbps with a wired connection. Google plans to fully cover the city over the next three years with gigabit or faster speeds. • In March, Visit Mesa and the City of Mesa were recognized in Travel + Leisure’s Global Vision Awards for groundbreaking work around accessible travel experiences. The Global Vision Awards 2023 celebrate innovators and innovations that are leading the world to a more sustainable, inclusive future. To arrive at this year’s list of 25 honorees, nominations were sourced from an esteemed panel of industry leaders and experts across the travel, hospitality, retail, and non-profit sectors, along with Travel + Leisure editors and correspondents. • In March, Benchmark Technologies Inc. opened a new 64,000 square foot precision technologies plant in Mesa. The facility is designed to provide a number of key engineering and manufacturing solution services, most notably supporting the production of semiconductor capital equipment building blocks and solutions. Benchmark intends to invest roughly $20 million into capabilities and technology at the new facility, in addition to hiring 100 people to support this facility as the company ramps up with customers. • In the first quarter of the year, Boeing celebrated 5 million flight hours flown by the Apache Helicopter. The Apache has been built by Boeing in Mesa since 1984. Since Boeing opened its manufacturing plant in Mesa, the company has brought jobs and economic growth to Arizona. Boeing’s Mesa plant is the third-largest manufacturer in the Phoenix valley. • The Infrastructure Investment and Jobs law signed into law early in 2023 will provide $4M to the Phoenix-Mesa Gateway Airport. The investment will be used to modernize the existing terminal building to accommodate the growing number of passengers who use the airport. VII • In April, the Banner Desert Medical Center completed a $45M modernization project. The new amenities include building facades with atrium lobbies, restrooms, lounge areas, solar shade structure and signage. • Northern Arizona University announced plans to open a Mesa Workforce Development Center focused on hospitality education near the Phoenix-Mesa Gateway Airport in 2024. The university will build a two-story building with one floor dedicated to restaurant training and the other with classrooms, food and beverage training labs and office space. • In April, Phelan Development held a groundbreaking ceremony for its Pecos Center project. The project is spread across three buildings totaling 474,309 square feet and is expected to be complete in the winter of 2024. The Pecos Center project is expected to cater to tenants desiring a freestanding building to conduct their business near the Phoenix-Mesa Gateway Airport. • Mesa was one of three cities in Arizona to be recognized by Salt River Project as an SRP Sustainable City for its commitment to sustainable growth while supporting SRP’s environmental policies and goals. Mesa programs that were highlighted were the Mesa Climate Action Plan and Mesa’s Trees are Cool initiative. • In June, Mesa won the All-America City Award for youth programs that encourage engagement, education attainment, and service in their communities. The prestigious award by the National Civic League is bestowed every year to ten municipalities or counties that are directly impacting the lives of their residents. The 2023 All-America City Award recognizes communities that are working to improve the health and well-being of young people, with particular attention to efforts that engage young people in this work. The last time Mesa won the All-America City Award was in 1979. • In June, Amazon opened a new 1.2M square foot distribution center in Mesa. This will be Amazon’s largest distribution center in the nation and will create more than 800 jobs in the east valley. This facility will be focused on housing third-party items sold on Amazon’s website. • In June, Silver Creek Development began construction on an eight-building, 330,000 square feet industrial complex in Mesa. The complex will be built on a 26-acre site in southeast Mesa and the eight buildings will range from 24,000 square feet to 60,000 square feet. • The Mesa Marathon was selected as the Best Marathon in Arizona for 2023 in a nationwide poll by RaceRaves, the premier global race finder and reviews community. The Mesa Marathon beat Phoenix’s Rock ‘n’ Roll Marathon for the number one spot. As an early-season Boston Qualifier, it was chosen for the stunning sunrise start near the Usery Park mountains and the gradual net elevation loss of 900+ feet. It was also noted to be a great winter run for first timers and traveling runners alike. • In July, Phoenix-Mesa Gateway Airport announced that it had set a new record for commercial passenger activity for the fiscal year 2023. The airport welcomed 1.92 million travelers in fiscal year 2023 which represents a 5.6% increase year-over-year. During the past year, Gateway Airport opened several new food and beverage concessions to provide more options for the growing number of air travelers. The airport is currently constructing a five-gate, 30,000 square-foot terminal addition and an enclosed pedestrian walkway connecting the airline ticket counters to the TSA security screening checkpoint. VIII • In July, demolition began on the 80-acre site of the former Fiesta Mall site. The redevelopment plan is led by Verde Investments Inc., who has said the demolition should be completed by the end of the calendar year. Verde Investments is proposing to rezone the site from limited commercial zoning to an infill development district which uses would include multi-family residential, office, commercial and open space. • In July, ZenniHome hosted a groundbreaking of its project known as 29 West. This project will feature studio and two-bedroom configurations and will consist of two six-story towers of stackable residential units. The models are touted as move in ready and feature options ranging from solar energy systems, lithium-ion back-up energy storage, Google Home Hub Max configuration, Starlink broadband internet access and can be purchased fully furnished. • In September, Google celebrated the groundbreaking of a $600M data center in Mesa. The data center will power services like search, maps and Gmail. Instead of using a water-cooling system, Google has announced that it will use air-cooled technology for its data center. The project is expected to be completed in the summer of 2025. • In September, EdgeConneX proposed a large data center campus in Mesa. The project would be comprised of three data hall buildings and one electrical substation on about 93 acres within Mesa’s Elliot Road Technology Corridor. The three buildings would total more than 1M square feet at full build out. • In September, XNRGY Climate Systems signed a lease at Gateway East, a business park located near Phoenix-Mesa Gateway Airport, to use more than 250,000 square feet for their national headquarters. XNRGY is a commercial climate control systems company and will construct a research and production facility and office space. They will also have the option to build an additional 750,000 square feet of manufacturing space. XNRGY will bring more than 1,200 jobs to Mesa. • In October, the Mesa Planning and Zoning Board unanimously recommended approval of DSV Air and Sea Inc.’s plans to bring a new 1.7M square foot building and an adjacent two-story 30,000 square foot regional corporate headquarters office to Mesa. DSV is proposing to build its project on 87 acres. • In October, Sysco Corporation announced that it will invest $102M in the construction of a 353,600 square foot facility in Mesa. Sysco is a leading global food-service distribution company who plans on employing 257 people at the facility. • In October, Commercial Metals Company (CMC) dedicated its third micro mill in Mesa. The new micro mill employes roughly 185 people and will achieve an estimated nominal annual capacity of 500,000 tons. • In October, Optum Rx opened its largest fulfillment center in the country in Mesa. Optum Rx is a pharmacy delivery business and will add 300 jobs in Mesa. The center is a 213,000 square foot building that has eight miles of conveyor belt used to help fill more than 3.5M prescriptions monthly for customers across the country. IX 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, 2022 Executive Director/CEO FINANCIAL SECTION A N N UA L CO M P R E H E N S I V E F I N A N CI A L R E P O RT F O R T H E F I S C A L Y E A R E N D E D | J U N E 30, 2023 CliftonLarsonAllen LLP CLAconnect.com INDEPENDENT AUDITORS’ REPORT 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, 2023, 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, 2023, 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 Matter As discussed in Note 1 to the financial statements, effective July 1, 2022, the City adopted new accounting guidance for subscription-based information technology arrangements. The guidance requires the City to recognize a right to use subscriptions asset and corresponding subscriptions liability for all arrangements with terms greater than twelve 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) 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 twelve 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) 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) 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 13, 2023, 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 13, 2023 (4) Management Discussion and Analysis For the Fiscal Year Ended June 30, 2023 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, 2023. 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 $82 million from $1.32 billion to $1.4 billion. The increase in revenues is primarily from Sales Tax revenues ($29.3 million), Charges for Services ($19.7 million) and Unrestricted Intergovernmental ($34.9 million). • The City’s Governmental Funds reported a combined ending fund balance of $751.7 million, a $70.3 million increase from the previous year. Approximately 55 percent of the total governmental fund balance amount, or $413.8 million, is designated by the City as committed, assigned and unassigned. The remaining 45 percent or $337.9 million is designated as non-spendable or restricted. • The total fund balance for the General Fund was $375.4 million, which represents an increase of $43.6 million over prior year. The increase is a combination of an increase in Sales Tax and Intergovernmental revenues. • The City’s Enterprise Fund reported a combined total net position of $452.9 million, which represents an increase of $7.9 million over prior year. The increase is primarily due to an increase in Charges for Services. 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. 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. 5 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 non-major 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 97-113 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, 2023, and 2022. Condensed Statement of Net Position As of June 30 (In thousands of dollars) Cash and Other Assets Capital Assets Total Assets Governmental Activities 2023 2022 $ 1,415,565 $1,367,060 1,722,053 1,680,031 3,137,618 3,047,091 Business-Type Activities 2023 2022 $ 708,677 $ 788,135 1,424,562 1,377,394 2,133,239 2,165,529 Total Government 2023 2022 $ 2,124,242 $ 2,155,195 3,146,615 3,057,425 5,270,857 5,212,620 Deferred Amounts on Refunding Deferred Outflows on Pensions & OPEB Total Deferred Amounts 4,202 292,707 296,909 5,128 295,552 300,680 20,463 17,557 38,020 22,896 22,457 45,353 24,665 310,264 334,929 28,024 318,009 346,033 Non-Current Liabilities, Due Within One Year Non-Current Liabilities, Due In M ore Than One Year Net Pension & OPEB Liability Other Liabilities Total Liabilities 68,002 53,565 56,036 52,483 124,038 106,048 485,431 1,643,536 245,547 2,442,517 515,214 1,694,472 271,002 2,534,253 1,305,232 125,288 156,212 1,642,768 1,368,213 133,955 137,524 1,692,175 1,790,663 1,768,824 401,759 4,085,285 1,883,427 1,828,427 408,526 4,226,428 190,500 63,269 253,769 151,757 54,791 206,548 20,268 55,336 75,604 17,239 56,517 73,756 210,768 118,605 329,373 168,996 111,308 280,304 1,229,376 357,673 (848,807) $ 738,242 1,246,582 249,626 (889,238) $ 606,970 92,703 114,531 245,653 $ 452,887 24,204 95,840 324,907 $ 444,951 1,322,079 472,204 (603,154) $ 1,191,129 1,270,786 345,466 (564,331) $ 1,051,921 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 2023 2022 Program Revenues: Charges for Services $ 126,244 Operating Grants & Contributions 75,436 Capital Grants & Contributions 24,611 General Revenues: Sales Taxes 331,144 Property Taxes 46,906 Occupancy Taxes 7,319 Unrestricted Intergovernmental 246,412 Utility Development Fees Contributions 31,799 Unrestricted Investment Income (loss) 8,542 Gain on Disposal of Capital Assets 1,854 M iscellaneous 8,233 Total Revenues 908,500 Business-Type Activities 2023 2022 Total Government 2023 2022 $ 125,132 105,858 44,369 $ 457,904 268 21,796 $ 439,343 452 30,888 301,862 52,005 6,427 211,534 7,771 (29,788) 1,856 14,758 841,784 14,142 3,672 1,252 499,034 584,148 75,704 46,407 $ 564,475 106,310 75,257 21,021 (9,155) 1,199 483,748 331,144 46,906 7,319 246,412 14,142 31,799 12,214 1,854 9,485 1,407,534 301,862 52,005 6,427 211,534 21,021 7,771 (38,943) 1,856 15,957 1,325,532 192,361 430,268 157,270 100,791 16,138 183,242 416,563 195,594 86,824 14,720 - - 192,361 430,268 157,270 100,791 16,138 183,242 416,563 195,594 86,824 14,720 896,827 896,943 48,672 51,105 128,558 82,752 51,213 7,671 1,528 371,499 43,206 43,125 119,329 89,219 41,001 6,002 1,703 343,585 48,672 51,105 128,558 82,752 51,213 7,671 1,528 1,268,326 43,206 43,125 119,329 89,219 41,001 6,002 1,703 1,240,528 Increase (Decrease) in Net Position Before Transfers Transfers 11,673 119,599 (55,159) 115,607 127,535 (119,599) 140,163 (115,607) 139,208 - 85,004 - Change in Net Position 131,272 60,448 7,936 24,556 139,208 85,004 Net Position - As Adjusted 606,970 546,522 444,951 420,395 1,051,921 966,917 $ 738,242 $ 606,970 $ 452,887 $ 444,951 $ 1,191,129 $ 1,051,921 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 8 $ Analysis of Government-Wide Net Position The City’s overall Net Position increased $139.2 million from $1.05 billion to $1.19 billion at the end of fiscal year 2023. The Restricted portion of the City's Net Position increased $127 million from $345 million to $472 million. Restricted Net Position represents resources that are subject to external restrictions on how they may be used. The restricted balances that increased in the current year include restrictions for debt service, public safety, and transportation programs. The Unrestricted Net Position of ($603) million is primarily due to the impact of the long-term liability associated with pensions and OPEB of ($1.77 billion). Several factors contributed to the overall increase in Net Position: • The City has continued to see historically high sales tax revenue, increasing $29.3 million in fiscal year 2023. Retail Sales Tax continues to be the largest contributor (increasing $7.4 million). Contracting Sales Tax increased $15 million due to a combination of the increase in construction (commercial, industrial, and residential) and an increase in cost of goods due to inflation. • Intergovernmental Revenues increased $34.9 million due to an increase in State Shared Sales Tax revenues. • Unrestricted Investment Income increased $51 million. This is due to the change in fair value of investments from a $38.9 million loss in prior year to a $12.2 million gain in current year. Governmental Activities In fiscal year 2023, Governmental Activities increased their Net Position by $131.3 million from $606.9 million to $738.2 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 (43%), Unrestricted Intergovernmental (28%) and Charges for Services (14%). The largest users of resources for the governmental activities are Public Safety (49%), General Government (22%) and Community Environment (18%). 9 Governmental Activities Revenues by Source Fiscal Year Ended June 30, 2023 Unrestricted Intergovernmental 28% Charges for Services 14% Operating Grants & Contributions 9% Unrestricted Contributions 3% Capital Grants & Contributions 3% Taxes 43% Governmental Activities Functional Expenses Fiscal Year Ended June 30, 2023 Public Safety 49% General Government 22% CulturalRecreational 11% Community Environment 18% 10 The following two graphs compare Governmental Activities revenues and expenses from fiscal year 2023 to fiscal year 2022. Governmental Activities - Revenues by Source 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 Program Revenues Taxes 2022 Unrestricted Intergovernmental 2023 Governmental Activities - Functional Expenses Two Year Comparison (In thousands of dollars) $500,000 $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 2023 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. The total fund balance of the General Fund was $375.4 million, while unassigned fund balance was $177.6 million. The total fund balance of the City’s General Fund increased by $43.7 million during the current fiscal year from $331.7 million to $375.4 million. The increase is due to an increase in revenues: • Sales Tax revenues increased $17.6 million. As previously stated, sales tax related to Retail Sales, and Contracting were the largest contributors. • Intergovernmental Revenues increased $34.2 million due to an increase in State Shared Sales Tax revenues. 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 $376.3 million, with the majority classified as Restricted. Total fund balance of the Non-Major Governmental Funds increased by $26.7 million during the current fiscal year. This is due to a combination of an increase in the Special Revenue funds ($55.9 million) and a decrease in the Capital Projects funds ($28.2 million). • Like the General Fund, sales tax in the Special Revenue funds continued to come in strong, and increased in the Public Safety Tax, Quality of Life Sales Tax, and Highway User Revenue fund. • Capital Project funds increased capital project spending, and the City delayed the issuance of General Obligation Bonds, thus fund balance decreased in these funds. 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 2023. 12 Business-Type Activities The following graphs present utility revenues and expenses for fiscal year 2023. The City’s largest utility, Water, had a net revenue/expense gain of $95.7 million and Wastewater had a net revenue/expense gain of $50.4 million, whereas the remaining Utilities saw a more moderate net revenue/expense gain. Utility Revenues Charges for Services and Program Expenses Fiscal Year 2023 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 $15.3 million from $483.7 million to $499 million. The increase is primarily related to an increase in utility rates, which increased Charges for Services by $18.6 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, 2023. This net investment in capital assets includes land, buildings, other improvements, machinery and equipment, intangibles, infrastructure, leases and subscription-based information technology arrangements (SBITAs). 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, 2023, and 2022: 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 SBITAs Total Governmental Activities 2023 2022 $ 413,564 $ 405,282 3,597 3,597 119,210 204,782 342,111 280,976 138,470 127,795 103,714 86,160 1 97 574,013 548,012 24,664 23,332 2,709 $ 1,722,053 $ 1,680,033 Business-Type Activities 2023 2022 $ 31,698 $ 28,715 17,666 17,666 129,835 99,689 28,288 29,145 36,982 38,864 23,628 25,457 3,691 3,802 1,152,774 1,134,057 $ 1,424,562 $ 1,377,395 Total Government 2023 2022 $ 445,262 $ 433,997 21,263 21,263 249,045 304,471 370,399 310,121 175,452 166,659 127,342 111,617 3,692 3,899 1,726,787 1,682,069 24,664 23,332 2,709 $ 3,146,615 $ 3,057,428 The City’s total capital asset balances on June 30, 2023, increased slightly in comparison with prior year balances. Buildings increased in the Governmental Activities by $61.1 million. The completion of the ASU Media and Immersive eXperience (MIX) Center contributed $57 million to the increase in buildings. Infrastructure assets increased $44.7 million, primarily due to Water, Wastewater and Streets Infrastructure projects. 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 2023, the City had total long-term bond obligations and notes payable outstanding of $1.7 billion. Of this amount, $285 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 $24.7 million in lease liability and $2.9 million in SBITAs liability. The City’s outstanding long-term debt decreased $95 million due to normal debt repayment. 14 The City’s total outstanding debt includes $99 million in Community Facility District (CFD) bonds. Special Assessment revenues and secondary property tax are collected to make the annual Community Facility District bond debt payments. The City has no liability for the Community Facility District bonds. However, the City is contingently liable in the event that the Special Assessment revenues are insufficient to satisfy the Special Assessment Bond debt payments. The following schedule shows the outstanding long-term debt of the City as of June 30, 2023, and 2022. Outstanding Long-term Debt As of June 30 (In thousands of dollars) Governmental Activities 2023 2022 General Obligation Bonds $284,955 $ 318,950 Utility System Revenue Bonds Utility Revenue Obligations Highway User Revenue Fund Bonds 29,030 39,030 Excise Tax Obligations 32,935 34,180 Community Facility District 98,955 91,816 Notes Payable Leases 24,714 23,025 SBITAs 2,866 Total $473,455 $ 507,001 Business-Type Activities 2023 2022 $ $ 1,112,515 1,227,750 138,725 84,795 983 1,135 $ 1,252,223 $ 1,313,680 Total Government 2023 2022 $ 284,955 $ 318,950 1,112,515 1,227,750 138,725 84,795 29,030 39,030 32,935 34,180 98,955 91,816 983 1,135 24,714 23,025 2,866 $ 1,725,678 $ 1,820,681 The City’s current bond ratings are as follows: Rating Agency General Obligation Bonds Highway User Revenue Bonds Utility Systems Revenue Bonds Utility System Obligations Standard and Poor’s Corporation AA AA AAA+ Moody’s Investors Service Aa2 A2 Aa2 Aa3 Fitch Ratings AAA N/A 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, 2023, was $377.7 million in the 6% capacity and $977.5 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 June 5, 2023, the City Council approved a $2.56 billion budget, which is an increase of $260 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. As of September 2023, the non-seasonally adjusted unemployment rate for Mesa was 3.8%. The City’s current rate remains competitive locally and nationally (3.8%), and sits below the state (4.0%) unemployment rate. The fiscal year 2023-24 assessed valuation increased 6.7% to $4.5 billion. On June 19, 2023, the City Council voted to decrease the City’ secondary property tax rate to $0.8582 from $0.9157 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 CO M P R E H E N S I V E F I N A N CI A L R E P O RT F O R T H E F I S C A L Y E A R E N D E D | J U N E 30, 2023 City of Mesa, Arizona Statement of Net Position June, 30, 2023 (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 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 859,089 84,751 3,415 59,911 10,112 7,312 Primary Government Business-Type Activities $ 58,431 103,794 912 2,534 3,436 $ Total 917,520 188,545 4,327 62,445 10,112 10,748 14,877 53,638 21,404 995 300,061 536,371 1,185,682 3,137,618 161,605 79,088 3,958 18,182 276,737 179,199 1,245,363 2,133,239 176,482 132,726 21,404 995 3,958 18,182 576,798 715,570 2,431,045 5,270,858 4,202 292,707 296,909 20,463 17,557 38,020 24,665 310,264 334,929 62,333 43,218 10,887 69,908 59,201 9,845 146,367 72,178 43,218 10,887 69,908 205,568 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 and SBITA Liability Bonds and Notes Payable Compensated Absences Net Pension and OPEB Liability Total Liabilities 68,002 56,036 124,038 23,906 430,822 30,703 1,643,536 2,442,516 1,301,460 3,772 125,288 1,642,768 23,906 1,732,282 34,475 1,768,824 4,085,284 Deferred Inflows of Resources Pensions and OPEB Leases Total Deferred Inflows of Resources 190,500 63,269 253,769 20,268 55,336 75,604 210,768 118,605 329,373 1,229,376 92,703 1,322,079 53,093 101,013 187,153 16,414 (848,807) 738,242 44,918 18,182 51,431 245,653 452,887 44,918 18,182 104,524 101,013 187,153 16,414 (603,154) 1,191,129 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, 2023 (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 192,361 430,268 157,270 100,791 16,138 896,827 $ 48,672 51,105 128,558 82,752 51,213 7,671 1,528 371,499 $ 1,268,326 28,956 53,310 20,675 23,303 126,244 Program Revenues Operating Grants and Contributions Capital Grants and Contributions $ $ 48,208 70,556 167,806 95,665 69,269 4,973 1,427 457,904 $ 584,148 27,505 15,601 32,146 184 75,436 268 268 $ 75,704 234 8,223 9,663 3,258 418 21,796 $ 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 18,786 558 669 4,598 24,611 46,407 (Continued) Net (Expense) Revenue and Changes in Net Position Primary Government Governmental Business-type Activities Activities Total * * $ $ (117,113) (360,799) (103,780) (72,706) (16,138) (670,536) $ - $ (117,113) (360,799) (103,780) (72,706) (16,138) (670,536) - (230) 27,674 49,179 16,171 18,056 (2,280) (101) 108,469 (230) 27,674 49,179 16,171 18,056 (2,280) (101) 108,469 (670,536) 108,469 (562,067) 331,144 46,906 7,319 246,412 31,799 8,542 1,854 8,233 119,599 801,808 14,142 3,672 1,252 (119,599) (100,533) 331,144 46,906 7,319 246,412 14,142 31,799 12,214 1,854 9,485 701,275 131,272 7,936 139,208 606,970 444,951 1,051,921 738,242 $ 452,887 $ 1,191,129 19 City of Mesa, Arizona Balance Sheet Governmental Funds June, 30, 2023 (in thousands) Assets Pooled Cash and Investments Accounts Receivable, Net Accrued Interest Receivable Due from Other Governments Due from Other Funds Prepaid Costs Restricted Assets: Pooled Cash and Investments Cash with Fiscal Agent 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 Non-major Governmental Funds Total Governmental Funds $ $ $ $ $ 341,458 81,931 1,474 23,364 25,194 4,299 477,720 29,563 2,353 3,834 $ $ 455,576 2,010 1,698 36,547 997 14,877 53,638 21,404 995 587,742 29,379 23,241 8,534 66,074 $ $ 797,034 83,941 3,172 59,911 25,194 5,296 14,877 53,638 21,404 995 1,065,462 58,942 23,241 10,887 69,908 35,750 9,186 50,015 186,429 9,186 50,015 222,179 Deferred Inflows of Resources Unavailable Revenue Deferred Inflows Related to Leases Total Deferred Inflows of Resources 3,285 63,269 66,554 25,028 25,028 28,313 63,269 91,582 Fund Balances Nonspendable Restricted Committed Assigned Unassigned Total Fund Balances 4,299 8,978 184,499 177,640 375,416 997 332,645 27,011 63,609 (47,977) 376,285 5,296 332,645 35,989 248,108 129,663 751,701 Total Liabilities, Deferred Inflows of Resources and Fund Balances $ 477,720 $ The accompanying notes are an integral part of the financial statements. 20 587,742 $ 1,065,462 City of Mesa, Arizona Reconciliation of the Balance Sheet of Governmental Funds To the Statement of Net Position June, 30, 2023 (in thousands) Fund Balances - total governmental funds $ 751,701 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. 1,718,392 Other assets used in governmental activities are not financial resources and therefore not reported in the governmental funds. 300,578 Deferred outflows related to deferred amounts on refunding and pensions are not financial resources and therefore not reported in the funds. 292,270 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. (2,160,905) 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. (155,780) Internal service funds are used by management to charge the costs of certain activities to individual funds. (8,014) Net position of the governmental activities - statement of net position The accompanying notes are an integral part of the financial statements. 21 $ 738,242 City of Mesa, Arizona Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Fiscal Year Ended June 30, 2023 (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 Non-major Governmental Funds Total 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 198,883 2,381 35,619 210,312 49,938 7,058 3,572 41 5,342 513,146 132,261 47,003 4,938 1,830 10,497 135,478 20,286 1,910 4,655 66 3,025 361,949 331,144 47,003 7,319 1,830 46,116 345,790 70,224 8,968 8,227 107 8,367 875,095 105,851 321,556 17,194 60,414 16,663 68,997 89,807 9,967 122,514 390,553 107,001 70,381 3,409 546 14,992 523,962 50,086 18,186 13 572 161,753 416,044 53,495 18,732 13 572 176,745 940,006 Excess (Deficiency) of Revenues Over (Under) Expenditures (10,816) (54,095) (64,911) Other Financing Sources (Uses) Transfers In Transfers Out Sale of Capital Asset Face Amount of Bonds Issued Financing of Leases Premium on Issuance of Bonds (Net) Total Other Financing Sources (Uses) 120,688 (72,317) 1,918 4,176 54,465 68,564 (1,015) 101 11,975 604 559 80,788 189,252 (73,332) 2,019 11,975 4,780 559 135,253 Net Change in Fund Balances 43,649 26,693 70,342 331,767 349,592 681,359 Fund Balance - Beginning Fund Balances - Ending $ 375,416 $ The accompanying notes are an integral part of the financial statements. 22 376,285 $ 751,701 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, 2023 (in thousands) Net change in fund balances - total governmental funds $ 70,342 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. (1,125) 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. (12,213) Governmental funds report capital outlays as expenditures. However, in the statement of activities, the costs of those assets are allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlay $112,670 exceeded depreciation/amortization ($75,136) in the current period. 37,534 Governmental funds report capital outlays for lease and SBITAs as expenditures. However, in the statement of activities, the costs of those assets are allocated over their estimated useful lives and reported as amortization expense. This is the amount by which capital outlay $4,780) exceeded amortization ($3,924)) in the current period. 858 The net effect of miscellaneous transactions involving capital assets (e.g., donations, transfers and disposals) is to decrease net position. (496) Change in equity in Joint Venture (11,711) 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. 36,740 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. 2,620 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. 8,722 Change in net position of the governmental activities - statement of activities The accompanying notes are an integral part of the financial statements. 23 $ 131,272 City of Mesa, Arizona Statement of Net Position Proprietary Funds June, 30, 2023 (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 Lease Assets Capital Assets, Not Being Depreciated Capital Assets, Being Depreciated, Net Total Noncurrent Assets Total Assets $ 52,462 46,168 883 2,470 3,436 Non-Major Fund Airport $ 5,969 57,626 29 64 - Total $ 58,431 103,794 912 2,534 3,436 Internal Service Funds $ 62,055 603 207 243 10,112 1,499 161,605 79,088 3,958 18,182 - 161,605 79,088 3,958 18,182 - 368,252 63,688 431,940 74,719 276,737 173,257 1,224,072 5,942 21,291 276,737 179,199 1,245,363 164 43 3,454 1,674,066 27,233 1,701,299 3,661 2,042,318 90,921 2,133,239 78,380 20,463 17,142 37,605 415 415 20,463 17,557 38,020 4,639 4,639 91,336 $ 2,171,259 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 $ 2,079,923 The accompanying notes are an integral part of the financial statements. 24 $ $ 83,019 (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 OPEB Liability Current Portion of Compensated Absences Total Current Liabilities $ Long-Term Liabilities: Bonds Payable Notes Payable Lease Liability Compensated Absences Net Pension and OPEB Liability Total Long-Term Liabilities Total Liabilities 9,663 - $ Non-Major Fund Airport $ 182 - Total $ 9,845 - Internal Service Funds $ 3,391 1,953 43,218 15,681 27,428 51,660 51,019 579 15,681 27,428 51,660 51,598 - 53,095 156 2,000 724 211,426 40 21 822 53,095 156 2,040 745 212,248 664 149 49,375 1,300,633 827 3,556 122,423 1,427,439 216 2,865 3,081 1,300,633 827 3,772 125,288 1,430,520 174 797 34,280 35,251 1,638,865 3,903 1,642,768 84,626 19,875 19,875 393 55,336 55,729 20,268 55,336 75,604 6,407 6,407 65,470 27,233 92,703 3,661 44,918 18,182 51,431 241,182 421,183 4,471 31,704 44,918 18,182 51,431 245,653 452,887 (11,675) (8,014) 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, Expenses and Changes in Net Position Proprietary Funds For the Fiscal Year Ended June 30, 2023 (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 $ 48,208 70,556 167,806 95,665 69,269 1,427 452,931 $ 4,973 4,973 $ 48,208 70,556 167,806 95,665 69,269 4,973 1,427 457,904 Governmental Activities Internal Service Funds $ 40,002 111,007 6,802 157,811 Operating Expenses: Electric Gas Water Wastewater Solid Waste Airport District Cooling Warehouse, Maintenance & Services Self-Insurance Total Operating Expenses 42,084 40,867 72,118 45,259 47,511 1,121 248,960 5,698 5,698 42,084 40,867 72,118 45,259 47,511 5,698 1,121 254,658 40,443 113,579 154,022 Operating Income (Loss) Before Depreciation and Amortization 203,971 (725) 203,246 3,789 Depreciation and Amortization (62,038) (1,977) (64,015) (368) 141,933 (2,702) 139,231 3,421 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, 2023 (in thousands) Nonoperating Revenues (Expenses): Investment Income Intergovernmental Lease Interest Revenue Interest Expense: Bonds Notes Payable Lease Gain/(Loss) on Disposal of Capital Assets Net Gain/(Loss) from Joint Venture Utility Development Fees Bond Issuance Costs Miscellaneous Revenue Total Nonoperating Revenues (Expenses) Business-type Activities Non-Major Fund Airport Utility Total $ 3,618 268 - $ 54 1,164 $ 3,672 268 1,164 Governmental Activities Internal Service Funds $ 315 - (46,848) (25) (1,428) (4,180) 14,142 (349) 88 (34,714) 4 1,222 (46,848) (25) (1,424) (4,180) 14,142 (349) 88 (33,492) (9) 306 Income before Transfers and Capital Contributions 107,219 (1,480) 105,739 3,727 Capital Contributions Transfers In Transfers Out 21,378 (119,592) 418 (7) 21,796 (119,599) 1,316 3,753 (74) Change in Net Position 9,005 (1,069) 7,936 8,722 412,178 32,773 444,951 (16,736) 31,704 $ 452,887 Total Net Position - Beginning Total Net Position - Ending $ 421,183 $ The accompanying notes are an integral part of the financial statements. 27 $ (8,014) City of Mesa, Arizona Statement of Cash Flows Proprietary Funds For the Fiscal Year Ended June 30, 2023 (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 Business-type Activities Non-Major Fund Airport Utility Total $ 507,750 Internal Service Funds 5,020 $ 512,770 (259,395) (44,826) 88 (5,121) (1,807) - (264,516) (46,633) 88 157,719 (141,426) (17,028) - Net Cash Provided By (Used For) Operating Activities 203,617 (1,908) 201,709 (735) Cash Flows From Noncapital Financing Activities: Intergovernmental Interfund Paybable Increase Transfers In from Other Funds Transfers Out to Other Funds 464 (119,592) 2,209 (7) 2,673 (119,599) 834 3,753 (74) Net Cash Provided by (Used For) Noncapital Financing Activities (119,128) 2,202 (116,926) 4,513 Cash Flows From Capital and Related Financing Activities: Proceeds from Bond Sales Payment to Refunded Bond Escrow Agent Proceeds From Sale of Capital Assets Acquisition and Construction of Capital Assets Lease Acquisition Financing of Lease Principal Paid on Bonds and Notes Maturities Interest Paid on Bonds and Notes Contributions from Other Governments Interest Income/(Expense) on Leases Bond Issuance Costs Contributions and Capital Grants 68,055 (67,300) 24 (81,565) (48,070) (54,404) (349) 14,689 4 (1,225) 1,164 418 68,055 (67,300) 28 (82,790) (48,070) (54,404) 1,164 (349) 15,107 (1,404) (244) 174 1,316 (9) - Net Cash Used For Capital and Related Financing Activities (168,920) 361 (168,559) (167) Cash Flows From Investing Activities: Interest Received on Investments 3,673 43 3,716 226 Net Cash Provided By Investing Activities 3,673 43 3,716 226 Net Change in Pooled Cash and Investments (80,758) 698 (80,060) 3,837 Total Cash and Investments at Beginning of Year 373,913 5,271 379,184 58,218 Total Cash and Investments at End of Year $ 293,155 5,969 $ 299,124 The accompanying notes are an integral part of the financial statements. 28 $ Governmental Activities $ $ $ 62,055 (Continued) City of Mesa, Arizona Statement of Cash Flows Proprietary Funds For the Fiscal Year Ended June 30, 2023 (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 $ 141,933 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 Pension and OPEB Liability Increase (Decrease) in Deferred Outflows Increase (Decrease) in Deferred Inflows Increase/(Decrease) in Other Accrued Expenses Total Adjustments $ Governmental Activities Internal Service Funds (2,702) $ 139,231 $ 3,421 62,038 88 1,977 - 64,015 88 368 - (7,014) 6,231 (1,060) (6,619) 4,788 3,099 133 47 42 (81) (8) 112 (1,251) (44) (6,967) 6,273 (1,141) (6,627) 4,900 1,848 89 (95) (973) (109) (26) (3,564) 1,351 2,531 (3,639) 61,684 794 62,478 (4,156) Net Cash Provided By (Used For) Operating Activities $ 203,617 $ (1,908) $ 201,709 $ (735) 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 $ (23,980) (1,424) 10,500 (2,433) $ - (23,980) (1,424) 10,500 (2,433) $ - 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, 2023 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, 2023 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 equal 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, 2023 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, 2023 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. 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. Non-major Governmental Funds: Twelve Special Revenue Funds are used to account for specific revenues that are legally restricted to expenditures for specific purposes. 33 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 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 8, 2022, the City of Mesa voters approved to continue under Home Rule through fiscal year 2027. 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 details, see the Notes to Budgetary Comparison Schedule. Budgeted amounts are as originally adopted by the City Council on June 6, 2022. 34 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 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, cash deposits are held separately in the State of Arizona Local Government Investment Pool (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. 35 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 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 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 and amortization of all assets are recorded and calculated using the straight-line method over the following estimated useful lives: Buildings Other Improvements Machinery and Equipment Intangibles Infrastructure 15-50 Years 5-50 Years 3-30 Years 6-15 Years 5-50 Years Lease and subscription-based information technology arrangements assets are amortized over the shorter of the lease period or estimated useful life of the associated contract. 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. 36 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 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. 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. 37 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 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 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, 2023, 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 2022-2023, current property tax collections were $38,408,321 or 98.51% 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, 2023, was $894,050 of which $423,997 was recorded as revenue and $470,053 as unavailable revenue. s. New Accounting Pronouncements 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 implemented this Statement in fiscal year 2023. 38 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 GASB Statement 94 Public-Private and Public-Public Partnerships and Availability Payment Arrangements improves financial reporting by addressing issues related to public-private and public-public partnership arrangements and provides uniform guidance on accounting and financial reporting for these transactions. The requirements of this Statement are effective for periods beginning after June 15, 2022. The City implemented this Statement in fiscal year 2023, with no effect. 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, 2023 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 Inventory Prepaid and Deposits Restricted Assets: Pooled Cash and Investments Cash with Fiscal Agent 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 $ $ $ 62,055 810 243 $ $ Liabilities Accounts Payable and Accrued Liabilities Due To Other Funds Claims Payable Customer and Defendant Deposits Unearned Revenue Liabilities Payable from Restricted Assets Pension and OPEB Long-term Liabilities Total Liabilities 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 517 - 10,112 1,499 (25,194) - 859,089 84,751 3,415 59,911 10,112 7,312 14,877 53,638 21,404 995 300,061 1,722,053 3,137,618 14,877 53,638 21,404 995 1,065,462 300,061 1,718,392 2,018,970 3,661 78,380 (25,194) - 4,202 288,068 292,270 4,639 4,639 - 4,202 292,707 296,909 $ 1,065,462 $ 2,311,240 $ 83,019 $ (25,194) $ 3,434,527 $ $ $ 3,391 1,953 43,218 34,944 1,120 84,626 $ (25,194) (25,194) $ Deferred Outflows of Resources Deferred Amounts on Refunding Pensions and OPEB Total Deferred Outflows of Resources Total Assets and Deferred Outflows of Resources 797,034 83,941 3,172 59,911 25,194 5,296 58,942 23,241 10,887 69,908 59,201 222,179 1,629,256 531,649 2,160,905 (28,313) 62,333 43,218 10,887 69,908 59,201 1,664,200 532,769 2,442,516 28,313 63,269 91,582 184,093 155,780 6,407 6,407 - 63,269 190,500 253,769 751,701 (5,445) (8,014) - 738,242 $ 1,065,462 $ 2,311,240 $ 83,019 (25,194) $ 3,434,527 40 - $ (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 (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 $ 300,061 When capital assets (land, buildings, equipment, etc.) that are to be used in governmental activities are purchased or constructed, the costs of those assets are reported as expenditures in governmental funds, and thus a reduction in fund balance. However, the statement of net position includes those capital assets among the assets of the City as a whole. Cost of Capital Assets Accumulated Depreciation Total $ 3,053,823 (1,362,640) $ 1,691,183 Certain items that are recognized as assets on the statement of net position are expended in governmental funds when paid such leases, and subscription-based information technology arrangements (SBITAs). These assets are capitalized and amortized over the shorter of the lease period or estimated useful life of the associated contract. Lease and SBITA Assets Accumulated Amortization Total $ $ 31,883 (4,674) 27,209 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 & SBITA Liability Compensated Absences Unamortized Bond Premium Post-employment Benefits Pension Liability 41 $ 445,875 27,406 34,944 23,424 694,681 934,575 2,160,905 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 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 Amounts on Refunding Deferred Pensions and OPEB $ 4,202 288,068 292,270 Deferred inflows relating to pensions represent acquisition of net assets that applies to future periods. Deferred Inflow of Resources on Pension $ 184,093 Prepaid expense consists of items that will consume net position in a future reporting period(s): Prepaid Cost of Issuance $ 517 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 502 21,404 6,407 28,313 (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 42 $ (8,014) (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balance to the Government-wide Statement of Activities (in thousands): Revenues and O ther Sources 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 Financing of Leases Premiums on Issuance of Bonds T otal Revenue and Other Sources Expenditures/Expenses and O ther Financing Uses 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) Statement of Activities $ $ $ $ 315 26,160 - $ $ $ (165) - 3,753 - 6,036 $ 30,228 (11,975) (4,780) (559) $ (17,314) $ (73,406) 119,599 1,854 $ 1,028,098 $ $ $ $ $ $ $ 331,144 47,003 7,319 1,830 46,115 345,790 70,224 8,968 8,227 107 8,367 189,252 2,019 11,975 4,780 559 1,083,679 122,514 390,553 107,001 70,381 (97) (894) (134) - $ (1,125) $ $ 6,201 (73,406) - 53,495 18,732 13 572 176,745 - (176,745) - (53,495) (3,269) 89 - - 73,332 - - 74 - (73,406) 192,361 430,268 157,270 100,790 15,463 13 661 - 1,013,338 12,213 (20,149) 21,506 (56,675) (73,406) 896,826 70,341 $ (13,338) $ 26,185 8,722 $ 39,361 $ - 331,144 46,906 7,319 936 46,115 345,790 70,224 8,968 8,542 32,468 8,233 $ 57,031 24,062 47,095 28,408 43 - - 3,578 7,135 515 985 $ 9,238 8,518 2,659 1,017 - - $ 131,272 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 (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 Revenues Special Assessment Revenue Unavailable Revenue (97) (894) (134) (1,125) 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 Absence OPEB Expense Pension Expense Total $ $ 1,215 3,889 7,109 12,213 (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 $ $ 112,670 (75,136) 37,534 When leases (in which the City is the lessee) and subscription-based information technology arrangements (SBITAs) are to be used in governmental activities, an expenditure is recorded in the governmental funds in the amount of the Present Value of the Future Lease Payments (PVFLP)/Present Value of the Future Subscription Payments (PVFSP), respectively; however, in the statement of activities, the PVFLP and PVFSP are recognized as intangible assets and amortized over the lease term/subscription term. Capital Outlay for Leases and SBITAs Lease & SBITA Amortization Total 44 $ $ 4,780 (3,922) 858 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 The financing of leases and subscription-based information technology arrangements (SBITAs) are reported as financing sources in governmental funds and thus contribute to the change in fund balance. The repayment of principal on leases and SBITAs consumes financial resources in the governmental funds. Neither transaction has any effect on the statement of activities. Lease Acquisition $ (4,780) Principal Repayment 3,419 $ (1,361) 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 $ (11,711) (496) (12,207) (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 Assets Change in Net Position $ 30,228 (21,506) 8,722 (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. Community Facility District Bonds Principal Repayments Total $ (11,975) 50,076 38,101 Governmental funds report bond premium, deferred amounts and prepaids relating to refunding when first issued. In the statement of activities these amounts are amortized. Premiums on Bonds Amortization of Bond Premiums Amortization of Deferred Refunding Amounts Prepaid Bond Issuance Costs Amortization of Bond Issuance Costs $ $ 45 559 (4,194) 926 114 (25) (2,620) (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 (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 $ $ 46 (73,406) 73,406 - (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 3. FUND BALANCE As of June 30, 2023, the fund balance details by classification are listed below (in thousands): Fund Balances: Nonspendable: Prepaid Costs Nonspendable Sub-total General Fund $ 4,299 4,299 Non-Major Governmental Funds Total Governmental Funds $ $ 997 997 5,296 5,296 Restricted: Community Facility District Court Debt Service Fire Library Parks & Recreation Police Public Health Spring Training & Tourism Transportation Programs Restricted Sub-total - 958 2,454 31,187 37,062 267 100 63,951 1,069 10,035 185,562 332,645 958 2,454 31,187 37,062 267 100 63,951 1,069 10,035 185,562 332,645 Committed To: Arts & Culture Cemetery Environmental Compliance Fire Technology Committed To Sub-total 3,802 5,176 8,978 905 2,918 20,345 2,843 27,011 905 6,720 20,345 5,176 2,843 35,989 Assigned To: Capital Projects Development Services Economic Development Fire General Government Parks & Recreation Police Sustainability Transit Vehicle Replacement Assigned To Sub-total 565 11,778 8,980 144,695 1,356 16,864 51 210 184,499 57,670 5,939 63,609 57,670 565 11,778 8,980 144,695 1,356 16,864 51 210 5,939 248,108 Unassigned 177,640 (47,977) 129,663 Total Fund Balances $ 375,416 47 $ 376,285 $ 751,701 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 4. POOLED CASH AND INVESTMENTS Total Pooled City Cash and Investments at fair value are as follows (in thousands): Cash on Hand Investments in Local Govt Invest Pools Cash with Custodian (1) Cash with Fiscal Agent (2) Long-Term Investments Total City Pooled Cash and Investments $ $ 40,856 10,808 15,023 132,726 1,027,315 1,226,728 (1) Represents cash sent by the City to Custodian on June 30, 2023 for investing purposes. (2) Represents cash sent by the City to fiscal agents on June 30, 2023 for debt service payments due to bondholders on July 1, 2023. Deposits At year end, the City’s cash totaled $40,856,520 which included $135,330 in petty cash. The City’s adjusted book balance was $40,721,190 and the bank balance was $48,624,683. The difference of $7,903,493 represents outstanding deposits and withdrawals 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, 2023 are covered under House Bill 2619. Investments 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. 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. 48 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 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. Associated with credit risk is concentration of credit risk and custodial credit risk. Concentration of credit risk is the risk of loss attributed to the magnitude of a government’s investment in a single issuer. Custodial credit risk is the risk that in the event of the failure of the counterparty to a transaction, a government will not be able to recover the value of investment or collateral securities that are in the possession of an outside party. The City's investments had the following credit risk structure as of June 30, 2023 (in thousands): Investment Type Corporate Notes Corporate Notes Corporate Notes Corporate Notes Corporate Notes Corporate Notes Corporate Notes First American Gov't Obligation MM Fund Foreign Issues Municipal Bonds Municipal Bonds Municipal Bonds Municipal Bonds Municipal Bonds Municipal Bonds Municipal Bonds Negotiable Certificate of Deposit US Agencies US Agencies US Agencies US Treasuries US Treasuries US Treasuries Short Term Total 49 S & P Rating AA+ AA AAA+ A ABBB+ AAAm AAA AAA AA+ AA AAA+ N/R** N/R* A+ AA+ N/R** N/R* N/R** N/R* N/R** Fair value 7,515 6,375 35,076 31,010 42,284 53,120 14,234 15,023 8,501 15,519 10,154 16,437 12,230 884 2,740 2,163 2,000 465,253 10,414 32,231 4,991 232,665 21,519 $ 1,042,338 $ (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 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, 2023, the City had the following recurring fair value measurements (in thousands): Fair Value Measurements Using: Investment by Fair Value Level Debt Securities Corporate Notes Fair Value 6/30/2023 Level 1 Level 2 Level 3 $ $ - $ 189,614 $ 189,614 - Foreign Issues 8,501 - $ 8,501 - Municipal Bonds 60,127 - $ 60,127 - Negotiable Certificates of Deposit 2,000 - $ 2,000 - 767,073 $ 1,027,315 - $ 767,073 $ 1,027,315 - US Treasuries and Agencies Total Debt Securities at Fair Value $ $ Investments Measured at Fair Value Arizona State Treasurers Investment Pools $ First American Gov't Obligation MM Fund 10,808 15,023 Total Investments Measured At Fair Value $ 1,053,146 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, 2023. 50 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 The City’s investment maturities on June 30, 2023 are as follows (in thousands): Investment M aturities (in Years) Investment Type Fair Value Less Than 1 Corporate Notes $ 189,614 $ First American Gov't Obligation M M Fund 15,023 Foreign Issues 8,501 M unicipal Bonds 60,127 Negotiable Certificates of Deposit 2,000 US Treasuries and Agencies Total 767,073 $1,042,338 1,199 1-3 3-5 $ 116,261 $ 72,154 Concentration of Credit Risk % 15,023 5,731 1.44% 7,522 979 0.82% 34,693 19,703 5.77% 2,000 $ 312,130 334,083 18.19% 293,125 $ 453,601 0.19% 161,818 $ 254,654 73.59% 100.00% On June 30, 2023 the following investments had callable dates (in thousands): U.S. Treasuries & Agencies FAMC (Federal Agri. Mtg Corp) FAMC (Federal Agri. Mtg Corp) FAMC (Federal Agri. Mtg Corp) Federal Farm Credit Banks Federal Home Loan Banks Federal Home Loan Banks Federal Home Loan Banks Federal Home Loan Banks Federal Home Loan Banks Federal Home Loan Banks Federal Home Loan Mortgage Corp. Federal Home Loan Mortgage Corp. Federal Home Loan Mortgage Corp. Federal Home Loan Mortgage Corp. Federal Home Loan Mortgage Corp. Total 51 Date Jul-23 Oct-23 Jun-24 Oct-23 Jul-23 Aug-23 Sep-23 Nov-23 Mar-24 Jul-28 Jul-23 Aug-23 Sep-23 Nov-23 Dec-23 Fair Value $ 922 3,941 1,987 2,970 1,727 2,877 2,208 3,945 1,489 1,931 981 1,988 1,994 4,215 2,997 $ 36,172 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Date Fair Value Abbott Laboratories Jun-25 $ Amazon.com Mar-27 952 American Express Jun-24 1,481 American Express American Express AstraZeneca Bank of America Bank of America Bank of America Bank of New York Mellon Bank of New York Mellon BMW Bank North America Brown-Forman Burlington Northern Sante Fe Charles Schwab Citigroup Citigroup Comcast Corp DNB Bank ASA Goldman Sachs Hershey Home Depot Honeywell HSBC Holdings PLC JP Morgan Chase & Co JP Morgan Chase & Co JP Morgan Chase & Co Mitsubishi Ufj Financial Group Morgan Stanley Morgan Stanley Morgan Stanley National Bank of Canada Northern Trust State Street Corp State Street Corp Truist Financial UBS AG London United Health US Bancorp Wells Fargo & Co Total Oct-26 Feb-27 Apr-26 Jul-23 Oct-23 Apr-24 Mar-25 Dec-25 Jan-26 Feb-25 Jan-25 Feb-27 May-24 Nov-24 Feb-27 Sep-24 Nov-25 May-25 Mar-27 Feb-27 May-24 Sep-23 Feb-24 Jun-24 Sep-23 May-24 Oct-24 Feb-25 Nov-23 Apr-27 Feb-25 Mar-25 Mar-26 Dec-24 Apr-26 Dec-24 May-24 1,335 911 1,354 1,698 1,180 2,873 1,406 888 1,177 967 1,059 897 2,077 552 472 913 1,439 920 704 882 2,003 1,552 945 2,689 1,655 2,284 931 1,108 1,378 1,442 415 958 882 1,393 4,069 1,098 891 53,394 Corporate/Bank Notes 52 $ 1,564 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 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: 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 Receivables Allowance 23,573 65,667 23,364 (7,309) - 16,264 65,667 23,364 3,193 21,404 995 (1,183) - 2,010 21,404 995 27,521 9,026 - 27,521 9,026 207 603 175,553 (8,492) 207 603 $ 167,061 (1,610) (58) (1,668) $ 46,168 97 57,529 2,534 $ 106,328 $ Business-Type Activities: Utility Customers Other Customers Leases Due from Other Governments Total Business-type Activities $ $ 47,778 155 57,529 2,534 107,996 $ $ $ Net Unbilled Accounts Receivable Unbilled utility service receivables are recorded in the year in which the services are provided. At June 30, 2023, unbilled utility service receivables are recorded in the Enterprise Fund as follows (in thousands): $ 2,772 1,732 9,917 4,493 3,062 $ 21,976 53 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Governmental funds report unavailable revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Additionally, governmental funds record unearned revenue when resources have been received, but not yet earned. At the end of the current fiscal year, the various components of unavailable and unearned revenue reported 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 Governmental Activities General Non-Major Fund Funds Total $ 2,393 $ 228 $ 2,621 1,441 $ 3,834 $ 59,816 188 5,844 66,076 59,816 188 7,285 $ 69,910 General Fund $ 3,285 $ 3,285 Non-Major Funds $ 3,122 502 21,404 $ 25,028 Total $ 6,407 502 21,404 $ 28,313 6. INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS The following interfund activities are included in the fund financial statements on June 30, 2023 (in thousands): Fund General Fund Non-major Governmental Funds Proprietary Funds Total Due from Other Funds $ 25,194 $ 25,194 Due to Other Funds $ 23,241 1,953 $ 25,194 Interfund balances on June 30, 2023, are short-term loans used to cover temporary cash deficits in various funds and are expected to be repaid within one year. 54 (Continued) Transfers In City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 The following interfund transfers are reflected in the fund financial statements for the year ended June 30, 2023 (in thousands): Transfers Out Non-major Internal General Governmental Utility Airport Service Funds Fund Fund Fund Funds Fund Total General Fund $ $ 1,015 $119,592 $ 7 $ 74 $ 120,688 Non-major Governmental Funds 68,564 68,564 Internal Service Funds 3,753 3,753 Total $ 72,317 $ 1,015 $119,592 $ 7 $ 74 $ 193,005 The transfer from business-type activities to governmental activities on the government-wide statement of activities is a $119,309,000 operational subsidy from the Utility 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/reserve transfers. 7. LEASES AND SUBSCIPTION-BASED INFORMATION TECHNOLOGY ARRANGEMENTS City as Lessee The City, as a lessee, has entered into lease agreements for three buildings, including one located at a local commercial airport, under long-term, non-cancelable lease agreements. The City sub-leases the airport building to an aircraft parts engineering and maintenance company. The airport 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 $28,238,170, less accumulated amortization of $3,573,378. Total future minimum lease payments under this lease agreement are as follows (in thousands): Governmental Activities Principal Interest 2024 $ 2,589 $ 464 2025 1,961 414 2026 1,312 384 2027 1,340 356 2028 1,361 328 2029-2033 6,419 1,247 Thereafter 9,732 566 Totals $ 24,714 $ 3,759 Total $ 3,053 2,375 1,696 1,696 1,689 7,666 10,298 $ 28,473 55 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 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 2079 and provide for renewal options ranging from 1 to 50 years. During the year ended June 30, 2023, the City recognized $6,453,205 and $2,518,811 in lease revenue and interest revenue, respectively, pursuant to these contracts. Subscription-Based Information Technology Arrangements The City has entered into subscription-based information technology arrangements (SBITAs) involving: • • • • • • • Special event ticketing software Public safety data backup services software Medical transport billing software Public safety operations and intelligence software Leave administration software. Pawnshop ticketing and tracking software Development information management software The total of the City’s subscription assets is recorded at a cost of $3,889,164, less accumulated amortization of $1,180,459. The future subscription payments under SBITA agreements are as follows (in thousands): Governmental Activities Principal Interest 2024 $ 1,085 $ 39 2025 1,045 17 2026 482 8 2027 251 2 2028 3 Totals $ 2,866 $ 66 $ $ $ $ $ $ Total 1,124 1,062 490 253 3 2,932 56 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 8. CAPITAL ASSETS A summary of capital asset activity, for the government-wide financial statements, for the year ended June 30, 2023, follows (in thousands): Restated Ending Beginning Additions Retirements Balance Balance Governmental Activities: Non-depreciable Assets: $ 405,282 $ 8,284 $ (2) $ 413,564 Land Infrastructure 3,597 3,597 Construction-in-Progress 204,780 143,681 (229,251) 119,210 Total Non-depreciable Assets 613,659 151,965 (229,251) 536,371 Depreciable Assets: Buildings 443,285 70,786 (41) 514,030 Other Improvements 291,438 21,759 (984) 312,211 Machinery & Equipment 288,564 34,237 (13,331) 309,470 Intangibles 24,337 (24) 24,312 Infrastructure 1,307,059 64,580 (937) 1,370,703 Total Depreciable Assets 2,354,683 191,362 (15,317) 2,530,728 Less Accumulated Depreciation for: Buildings (162,309) (9,652) 41 (171,919) Other Improvements (163,643) (11,009) 911 (173,741) Machinery & Equipment (202,404) (16,091) 12,735 (205,756) Intangibles (24,240) (95) 24 (24,311) Infrastructure (759,047) (38,576) 936 (796,689) Total Accum. Depreciation (1,311,643) (75,423) 14,648 (1,372,418) Total Depreciable Assets, net 1,043,040 115,938 (669) 1,158,309 Lease Assets Buildings 24,083 4,155 28,238 Total Lease Assets 24,083 4,155 28,238 Less Accumulated Amortization for: Buildings (751) (2,823) (3,574) Total Accum. Amortization (751) (2,823) (3,574) Total Amortizable Assets, net 23,332 1,332 24,664 Subscription-Based Information Technology Agreement Assets Software 3,020 869 3,889 Total SBITA Assets 3,020 869 3,889 Less Accumulated Amortization for: Software (1,180) (1,180) Total Accum. Amortization (1,180) (1,180) Total Amortizable Assets, net 3,020 (311) 2,709 Governmental Activities Capital Assets, net $ 1,683,051 $ 268,924 $ (229,920) $ 1,722,053 57 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 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 $ 28,715 17,560 106 99,689 146,070 $ 8,316 13,884 41,251 15,607 368 $ 79,426 Additions Retirements $ $ 2,983 108,603 111,586 (78,457) (78,457) Ending Balance $ 31,698 17,560 106 129,835 179,199 46,702 86,581 89,366 27,174 2,205,324 2,455,147 419 2,347 75,389 78,155 (48) (2,214) (372) (28,372) (31,006) 46,702 86,952 89,500 26,801 2,252,340 2,502,295 (17,557) (47,717) (63,909) (23,372) (1,071,268) (1,223,823) 1,231,324 (857) (2,303) (4,086) (112) (56,657) (64,015) 14,138 48 2,124 372 28,359 30,903 (102) (18,414) (49,970) (65,872) (23,110) (1,099,566) (1,256,932) 1,245,363 $ 1,377,394 $ 125,725 $ (78,560) $ 1,424,562 58 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 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 $ $ 4,425 5,413 31,272 18,416 2,105 1,977 407 64,015 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 $ 116,419 5,803 24 122,248 Construction in Progress Commitments $ $ $ 59 114,427 2,726 1,543 513 119,209 2,627 35,928 49,312 37,754 329 3,883 129,835 $ 779 3,771 40,374 16,017 3,889 67 64,900 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 9. LONG-TERM OBLIGATIONS a. Changes in Long-Term Obligations The following is a summary of changes in long-term obligations (in thousands). Restated Beginning Balances Governmental Activities: Bonds Payable: General Obligation Bonds Highway User Revenue Bonds Excise Tax Revenue Obligations Community Facility District Total Bonds Payable $ 318,950 39,030 34,180 91,816 483,976 Additions Reductions $ $ 11,975 11,975 (33,995) (10,000) (1,245) (4,836) (50,076) Ending Balances $ 284,955 29,030 32,935 98,955 445,875 Amounts Due Within One Year $ 23,070 10,490 1,305 3,612 38,477 Leases Subsciption-Based Information Technology Arrangements Unamortized Premiums Compensated Absences Pension and OBEB Liabiity Governmental Activities Total 23,025 4,155 (2,466) 24,714 2,589 3,020 27,057 34,721 1,694,472 $ 2,266,271 869 559 32,338 49,896 (1,023) (4,192) (31,168) (30,272) (119,197) 2,866 23,424 35,890 1,664,200 $ 2,196,969 1,085 5,187 20,664 68,002 Business-type Activities: Bonds Payable: Utility Revenue Bonds Utility Revenue Obligations Total Bonds Payable $ 1,227,750 84,795 1,312,545 (115,235) (3,725) (118,960) $ 1,112,515 138,725 1,251,240 Notes Payable Unamortized Bond Premiums Unamortized Obligation Premiums Compensated Absences Pension and OBEB Liabiity Business-type Activities Total 1,135 98,142 4,446 4,428 133,955 $ 1,554,651 (152) (12,295) (1,166) (4,531) (6,627) (143,731) 983 85,847 16,641 4,517 127,328 $ 1,486,556 $ $ $ 57,655 57,655 13,361 4,620 75,636 $ $ $ $ $ $ 49,390 3,705 53,095 156 745 2,040 56,036 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, $946,171 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, 2023 b. Bonds Payable On June 30, 2023, 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. $ 17,100 $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. 3,250 $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. 38,125 $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. 21,975 $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. 4,990 $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. 27,625 $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. 17,055 $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. 12,675 $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. 33,355 $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. 34,260 61 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 $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. $ 6,175 $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. 14,385 $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. 9,805 $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. 20,635 $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. 1,870 $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. 11,720 $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. 9,955 Total General Obligation Bonds $ 284,955 Street and Highway User Revenue Bonds $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. $ 975 $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. 2,000 $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 62 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 $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. Total Street and Highway User Revenue Bonds $ 17,555 $ 29,030 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. $ 1,846 $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. 2,445 $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. 2,416 $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. 1,488 $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. 5,285 $970,000 2015 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) Assessment District No. 4 Special Assessment Revenue Bonds, due in annual principal installments ranging from $15,000 to $65,000, plus semi-annual interest ranging from 2 percent to 5 percent through July 1, 2040. 673 $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. 826 63 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 $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. $ 410 $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. 6,715 $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. 1,115 $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. 640 $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. 291 $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. 8,570 $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. 945 870 $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. 234 $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 64 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 $130,000, plus semi-annual interest ranging from 2.75 percent to 5.20 percent through July 1, 2043. $ 1,675 $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. 225 $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. 1,751 $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. 1,095 $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. 12,655 $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. 645 $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. 2,545 $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. 5,350 $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. 12,440 $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. 2,110 65 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 $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. $ 4,195 $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. 1,410 $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. 8,665 $3,520,000 2023 Eastmark Community Facilities District No.1 (City of Mesa, Arizona) General Obligation Bonds, due in annual principal installments ranging from $850,000 to $1,080,000, plus semi-annual interest ranging from 4.125 percent to 5.00 percent through July 15, 2045. 2,670 $3,480,000 2023 Eastmark Community Facilities District No. 2 (City of Mesa, Arizona) General Obligation Bonds, due in annual principal installments ranging from $115,000 to $1,305,000, plus semi-annual interest ranging from 4.25 percent to 5.00 percent through July 15, 2046. 3,110 $4,975,000 2023 Cadence Community Facilities District (City of Mesa, Arizona) General Obligation Bonds, due in annual principal installments ranging from $385,000 to $1,095,000, plus semi-annual interest ranging from 4.00 percent to 5.00 percent through July 15, 2046. 4,590 Total Community Facilities District Bonds $ 98,955 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. $ 32,935 Total bonds payable recorded in governmental activities $ 445,875 66 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Classified in Business-type Activities on the government-wide financial statements: Utility Systems Revenue Bonds $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. $ 3,875 $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. 19,045 $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. 4,265 $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. 1,575 $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. 84,540 $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. 25,920 $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. 86,275 67 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 $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. 117,150 $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. 71,070 $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. 97,120 $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. 81,825 $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. 52,750 $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. 66,075 $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. 66,280 $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 $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. 30,495 $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. 44,870 Total Utility Systems Revenue Bonds $ 1,112,515 68 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 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. $ 13,015 $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. 13,350 $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. 54,705 $57,655,000 2022C taxable utility revenue refunding serial obligations, due in a single principal installment of $57,655,000 plus semi-annual interest of 5 percent through July 1, 2036. 57,655 Total Utility Systems Revenue Obligations $ Total bonds payable recorded in business-type activities $ 1,251,240 69 138,725 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 The following tables summarize the City’s debt service requirements to maturity for its long-term bonds payable on June 30, 2023 (in thousands). The deferred amounts on refundings are not included. Governmental Activities General Obligation Bonds Fiscal Year 2024 2025 2026 2027 2028 2029-2033 2034-2038 2039-2041 Principal $ 23,070 24,745 26,235 27,195 28,210 118,220 34,370 2,910 Interest $ 9,829 9,049 8,170 7,286 6,300 17,205 2,895 100 TOTALS $ 284,955 $ 60,835 Highway User Revenue Bonds Total 32,899 33,794 34,405 34,481 34,510 135,425 37,265 3,010 Fiscal Year 2024 2025 2026 2027 2028 2029-2033 2034-2038 2039-2041 $ 345,790 TOTALS $ $ Principal 10,490 10,880 3,755 3,905 - $ 29,030 Excise Tax Revenue Obligations Fiscal Year 2024 2025 2026 2027 2028 2029-2033 2034-2038 2039-2040 TOTALS Principal $ 1,305 1,375 1,440 1,515 1,590 9,220 11,380 5,110 - Interest $ 1,389 1,323 1,255 1,183 1,107 4,262 2,104 283 - $ $ 32,935 12,908 $ $ Interest $ 1,311 785 343 156 $ 2,597 $ Total 11,801 11,665 4,098 4,061 - $ 31,627 Community Facilities District Total 2,694 2,698 2,695 2,698 2,697 13,482 13,484 5,393 - Fiscal Year 2024 2025 2026 2027 2028 2029-2033 2034-2038 2039-2043 2044-2046 45,843 TOTALS $ Principal 3,612 3,710 3,816 3,941 4,055 21,994 25,551 24,946 7,330 $ 98,955 Interest $ 3,900 3,772 3,637 3,490 3,332 14,118 9,353 4,040 444 $ 46,089 $ Total 7,512 7,482 7,453 7,431 7,387 36,112 34,904 28,986 7,774 $ 145,044 Business-type Activities Revenue Bonds Fiscal Year 2024 2025 2026 2027 2028 2029-2033 2034-2038 2039-2043 2044-2046 Principal $ 49,390 50,840 52,185 54,655 58,055 323,815 276,125 228,455 18,995 TOTALS $ 1,112,515 $ Interest 45,658 43,199 40,919 38,645 36,351 143,720 81,995 28,703 967 $ 460,161 Utility Revenue Obligations Total 95,048 94,039 93,104 93,300 94,406 467,535 358,120 257,158 19,962 Fiscal Year 2024 2025 2026 2027 2028 2029-2033 2034-2038 2039-2043 2044-2046 $ 1,572,676 TOTALS $ 70 $ $ Principal 3,705 3,690 3,670 3,655 3,630 15,410 64,315 14,995 25,655 138,725 Interest $ 6,682 6,548 6,406 6,262 6,112 28,107 19,078 9,478 2,447 $ 91,152 $ $ Total 10,387 10,238 10,076 9,917 9,742 43,517 83,393 24,473 28,102 229,877 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 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, 2023, is (in thousands): 6% Bonds 20% Bonds Total Available $ 377,678 977,473 $ 1,355,151 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, 2023, total principal and interest outstanding for CFD general obligation bonds was $112,521,938. 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, 2023, the special assessments receivable for CFDs, together with amounts paid in advance and interest to be received over the life of the assessment period, are 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 $32,522,353. Principal and interest paid for the current year and total assessments collected were $1,720,823, and $1,830,436 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, 2023, the amount provided in the Replacement and Extension Funds equaled $9,054,709 which is in compliance with the bond provisions. As of June 30, 2023, the amount available is $44,917,565. 71 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 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, 2023 (in thousands): Fiscal Year 2024 2025 2026 2027 2028 2029 Totals Business-type Activities Interest Principal & Fees Total $ 156 $ 21 $ 177 159 18 177 163 14 177 167 10 177 170 10 180 168 3 171 $ 983 $ 76 $ 1,060 d. Short-term Debt The City had no short-term debt activity for the fiscal year ended June 30, 2023. 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, 2023 f. Pledged Revenues Utility System Revenue Bonds The City has pledged future utility customer revenues, net of specified operating expenses, to repay approximately $1.112 billion in utility system revenue bonds issued and outstanding since 2006. 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 47.1 percent of net revenues. The total principal and interest remaining to be paid on the bonds is $1.573 billion. Principal and interest paid for the current year and total customer net revenues were $95,979,975 and $203,665,000, respectively. Highway User Revenue Bonds The City has pledged future Highway User Taxes Revenue to repay $29,030,000 in highway user revenue bonds issued and outstanding since 2006. 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 24.7 percent of eligible revenues. The total principal and interest remaining to be paid on the bonds is $31,627,088. Principal and interest paid for the current year and total highway user tax revenues were $11,812,412 and $47,902,631, respectively. 10. REFUNDED, REFINANCED AND DEFEASED OBLIGATIONS On August 25, 2022 the City issued $57,655,000 of utility revenue refunding obligations with an original issue premium of $10,399,809 to advance refund $67,300,000 of outstanding utility revenue bonds. The refunding obligations were issued with an interest rate of 5.0 percent. Net proceeds in the amount of $67,936,020 (after payment of $118,789 in underwriters’ fees) were provided to a refunding escrow agent to purchase United States Government securities. The cash and securities were deposited in an irrevocable trust to provide for all future debt service payments of the refunded bonds. As a result, the refunded bonds are considered to be defeased and the liability for those bonds has been removed from the debt of the City. The current refunding resulted in a difference between the reacquisition price and the net carrying amount of the old debt of $286,446. This difference, reported in the accompanying financial statements as a deduction from utility revenue bonds payable, is being charged to operations. The purpose of the refunding was to take advantage of lower interest rates and restructure debt service payments to achieve a more level debt retirement schedule. The refunding will decrease debt service payments by $7,406,913 over the next 14 years producing an economic gain (difference between the present value of old and new debt service payments) of $4,379,485. 73 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 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, 2023, as reflected below is not included in the City’s financial statements (in thousands). Utility System Revenue Bond Issue dated June 28, 2006 $ 4,874 Utility System Revenue Bond Issue dated May 30, 2007 1,182 Utility System Revenue Bond Issue dated May 29, 2008 3,696 Utility System Revenue Refunding Bond Issue dated September 25, 2014 4,743 Utility System Revenue Bond Issue Dated June 5, 2014 9,230 Total Refunded and Defeased Bonds Outstanding $ 23,725 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, 2023, 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. 74 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 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, 6/30/21 Adjustments to Reserves Claim Expense $ 14,941 (2,890) 359 Unpaid Claims, 6/30/22 12,410 Adjustments to Reserves Claims Expense (2,937) 996 Unpaid Claims, 6/30/23 $ 10,469 $ $ 28,523 (290) 322 4,908 71,902 (70,965) $ 48,372 68,722 (70,284) 28,555 5,845 46,810 (350) 79 70,522 (71,902) 67,235 (70,827) 4,465 $ 43,218 28,284 $ $ All unpaid claims are reported as current liabilities in the Statement of Net Position as the change in these amounts has already been expensed in the statement of activities. 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, the 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, 2023, is $14,083,631. 75 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 13. NET POSITION a. Restricted Net Position The government-wide statement of net position reports $357,673,000 of restricted net position, of which $235,029,000 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 and the Property and Public Liability Self-Insurance Funds consists of the prior year’s deficit resulting from claims expenses exceeding revenues received and from post-employment benefit charges and pension expenses. The City’s funding plan calls for yearly contributions from various funds to equal the year’s estimated claims and claim related expenses. Future claim liabilities, post-employment benefit charges, and pension expenses are not considered in determining funding for each year. The deficit in the Warehouse, Maintenance, and Services Fund consists of the prior year’s deficit resulting from other post-employment benefit charges and pension expenses. The City’s funding plan calls for Charges for Services to cover operational expenses. Post-employment benefit charges and pension expenses are not considered in determining Charges for Services. The deficit in the Mesa Housing Authority Fund will be covered by future revenues. The Relief Fund deficit consists of the prior year’s deficit due to a loss in investment income which will be covered by a gain on investments in future years. The deficit in the Parks and Public Safety Capital Project Funds will be covered by proceeds from a future bond sale. 76 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 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, 2023, for these services are as follows (in thousands): Operating Expenses Functions Electric Gas Water Wastewater Solid Waste Airport District Cooling Total Operating Revenues $ 48,208 70,556 167,806 95,665 69,269 4,973 1,427 $ 457,904 Depreciation $ 4,425 5,413 31,272 18,416 2,105 1,978 407 $ 64,016 Other $ 42,084 40,867 72,118 45,259 47,511 5,698 1,121 $ 254,658 Operating Income (Loss) $ 1,699 24,276 64,416 31,990 19,653 (2,703) (101) $ 139,230 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. The City's investment in these Joint Ventures as of June 30, 2023, 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 294,346 $ 5,715 $ 300,061 77 Business-Type Activities $ 76,920 53,184 146,633 18,182 $ 294,919 Total $ 294,346 5,715 76,920 53,184 146,633 18,182 $ 594,980 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 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 $294,346,151 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 $5,715,329 and is reflected in the governmental activities. Separate financial statements are not prepared. Total investment in the joint venture as of June 30, 2023, is (in thousands): TOPAZ Regional Wireless Cooperative City of Mesa $ 5,715 Town of Gilbert 1,381 City of Apache Junction 502 Superstition Fire and Medical 158 Town of Queen Creek 106 Fort McDowell 49 Rio Verde Fire District 12 Total Joint Venture $ 7,923 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. 78 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 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 $76,920,093 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 $146,633,289 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, 2023, is (in thousands): Greenfield Water Reclamation Project Mesa's Share $ 146,633 Gilbert's Share 95,600 Queen Creek's Share 28,761 Total Joint Venture $ 270,994 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 the 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 $53,183,606 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. 79 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 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, 2023, the City reported the following aggregate amounts related to pensions for all plans to which it contributes (in thousands): BusinessType Statement of Net Position and Statement of Governmental Activities Activities Activities Total Net Pension Liabilities $ 946,178 $ 55,903 $ 1,002,081 Deferred Outflows of Resources - Pension 207,983 9,212 217,195 Deferred Inflows of Resources - Pension 7,895 1,811 9,706 Pension Expense 108,810 6,243 115,053 Net OPEB Liabilities Deferred Outflows of Resources - OPEB Deferred Inflows of Resources - OPEB OPEB Expense 718,022 84,724 182,605 28,326 80 71,425 8,345 18,457 2,729 789,446 93,069 201,062 31,055 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 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. provides statutory authority for determining the employees’ and employers’ contribution amounts as a percentage of covered payroll. Employers are required to contribute at 81 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 the same rate as employees. The combined active member and employer contribution rates are expected to finance the costs of benefits employees earn during the year, with an additional amount to finance any unfunded accrued liability. For the year ended June 30, 2023, the city and covered employees were required by state statute to contribute at the actuarially determined rate of 12.17% (12.03% pension plus 0.14% long-term disability) of the active members’ annual covered payroll. The City’s contributions to the System for the year ending June 30, 2023, was $24,959,547, 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, 2023, was 9.68 % (9.62% pension plus, 0.06% long-term disability). The City’s ACR contributions to the System for the year ending June 30, 2023, were $169,568. c. Pension Liability On June 30, 2023, the City reported a liability of $263,693,640 for its proportionate share of the ASRS’ net pension liability. The net pension liability was measured as of June 30, 2022. 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, 2021, to the measurement date of June 30, 2022. 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, 2022. The City’s proportion measured as of June 30, 2022, was 1.61555%, which was an increase of 0.02985% from its proportion measured as of June 30, 2021. d. Pension Expense and Deferred Outflows/Inflows of Resources For the year ended June 30, 2023, the City recognized pension expense for ASRS of $29,449,016. On June 30, 2023, 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 82 Deferred Outflows of Resources $ 2,247 13,088 Deferred Inflows of Resources $ - - 6,946 2,991 25,129 43,455 1,599 8,545 $ $ (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 The $25,129,115 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, 2024. 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, 2024 $ 12,466 2025 (1,742) 2026 (12,060) 2027 11,117 $ 9,781 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, 2021 June 30, 2022 Entry Age Normal 7.0% 2.9 - 8.4% 2.3% Included 2017 SRA Scale U-MP Actuarial assumptions used in the June 30, 2021, 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% 83 Long-Term Expected Geometric Real Rate of Return 3.90% 5.30% -0.20% 6.00% (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 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% $ $ $ 159,148 389,072 263,694 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. 84 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 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 20 years of service, any age 15 years of service, age 62 25 years of service or 15 years of credited service, age 52.5 15 years of credited service, age 52.5*; 15 or more years of service, age 55 Final average salary is based Highest 36 consecutive months on of last 20 years Highest 60 consecutive months of last 20 years Highest 60 consecutive months of last 15 years Retirement and Disability Years of service and age required to receive benefit Benefit percentage Normal Retirement 50% less 2.0% for each year of credited service less than 20 years OR plus 2.0% to 2.5% for each year of credited service, not to exceed 80% On or After July 1, 2017 1.5% to 2.5% for each year of credited service not to exceed 80% Accidental Disability Retirement 50% or normal retirement, whichever is greater Catastrophic Disability Retirement 90% for the first 60 months then reduced to either 62.5% or normal retirement, whichever is greater Ordinary Disability Retirement Normal retirement calculated with actual years of credited service or 20 years of credited service, whichever is greater, multiplied by years of credited service (not to exceed 20 years) divided by 20 Survivor Benefit Retired M embers 80% to 100% of retired member's pension benefit Active M embers 80% to 100% of accidental disability retirement benefit or 100% of average monthly compensation if death was the result of injuries received on the job * With actuarially reduced benefits 85 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Retirement and survivor benefits are subject to automatic cost-of-living adjustments based on inflation. PSPRS also provides temporary disability benefits of 50 percent of the member’s compensation for up to 12 months. Health insurance premium benefits are available to retired or disabled members with 5 years of credited service. The benefits are payable only with respect to allowable health insurance premiums for which the member is responsible. Benefits range from $100 per month to $260 per month depending on the age of the member and dependents. The PSPRS-Fire OPEB plan is not presented because of its relative insignificance to the financial statements. Employees Covered by Benefit Terms On June 30, 2023, 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 305 705 705 96 382 783 268 705 1,678 268 705 1,678 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, 2023, are indicated below. Rates are a percentage of active members’ annual covered payroll. Active Member Pension PSPRS - Fire 7.65% PSPRS - Police 7.65% PSPRS Tier 3 - Fire 10.84% PSPRS Tier 3 - Police 10.23% City Pension 57.48% 58.76% 10.71% 10.13% City OPEB 0.57% 1.48% 0.13% 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 42.75% and 45.15% for City fire and police employees respectively, who were PSPRS Tier 3 members. 86 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 The City’s required contributions to the plans for the year ended June 30, 2023, were: Pension PSPRS - Fire $ 17,736,321 PSPRS - Police 30,831,491 PSPRS Tier 3 - Fire 4,832,597 PSPRS Tier 3 - Police 11,598,381 OPEB $ 175,882 776,559 30,735 247,578 The City contributed to the unfunded liability additional amounts of $3,819,017 and $12,685,952 to PSPRS-Fire and PSPRS-Police, respectively. The City’s contribution to the system was paid for by 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, 2023, was 42.75% and 45.15% for fire and police, respectively. The City did not have any ACR contributions for the year ending June 30, 2023. d. Liability On June 30, 2023, the City reported the following pension liabilities of $253,036,446 and $485,351,268 for fire and police, respectively. The City also reported an OPEB liability of $11,400,902 for police. The net liabilities were measured as of June 30, 2022, and the total liability used to calculate the net liability was determined by an actuarial valuation as of that date. The total liabilities as of June 30, 2022, reflect changes of actuarial assumptions, including decreasing the investment rate of return from 7.3% to 7.2%, changing the wage inflation from 3.5% to a range of 3.0% to 6.25%, and increasing the cost-of-living adjustment from 1.75% to 1.85%. e. Pension/OPEB Expense and Deferred Outflows/Inflows of Resources For the year ended June 30, 2023, the City recognized pension expenses of $29,630,538 and $55,973,498 for fire and police, respectively. The city also recognized OPEB expense of $1,323,317 for police. 87 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 On June 30, 2023, the City reported deferred outflows of resources and deferred inflows of resources related to pensions and OPEB from the following sources (in thousands): PSPRS - Fire Pension Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual experience $ $ 20,869 Changes in assumptions 1,161 13,418 - 4,374 - 26,388 - Net difference between projected and actual earnings on pension plan investments City contributions subsequent to the measurement date Total $ 65,049 $ 1,161 Pension OPEB PSPRS - Police Deferred Outflows of Resources Deferred Inflows of Resources Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual experience $ $ $ $ Changes in assumptions 29,863 - 529 - 15,771 - 418 5 7,941 - 199 - 55,116 - 1,024 - Net difference between projected and actual earnings on plan investments City contributions subsequent to the measurement date Total $ 88 108,691 $ - $ 2,170 $ (Continued) 5 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 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, 2024. 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, 2024 2025 2026 2027 2028 Thereafter f. PSPRS Fire Pension $ 9,648 7,792 4,152 9,638 3,689 2,581 $ 37,500 PSPRS Police Pension $ 15,277 13,584 4,064 15,877 4,773 $ 53,575 PSPRS Police OPEB 372 262 54 365 88 $ 1,141 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, 2022 June 30, 2022 Entry Age Normal 7.20% 3.0 -6.25%, N/A for OPEB 2.5%, N/A for OPEB 1.85%, N/A for OPEB PubS-2010 tables N/A Actuarial assumptions used in the June 30, 2022, valuation were based on the results of an actuarial experience study for the 5-year period ended June 30, 2021. The long-term expected rate of return on PSPRS plan investments was determined to be 7.2% 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: 89 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 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 -0.35% 0.45% 4.83% 2.68% 4.47% 7.18% 5.10% 3.49% g. Discount Rate A discount rate of 7.20% 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 (6.2%) or 1 percentage point higher (8.2%) than the current rate (in thousands): Fire Net Pension Liability Police Net Pension Liability Police OPEB Liability 90 1% Decrease $ 319,268 614,117 13,704 Current Discount Rate $ 253,036 485,351 11,401 1% Increase $ 198,603 380,434 9,457 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 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 $ 474,607 $ 261,293 $ 213,314 Service Cost 8,079 - 8,079 Interest on the Total Liability 34,277 - 34,277 - - - 11,356 - 11,356 6,706 - 6,706 Contributions - Employer - 28,025 (28,025) Contributions - Employee - 3,507 (3,507) Net Investment Income - (10,644) 10,644 (26,268) (26,268) - Changes for the Year: Changes of Benefit Terms Differences Between Expected & Actual Experience in the M easurement of the Liability Changes of Assumptions / Other Inputs Benefit Payments, Including Refunds of Employee Contributions Administrative Expenses Net Changes Balances - End of Year $ - (192) 192 34,150 (5,572) 39,722 508,757 $ 255,721 $ 253,036 91 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 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 $ 886,034 $ 466,887 $ 419,147 $ $ $ Service Cost 13,979 - 13,979 280 - 280 Interest on the Total Liability 64,052 - 64,052 1,537 - 1,537 - - - - - - 21,565 11,989 9,576 Changes for the Year: Changes of Benefit Terms Differences Between Expected & Actual Experience in the M easurement of the Liability 18,155 - 18,155 218 - 218 10,488 - 10,488 312 - 312 Contributions - Employer - 53,349 (53,349) - 946 (946) Contributions - Employee - 6,608 (6,608) - 32 (32) Net Investment Income - (19,142) 19,142 - (448) 448 Changes of Assumptions / Other Inputs Benefit Payments, Including Refunds of Employee Contributions (45,167) (45,167) - (1,571) (1,571) - - (345) 345 - (8) 8 Administrative Expenses Net Changes Balances - End of Year 61,507 (4,697) 66,204 $ 947,541 $ 462,190 $ 485,351 776 $ 22,341 (1,049) $ 10,940 1,825 $ 11,401 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. i. 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 single employer 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. 92 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 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 on January 1, 2001 but before January 1, 2006. Twenty years of service for employees hired on or after January 1, 2006. 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 1,985 1,415 6,783 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, 2023, is $778,045,588. d. OPEB Expense and Deferred Outflows/Inflows of Resources For the year ended June 30, 2023, the City recognized OPEB expense of $29,732,171. On June 30, 2023, 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 $ 27,811 Changes of assumptions 40,245 City benefit payments subsequent to the measurement date 22,843 Total $ 90,899 93 Deferred Inflows of Resources $ 2,841 198,221 $ 201,062 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 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, 2024. 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, 2024 $ (9,173) 2025 (16,767) 2026 (34,345) 2027 (36,521) 2028 (36,200) $ (133,006) 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, 2022 June 30, 2022 Entry Age Normal 4.09% 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. 94 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 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 4.09%. The discount rate increased from 2.18% as of June 30, 2021, to 4.09% as of June 30, 2022. 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, 2022. g. Changes in OPEB Liability The below table outlines the changes in OPEB Liability for the fiscal year ending June 30, 2023 (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 $ 978,037 24,665 21,603 (1,720) (221,049) (23,491) (199,992) $ 778,045 * Because the City funds OPEB benefits on a “pay-as-you-go” basis, employer contributions are equal to benefit payments. 95 (Continued) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 The City’s benefit payments to the plan were 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 $ 899,773 Current Municipal Bond Rate $ 778,045 1% Increase $ 679,916 1% Decrease City OPEB Plan $ 676,122 Current Healthcare Trend Rate $ 778,045 1% Increase $ 905,344 17. SUBSEQUENT EVENTS On December 7, 2023, The City issued $83,340,000 of Series 2023 City of Mesa, Arizona General Obligation Bonds. These bonds are due in annual principal installments ranging from $2,440,000 to $9,235,000 plus semi-annual interest of 5 percent through July 1, 2043. On December 7, 2023, The City issued $193,710,000 of Series 2023 City of Mesa, Arizona Utility System Revenue Obligations. These obligations are due in annual principal installments ranging from $2,500,000 to $35,355,000, plus semi-annual interest of 5 percent through July 1, 2048. 96 (Concluded) REQUIRED SUPPLEMENTARY INFORMATION A N N UA L CO M P R E H E N S I V E F I N A N CI A L R E P O RT F O R T H E F I S C A L Y E A R E N D E D | J U N E 30, 2023 City of Mesa, Arizona Schedule of the City's Proportionate Share Of Net Pension Liability Cost-Sharing Pension Plan June 30, 2023 (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 2023 (2022) 2022 (2021) 2021 (2020) 2020 (2019) $ 1.6156% 263,694 $ 1.5857% 208,353 $ 1.6188% 280,473 $ 1.6209% 235,853 $ 192,542 $ 178,405 $ 175,767 $ 169,900 See accompanying notes to pension plan schedules. 97 136.95% 116.79% 159.57% 138.82% 74.26% 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 (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, 2023 (in thousands) Public Safety Personnel Retirement System - Fire Reporting Fiscal Year (Measurement Date) 2023 (2022) 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) 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 8,079 34,277 - 2022 (2021) $ $ City's Net Pension Liability as a Percentage of its Covered Payroll 99 7,871 31,397 - $ 7,663 29,147 - 7,760 - (221) - 11,844 8,488 (26,268) 34,150 (22,868) 25,076 (23,473) 15,574 (18,809) 38,333 474,607 508,757 449,531 474,607 433,957 449,531 395,624 433,957 28,025 3,507 (10,644) 21,601 3,321 56,815 18,107 2,845 2,587 16,708 2,805 10,339 (26,268) (192) (5,572) (22,868) (266) 58,603 (23,473) (211) 58 (87) (18,809) (181) 10,862 261,293 261,293 255,721 202,690 202,690 261,293 202,777 202,777 202,690 191,986 (71) 191,915 202,777 253,036 36,776 688.05% See accompanying notes to pension plan schedules. $ 2020 (2019) 11,356 6,706 $ 50.26% City's Covered Payroll 7,645 32,539 - 2021 (2020) 213,314 $ 55.05% $ 34,198 623.76% 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) $ 6,127 23,086 - 2015 (2014) $ 6,281 20,708 4,044 1,951 - (2,670) 12,613 (4,423) 11,970 (3,518) - (6,961) 23,097 (16,608) 20,060 (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% $ 31,661 137,717 54.05% $ 454.69% 30,782 447.39% 100 2014 (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, 2023 (in thousands) Public Safety Personnel Retirement System - Police Pension Reporting Fiscal Year (Measurement Date) 2023 (2022) 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 $ 13,979 64,052 - 2022 (2021) $ 13,861 61,557 - 2021 (2020) $ 14,016 57,794 - 2020 (2019) $ 15,015 53,953 - 18,155 10,488 2,112 - 19,067 - 10,259 21,092 (45,167) 61,507 (41,764) 35,766 (36,572) 54,305 (36,864) 63,455 886,034 947,541 850,268 886,034 795,963 850,268 732,508 795,963 53,349 6,608 (19,142) 38,561 6,268 101,528 34,340 6,045 4,551 32,387 5,718 18,270 (45,167) (345) (4,697) (41,764) (477) 104,116 (36,572) (371) (2) 7,991 (36,864) (319) 340 19,532 466,887 466,887 462,190 362,771 362,771 466,887 354,780 354,780 362,771 335,631 (383) 335,248 354,780 City's Net Pension Liability - Ending (a) - (b) $ 485,351 $ 419,147 $ 487,497 $ 441,183 Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 48.78% 52.69% 42.67% 44.57% 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 Covered Payroll $ City's Net Pension Liability as a Percentage of its Covered Payroll 68,471 708.84% See accompanying notes to pension plan schedules. 101 $ 64,419 650.66% $ 63,232 770.97% $ 63,993 689.42% Reporting Fiscal Year (Measurement Date) 2019 (2018) $ 13,826 50,926 - 2018 (2017) $ 15,841 47,572 5,718 2017 (2016) $ 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 $ 377,892 $ 358,206 $ 282,610 $ 267,799 45.82% 45.91% 44.26% 49.95% 50.66% $ 63,003 629.93% $ 64,740 583.71% $ 61,211 585.20% $ 62,461 $ 452.46% 102 59,688 448.66% 2014 (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, 2023 (in thousands) Public Safety Personnel Retirement System - Police OPEB Reporting Fiscal Year (Measurement Date) Total Liability Service Cost Interest on the Total Liability Changes of Benefit Terms Difference Between Expected and Actual Experience in the Measurement of the Liability Changes of Assumptions or Other Inputs Benefit Payments, Including Refunds of Employee Contributions Net Change in Total OPEB Liability Total OPEB Liability - Beginning Total OPEB Liability - Ending (a) 2023 (2022) 2022 (2021) 2021 (2020) 2020 (2019) $ $ $ $ 280 1,537 - 351 1,511 - 322 1,477 - 200 1,416 - 218 312 100 - 381 - 43 474 (1,571) 776 21,565 22,341 (1,494) 468 21,097 21,565 (1,455) 725 20,372 21,097 (1,391) 742 19,630 20,372 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 946 32 (448) 853 88 2,583 934 46 123 736 14 530 (1,571) (8) (1,049) (1,494) (10) 2,020 (1,455) (10) (362) (1,391) (9) (120) Plan Fiduciary Net Position - As Previously Reported Adjustment to Beginning Balance Plan Fiduciary Net Position - Beginning Plan Fiduciary Net Position - Ending (b) 11,989 11,989 10,940 9,969 9,969 11,989 10,331 10,331 9,969 10,067 384 10,451 10,331 City's Net OPEB Liability - Ending (a) - (b) $ 11,401 $ 9,576 $ 11,128 $ 10,041 Plan Fiduciary Net Position as a Percentage of the Total OPEB Liability 48.97% 55.59% 47.25% 50.71% $ 68,471 $ 64,419 $ 63,232 $ 63,993 16.65% 14.87% 17.60% 15.69% City's Covered Payroll City's Net OPEB Liability as a Percentage of its Covered Payroll See accompanying notes to pension plan schedules. 103 Reporting Fiscal Year (Measurement Date) 2019 (2018) 2018 (2017) 2017 through 2014 Information $ 190 1,359 - $ 213 1,356 35 472 - 312 (335) (1,325) 696 18,934 19,630 (1,239) 342 18,592 18,934 231 695 639 1,141 (1,325) (11) (410) (1,239) (10) 531 10,477 10,477 10,067 9,946 9,946 10,477 $ 9,563 $ 8,457 51.28% 55.33% $ 63,003 $ 64,740 15.18% 13.06% not available 104 City of Mesa, Arizona Schedule of City Pension Contributions June 30, 2023 (in thousands) Arizona State Retirement System Statutorily Required Contribution City's Contribution in Relation to the Statutorily Required Contribution City's Contribution (Deficiency) / Excess $ 2023 25,129 $ 2022 23,097 $ 2021 20,763 $ 2020 20,258 $ 25,129 - $ 23,097 - $ 20,763 - $ 20,258 - City's Covered Payroll $ 211,155 $ 192,542 $ 178,405 $ 175,767 11.64% 11.53% City's Contributions as a Percentage of Covered Payroll 11.90% 12.00% 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 $ 2023 22,569 $ 2022 20,178 City's Covered Payroll $ 26,388 3,819 $ 39,896 City's Contributions as a Percentage of Covered Payroll 66.14% See accompanying notes to plan schedules. 105 $ 2021 19,617 $ 27,797 7,619 $ 36,776 75.58% $ 2020 18,035 $ 19,617 - $ 18,035 - $ 34,198 $ 32,562 57.36% 55.39% $ 2019 19,124 $ 2018 17,650 $ 2017 17,423 $ 2016 16,955 $ 2015 16,146 $ 2014 15,750 $ 19,124 - $ 17,650 - $ 17,423 - $ 16,955 - $ 16,146 - $ 15,750 - $ 169,900 $ 162,089 $ 158,958 $ 155,868 $ 151,154 $ 147,402 10.96% 10.88% 11.26% $ 2019 16,431 $ 16,431 - $ 34,136 48.13% 10.89% $ 2017 13,490 $ 10,479 (3,810) $ $ 32,446 $ 2018 14,289 32.30% $ $ 2016 11,197 13,490 32,941 40.95% 10.67% $ 2015 9,827 $ 12,735 1,538 $ 32,453 10.68% $ 2014 9,157 $ 9,827 - $ 9,157 - $ 31,661 $ 30,782 39.24% 31.04% 106 29.75% City of Mesa, Arizona Schedule of City Pension Contributions June 30, 2023 (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 $ 2023 42,430 $ 2022 37,457 $ 2021 37,484 $ 2020 34,308 $ 55,116 12,686 $ 53,372 15,915 $ 37,484 - $ 34,308 - City's Covered Payroll $ 73,451 $ 68,471 $ 64,419 $ 63,232 City's Contributions as a Percentage of Covered Payroll 75.04% 77.95% 58.19% 54.26% $ 2022 838 $ 2021 713 2020 $ 815 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 $ 2023 1,024 $ 1,024 - $ 838 - $ 713 - $ 815 - City's Covered Payroll $ 73,451 $ 68,471 $ 64,419 $ 63,232 City's Contributions as a Percentage of Covered Payroll 1.39% See accompanying notes to plan schedules. 107 1.22% 1.11% 1.29% $ 2019 29,314 $ 2018 29,048 $ 2017 26,809 $ 2016 21,697 $ 2015 19,680 $ 2014 17,443 $ 29,314 - $ 21,726 (7,322) $ 26,809 - $ 24,067 2,370 $ 19,680 - $ 17,443 - $ 63,993 $ 63,003 $ 64,740 $ 61,211 $ 62,461 $ 59,688 45.81% 34.48% 41.41% 2019 $ 733 2018 $ 772 2017 641 $ 39.32% 2016 through 2014 Information not $ 733 - $ 772 - $ 641 - $ 63,993 $ 63,003 $ 64,740 1.15% 1.23% available 0.99% 108 31.51% 29.22% City of Mesa, Arizona Notes to Pension Plan Schedules June 30, 2023 (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 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. Actuarial Assumptions: Investment Rate of Return p y In the 2019 actuarial valuation, the investment rate of return was decreased from 7.4% to 7.3%. 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. Projected Salary Increases Wage Growth Retirement Age Mortality 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. 109 City of Mesa, Arizona Schedule of Changes in the City's Total OPEB Liability June 30, 2023 (in thousands) 2023 2022 2021 2020 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 (1,720) (221,049) 26,062 (21,298) (2,548) 18,858 34,022 92,823 (23,491) (199,992) 978,037 $ 778,045 $ (21,010) 35,403 942,634 978,037 $ (20,641) 45,259 897,375 942,634 (19,687) 150,560 746,815 $ 897,375 City's Covered Employee Payroll $ $ 277,022 $ 271,561 $ 268,029 7.6% 7.3% $ City's Contributions as a % of Covered Employee Payroll 24,665 21,603 297,789 7.9% $ 26,157 25,492 7.6% $ 24,165 25,425 $ Note: The City funds OPEB benefits on a “pay-as-you-go” basis. Therefore there are no assets accumulated in a trust that meet the criteria of GASB 75. In addition, employer contributions are equal to benefit payments. 110 20,818 22,584 2019 $ 19,997 22,447 2018 $ 21,430 20,112 (1,133) 17,023 (46,955) (17,232) 41,102 705,713 $ 746,815 (19,013) (24,426) 730,139 $ 705,713 $ 257,537 $ 256,639 6.7% 7.4% 2017 through 2014 Information not available 111 City of Mesa, Arizona Budgetary Comparison Schedule (Non-GAAP Basis) Combined Governmental & Enterprise Funds For the Fiscal Year Ended June 30, 2023 (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 2,300,000 $ 2,300,000 $ 2,071,051 Variance with Final Budget $ 228,949 2,300,000 2,300,000 2,063,471 236,529 - - 7,580 (7,580) 1,147,888 1,147,888 1,147,888 - 1,147,888 $ 1,147,888 $ 1,155,468 $ 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. 112 (7,580) City of Mesa, Arizona Notes to Budgetary Comparison Schedule June 30, 2023 (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”, a reconciliation is performed. Adjustments necessary to convert the results of operations of the governmental and proprietary funds for the year ended June 30, 2023 on the “GAAP basis” to the “budget basis” as follows: Net Change in Fund Balance-Budget Basis - $ Bond related 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 - 7,580 51,042 7,674 2,455 25,183 5,488 (1,619) 897 (5,077) (6,624) $ 87,000 113 COMBINING STATEMENTS A N N UA L CO M P R E H E N S I V E F I N A N CI A L R E P O RT F O R T H E F I S C A L Y E A R E N D E D | J U N E 30, 2023 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. 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. Other Restricted Funds accounts for federal and state grant expenditures and other City programs. The principle financing source is federal and state grant revenues. 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. Relief Fund accounts for federal expenditures dedicated to supporting the City’s response to COVID19. 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, 2023 (in thousands) Assets Pooled Cash and Investments Accounts Receivable, Net Accrued Interest Receivable Due from Other Governments Prepaid Costs Restricted Assets: Pooled Cash and Investments Cash with Fiscal Agent Accounts Receivable Due from Other Governments Total Assets Liabilities Accounts Payable and Accrued Liabilities Due to Other Funds Customer and Defendant Deposits Unearned Revenue Payable from Restricted Assets: Accrued Interest Payable Matured Bonds Payable Total Liabilities Special Revenue Funds Cemetery Community Facilities District Development Impact Fees Environmental Compliance $ $ $ $ $ $ Deferred Inflows of Resources Unavailable Revenue Total Deferred Inflows of Resources Fund Balances Nonspendable Restricted Committed Assigned Unassigned Total Fund Balances Total Liabilities, Deferred Inflows of Resources and Fund Balances $ 2,892 13 15 2,920 - $ $ 744 3 4 751 61 70 $ $ 21,358 21,358 - $ $ Highway User Revenue 21,173 130 89 50 $ 46,545 234 4,854 38 21,442 $ 51,671 1,047 - $ 4,209 - - 131 - 1,047 4,209 2 2 - - - - 2,918 2,918 620 620 21,358 21,358 50 20,345 20,395 38 47,424 47,462 21,442 $ 51,671 2,920 $ 114 751 $ 21,358 $ (Continued) Special Revenue Funds Mesa Arts Center Restoration Mesa Housing Authority Other Restricted Funds Public Safety Sales Tax Quality of Life Sales Tax Relief Fund Street Sales Tax Total Special Revenue Funds $ $ $ 11,783 564 89 2,768 242 $ 55,425 219 7,076 9 $ 29,727 119 7,081 - $ 55,358 135 223 533 $ 85,875 1,050 348 8,510 78 $ 15,446 $ 62,729 $ 36,927 $ 56,249 $ 95,861 $ 3,068 1,300 $ $ $ $ $ $ 1,356 4 5 1,365 226 $ $ $ 71 (61) 2,030 2,040 1,103 2,449 $ $ 2,103 - - 781 56,615 1,886 8,531 - 332,307 1,835 1,344 32,323 950 368,759 14,258 8,531 60,660 226 3,552 4,368 2,103 - 57,396 10,417 83,449 1 1 - 1,528 1,528 - - - 365 365 1,896 1,896 1,138 1,138 (1,512) (1,512) 242 17,394 2,610 (10,696) 9,550 9 60,617 60,626 36,927 36,927 533 (1,680) (1,147) 78 85,001 85,079 950 269,341 27,011 (13,888) 283,414 15,446 $ 62,729 $ 36,927 $ 56,249 $ 95,861 1,365 $ 2,040 $ 115 $ 368,759 City of Mesa, Arizona Combining Balance Sheet Non-Major Governmental Funds June, 30, 2023 (in thousands) Assets Pooled Cash and Investments Accounts Receivable, Net Accrued Interest Receivable Due from Other Governments Prepaid Costs Restricted Assets: Pooled Cash and Investments Cash with Fiscal Agent Accounts Receivable Due from Other Governments Total Assets Liabilities Accounts Payable and Accrued Liabilities Due to Other Funds Customer and Defendant Deposits Unearned Revenue Payable from Restricted Assets: Accrued Interest Payable Matured Bonds Payable Total Liabilities Capital Projects Funds Community Facilities District General Capital Projects $ 338 338 $ 64,571 276 47 $ 64,894 - $ 4,245 - - $ $ 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 $ 725 3 - $ 57,635 175 50 4,224 - $ 123,269 175 329 4,224 47 728 $ 62,084 $ 128,044 Public Safety Parks $ Streets Total Capital Projects Funds - $ - $ - $ 5,169 23,241 - $ 3,400 - $ 2,307 5,414 $ 15,121 23,241 5,414 4,245 28,410 3,400 7,721 43,776 - - - - 1,226 1,226 1,226 1,226 338 338 47 63,609 (3,007) 60,649 (28,410) (28,410) (2,672) (2,672) 53,137 53,137 47 53,475 63,609 (34,089) 83,042 338 $ 64,894 728 $ 62,084 $ 128,044 116 $ - $ $ (Concluded) Debt Service Funds Community Facilities District $ $ $ $ 13 8,788 1,182 21,404 101 31,488 3 - Excise Tax Obligation General Obligation Bonds Highway User Revenue Bonds Total Debt Service Funds Total Nonmajor Governmental Funds $ $ $ $ $ $ $ 34 1,971 2,005 - $ $ 12 6,055 39,579 894 46,540 - - 25 - 10,906 $ 10,906 14,877 53,638 21,404 995 $ 90,939 $ $ $ $ - 3 - 455,576 2,010 1,698 36,547 997 14,877 53,638 21,404 995 587,742 29,379 23,241 8,534 66,074 1,970 4,775 6,748 726 1,245 1,971 5,584 33,995 39,579 906 10,000 10,906 9,186 50,015 59,204 9,186 50,015 186,429 21,436 21,436 - 470 470 - 21,906 21,906 25,028 25,028 3,304 3,304 34 34 6,491 6,491 - 9,829 9,829 997 332,645 27,011 63,609 (47,977) 376,285 46,540 $ 10,906 $ 90,939 31,488 $ 2,005 $ 117 $ 587,742 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, 2023 (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 Special Revenue Funds Cemetery Community Facilities District Development Impact Fees Environmental Compliance Highway User Revenue $ $ $ $ $ Expenditures: Current: General Government Public Safety Community Environment Cultural-Recreational Debt Service: Principal Retirement Interest on Bonds Service Charges Cost of Issuance Capital Outlay Total Expenditures 126 64 190 552 (8) 544 9,480 9,480 276 17,570 94 17,940 48,007 1 48,008 - 258 - - 2,148 32 4,858 7,899 86 19,253 - - 258 - 1,319 16,256 10,378 29,717 Excess (Deficiency) of Revenues Over (Under) Expenditures 190 286 9,480 1,684 18,291 Other Financing Sources (Uses): Transfers In Transfers Out Sale of Capital Assets Face Amount of Bonds Issued Face Amount of Leases Issued Premium on Issuance of Bonds (Net) Total Other Financing Sources (Uses) (887) (887) - (3,122) (3,122) (4) (4) (11,825) (11,825) Net Change in Fund Balances (697) 286 6,358 1,680 6,466 Fund Balances - Beginning 3,615 334 15,000 18,715 40,996 Fund Balances - Ending $ 2,918 $ 118 620 $ 21,358 $ 20,395 $ 47,462 (Continued) Special Revenue Funds Mesa Arts Center Restoration Mesa Housing Authority Other Restricted Funds Public Safety Sales Tax Quality of Life Sales Tax $ $ $ 4,938 654 16,029 15 771 (130) 66 2,478 24,821 $ 41,304 181 41,485 $ 41,344 131 (126) 41,349 $ 544 (13) 531 24,783 91 24,874 $ Relief Street Sales Tax Total Special Revenue Funds 32,764 1,532 34,296 $ 49,613 229 379 2,073 54 594 52,942 $ 132,261 552 4,938 10,494 122,238 19,784 1,315 1,740 66 3,072 296,460 - 27,022 - 7,861 4,845 102 1,967 238 27,113 - 234 29,832 - 2,584 6,734 16,093 101 3,254 441 22,479 - 16,663 68,997 89,807 9,967 - 27,022 10 7,469 22,254 6,756 34,107 30,066 7,207 32,719 7,147 33,321 10 40,276 225,720 531 (2,148) 2,567 7,378 11,283 1,577 19,621 70,740 - 2 2 455 604 1,059 - - - (78) (78) 457 (15,916) 604 (14,855) 531 (2,146) 3,626 7,378 11,283 1,577 19,543 55,885 607 634 5,924 53,248 25,644 (2,724) 65,536 227,529 1,138 $ (1,512) 9,550 $ 60,626 $ 36,927 (1,147) $ 85,079 $ 283,414 $ 119 $ 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, 2023 (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 $ $ - (992) (47) (1,039) Parks $ (115) (115) Public Safety Streets Total Capital Projects Funds $ $ $ 466 466 3 13,240 302 2,997 16,542 3 13,240 302 2,356 (47) 15,854 Expenditures: Current: General Government Public Safety Community Environment Cultural-Recreational Debt Service: Principal Retirement Interest on Bonds Service Charges Cost of Issuance Capital Outlay Total Expenditures - - - - 571 11,931 12,502 43,580 43,580 33,271 33,271 12,862 12,862 19,833 19,833 571 121,477 122,048 Excess (Deficiency) of Revenues Over (Under) Expenditures (12,502) (44,619) (33,386) (12,396) (3,291) (106,194) Other Financing Sources (Uses): Transfers In Transfers Out Sale of Capital Assets Face Amount of Bonds Issued Face Amount of Leases Issued Premium on Issuance of Bonds (Net) Total Other Financing Sources (Uses) 11,975 559 12,534 65,442 101 65,543 - - (35) (35) 65,442 (35) 101 11,975 559 78,042 Net Change in Fund Balances 32 20,924 (33,386) (12,396) (3,326) (28,152) Fund Balances - Beginning 306 39,725 4,976 9,724 56,463 111,194 338 $ 60,649 $ (28,410) $ (2,672) $ 53,137 $ 83,042 Fund Balances - Ending $ 120 - - (Concluded) Debt Service Funds Community Facilities District $ $ 7,090 1,830 216 9,136 Excise Tax Obligation General Obligation Bonds Highway User Revenue Bonds Total Debt Service Funds Total Nonmajor Governmental Funds $ $ $ $ $ 200 200 39,361 595 343 40,299 - 46,451 1,830 200 595 559 49,635 132,261 47,003 4,938 1,830 10,497 135,478 20,286 1,910 4,655 66 3,025 361,949 - - - - - 16,663 68,997 89,807 9,967 4,836 3,735 7 1 8,579 1,245 1,442 1 2,688 33,995 11,197 3 45,195 10,000 1,812 2 11,814 50,076 18,186 13 1 68,276 50,086 18,186 13 572 161,753 416,044 557 (2,488) (4,896) (11,814) (18,641) (54,095) - 2,495 2,495 3,892 (600) 3,292 11,814 11,814 18,201 (600) 17,601 84,100 (16,551) 101 11,975 604 559 80,788 557 7 (1,604) - (1,040) 26,693 2,747 27 8,095 - 10,869 349,592 3,304 $ 34 $ 6,491 $ - $ 121 9,829 $ 376,285 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, 2023 (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: Lease Asset Capital Assets, Not Being Depreciated Capital Assets, Being Depreciated, Net Total Noncurrent Assets 419 10,112 10,531 9,006 32 1,202 10,240 Employee Benefits Self Insurance Total 7,747 31 297 8,075 $ 45,302 184 207 180 45,873 $ 62,055 603 207 243 10,112 1,499 74,719 43 3,448 3,491 - - 164 6 170 164 43 3,454 3,661 14,022 10,240 8,075 46,043 78,380 3,454 3,454 363 363 239 239 583 583 4,639 4,639 17,476 10,603 8,314 46,626 83,019 Liabilities Current Liabilities Accounts Payable and Accrued Liabilities Claims Payable Due to Other Funds Current Portion of OPEB Liability Current Portion of Compensated Absences Total Current Liabilities 1,204 1,953 500 113 3,770 5 10,469 35 13 10,522 165 28,284 27 7 28,483 2,017 4,465 102 16 6,600 3,391 43,218 1,953 664 149 49,375 Long-Term Liabilities Lease Compensated Absences Net Pension and OPEB Liability Total Long-Term Liabilities 543 25,600 26,143 131 2,528 2,659 26 1,698 1,724 174 97 4,454 4,725 174 797 34,280 35,251 29,913 13,181 30,207 11,325 84,626 4,837 4,837 364 364 267 267 939 939 6,407 6,407 3,491 (20,765) (17,274) (2,942) (2,942) (22,160) (22,160) 170 34,192 $ 34,362 3,661 (11,675) $ (8,014) 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 $ $ 122 $ City of Mesa, Arizona Internal Service Funds Combining Statement of Revenues, Expenses and Changes in Net Position For the Fiscal Year Ended June 30, 2023 (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 $ $ $ $ 9,255 29,785 962 - - - Total $ 9,255 29,785 962 355 40,357 7,205 7,205 6,083 88 6,171 14,207 78,361 5,151 6,359 104,078 14,207 91,649 5,151 6,802 157,811 9,533 29,922 988 - - - 9,533 29,922 988 40,443 1,406 5,422 6,828 2,814 4,774 7,588 8,615 90,548 99,163 12,835 100,744 154,022 Operating Income (Loss) Before Depreciation (86) 377 (1,417) 4,915 3,789 Depreciation and Amortization (287) - - (81) (368) Operating Income (Loss) (373) 377 (1,417) 4,834 3,421 Nonoperating Revenues (Expense): Investment Income/(Loss) Lease Interest Expenses Total Nonoperating Revenues (Expenses) (50) (50) 124 124 16 16 225 (9) 216 315 (9) 306 Income (Loss) Before Capital Contributions (423) 501 (1,401) 5,050 3,727 Capital Contributions Transfers In Transfers Out 1,316 (48) 1,100 - 2,653 - (26) 1,316 3,753 (74) Change in Net Position 845 1,601 1,252 5,024 8,722 (18,119) (4,543) (23,412) 29,338 (16,736) Operating Expenses: Warehouse, Maintenance & Services: Warehouse Fleet Support Services Printing and Graphics Self-Insurance: Administrative Costs Claims and Premiums Paid Total Operating Expenses Total Net Position - Beginning Total Net Position - Ending $ (17,274) $ 123 (2,942) $ (22,160) $ 34,362 $ (8,014) City of Mesa, Arizona Internal Service Funds Combining Statement of Cash Flows For the Fiscal Year Ended June 30, 2023 (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 $ $ $ 40,389 (26,015) (15,022) 7,205 (7,811) (1,051) Employee Benefits Self Insurance Total 6,171 (7,073) (703) $ 103,954 (100,527) (252) $ 157,719 (141,426) (17,028) (648) (1,657) (1,605) 3,175 (735) 834 (48) 1,100 - 2,653 - (26) 834 3,753 (74) 786 1,100 2,653 (26) 4,513 (1,404) 1,316 - - (244) 174 (9) - (1,404) (244) 174 (9) 1,316 (88) - - (79) (167) (50) (50) 117 117 3 3 156 156 226 226 Net Change in Pooled Cash and Investments - (440) 1,051 3,226 3,837 Pooled Cash and Investments at Beginning of Year - 9,446 6,696 42,076 58,218 Cash Flows From Noncapital Financing Activities: Interfund Payable Increase Transfers In From Other Funds Transfers Out From Other Funds Net Cash Provided By/(Used For) Noncapital Financing Activities Cash Flows from Capital and Related Financing Activities: Acquisition and Construction of Capital Assets Lease Acquisition Financing of Lease Interest Income/(Expense) on Lease Capital Contributions Net Cash Provided By/(Used For) Capital and Related Financing Activities Cash Flows from Investing Activities: Interest Received on Investments Net Cash Provided By/(Used For) Investing Activities Pooled Cash and Investments at End of Year $ - $ 9,006 $ 7,747 $ 45,302 $ 62,055 $ (373) $ 377 $ (1,417) $ $ 3,421 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 and Amortization 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 Pension and OPEB Liability (Increase)/Decrease in Deferred Outflows Increase/(Decrease) in Deferred Inflows Increase/(Decrease) in Other Accrued Expenses Total Adjustments Net Cash Provided by/(Used for) Operating Activities $ 4,834 287 - - 81 368 30 (973) 9 193 (2,768) 1,009 1,994 (56) (113) (31) (44) 98 (27) (1,917) (37) 115 (74) 67 26 (285) (125) 32 (303) (678) 177 538 (1,381) (95) (973) (109) (26) (3,564) 1,351 2,531 (3,639) (275) (2,034) (188) (1,659) (4,156) (648) 124 $ (1,657) $ (1,605) $ 3,175 $ (735) SUPPLEMENTAL INFORMATION A N N UA L CO M P R E H E N S I V E F I N A N CI A L R E P O RT F O R T H E F I S C A L Y E A R E N D E D | J U N E 30, 2023 City of Mesa, Arizona Supplemental Information Budgetary Comparison Schedule (Non-GAAP Basis) Community Facilities Districts - Cadence For the Fiscal Year Ended June 30, 2023 (in thousands) Budgeted Amounts Original Revenues: Property Taxes Special Assessments Investment Income Contributions Total Revenues $ Expenditures: Current: General Government Debt Service: Principal Retirement Interest on Bonds Service Charges Cost of Issuance Capital Outlay Total Expenditures Excess (Deficiency) of Revenues Over (Under) Expenditures Other Financing Uses: Face Amount of Bonds Issued Premium on Issuance of Bonds Total Other Financing Uses Net Change in Fund Balances Fund Balance - Beginning Fund Balance - Ending $ Actual Budgetary Basis Variance with Final Budget $ $ Final 1,206 358 64 1,628 $ 1,206 358 64 1,628 1,202 356 11 1,568 (5) (3) 11 (64) (60) 1,057 1,057 43 1,014 858 617 2 155 6,339 9,028 858 617 2 155 6,339 9,028 833 520 2 190 5,016 6,604 25 97 0 (35) 1,323 2,424 (7,400) (7,400) (5,036) 2,364 7,400 7,400 7,400 7,400 4,975 238 5,213 2,425 (238) 2,187 - - 177 177 479 479 479 - 479 $ 479 $ 656 $ Note: Cadence is a blended component unit. Budget is approved by the Board at the District Level 125 177 City of Mesa, Arizona Supplemental Information Budgetary Comparison Schedule (Non-GAAP Basis) Community Facilities Districts - Eastmark 1 For the Fiscal Year Ended June 30, 2023 (in thousands) Budgeted Amounts Original Revenues: Property Taxes Special Assessments Investment Income Contributions Total Revenues $ Actual Budgetary Basis Variance with Final Budget $ $ Final 5,984 2,221 $ 52 8,257 5,984 2,221 52 8,257 5,978 1,432 84 7,494 (6) (789) 84 (52) (763) Expenditures: Current: General Government Debt Service: Principal Retirement Interest on Bonds Service Charges Cost of Issuance Capital Outlay Total Expenditures 3,490 3,490 179 3,311 3,302 4,465 5 450 21,544 33,256 3,302 4,465 5 450 21,544 33,256 3,556 3,049 5 181 3,465 10,435 (254) 1,416 0 269 18,079 22,821 Excess (Deficiency) of Revenues Over (Under) Expenditures (24,999) (24,999) (2,941) 22,059 25,000 25,000 25,000 25,000 3,520 146 3,666 21,480 (146) 21,334 1 1 725 725 2,981 2,981 2,981 - Other Financing Uses: Face Amount of Bonds Issued Premium on Issuance of Bonds Total Other Financing Uses Net Change in Fund Balances Fund Balance - Beginning Fund Balance - Ending $ 2,981 $ 2,981 $ 3,706 $ Note: Eastmark #1 is a blended component unit. Budget is approved by the Board at the District Level 126 725 City of Mesa, Arizona Supplemental Information Budgetary Comparison Schedule (Non-GAAP Basis) Community Facilities Districts - Eastmark 2 For the Fiscal Year Ended June 30, 2023 (in thousands) Budgeted Amounts Original Revenues: Property Taxes Special Assessments Investment Income Contributions Total Revenues $ Actual Budgetary Basis Variance with Final Budget $ $ Final 469 339 90 897 $ 469 339 90 897 463 42 6 512 (6) (296) 6 (90) (385) Expenditures: Current: General Government Debt Service: Principal Retirement Interest on Bonds Service Charges Cost of Issuance Capital Outlay Total Expenditures 830 830 38 792 267 505 1 250 6,744 8,597 267 505 1 250 6,744 8,597 447 166 1 201 3,450 4,303 (180) 339 0 49 3,294 4,294 Excess (Deficiency) of Revenues Over (Under) Expenditures (7,700) (7,700) (3,791) 3,909 7,700 7,700 7,700 7,700 3,480 175 3,655 4,220 (175) 4,045 - - (136) (136) 287 287 287 - Other Financing Uses: Face Amount of Bonds Issued Premium on Issuance of Bonds Total Other Financing Uses Net Change in Fund Balances Fund Balance - Beginning Fund Balance - Ending $ 287 $ 287 $ 151 $ (136) Note: Eastmark #2 is a blended component unit. Budget is approved by the Board at the District Level 127 STATISTICAL SECTION A N N UA L CO M P R E H E N S I V E F I N A N CI A L R E P O RT F O R T H E F I S C A L Y E A R E N D E D | J U N E 30, 2023 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. 128 Revenue Capacity These schedules contain information to help readers assess the City’s most significant local revenue source, the sales tax. 140 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. 143 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. 151 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. 153 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) 2022-23 2021-22 2020-21 2019-20 GOVERNMENTAL ACTIVITIES Net Investment in Capital Assets Restricted Unrestricted $ 1,229,376 357,673 (848,807) $ 1,246,582 249,626 (889,238) $ 1,184,908 203,284 (841,670) $ 1,075,182 143,839 (833,300) Total Governmental Activities Net Position $ 738,242 $ 606,970 $ 546,522 $ 385,721 $ 92,703 114,531 245,653 $ 24,204 95,840 324,907 $ 30,965 70,940 318,490 $ 213,576 63,113 252,261 Total Business-type Activities $ 452,887 $ 444,951 $ 420,395 $ 528,950 PRIMARY GOVERNMENT Net Investment in Capital Assets Restricted Unrestricted $ 1,322,079 472,204 (603,154) $ 1,270,786 345,466 (564,331) $ 1,215,873 274,224 (523,180) $ 1,288,758 206,952 (581,039) Total Primary Government $ 1,191,129 $ 1,051,921 $ $ BUSINESS-TYPE ACTIVITIES Net Investment in Capital Assets Restricted Unrestricted 128 966,917 914,671 Table I (Concluded) 2018-19 2017-18 2016-17 2015-16 2014-15 2013-14 $ 1,038,928 103,164 (834,016) $ 1,019,888 88,305 (858,392) $ 986,354 88,721 (711,367) $ 965,148 81,941 (666,986) $ 932,660 72,170 (666,758) $ 866,332 60,555 (120,803) $ 308,076 $ 249,801 $ 363,708 $ 380,103 $ 338,072 $ 806,084 $ 170,427 47,857 350,006 $ 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 $ 568,290 $ 505,983 $ 518,804 $ 510,416 $ 536,253 $ 615,445 $ 1,209,355 151,021 (484,010) $ 1,285,900 128,745 (658,861) $ 1,233,952 131,767 (483,207) $ 1,267,669 131,080 (508,230) $ 1,260,403 119,746 (505,824) $ 1,260,052 103,578 57,899 $ $ $ $ $ $ 1,421,529 876,366 755,784 882,512 890,519 129 874,325 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 2022-23 $ 192,361 430,268 157,270 100,791 16,138 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 $ 134,299 384,800 152,847 62,014 17,841 Total Governmental Activities Expenses 896,827 896,942 842,218 751,801 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 48,672 51,105 128,558 82,752 51,213 7,671 1,528 - 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 - Total Business-type Activities Expenses 371,499 343,585 329,035 320,208 $ 1,268,326 $ 1,240,527 $ 1,171,253 $ 1,072,009 Total Primary Government Expenses 130 Table II (Continued) 2018-19 2017-18 2016-17 2015-16 2014-15 2013-14 $ 119,819 355,752 119,506 58,345 18,078 $ 105,140 334,905 113,916 54,828 19,514 $ 101,301 379,505 104,173 55,739 19,279 $ 96,860 305,376 117,120 54,967 20,424 $ 102,396 302,633 101,531 52,430 23,939 $ 103,819 277,614 125,700 49,275 24,431 671,500 628,303 659,997 594,747 582,929 580,839 22,475 33,124 103,821 57,468 38,524 5,029 2,117 4,413 2,748 7,867 1,186 - 25,573 31,636 101,005 74,157 37,988 5,308 1,965 4,481 3,174 5,870 1,181 - 26,561 37,109 95,608 71,782 37,911 5,125 2,028 4,711 3,687 6,042 1,268 - 27,647 31,549 95,574 73,877 36,586 4,865 2,575 4,252 2,913 5,271 1,182 - 28,495 32,104 101,863 71,161 36,979 2,863 2,210 3,715 1,200 8,581 885 4,124 30,044 35,020 93,871 65,637 32,908 4,343 2,555 3,060 2,879 6,201 1,153 - 278,772 292,338 291,832 286,291 294,180 277,671 $ 950,272 $ 920,641 $ 951,829 $ 881,038 $ 877,109 $ 858,510 131 City of Mesa, Arizona Table II (Continued) Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) (in thousands) PROGRAM REVENUES 2022-23 2021-22 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 $ 46,116 70,224 8,968 936 75,436 24,611 226,291 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 48,208 70,556 167,806 95,665 69,269 4,973 1,427 268 21,796 479,968 Total Primary Government Program Revenues $ 706,259 $ NET (EXPENSE) REVENUE Governmental Activities Business-type Activities Total Primary Government Net Expense $ 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 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 35,896 412,383 746,042 $ 651,899 $ 585,394 $ (670,536) 108,469 $ (621,583) 127,098 $ (629,852) 110,498 $ (578,790) 92,175 $ (562,067) $ (494,485) $ (519,354) $ (486,615) 132 Table II (Continued) 2018-19 $ 23,812 43,214 10,838 3,439 25,326 13,780 120,409 2017-18 $ 25,119 40,222 10,436 2,979 34,446 23,618 136,820 2016-17 $ 23,152 38,348 9,873 1,330 26,955 24,451 124,109 2015-16 $ 23,254 38,178 11,049 9,385 26,361 35,925 144,152 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 29,986 43,547 144,896 84,220 62,432 4,339 1,608 3,153 75 250 1,148 2,316 19,692 397,662 31,425 39,171 147,667 83,078 60,522 3,983 1,635 2,809 51 238 1,215 2,406 23,474 397,674 33,534 39,752 138,335 79,056 58,117 3,846 1,545 3,299 54 291 1,231 158 28,711 387,929 32,254 38,962 130,674 79,523 55,354 3,623 1,645 2,798 63 201 1,234 267 16,929 363,527 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 $ 518,071 $ 534,494 $ 512,038 $ 507,679 $ 527,279 $ 442,362 $ (551,091) 118,890 $ (491,483) 105,336 $ (535,888) 96,097 $ (450,595) 77,236 $ (407,206) 57,376 $ (469,418) 53,270 $ (432,201) $ (386,147) $ (439,791) $ (373,359) $ (349,830) $ (416,148) 133 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 2022-23 2021-22 2020-21 2019-20 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 $ 331,144 46,906 7,319 246,412 31,799 8,542 8,233 1,854 119,599 $ 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 Total Governmental Activities 801,808 682,032 685,345 656,435 BUSINESS-TYPE ACTIVITIES: Occupancy Taxes Utility Development Fees Investment Income (Loss) Gain (Loss) on Sale of Capital Assets Miscellaneous Transfers 14,142 3,672 1,252 (119,599) 21,021 (9,155) 1,199 (115,607) 45 192 (113,982) 1,459 7,618 (801) (3,397) (136,394) Total Business-type Activities (100,533) (102,542) (113,745) (131,515) Total Primary Government $ 701,275 $ 579,490 $ 571,600 $ 524,920 Change in Net Position Governmental Activities Business-type Activities $ 131,272 7,936 $ 60,448 24,556 $ 55,493 (3,247) $ 77,645 (39,340) Total Primary Government $ 139,208 $ 85,004 $ 52,246 $ 38,305 134 Table II (Concluded) 2018-19 2017-18 2016-17 2015-16 2014-15 2013-14 $ 189,871 36,013 3,246 175,278 65,189 13,729 11,531 (27) 114,535 $ 169,024 35,571 2,628 167,540 80,312 1,912 5,418 (2,462) 116,006 $ 159,735 34,684 2,536 158,916 46,817 448 11,161 (1,411) 106,607 $ 151,826 33,825 2,331 149,350 44,928 2,210 6,008 102,148 $ 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 5,550 109,520 609,365 575,949 519,493 492,626 478,743 504,792 1,602 8,004 44,056 4,290 (114,535) 1,192 1,691 261 1,915 (116,006) 1,085 983 16,364 466 (106,607) 1,161 3,020 (6,145) 1,039 (102,148) 999 1,141 5,157 233 (94,427) 851 1,453 18,697 288 (109,520) (56,583) (110,947) (87,709) (103,073) (86,897) (88,231) $ 552,782 $ 465,002 $ 431,784 $ 389,553 $ 391,846 $ 416,561 $ 58,275 62,307 $ 84,466 (5,611) $ (16,395) 8,388 $ 42,031 (25,837) $ 71,537 (29,521) $ 35,374 (34,961) $ 120,582 $ 78,855 $ $ 16,194 $ 42,016 $ (8,007) 135 413 City of Mesa, Arizona Table III Fund Balance, Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) (in thousands) 2022-23 2021-22 $ $ Total General Fund $ 375,416 $ 331,767 $ 288,608 $ 195,068 ALL OTHER GOVERNMENTAL FUNDS Nonspendable Restricted (1) Committed Assigned Unassigned $ 997 332,645 27,011 63,609 (47,977) $ $ $ Total All Other Governmental Funds $ 376,285 $ 349,592 GENERAL FUND Nonspendable Restricted Committed Assigned Unassigned 4,299 8,978 184,499 177,640 136 3,185 4,313 171,743 152,526 723 296,748 25,677 39,153 (12,709) 2020-21 $ 2,680 18,529 79,024 188,375 928 274,623 66,679 897 (11,517) $ 331,610 2019-20 $ 2,301 19,910 42,515 130,342 576 184,980 63,866 786 (1,043) $ 249,165 Table III (Concluded) 2018-19 $ 794 26 14,016 30,869 90,190 2017-18 $ 2,304 10,377 28,346 89,347 2016-17 $ 2015-16 2014-15 2013-14 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 $ 135,895 $ 130,374 $ 114,426 $ 94,806 $ 77,945 $ 77,311 $ $ $ $ 77 95,701 28,580 6 (155) $ 138 172,316 30,092 (31) $ 23 190,609 21,379 (675) 1,196 159,745 57,432 459 (134) $ 218,698 135 132,462 41,641 22 (176) $ 174,084 37 112,105 30,928 2 (69) $ 143,003 $ 124,209 $ 202,515 137 $ 211,336 City of Mesa, Arizona Table IV Fund Balance, Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) (in thousands) 2022-23 2021-22 2020-21 2019-20 2018-19 $ 331,144 47,003 7,319 1,830 46,116 345,790 70,224 8,968 8,227 107 8,367 875,095 $ 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 6,688 539,094 122,514 390,553 107,001 70,381 110,608 365,887 127,637 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 53,495 18,732 13 572 176,745 940,006 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 Excess of Revenues Under Expenditures (64,911) (93,683) (76,158) (66,053) (112,713) OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Sale of Capital Asset Face Amount of Bonds Issued Financing of Leases Premium on Issuance of Bonds (Net) Issuance of Refunding Bonds Payment to Refunding Bond Agent Total Other Financing Sources (Uses) 189,252 (73,332) 2,019 11,975 4,780 559 135,253 143,814 (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 $ 70,342 $ 61,142 $ 175,985 89,640 $ 50,135 8.73% 9.26% 9.08% 10.39% 10.07% 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%. 138 $ Table IV (Concluded) 2017-18 2016-17 2015-16 2014-15 2013-14 $ 169,024 35,616 2,628 1,174 25,119 223,800 40,222 10,436 1,608 429 5,547 515,603 $ 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 90,209 266,459 73,404 46,143 86,360 261,892 68,403 43,744 79,448 254,528 65,559 43,651 81,066 243,570 60,512 40,365 75,077 231,364 56,573 38,788 34,738 18,477 14 1,023 76,279 606,746 32,587 17,994 15 1,271 82,062 594,328 107,383 18,905 14 1,505 91,784 662,777 28,367 23,269 13 657 74,150 551,969 71,015 23,704 727 102,657 599,905 (91,143) (118,025) (202,143) (105,355) (181,436) 176,572 (66,208) 26,745 1,063 138,172 139,516 (31,931) 47,682 4,613 47,450 (50,891) 156,439 122,572 (24,298) 46,530 2,283 43,304 (49,693) 140,698 123,044 (45,324) 18,999 2,952 17,555 (20,058) 97,168 141,909 (32,389) 40,800 430 150,750 $ 47,029 $ 38,414 $ (61,445) (8,187) $ (30,686) 10.03% 9.88% 22.12% 10.81% 19.05% $ 139 City of Mesa, Arizona Table V Sales Tax Collections by Category Last Ten Fiscal Years (in thousands) 2022-23 2021-22 2020-21 Retail Sales Rentals Utilities Restaurants & Bars Communications Amusements Publishing Miscellaneous Printing & Advertising Contracting $ 169,720 51,391 19,982 27,812 3,493 2,716 478 1,381 632 53,532 $ 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 Total $ 331,137 $ 301,862 $ 253,823 $ 219,915 $ 189,871 $ 169,024 2.00% 2.00% 2.00% City Direct Tax Rate (1) 2019-20 (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 140 2.00% 2018-19 2.00% 2017-18 1.75% Table V (Concluded) 2016-17 2015-16 2014-15 2013-14 $ 79,716 26,340 13,575 15,002 4,432 1,581 526 1,313 446 16,806 $ 76,160 25,578 13,251 14,240 4,229 1,561 688 1,068 428 14,623 $ 71,996 25,102 13,111 13,708 4,796 1,542 747 771 461 14,103 $ 69,276 24,374 12,344 12,972 4,230 1,469 830 823 455 13,794 $ 159,737 $ 151,826 $ 146,337 $ 140,567 1.75% 1.75% 1.75% 1.75% 141 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 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 1.75% 1.75% 1.75% 1.75% 1.75% 2.00% 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 142 City of Mesa, Arizona Table VII Ratios of Outstanding Debt by Type Last Ten Fiscal Years (in thousands) - 2022-23 Governmental Activities General Obligation Bonds Highway User Revenue Bonds Excise Tax Revenue Obligation Bonds Special Assessment Bonds Community Facilities District Leases Subscription-Based Information Technology Arrangements Notes Payable Business-type Activities Utility System Revenue Bonds Utility Revenue Obligations General Obligation Bonds Notes Payable Total Primary Government $ $ 2020-21 335,174 40,420 40,245 95,193 23,025 $ 2019-20 353,434 51,141 42,078 86,134 - $ 334,609 58,750 219 57,307 - 2,866 - - - - 1,198,362 155,366 983 $ 1,851,590 1,322,930 92,203 1,135 $ 1,950,325 1,382,558 16,977 28 1,285 $ 1,933,635 1,242,670 151 1,431 $ 1,695,137 9.44% 9.74% 12.21% 10.99% Percentage of Personal Income (1) Per Capita (1) 298,366 29,916 38,387 102,630 24,714 2021-22 $ 3,616 $ (1) Information on personal income and population is presented on Table XII. 143 3,832 $ 3,837 - $ 3,298 Table VII (Concluded) 2018-19 $ 2017-18 370,479 67,905 49,025 438 40,631 - $ 2016-17 365,519 76,620 4,902 1,005 28,813 - $ 2015-16 374,443 84,995 94,060 1,340 19,172 - $ 2014-15 350,560 92,895 94,060 2,085 19,315 - $ 2013-14 336,716 100,285 94,060 2,830 10,974 - 344,040 107,705 94,060 3,574 5,897 72 - - - - 77,835 77,835 1,279,020 191 1,574 $ 1,809,263 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 12.26% 12.62% 13.74% 13.79% 14.42% 15.23% $ 3,541 $ 3,406 $ 3,525 - $ $ 3,421 144 - $ 3,534 - $ 3,578 City of Mesa, Arizona Table VIII Ratios of General Bonded Debt Outstanding Last Ten Fiscal Years (in thousands) Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Secondary Assessed Value (1) 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 4,233,637 General Obligation Bonds Less: Amounts Available in Debt Service Fund 347,465 338,875 350,983 374,755 365,755 373,827 334,760 353,462 335,174 298,366 372 3,584 2,618 4,989 5,384 4,853 3,535 7,568 8,095 6,491 Total 347,093 335,291 348,365 369,766 360,371 368,974 331,225 345,894 327,079 291,875 Source: (1) Maricopa County Finance Department Assessor's Office. (2) Population figures are found on Table XII. 145 Percentage of Secondary Assessed Value Per Capita (2) 13.56% 11.88% 12.63% 12.80% 11.82% 11.26% 9.42% 9.26% 8.20% 6.89% 765 726 733 750 719 722 644 686 643 570 City of Mesa, Arizona Table IX Direct and Overlapping Governmental Activities Debt June 30, 2023 (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 135,585 600,335 312,105 151,380 121,045 78,470 113,435 138,935 62,405 5,655 13,345 8.21% 8.15% 86.52% 27.42% 36.98% 2.34% 0.50% 1.17% 100.00% 100.00% 100.00% 11,130 48,940 270,045 41,507 44,764 1,835 566 1,624 62,405 5,655 13,345 39,590 8.21% 3,250 Subtotal, overlapping debt 505,066 City direct debt (2) 469,299 Total Direct and Overlapping Debt $ (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. 146 974,365 City of Mesa, Arizona Table X Legal Debt Margin Information Last Ten Fiscal Years (in thousands) 2022-23 2021-22 2020-21 2019-20 6% Limitation (1) Legal Debt Limitation General Obligation Bonds Outstanding $ 378,486 808 $ 353,301 852 $ 317,794 2,715 $ 285,114 450 Total Debt Margin Available $ 377,678 $ 352,449 $ 315,079 $ 284,664 Total Net Debt Applicable to the 6% Limit as A Percentage of the 6% Legal Debt Limitation 0.21% 0.24% 0.85% $ 1,059,313 331,690 $ 950,381 334,609 $ $ 615,772 20% Limitation (2) Legal Debt Limitation General Obligation Bonds Outstanding $ 1,261,620 284,147 $ 1,177,671 318,098 Total Debt Margin Available $ 977,473 $ 859,573 Total Net Debt Applicable to the 20% Limit as A Percentage of the 20% Legal Debt Limitation 22.52% 727,623 27.01% 31.31% 0.16% 35.21% Total Margin Available $ 1,355,151 $ 1,212,022 $ 1,042,702 $ Full Cash Net Assessed Value $ 6,308,100 $ 5,888,354 $ 5,296,564 $ 4,751,903 (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. 147 900,436 Table X (Concluded) 2018-19 2017-18 2016-17 2015-16 2014-15 2013-14 $ 196,678 518 $ 182,934 724 $ 173,297 846 $ 165,475 1,047 $ 169,270 1,275 $ 153,578 605 $ 196,160 $ 182,210 $ 172,451 $ 164,428 $ 167,995 $ 152,973 0.26% 0.40% 0.49% 0.63% 0.75% 0.39% $ 655,593 370,152 $ 609,779 365,031 $ 577,658 373,909 $ 551,583 349,903 $ 564,235 343,370 $ 511,927 344,040 $ 285,441 $ 244,748 $ 203,749 $ 201,680 $ 220,865 $ 167,887 56.46% $ 481,601 $ 4,329,347 59.86% $ 426,958 $ 3,983,671 64.73% $ 376,200 $ 3,707,067 63.44% $ 366,108 $ 2,757,913 148 60.86% $ 388,860 $ 2,821,173 67.20% $ 320,860 $ 2,559,634 City of Mesa, Arizona Table XI Pledged-Revenue Coverage Last Ten Fiscal Years (in thousands) Debt Service Fiscal Year 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 Operating Revenues (1) 295,710 311,506 323,099 348,794 361,863 365,081 366,838 399,197 433,048 451,504 Operating Revenues (1) 433,048 451,504 Operating Expenses Net Available Revenue Principal Interest Coverage Ratio Utility System Revenue Bonds 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 47,890 309,470 142,034 47,935 51,927 46,423 44,794 47,187 50,739 50,695 55,061 51,098 53,469 48,045 1.24 1.49 1.48 2.02 1.62 1.50 0.89 1.36 1.50 1.48 Utility System Revenue Obligations Net Revenue Available Debt Service Operating for Debt Expenses Service Principal Interest 281,381 151,667 666 309,470 142,034 3,725 6,461 Coverage Ratio 227.73 21.98 (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. 149 Table XI (Concluded) Debt Service Revenues 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 Principal Interest Special Assessment Bonds 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 0.89 1.23 0.72 0.42 1.21 1.03 - Revenues (2) Principal Interest Coverage Ratio Community Facility District Bonds 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 8,920 4,836 3,735 0.99 0.98 1.00 1.03 1.04 0.79 1.08 1.01 1.03 1.03 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 Highway Project Advancement Notes 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 2,451 115.26 298,110 49,025 1,226 5.93 - 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 Highway User Revenue Fund Revenue Bonds 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 45,049 9,645 2,796 3.62 47,989 10,075 2,314 3.87 48,007 10,000 1,812 3.87 Excise Tax Revenue Obligations Series 2020 354,315 645 861 235.27 389,868 1,185 1,483 146.13 437,250 1,245 1,442 162.73 150 City of Mesa, Arizona Table XII Demographic and Economic Statistics Last Ten Fiscal Years Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Sources: (1) (2) Population 454,981 462,376 475,274 493,089 501,137 511,334 514,144 504,258 509,475 512,498 Personal Income (in thousands) Per Capita Personal Income Median Age Public School Enrollment (1) Unemployment Rate (2) 10,687,959 11,321,276 11,783,944 12,644,774 13,522,180 14,753,009 15,423,806 15,509,968 18,217,807 19,609,198 23,491 24,485 24,794 25,644 26,983 28,852 29,999 30,758 35,758 38,262 35.3 35.5 35.7 36.0 36.2 36.3 36.3 36.6 37.8 38.1 64,932 64,532 65,049 63,779 67,025 62,593 62,490 57,876 58,595 57,909 6.5% 5.4% 5.3% 4.5% 4.3% 4.6% 9.7% 6.6% 3.4% 3.9% Arizona Department of Education Bureau of Labor Statistics 151 City of Mesa, Arizona Table XIII Principal Employers Current Year and Nine Years Ago 2023 Employer Mesa Unified School District 4 Banner Health City of Mesa The Boeing Company Walmart Maricopa County Community College Dexcom Drivetime Automotive Group Frys Food Stores Home Depot Maricopa County Government Gilbert Unified School District Aviall Inc Total 2014 Employees Rank Percentage of Total City Employment 7,600 1 2 3 4 5 6 7 8 9 10 4.09% 3.29% 2.37% 2.07% 1.64% 0.97% 0.94% 0.78% 0.75% 0.67% 6,120 4,410 3,840 3,040 1,810 1,750 1,450 1,390 1,250 32,660 17.58% Source: Maricopa Association of Governments 152 Employees Rank Percentage of Total City Employment 8770 9573 3519 4700 2533 1951 2 1 4 3 6 7 7.06% 7.71% 2.83% 3.78% 2.04% 1.57% 1210 8 0.97% 2,644 5 9 10 2.13% 0.88% 0.68% 29.66% 1,087 842 36,829 City of Mesa, Arizona Table XIV Full-Time Equivalent City Government Employees by Function/Program Last Ten Fiscal Years 2022-23 2021-22 2020-21 2019-20 2018-19 Function/Program General Government Public Safety Community Environment Cultural-Recreational Energy Resources Water Resources Solid Waste Airport 944 2,088 212 381 124 279 153 14 870 1,933 180 345 121 261 158 13 854 1,882 194 313 116 265 148 11 848 1,870 187 320 116 271 147 11 865 1,758 189 340 117 264 147 12 Total 4,194 3,880 3,782 3,770 3,690 Source: City of Mesa Human Resources 153 Table XIV (Concluded) 2017-18 2016-17 2015-16 2014-15 2013-14 826 1,711 195 315 120 257 148 11 811 1,707 194 289 118 249 147 11 860 1,647 189 599 116 238 138 11 876 1,656 182 338 116 240 127 10 880 1,655 178 317 117 238 125 10 3,582 3,526 3,798 3,545 3,520 154 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) 2022-23 2021-22 2020-21 2019-20 10,333 9,335 11,491 9,597 12,132 6,402 11,716 6,267 1,270 60,508 1,549 665 11,434 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 92,180 579,666 1,403,603 17,851 74,354 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 68,624 159,783 76.56 113.78 156,290 84.86 118.92 153,586 85.91 124.77 151,634 89.77 128.91 134,757 33.60 132,412 34.40 130,775 33.60 127,763 33.60 142,332 273,190 30,610 13,711 141,110 254,442 35,734 14,337 137,537 245,542 40,176 10,921 136,739 244,697 39,697 13,643 812 348,168 797 319,892 821 336,631 724 349,300 * mgd - millions of gallons per day ** mg - millions of gallons 155 Table XV (Concluded) 2018-19 2017-18 2016-17 2015-16 2014-15 2013-14 11,559 6,637 12,347 6,599 13,151 6,966 13,208 6,968 14,795 6,622 14,561 6,107 1,004 54,139 1,373 505 14,337 1,144 53,183 1,087 471 11,536 1,153 50,024 989 488 14,034 1,053 49,743 1,083 507 10,613 1,083 45,832 1,106 534 8,964 1,075 44,885 1,176 477 9,403 117,974 1,131,120 1,159,536 17,018 65,993 119,489 1,061,875 1,131,101 17,066 63,969 121,340 1,067,207 1,272,859 16,991 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 58,012 148,877 78.66 117.77 146,172 79.26 117.47 144,276 78.59 119.73 141,824 78.55 116.62 139,560 79.55 113.45 137,910 80.85 117.13 127,000 34.50 130,343 34.60 128,782 34.10 126,359 34.30 124,142 33.30 122,623 33.10 134,777 241,307 32,227 20,236 131,991 232,756 32,367 16,688 129,479 232,812 35,546 19,639 127,517 236,849 35,499 20,602 122,552 233,754 35,541 21,151 121,674 217,745 34,629 18,854 752 326,255 717 288,122 689 289,801 663 270,702 702 241,848 729 276,731 156 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 2022-23 2021-22 2020-21 2019-20 8 326 21 3 8 301 21 3 8 298 20 3 8 300 20 4 2,100 370 9 6 2,074 397 9 6 2,023 394 9 6 2,139 719 9 6 1,638 1 456 1,481 1,629 1 452 1,454 1,625 1 405 1,431 1,485 1 402 1,384 2,518 109 2,502 109 2,486 109 2,462 109 1,830 70 1,812 70 1,827 70 1,789 70 95 1 96 1 91 1 90 1 Note 1: The decrease in water storage capacity in FY 16/17 is due to Reservoir FFR6 being decommissioned 157 Table XVI (Concluded) 2018-19 2017-18 2016-17 2015-16 2014-15 2013-14 8 287 20 4 8 281 20 4 8 281 20 4 8 287 20 4 8 292 20 4 8 291 20 4 1,929 861 9 6 1,929 861 9 5 2,300 475 9 5 1,901 633 9 4 1,901 633 9 4 1,232 1,157 9 4 1,482 1 398 1,363 1,476 82 397 1,346 1,387 82 394 1,325 1,427 1 423 1,311 1,427 1 423 1,311 1,418 1 440 1,256 2,435 112 2,401 112 2,398 112 2,364 112 2,364 112 2,315 125 1,788 60 1,784 60 1,778 60 1,781 60 1,781 60 1,677 60 77 1 77 1 75 1 73 1 74 1 72 1 158 F I N A N CI A L S E RV I CE 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 N A , 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