CITY OF MESA, AZ ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR T H E F I S CA L Y E A R E N D E D • JU N E 3 0 , 2 0 25 CITY OF MESA, AZ DISTRICT MAP MERIDIAN RD SIGNAL BUTTE RD CRISMON RD ELLSWORTH RD HAWES RD SOSSAMAN RD POWER RD RECKER RD HIGLEY RD GREENFIELD RD VAL VISTA DR LINDSAY RD GILBERT RD STAPLEY DR MESA DR COUNTRY CLUB DR ALMA SCHOOL RD DOBSON RD PRICE / 101 PIMA FRWY FOR T H E F I S CA L Y E A R E N D E D • JU N E 3 0 , 2 0 25 THOMAS RD 5 MCDOWELL RD MCKELLIPS RD 1 BROWN RD UNIVERSITY DR MAIN ST 3 4 2 BROADWAY RD SOUTHERN AVE BASELINE RD o GUADALUPE RD ELLIOT RD Mayor Mark Freeman Vice Mayor Scott Somers – District 6 Councilmember Rich Adams – District 1 Councilmember Julie Spilsbury – District 2 Councilmember Francisco Heredia – District 3 Councilmember Jenn Duff – District 4 Councilmember Alicia Goforth – District 5 6 Scott Butler, City Manager Marc Heirshberg, Assistant City Manager Prepared by: Financial Services Department P.O. Box 1466 Mesa, Arizona 85211-1466 | (480) 644-2275 | www.mesaaz.gov WARNER RD RAY RD WILLIAMS FIELD RD PECOS RD GERMANN RD Citizens of Mesa Updated August 2025 Mayor and City Council City Clerk City Court City Manager City Attorney City Auditor Holly Moseley Stephen Umpleby Scott Butler Jim Smith Joe Lisitano Advisory Boards and Committees Human Resources Teri Overbey Deputy City Manager Assistant City Manager Assistant City Manager Assistant City Manager Deputy City Manager/CFO Candace Cannistraro Brent Stoddard Marc Heirshberg Ken Cost Michael Kennington Thriving Community Jobs and Prosperity Quality Developments Safe Community Fiscal Responsibility Parks, Recreation and Community Facilities Andrea Moore Economic Development Jaye O’Donnell Development Services Nana Appiah Police Department Dan Butler Financial Services Irma Ashworth Arts and Culture VACANT Office of Urban Transformation Jeff McVay Engineering Lance Webb Fire and Medical Department Mary Cameli Office of Management and Budget Brian Ritschel Community Services Ruth Giese Falcon Field Airport Corinne Nystrom Transportation Erik Guderian (Interim) Public Safety Support Department Kim Meza Business Services Ed Quedens Public Information and Communications Ana Pereira Government Relations and Grants Miranda DeWitt Asst. to the City Manager Ian Linssen Office of Innovation and Efficiency Mayor and Council Support Citywide Fiber Asst. to the City Manager Andrea Alicoate Education and Workforce Development Library Services Polly Bonnett Department of Innovation and Technology Scott Conn Water Resources Chris Hassert Code Compliance Angelica Guevara Solid Waste Sheri Collins Facilities Management Tony Miele Transit Jodi Sorrell Energy Resources Scott Bouchie Liaison to City Court Fleet Services Mike Lewis Diversity and Community Engagement Employee and Community Relations Asst. to the City Manager Public Defender Program Environmental and Sustainability Destination Mesa Andrew Calhoun Enterprise Resource Planning (ERP) Equal Employment Opportunity Office (EEOO) Deferred Compensation Plan Lead Agenda Management Special Projects Office CITY OF MESA, AZ INTRODUCTORY SECTION FOR T H E F I S CA L Y E A R E N D E D • JU N E 3 0 , 2 0 25 TABLE OF CONTENTS Page SECTION I – INTRODUCTORY SECTION Table of Contents Letter of Transmittal Certificate of Achievement for Excellence in Financial Reporting I IV XIII 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 19 20 21 22 Proprietary Funds Financial Statements Statement of Net Position Statement of Revenues, Expenses and Changes in Net Position Statement of Cash Flows I 23 25 27 TABLE OF CONTENTS 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 29 36 44 45 48 49 50 52 55 67 67 68 69 69 70 72 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 87 89 95 99 100 102 103 Combining Statements Non-Major Governmental Funds Combining Balance Sheet Combining Statement of Revenues, Expenditures and Changes in Fund Balances 104 108 Internal Service Funds Combining Statement of Net Position Combining Statement of Revenues, Expenses and Changes in Net Position Combining Statement of Cash Flows II 112 113 114 TABLE OF CONTENTS 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 #2 116 117 118 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 119 120 127 129 Revenue Capacity Sales Tax Collections by Category – Last Ten Fiscal Years Direct and Overlapping Sales Tax Rates – Last Ten Fiscal Years 131 133 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 134 136 137 138 140 Demographic and Economic Information Demographic and Economic Statistics – Last Ten Fiscal Years Principal Employers – Current Year and Nine Years Ago 142 143 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 144 146 148 Financial Services Department December 16, 2025 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, 2025, 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, 2025, 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, 2025, 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 517,151 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 4,801 full-time (equivalent) City employees working within 30 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 approximately 12,643 fans per game. The Athletic’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 to 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, as well as from the resolution that sets the limit. In November 2024, Mesa voters approved a Permanent Base Adjustment to the State of Arizona’s expenditure limitation, replacing the previous Home Rule exemption. This adjustment provides the City with greater long-term flexibility in determining its budget levels, as long as sufficient resources are identified to cover 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. V Factors Affecting Financial Condition The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specific environment within which the City operates. Local Economy The City of Mesa continues to prosper and experience record-setting growth across all areas of the community, with strong gains in both commercial and residential development. From the revitalized historic downtown and expanding innovation districts to the advanced manufacturing and technology corridor in southeast Mesa, the City is realizing one of the fastest-growing local economies in the nation. Recent economic reports rank Mesa among the top U.S. cities for GDP growth, business expansion, and infrastructure investment, driven by thriving sectors such as aerospace, technology, healthcare, and tourism. Guided by a long-term vision for sustainable development, Mesa has established a balanced approach to growth, strengthening its economic base while ensuring the delivery of high-quality services, infrastructure, and amenities that support businesses and residents today and for generations to come. Mesa works to enhance the local economy by fostering a culture of quality, supporting the creation of higher wage jobs, promoting direct investment, and increasing the prosperity of our residents. Construction activity provides for revenues that will deliver a variety of significant City capital projects. Job expansion and higher paying jobs continue 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, 2025, local sales tax revenue was up 2.6% from the previous fiscal year. Construction sales tax was up 3.7% over the prior fiscal year. However, in 2024, the Arizona State Legislature ended the local sales tax on residential rentals. This change reduced one of Mesa’s steady sources of revenue and resulted in no growth for total sales tax collected for FY 2025. The City’s economic indicator for residential construction in FY 24/25 was up 4%. During FY 24/25 the City issued 1,117 permits for new single family residential construction. The commercial valuation came in at approximately $2.8 billion representing a 75% increase from the prior fiscal year. Consequently, the total value of construction in FY 24/25 grew by 55%. The corresponding dollar valuation associated with all FY 24/25 permits grew approximately $1.2 billion from the prior fiscal year. Conservative budget practices and willingness to respond to economic indicators continue to allow the City to maintain unrestricted fund balance reserve levels as established in the City’s financial policies. The FY 2026 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 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 Ratings sustained their As3 rating with a stable outlook on the City’s utility revenue obligations. • In summer of 2024, Virgin Galactic completed its new two-hangar manufacturing facility at Phoenix-Mesa Gateway Airport, where it will assemble its next-generation Delta spaceships. The VI $450,000-per-seat commercial spacecraft—each seating up to six passengers and capable of up to eight missions per month—will be built and tested in Mesa before being transported to Spaceport America in New Mexico for flight testing and operations starting in 2026. The Mesa plant, able to produce up to six ships annually, represents hundreds of high-skilled aerospace jobs and strengthens Arizona’s growing role as a national space hub alongside its booming semiconductor and advanced manufacturing sectors. • In July, Southern Cross Aviation, a leading aviation parts distributor, opened a new $10 million, 23,599-square-foot facility in Mesa, marking its third U.S. location after Fort Lauderdale and Anchorage. Strategically located near Phoenix-Mesa Gateway Airport, the site will serve regional airlines, flight schools, MRO shops, law enforcement, medevac operators, and other aviation clients across Greater Phoenix. The expansion strengthens Mesa’s position as an aerospace hub, creating jobs and supporting pilot training programs amid rising demand for aviation professionals. Company leaders and city officials hailed the move as a boost to the region’s growing aviation, aerospace, and defense ecosystem. • In August, Magna International announced its plans to build out a 230,000 square-foot space at Power Industrial Park in Mesa representing a “multimillion-dollar investment.” The expansion by Magna adds to a pipeline of emerging and established firms in an automotive ecosystem in the Valley. Magna International was the fourth largest auto supplier in the world as of 2023. • In August, South Korea-based KoMiCo, a precision cleaning and advanced coatings company serving the semiconductor industry, purchased a 125,000-square-foot building in Mesa for $17.5 million, marking its third and largest U.S. facility. The $50 million investment is expected to open in 2026 and create around 200 jobs. KoMiCo, a supplier to Taiwan Semiconductor Manufacturing Company and Intel, joins dozens of semiconductor-related firms expanding in Arizona since the 2022 Chips and Science Act. • In September, Quantum Industrial Services, LLC, a mechanical and plumbing contractor, leased 135,759 square feet in Mesa for a new pipe fabrication facility serving clients across the Western U.S. The plant, equipped with advanced technologies, will include 27,000 square feet of office space and employ about 200 workers. The facility, part of a recently completed industrial park, underscores Quantum’s growth and expertise in piping fabrication and mechanical services. • In October, the Mesa Chamber of Commerce launched Next Phase, a new small business incubator at Superstition Springs Mall designed to help entrepreneurs test and grow retail concepts in a live shopping environment. Located on the mall’s second floor, the space can host up to 15 business owners and opened with three inaugural participants: BG Customs, Blooming Blinds, and Treats by Tatj. The program pairs participants with Chamber members for mentorship and partners with local colleges for business training. Supported by several community sponsors, Next Phase aims to strengthen Mesa’s retail sector and foster long-term business success, reflecting the Chamber’s ongoing commitment to local economic growth and innovation. • In November, Nucleus RadioPharma, a leader in radiopharmaceutical development and manufacturing, signed a lease and committed to build a 53,000-square-foot facility in Mesa, Arizona, creating 50 skilled jobs when it opens in mid-2026. The site will help address a national shortage of production capacity for theranostic radiopharmaceuticals—advanced treatments that combine therapy and diagnostics—supporting both clinical trials and commercial supply. Part of a nationwide expansion that includes a new Philadelphia facility, the Mesa location strengthens Arizona’s growing bioscience sector and enhances patient access to life-saving cancer therapies. VII • In November, JX Advanced Metals USA, Inc. opened its new 273,000-square-foot advanced manufacturing plant in Mesa, on a 63-acre site. The facility produces high-performance sputtering targets for the semiconductor industry, more than doubling the company’s U.S. capacity and serving customers across the U.S. and Europe. Featuring state-of-the-art production areas, solar-covered parking, and employee amenities, the Mesa plant establishes the city as JX’s U.S. hub for advanced materials. • In December, The Phoenix-Mesa Gateway Airport Authority officially renamed the East Valley’s major air travel hub as Mesa Gateway Airport, marking a new era of regional identity and growth. The change follows Phoenix’s withdrawal from the airport authority earlier in 2023 and reflects Mesa’s leadership in the airport’s continued expansion. Serving nearly 2 million passengers annually, Mesa Gateway is Arizona’s third-busiest commercial airport and recently opened a new 30,000-square-foot concourse with five gates. Regional and tourism leaders said the rebranding highlights the East Valley’s economic vitality and growing appeal as a destination for travelers and businesses alike. • In December, AT&T contributed $70,000 to support Mesa Community College’s EmpowerEd for Student Success campaign, part of a $20 million Maricopa Community Colleges Foundation initiative to expand access to higher education and strengthen Arizona’s workforce. The donation will fund iPad bundles and digital training for 30 first-generation, low- and moderate-income students through the Mesa College Promise, which covers tuition for eligible Mesa residents. The EmpowerEd campaign also seeks to raise $1 million for the Mesa College Promise and $500,000 for the Thunderbird Excellence Fund, which assists students facing financial or personal hardships. • In December, Revel Surf Park at Cannon Beach in Mesa officially opened, bringing surfing back to Arizona for the first time since Big Surf closed in 2019. The $45 million, 4.5-acre attraction features a two-acre, three-million-gallon surf lagoon powered by patented, energy-efficient wave technology that creates customizable waves for all skill levels. The park also includes cliffjumping platforms, a skate park, restaurants, cabanas, and hot tubs, offering a full resort-style experience. Built on former farmland using just 2% of the site’s previous water consumption, Revel Surf Park marks the first phase of the larger Cannon Beach development, which will soon add restaurants, a theater, and hotels. • In December, VIVO Development Partners broke ground on a dual-branded Tempo by Hilton and Homewood Suites by Hilton at Gallery Park in southeast Mesa, marking a major milestone for the Mesa’s emerging mixed-use destination. The four-story, 174-room hotel—featuring 97 upscale lifestyle rooms and 77 extended-stay suites—will include a resort-style pool, fitness areas, event spaces, and a full-service restaurant and bar. As the first Tempo by Hilton in the region, the project anchors the 1-million-square-foot Gallery Park development, which also includes luxury apartments, offices, retail, and restaurants. • At the beginning of 2025, Gulfstream Aerospace opened a new 225,000-square-foot, $130 million customer support service center at Mesa Gateway Airport, marking a major expansion of its maintenance, repair, and overhaul operations in the Western U.S. The facility can service up to 13 large-cabin aircraft and complements Gulfstream’s existing Mesa west campus, which accommodates 10 additional aircraft. Already responsible for more than 250 local jobs, with 100 more expected this year, Gulfstream is partnering with local colleges on training, apprenticeships, and internships to build the region’s aviation workforce. Designed for environmental efficiency and expected to earn LEED Silver certification, the new center features sustainable materials, water- and energy-saving systems, and an on-site fuel farm with a 30,000-gallon tank dedicated to sustainable aviation fuel. VIII • In January, Meta announced that their new data center was now online and serving global traffic, marking a major milestone in the company’s more than $1 billion investment in Arizona since breaking ground in 2021. The project employed an average of 2,000 construction workers at peak and now supports more than 200 operational jobs, with Meta citing Mesa’s strong infrastructure, renewable energy access, and skilled workforce as key reasons for choosing the city. In addition to powering its facility with 100% renewable energy and supporting 12 regional water restoration projects, Meta has invested over $1.3 million in local schools and nonprofits, including a new $225,000 grant for the Mesa College Promise program and a $75,000 grant to create a multimedia center at Desert Ridge Junior High. • In February, Governor Katie Hobbs and state, education, and industry leaders announced the launch of Arizona’s newest Future48 Workforce Accelerator, an aerospace and defense-focused training facility at Chandler-Gilbert Community College’s Williams campus in Mesa. Backed by over $6 million from the Arizona Commerce Authority, the Accelerator will open in fall 2026 to train students for high-demand careers in aerospace and defense manufacturing through hands-on instruction in advanced labs for electrical and mechanical assembly and wiring. Developed in partnership with Boeing, Honeywell, and other stakeholders, the project strengthens Arizona’s leadership in aerospace innovation and workforce development, part of the state’s broader $30 million Future48 initiative to expand advanced manufacturing training statewide. • In February, Sunbelt Investment Holdings Inc., Okland Construction and CBRE broke ground on Mesa Grandview Business Park, a 270,000-square-foot, three-building industrial development in the Falcon District near Loop 202 and Greenfield Road. Set for completion in early 2026, the project will feature state-of-the-art industrial space with 30–32-foot clear heights, 100% HVAC warehouses, dock-high and grade-level loading, heavy power, ample parking, and tenant amenities. Designed with sustainability in mind, the buildings will include skylights, native landscaping, EV charging stations, LEED certification and solar-ready roofs. City leaders praised the project as a major boost to economic growth and job creation near Falcon Field and surrounding aerospace employers, with an additional 22.7 acres available for future development. • In March, Mesa Gateway Airport reported its busiest month ever, serving 261,536 passengers, a 24% year-over-year increase that surpassed its previous March record and contributed to eight record-breaking months in the past year. Airport and regional leaders credited the surge to strong partnerships with airlines, expanded service offerings, and the airport’s convenience focused “Just Plane Easy” experience. With flights up 36%, a new five-gate concourse opened last year, and expanded Allegiant service, Gateway now offers nonstop service to 45 destinations, continuing to fuel major economic growth. • Mesa celebrated a strong 2025 Spring Training season, with the Chicago Cubs leading all MLB spring training attendance and topping the Cactus League for the 12th consecutive year, while the Athletic’s saw an impressive 11% increase in turnout. Sloan Park welcomed 227,570 fans— including a Cactus League record 16,161 attendees on March 8, while HoHoKam Stadium drew 82,636 fans, up from last year’s total. Mesa’s 30 home games accounted for nearly 20% of all Cactus League attendance, underscoring the city’s popularity as a premier spring baseball destination. • In April, Komatsu broke ground on a new $80 million, 215,000-square-foot facility in southeast Mesa, tripling its current footprint to better serve customers across the Southwestern U.S. The state-of-the-art building, located near the airport and slated for completion in summer 2026, reflects Komatsu’s commitment to supporting Arizona’s growing copper and mining industries. The project will generate construction jobs and up to 100 long-term positions, further strengthening the region’s economy and Komatsu’s role in advancing sustainable industrial growth. IX • In April, Cyclic Materials announced a $20 million investment to build its first commercial rare earth element (REE) recycling facility in Mesa, Arizona, which will open in early 2026 and create more than 30 jobs. The state-of-the-art plant will use the company’s proprietary MagCycle℠ process to recover permanent magnets from end-of-life products—materials that were previously not recycled—establishing the company’s first global REE separation operation and strengthening a U.S.-wide feedstock network. State and local leaders praised the project as a boost to Arizona’s clean energy economy, sustainable manufacturing sector, and circular supply chain development. Backed by a $57 million Series B from investors including Microsoft, BMW iVentures, Hitachi Ventures and Amazon’s Climate Pledge Fund, Cyclic Materials is expanding across North America and positioning Mesa as a key hub for innovation in critical materials recovery. • In April, Edged topped out its new 36 MW, waterless-cooled data center in Mesa, Arizona, marking completion of the facility’s structural framework and moving it toward full operations in late 2025. The AI-optimized center will feature ultra-efficient ThermalWorks cooling that saves more than 142 million gallons of water annually and supports high-density compute loads of up to 200 kW per rack. The milestone ceremony included project partners Haydon Building Corp and the announcement of Light Source Communications as the first network provider for the site. Part of Edged’s nationwide expansion, the Mesa facility strengthens the region’s growing AI and high-performance computing ecosystem. • In May, Waymo announced plans for a new 239,000-square-foot autonomous vehicle integration factory in Mesa, a multimillion-dollar investment that will build thousands of fully autonomous Jaguar I-PACE vehicles to support the rapid expansion of the Waymo One ride-hailing service, which already provides more than 250,000 paid trips per week across major U.S. cities. Developed in partnership with Magna, the facility is expected to create hundreds of local jobs and will ultimately be capable of producing tens of thousands of autonomous vehicles per year, including models equipped with the next-generation Waymo Driver. Waymo says the factory will enable vehicles to be deployed into public service in Phoenix within minutes and to other cities within hours. • In May, Apex Power Conversion opened its new 206,000-square-foot U.S. headquarters and manufacturing facility in Mesa’s Elliot Road Technology Corridor, an over $60 million investment that will initially employ up to 300 people, with plans to grow to 700 by 2029. The site will support customer engagement, product training, and ultimately the manufacturing of advanced multi-megawatt power conversion systems that integrate renewable energy and storage into the grid, with full production expected in early 2026. • In June, Super Radiator Coils opened a new 150,000-square-foot manufacturing facility in Mesa, marking a major expansion that will create 125 new jobs across production, engineering, and administrative roles. The century-old cooling systems manufacturer selected Mesa as part of the region’s rapidly growing advanced manufacturing ecosystem, joining major players like TSMC and Lucid. The company is partnering with Mesa Community College and local trade schools on apprenticeship programs, further boosting workforce development and economic impact. • In June, Mesa approved a new agreement allowing developer Soltrust to acquire and restart The Grid, a long-stalled mixed-use project on three acres at Main Street and Pomeroy. The agreement clears the project from bankruptcy and paves the way for major revisions—including converting the partially built first phase into a hotel with a ground-floor Crust Simply Italian restaurant, speakeasy, and dessert concept. X • In July, Moses Lake Industries (MLI), a global leader in advanced semiconductor chemical solutions, opened a new 50,000-square-foot, nearly $100 million manufacturing and R&D facility in Mesa, strengthening the city’s position in Arizona’s fast-growing semiconductor corridor. The state-of-the-art site will support the development of high-purity electrolyte and copper-based materials essential to next-generation chip technologies while enabling closer collaboration with major semiconductor manufacturers through enhanced proximity and dedicated co-development spaces. • Medina Station, a new 64-acre mixed-use destination in East Mesa, is set to become a major retail, dining, and residential hub with 337,000+ square feet of commercial space and up to 850 multifamily units. Developed by SimonCRE, the project has already pre-leased more than 70% of its retail space, including anchors Target (148,000 sq ft) and Dick’s Sporting Goods (80,000 sq ft), along with tenants such as Boot Barn, Einstein Bros. Bagels, Hawaiian Bros, Café Zupas, and a 39,000-square-foot Restaurant Row featuring local favorites like OSHO. Designed as a walkable, community-focused destination with plazas and pedestrian connections, Medina Station will serve a fast-growing trade area of over 83,000 nearby households. Construction began in early 2025, with the first phase opening in 2026, positioning the development as the future heart of East Mesa. • Arizona State University has completed the $185 million Interdisciplinary Science and Technology Building 12 (ISTB 12) at its Polytechnic campus in Mesa, a 173,000-square-foot hub for advanced manufacturing, robotics, semiconductor research, and energy systems. Designed by SmithGroup and built by McCarthy Building Companies, the state-of-the-art facility anchors the Ira A. Fulton Schools of Engineering’s School of Manufacturing Systems and Networks and represents a $250 million investment in the East Valley Innovation Zone. Open for the 2025 fall semester, ISTB 12 features adaptable labs, sustainable design targeting LEED Gold certification, and innovative prefabrication methods. The building will host over 100 classes annually, serving more than 10,000 students and supporting Arizona’s growing advanced manufacturing ecosystem. XI 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, 2024 Executive Director/CEO CITY OF MESA, AZ FINANCIAL SECTION FOR T H E F I S CA L Y E A R E N D E D • JU N E 3 0 , 2 0 25 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, 2025, 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, 2025, 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. 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. 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 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 and schedules 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 and schedules are 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 16, 2025, 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 16, 2025 (4) Management Discussion and Analysis For the Fiscal Year Ended June 30, 2025 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, 2025. The reader is encouraged to consider the information presented here in conjunction with the transmittal letter presented on pages IV 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 of $1.5 billion were comparable to prior years revenue of $1.5 billion. This is a combination of increases in some revenue streams and decreases in others. The two larger fluctuations were in Charges for Services (increased by $54.8 million) and Capital Grants & Contributions (decreased by $45.7 million). • The City’s Governmental Funds reported a combined ending fund balance of $1.02 billion, a $155.2 million increase from the previous year. Approximately 54 percent of the total governmental fund balance amount, or $554.0 million, is designated by the City as committed, assigned and unassigned. The remaining 46 percent or $470.8 million is designated as nonspendable or restricted. • The total fund balance for the General Fund was $439.0 million, which represents an increase of $16.3 million over prior year. The increase is a combination of an increase in Charges for Services and Investment Income. • The City’s Enterprise Fund reported a combined total net position of $495.0 million, which represents an increase of $20.5 million over the 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) GovernmentWide 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 17-18) 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. 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- 5 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 19-28) 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: • 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. • 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 self-insurance programs. Since the primary customers of the internal service funds are the Governmental Activities, the assets and liabilities of those funds are included in the Governmental Activities’ column of the Government-Wide Statement of Net Position. The 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. 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 29-86 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 87-103 of this report. 6 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, 2025, and 2024. Condensed Statement of Net Position As of June 30 (In thousands of dollars) Governmental Activities 2025 Business-Type Activities 2024 2025 Total Government 2024 2025 2024 Cash and Other Assets $1,611,204 $1,499,081 $ 810,730 $ 788,154 $2,421,934 $2,287,235 Capital Assets 1,924,520 1,830,466 1,802,262 1,547,985 3,726,782 3,378,451 Total Assets 3,535,724 3,329,547 2,612,992 2,336,139 6,148,716 5,665,686 Deferred Amounts on Refunding Deferred Outflows on Pensions & OPEB Total Deferred Amounts 2,264 3,182 15,316 17,828 17,580 21,010 308,409 298,479 17,086 15,306 325,495 313,785 310,673 301,661 32,402 33,134 343,075 334,795 Non-Current Liabilities, Due Within One Year Non-Current Liabilities, Due In 72,339 74,745 68,048 62,666 140,387 137,411 More Than One Year 655,040 524,567 1,653,525 1,434,632 2,308,565 1,959,199 Other Liabilities 211,440 241,780 222,227 187,360 433,667 429,140 1,848,574 1,788,214 136,045 136,582 1,984,619 1,924,796 2,787,393 2,629,306 2,079,845 1,821,240 4,867,238 4,450,546 Deferred Inflows on Pensions & OPEB 148,776 167,201 14,965 17,943 163,741 185,144 Deferred Inflows on Leases 46,088 49,952 55,593 55,646 101,681 105,598 194,864 217,153 70,558 73,589 265,422 290,742 1,377,695 1,317,166 100,008 82,964 1,477,703 1,400,130 415,817 382,409 97,102 122,088 512,919 504,497 Net Pension & OPEB Liability Total Liabilities Net Investment in Capital Assets Restricted Net Position Unrestricted Net Position (929,372) (914,825) 297,881 269,392 (631,491) (645,433) Total Net Position $ 864,140 $ 784,750 $ 494,991 $ 474,444 $1,359,131 $1,259,194 7 Changes in Net Position Year Ended June 30 (in thousands of dollars) Governmental Activities Business-Type Activities Total Government 2024 2025 2024 2025 $ 132,016 $ 511,700 470,018 78,057 14,618 339 16,806 236 56,440 78,248 25,394 78,293 71,058 329,821 47,924 6,837 290,065 – 27,428 – – – – 4,067 – – – – – 7,395 – 330,176 46,308 6,726 266,556 4,067 36,803 329,821 47,924 6,837 290,065 7,395 27,428 46,922 200 13,226 987,114 11,550 — 12,812 557,274 13,092 — 7,783 554,964 69,285 — 27,133 1,547,498 60,014 200 21,009 1,542,078 230,515 494,279 193,168 113,669 17,949 225,391 525,883 192,205 107,468 16,793 – – – – – – – – – – 230,515 494,279 193,168 113,669 17,949 225,391 525,883 192,205 107,468 16,793 – – – – – – – 1,049,580 – – – – – – – 1,067,740 43,912 46,783 149,731 97,809 51,305 6,691 1,750 397,981 49,009 46,078 151,246 89,096 55,972 13,302 1,570 406,273 43,912 46,783 149,731 97,809 51,305 6,691 1,750 1,447,561 49,009 46,078 151,246 89,096 55,972 13,302 1,570 1,474,013 Increase (Decrease) in Net Position Before Transfers Transfers (59,356) 138,746 (80,626) 127,134 159,293 (138,746) 148,691 (127,134) 99,937 – 68,065 – Change in Net Position 79,390 46,508 20,547 21,557 99,937 68,065 Net Position - Beginning 784,750 738,242 474,444 452,887 1,259,194 1,191,129 Net Position - Ending $ 864,140 $ 784,750 $ 494,991 $ 474,444 $ 1,359,131 $ 1,259,194 2025 Program Revenues: Charges for Services $ 145,102 Operating Grants & 77,909 Contributions Capital Grants & Contributions 8,588 General Revenues: Sales Taxes 330,176 Property Taxes 46,308 Occupancy Taxes 6,726 Unrestricted Intergovernmental 266,556 Utility Development Fees – Contributions 36,803 Unrestricted Investment Income (loss) 57,735 Gain on Sale of Capital Assets — Miscellaneous 14,321 Total Revenues 990,224 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 8 $ 656,802 2024 $ 602,034 Analysis of Government-Wide Net Position Net Position consists of (1) Net Investment in Capital Assets, (2) Restricted and (3) Unrestricted. Net Investment in Capital Assets represents the City’s investment in capital assets, less the related debt. Net Investment in Capital Assets increased by $75 million from $1.40 billion to $1.48 billion primarily due to an increase in capital assets in the Business-Type Activities. Restricted Net Position represents resources that are subject to external restrictions on how they may be used. The Restricted portion of the City's Net Position increased $79 million from $504.5 million to $512.9 million. The restricted balances that increased in the current year were primarily for capital projects. The Unrestricted Net Position of $(631.5) million is primarily due to the impact of the long-term liability associated with pensions and OPEB of ($2.0 billion). The City’s overall Net Position increased $99.9 million from $1.3 billion to $1.4 billion at the end of fiscal year 2025. Several factors contributed to the overall increase in Net Position: • • • Charges for Services increased $54.8 million primarily due to an increase in utility sales and charges. General governmental charges for services also increased in various revenue streams. Investment returns continued strong resulting in an increase in investment income of $9.2 million. Overall expenses (both Governmental and Business-Type) decreased by $26.4 million due to a Citywide effort to decrease expenses by 2%. Governmental Activities In fiscal year 2025, Governmental Activities increased their Net Position by $79.4 million from $784.8 million to $864.1 million. As described above, the increase in Net Position for the Governmental Activities is due to a combination of an increase in charges for services, investment returns and a decrease in expenses. As presented in the following two graphs, the largest funding sources for the governmental activities are Taxes (42%), Unrestricted Intergovernmental (29%) and Charges for Services (16%). The largest users of resources for the governmental activities are Public Safety (48%), General Government (22%) and Community Environment (19%). 9 Governmental Activities Revenues by Source Fiscal Year Ended June 30, 2025 Operating Grants & Contributions 8% Capital Grants & Contributions 1% Charges for Services 16% Taxes 42% Unrestricted Intergovernmental 29% Unrestricted Contributions 4% Governmental Activities Functional Expenses Fiscal Year Ended June 30, 2025 Public Safety 48% General Government 22% Community Environment 19% Cultural-Recreational 11% 10 The following two graphs compare Governmental Activities revenues and expenses from fiscal year 2025 to fiscal year 2024. 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 Program Revenues Taxes 2024 Unrestricted Intergovernmental 2025 Governmental Activities - Functional Expenses Two Year Comparison (In thousands of dollars) $550,000 $500,000 $450,000 $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 General Government Public Safety Community Environment 2024 2025 11 CulturalRecreational 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 $439.0 million, while unassigned fund balance was $210.1 million. The total fund balance of the City’s General Fund increased by $16.3 million during the current fiscal year from $422.7 million to $439.0 million. The increase is due to Other Financing Sources. The combination of Transfers in/out and Financing of subscription-based information technology arrangements (SBITAs), helped offset the Deficiency of Revenues Under Expenditures. 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 $585.9 million, with the majority classified as Restricted. Total fund balance of the Non-Major Governmental Funds increased by $139.0 million during the current fiscal year. This is due to a combination of an increase in the Special Revenue funds ($20.6 million) and an increase in the Capital Projects funds ($118.78) million. • The increase in the Special Revenue funds is primarily due to Sales tax revenue in the Street Sales Tax fund exceeding expenditures in that fund. • Capital Project funds fund balance increased in the Parks, Public Safety and Streets Capital funds due to the $154.3 million issuance of General Obligation Bonds. 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 2025. 12 Business-Type Activities The following graphs present utility revenues and expenses for fiscal year 2025. The City’s largest utility, Water, had a net revenue/expense gain of $116.0 million and Wastewater had a net revenue/expense gain of $55.7 million, whereas the remaining Utilities saw a more moderate net revenue/expense gain. Utility Revenues Charges for Services and Program Expenses Fiscal Year 2025 (In thousands of dollars) $200,000 $180,000 $160,000 $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $— Electric Gas Water Charges for Services Wastewater Solid Waste Program Expenses Total Business-Type Activities program and general revenues increased by $2.3 million from $555.0 million to $557.3 million. While Charges for Services increased by $41.7 million, this was offset by decrease in Capital Grants & Contributions by $39.6 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 $3.7 billion (net of accumulated depreciation/amortization) as of June 30, 2025. 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, 2025, and 2024: Capital Assets (net of accumulated depreciation/amortization) As of June 30 (In thousands of dollars) Governmental Activities 2025 Land $ 419,761 Infrastructure - Nondepr 3,597 Construction-in-Progress 171,426 Buildings 408,062 Other Improvements 178,495 Machinery & Equipment 148,037 Intangibles — Infrastructure 567,803 Leases 21,579 SBITAs 5,760 Total $ 1,924,520 Business-Type Activities 2024 419,761 3,597 186,489 359,751 143,117 117,272 — 577,269 21,739 1,471 $ 1,830,466 2025 31,786 17,666 412,953 26,571 33,177 36,636 3,467 1,240,005 — — $ 1,802,261 $ $ 2024 31,786 17,666 191,396 27,428 35,205 26,178 3,579 1,214,747 — — $ 1,547,985 $ Total Government 2025 451,547 21,263 584,379 434,633 211,672 184,673 3,467 1,807,808 21,579 5,760 $ 3,726,781 $ 2024 451,547 21,263 377,885 387,179 178,322 143,450 3,579 1,792,016 21,739 1,471 $ 3,378,451 $ The City’s total capital asset balances on June 30, 2025, increased by $348.3 million in comparison with prior year balances. The largest increase was in Construction in Progress, which increased by $206.5 million. There were several large projects that either started this year or had significant expenses. These projects included Waterline and Sewer Replacement projects ($37.0 million), the expansion to Signal Butte Water Treatment Plant ($56.8 million), and Central Mesa Reuse Pipeline ($101.2 million). 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 2025, the City had total long-term bond obligations and notes payable outstanding of $2.2 billion. Of this amount, $456.5 million comprises debt backed by the full faith and credit of the City, $1.7 billion represents bonds secured by specified revenue sources (i.e., Utility System Revenue, Highway User Revenue, Sales Tax) and $22.4 million in lease liability and $6.8 million in SBITAs liability. The City’s total outstanding debt includes $89 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, 14 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, 2025, and 2024. Outstanding Long-term Debt As of June 30 (In thousands of dollars) Governmental Activities General Obligation Bonds Utility System Revenue Bonds Utility Revenue Obligations Highway User Revenue Fund Excise Tax Obligations Community Facility District Notes Payable Leases SBITAs Total 2025 $ 456,510 — — 7,660 30,255 89,383 — 22,391 6,774 $ 612,973 2024 $ 335,990 — — 18,540 31,630 92,971 — 22,077 1,900 $ 503,108 Business-Type Activities 2025 — 997,790 610,650 — — — 667 — — $ 1,609,107 $ 2024 — 1,063,125 323,975 — — — 827 — — $ 1,387,927 $ Total Government 2025 456,510 997,790 610,650 7,660 30,255 89,383 667 22,391 6,774 $ 2,222,080 $ 2024 335,990 1,063,125 323,975 18,540 31,630 92,971 827 22,077 1,900 $ 1,891,035 $ The City’s current bond ratings are as follows: Rating Agency Standard and Poor’s Corporation Moody’s Investors Service Fitch Ratings General Obligation Bonds AA Aa2 AAA Highway User Revenue Bonds AA Aa2 N/A Utility System Revenue Bonds AA- Aa2 N/A Utility System Obligations A+ Aa3 N/A Excise Tax Obligations AA+ Aa2 N/A Under the provisions of the Arizona Constitution, outstanding general obligation bonded debt for water, artificial light or sewers, land for open space preserves, parks, playgrounds and recreational facilities, public safety, fire, 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, 2025, was $579.7 million in the 6% capacity and $1.5 billion 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 10 in the Statistical Section. 15 ECONOMIC FACTORS AND NEXT YEAR’S BUDGET On June 2, 2025, the City Council approved a $2.79 billion budget, which is an increase of $100 million compared to prior year’s budget. The adopted fiscal year 2026 budget continues the City’s fiscally conservative approach. The Governmental Funds financial principles include 10%-15% fund balance over a 5-year forecasted period, sustainability of programs and services, competitive wages and benefits for employees, and investment in capital and lifecycle replacement projects. The Utility Fund financial principles includes 20% or higher reserve fund balance, and affordable utility services. The City’s conservative budget practices and willingness to respond to economic indicators continues to allow the City to maintain unrestricted fund balance reserve levels as established in the City’s financial policies. The fiscal year 2025-26 assessed valuation increased 5.5% to $5.2 billion. On June 2, 2025, the City Council voted to maintain the City’ secondary property tax rate at $0.8582 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 CITY OF MESA, AZ BASIC FINANCIAL SECTION FOR T H E F I S CA L Y E A R E N D E D • JU N E 3 0 , 2 0 25 City of Mesa, Arizona Statement of Net Position June 30, 2025 (in thousands) Primary Government BusinessGovernmental Type Activities Activities Assets Pooled Cash and Investments Accounts Receivable, Net Lease Receivable Accrued Interest Receivable Due from Other Governments Inventory Prepaid and Deposits Restricted Assets: Pooled Cash and Investments Cash with Fiscal Agent Cash with Trustee Accounts Receivable, net Due from Other Governments Customer Deposits Joint Venture Construction Deposits Investment in Joint Ventures Capital Assets, Not Being Depreciated Capital Assets, Being Depreciated, Net Total Assets $ Deferred Outflows of Resources Debt Refunding Pensions and OPEB Total Deferred Outflows of Resources 1,010,082 30,550 49,536 5,159 50,798 14,646 8,018 $ Total 97,763 52,161 59,967 989 5,867 5,993 $ 1,107,845 82,711 109,503 6,148 56,665 14,646 14,011 87,039 55,462 19,740 1,238 278,936 594,784 1,329,736 3,535,724 212,283 88,957 7 3,623 7,119 276,001 462,406 1,339,856 2,612,992 299,322 144,419 7 19,740 1,238 3,623 7,119 554,937 1,057,190 2,669,592 6,148,716 2,264 308,409 310,673 15,316 17,086 32,402 17,580 325,495 343,075 71,634 39,946 10,035 30,164 59,661 21,631 200,596 93,265 39,946 10,035 30,164 260,257 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 72,339 68,048 140,387 24,950 582,427 47,663 1,848,574 2,787,393 1,647,875 5,650 136,045 2,079,845 24,950 2,230,302 53,313 1,984,619 4,867,238 Deferred Inflows of Resources Pensions and OPEB Leases Total Deferred Inflows of Resources 148,776 46,088 194,864 14,965 55,593 70,558 163,741 101,681 265,422 1,377,695 100,008 1,477,703 48,622 118,722 230,310 18,163 (929,372) 864,140 $ 46,850 7,119 43,133 297,881 494,991 46,850 7,119 91,755 118,722 230,310 18,163 (631,491) $ 1,359,131 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 these financial statements. 17 City of Mesa, Arizona Statement of Activities For the Fiscal Year-Ended June 30, 2025 (in thousands) Net (Expense) Revenue and Changes in Net Position Program Revenues Functions/Programs: Governmental Activities: General Government Public Safety Community Environment Cultural-Recreational Interest on Long-Term Debt Total Governmental Activities Business-Type Activities: Electric Gas Water Wastewater Solid Waste Airport District Cooling Total Business-type Activities Total Government Expenses $ 230,515 494,279 193,168 113,669 17,949 1,049,580 43,912 46,783 149,731 97,809 51,305 6,691 1,750 397,981 $ 1,447,561 Charges for Services Operating Grants and Contributions Capital Grants and Contributions Governmental Activities $ $ $ $ $ 34,141 58,759 25,136 27,066 145,102 51,377 60,901 205,684 110,266 76,885 5,086 1,501 511,700 656,802 $ 22,849 19,348 35,407 305 77,909 282 57 339 78,248 $ 7,584 514 490 8,588 1,032 526 9,293 4,688 1,267 16,806 25,394 General Revenues: Sales Taxes Property Taxes Occupancy Taxes Unrestricted Intergovernmental Revenues Utility Development Fees Unrestricted Contributions Investment Income (Loss) Miscellaneous Revenues Transfers Total General Revenues and Transfers Change in Net Position Total Net Position - Beginning Net Position - Ending $ Business-type Activities (165,941) $ (415,658) (132,135) (86,298) (17,949) (817,981) - $ (165,941) (415,658) (132,135) (86,298) (17,949) (817,981) (817,981) 8,497 14,644 65,528 17,145 25,637 (338) (249) 130,864 130,864 8,497 14,644 65,528 17,145 25,637 (338) (249) 130,864 (687,117) 330,176 46,308 6,726 266,556 36,803 57,735 14,321 138,746 897,371 79,390 784,750 864,140 4,067 11,550 12,812 (138,746) (110,317) 20,547 474,444 494,991 $ 330,176 46,308 6,726 266,556 4,067 36,803 69,285 27,133 787,054 99,937 1,259,194 1,359,131 $ The accompanying notes are an integral part of these financial statements. 18 Total City of Mesa, Arizona Balance Sheet Governmental Funds June 30, 2025 (in thousands) General Fund Assets Pooled Cash and Investments Accounts Receivable, Net Lease Receivable Accrued Interest Receivable Due from Other Governments Due from Other Funds Prepaid Costs Restricted Assets: Pooled Cash and Investments Cash with Fiscal Agent Accounts Receivable Due from Other Governments Total Assets Liabilities Accounts Payable and Accrued Liabilities Customer and Defendant Deposits Unearned Revenue Payable from Restricted Assets: Accrued Interest Payable Matured Bonds Payable Total Liabilities $ $ $ 429,056 24,475 49,536 1,467 17,562 4,947 4,523 531,566 35,175 1,694 5,237 Total NonMajor Governmental Funds Total Governmental Funds $ $ $ $ 526,440 4,756 3,530 33,236 843 87,039 55,462 19,740 1,238 732,284 30,468 8,341 24,927 $ 955,496 29,231 49,536 4,997 50,798 4,947 5,366 87,039 55,462 19,740 1,238 1,263,850 $ 65,643 10,035 30,164 42,106 10,095 49,566 123,397 10,095 49,566 165,503 Deferred Inflows of Resources Unavailable Revenue Deferred Inflows Related to Leases Total Deferred Inflows of Resources 4,379 46,088 50,467 23,034 23,034 27,413 46,088 73,501 Fund Balance Nonspendable Restricted Committed Assigned Unassigned Total Fund Balances 4,523 6,741 217,638 210,091 438,993 843 465,448 26,326 93,236 585,853 5,366 465,448 33,067 310,874 210,091 1,024,846 Total Liabilities, Deferred Inflows of Resources and Fund Balances $ 531,566 $ 732,284 $ 1,263,850 The accompanying notes are an integral part of these financial statements. 19 City of Mesa, Arizona Reconciliation of the Balance Sheet of Governmental Funds To the Statement of Net Position June 30, 2025 (in thousands) Fund Balances - total governmental funds $ 1,024,846 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 governmental funds. 1,914,481 Other assets used in governmental activities are not financial resources and therefore not reported in the governmental funds. 279,404 Deferred outflows related to deferred amounts on refunding and pensions are not financial resources and therefore not reported on the funds. 306,324 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. (2,534,675) Deferred inflows relating to pensions represent a future acquisition on 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. (116,738) Internal service funds are used by management to charge the costs of certain activities to individual funds. (9,502) Net position of the governmental activities - statement of net position The accompanying notes are an integral part of these financial statements. 20 $ 864,140 City of Mesa, Arizona Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Fiscal Year Ended June 30, 2025 (in thousands) Revenues Sales Taxes Property Taxes Occupancy Taxes Special Assessments Licenses and Permits Intergovernmental Charges for Services Fines and Forfeitures Investment Income Contributions Miscellaneous Revenue Total Revenues General Fund Non-Major Governmental Funds Total Governmental Funds $ $ $ Expenditures Current: General Government Public Safety Community Environment Cultural-Recreational Debt Service: Principal Interest Service Charges Cost of Issuance Capital Outlay Total Expenditures 198,335 2,384 40,372 227,941 66,959 6,382 23,488 13 6,120 571,994 131,841 46,543 4,342 1,737 3,933 125,112 24,699 1,866 31,276 44 5,875 377,268 330,176 46,543 6,726 1,737 44,305 353,053 91,658 8,248 54,764 57 11,995 949,262 139,392 356,180 30,678 68,658 21,502 82,379 95,879 19,283 160,894 438,559 126,557 87,941 5,713 753 24,435 625,809 49,707 19,361 13 772 187,207 476,103 55,420 20,114 13 772 211,642 1,101,912 Excess (Deficiency) of Revenues Over (Under) Expenditures (53,815) (98,835) (152,650) Other Financing Sources (Uses) Transfers In Transfers Out Proceeds from Sale of Capital Asset Face Amount of Bonds Issued Financing of SBITA Premium on Issuance of Bonds (Net) Total Other Financing Sources (Uses) 144,428 (85,832) 357 11,123 70,076 74,445 (5,739) 211 154,266 14,622 237,805 218,873 (91,571) 568 154,266 11,123 14,622 307,881 16,261 138,970 155,231 422,732 446,883 869,615 Net Change in Fund Balances Fund Balance - Beginning Fund Balances - Ending $ 438,993 $ 585,853 $ 1,024,846 The accompanying notes are an integral part of these financial statements. 21 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, 2025 (in thousands) Net change in fund balances - total governmental funds $ 155,231 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. 1,245 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. (39,685) 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 $163,058 exceeded depreciation/amortization ($78,738) in the current period. 84,320 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 $11,123 exceeded amortization ($6,900) in the current period. 4,223 The net effect of miscellaneous transactions involving capital assets (e.g., donations, transfers and disposals) is to decrease net position. (346) Change in equity in Joint Venture (8,836) 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. (109,969) 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. (11,672) Internal service funds are used by management to charge the costs of certain activities to individual funds. The net revenue (expense) of certain internal service funds is reported with governmental activities. 4,879 Change in net position of the governmental activities - statement of activities The accompanying notes are an integral part of these financial statements. 22 $ 79,390 City of Mesa, Arizona Statement of Net Position Proprietary Funds June 30, 2025 (in thousands) Business-Type Activities Governmental Activities Non-Major Fund Airport Internal Service Funds Utility Assets Current Assets: Pooled Cash and Investments Accounts Receivable, Net Lease Receivable Accrued Premiums Receivable Accrued Interest Receivable Due from Other Governments Inventory Prepaid and Deposits Restricted Assets: Pooled Cash and Investments Cash with Fiscal Agents Cash with Trustees Customer Deposits Joint Venture Construction Deposits Total Current Assets Noncurrent Assets: Investment in Joint Ventures Capital Assets, Not Being Depreciated Capital Assets, Being Depreciated, Net Total Noncurrent Assets Total Assets $ Total 92,445 $ 51,360 964 5,480 5,993 5,318 801 59,967 25 387 - 211,107 88,957 7 3,623 7,119 467,055 1,176 67,674 212,283 88,957 7 3,623 7,119 534,729 72,897 276,001 452,205 1,321,882 2,050,088 10,201 17,974 28,175 276,001 462,406 1,339,856 2,078,263 121 9,918 10,039 2,517,143 95,849 2,612,992 82,936 15,316 16,661 31,977 425 425 15,316 17,086 32,402 4,349 4,349 Deferred Outflows of Resources Debt Refundings Pensions and OPEB Total Deferred Outflows of Resources $ 97,763 52,161 59,967 989 5,867 5,993 The accompanying notes are an integral part of these financial statements. 23 $ 54,586 1,308 11 162 14,646 2,184 City of Mesa, Arizona Statement of Net Position Proprietary Funds June 30, 2025 (in thousands) Business-Type Activities Utility Liabilities Current Liabilities - Payable From Current Assets: Accounts Payable and Accrued Liabilities $ Claims Payable Due to Other Funds Current Liabilities-Payable From Restricted Assets: Accounts Payable and Accrued Liabilities Interest Payable Matured Bonds Payable Customer Deposits and Prepayments Current Portion of Long-Term Liabilities: Current Portion of Bonds Payable Current Portion of Notes Payable Current Portion of Compensated Absences Current Portion of OPEB Liability Total Current Liabilities Long-Term Liabilities: Bonds Payable Notes Payable Compensated Absences Net Pension and OPEB Liability Total Long-Term Liabilities Total Liabilities Total 181 - 50,664 29,327 59,630 60,220 68 687 50,732 29,327 59,630 60,907 - 64,755 163 784 2,263 289,256 32 51 1,019 64,755 163 816 2,314 290,275 236 785 51,905 1,647,371 504 5,432 132,802 1,786,109 218 3,243 3,461 1,647,371 504 5,650 136,045 1,789,570 1,149 39,108 40,257 2,075,365 4,480 2,079,845 92,162 14,618 14,618 347 55,593 55,940 14,965 55,593 70,558 4,625 4,625 71,833 28,175 100,008 10,039 46,850 7,119 43,133 290,202 459,137 $ 7,679 35,854 46,850 7,119 43,133 297,881 494,991 (19,541) (9,502) $ $ $ 21,631 - Internal Service Funds 21,450 $ - 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 Non-Major Fund Airport Governmental Activities The accompanying notes are an integral part of these financial statements. 24 $ $ 5,991 39,946 4,947 City of Mesa, Arizona Statement of Revenues, Expenses and Changes in Net Position Proprietary Funds For the Fiscal Year Ended June 30, 2025 (in thousands) Governmental Activities Business-Type Activities Non-Major Fund Airport Utility 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 $ 51,377 60,901 205,684 110,266 76,885 1,501 506,614 $ Total 5,086 5,086 $ 51,377 60,901 205,684 110,266 76,885 5,086 1,501 511,700 Internal Service Funds $ 45,662 125,109 13,310 184,081 Operating Expenses: Electric Gas Water Wastewater Solid Waste Airport District Cooling Warehouse, Maintenance & Services Self-Insurance Total Operating Expenses 37,881 34,310 89,666 54,610 48,415 1,431 266,313 4,896 4,896 37,881 34,310 89,666 54,610 48,415 4,896 1,431 271,209 44,590 148,615 193,205 Operating Income (Loss) Before Depreciation and Amortization 240,301 190 240,491 (9,124) Depreciation and Amortization (63,800) (1,795) (65,595) (416) Operating Income (Loss) 176,501 (1,605) 174,896 (9,540) The accompanying notes are an integral part of these 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, 2025 (in thousands) Business-Type Activities Governmental Activities Non-Major Fund Airport Internal Service Funds Utility Nonoperating Revenues (Expenses): Investment Income Intergovernmental Lease Interest Revenue Interest Expense: Bonds Notes Payable Lease Gain/(Loss) on Sale of Capital Assets Net Gain/(Loss) from Joint Venture Utility Development Fees Bond Issuance Costs Miscellaneous Revenue Total Nonoperating Revenues (Expenses) 403 1,379 $ 11,550 339 1,379 2,971 - (51,235) (18) (205) (8,797) 4,067 (922) 11,306 (34,318) 127 1,909 (51,235) (18) (205) (8,797) 4,067 (922) 11,433 (32,409) (1) 5 2,975 Income before Transfers and Capital Contributions 142,183 304 142,487 (6,565) Capital Contributions Transfers In Transfers Out 15,539 (138,733) 1,267 (13) 16,806 (138,746) 11,556 (112) Change in Net Position 18,989 1,558 20,547 4,879 Total Net Position - Beginning 440,148 34,296 474,444 (14,381) 35,854 $ 494,991 Total Net Position - Ending $ 11,147 339 - $ 459,137 $ Total $ The accompanying notes are an integral part of these financial statements. 26 $ (9,502) City of Mesa, Arizona Statement of Cash Flows Proprietary Funds For the Fiscal Year Ended June 30, 2025 (in thousands) Business-Type Activities Non-Major Fund Utility Airport Total Cash Flows From Operating Activities: Cash Received From Customers Cash Received From Users Cash Payments to Suppliers Cash Payments to Employees Other Nonoperating Revenue $ 510,696 (213,524) (49,361) 11,306 $ 3,278 (4,384) (1,889) 127 $ 513,974 (217,908) (51,250) 11,433 Governmental Activities Internal Service Funds $ 183,440 (189,938) (10,648) - Net Cash Provided by (Used For) Operating Activities 259,117 (2,868) 256,249 (17,146) Cash Flows From Noncapital Financing Activities: Intergovernmental Interfund Payable Increase Transfers In from Other Funds Transfers Out to Other Funds (4,852) (138,733) 1,968 (13) (2,884) (138,746) 1,395 11,556 (112) Net Cash Provided by (Used For) Noncapital Financing Activities (143,585) 1,955 (141,630) 12,839 Principal Paid on Bonds and Notes Maturities Principal Paid on Lease Interest Paid on Bonds and Notes Interest Income/(Expense) on Leases Bond Issuance Costs Contributions and Capital Grants 308,288 124 (284,157) (72,505) (61,281) (922) 7,942 (2,847) 1,379 1,268 308,288 124 (287,004) (72,505) (61,281) 1,379 (922) 9,210 (6,299) 5 (78) (3) - Net Cash Used For Capital and Related Financing Activities (102,511) (200) (102,711) (6,375) Cash Flows From Investing Activities: Interest Received on Investments 11,061 406 11,467 3,061 Net Cash Provided By Investing Activities 11,061 406 11,467 3,061 Net Change in Pooled Cash and Investments 24,082 (707) 23,375 (7,621) Total Cash and Investments at Beginning of Year 368,434 7,201 375,635 62,207 6,494 $ 399,010 Cash Flows From Capital and Related Financing Activities: Proceeds From Bond Sales Proceeds From Sale of Capital Assets Acquisition and Construction of Capital Assets Proceeds from the Sale of Capital Assets Total Cash and Investments at End of Year $ 392,516 $ The accompanying notes are an integral part of these financial statements. 27 $ 54,586 City of Mesa, Arizona Statement of Cash Flows Proprietary Funds For the Fiscal Year Ended June 30, 2025 (in thousands) Business-Type Activities Governmental Activities Non-Major Fund Airport Internal Service Funds Utility Reconciliation of Operating Income (Loss) to Net Cash Provided by (Used For) Operating Activities: Operating Income (Loss) $ 176,501 Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided By (Used By) Operating Activities: Depreciation and Amortization Miscellaneous Revenue Changes in Assets and Liabilities: (Increase)/Decrease in Receivables (Increase)/Decrease in Inventory (Increase)/Decrease in Prepaid and Deposits (Increase)/Decrease in Deferred Outflows Increase/(Decrease) in Accounts Payable Increase/(Decrease) in Pension and OPEB Liability Increase(/Decrease) in Deferred Inflows Increase/(Decrease) in Compensated Absence Total Adjustments (1,605) $ 174,896 63,800 11,306 1,795 127 65,595 11,433 416 - (2,486) 5,871 (1,739) 8,719 (160) (2,918) 223 (1,808) 69 (41) (1,173) (103) (113) (16) (4,294) 5,940 (1,780) 7,546 (263) (3,031) 207 (641) (2,662) (350) (214) 1,014 959 (1,049) (5,079) 82,616 (1,263) 81,353 (7,606) $ (2,868) $ 256,249 $ (17,146) $ - $ (11,664) (205) 10,208 (2,512) $ - Net Cash Provided By (Used For) Operating Activities $ 259,117 Noncash Transactions Affecting Financial Position: Contributions of Capital Assets Gain (Loss) on Sale of Capital Assets Amortization of Bond Premium Amortization of Deferred Amounts on Refunding $ (11,664) (205) 10,208 (2,512) $ Total The accompanying notes are an integral part of these financial statements. 28 $ (9,540) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 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. 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. 29 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 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. 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 30 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 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 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 31 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 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 Cityowned 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. 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 City-owned 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. 32 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 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 3, 2024. 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 longterm 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. 33 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 j. Capital Assets Capital assets, including infrastructure (streets, sidewalks, street lighting, storm drainage and other assets that are immovable and of value only to the City) are defined as assets with an initial cost of $10,000 or more and an estimated useful life of more than one year. Intangible assets for the City include goodwill, right of way, easements and computer software. The City has elected to capitalize software with an initial cost of $100,000 or more. All capital assets, whether owned by governmental activities or business-type activities, are required to be recorded and depreciated in the government-wide financial statements. Capital assets are recorded at cost or estimated historical cost if purchased or constructed. Contributions of assets are stated at acquisition value or engineering estimates of acquisition value 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 more likely than not 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. 34 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 m. Long-Term Obligations In the Government-Wide Financial Statements and the Proprietary Fund Financial Statements, long-term debt and other long-term obligations are reported as liabilities in the applicable Governmental Activities, Business-Type Activities, or Proprietary Fund Statement of Net Position. Bond premiums and discounts are amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. 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. 35 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 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, 2025, 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 2024-2025, current property tax collections were $40,911,056 or 98.79% 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, 2025, was $1,145,595 of which $642,915 was recorded as revenue and $502,680 as unavailable revenue. s. New Accounting Pronouncements GASB Statement No. 102 Certain Risk Disclosures. This Statement establishes financial reporting requirements for risks related to vulnerabilities due to certain concentrations or constraints. The requirements of this Statement are effective for fiscal years beginning after June 15, 2024. The City implemented this Standard in fiscal year 2025 with no significant impact on these financial statements. 2. RECONCILIATION OF GOVERNMENTAL FUND FINANCIAL STATEMENTS TO GOVERNMENTWIDE 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. 36 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 Reconciliation of the Governmental Funds Balance Sheet to the Government-Wide Statement of Net position (in thousands): Assets Pooled Cash and Investments Accounts and Misc Receivable, Net Lease Receivable Accrued Interest Receivable Due from Other Governments Dues from Other Funds Inventory Prepaid and Deposits Restricted Assets: Pooled Cash and Investments Cash with Fiscal Agent Accounts Receivable Dues 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 $ $ $ $ 468 162 14,646 2,184 (4,947) - $ 1,010,082 30,550 49,536 5,159 50,798 14,646 8,018 87,039 55,462 19,740 1,238 1,263,850 278,936 1,914,481 2,193,885 10,039 82,936 (4,947) 87,039 55,462 19,740 1,238 278,936 1,924,520 3,535,724 - 2,264 304,060 306,324 4,349 4,349 - 2,264 308,409 310,673 $ 1,263,850 $ 2,500,209 $ 87,285 $ (4,947) $ 3,846,397 $ 65,643 10,035 30,164 59,661 165,503 $ $ 5,991 4,947 39,946 39,893 1,385 92,162 $ (4,947) - $ Deferred Outflows of Resources Deferred Amounts on Refunding Pensions and OPEB Total Deferred Outflows of Resources Total Assets and Deferred Outflows of Resources Liabilities Accounts Payable and Accrued Due to Other Funds Claims Payable Customer and Defendant Deposits Unearned Revenue Liabilities Payable from Restricted Pension and OPEB Long-term Liabilities Total Liabilities Deferred Inflows of Resources Unavailable Revenue Pension Deferred Inflows Related to Leases Total Deferred Inflows of Resources Fund Balance/Net Position Total Fund Balance/Net Position Total Liabilities and Fund Balance/Net Position $ 955,496 29,231 49,536 4,997 50,798 4,947 5,366 - 1,833,432 701,243 2,534,675 54,586 1,319 - (4,947) 71,634 39,946 10,035 30,164 59,661 1,873,325 702,628 2,787,393 27,413 46,088 73,501 (27,413) 144,151 116,738 4,625 4,625 - 148,776 46,088 194,864 1,024,846 (151,204) (9,502) - 864,140 1,263,850 $ 2,500,209 (4,947) $ 3,846,397 37 $ 87,285 $ City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 (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 278,936 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 $ 3,393,533 $ (1,506,391) 1,887,142 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 $ 38,071 Accumulated Amortization Total $ (10,732) 27,339 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 $ 583,808 Lease & SBITA Liability 29,165 Compensated Absences 52,003 Unamortized Bond Premium 36,267 Post-employment Benefits 864,723 Pension Liability Total 968,709 2,534,675 $ 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 $ 2,264 $ 304,060 306,324 Deferred Pensions and OPEB 38 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 Deferred inflows relating to pensions represent acquisition of net assets that applies to future periods. Deferred Inflow of Resources on Pension $ 144,151 Prepaid expense consists of items that will consume net position in a future reporting period(s): $ Prepaid Cost of Issuance 468 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 $ 533 19,740 7,140 27,413 (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 39 $ (9,502) City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balance to the Government-wide Statement of Activities (in thousands): Total Long-term Governmental Revenues/ Funds Expenses(1) Revenues and Other Revenues: $ Sales Taxes Property Taxes Occupancy Taxes Special Assessments Licenses and Permits Intergovernmental Charges for Service Fines and Forfeitures Investment Income Contributions Miscellaneous Other Sources: O Transfers In Sale of Capital Assets Face Amount of Bonds Financing of Leases Premiums on Issuance P of Bonds rT Total Revenue and Other Sources o t Expenditures/ E Expenses and Other x Expenditures/Expenses: E Current: General Public Safety Community CulturalDebt Service: Principal Interest Service Charge Cost of Issuance Capital Outlay Other Financing Uses: O Transfers Out Total Expenditures/ T & Other Financing Net Change for the Year N$ 330,176 $ 46,543 6,726 1,737 44,305 353,053 91,658 8,248 54,764 57 11,995 Capital Related Items(2) Internal Service Funds(3) Long-term Eliminations Debt (4) (5) $ 2,971 32,690 - $ - $ (235) (846) 2,326 4,056 - 218,873 568 154,266 11,123 - (568) - 11,556 - (154,266) (11,123) (91,683) - 138,746 - 14,622 - - - (14,622) - - 1,348,714 1,245 3,488 47,217 (180,011) 160,894 438,559 126,557 87,941 17,661 17,960 1,994 2,070 33,202 21,682 59,355 21,530 18,758 16,078 5,262 2,128 - - 230,515 494,279 193,168 113,669 55,420 20,114 13 772 211,642 - (211,642) - (55,420) (2,975) 25 - - 17,139 13 797 - 91,571 - - 112 - (91,683) - 1,193,483 39,685 (75,873) 42,338 (58,370) (91,683) 1,049,580 4,879 $(121,641) $ - $ 155,231 $ (38,440) $ 79,361 40 $ - $ - Statement of Activities - $ 330,176 46,308 6,726 891 44,305 353,053 91,658 8,248 57,735 36,803 14,321 (91,683) 1,128,970 79,390 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 (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 $ (235) Special Assessment Revenue (846) Unavailable Revenue 2,326 1,245 $ 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 $ 3,289 OPEB Expense 31,303 Pension Expense Total $ 5,093 39,685 (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 $ 163,058 Depreciation Expense Total $ (78,738) 84,320 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 41 $ 11,123 $ (6,900) 4,223 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 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 $ $ (8,836) (346) (9,182) (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 $ 47,217 $ (42,338) 4,879 (4) Bond and note proceeds are reported as financing sources and the repayment of principal consumes financial resources in the governmental funds. Neither transaction has any effect on the statement of activities. General Obligation Bonds $ (154,266) Principal Repayments Total $ 49,588 (104,678) 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 $ (11,123) $ 5,832 (5,291) Principal Repayment 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 (3,894) Amortization of Deferred Refunding Amounts 919 Amortization of Bond Issuance Costs $ 42 14,622 25 11,672 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 (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 $ (91,683) $ 91,683 – Transfers In 43 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 3. FUND BALANCE As of June 30, 2025, the fund balance details by classification are listed below (in thousands): Fund Balances: Nonspendable: Prepaid Costs Nonspendable Sub-total General Fund Non-major Governmental Funds Total Governmental Funds $ $ $ 4,523 4,523 843 843 5,366 5,366 Restricted: Capital Projects Community Facility District Coronavirus Relief Court Debt Service Fire General Government Housing Library Parks & Recreation Police Public Health Spring Training and Tourism Transportation Programs Restricted Sub-total - 139,584 1,550 2,894 2,090 28,349 51,624 10 1,972 276 709 67,098 4,946 3,716 160,630 465,448 139,584 1,550 2,894 2,090 28,349 51,624 10 1,972 276 709 67,098 4,946 3,716 160,630 465,448 Committed To: Arts & Culture Cemetery Environmental Compliance Fire Technology Committed To Sub-total 3,553 3,188 6,741 1,121 3,343 19,314 2,548 26,326 1,121 6,896 19,314 3,188 2,548 33,067 Assigned To: Capital Projects Development Services Economic Development Fire General Government Housing Parks & Recreation Police Spring Training and Tourism Sustainability Transit Vehicle Replacement Assigned To Sub-total 608 6,125 10,698 143,084 5,600 1,831 18,413 30,531 397 351 217,638 91,283 219 1,734 93,236 91,283 608 6,125 10,698 143,303 5,600 1,831 18,413 30,531 397 351 1,734 310,874 Unassigned 210,091 - 210,091 Total Fund Balances $ 438,993 $ 44 585,853 $ 1,024,846 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 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) Money Market Cash with Fiscal Agent (2) Cash with Trustee Long-Term Investments Total City Pooled Cash and Investments $ $ 18,670 11,087 11,300 30,000 144,419 7 1,336,110 1,551,593 (1) Represents cash sent by the City to Custodian on June 30, 2025 for investing purposes. (2) Represents cash sent by the City to fiscal agents on June 30, 2025 for debt service payments due to bondholders on July 1, 2025 Deposits At year end, the City’s cash totaled $18,670,416 which included $137,030 in petty cash. The City’s adjusted book balance was $18,533,386 and the bank balance was $29,624,660. The difference of $11,091,274 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, 2025 are covered under House Bill 2619. Investments The City’s Investment Policy is consistent with the City Charter. The investment policy authorizes the investment of City funds in accordance with Arizona Revised Statute §35-323. These investments include obligations of the U.S. Treasury and U.S.agencies, certificates of deposit in eligible depositories, repurchase agreements, obligations of the State of Arizona or any of its counties, or incorporated cities, towns or duly organized school districts, improvement districts in this state, State Treasurer Investment Pool, and investment grade corporate bonds, debentures, notes and other evidence of indebtedness issued or guaranteed by solvent U.S. corporations which are not in default as to principal or interest. Interest Rate Risk The City’s investment policy for limiting its exposure from rising interest rates complies with Arizona Revised Statute §35-323, which limits investments of public monies to maturities of five years or less. Credit Risk Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The City’s investment policy for credit risk complies with Arizona Revised Statute §35-323. The City’s portfolio 45 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 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, 2025 (in thousands): Investment Type S & P Rating Fair value Corporate Notes AAA $ 3,076 Corporate Notes AA+ 9,418 Corporate Notes AA 1,502 Corporate Notes AA29,858 Corporate Notes A+ 33,422 Corporate Notes A 29,682 Corporate Notes A27,524 Corporate Notes BBB+ 4,063 Corporate Notes NR / NR** 5,067 First American Gov't Obligation MM Fund AAAm 11,300 Goldman Sachs Money Market AAAm 30,000 Foreign Issues AAA 13,065 Foreign Issues AA13,811 Foreign Issues A+ 13,807 Foreign Issues A 10,991 Foreign Issues A19,500 Foreign Issues BBB+ 3,023 Municipal Bonds AAA 15,499 Municipal Bonds AA+ 8,974 Municipal Bonds AA 15,388 Municipal Bonds AA20,108 Municipal Bonds A+ 3,028 Municipal Bonds A 984 Municipal Bonds N/A 7,374 Municipal Bonds N/R 6,973 US Agencies AA+ 377,152 US Agencies N/A 328,378 US Agencies and Treasuries Short Term N/R** 334,443 Total $ 1,377,410 *Rating by Moodys **No Rating Fair Value of Investments The City measures and records its investments using fair value measurement guidelines established by generally accepted accounting principles. These guidelines recognize a three-tiered fair value hierarchy, as follows: 46 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 • • • 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, 2025, the City had the following recurring fair value measurements (in thousands): Fair Value Measurements Using: Fair Value 6/30/2025 Investment by Fair Value Level Debt Securities Corporate Notes Foreign Issues Municipal Bonds US Treasuries and Agencies $ Total Debt Securities at Fair Value Investments Measured at Net Asset Value Arizona State Treasurers Investment Pools First American Gov’t Obligation MM Fund Goldman Sachs Money Market Total Investments Measured At Fair Value Level 1 Level 2 Level 3 143,612 74,197 78,328 1,039,973 $ - $ 143,612 74,197 78,328 1,039,973 $ - 1,336,110 $ - $1,336,110 $ - 11,087 11,300 30,000 $ 1,388,497 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, 2025. The City’s investment maturities on June 30, 2025 are as follows (in thousands): Investment Maturities (in Years) Investment Type Corporate Notes First American Gov’t Obligation MM Fund Goldman Sachs Money Market Foreign Issues Municipal Bonds US Treasuries and Agencies Totals Less Fair Value Than 1 $ 143,613 $ 4,277 11,300 11,300 30,000 30,000 74,197 12,697 78,327 26,887 1,039,973 613,833 $1,377,410 $ 698,994 47 1-3 $ 75,705 39,001 31,215 270,223 $ 416,144 3-5 $ 63,631 22,499 20,225 155,917 $262,272 Concentration of Credit Risk % 10.43 % 0.82 % 2.18 % 5.39 % 5.69 % 75.50 % 100.00 % City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 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 Business-Type Activities: Utility Customers Other Customers Leases Due from Other Governments Total Business-type Activities Receivables $ $ $ $ Allowance (9,518) $ - 24,475 49,536 17,562 6,002 19,740 1,238 (1,246) - 4,756 19,740 1,238 26,403 6,833 - 26,403 6,833 11 1,952 163,270 (644) (11,408) $ 11 1,308 151,862 (2,172) $ (190) (2,362) $ 50,813 1,347 59,967 5,867 117,994 33,993 49,536 17,562 52,985 1,537 59,967 5,867 120,356 $ Net $ $ $ Unbilled Accounts Receivable Unbilled utility service receivables are recorded in the year in which the services are provided. At June 30, 2025, unbilled utility service receivables are recorded in the Enterprise Fund as follows (in thousands): Electric $ Gas Water Wastewater Solid Waste $ 3,669 1,869 12,874 6,212 3,818 28,442 48 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 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 Governmental Activities General Non-Major Fund Funds Total $ 3,762 $ 276 $ 4,038 $ Unavailable Revenue Receivables not yet collected Delinquent Property Taxes Special Assessments not yet due 6. 1,475 5,237 General Fund $ 4,379 $ 4,379 $ 18,496 110 6,045 24,927 Non-Major Funds $ 2,761 533 19,740 $ 23,034 18,496 110 7,520 $ 30,164 Total 7,140 533 19,740 $ 27,413 $ INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS The following interfund activities are included in the fund financial statements on June 30, 2025 (in thousands): Due from Other Due to Other Fund Funds Funds General Fund $ 4,947 $ Proprietary Funds 4,947 Total $ 4,947 $ 4,947 Interfund balances on June 30, 2025, are short-term loans used to cover temporary cash deficits in various funds and are expected to be repaid within one year. 49 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 The following interfund transfers are reflected in the fund financial statements for the year ended June 30, 2025 (in thousands): Transfers In Transfers Out Funds General $ Non-Major Governmental Internal Service Total $ Non-Major Internal Governmental Utility Airport Service Total - $ 5,739 $ 138,566 $ 11 $ 112 $ 144,428 74,445 74,445 11,387 167 2 11,556 85,832 $ 5,739 $ 138,733 $ 13 $ 112 $ 230,429 General The transfer from business-type activities to governmental activities on the government-wide statement of activities is a $138,143,000 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 SUBSCRIPTION-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 $27,809,868, less accumulated amortization of $6,040,833. Total future minimum lease payments under this lease agreement are as follows (in thousands): 2026 2027 2028 2029 2030 2031-2035 Thereafter Totals Governmental Activities Principal Interest $ 2,795 $ 446 2,140 360 1,327 326 1,231 301 1,253 276 6,645 982 6,999 254 $ 22,391 $ 2,945 Total $ 3,241 2,500 1,653 1,532 1,529 7,627 7,253 $ 25,335 City as Lessor The City, as a lessor, has entered into lease agreements for land, air, buildings, and equipment under long-term, non-cancelable lease agreements. The building that is leased from a local commercial airport is sub-leased 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, 2025, the City recognized $5,625,422 and $2,422,956 in lease revenue and interest revenue, respectively, pursuant to these contracts. 50 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 Subscription-Based Information Technology Arrangements The City has obtained the right to use various desktop and server software, cloud backup services, payroll and human resources software, and other intangible right-to-use software under the provisions of various subscription-based information technology arrangements (SBITA’s). The total of the City’s subscription assets is recorded at a cost of $10,262,000, less accumulated amortization of $4,690,000. The future subscription payments under SBITA agreements are as follows (in thousands): Governmental Activities 2026 2027 2028 2029 2030 2031-2035 Totals Principal 1,420 1,268 662 384 416 2,625 $ 6,775 $ Interest 247 198 160 144 127 282 $ 1,158 $ Total 1,667 1,466 822 528 543 2,907 $ 7,933 $ 51 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 8. CAPITAL ASSETS A summary of capital asset activity, for the government-wide financial statements, for the year ended June 30, 2025, follows (in thousands): Government Activities Beginning Balance Non-depreciable Assets: Land Infrastructure Construction-in-Progress Total Non-depreciable Assets $ 419,761 3,597 186,489 609,847 Depreciable Assets: Buildings Other Improvements Machinery & Equipment Infrastructure Intangible: Subscription Assets Lease - Buildings Lease - Machinery & Equipment Lease - Land Software Total Depreciable Assets Additions Retirements $ $ 202,455 202,455 Ending Balance (217,518) (217,518) $ 419,761 3,597 171,426 594,784 542,027 327,457 335,730 1,412,491 58,764 47,530 48,029 30,099 (1,673) (5,481) (70) 600,791 373,314 378,278 1,442,520 3,926 28,316 24,312 2,674,259 8,000 2,832 264 26 195,544 (1,664) (3,629) (12,517) 10,262 27,519 264 26 24,312 2,857,286 Less Accumulated Depreciation for: Buildings Other Improvements Machinery & Equipment Infrastructure Intangible: Subscription Assets Lease - Buildings Lease - Machinery & Equipment Lease - Land Software Total Accum. Depreciation (182,276) (184,340) (218,458) (835,222) (10,453) (11,943) (17,105) (39,565) 1,464 5,322 70 (192,729) (194,819) (230,241) (874,717) (2,455) (6,577) (24,312) (1,453,640) (3,899) (2,967) (84) (18) (86,034) 1,664 3,604 12,124 (4,690) (5,940) (84) (18) (24,312) (1,527,550) Total Depreciated Capital Assets net 1,220,619 109,510 (393) 1,329,736 Governmental Activities Capital, net $1,830,466 $ 311,965 $ (217,911) $1,924,520 52 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 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 $ $ Business-Type Activities: Non-depreciable Assets: Land Water Rights Collections of Art Construction-in-Progress Total Non-depreciable Assets Beginning $ 31,786 17,560 106 191,396 240,848 Additions $ 327,488 327,488 11,628 14,685 42,590 16,715 416 86,034 Ending Balance Retirements $ (105,931) (105,931) $ 31,786 17,560 106 412,953 462,405 Depreciable Assets: Buildings Other Improvements Machinery & Equipment Intangibles Infrastructure Total Depreciable Assets 46,701 87,533 93,555 26,801 2,372,334 2,626,924 314 15,334 82,707 98,355 (4,032) (100) (4,132) 46,701 87,847 104,857 26,801 2,454,941 2,721,147 Less Accumulated Depreciation for: Buildings Other Improvements Machinery & Equipment Intangibles Infrastructure Total Accum. Depreciation (19,273) (52,328) (67,377) (23,222) (1,157,587) (1,319,787) (857) (2,342) (4,876) (112) (57,408) (65,595) 4,032 59 4,091 (20,130) (54,670) (68,221) (23,334) (1,214,936) (1,381,291) Total Depreciable Assets, net 1,307,137 32,760 (41) 1,339,856 Business-Type Activities Assets, net $1,547,985 360,248 $ (105,972) $ 1,802,261 $ 53 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 Depreciation and Amortization expense was charged to enterprise functions in the government-wide financial statements as follows (in thousands): Electric Gas Water Wastewater Solid Waste Airport District Cooling $ $ 3,826 6,780 32,806 17,363 2,706 1,795 319 65,595 Construction in progress and related construction commitments are composed of the following (in thousands): Governmental Activities General Governments Public Safety Community Environment Cultural-Recreational Total Business-Type Activities Electric Gas Water Wastewater Solid Waste Airport District Cooling Total Construction in Progress Commitments $ $ $ 150,717 3,206 5,864 11,639 171,426 $ 169,937 1,360 129 204 171,630 Construction In Progress Commitments $ $ $ 10,422 54,044 263,537 69,318 7,319 8,142 171 412,953 54 $ 1,965 11,253 227,756 30,512 4,226 1,472 19 277,203 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 9. LONG-TERM OBLIGATIONS a. Changes in Long-Term Obligations The following is a summary of changes in long-term obligations (in thousands). Beginning Balances Additions Reductions Governmental Activities: Bonds Payable: General Obligation Bonds $ 335,990 Highway User Revenue Bonds 18,540 Excise Tax Revenue Obligations 31,630 Community Facility District 92,971 Total Bonds Payable 479,131 $ 154,265 154,265 $ (33,745) (10,880) (1,375) (3,588) (49,588) Ending Balances $ 456,510 7,660 30,255 89,383 583,808 Amounts Due Within One Year $ 28,775 3,755 1,440 3,678 37,648 Leases Subscription-Based Information Technology Arrangements Unamortized Premiums Compensated Absences Pension and OPEB Liability Governmental Activities Total 22,077 3,122 (2,808) 22,391 2,795 1,900 25,539 50,001 1,808,878 $2,387,526 8,000 14,622 40,064 64,447 $ 284,519 (3,126) (3,894) (36,677) $ (96,093) 6,774 36,267 53,388 1,873,325 2,575,953 1,420 5,725 24,751 72,339 Business-Type Activities: Bonds Payable: Utility Revenue Bonds Utility Revenue Obligations Total Bonds Payable $1,063,125 323,975 1,387,100 $ 295,465 295,465 $ (65,335) (8,790) (74,125) 12,823 5,251 $ 313,539 (160) (8,453) (1,755) (5,044) (263) $ (89,799) Notes Payable 827 Unamortized Bond Premiums 76,961 Unamortized Obligation Premiums 24,110 Compensated Absences 6,259 Pension and OPEB Liability 138,622 Business-Type Activities Total $1,633,879 $ $ $ 997,790 610,650 1,608,440 667 68,508 35,178 6,466 138,359 1,857,619 $ $ $ 52,185 12,570 64,755 163 816 2,314 68,048 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, $1,384,705 of internal service funds compensated absences are included in the above amounts. For governmental activities, compensated absences are generally liquidated by the general fund. 55 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 b. Bonds Payable On June 30, 2025, 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. $ 14,875 $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. 32,525 $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. 18,800 $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. 4,315 $37,700,000 2016 general obligation serial bonds due in annual installments ranging from $825,000 to $2,775,000, plus semi-annual interest ranging from 2 percent to 4 percent through July 1, 2036. 23,100 $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. 10,485 $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. 10,495 $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. 29,630 $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. 27,025 $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. 5,525 56 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 $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. $ 12,965 $22,075,000 2020 general obligation serial and term bonds due in annual installments ranging from $465,000 to $11,330,000 plus semi-annual interest ranging from 1.875 percent to 3 percent through July 1, 2040. 8,825 $23,390,000 2020 general obligation refunding serial bonds due in annual installments ranging from $730,000 to $12,480,000, plus semi-annual interest ranging from 4 percent to 5 percent through July 1, 2030. 18,530 $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. 1,685 $14,495,000 2021 general obligation refunding serial bonds due in annual installments ranging from $665,000 to $6,380,000, plus semi-annual interest ranging of 5 percent through July 1, 2031. 10,260 $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. 8,100 $83,340,000 2023 general obligation serial bonds due in annual installments ranging from $2,440,000 to $9,235,000, plus semi-annual interest of 5 percent through July 1, 2032. 68,665 $154,265,000 2025 general obligation serial bonds due in annual installments ranging from $100,000 to $14,895,000, plus semi-annual interest of 5 percent through July 1, 2045. 150,705 Total General Obligation Bonds $ 456,510 $ 7,660 Street and Highway User Revenue Bonds $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. 57 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 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. $ 1,702 $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 $215,000, plus semi-annual interest ranging from 2 percent to 5.375 percent through July 1, 2039. 2,197 $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. 1,392 $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. 4,845 $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. 618 $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. 765 $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. 378 $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. 6,220 $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. 1,031 58 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 $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. $ 597 $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. 270 $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. 7,995 $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. 810 $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. 214 $1,883,000 2019 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) Assessment District No. 10 Special Assessment Revenue Bonds, due in annual principal installments ranging from $48,000 to $130,000, plus semi-annual interest ranging from 2.75 percent to 5.20 percent through July 1, 2043. 1,562 $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. 205 $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. 1,639 $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. 1,025 59 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 $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. $ 11,805 $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. 596 $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. 2,405 $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. 4,965 $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. 11,550 $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. 1,975 $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. 3,922 $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. 1,290 $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. 7,820 $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. 2,470 60 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 $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. $ $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. Total Community Facilities District Bonds 2,880 4,240 $ 89,383 $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. $ 30,255 Total bonds payable recorded in governmental activities $ 583,808 $ 650 Excise Tax Revenue Obligation Classified in Business-type Activities on the government-wide financial statements: Utility Systems Revenue Bonds $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. $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 semiannual interest ranging from 2 percent to 4 percent through July 1, 2030. 77,880 $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. 23,445 61 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 $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. $ 83,925 $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. 134,660 $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. 112,050 $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. 43,620 $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. 91,120 $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. 76,730 $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. 41,560 $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. 58,055 $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. 60,480 $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. 27,395 $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 $ 62 997,790 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 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 semiannual interest ranging from 4.00 percent to 5.00 percent through July 1, 2045. $ 11,015 $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 semiannual interest of 5.00 percent through July 1, 2046. 7,955 $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 $193,710,000 2023 utility revenue serial obligations, due in annual principal installment ranging from 2,500,000 to 21,300,000 plus semi-annual interest of 5 percent through July 1, 2048. 183,855 $295,465,000 2025 utility revenue serial obligations, due in annual principal installment ranging from 3,100,000 to 25,000,000 plus semiannual interest of 5 percent through July 1, 2049. 295,465 Total Utility Systems Revenue Obligations $ Total bonds payable recorded in business-type activities $ 1,608,440 63 610,650 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 The following tables summarize the City’s debt service requirements to maturity for its long-term bonds payable on June 30, 2025 (in thousands). The deferred amounts on refundings are not included. Governmental Activities General Obligation Bonds Highway User Revenue Bonds Fiscal Year 2026 2027 2028 2029 2030 2031-2035 2036-2040 2041-2045 Principal Interest Total $ 28,775 $ 19,139 $ 47,914 29,860 18,128 47,988 31,000 17,009 48,009 32,135 15,854 47,989 33,440 14,655 48,095 153,590 52,938 206,528 103,400 24,684 128,084 44,310 5,330 49,640 Fiscal Year 2026 2027 2028 2029 2030 2031-2035 2036-2040 2041-2045 TOTALS $ 456,510 $ 167,737 $ 624,247 TOTALS Excise Tax Revenue Obligations Fiscal Year 2026 2027 2028 2029 2030 2031-2035 2036-2040 2041-2045 2046-2050 TOTALS Principal Interest Total $ 1,440 $ 1,255 $ 2,695 1,515 1,183 2,698 1,590 1,107 2,697 1,670 1,028 2,698 1,750 944 2,694 10,105 3,380 13,485 12,185 1,297 13,482 $ 30,255 $ 10,195 $ 40,450 Principal Interest Total $ 3,755 $ 344 $ 4,099 3,905 156 4,061 $ 7,660 $ 500 $ 8,160 Community Facilities District Fiscal Year 2026 2027 2028 2029 2030 2031-2035 2036-2040 2041-2045 2046-2050 TOTALS Principal Interest Total $ 3,678 $ 3,524 $ 7,202 3,807 3,384 7,191 3,915 3,233 7,148 4,001 3,078 7,079 4,116 2,918 7,034 22,441 11,507 33,948 25,737 7,443 33,180 21,113 2,418 23,531 575 24 599 $ 89,383 $ 37,529 $ 126,912 Business-type Activities Revenue Bonds Utility Revenue Obligations Fiscal Year 2026 2027 2028 2029 2030 2031-2035 2036-2040 2041-2045 2046-2050 Principal Interest Total $ 52,185 $ 40,379 $ 92,564 54,655 38,104 92,759 58,055 35,811 93,866 56,235 33,383 89,618 55,770 31,043 86,813 322,900 115,743 438,643 270,510 60,944 331,454 127,480 12,075 139,555 - Fiscal Year 2026 2027 2028 2029 2030 2031-2035 2036-2040 2041-2045 2046-2050 Principal Interest Total $ 12,570 $ 31,394 $ 43,964 13,055 29,260 42,315 11,830 28,641 40,471 15,360 28,077 43,437 15,275 27,309 42,584 79,435 125,450 204,885 168,355 91,962 260,317 189,905 53,999 243,904 104,865 10,293 115,158 TOTALS $ 997,790 $ 367,482 $1,365,272 TOTALS $ 610,650 $426,385 $1,037,035 64 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 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, 2025, is (in thousands): 6% Bonds $ 20% Bonds Total Available 579,729 1,540,939 $ 2,120,668 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, 2025, total principal and interest outstanding for CFD general obligation bonds was $97,790,063. 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, 2025, 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 $29,122,861. Principal and interest paid for the current year and total assessments collected were $1,669,000, and $1,737,000 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, 2025, the amount provided in the Replacement and Extension Funds equaled $10,133,000 which is in compliance with the bond provisions. As of June 30, 2025, the amount available is $46,850,000. 65 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 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, 2025(in thousands): Business-type Activities Fiscal Year 2026 2027 2028 2029 Totals Principal $ 163 167 170 167 $ 667 Interest & Fees $ 15 11 7 4 $ 37 Total $ 178 178 177 171 $ 704 d. Short-term Debt The City had no short-term debt activity for the fiscal year ended June 30, 2025. e. Series 2012 Special Activity Revenue Bonds PMGAA issued $19,220,000 in special facility Revenue Bonds on February 29, 2012. The City has entered into a memorandum of understanding (MOU) with PMGAA and Able Engineering and Component Services for the development, construction and lease of an aircraft maintenance repair and overhaul facility at Phoenix-Mesa Gateway Airport. In general, the MOU addresses PMGAA issuing Special Facility Revenue Bonds, constructing the facility and leasing the facility to the City. The City, in turn, will sublease the facility to Able Engineering. The City pledged a portion of its excise taxes as security for payment of the base rent. The pledge of such excise taxes will be a junior lien subordinate to certain outstanding senior obligations. The bonds are payable from the future revenues from the City through 2038. During that time frame, total principal and interest to be paid on the bonds will be $35,216,300. The bonds are not considered the debt of the City. f. Pledged Revenue Utility System Revenue Bonds The City has pledged future utility customer revenues, net of specified operating expenses, to repay approximately $0.998 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 45.1% percent of net revenues. The total principal and interest remaining to be paid on the bonds is 66 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 $1.365 billion. Principal and interest paid for the current year and total customer net revenues were $108,264,000 and $240,231,000, respectively. Highway User Revenue Bonds The City has pledged future Highway User Taxes Revenue to repay $7,660,000 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 23.2% percent of eligible revenues. The total principal and interest remaining to be paid on the bonds is $8,160,000. Principal and interest paid for the current year and total highway user tax revenues were $11,666,000 and $50,373,000, respectively. Excise Tax Revenue Obligations The City has pledged future Excise Tax Revenues to repay $30,255,000 in excise tax revenue obligations issued and outstanding since 2020. Proceeds from the obligations provided financing for construction and installation of new higher education building. Annual principal and interest payments on the bonds were 0.005% of eligible revenues. The total principle and interest remaining to be paid on the bonds is $40,450,000. Principle and interest paid for the current year and total excise tax revenues were $2,698,900 and $490,847,000, respectively. 10. REFUNDED, REFINANCED AND DEFEASED OBLIGATIONS Liabilities to be Paid from Assets Held in Escrow Liabilities to be paid from assets held in escrow include bonded debt of the City that has been provided for through an Advanced Refunding Bond Issue or a Defeasance. Under an advanced refunding arrangement, refunding bonds are issued and the net proceeds, plus additional resources that may be required, are used to purchase securities issued or guaranteed by the United States Government. Under a Defeasance City resources are used to purchase securities issued or guaranteed by the United States Government. These securities are then deposited in an irrevocable trust under an escrow agreement which provides that all proceeds from the trust will be used to fund the principal and interest payments of the previously issued bonded debt being refunded. The trust deposits have been computed so that the securities in the trust, along with future cash flow generated by the securities, will be sufficient to service the previously issued bonds. In accordance with GASB Statement No. 7, the refunded debt outstanding on June 30, 2025, as reflected below is not included in the City’s financial statements (in thousands). Utility System Revenue Bond Issue dated May 29, 2008 Utility System Revenue Refunding Bond Issue dated September 25, 2014 $ 3,150 14,050 Total Refunded and Defeased Bonds Outstanding $ 17,200 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 67 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 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, 2025, 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 self-insurance funds during the fiscal year. The estimated liability for claims outstanding is determined by a yearly actuarial study in the Property and Public Liability Fund and the Workers Compensation Fund. The claims liability in the Employee Benefits Fund is generated by a third-party claims processing company. Changes in the balances of claims liabilities during the past two fiscal years are as follows (in thousands): Property & Public Liability Unpaid Claims, 6/30/23 Adjustments to Reserves Claim Expense $ 10,469 2,464 (1,021) Workers' Compensation $ Employee Benefits Total 28,284 $ 4,465 $ 43,218 (1,671) 71,828 72,621 827 (70,522) (70,716) Unpaid Claims, 6/30/24 11,912 27,440 5,771 45,123 Adjustments to Reserves Claims Expense (246) (1,032) (2,248) (2,512) 72,687 (71,828) 70,193 (75,372) 6,630 $ 39,944 Unpaid Claims, 6/30/25 $ 10,634 $ 22,680 $ 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 68 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 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, 2025, is $25,168,730. 13. NET POSITION a. Restricted Net Position The government-wide statement of net position reports $512,919,000 of restricted net position, of which $280,357,000 is restricted by enabling legislation. b. Designated Net Position The net position in the Employee Benefits Self Insurance Fund is designated for anticipated future losses and is a result of excess premiums charged to increase the fund balance specifically for this purpose. c. Deficit in Net Position and Fund Balance The deficit in the Worker’s Compensation Self-Insurance Fund consists of 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. 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, 2025, for these services are as follows (in thousands): Operating Expenses Functions Electric Gas Water Wastewater Solid Waste Airport District Cooling Total Operating Revenues $ 51,377 60,901 205,684 110,266 76,885 5,086 1,501 $ 511,700 Depreciation $ 3,826 6,780 32,806 17,363 2,706 1,795 319 $ 65,595 Other $ 37,881 34,310 89,666 54,610 48,415 4,896 1,431 $ 271,209 69 Operating Income (Loss) $ 9,670 19,811 83,212 38,293 25,764 (1,605) (249) $ 174,896 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 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, 2025, 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 Business-Type Activities $ $ $ 272,615 6,321 278,936 $ 86,926 52,535 136,540 7,119 283,120 Total $ $ 272,615 6,321 86,926 52,535 136,540 7,119 562,056 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 $272,615,164 and is reflected in the governmental activities. Separate financial statements can be obtained through Valley Metro Rail Inc. at 101 North First Avenue, Suite 1300, Phoenix, Arizona, 85003. TOPAZ Regional Wireless Cooperative The City of Mesa currently participates with the City of Apache Junction, Superstition Fire and Medical, the Town of Gilbert, the Town of Queen Creek, Fort McDowell and Rio Verde Fire District (the Parties) in an intergovernmental agreement to plan, design, construct, operate, maintain and finance the TOPAZ Regional Wireless Cooperative Network (TOPAZ). TOPAZ is a 700/800 MHz Network procured and built by the City of Mesa. The City acts as the lead agency and is responsible for the planning, budgeting, construction, operation and maintenance of the network. As lead agent, the City provides all management personnel and financing arrangements. The Parties participate in ownership of the network and are charged for operating and capital expenses based on six month rolling average of airtime. The City’s equity in the joint venture is $6,320,920 and is reflected in the governmental activities. Separate financial statements are not prepared. 70 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 Total investment in the joint venture as of June 30, 2025, is (in thousands): TOPAZ Regional Wireless Cooperative City of Mesa $ Town of Gilbert City of Apache Junction Superstition Fire and Medical Town of Queen Creek Fort McDowell Rio Verde Fire District Fountain Hills Total Joint Venture $ 6,321 1,565 635 177 284 71 17 13 9,083 Wastewater Subregional Operating Group The City participates with the cities of Phoenix, Glendale, Scottsdale and Tempe in the Subregional Operating Group (SROG). SROG was formed pursuant to the Joint Exercise of Powers Agreement (JEPA) in order to govern the construction, operation and maintenance of a multi-city sanitary sewer system (the “System”). The System includes the 91st Avenue Wastewater Treatment Plant, the Salt River Outfall Sewer, the Southern Avenue Interceptor and related transportation facilities. The City of Phoenix acts as the lead agency in SROG and is responsible for the planning, budgeting, construction, operation and maintenance of the plant in addition to providing all management personnel and financing arrangements. The various cities participate in ownership of the plant and are charged for operating expenses based on gallons of flow. The different agencies participate in each facility at varying rates depending on their needs at the time each facility was constructed. The City’s equity in the joint venture is $86,925,857 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 $136,540,254 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, 2025, is (in thousands): Greenfield Water Reclamation Project Mesa's Share $ 136,540 Gilbert's Share 89,334 Queen Creek's Share 27,045 Total Joint Venture $ 252,919 71 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 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 $52,535,155 and is reflected in the proprietary funds financial statements. The water treatment plant has no bonded debt outstanding. Separate financial statements for the activity can be obtained through the City of Phoenix, Finance Department, Financial Accounting and Reporting Division at 251 W. Washington Street, 9th Floor, Phoenix, Arizona, 85003. 16. PENSIONS AND OTHER POST EMPLOYMENT BENEFITS All benefited 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, 2025, the City reported the following aggregate amounts related to pensions for all plans to which it contributes (in thousands): Statement of Net Position and Statement of Activities Net Pension Liabilities Deferred Outflows of Resources - Pension Deferred Inflows of Resources - Pension Pension Expense Net OPEB Liabilities Deferred Outflows of Resources - OPEB Deferred Inflows of Resources - OPEB OPEB Expense Governmental Activities $ 980,645 246,892 26,909 123,331 BusinessType Activities $ 55,934 11,495 3,579 6,480 892,680 61,517 121,868 52,358 82,425 5,591 11,386 4,775 72 $ Total 1,036,579 258,387 30,488 129,811 975,105 67,108 133,254 57,133 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 Arizona State Retirement System Defined Benefit Plan: a. Plan Description All of the City’s eligible benefited 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: Years of service and age required to receive benefit Before July 1, 2011 Sum of years and age equals 80 10 years, age 62 5 years, age 50* any years, age 65 Final average salary is based on Highest 36 consecutive Benefit percentage per year of service On or After July 1, 2011 30 years, age 55 25 years, age 60 10 years, age 62 5 years, age 50* any years, age 65 months of last 120 months Highest 60 consecutive months of last 120 months 2.1% to 2.3 % 2.1% to 2.3 % * 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. 73 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 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 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, 2025, the city and covered employees were required by state statute to contribute at the actuarially determined rate of 12.27% (12.12% pension plus 0.15% longterm disability) of the active members’ annual covered payroll. The City’s contributions to the System for the year ending June 30, 2025, was $29,632,022, 75.35% paid from governmental funds, 4.33% paid from internal service funds, and 20.31% 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, 2025, was 10.19 % (10.14% pension plus, 0.05% long-term disability). The City’s ACR contributions to the System for the year ending June 30, 2025, were $221,336. c. Pension Liability On June 30, 2025, the City reported a liability of $275,385,905 for its proportionate share of the ASRS’ net pension liability. The net pension liability was measured as of June 30, 2024. 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, 2023, to the measurement date of June 30, 2024. 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, 2024. The City’s proportion measured as of June 30, 2024, was 1.72100%, which was a increase of 0.10612% from its proportion measured as of June 30, 2023. d. Pension Expense and Deferred Outflows/Inflows of Resources For the year ended June 30, 2025, the City recognized pension expense for ASRS of $31,903,303. On June 30, 2025, the City reported deferred outflows of resources and deferred inflows of resourced related to pensions from the following sources (in thousands): Deferred Outflows of Resources 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 $ $ 11,367 29,853 $ 74 15,372 - Deferred Inflows of Resources 56,592 17,586 34 - $ 17,620 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 The $29,853,358 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, 2026. 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, 2026 $ (2,058) 2027 18,855 2028 (4,452) 2029 (3,226) $ 9,119 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, 2023 June 30, 2024 Entry Age Normal 7.0% 2.9 - 8.4% 2.3% Included 2017 SRA Scale U-MP Actuarial assumptions used in the June 30, 2024, 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. The target allocation and best estimates of geometric real rates of return for each major asset class are summarized in the following table: Target Allocation 44% Long-Term Expected Geometric Real Rate of Return 4.48 % Credit 23% 4.40 % Real Estate Private Equity Interest Rate Sensitive 17% 10% 6% 6.05 % 6.11 % (0.45)% Total 100% Asset Class Public Equity 75 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 f. Discount Rate At June 30, 2024, the discount rate used to measure the ASRS total pension liability was 7.0%. 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): 1% Decrease 6.0% City's proportionate share of the net pension liability $ 421,672 Current Discount Rate 7.0% $ 275,386 1% Increase 8.0% $ 153,469 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 multiple-employer defined benefit health insurance premium benefit (OPEB) plan. The PSPRS is jointly administered by a ninemember 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. 76 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 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 On or After July 1, 2017 Retirement and Disability Years of service and age required to receive benefit 20 years of service, any age 15 years of service, age 62 25 years of service or 15 years of credited service, age 52.5 15 years of credited service, age 52.5*; 15 or more years of service, age 55 Final average salary is based on Highest 36 consecutive months of last 20 years Highest 60 consecutive months of last 20 years Highest 60 consecutive months of last 15 years Benefit percentage Normal Retirement 50% less 2.0% for each year of credited service less than 20 years OR plus 2.0% to 2.5% for each year of credited service over 20 years, not to exceed 80% 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 Members Active Members 80% to 100% of retired member's pension benefit 80% to 100% of accidental disability retirement benefit or 100% of average monthly compensation if death was the result of injuries received on the job * With actuarially reduced benefits Retirement and survivor benefits are subject to automatic cost-of-living adjustments based on inflation. PSPRS also provides temporary disability benefits of 50 percent of the member’s compensation for up to 12 months. 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. 77 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 Employees Covered by Benefit Terms On June 30, 2025, the following employees were covered by the agent plans’ benefit terms: PSPRS Fire PSPRS Police Pension 330 91 Pension 764 292 Health 764 117 Active employees 435 731 731 Total 856 1,787 1,612 Inactive employees or beneficiaries currently receiving benefits Inactive employees entitled to but not yet receiving benefits 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, 2025, are indicated below. Rates are a percentage of active members’ annual covered payroll. PSPRS - Fire PSPRS - Police PSPRS Tier 3 - Fire PSPRS Tier 3 - Police Active Member Pension 7.65% 7.65% 9.66% 8.67% City Pension 60.49% 61.22% 9.53% 8.58% City OPEB 0.58% 1.50% 0.13% 0.09% 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 43.87% and 47.28% for City fire and police employees respectively, who were PSPRS Tier 3 members. The City’s required contributions to the plans for the year ended June 30, 2025, were: PSPRS - Fire PSPRS - Police PSPRS Tier 3 - Fire PSPRS Tier 3 - Police $ Pension 18,446,029 29,877,822 8,613,987 18,862,370 OPEB $ 176,867 732,060 59,685 415,337 The City contributed to the unfunded liability additional amounts of $4,206,978 and $12,116,780 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 78 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 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, 2025, was 43.87% and 47.28% for fire and police, respectively. The City did not have any ACR contributions for the year ending June 30, 2025. d. Liability On June 30, 2025, the City reported the following pension liabilities of $263,264,432 and $497,926,145 for fire and police, respectively. The City also reported an OPEB liability of $11,072,878 for police. The net liabilities were measured as of June 30, 2024, 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, 2024, reflect changes of actuarial assumptions from the prior year. e. Pension/OPEB Expense and Deferred Outflows/Inflows of Resources For the year ended June 30, 2025, the City recognized pension expenses of $34,283,881 and $63,624,098 for fire and police, respectively. The City also recognized OPEB expense of $1,288,446 for police. On June 30, 2025, the City reported deferred outflows of resources and deferred inflows of resources related to pensions and OPEB from the following sources (in thousands): PSPRS - Fire Pension Differences between expected and actual experience Changes in assumptions Net difference between projected and actual earnings on pension plan investments City contributions subsequent to the measurement date Total Deferred Outflows of Resources $ 37,900 5,044 Deferred Inflows of Resources $ 63 - - 4,413 31,267 - $ 74,211 $ 4,476 Pension PSPRS - Police Differences between expected and actual experience Changes in assumptions Net difference between projected and actual earnings on plan investments City contributions subsequent to the measurement date Total OPEB Deferred Outflows of Resources $ 61,482 5,244 Deferred Inflows of Resources $ - Deferred Outflows of Resources $ 408 156 Deferred Inflows of Resources $ - - 8,391 - 84 60,857 - 1,147 - $ 127,583 79 $ 8,391 $ 1,711 $ 84 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 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, 2026. 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, 2026 2027 2028 2029 2030 Thereafter PSPRS Fire Pension $ 6,094 11,581 5,631 4,826 4,014 6,322 PSPRS Police Pension $ 10,870 22,683 11,580 7,370 5,832 - PSPRS Police OPEB $ 38 350 73 (13) 16 16 $ $ $ 38,468 58,335 480 f. 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, 2024 June 30, 2024 Entry Age Normal 7.20% 3.25 - 15.0%, N/A for OPEB 2.5%, N/A for OPEB 1.85%, N/A for OPEB PubS-2010 tables Not applicable Actuarial assumptions used in the June 30, 2024, 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: 80 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 Target Allocation 24% 16% Long-Term Expected Geometric Real Rate of Return 3.62% 4.47% Global Private Equity Core Bonds Private Credit Diversifying Strategies Cash - Mellon 27% 6% 20% 5% 2% 7.05% 2.44% 6.24% 3.15% 0.89% Total 100% Asset Class U.S. Public Equity International Public Equity 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 1% Decrease $ 339,334 645,608 13,411 Current Discount Rate $ 263,264 497,926 11,073 81 1% Increase $ 200,837 377,782 9,099 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 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 Balance - Beginning of Year Changes for the Year: Service Cost Interest on the Total Liability Differences Between Expected & Actual Experience in the Measurement of the Liability Contributions - Employer Contributions - Employee Net Investment Income Benefit Payments, Including Refunds of Employee Contributions Total Pension Liability $ 540,182 Plan Fiduciary Net Position $ 278,421 Net Pension Liability $ 261,761 10,101 38,618 - 10,101 38,618 18,462 - 32,664 3,990 29,201 18,462 (32,664) (3,990) (29,201) (27,833) (27,833) - 39,348 (177) 37,845 177 1,503 579,530 $ 316,266 $ 263,264 Administrative Expenses Net Changes Balances - End of Year Police Balance - Beginning of Year Changes for the Year: Service Cost Interest on the Total Liability Differences Between Expected & Actual Experience in the Measurement of the Liability Contributions - Employer Contributions - Employee Net Investment Income Benefit Payments, Including Refunds of Employee Contributions Administrative Expenses Net Changes Balances - End of Year $ Total Pension Liability $ 1,010,327 Plan Fiduciary Net Position $511,948 Net Pension Liability $498,379 Total OPEB Liability $ 22,671 Plan Fiduciary Net Position $ 11,171 Net OPEB Liability $ 11,501 15,642 71,984 - 15,642 71,984 237 1,589 - 237 1,589 34,992 - 62,164 7,300 53,977 34,992 (62,164) (7,300) (53,977) 115 - 1,311 1,064 115 (1,311) (1,064) (52,375) 70,243 (52,375) (370) 70,696 370 (453) (1,690) 251 (1,690) (7) 678 (427) $ 1,080,570 $582,644 $497,926 $ 22,922 $ 11,849 $ 11,074 82 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 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 benefits (OPEB) for retired employees through a single employer defined benefit medical plan. The plan provides these benefits for eligible retirees, their spouses and dependents through the City’s self-insurance health insurance plan which covers both active and retired members. The benefits, benefit levels and contribution rates are determined annually by the City’s Benefits Advisory Board and approved by the Mesa City Council. The plan is not accounted for as a trust fund, and an irrevocable trust has not been established to account for the plan. b. Benefits Provided The City provides post-employment medical care benefits to its retirees. To be eligible for benefits, an employee must qualify for retirement under one of the state retirement plans for public employees and be covered under the City’s medical plan during their active status. Employees must enroll in a City plan immediately after they retire or their eligibility for this benefit ceases. All medical care benefits are provided through the City’s self-insured health plan. The benefit levels are the same as those afforded to active employees. Upon a retiree’s death, the retiree’s dependents are no longer eligible for City coverage. To receive maximum benefits an employee must meet the following: • • • Ten years of service for employees hired prior to January 1, 2001 Fifteen years of service for employees hired 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, 2023 (date of most recent valuation), membership consisted of: Active Employees Retirees Spouses 3,707 2,139 1,517 Others 414 Total 7,777 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, 2025, is $964,030,800. 83 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 d. OPEB Expense and Deferred Outflows/Inflows of Resources For the year ended June 30, 2025, the City recognized OPEB expense of $55,843,809. On June 30, 2025, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources (in thousands): Differences between expected and actual experience Changes of assumptions City benefit payments subsequent to the measurement date Deferred Outflows of Resources $ 26,584 11,748 27,065 Deferred Inflows of Resources $ 3,319 129,851 - Total $ $ 133,170 65,397 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, 2025. 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, 2026 $ (31,709) 2027 2028 2029 2030 2031 (33,885) (33,560) 2,635 1,528 153 $ (94,838) 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 short-term volatility in actuarial accrued liabilities and the actuarial value of assets. Significant methods and assumptions used for this fiscal year valuation were as follows: 84 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 Actuarial Assumptions: Actuarial Valuation Date Measurement Date Actuarial Cost Method June 30, 2023 June 30, 2024 Entry Age Normal Discount Rate 4.21% Consumer Price Index Projected Salary Increases Mortality Rates 3.00% 2.90 - 15.0% Based on the rates used for the June 30, 2024 valuations of the ASRS Plan and the PSPRS Plan. Health care cost trend rate: Medical, Drugs Dental, Vision 4.50-8.00% 4.50% Actuarial assumptions used in the June 30, 2023 valuation were projected on an on-going plan basis. This assumption does not necessarily imply that an obligation to continue the plan actually exists. Future Salary Increase Consistent with the June 30, 2024, 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 2024 ASRS experience study. Salary increases assumptions range from 2.9% to 15.0%, 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 the 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 4.5% to 8.0%. f. Discount Rate The discount rate at the measurement date is 4.21%. The discount rate increased from 4.13% as of June 30, 2023, to 4.21% as of June 30, 2024. 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, 2024. 85 City of Mesa, Arizona Notes to Financial Statements For the Fiscal Year Ended June 30, 2025 g. Changes in OPEB Liability The below table outlines the changes in OPEB Liability for the fiscal year ending June 30, 2025 (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 $ 914,548 31,496 38,479 (2,539) 11,038 (28,991) 49,483 OPEB Liability at End of Year $ 964,031 * Because the City funds OPEB benefits on a “pay-as-you-go” basis, employer contributions are equal to benefit payments. The City’s benefit payments to the plan were paid 88.55% from governmental funds, 2.9% from internal service funds, and 8.55% 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): City OPEB Plan 1% Decrease $ 1,117,722 Current Municipal Bond Rate $ 964,031 1% Increase $ 840,444 City OPEB Plan 1% Decrease $ 830,617 Current Healthcare Trend Rate $ 964,031 1% Increase $ 1,133,594 86 CITY OF MESA, AZ REQUIRED SUPPLEMENTARY INFORMATION FOR T H E F I S CA L Y E A R E N D E D • JU N E 3 0 , 2 0 25 City of Mesa, Arizona Schedule of the City's Proportionate Share of Net Pension Liability Cost-Sharing Pension Plan June 30, 2025 (in thousands) Arizona State Retirement System City's Proportion of Net Pension Liability City's Proportionate Share of Net Pension Liability City's Covered Payroll City's Proportionate Share of Net Pension Liability as a Percentage of its Covered Payroll Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 2025 (2024) 1.7210% $ 275,386 $ 241,163 Reporting Fiscal Year (Measurement Date) 2024 2023 (2023) (2022) 1.6149% 1.6156% $ 261,311 $ 263,694 $ 211,155 $ 192,542 2022 (2021) 1.5857% $ 208,353 $ 178,405 114.19% 123.75% 136.95% 116.79% 76.93% 75.47% 74.26% 78.58% See accompanying notes to pension plan schedules. 87 Reporting Fiscal Year (Measurement Date) 2019 2018 (2018) (2017) 1.6293% 1.6416% $ 227,233 $ 255,729 $ 162,089 $ 158,958 2021 (2020) 1.6188% $ 280,473 $ 175,767 2020 (2019) 1.6209% $ 235,853 $ 168,900 159.57% 139.64% 140.19% 69.33% 73.24% 73.40% 2017 (2016) 1.6605% $ 268,013 $ 155,868 2016 (2015) 1.6393% $ 255,337 $ 151,154 160.88% 171.95% 168.93% 69.92% 67.06% 68.35% 88 City of Mesa, Arizona Schedule of Changes in the City's Net Pension/OPEB Liability and Related Ratios Agent Plans June 30, 2025 (in thousands) Personal Safety Personnel Retirement System - Fire Reporting Fiscal Year (Measurement Date) 2025 (2024) 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) $ 10,101 38,618 - 2024 (2023) $ 9,175 36,294 - 2023 (2022) $ 8,079 34,277 - 2022 (2021) $ 7,645 32,539 - 18,462 - 13,651 - 11,356 6,706 7,760 - (27,833) 39,348 540,182 579,530 (27,696) 31,423 508,759 540,182 (26,268) 34,150 474,607 508,757 (22,868) 25,076 449,531 474,607 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 32,664 3,990 29,201 26,733 3,776 20,023 28,025 3,507 (10,644) 21,601 3,321 56,815 (27,833) (177) 37,845 (27,696) (136) 22,699 (26,268) (192) (5,572) (22,868) (266) 58,603 Plan Fiduciary Net Position - As Previously Reported Adjustment to Beginning Balance Plan Fiduciary Net Position - Beginning Plan Fiduciary Net Position - Ending (b) 278,421 278,421 316,266 255,722 255,722 278,421 261,293 261,293 255,721 202,690 202,690 261,293 City's Net Pension Liability - Ending (a) - (b) $ Plan Fiduciary Net Position as a Percentage of the Total Pension Liability City's Covered Payroll City's Net Pension Liability as a Percentage of its Covered Payroll 263,264 $ 54.57% $ 48,048 547.91% 89 261,761 $ 51.54% $ 39,896 656.11% 253,036 $ 50.26% $ 36,776 688.05% 213,314 55.05% $ 34,198 623.76% See accompanying notes to pension plan schedules Reporting Fiscal Year (Measurement Date) 2021 (2020) $ $ 7,871 31,397 - 2020 (2019) $ $ 7,271 27,446 - 2018 (2017) $ 2017 (2016) 7,724 25,687 2,125 $ 6,439 23,654 21,380 2016 (2015) $ 6,127 23,086 - (221) - 11,844 8,488 1,951 - (2,670) 12,613 (4,423) 11,970 (3,518) - (23,473) 15,574 433,957 449,531 (18,809) 38,333 395,624 433,957 (16,608) 20,060 375,564 395,624 (17,095) 28,384 347,180 375,564 (19,893) 39,127 308,053 347,180 (17,323) 8,372 299,681 308,053 18,107 2,845 2,587 16,708 2,805 10,339 16,733 3,035 12,464 13,558 3,923 19,308 12,735 4,396 954 9,828 3,847 5,878 (23,473) (211) 58 (87) (18,809) (181) 10,862 (16,608) (5,150) (190) 2 10,286 (17,095) (174) 43 19,563 (19,893) (138) (12) (1,958) (17,323) (144) 45 2,131 202,777 202,777 202,690 191,986 (71) 191,915 202,777 181,700 181,700 191,986 162,137 162,137 181,700 164,095 164,095 162,137 161,964 161,964 164,095 193,864 $ 185,043 246,841 $ 45.09% $ 7,663 29,147 - 2019 (2018) 32,562 758.06% 231,180 $ 46.73% $ 34,136 677.23% 203,638 $ 48.53% $ 32,445 627.64% 48.38% $ $ 46.70% 32,941 $ 588.52% 32,453% 570.19% 90 143,958 53.27% $ 31,661 454.69% City of Mesa, Arizona Schedule of Changes in the City's Net Pension/OPEB Liability and Related Ratios Agent Plans June 30, 2025 (in thousands) Personal Safety Personnel Retirement System - Police Pension Reporting Fiscal Year (Measurement Date) 2024 2023 (2023) (2022) 2025 (2024) Total Pension Liability Service Cost $ 15,642 Interest on the Total Pension Liability 71,984 Changes of Benefit Terms Diff Between Expected and Actual Experience in the Measurement of the Pension Liability 34,992 Changes of Assumptions or Other Inputs Benefit Payments, Including Refunds of Employee Contributions (52,375) Net Change in Total Pension Liability 70,243 Total Pension Liability - Beginning 1,010,327 Total Pension Liability - Ending (a) 1,080,570 Plan Fiduciary Net Position Contributions - Employer 62,164 Contributions - Employee 7,300 Net Investment Income 53,977 Benefit Payments, Including Refunds of Employee Contributions (52,375) Hall/Parker Settlement Administrative Expense (370) Other Changes Net Change in Plan Fiduciary Net Position 70,696 Plan Fiduciary Net Position - As Previously Reported 511,948 Adjustment to Beginning Balance Plan Fiduciary Net Position - Beginning 511,948 Plan Fiduciary Net Position - Ending (b) 582,644 City's Net Pension Liability - Ending (a) - (b) $ 497,926 Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 53.92% City's Covered Payroll $ 86,055 City's Net Pension Liability as a Percentage of its Covered Payroll 578.61% See accompanying notes to pension plan schedules 91 $ 14,824 67,540 - $ 13,979 64,052 - 2022 (2021) $ 13,861 61,557 - 29,045 - 18,155 10,488 2,112 - (48,622) 62,787 947,541 1,010,327 (45,167) 61,507 886,034 947,541 (41,764) 35,766 850,268 886,034 55,209 6,897 36,571 53,349 6,608 (19,142) 38,561 6,268 101,528 (48,622) (288) (7) 49,759 462,190 462,190 511,949 $ 498,379 (45,167) (345) (4,697) 466,887 466,887 462,190 $ 485,351 (41,764) (477) 104,116 362,771 362,771 466,887 $ 419,147 $ 50.67% 73,451 678.52% $ 48.78% 68,471 708.84% $ 52.69% 64,419 650.66 % 2021 (2020) $ 14,016 57,794 - Reporting Fiscal Year (Measurement Date) 2019 2018 2017 (2018) (2017) (2016) 2020 (2019) $ 15,015 53,953 - $ 13,826 50,926 - $ 15,841 47,572 5,718 $ 12,438 43,573 34,005 2016 (2015) $ 12,216 41,908 - 19,067 - 10,259 21,092 3,862 - 365 19,037 (4,001) 23,614 (2,173) - (36,572) 54,305 795,963 850,268 (36,864) 63,455 732,508 795,963 (34,755) 33,859 698,649 732,508 (32,522) 56,011 642,638 698,649 (31,689) 77,940 564,698 642,638 (29,998) 21,953 542,745 564,698 34,340 6,045 4,551 32,387 5,718 18,270 31,596 6,058 21,889 26,819 7,693 34,221 24,067 8,157 1,667 19,680 7,613 10,065 (36,572) (371) (2) 7,991 354,780 354,780 362,771 $ 487,497 (36,864) (319) 340 19,532 335,631 (383) 335,248 354,780 $ 441,183 (34,754) (10,096) (333) 514 14,874 320,757 320,757 335,631 $ 396,877 (32,522) (360) 420 36,271 284,432 284,432 320,757 $ 377,892 (31,689) (240) 382 2,344 282,088 282,088 284,432 $ 358,206 (29,998) (246) 28 7,142 274,946 274,946 282,088 $ 282,610 42.67% 63,232 44.57% 63,993 45.82% 63,003 45.91% 64,740 44.26% 61,211 49.95% 62,461 $ 770.97% $ 689.42% $ 629.93% $ $ 583.71% 585.20% 92 $ 452.46% City of Mesa, Arizona Schedule of Changes in the City's Net Pension/OPEB Liability and Related Ratios Agent Plans June 30, 2025 (in thousands) Personal Safety Personnel Retirement System - Police OPEB Reporting Fiscal Year (Measurement Date) 2025 (2024) Total OPEB Liability Service Cost Interest on the Total OPEB Liability Changes of Benefit Terms Diff Between Expected and Actual Experience in the Measurement of the OPEBLiability 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) 237 1,589 - 2024 (2023) $ 250 1,568 - 2023 (2022) $ 280 1,537 - 2022 (2021) $ 351 1,511 - 115 - 155 - 218 312 100 - (1,690) 251 (1,640) 331 (1,571) 776 (1,494) 468 22,671 22,922 22,341 22,672 21,565 22,341 21,097 21,565 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 1,311 1,064 1,050 44 784 946 32 (448) 853 88 2,583 (1,690) (7) 678 (1,640) (7) 231 (1,571) (8) (1,049) (1,494) (10) 2,020 Plan Fiduciary Net Position - As Previously Reported Adjustment to Beginning Balance Plan Fiduciary Net Position - Beginning Plan Fiduciary Net Position - Ending (b) 11,171 11,171 11,849 10,940 10,940 11,171 11,989 11,989 10,940 9,969 9,969 11,989 City's Net OPEB Liability - Ending (a) - (b) $ Plan Fiduciary Net Position as a Percentage of the Total OPEB Liability City's Covered Payroll City's Net OPEB Liability as a Percentage of its Covered Payroll 11,074 $ 51.69% $ 86,055 12.87% See accompanying notes to pension plan schedules 93 11,501 $ 49.27% $ 73,451 15.66% 11,401 $ 48.97% $ 68,471 16.65% 9,576 55.59% $ 64,419 14.87% Reporting Fiscal Year (Measurement Date) 2021 (2020) $ $ 322 1,477 - 2020 (2019) $ $ 190 1,359 - $ 213 1,356 35 43 474 472 - 312 (335) (1,455) 725 (1,391) 742 (1,325) 696 (1,239) 342 20,372 21,097 19,630 20,372 18,934 19,630 18,592 18,934 934 46 123 736 14 530 231 695 639 1,141 (1,455) (10) (362) (1,391) (9) (120) (1,325) (11) (410) (1,239) (10) 531 10,331 10,331 9,969 10,067 384 10,451 10,331 10,477 10,477 10,067 9,946 9,946 10,477 11,128 $ 63,232 17.60% 10,041 $ 50.71% $ 63,993 15.69% 9,563 $ 51.28% $ 63,003 15.18% 2017 through 2015 Information not available 2018 (2017) 381 - 47.25% $ 200 1,416 - 2019 (2018) 8,457 55.33% $ 64,740 13.06% 94 City of Mesa, Arizona Schedule of City Pension Contributions June 30, 2025 (in thousands) Arizona State Retirement System Statutorily Required Contribution City's Contribution in Relation to the Statutorily Required Contribution City's Contribution (Deficiency) / Excess $ 2025 29,853 $ 29,853 - $ 28,965 - $ 25,129 - $ 23,097 - City's Covered Payroll $ 248,092 $ 232,139 $ 211,155 $ 192,542 City's Contributions as a Percentage of Covered Payroll $ 2024 28,965 12.03% $ 2023 25,129 $ 2022 23,097 12.48% 11.90% 12.00% $ 2024 27,751 $ 2023 22,569 $ 2022 20,178 $ 26,388 3,819 $ 27,797 7,619 $ 39,896 $ 36,776 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 $ 2025 27,060 $ 31,267 4,207 $ 30,800 3,049 City's Covered Payroll $ 46,625 $ 48,048 City's Contributions as a Percentage of Covered Payroll 67.06% See accompanying notes to plan schedules 95 64.10% 66.14% 75.58% $ 2021 20,763 $ 2020 20,258 $ 2019 19,124 $ 20,763 - $ 178,405 $ 2018 17,650 $ 20,258 - $ 175,767 $ 2017 17,423 $ 19,124 - $ 169,900 $ 2016 16,955 $ 17,650 - $ 17,423 - $ 16,955 - $ 162,089 $ 158,958 $ 155,868 11.64% 11.53% 11.26% 10.89% 10.96% 10.88% $ 2021 19,617 $ 2020 18,035 $ 2019 16,431 $ 2018 14,289 $ 2017 13,490 $ 2016 11,197 $ 19,617 - $ 18,035 - $ 16,431 - $ 10,479 (3,810) $ 13,490 - $ 12,735 1,538 $ 34,198 $ 32,562 $ 34,136 $ 32,446 $ 32,941 $ 32,453 57.36% 55.39% 48.13% 32.30% 96 40.95% 39.24% City of Mesa, Arizona Schedule of City Pension Contributions June 30, 2025 (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 $ 2025 48,740 $ 2024 49,162 City's Covered Payroll $ 60,857 12,117 $ 82,571 City's Contributions as a Percentage of Covered Payroll $ 2023 42,430 $ 2022 37,457 $ 62,062 12,900 $ 55,116 12,686 $ 53,372 15,915 $ 86,055 $ 73,451 $ 68,471 73.70% 72.12% 75.04% 77.95% $ 2024 1,184 $ 2023 1,024 $ 2022 838 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 $ 2025 1,147 $ 1,147 - $ 1,184 - $ 1,024 - $ 838 - City's Covered Payroll $ 82,571 $ 86,055 $ 73,451 $ 68,471 City's Contributions as a Percentage of Covered Payroll 1.39% See accompanying notes to plan schedules. 97 1.38% 1.39% 1.22% $ 2021 37,484 $ 2020 34,308 $ 2019 29,314 $ 37,484 - $ 64,419 $ 2018 29,048 $ 34,308 - $ 63,232 $ 2017 26,809 $ 29,314 - $ 63,993 $ 2016 21,697 $ 21,726 (7,322) $ 26,809 - $ 21,697 - $ 63,003 $ 64,740 $ 61,211 58.19% 54.26% 45.81% 34.48% 41.41% 39.32% $ 2021 713 $ 2020 815 $ 2019 733 $ 2018 772 2017 $641 $ 713 - $ 815 - $ 733 - $ 772 - 2016 Information not available $ - $ 64,419 $ 63,232 $ 63,993 $ 63,003 $ 64,740 1.11% 1.29% 1.15% $641 1.23% 98 0.99 % City of Mesa, Arizona Notes to Pension Plan Schedules June 30, 2025 (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 Entry age normal Amortization Method Level percent of payroll, closed Remaining Amort Period 15 years of unfunded actuarial accrued liability, 15 years of excess Asset Valuation Method 7-year smoothed market value; 20% market value corridor Actuarial Assumptions: Investment Rate of Return Project Salary Increases Wage Growth Retirement Age Mortality In the 2022 actuarial valuation, the investment rate of return was decreased from 7.3% to 7.2% 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% 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 2022 actuarial valuation, wage growth was changed from 3.5% to a range of 3.0% - 6.25% In the 2017 actuarial valuation, wage growth was decreased from 4.0%-3.5%. Experienced-based table of rates is specific to the type of eligibility condition. Last updated for the 2012 valuation pursuant to an experience study for the period July 1, 2006-June 30, 2011 RP-2000 mortality table (adjusted by 105% for both males and females). In the 2017 actuarial valuation, changed to RP 2014 tables with 75% of MP 2016 fully generational projection scales. Note 2 - Factors that affect trends Arizona courts have ruled that provisions of a 2011 law that changed the mechanism for funding permanent pension benefit increases and increased employee pension contribution rates were unconstitutional or a breach of contract because those provisions apply to individuals who were members as of the law’s effective date. As a result, the PSPRS changed benefit terms to reflect the prior mechanism for funding permanent benefit increases for those members and revised actuarial assumptions to explicitly value future permanent benefit increases. PSPRS also reduced those members’ employee contribution rates. These changes are reflected in the plans’ pension liabilities for fiscal year 2015 (measurement date 2014) for members who were retired as of the law’s effective date and fiscal year 2018 (measurement date 2017) for members who retired or will retire after the law’s effective date. These changes also increased the PSPRS required pension contributions beginning in fiscal year 2016 for members who were retired as of the law’s effective date. These changes will increase the PSPRS required contributions beginning in fiscal year 2019 for members who retired or will retire after the law’s effective date. Also, the City refunded excess employee contributions to PSPRS. PSPRS allowed the City to reduce its actual employer contributions for the refund amounts. As a result, the City’s pension contributions were less than the actuarially or statutorily determined contributions for 2018. 99 City of Mesa, Arizona Schedule of Changes in the City’s Total OPEB Liability June 30, 2025 (in thousands) 2025 Total Liability Service Cost $ 31,496 Interest on the Total Liability 38,479 Changes of Benefit Terms Difference Between Expected and Actual Experience in the Measurement of the Liability (2,539) Changes of Assumptions or Other Inputs 11,038 Benefit Payments, Including Refunds of Employee Contributions (28,991) Net Change in Total OPEB Liability 49,484 2024 $ 16,117 32,007 104,183 2023 $ 24,665 21,603 - 2022 $ 26,157 25,492 - 26,605 (19,003) (1,720) (221,049) 26,062 (21,298) (23,408) 136,502 (23,491) (199,992) (21,010) 35,403 Total OPEB Liability - Beginning Total OPEB Liability - Ending 914,547 $ 964,031 778,045 $ 914,547 978,037 $ 778,045 942,634 $ 978,037 City's Covered Employee Payroll $ 375,266 $ 323,910 $ 297,789 $ 277,022 7.7 % 7.2 % 7.9 % 7.6 % City's Contributions as a % of Covered Employee Payroll 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. 100 2021 $ 24,165 25,425 - 2020 $ 20,818 22,584 - 2019 $ 19,997 22,447 - 2017 through 2015 Information not available 2018 $ 21,430 20,112 - (2,548) 18,858 34,022 92,823 (1,133) 17,023 (46,955) (20,641) 45,259 (19,687) 150,560 (17,232) 41,102 (19,013) (24,426) $ 897,375 942,634 $ 746,815 897,375 $ 705,713 746,815 730,139 $ 705,713 $ 271,561 $ 268,029 $ 257,537 $ 7.6 % 7.3 % 256,639 6.7 % 7.4 % 101 City of Mesa, Arizona Budgetary Comparison Schedule (Non-GAAP Basis) Combined Governmental & Enterprise Funds For the Fiscal year Ended June 30, 2025 (In thousands) Budgeted Amounts ActualOriginal Final Budgetary Variance with Basis Final Budget City Total Resources $2,690,000 $2,690,000 $2,652,918 $37,082 City Total Expenditures 2,690,000 2,690,000 1,937,895 1,937,895 - - 715,023 (1,900,813) Fund Balance - Beginning 1,229,318 1,229,318 1,229,318 - Fund Balance - Ending $1,229,318 $1,229,318 $1,944,341 (715,023) Net Change in Fund Balances 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. 102 City of Mesa, Arizona Notes to Budgetary Comparison Schedule June 30, 2025 (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, 2025 on the “GAAP basis” to the “budget basis” as follows: Net Change in Fund Balance-Budget Basis- $ 715,023 Bond related (226,314) Capital Related Items (293,303) Depreciation and Amortization (65,944) Lease Related items 1,919 Differences in Revenue Recognition 24,121 Payroll and Other Accruals 3,630 Pension and OPEB Expense 2,004 Joint Ventures - Change in Equity (8,797) Unrealized Gain on Investments 28,318 Net Change in Fund Balance-GAAP Basis - $ 180,657 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. 103 CITY OF MESA, AZ COMBINING STATEMENTS FOR T H E F I S CA L Y E A R E N D E D • JU N E 3 0 , 2 0 25 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 are 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 COVID 19. 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 Obligations 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 For the Fiscal year Ended June 30, 2025 (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 Customer and Defendant Deposits Unearned Revenue Payable from Restricted Assets: Accrued Interest Payable Matured Bonds Payable Total Liabilities Cemetery Community Facilities District Development Impact Fees Environmental Compliance $ $ $ $ $ $ Deferred Inflows of Resources Unavailable Revenue Total Deferred Inflows of Resources Fund Balance Nonspendable Restricted Committed Assigned Total Fund Balances Total Liabilities, Deferred Inflows of Resources and Fund Balances Special Revenue Funds $ 3,321 12 13 3,346 - $ $ 1,670 5 4 1,679 59 70 $ $ 19,931 19,931 9 - $ $ 20,280 90 79 12 20,461 1,135 - Highway User Revenue $ $ $ 39,628 22 194 4,945 25 44,814 3,395 - - 129 9 1,135 3,395 3 3 - - - - 3,343 3,343 1,550 1,550 19,922 19,922 12 19,314 19,326 25 41,394 41,419 3,346 $ 104 1,679 $ 19,931 $ 20,461 $ 44,814 Special Revenue Funds Mesa Arts Center Restoration Mesa Housing Authority Other Restricted Funds Public Safety Sales Tax Quality of Life Sales Tax Relief Fund $ $ $ 16,301 3,147 74 2,686 49 - $ 60,449 14 236 6,678 93 - $ 41,595 156 6,682 - $ 22,445 531 - $ 120,171 $ 1,160 465 8,098 48 - 350,245 4,545 1,229 30,639 758 - 22,257 $ 67,470 $ 48,433 $ 22,976 $ 129,942 $ 387,416 1,512 1,340 $ $ $ $ 2,133 $ 8,337 - 12,553 8,337 19,513 $ $ $ 1,875 6 7 1,888 31 276 $ $ 2,579 94 1,546 4,219 676 1,571 $ $ 308 - - Street Total Special Sales Tax Revenue Funds 3,295 16,256 307 2,247 2,852 308 - 19,551 10,470 40,403 1 1 - 2,081 2,081 - - - 188 188 2,273 2,273 1,580 1,580 1,972 1,972 49 14,967 2,089 219 17,324 93 67,069 67,162 48,433 48,433 531 2,894 3,425 48 119,236 119,284 758 317,437 26,326 219 344,740 22,257 $ 67,470 $ 48,433 $ 22,976 $ 129,942 1,888 $ 4,219 $ 105 $ 387,416 City of Mesa, Arizona Combining Balance Sheet Non-Major Governmental Funds For the Fiscal year Ended June 30, 2025 (in thousands) Capital Projects Funds Total Capital Projects Funds Community Facilities District General Capital Projects $ - $ 98,704 $ 74 401 85 - 4,822 17,233 54,336 $ 104,086 $ 17,312 $ 54,601 $ 80,504 76,391 $ 256,503 - $ 10,866 - 762 - $ 5,598 5,414 $ - 10,866 689 762 11,012 23,329 Deferred Inflows of Resources Unavailable Revenue Total Deferred Inflows of Resources - - - - 488 488 488 488 Fund Balance Nonspendable Restricted Committed Assigned Total Fund Balances - 85 118 93,017 93,220 16,623 16,623 53,839 53,839 69,004 69,004 85 139,584 93,017 232,686 – $ 104,086 $ 17,312 $ 54,601 $ 80,504 $ 256,503 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 Customer and Defendant Deposits Unearned Revenue Payable from Restricted Assets: Accrued Interest Payable Matured Bonds Payable Total Liabilities $ $ Total Liabilities, Deferred Inflows of Resources and Fund Balances $ 106 Public Safety Parks $ 13 66 - 689 - $ $ Streets 265 - $ 77,491 $ 176,195 124 211 292 1,024 2,597 2,597 85 17,915 5,414 (Concluded) Debt Service Funds Community Facilities District Excise Tax Obligations General Obligation Bonds $ $ $ $ $ $ 32 8,432 1,194 19,740 92 29,490 4 - $ $ 2,037 2,037 - $ $ 1,245 2,216 40,958 1,146 45,565 - 1,827 3,566 5,397 662 1,375 2,037 33,745 19,770 19,770 4,323 4,323 29,490 $ Highway User Revenue Bonds $ $ $ 11,273 11,273 - Total Non-Major Governmental Funds $ $ $ $ 1,277 10,648 55,462 19,740 1,238 88,365 4 - $ $ 526,440 4,756 3,530 33,236 843 87,039 55,462 19,740 1,238 732,284 30,468 8,341 24,927 40,958 393 10,880 11,273 10,095 49,566 59,665 10,095 49,566 123,397 - 503 503 - 20,273 20,273 23,034 23,034 - 4,104 4,104 - 8,427 8,427 843 465,448 26,326 93,236 585,853 2,037 7,213 - Total Debt Service Funds $ 45,565 $ 11,273 $ 107 88,365 $ 732,284 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, 2025 (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 Development Environmental Facilities Impact Fees Compliance District Highway User Revenue $ $ $ - $ 720 73 793 - $ 2,861 2,861 18,255 1,377 95 19,727 - 298 - - 3,602 5,082 10,160 150 23,349 - - 298 - 2,266 21,110 16,330 39,829 319 495 2,861 (1,383) 13,478 - - (4,275) (4,275) (6) (6) (11,683) (11,683) Net Change in Fund Balances 319 495 (1,414) (1,389) 1,795 Fund Balances - Beginning 3,024 1,055 21,336 20,715 39,624 Expenditures Current: General Government Public Safety Community Environment Cultural-Recreational Debt Services: Principal Retirement Interest on Bonds Services Charges Cost of Issuance Capital Outlay Total Expenditures Excess (Deficiency) of Revenues Over (Under) Expenditures Other Financing Sources (Uses): Transfers In Transfers Out Sale of Capital Assets Face Amounts of Bonds Issued Face Amounts of Leases Issued Premium on Issuance of Bonds (Net) Total Other Financing Sources (Uses) Fund Balances - Ending $ 120 199 319 3,343 $ 1,550 108 $ 19,922 $ 19,326 $ 50,374 2,933 53,307 41,419 Special Revenue Funds Mesa Arts Center Restoration $ $ 562 114 676 Mesa Housing Authority $ Other Restricted Funds 34,695 168 34,863 $ 4,342 704 13,690 139 712 1,119 44 5,103 25,853 Public Safety Sales Tax $ 41,187 14 3,855 (1) 45,055 Quality of Life Sales Tax $ 41,206 122 2,615 43,943 Relief $ 20,257 2,074 22,331 Street Sales Tax Total Special Revenue Funds $ $ 49,448 246 154 5,873 6,925 512 63,158 131,841 720 4,342 3,933 119,184 24,387 1,274 21,452 44 5,709 312,886 - 13 33,515 - 10,082 4,678 1,150 3,600 251 38,803 - 254 36,617 5,378 2,584 2,110 5,153 145 4,268 171 27,630 - 21,502 82,379 95,879 19,283 496 496 299 33,827 119 6,565 26,202 6,442 45,496 193 42,442 5,308 15,300 13,942 46,011 119 51,841 271,011 180 1,036 (349) (441) 1,501 7,031 17,147 41,875 - - 356 356 - - 93 (5,693) (5,600) (116) (116) 449 (21,773) (21,324) 180 1,036 7 (441) 1,501 1,431 17,031 20,551 1,400 936 17,317 67,603 46,932 1,994 102,253 324,189 1,580 $ 1,972 $ 17,324 $ 67,162 $ 109 48,433 $ 3,425 $ 119,284 $ 344,740 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, 2025 (in thousands) Capital Projects Funds Community Facilities District 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 $ Expenditures Current: General Government Public Safety Community Environment Cultural-Recreational Debt Services: Principal Retirement Interest on Bonds Services Charges Cost of Issuance Capital Outlay Total Expenditures - General Capital Projects $ Public Safety Parks 44 5,652 166 5,862 $ 3 3 $ Total Capital Projects Funds Streets (783) (783) $ 5,884 204 3,724 9,812 $ 5,928 204 8,596 166 14,894 - - - - - - - 53 83,486 83,539 115 8,532 8,647 489 24,585 25,074 115 18,763 18,878 772 135,366 136,138 - (77,677) (8,644) (25,857) (9,066) (121,244) Other Financing Sources (Uses): Transfers In Transfers Out Sale of Capital Assets Face Amounts of Bonds Issued Face Amounts of Leases Issued Premium on Issuance of Bonds (Net) Total Other Financing Sources (Uses) (338) (338) 71,263 211 10,677 1,012 83,163 65 (65) 22,935 2,173 25,108 44 (44) 97,742 9,261 107,003 22,912 2,171 25,083 71,372 (447) 211 154,266 14,617 240,019 Net Change in Fund Balances (338) 5,486 16,464 81,146 16,017 118,775 Fund Balances - Beginning 338 87,734 159 (27,307) 52,987 113,911 93,220 $ 16,623 53,839 $ 69,004 $ 232,686 Excess (Deficiency) of Revenues Over (Under) Expenditures Fund Balances - Ending $ – $ 110 $ (Concluded) Debt Service Funds Community Facilities District Excise Tax Obligations $ $ 5,845 1,737 430 - - - 21,502 82,379 95,879 19,283 3,588 3,653 7 7,248 1,375 1,324 2 2,701 33,745 13,590 4 47,339 10,880 786 11,666 49,588 19,353 13 68,954 49,707 19,353 13 772 187,207 476,103 764 (2,593) (5,971) (11,666) (19,466) (98,835) 338 338 2,593 2,593 5,144 (636) 5 4,513 11,666 11,666 19,741 (636) 5 19,110 74,445 (5,739) 211 154,266 14,622 237,805 1,102 - (1,458) - (356) 138,970 3,221 - 5,562 - 8,783 446,883 – $ 4,104 $ - $ - $ $ $ - - 39,978 592 798 41,368 Total Nonmajor Governmental Funds 8,012 4,323 $ Total Debt Service Funds 108 108 - $ Highway User Revenue Bonds General Obligation Bonds – 111 $ 45,823 1,737 108 592 1,228 49,488 8,427 $ 131,841 46,543 4,342 1,737 3,933 125,112 24,699 1,866 31,276 44 5,875 377,268 585,853 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, 2025 (in thousands) Property Warehouse, and Public Workers’ Employee Maintenance Liability Self Compensation Benefits Self and Services Insurance Self Insurance Insurance Assets Current Assets: Pooled Cash and Investments Accounts Receivable Accrued Premiums Receivable Accrued Interest Receivable Inventory Deposits and Prepaid Costs Total Current Assets $ 22 645 14,646 15 15,328 $ 11,180 42 1,784 13,006 $ 7,702 29 385 8,116 $ Total 35,682 663 11 91 36,447 $ 54,586 1,308 11 162 14,646 2,184 72,897 Noncurrent Assets: Capital Assets, Not Being Depreciated Capital Assets, Being Depreciated, Net Total Noncurrent Assets 53 3,008 3,061 - - 68 6,910 6,978 121 9,918 10,039 18,389 13,006 8,116 43,425 82,936 3,299 3,299 283 283 254 254 513 513 4,349 4,349 21,688 13,289 8,370 43,938 87,285 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 2,102 4,947 609 164 7,822 53 10,634 30 14 10,731 86 22,682 35 45 22,848 3,750 6,630 111 13 10,504 5,991 39,946 4,947 785 236 51,905 Long-Term Liabilities Compensated Absences Net Pension and OPEB Liability Total Long-Term Liabilities 823 29,977 30,800 134 2,059 2,193 51 2,039 2,090 141 5,033 5,174 1,149 39,108 40,257 38,622 12,924 24,938 15,678 92,162 3,565 212 226 622 4,625 3,565 212 226 622 4,625 3,061 - - 6,978 10,039 (23,560) 153 (16,794) 20,660 (19,541) (20,499) $ 153 (16,794) $ 27,638 $ (9,502) 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 $ 112 $ City of Mesa, Arizona Internal Service Funds Combining Statement of Revenue, Expenses and Changes in Net Position For the Fiscal Year Ended June 30, 2025 (In thousands) Operating Revenues: Charges For Services: Warehouse Fleet Support Services Printing and Graphics Self-Insurance Contributions: Warehouse, Maintenance and Services Property and Public Liability Self Insurance Workers’ Compensation Self Insurance Employee Benefits Self Insurance $ $ $ $ Employee City State Retirement System Other Total Operating Revenues 12,077 32,775 810 - - - Total $ 12,077 32,775 810 571 46,233 10,359 10,359 4,630 4,630 13,971 90,740 5,409 12,739 122,859 13,971 105,729 5,409 13,310 184,081 Warehouse Fleet Support Services Printing and Graphics Self-Insurance: Administrative Costs Claims and Premiums Paid Total Operating Expenses 11,436 32,211 943 - - - 11,436 32,211 943 44,590 667 6,836 7,503 2,052 406 2,458 10,850 127,804 138,654 13,569 135,046 193,205 Operating Income (Loss) Before 1,643 2,856 2,172 (15,795) (9,124) Depreciation and Amortization (282) - - (134) (416) Operating Income (Loss) 1,361 2,856 2,172 (15,929) (9,540) Nonoperating Revenues (Expense): Investment Income/(Loss) Lease Interest Expenses Gain/(Loss) on Disposal of Capital Total Nonoperating Revenues (319) 5 (314) 564 564 567 567 2,159 (1) 2,158 2,971 (1) 5 2,975 Income (Loss) Before Capital 1,047 3,420 2,739 (13,771) (6,565) 408 (73) - - 11,148 (39) 11,556 (112) 1,382 3,420 2,739 (2,662) 4,879 (21,881) (3,268) (19,533) 30,301 (14,381) Operating Expenses: Warehouse, Maintenance & Services: Transfers In Transfers Out Change in Net Position Total Net Position - Beginning Total Net Position - Ending $ (20,499) $ 113 152 $ (16,794) $ 27,639 $ (9,502) City of Mesa, Arizona Internal Service Funds Combining Statement of Cash Flows For the Fiscal Year Ended June 30, 2025 (In thousands) Property and Public Warehouse, Liability Workers’ Maintenance Self Compensation and Services Insurance Self Insurance 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 $ Employee Benefits Self Insurance Total 46,046 $ 10,359 $ (39,491) (8,636) (7,899) (942) 4,630 $ 122,405 $183,440 (6,379) (135,432) (189,938) (735) (1,072) (10,648) (1,344) 781 (2,484) $ (14,099) (17,146) 1,395 408 (73) - - 11,148 (39) 1,395 11,556 (112) 1,730 - - 11,109 12,839 (50) 5 - - - (6,249) (78) (3) (6,299) 5 (78) (3) (45) - - (6,330) (6,375) (319) (319) 560 560 577 577 2,243 2,243 3,061 3,061 Net Change in Pooled Cash and Investments 22 1,341 (1,907) (7,077) (7,621) Pooled Cash and Investments at Beginning of - 9,839 9,609 42,759 62,207 22 $ 11,180 35,682 $ 54,586 Cash Flows From Noncapital Financing Activities: Increase in Interfund Payable Transfers In From Other Funds Transfers Out To Other Funds Net Cash Provided By/(Used For) Noncapital Financing Activities Cash Flows from Capital and Related Financing Activities: Acquisition and Construction of Capital Assets Proceeds from the Sale of Capital Assets Principal Paid on Leases Interest Income/(Expense) on Lease 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 Pooled Cash and Investments at End of Year $ 114 $ 7,702 $ City of Mesa, Arizona Internal Service Funds Combining Statement of Cash Flows For the Fiscal Year Ended June 30, 2025 (In thousands) Property and Public Warehouse, Liability Workers’ Maintenance Self Compensation and Services Insurance Self Insurance Employee Benefits Self Insurance Total Reconciliation of Operating Income/(Loss) to Net Cash Provided By/(Used For) Operating Activities: Operating Income/(Loss) $ 1,361 $ 2,856 $ 2,172 $ (15,929) $ (9,540) Adjustments to Reconcile Operating Income/ (Loss) to Net Cash Provided By(Used For) Operating Activities: Depreciation and Amortization Changes in Assets and Liabilities: (Increase)/Decrease in Receivables (Increase)/Decrease in Inventory (Increase)/Decrease in Deposits and Prepaid (Increase)/Decrease in Deferred Outflows Increase/(Decrease) in Accounts Payable Increase/(Decrease) in Pension and OPEB Increase/(Decrease) in Deferred Inflows Increase/(Decrease) in Other Accrued Expenses 282 - - 134 416 (187) (2,662) (5) (147) 35 732 (857) 104 (266) 14 51 (498) (80) (1,296) (79) (54) (61) 284 5 (4,751) (454) (27) 989 441 (117) 864 (641) (2,662) (350) (214) 1,014 959 (1,049) (5,079) Total Adjustments (2,705) (2,075) (4,656) 1,830 (7,606) (1,344) $ 781 5 - Net Cash Provided By/(Used for) Operating $ Noncash Transactions Affecting Financial Position: Gain/(Loss) on Disposal of Capital Assets 115 $ (2,484) $ - (14,099) $ (17,146) - 5 CITY OF MESA, AZ SUPPLEMENTAL INFORMATION FOR T H E F I S CA L Y E A R E N D E D • JU N E 3 0 , 2 0 25 City of Mesa, Arizona Supplemental Information Budgetary Comparison Schedule (Non-GAAP Basis) Cadence Community Facilities Districts For the Fiscal Year Ended June 30, 2024 (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 Total Expenditures 1,026 317 22 1,365 Final $ 1,026 317 22 1,365 Actual Budgetary Basis Variance with Final Budget $ $ 1,026 324 29 1,379 7 29 (22) 14 148 148 36 112 618 616 2 1,384 618 616 2 1,384 618 616 2 1,272 112 Excess (Deficiency) of Revenues Over (Under) Expenditures Net Change in Fund Balances (19) (19) (19) (19) 107 107 126 126 Fund Balance - Beginning 771 771 771 - Fund Balance - Ending $ 752 $ 752 $ 878 $ 126 Note: Cadence is a blended component unit. Budget is approved by the Board at the District Level. 116 City of Mesa, Arizona Supplemental Information Budgetary Comparison Schedule (Non-GAAP Basis) Eastmark 1 Community Facilities Districts For the Fiscal year Ended June 30, 2025 (in thousands) Budgeted Amounts Original Revenues: Property Taxes Special Assessments Investment Income Total Revenues $ 5,307 1,305 6,612 Final $ 5,307 1,305 6,612 Actual Budgetary Basis Variance with Final Budget $ $ 5,169 1,369 202 6,740 (138) 64 202 128 Expenditures: Current: General Government Debt Service: Principal Retirement Interest on Bonds Service Charges Capital Outlay Total Expenditures 567 567 215 352 2,875 2,916 5 17,000 23,363 2,875 2,916 5 17,000 23,363 2,762 2,799 4 5,780 113 117 1 17,000 17,583 Excess (Deficiency) of Revenues Over (Under) Expenditures (16,751) (16,751) 960 17,711 Other Financing Uses: Face Amount of Bonds Issued Total Other Financing Uses 17,000 17,000 17,000 17,000 - 17,000 17,000 Net Change in Fund Balances 249 249 960 711 3,898 3,898 3,898 - Fund Balance - Beginning Fund Balance - Ending $ 4,147 $ 4,147 $ 4,858 $ 711 Note: Eastmark 1 is a blended component unit. Budget is approved by the Board at the District Level. 117 City of Mesa, Arizona Supplemental Information Budgetary Comparison Schedule (Non-GAAP Basis) Eastmark 2 Community Facilities Districts For the Fiscal year Ended June 30, 2025 (in thousands) Budgeted Amounts Original Revenues: Property Taxes Special Assessments Investment Income Contributions Total Revenues $ 372 43 76 491 Final $ 372 43 76 491 Actual Budgetary Basis Variance with Final Budget $ $ 371 44 12 427 (1) 1 12 (76) (64) Expenditures: Current: General Government Debt Service: Principal Retirement Interest on Bonds Service Charges Capital Outlay Total Expenditures 118 118 49 69 205 239 1 1,500 2,063 205 239 1 1,500 2,063 208 238 1 496 (3) 1 1,500 1,567 Excess (Deficiency) of Revenues Over (Under) Expenditures (1,572) (1,572) (69) 1,503 Other Financing Uses: Face Amount of Bonds Issued Total Other Financing Uses 1,500 1,500 1,500 1,500 - 1,500 1,500 Net Change in Fund Balances (72) (72) (69) 3 Fund Balance - Beginning 293 293 293 - Fund Balance - Ending $ 221 $ 221 $ 224 $ 3 Note: Eastmark 2 is a blended component unit. Budget is approved by the Board at the District Level. 118 CITY OF MESA, AZ STATISTICAL SECTION FOR T H E F I S CA L Y E A R E N D E D • JU N E 3 0 , 2 0 25 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. 119 Revenue Capacity These schedules contain information to help readers assess the City’s most significant local revenue source, the sales tax. 131 Debt Capacity 134 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. 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. 142 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. 144 Sources: Unless otherwise noted, the information in these schedules is derived from the Annual Comprehensive Financial Report for the relevant year. City of Mesa, Arizona Table 1 Net Position by Components Last Ten Fiscal Years (accrual basis of accounting) (in thousands) 2025 2024 2023 2022 GOVERNMENTAL ACTIVITIES Net Investment in Capital Assets Restricted Unrestricted $ 1,377,695 $ 1,317,166 $ 1,229,376 $ 1,246,582 415,817 382,409 357,673 249,626 (929,372) (914,825) (848,807) (889,238) Total Governmental Activities Net Position $ 864,140 $ 784,750 $ 738,242 $ 606,970 $ 100,008 97,102 297,881 $ 82,964 122,088 269,392 $ 92,703 114,531 245,653 $ 24,204 95,840 324,907 Total Business-type Activities $ 494,991 $ 474,444 $ 452,887 $ 444,951 PRIMARY GOVERNMENT Net Investment in Capital Assets Restricted Unrestricted $ 1,477,703 $ 1,400,130 $ 1,322,079 $ 1,270,786 512,919 504,497 472,204 345,466 (631,491) (645,433) (603,154) (564,331) Total Primary Government $ 1,359,131 BUSINESS-TYPE ACTIVITIES Net Investment in Capital Assets Restricted Unrestricted 119 $ 1,259,194 $ 1,191,129 $ 1,051,921 Table 1 (Concluded) 2021 2020 2019 2018 2017 2016 $ 1,184,908 $ 203,284 (841,670) 1,075,182 $ 143,839 (833,300) 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) $ 546,522 $ 385,721 $ 308,076 $ 249,801 $ 363,708 $ 380,103 $ 30,965 70,940 318,490 $ 213,576 63,113 252,261 $ 170,427 47,857 350,006 $ 266,012 40,440 199,531 $ 247,598 $ 43,046 228,160 302,521 49,139 158,756 $ 420,395 $ 528,950 $ 568,290 $ 505,983 $ 518,804 $ 510,416 $ 1,215,873 $ 274,224 (523,180) 1,288,758 $ 206,952 (581,039) 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) $ 966,917 914,671 876,366 755,784 882,512 $ 890,519 $ $ 120 $ $ City of Mesa, Arizona Table 2 Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) (in thousands) 2025 EXPENSES GOVERNMENTAL ACTIVITIES: General Government Public Safety Community Environment Cultural-Recreational Interest on Long-term Debt $ 230,515 494,279 193,168 113,669 17,949 2024 $ 225,391 525,883 192,205 107,468 16,793 2023 $ 192,361 430,268 157,270 100,791 16,138 2022 $ 183,241 416,563 195,594 86,824 14,720 1,049,580 1,067,740 896,827 896,942 BUSINESS-TYPE ACTIVITIES: Electric Gas Water Wastewater Solid Waste Airport Golf Course Convention Center Hohokam Stadium/Fitch Complex Cubs Stadium District Cooling 43,912 46,783 149,731 97,809 51,305 6,691 1,750 49,009 46,078 151,246 89,096 55,972 13,302 1,570 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 Total Business-type Activities Expenses 397,981 406,273 371,499 343,585 Total Primary Government Expenses $1,447,561 Total Governmental Activities Expenses 121 $ 1,474,013 $ 1,268,326 $ 1,240,527 Table 2 (Continued) 2021 $ $ 175,608 409,549 172,840 66,020 18,201 2020 $ 134,299 384,800 152,847 62,014 17,841 2019 $ 119,819 355,752 119,506 58,345 18,078 2018 $ 2017 105,140 334,905 113,916 54,828 19,514 $ 101,301 379,505 104,173 55,739 19,279 2016 $ 96,860 305,376 117,120 54,967 20,424 842,218 751,801 671,500 628,303 659,997 594,747 30,259 41,386 126,797 77,488 45,848 5,958 — — — — 1,299 25,028 29,096 128,244 80,548 41,719 6,004 1,233 4,150 2,615 408 1,163 22,475 33,124 103,821 57,468 38,524 5,029 2,117 4,413 2,748 7,867 1,186 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 1,182 329,035 320,208 278,772 292,338 291,832 286,291 1,171,253 $ 1,072,009 920,641 $ 951,829 $ 950,272 $ 122 $ 881,038 City of Mesa, Arizona Table 2 Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) (in thousands) 2025 PROGRAM REVENUES GOVERNMENTAL ACTIVITIES: Charges for services: Licenses and Permits Charges for Services Fines and Forfeitures Other activities Operating Grants and Contributions Capital Grants and Contributions Total Governmental Activities Program Revenues $ 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 Operating Grants and Contributions Capital Grants and Contributions Total Business-type Activities Program Revenues 44,305 91,658 8,248 891 77,909 8,588 231,599 2024 $ 39,954 82,356 8,787 919 78,057 14,618 224,691 2023 $ 46,116 70,224 8,968 936 75,436 24,611 226,291 2022 $ 48,574 65,920 9,672 966 105,858 44,369 275,359 51,377 60,901 205,684 110,266 76,885 5,086 1,501 339 16,806 528,845 50,234 58,932 184,360 98,598 71,773 4,798 1,323 236 56,440 526,694 48,208 70,556 167,806 95,665 69,269 4,973 1,427 268 21,796 479,968 52,613 57,313 163,263 93,727 66,132 4,808 1,487 452 30,888 470,683 Total Primary Government Program Revenues $ 760,444 $ 751,385 $ 706,259 $ 746,042 NET (EXPENSE) REVENUE Governmental Activities Business-type Activities $ (817,981) $ (843,049) $ (670,536) $ (621,583) 130,864 120,421 108,469 127,098 Total Primary Government Net Expense $ (687,117) $ (722,628) $ (562,067) $ (494,485) 123 Table 2 (Continued) 2021 $ 42,635 41,394 8,573 8,145 100,923 10,696 212,366 2020 $ 32,666 45,141 169,473 87,573 64,344 4,007 1,158 452 34,719 439,533 24,126 40,489 9,253 3,791 70,633 24,719 173,011 2019 $ 29,855 39,986 152,266 81,464 63,267 4,018 2,595 40 221 1,143 1,632 35,896 412,383 2018 23,812 43,214 10,838 3,439 25,326 13,780 120,409 $ 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 25,119 40,222 10,436 2,979 34,446 23,618 136,820 2017 $ 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 23,152 38,348 9,873 1,330 26,955 24,451 124,109 2016 $ 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 23,254 38,178 11,049 9,385 26,361 35,925 144,152 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 $ 651,899 $ 585,394 $ 518,071 $ 534,494 $ 512,038 $ 507,679 $ (629,852) 110,498 $ (578,790) 92,175 $ (551,091) 118,890 $ (491,483) 105,336 $ (535,888) 96,097 $ (450,595) 77,236 $ (519,354) $ (486,615) $ (432,201) $ (386,147) $ (439,791) $ (373,359) 124 City of Mesa, Arizona Table 2 Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) (in thousands) GENERAL REVENUES AND OTHER CHANGES IN NET POSITION 2025 2024 2023 2022 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 $ 330,176 46,308 6,726 266,556 36,803 57,735 14,321 138,746 $ 329,821 47,924 6,837 290,065 27,428 46,922 13,226 200 127,134 $ 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 Total Governmental Activities 897,371 889,557 801,808 682,032 BUSINESS-TYPE ACTIVITIES: Occupancy Taxes Utility Development Fees Investment Income (Loss) Gain (Loss) on Sale of Capital Assets Miscellaneous Transfers 4,067 11,550 12,812 (138,746) 7,395 13,092 7,783 (127,134) 14,142 3,672 1,252 (119,599) 21,021 (9,155) 1,199 (115,607) Total Business-type Activities (110,317) (98,864) (100,533) (102,542) Total Primary Government $ 787,054 $ 790,693 $ 701,275 $ 579,490 Change in Net Position Governmental Activities Business-type Activities $ 79,390 20,547 $ 46,508 21,557 $ 131,272 7,936 $ 60,448 24,556 Total Primary Government $ 99,937 $ 68,065 $ 139,208 $ 85,004 125 Table 2 (Concluded) 2021 $ 253,825 47,247 3,990 206,397 19,052 2,308 21,315 17,229 113,982 2020 $ 219,932 45,068 2,564 183,189 36,912 16,002 16,374 136,394 2019 $ 189,871 36,013 3,246 175,278 65,189 13,729 11,531 (27) 114,535 2018 $ 169,024 35,571 2,628 167,540 80,312 1,912 5,418 (2,462) 116,006 2017 $ 159,735 34,684 2,536 158,916 46,817 448 11,161 (1,411) 106,607 2016 $ 151,826 33,825 2,331 149,350 44,928 2,210 6,008 102,148 685,345 656,435 609,365 575,949 519,493 492,626 45 192 (113,982) 1,459 7,618 (801) (3,397) (136,394) 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) (113,745) (131,515) (56,583) (110,947) (87,709) (103,073) $ 571,600 $ 524,920 $ 552,782 $ 465,002 $ 431,784 $ 389,553 $ 55,493 (3,247) $ 77,645 (39,340) $ 58,275 62,307 $ 84,466 (5,611) $ (16,395) 8,388 $ 42,031 (25,837) $ 52,246 $ 38,305 $ 120,582 $ 78,855 $ (8,007) $ 16,194 126 City of Mesa, Arizona Table 3 Fund Balance, Governmental Funds Last Ten Fiscal Years (accrual basis of accounting) (in thousands) 2025 GENERAL FUND Nonspendable Restricted Committed Assigned Unassigned 2024 2023 2022 $ 4,523 6,741 217,638 210,091 $ 4,860 8,628 215,138 194,106 $ 4,299 8,978 184,499 177,640 $ 3,185 4,313 171,743 152,526 $ 438,993 $ 422,732 $ 375,416 $ 331,767 ALL OTHER GOVERNMENTAL FUNDS Nonspendable $ Restricted Committed Assigned Unassigned 843 465,448 26,326 93,236 - $ 1,665 360,119 27,600 84,806 (27,307) $ 997 332,645 27,011 63,609 (47,977) $ 723 296,748 25,677 39,153 (12,709) Total All Other Governmental Funds 585,853 $ 446,883 $ 376,285 $ 349,592 Total General Fund $ 127 Table 3 (Concluded) 2021 2020 2019 2018 2017 2016 $ 2,680 18,529 79,024 188,375 $ 2,301 19,910 42,515 130,342 $ 794 26 14,016 30,869 90,190 $ 2,304 10,377 28,346 89,347 $ 2,145 146 528 19,367 92,240 $ 4,035 184 227 10,703 79,657 $ 288,608 $ 195,068 $ 135,895 $ 130,374 $ 114,426 $ 94,806 $ 928 274,623 66,679 897 (11,517) $ 576 184,980 63,866 786 (1,043) $ 1,196 159,745 57,432 459 (134) $ 135 132,462 41,641 22 (176) $ 37 112,105 30,928 2 (69) $ 77 95,701 28,580 6 (155) $ 331,610 $ 249,165 $ 218,698 $ 174,084 $ 143,003 $ 124,209 128 City of Mesa, Arizona Table 4 Changes in Fund Balance, Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) (in thousands) REVENUES Sales Taxes Property Taxes Occupancy Taxes Special Assessments Licenses and Permits Intergovernmental Charges for Services Fines and Forfeitures Investment Income Contributions Miscellaneous Total Revenues $ 2025 2024 330,176 46,543 6,726 1,737 44,305 353,053 91,658 8,248 54,764 57 11,995 949,262 $ 329,821 47,658 6,837 1,736 39,954 382,740 82,356 8,787 44,051 147 14,818 958,905 2023 $ 331,144 47,003 7,319 1,830 46,116 345,790 70,224 8,968 8,227 107 8,367 875,095 2022 $ 301,862 51,926 6,427 1,830 48,574 347,578 65,920 9,672 (27,716) 1,081 7,332 814,486 EXPENDITURES Current General Government Public Safety Community Environment Cultural-Recreational Debt Service Principal Interest Service Charges Cost of Issuance Capital Outlay Total Expenditures 160,894 438,559 126,557 87,941 133,471 434,589 125,473 78,162 122,514 390,553 107,001 70,381 110,608 365,887 127,637 62,542 55,420 20,114 13 772 211,642 1,101,912 53,749 19,288 14 481 213,194 1,058,421 53,495 18,732 13 572 176,745 940,006 54,032 19,283 12 540 167,628 908,169 Excess of Revenues Under Expenditures (152,650) (99,516) (64,911) (93,683) 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) 218,873 (91,571) 568 154,266 11,123 14,622 307,881 219,576 (92,349) 579 83,340 131 6,153 217,430 189,252 (73,332) 2,019 11,975 4,780 559 135,253 143,814 (28,207) 2,004 34,155 3,059 154,825 155,231 $ 117,914 Net Change in Fund Balances Debt Service as a percentage of Noncapital Expenditures $ 8.14 % 129 8.44 % $ 70,342 8.73% $ 61,142 9.26% Table 4 (Concluded) 2021 $ $ 253,825 47,253 3,990 1,832 42,635 316,871 41,394 8,573 2,287 130 7,036 725,826 2020 $ 219,932 44,970 2,564 1,661 24,126 277,396 40,489 9,253 14,026 2,295 9,487 646,199 2019 $ 189,871 36,005 3,246 1,274 23,812 213,051 43,214 10,838 10,840 255 6,688 539,094 2018 $ 169,024 35,616 2,628 1,174 25,119 223,800 40,222 10,436 1,608 429 5,547 515,603 2017 $ 159,735 34,675 2,536 2,125 23,152 200,820 38,348 9,873 331 360 4,348 476,303 2016 $ 151,826 34,765 2,331 1,433 23,254 191,360 38,178 11,049 1,483 961 3,994 460,634 98,423 308,271 127,421 45,596 96,141 291,674 90,207 47,639 98,009 277,313 76,623 48,636 90,209 266,459 73,404 46,143 86,360 261,892 68,403 43,744 79,448 254,528 65,559 43,651 45,793 17,443 14 2,038 156,985 801,984 46,929 18,208 14 838 120,602 712,252 39,511 18,185 19 874 92,637 651,807 34,738 18,477 14 1,023 76,279 606,746 32,587 17,994 15 1,271 82,062 594,328 107,383 18,905 14 1,505 91,784 662,777 (76,158) (66,053) (112,713) (91,143) (118,025) (202,143) 185,897 (71,915) 21,597 106,637 20,193 38,395 (48,661) 252,143 163,801 (27,407) 18,361 938 155,693 147,590 (33,055) 47,008 1,305 162,848 176,572 (66,208) 26,745 1,063 138,172 139,516 (31,931) 47,682 4,613 47,450 (50,891) 156,439 122,572 (24,298) 46,530 2,283 43,304 (49,693) 140,698 175,985 9.08% $ 89,640 10.39% $ 50,135 $ 10.07% 47,029 10.03% 130 $ 38,414 9.88% $ (61,445) 22.12% City of Mesa, Arizona Table 5 Sales tax Collections by Category Last Ten Fiscal Years (in thousands) 2025 2024 2023 2022 Retail Sales Rentals Utilities Restaurants & Bars Communications Amusements Publishing Miscellaneous Printing & Advertising Contracting $ 173,096 44,199 23,861 29,352 3,516 2,939 475 1,877 743 50,118 $ 168,775 54,491 21,609 28,318 3,360 2,861 523 1,770 659 47,454 $ 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 Total $ 330,176 $ 329,820 $ 331,137 $ 301,862 City Direct Tax Rate (1) 2.00% 2.00% 2.00% (1) Mesa tax rate increased from 1.75% to 2.00% effective March 1, 2019. Source: City of Mesa Tax & Licensing Division 131 2.00% Table 5 (Concluded) 2021 2020 2019 2018 2017 2016 $ 143,435 38,149 17,511 21,716 4,730 1,351 477 1,154 479 24,821 $ 115,525 35,885 16,287 19,345 5,162 1,755 463 1,131 495 23,867 $ 95,806 31,754 14,964 17,961 4,365 1,941 408 943 507 21,222 $ 84,640 28,003 14,199 16,065 3,876 1,624 362 986 413 18,856 $ 79,716 26,340 13,575 15,002 4,432 1,581 526 1,313 446 16,806 $ 76,160 25,578 13,251 14,240 4,229 1,561 688 1,068 428 14,623 $ 253,823 $ 219,915 $ 189,871 $ 169,024 $ 159,737 $ 151,826 2.00% 2.00% 2.00% 1.75% 132 1.75% 1.75% City of Mesa, Arizona Table 6 Direct and Overlapping Sales Tax Rates Last Ten Fiscal Years Fiscal Year 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 City Direct Rate Maricopa County 1.75 % 1.75 % 1.75 % 2.00 % 2.00 % 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 % (1): The City of Mesa increased its tax to 2.00% effective 3/1/19 Source: City of Mesa Tax & Licensing Office 133 State of Arizona 5.60 % 5.60 % 5.60 % 5.60 % (1) 5.60 % 5.60 % 5.60 % 5.60 % 5.60 % 5.60 % City of Mesa, Arizona Table 7 Ratios of Outstanding Debt by Type Last Ten Fiscal Years (in thousands) 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 Business-type Activities Utility System Revenue Bonds Utility Revenue Obligations General Obligation Bonds Notes Payable Total Primary Government 2025 $ 1,066,298 645,828 667 $ 2,362,034 Percentage of Personal Income (1) Per Capita (1) 485,216 7,836 34,561 92,463 22,391 6,774 2024 $ 1,124,964 348,085 827 $ 2,002,523 10.37% $ 4,569 352,848 18,977 36,495 96,350 22,077 1,900 $ $ 3,911 298,366 29,916 38,387 102,630 24,714 2,866 1,198,362 155,366 983 $ 1,851,590 9.58% (1) Information on personal income and population is presented on Table 12. 134 2023 2022 $ 1,322,930 92,203 1,135 $ 1,950,325 9.44% $ 3,616 335,174 40,420 40,245 95,193 23,025 - 9.74% $ 3,832 Table 7 (Concluded) 2021 $ $ 353,434 51,141 42,078 86,134 - 1,382,558 16,977 28 1,285 1,933,635 2020 $ $ 12.21% $ 3,837 334,609 58,750 219 57,307 - 1,242,670 151 1,431 1,695,137 2019 $ $ 10.99% $ 3,298 2018 370,479 67,905 49,025 438 40,631 - 1,279,020 191 1,574 1,809,263 $ $ 12.26% $ 3,541 135 365,519 76,620 4,902 1,005 28,813 - 1,227,355 236 1,714 1,706,164 2017 $ $ 12.62% $ 3,406 374,443 84,995 94,060 1,340 19,172 - 1,161,755 191 1,851 1,737,807 2016 $ $ 13.74% $ 3,525 350,560 92,895 94,060 2,085 19,315 - 1,063,710 390 1,985 1,625,000 13.79% $ 3,421 City of Mesa, Arizona Table 8 Ratios of General Bonded Debt Outstanding June 30, 2024 Year Secondary Assessed Value (1) 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 $ 2,757,913 2,888,291 3,048,893 3,277,965 3,516,377 3,736,210 3,990,099 4,233,637 4,517,096 4,894,666 General Obligation Bonds $ 350,983 374,755 365,755 373,827 334,760 353,462 335,174 298,366 352,848 485,216 Less: Amounts Available in Debt Service Fund $ 2,618 4,989 5,384 4,853 3,535 7,568 8,095 6,491 5,562 4,104 Total $ 348,365 369,766 360,371 368,974 331,225 345,894 327,079 291,875 347,286 481,112 Source: (1) Maricopa County Finance Department Assessor's Office. (2) Population figures are found on Table 12. 136 Percentage of Secondary Assessed Value Per Capita (2) 12.63% $ 12.80% 11.82% 11.26% 9.42% 9.26% 8.20% 6.89% 7.69% 9.83% 733 750 719 722 644 686 643 570 665 930 City of Mesa, Arizona Table 9 Direct and Overlapping Governmental Activities Debt June 30, 2025 (in thousands) Governmental Unit Debt repaid with property taxes Maricopa County Community College District Maricopa Special Health Care District Mesa Unified School District No. 4 Gilbert Unified School District No. 41 Queen Creek Unified School District No. 95 Higley Unified School District No. 60 Tempe Union High School District No. 213 Tempe Elementary School District No. 3 Eastmark Community Facilities District No. 1 Eastmark Community Facilities District No. 2 Cadence Community Facilities District Debt Outstanding $ Other Debt: Maricopa County Estimated Percentage Applicable to City of Mesa Percent (1) Amount 57,615 544,135 211,485 108,900 103,600 61,210 144,820 161,650 54,870 5,040 12,200 8.39% 8.51% 86.46% 29.37% 42.31% 4.48% 0.47% 1.10% 100.00% 100.00% 100.00% 325,450 8.39% $ 4,835 46,279 182,852 31,983 43,830 2,741 682 1,783 54,870 5,040 12,200 27,312 Subtotal, overlapping debt 414,407 City direct debt (2) 649,240 Total Direct and Overlapping Debt $ 1,063,647 (1) Proportion applicable to the City is computed on the ratio of net assessed limited property valuation for fiscal year 2024 (2) Includes: General Obligation Bonds, Highway User Revenue Bonds, Excise Tax Revenue Obligations, Community Facilities District Bonds, Unamortized Bond Premiums, Lease and SBITA liabilities 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. 137 City of Mesa, Arizona Table 10 Legal Debt Margin Information Last Ten Fiscal Years 2025 2024 2023 2022 6% Limitation (1) Legal Debt Limitation General Obligation Bonds Outstanding $ 594,733 15,005 $ 485,080 4,926 $ 378,486 808 $ 353,301 852 Total Debt Margin Available $ 579,729 $ 480,154 $ 377,678 $ 352,449 Total Net Debt Applicable to the 6% Limit as A Percentage of the 6% Legal Debt Limitation 2.52 % 1.02 % 0.21 % 0.24 % 20% Limitation (2) Legal Debt Limitation General Obligation Bonds Outstanding $ 1,982,445 441,505 $ 1,616,935 331,064 $ 1,261,620 284,147 $ 1,177,671 318,098 Total Debt Margin Available $ 1,540,939 $ 1,285,871 $ $ 22.27 % 20.47 % 22.52 % 27.01 % Total Margin Available $ 2,120,668 $ 1,766,025 $ 1,355,151 $ 1,212,022 Full Cash Net Assessed Value $ 9,912,223 $ 8,084,674 $ 6,308,100 $ 5,888,354 Total Net Debt Applicable to the 20% Limit as A Percentage of the 20% Legal Debt Limitation 977,473 859,573 (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. 138 Table 10 (Concluded) 2021 2020 2019 2018 2017 2016 $ 317,794 2,715 $ 285,114 450 $ 196,678 518 $ 182,934 724 $ 173,297 846 $ 165,475 1,047 $ 315,079 $ 284,664 $ 196,160 $ 182,210 $ 172,451 $ 164,428 0.85% 0.16% 0.26% 0.40% 0.49% 0.63% $ 1,059,313 331,690 $ 950,381 334,609 $ 655,593 370,152 $ 609,779 365,031 $ 577,658 373,909 $ 551,583 349,903 $ $ 615,772 $ 285,441 $ 244,748 $ 203,749 $ 201,680 727,623 31.31% $ 1,042,702 $5,296,564 35.21% $ 900,436 $4,751,903 56.46% $ 481,601 $4,329,347 59.86% $ 426,958 $3,983,671 139 64.73% $ 376,200 $3,707,067 63.44% $ 366,108 $2,757,913 City of Mesa, Arizona Table 11 Pledged-Revenue Coverage Last Ten Fiscal Years (in thousands) Fiscal Year 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Operating Revenues (1) $ 323,099 348,794 361,863 365,081 366,838 399,197 433,048 451,504 463,897 505,113 Utility System Revenue Bonds Debt Service Operating Expenses $ 218,706 225,257 228,933 257,166 285,610 273,305 281,381 309,470 337,544 328,363 Net Available Revenue $ 104,393 123,537 132,930 107,915 81,228 125,892 151,667 142,034 126,353 176,750 Principal $ 25,800 13,885 31,354 21,450 36,350 41,770 47,890 47,935 49,390 65,335 Interest $ 44,794 47,187 50,739 50,695 55,061 51,098 53,469 48,045 45,659 42,929 Coverage Ratio 1.48 2.02 1.62 1.50 0.89 1.36 1.50 1.48 1.33 1.63 Utility System Revenue Obligations Debt Service Fiscal Year 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Operating Revenues (1) $ 433,048 451,504 463,897 505,113 Operating Expenses $ 281,381 309,470 337,544 328,363 Net Available Revenue $ 151,667 142,034 126,353 176,750 Principal $ 3,725 8,460 8,790 Interest $ 666 6,461 12,171 15,996 Coverage Ratio 227.73 21.98 6.12 7.13 (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. 140 Table 11 (Concluded) Special Assessment Bonds Debt Service Fiscal Year Revenues 2016 $ 790 2017 1,041 2018 289 2019 261 2020 288 2021 232 2022 2023 2024 2025 - Principal $ 745 745 335 567 219 219 - Interest $ 138 98 68 49 19 6 - Community Facility District Bonds Debt Service Coverage Ratio 0.89 1.23 0.72 0.42 1.21 1.03 - Revenues $ 1,320 1,612 2,261 3,010 4,324 5,940 7,387 8,920 9,693 7,582 Principal $ 489 645 984 2,125 1,685 2,881 3,667 4,836 5,984 3,588 Interest $ 832 914 1,197 1,690 2,321 3,029 3,446 3,735 3,899 3,653 Coverage Ratio 1.00 1.03 1.04 0.79 1.08 1.01 1.03 1.03 0.98 1.05 Highway Project Advancement Notes Debt Service Fiscal Coverage Year Revenues Principal Interest Ratio 2016 $ 242,020 $ 77,835 $ 324 3.10 2017 2018 2019 2020 2021 2022 2023 2024 2025 - Excise Tax Revenue Obligations Series 2013 Debt Service Revenues Coverage (2) Principal Interest Ratio $ 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 - Highway User Revenue Fund Revenue Bonds Debt Service Fiscal Coverage Year Revenues Principal Interest Ratio 2016 $ 35,383 $ 7,390 $ 4,844 2.89 2017 38,048 7,900 4,473 3.08 2018 39,477 8,375 4,080 3.17 2019 42,406 8,715 3,663 3.43 2020 42,099 9,155 3,243 3.40 2021 45,049 9,645 2,796 3.62 2022 47,989 10,075 2,314 3.87 2023 48,007 10,000 1,812 3.87 2024 52,439 10,490 1,312 4.44 2025 53,307 10,880 786 4.57 Excise Tax Revenue Obligations Series 2020 Debt Service Revenues Coverage (2) Principal Interest Ratio $ $ - $ 354,315 645 861 235.27 389,868 1,185 1,483 146.13 437,250 1,245 1,442 162.73 504,685 1,305 1,389 187.34 490,847 1,375 1,324 181.86 141 City of Mesa, Arizona Table 12 Demographic and Economic Statistics Last Ten Fiscal Years Personal Per Capita Personal Income Median Age Public School Enrollment Enrollment (1) Unemployment Rate (2) 24,794 25,644 26,983 28,852 29,999 30,758 35,758 38,262 40,844 43,345 35.7 36.0 36.2 36.3 36.3 36.6 37.8 38.1 37.9 38.2 65,049 63,779 67,025 62,593 62,490 57,876 58,595 57,909 57,311 55,600 5.3 % 4.5 % 4.3 % 4.6 % 9.7 % 6.6 % 3.4 % 3.9 % 3.5 % 4.0 % Year Population Income (in thousands) 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 475,274 493,089 501,137 511,334 514,144 504,258 509,475 512,498 511,648 517,151 11,783,944 12,644,774 13,522,180 14,753,009 15,423,806 15,509,968 18,217,807 19,609,198 20,897,751 22,678,971 Sources: (1) Arizona Department of Education (2) US Census Bureau 142 City of Mesa, Arizona Table 13 Principal Employers Current Year and Nine Years Ago 2025 Employer Mesa Unified School District 4 Banner Health City of Mesa The Boeing Company Walmart Maricopa County Community College Dexcom Fry’s Food Store Home Depot Maricopa County Government Gilbert Unified School District 41 2016 Employees Rank Percentage of Total City Employment 7,977 6,468 4,919 4,353 2,988 1,889 1,867 1,232 1,132 1,094 1 2 3 4 5 6 7 8 9 10 4.67% 3.78% 2.88% 2.55% 1.75% 1.10% 1.09% 0.72% 0.66% 0.64% Drivetime Automotive Group Santander Consumer Holdings USA Total 33,919 19.84% Source: Maricopa Association of Governments 143 Employees Rank Percentage of Total City Employment 8,435 9,573 3,798 4,700 2,541 2 1 4 3 5 5.39% 6.11% 2.43% 3.00% 1.62% 1,128 7 0.72% 986 1,229 990 970 34,350 9 6 8 10 0.63% 0.78% 0.63% 0.62% 21.93% City of Mesa, Arizona Table 14 Full-Time Equivalent City Government Employees by Function/Program Last Ten Fiscal Years 2025 Function/Program General Government Public Safety Community Environment Cultural-Recreational Energy Resources Water Resources Solid Waste Airport 986 2240 227 378 134 271 151 14 Total 4,401 Source: City of Mesa Human Resources 144 2024 2023 2022 938 2137 214 389 135 284 150 13 944 2,088 212 381 124 279 153 14 870 1,933 180 345 121 261 158 13 4,260 4,194 3,880 Table 14 (Concluded) 2021 2020 2019 2018 2017 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 12 826 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 3,782 3,770 3,690 3,582 3,526 3,798 145 2016 City of Mesa, Arizona Table 15 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) 2025 2024 2023 2022 9,657 10,309 10,050 10,123 10,333 9,335 11,491 9,597 1,035 64,429 1,373 679 11,277 1,274 63,839 1,515 794 10,968 1,270 60,508 1,549 665 11,434 1,184 62,249 1,435 546 13,848 114,094 689,123 1,423,810 18,470 80,161 105,999 649,237 1,307,988 18,154 77,050 92,180 579,666 1,403,603 17,851 74,354 77,688 473,261 1,149,289 17,573 72,182 165,637 89.88 122.60 160,456 78.60 119.40 159,783 76.56 113.78 156,290 84.86 118.92 136,694 135,843 134,757 132,412 34.90 35.50 33.60 34.40 146,750 244,471 30,220 11,910 143,274 267,977 31,152 14,509 142,332 273,190 30,610 13,711 141,110 254,442 35,734 14,337 852 464,697 806 361,264 812 348,168 797 319,892 * mgd - millions of gallons per day ** mg - millions of gallons 146 Table 15 (Concluded) 2021 2020 2019 2018 2017 2016 12,132 6,402 11,716 6,267 11,559 6,637 12,347 6,599 13,151 6,966 13,208 6,968 1,428 55,878 1,190 543 12,464 1,113 54,478 1,210 518 15,520 1,004 54,139 1,373 505 14,337 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 85,827 116,499 980,380 17,558 70,281 106,062 671,069 1,073,373 17,026 68,624 117,974 1,131,120 1,159,536 17,018 65,993 119,489 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 60,384 153,586 85.91 124.77 151,634 89.77 128.91 148,877 78.66 117.77 146,172 79.26 117.47 144,276 78.59 119.73 141,824 78.55 116.62 130,775 127,763 127,000 130,343 128,782 126,359 33.60 33.60 34.50 34.60 34.10 34.30 137,537 245,542 40,176 10,921 136,739 244,697 39,697 13,643 134,777 241,307 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 20,602 821 336,631 724 349,300 752 326,255 717 288,122 689 289,801 663 270,702 147 City of Mesa, Arizona Table 16 Capital Asset Statistics by Function/Program Last Ten Fiscal Years Function/Program 2025 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 2024 2023 2022 8 431 22 4 8 401 21 4 8 326 21 3 8 301 21 3 2,362 21 9 6 2,166 351 9 6 2,100 370 9 6 2,074 397 9 6 1,594 1 440 1,552 1,518 1 460 1,521 1,638 1 456 1,481 1,629 1 452 1,454 2,652 109 2,637 109 2,518 109 2,502 109 1,860 70 1,849 70 1,830 70 1,812 70 97 1 99 1 95 1 96 1 Note 1: The decrease in FY 2020 is due to Reservoir DWR2 being out of service for rehabilitation. 148 Table 16 (Concluded) 2021 2020 2019 2018 2017 2016 8 298 20 3 8 300 20 4 8 287 20 4 8 281 20 4 8 281 20 4 8 287 20 4 2,023 394 9 6 2,139 719 9 6 1,929 861 9 6 1,929 861 9 5 1,918 475 9 5 1,901 633 9 4 1,625 1 405 1,431 1,485 1 402 1,384 1,482 1 398 1,363 1,476 1 397 1,346 1,387 1 394 1,325 1,427 1 423 1,311 2,486 109 2,462 109 2,435 112 2,401 112 2,398 112 2,364 112 1,827 70 1,789 70 1,788 60 1,784 60 1,778 60 1,781 60 91 1 90 1 77 1 77 1 75 1 73 1 149 F I N A N C I A L S E R V I C E S D E PA R T M E N T P. O . B O X 1 4 6 6 M E S A , A R I Z O N A , 8 5 2 1 1 - 1 4 6 6 (480) 644-2275 M E SA A Z . GOV