GILBERT, AZ COMPREHENSIVE ANNUAL FINANCIAL REPORT Fiscal Year Ended June 30, 2021 Celebrating 100 Years GilbertAZ2020.com Table of Contents INSTRUCTIONS FOR NAVIGATING IN THE “COMPREHENSIVE ANNUAL FINANCIAL REPORT” PDF Files ¾ Bookmarks for major sections are provided in the navigation pane on the left. Click on the bookmark to jump directly to that section. ¾ If a “+” sign is at the left of a bookmark, click on the “+” to bring up subheadings. ¾ All pages are linked to the Table of Contents. To jump to a specific page or subsection from the Table of Contents, put the pointer finger on the title or page number within and click the mouse. ¾ Click the “Table of Contents” text located in the top right hand corner of any page or click the Table of Contents bookmark on the left. Table of Contents Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to Town of Gilbert Arizona For its Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2020 Executive Director/CEO Table of Contents Comprehensive Annual Financial Report Year Ended June 30, 2021 Brigette Peterson, Mayor Yung Koprowski, Vice Mayor Aimee Yentes, Council Member Kathy Tilque, Council Member Laurin Hendrix, Council Member Scott Anderson, Council Member Scott September, Council Member Patrick Banger, Manager Prepared by the Finance & Management Services Department Håkon Johanson, Finance & Management Services Director TOWN OF GILBERT, ARIZONA Comprehensive Annual Financial Report For the Year Ended June 30, 2021 TABLE OF CONTENTS Page INTRODUCTORY SECTION Letter of Transmittal Organizational Report Chart 1 8 FINANCIAL SECTION Independent Auditor's Report 11 Management's Discussion and Analysis (required supplementary information) 15 Basic Financial Statements: Government-wide Financial Statements Statement of Net Position Statement of Activities 29 30 Fund Financial Statements Balance Sheet - Governmental Funds Reconciliation of the Balance Sheet to the Statement of Net Position Statement of Revenues, Expenditures, and Changes in Fund Balances Fund Balances - Governmental Funds Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities Statement of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual - General Fund Statement of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual -Streets Special Revenue Fund Statement of Net Position - Proprietary Funds Statement of Revenues, Expenses, and Changes in Fund Net Position - Proprietary Funds Statement of Cash Flows - Proprietary Funds Notes to the Financial Statements Summary of Significant Accounting Policies Deposits and Investments Taxes Receivable and Due from Other Governments Interfund Receivables and Payables Capital Assets Construction-in-Progress and Commitments Long-Term Debt Risk Management Pensions and Other Postemployment Benefits Postemployment Healthcare Benefits Fund Balance Classifications of the Governmental Funds Capital Contributions Interfund Transfers Individual Fund Disclosures Contingent Liabilities Pledged Revenues Investment in Joint Venture Tax Abatements Subsequent Events Required Supplementary Information Schedule of the Proportionate Share of the Net Pension Liability - ASRS Schedule of Changes in the Net Pension Liability and Related Ratios - PSPRS - Police Schedule of Changes in the Net Pension Liability and Related Ratios - PSPRS - Fire Schedule of Pension Contributions - ASRS Schedule of Pension Contributions - PSPRS Schedule of Changes in the Town’s Total OPEB Liability and Related Ratios Notes to Pension Plan Schedules - Actuarially Determined Contribution Rates 32 35 36 39 40 41 42 43 44 45 54 56 57 58 59 60 65 66 75 78 78 79 79 80 80 80 82 82 85 86 88 90 91 92 93 TOWN OF GILBERT, ARIZONA Comprehensive Annual Financial Report For the Year Ended June 30, 2021 TABLE OF CONTENTS Page Combining and Individual Fund Statements and Schedules Combining Balance Sheet - Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Nonmajor Governmental Funds Schedules of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual: Streets and Traffic Capital Projects Fund Parks Capital Projects Fund Municipal Facilities Capital Projects Fund Debt Service Fund Special Assessments Debt Service Fund Grants Fund Special Districts Fund Other Special Revenue Fund Other Capital Projects Fund Combining Statement of Net Position - Internal Service Funds Combining Statement of Revenues, Expenses and Changes in Fund Net Position - Internal Service Funds Combining Statement of Cash Flows - Internal Service Funds STATISTICAL SECTION Financial Trends Net Position by Component - Last Ten Fiscal Years Changes in Net Position - Last Ten Fiscal Years Program Revenues by Function - Last Ten Fiscal Years Fund Balances of Governmental Funds - Last Ten Fiscal Years Changes in Fund Balances of Governmental Funds - Last Ten Fiscal Years Revenue Capacity Sales Tax Collections by Category - Last Ten Fiscal Years Direct and Overlapping Sales Tax Rates - Last Ten Fiscal Years Debt Capacity Ratios of Outstanding Debt by Type - Last Ten Fiscal Years Ratios of General Bonded Debt Outstanding - Last Ten Fiscal Years Direct and Overlapping Governmental Activities Debt - Current Fiscal Year-End Legal Debt Margin Information - Last Ten Fiscal Years Pledged-Revenue Coverage - Last Ten Fiscal Years Demographic and Economic Information Demographic and Economic Statistics - Last Ten Fiscal Years Principal Employers - Current Fiscal Year and Nine Years Ago Operating Information Full-time Equivalent Employees by Function - Last Ten Fiscal Years Operating Indicators by Function - Last Ten Fiscal Years Capital Asset Statistics by Function - Last Ten Fiscal Years Other information Property Value, Construction and Bank Deposits - Last Ten Fiscal Years System Development Fees - Current Fiscal Year-End Property Tax Levies and Collections - Last Ten Fiscal Years Principal Property Taxpayers - Current Fiscal Year-End 96 97 100 101 102 103 104 105 106 107 108 110 111 112 114 116 118 119 120 121 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137 Table of Contents Table of Contents Introductory Section ________________________________ Letter of Transmittal Organizational Report Chart Table of Contents December 20, 2021 Honorable Mayor, Members of the Council, and Gilbert Citizens: I am pleased to submit to you the Comprehensive Annual Financial Report for the Town of Gilbert (Gilbert), for the fiscal year ended June 30, 2021. State law (Arizona Revised Statutes §9-481) requires that local governments publish a complete set of audited financial statements within six months of the close of each fiscal year. Management assumes full responsibility for the completeness and reliability of the information contained in this report, based upon a comprehensive framework of internal control that it has established for this purpose. Because the cost of internal control should not exceed anticipated benefits, the objective is to provide reasonable, rather than absolute, assurance that the financial statements are free of any significant misstatements. Heinfeld, Meech & Company, a firm of licensed certified public accountants, has issued an unmodified opinion on Gilbert’s financial statements for the year ended June 30, 2021. The independent auditor’s report is located in the Financial Section of this report. This letter of transmittal is designed to complement Management’s Discussion and Analysis (MD&A) and should be read in conjunction with it. The MD&A can be found in the Financial Section of this report. GILBERT PROFILE Governmental Structure Gilbert is an Arizona Municipal Corporation, operating as a general law community as prescribed in the Arizona Revised Statutes. Gilbert was incorporated July 6, 1920, and operates under the Council-Manager form of government. The Mayor is a member of the Council and is elected by the voters for a four-year term. Six additional council members are elected at-large to staggered four-year terms. The Mayor is chairperson of the Council. The Town Manager (Manager) is appointed by the Council and serves as the chief executive officer to oversee and carry out operations. During fiscal year 2021, the Manager administered Gilbert's operations through a staff of 1,566 budgeted full-time equivalent positions. Gilbert provides or administers a full range of services including public safety (police and fire protection and ambulance transport), development services (planning, code enforcement, and engineering), public works (water, wastewater, environmental services, and streets), and parks and recreation services among others. Transit and “dial-a-ride” services are provided through an intergovernmental agreement with the Regional Public Transportation Authority. Library services, incarceration and animal control are provided through intergovernmental agreements with Maricopa County. Geography and Population Gilbert is located in the southeastern section of the greater Phoenix metropolitan area in Maricopa County, bounded on the north and east by the City of Mesa, on the west by the City of Chandler, on the southeast by the Town of Queen Creek, and on the south by the Gila River Indian Community. Gilbert has a planning area of 72.6 square miles. The most recent estimate of population as of July 1, 2020 is 263,461, which was derived from Maricopa Association of Governments population estimates. The following graph depicts the ten-year population trend for Gilbert. 50 E. Civic Center Drive Gilbert, AZ 85296 (480) 503-6871 email.gilbertaz.gov 1 gilbertaz.gov Table of Contents FACTORS AFFECTING FINANCIAL CONDITION Coronavirus Pandemic (COVID-19) On January 30, 2020, the World Health Organization (WHO) announced a global health emergency because of a new strain of coronavirus (COVID-19). In March of 2020, the WHO classified COVID-19 as a pandemic. Gilbert initially responded to the pandemic by issuing hiring and spending freezes to remain conservative in its operations and spending until more information was available. Gilbert also transitioned much of its workforce, where possible, to a remote environment to both stop the spread of the virus and to adhere to state and federal guidelines issued by the Centers for Disease Control and Prevention (CDC) and state ordered mandates issued by the state governor’s office. Later in March of 2020, the federal government issued the Coronavirus Aid, Relief, and Economic Security Act (CARES) that provided relief funding to state and local governments. Gilbert received a total of $29.2 million, of which $23.0 million was recognized as revenue in fiscal year 2020; the remaining $6.2 million was recognized in fiscal year 2021. Gilbert used the $6.2 million to offset public safety personnel expenses incurred during fiscal year 2021. This left Gilbert with funds to provide aid and relief monies to support the local community in areas that felt adverse effects of the pandemic and related economic shutdown. In March of 2021, the American Rescue Plan Act (ARPA) was signed into law for the immediate pandemic response for an equitable recovery to decrease the spread of the virus, replace lost public sector revenue, support economic stabilization for households and businesses, and address systemic public health concerns. Gilbert was allocated a total of $24.2 million, of which $12.1 million was received in May of 2021 with another $12.1 million in funding to be received in June of 2022. The majority of this funding is slated to be used for public safety related purposes. Also, in March of 2021, Gilbert was allocated $7.7 million from the Emergency Rental Assistance (ERA) Program. ERA funds are designated to assist households that are unable to pay rent and utilities due to the COVID-19 pandemic. Gilbert has partnered with local non-profit agencies to determine eligible households to receive financial support and distributed $3.8 million to residents in fiscal year 2021. The remaining funds will be distributed in fiscal year 2022. Gilbert has not experienced a material adverse financial effect from the pandemic. Gilbert’s sales tax and state-shared revenues for fiscal year 2021 were higher than the previous fiscal year, putting Gilbert in a sound financial position. Furthermore, Gilbert does not expect that the pandemic will have a material adverse financial effect on items such as development activities or collections from its business-type activities in the short-or long-term. 2 Table of Contents Growth and Construction There were 2,161 new residential permits and 219 commercial permits issued in fiscal year 2021, which represents an increase from the prior fiscal year in residential and commercial permits of 967 and 11, respectively. The total value of all new construction in fiscal year 2021, including commercial, was $702.5 million, an increase of $94.7 million from fiscal year 2020. The decreased activity in fiscal year 2020 was largely due to COVID-19 which slowed construction for several months due to social distancing requirements. System Development Fees (SDFs) are collected for capital needs related to growth in the community. Council has adopted SDFs for police, fire, general government, road maintenance, traffic signals, parks and recreation, water resources, water, and wastewater. The fees are based on build-out system requirements to serve the projected population and land uses. During fiscal year 2021, a total of $59.9 million was collected in SDFs compared to $35.1 million in fiscal year 2020. The increase is due to decreased activity in fiscal year 2020 due to COVID-19, as described above. Economic Development With over 260,000 residents, Gilbert is focused on sustaining the thriving community seen today well into the future. This aim is supported through a commitment to develop a prosperous community, strong economy, and exceptional built environment. Over the past few years, Gilbert has received numerous awards and recognitions, a few of which are included below. • • • • • • • • • • • AAA Bond rating from all three major rating agencies (S&P, Moody’s, and Fitch) Gold Certified City for Data Management (What Works Cities, 2021) Excellence in Built Environment and Excellence in Foundations of Livability (NRC and ICMA, 2020) Best City for Small Business Recovery Since Pandemic (QuickBooks, 2021) Best City for Remote Workers (RetailMeNot, 2021) Most Prosperous Large City (Economic Innovation Group, 2020) 2nd Best City for First-Time Home Buyers (WalletHub, 2021) 2nd Best Place to Live in Arizona (HomeSnacks, 2020) 3rd Safest City in Arizona (SafeWise, 2021) 4th Best School District in America - Gilbert Public Schools (Alarms.org, 2018) 5th Best City for Women Entrepreneurs (Fundera, 2020) Gilbert is a community committed to education; 45.1% of residents age 25 and older hold a bachelor’s degree or higher, compared with about 30.6% statewide and 33.6% nationally. Notable employers like Banner Health, Dignity Health, Banner MD Anderson Cancer Center, Go Daddy, the worldwide headquarters of Isagenix, Footprint, Silent-Aire, Northrop Grumman, Lockheed Martin, and Deloitte benefit from this commitment to education and have helped keep Gilbert’s fiscal year 2021 unemployment rate at 4.9%, as compared to 7.12% for the state. Knowledge assets that support the community include Park University, the University of Arizona, Arizona State University Polytechnic Campus, ChandlerGilbert Community College, A.T. Still University, and numerous other colleges, universities, and technical schools within a 30-minute commute. Additionally, more than 30 charter/private schools and three A-rated school districts – Gilbert, Higley, and Chandler – serve the citizens of Gilbert. The Gilbert Office of Economic Development (OED) is one of approximately 65 Accredited Economic Development Organizations in the nation. Gilbert achieved this accreditation through the International Economic Development Council in 2013 and was the first Arizona economic development organization, and the second municipality in the nation, to do so. In fiscal year 2021, the team focused much of their efforts on supporting Gilbert based businesses that were facing difficulties in the wake of the COVID-19 pandemic. Through the leadership of the Gilbert Town Council, the OED launched and managed the #GilbertTogether Business Recovery Program focused on relief, recovery, and resiliency. Through this program, Gilbert issued relief grants totaling $9.7 million to 457 businesses, facilitated the issuance of $340 thousand in recovery loans, and launched a business resiliency platform to provide technical assistance and scholarships to businesses and residents. During these difficult economic times, the business development lines of services also saw strong performance with the attraction and expansion of 17 businesses representing over 500 new or expanded jobs, $164 million in capital investment, and nearly 925,000 new or expanded square footage. 3 Table of Contents Investment in the Heritage District continued with a focus on attracting and developing critical infrastructure to support future growth. During fiscal year 2021, the Heritage District welcomed five new restaurants and one new retailer along with the completion of two critical infrastructure projects. A new pedestrian bridge that runs across the Union Pacific Rail Road tracks along the Western Powerline trail opened to the public on August 26, 2021, as well as five new passenger loading zones located throughout the core of the District that will accommodate the safe drop off and pick up of passengers for ridesharing services. On the tourism front, demand is rebounding from the pandemic and awareness of Gilbert as a travel destination is growing. Marketing campaigns have helped keep Gilbert top-of-mind for overnight and regional day visitors. While travel was significantly impacted in 2020, Gilbert was able to maintain a 55% occupancy rate similar to the Phoenix market’s occupancy rate of 54% in the fiscal year. Occupancy rebounded strongly from April 2021 through July 2021, outpacing both Gilbert’s 2019 levels as well as the Phoenix market’s levels in the same time period. As group and business travel returns, Gilbert expects to see occupancy and related travel spending continue to strengthen. Gilbert’s connectivity to major markets is provided through a comprehensive transportation network which includes the SanTan Loop 202 and US-60 Superstition Freeways, Sky Harbor International Airport, and Phoenix-Mesa Gateway Airport. This network provides access to Gilbert-based businesses while connecting the community to local, national and international markets. Located just over 10 miles west of Gilbert, Phoenix Sky Harbor Airport is served by 20 airlines. Sky Harbor is one of the busiest airports in the nation for passenger traffic with over 125,000 passengers daily. Phoenix-Mesa Gateway Airport is located on Gilbert’s eastern border and handled 1,127,784 passengers in 2020 with flights to over 55 destinations throughout the United States. The airport also provides air cargo services and is located within a Foreign Trade Zone. Transaction Privilege (Sales) Tax Trend Sales tax revenues represented 50.8% of General Fund revenues for fiscal year 2021, totaling approximately $123.9 million. Local sales taxes are collected by the Arizona Department of Revenue and remitted to Gilbert weekly. The following graph depicts sales tax receipts by source for the past five years. Property Taxes State law requires municipalities to adopt a property tax levy based on the amount of scheduled and projected debt service for the year plus a reasonable amount for delinquencies and certain costs. For fiscal year 2021, Gilbert’s property tax rate was $0.99 per $100 of limited property valuation and was used exclusively for the payment of voter approved general obligation bond debt. Gilbert does not levy a primary property tax for general operating purposes. Limited Property Value The limited property value of real property within the Gilbert annexed area is a vital economic forecast variable, as the State Constitution contains regulatory restrictions on the amount of debt a community may have outstanding based on limited property valuation. Taking the market value of a property and applying the statutory assessment rate derives the limited property value. Residential properties are assessed at 10%, vacant land is assessed at 16%, and commercial properties are assessed at 18%. This illustrates how crucial the additions of commercial properties are to the tax base. The limited property valuation increased by 7.84% in fiscal year 2021 from $2.428 billion to $2.619 billion. The following graph depicts the changes in the limited property valuation in Gilbert for the past ten years: 4 Table of Contents Limited Property Value (Millions) $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 State-Shared Revenues State-shared revenues totaled $78.5 million for the General Fund and $17.6 million for the Streets Special Revenue Fund in fiscal year 2021, representing approximately 32.2% of total General Fund revenues and 99.4% of total Streets Special Revenue Fund revenues. State-shared revenues include allocations of state sales tax, income tax, gas tax, motor vehicle in-lieu tax, vehicle license tax, and lottery funds. These revenues are shared based upon relative population in the State as determined by the most recent population estimates of the United States Census Bureau. Budget and Financial Policies Gilbert’s financial policies establish the framework for overall fiscal planning and management. The policies set forth guidelines for both current activities and long-range planning. The purposes of the financial policies are: Balanced Budget – Gilbert is required by Arizona Revised Statutes to adopt a balanced budget each fiscal year. A balanced budget is one in which the sum of estimated revenues and appropriated fund balances is equal to appropriations. Fiscal Conservatism – To ensure that Gilbert is always in solid financial condition, defined as: Maximum efficiency – best possible service at the lowest possible cost Cash solvency – the ability to pay bills Budgetary solvency – the ability to balance the budget Long-term solvency – the ability to pay future costs Service level solvency – the ability to provide needed and desired services Flexibility – To ensure Gilbert is in a position to respond to changes in the economy or new service challenges without an undue amount of financial stress. Transparency and Communication – To utilize best practices in communicating financial information to facilitate sound decision-making, to promote openness and transparency, and to inspire public confidence and trust. Adherence to the Highest Accounting and Management Practices – As set by the Governmental Accounting Standards Board and the Government Finance Officers Association standards for financial reporting and budgeting. A five-year financial plan is developed for each operating fund, and current year decisions are made with a forecasted future impact. Other financial policies that guide the budget include: maintaining a minimum general fund balance sufficient to cover 90 days of ongoing operating expenditures and annual debt service payments; one-time revenues are not applied toward ongoing expenditures; and an economic development reserve. Gilbert’s Council adopted a comprehensive listing of policies of responsible financial management in November of 2011, with the latest revision adopted in June of 2021. These policies are reviewed annually to ensure their continued relevance and adherence. 5 Table of Contents Long-Term Financial Planning In addition to Gilbert’s General Plan and Capital Improvement Plan, Gilbert is developing infrastructure inventories (including repair and replacement plans) and functional area master plans. Gilbert staff and Council also align both shortterm goals and resources toward the long-term realization of Gilbert’s established strategic focus areas: Strong Economy, Prosperous Community and Exceptional Built Environment. In fiscal year 2019, Gilbert proudly unveiled its new mission and “City of the Future” concept to anticipate change, create solutions and help people. Gilbert has implemented Franklin Covey’s The 4 Disciplines of Execution, providing an exceptional tool for advancing these goals while managing the challenges of the daily whirlwind, and Lean Six Sigma (Lean) process improvement events to optimize processes throughout the organization to further enhance Gilbert’s long-term financial resiliency. Gilbert continues to update its Long-Term Financial Plan, which includes an interactive Excel model. The model looks at revenue and spending trends to predict what the financial sustainability of Gilbert would look like if those trends were to continue. The main dashboard contains live “what if” variables that can be easily changed to help decision-makers see the financial impact that individual changes make to the overall budget health into the future. AWARDS The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting (Certificate of Achievement) to the Town of Gilbert for its Comprehensive Annual Financial Report for the fiscal year ended June 30, 2020. This was the 30th consecutive year that Gilbert has received this prestigious award. In order to be awarded a Certificate of Achievement, we must publish an easily readable and efficiently organized Comprehensive Annual Financial Report that satisfies both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current Comprehensive Annual Financial Report continues to meet the Certificate of Achievement Program’s requirements and we are submitting this year’s report to the GFOA to determine its eligibility for another certificate. Gilbert also received the GFOA’s Distinguished Budget Presentation Award for our annual budget document. In order to qualify for this award, our budget document was judged to be proficient as a policy document, a financial plan, an operations guide, and a communications device. Gilbert has received this award for 22 consecutive years. In addition, the International City/County Management Association recognized Gilbert with a Certificate of Excellence in Performance Management for its data-driven management and reporting efforts. This marks the sixth consecutive year that Gilbert has received this Certificate. ACKNOWLEDGMENTS The completion of this report is the result of the efficient and dedicated services of the entire staff of the Accounting Division. I would like to give special recognition to Tanya Wright, Accounting Manager; Anthony St. George, Accounting Supervisor; and Nicholas Baldelli, Accounting Supervisor who were primarily responsible for preparing this document. In addition, I would like to thank staff from all Town departments for their contributions and assistance. Finally, I wish to acknowledge the continued support of the Council and the Manager in providing the leadership necessary for sound financial management. Respectfully submitted, Håkon Johanson Finance & Management Services Director 6 Table of Contents 7 Table of Contents 8 Table of Contents 9 Table of Contents 10 Table of Contents Financial Section ________________________________ Independent Auditor’s Report Management's Discussion and Analysis Basic Financial Statements Government-wide Financial Statements Fund Financial Statements Notes to the Financial Statements Required Supplemental Information Combining and Individual Fund Statements and Schedules Table of Contents Independent Auditor’s Report Honorable Mayor and Members of the Town Council Town of Gilbert, Arizona Report on Audit of Financial Statements Opinions We have audited the accompanying financial statements of the governmental activities, business-type activities, each major fund, and the aggregate discretely presented component unit and remaining fund information of Town of Gilbert, Arizona (Town), as of and for the year ended June 30, 2021, and the related notes to the financial statements, which collectively comprise the Town’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 discretely presented component unit and remaining fund information of the Town of Gilbert, Arizona, as of June 30, 2021, and the respective changes in financial position and, where applicable, cash flows, and the respective budgetary comparison for the General Fund and Streets Special Revenue Fund 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 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 Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of Town of Gilbert, Arizona, 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. Change in Accounting Principle As described in Note 1, the Town implemented the provisions of the Governmental Accounting Standards Board (GASB) Statement No. 84, Fiduciary Activities, for the year ended June 30, 2021, which represents a change in accounting principle. Our opinion is not modified with respect to this matter. 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. 11 Table of Contents 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 Town’s ability to continue as a going concern for one year beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. Auditor’s 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 auditor's 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 generally accepted auditing standards 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 generally accepted auditing standards 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 Town’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 Town’s ability to continue as a going concern for a reasonable period of time. 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. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis, net pension liability information, and other postemployment benefit plan information, as listed in the table of contents, 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 auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. 12 Table of Contents Supplementary Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Town’s basic financial statements. The Combining and Individual 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. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Combining and Individual Fund Statements and Schedules information is fairly stated in all material respects in relation to the basic financial statements as a whole. Other Information Management is responsible for the other information included in the annual report. The other information comprises the Introductory Section and Statistical Section but does not include the basic financial statements and our auditor’s 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 other work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 20, 2021, on our consideration of Town of Gilbert, Arizona’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 Town of Gilbert, Arizona’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 Town of Gilbert, Arizona’s internal control over financial reporting and compliance. Heinfeld, Meech & Co., P.C. Tucson, Arizona December 20, 2021 13 Table of Contents 14 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS As management of Gilbert, we offer this narrative overview and analysis of Gilbert’s financial activities for the fiscal year ended June 30, 2021. We encourage readers to consider the information presented here in conjunction with information provided in the Letter of Transmittal. Financial Highlights         Gilbert’s assets and deferred outflows of resources exceeded its liabilities and deferred inflows of resources at the end of the fiscal year by $2.0 billion, which is an increase over the prior year of $93.9 million, due primarily to increases in governmental and business-type activities. Included in this amount, defined as net position, is $580.3 million of unrestricted net position, of which $188.9 million is invested in joint ventures with the Cities of Mesa and Chandler and the Town of Queen Creek, and $391.4 million which may be used to fund ongoing operations in future years. Governmental activities increased net position by $69.5 million, which was primarily due to higher than expected taxes totaling $222.7 million, offset by net program expenses of $151.6 million. The business-type activities increased net position by $24.4 million, primarily due to capital grants and contributions in the Water and Wastewater funds of $16.3 million and $5.3 million, respectively. Net position includes $826.0 million net investment in capital assets in governmental activities such as streets, parks, and municipal buildings and a $485.0 million net investment in business-type activities in water, wastewater and environmental services infrastructure and equipment. Amounts increased in the governmental activities by $21.0 million from the prior year primarily due to the final construction costs of the Public Safety Training Facility ($19.6 million). Amounts increased in the business-type activities by $16.5 million in fiscal year 2021 primarily due to the construction of various capital projects including a project to design and construct a four million gallon ground reservoir and pump station, along with equipping a previously drilled well to supply the reservoir ($11.4 million) and the Greenfield Repair and Replacement Expansion expenses during the fiscal year ($4.4 million). The combined fund balance for all governmental funds is $314.3 million. Unrestricted fund balance is classified as Committed, Assigned and Unassigned. The unrestricted portion of all governmental funds is $207.0 million which is an increase of $21.6 million. The increase is primarily due to higher collections of sales tax over the prior fiscal year of $16.4 million. The General Fund unrestricted fund balance is $216.3 million, of which $76.7 million has been assigned for capital replacement, capital improvements, and road maintenance. The General Fund unassigned balance of $139.5 million is approximately 66.8% of the total fund expenditures. Gilbert’s total bonded debt outstanding at the end of the fiscal year was $340.3 million, as compared to $381.9 million at the end of fiscal year 2020, which is a decrease of $41.6 million due to the regularly scheduled debt payments made throughout the fiscal year. Gilbert’s total net pension liability at the end of the fiscal year was $153.6 million, as compared to $144.7 million at the end of fiscal year 2020. Gilbert made contributions in excess of the annual required contribution to the Public Safety Personnel Retirement System (PSPRS) of $15.0 million during the fiscal year. Overview of the Financial Statements This discussion and analysis are intended to serve as an introduction to Gilbert’s basic financial statements, which are comprised of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements. Government-wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the finances of Gilbert as a whole, in a manner similar to a private-sector business. 15 Table of Contents The statement of net position presents information on all of Gilbert’s assets, liabilities, and deferred inflows/outflows of resources, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether Gilbert’s financial position is improving or declining. The statement of activities presents the changes in net position from the previous year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will result in cash flows in future fiscal periods (e.g., earned but unused vacation leave). Both government-wide financial statements distinguish functions of Gilbert that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover a majority, or all, of their costs through user fees and charges (business-type activities). The governmental activities of Gilbert include general government, public safety, highways and streets, parks and recreation, and transportation. The business-type activities include water, wastewater, and environmental services. The government-wide financial statements also include the Industrial Development Authority (IDA) as a component unit of Gilbert. The IDA provides financing for eligible private sector entities to acquire and construct facilities deemed to be in the public interest. The financial information for the IDA is presented separately in the statements. The government-wide financial statements can be found on pages 27-29 of this report. Fund Financial Statements A fund is a grouping of related accounts used to maintain control over resources segregated for specific activities or objectives. Gilbert, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of Gilbert’s funds can be divided into two categories: governmental funds and proprietary funds. Governmental Funds Governmental funds account for essentially the same functions reported as governmental activities in the government-wide financial statements. Unlike the government-wide financial statements, however, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as balances of spendable resources available at fiscal year-end. This information may be useful in evaluating a government’s near-term financing ability. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of Gilbert’s near-term financing decisions. To facilitate this comparison, reconciliations are provided with the fund financial statements. The basic governmental fund financial statements can be found on pages 30-39. 16 Table of Contents Proprietary Funds Gilbert maintains two different types of proprietary funds. Enterprise funds report the same functions presented as business-type activities in the government-wide financial statements, which include water, wastewater, and environmental services. Internal service funds accumulate and allocate costs internally among the various functions. Gilbert uses internal service funds to account for maintenance of its fleet of vehicles, and employee health, dental and workers’ compensation self-insurance. The assets and liabilities of the internal service funds are included in the governmental activities column of the government-wide statement of net position. Costs of internal service funds are allocated to the various user functions on the government-wide statement of activities. Enterprise funds provide the same information as the government-wide financial statements, only with more detail. Internal service funds are combined into a single column on the proprietary funds statements. Additional detail for the internal service funds can be found on pages 108-110. The proprietary fund statements can be found on pages 40-42. Notes to the Financial Statements The notes to the financial statements provide additional information that is essential to obtain a 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 43-80. Government-wide Financial Analysis Net position serves as a useful indicator of a government’s financial position. The following table reflects the condensed Statement of Net Position as of June 30, 2021 and 2020. Town of Gilbert Condensed Statement of Net Position Current and other assets Capital assets Total assets Governmental Activities 2021 2020 $ 402,154,547 $ 373,833,644 1,052,831,742 1,042,290,182 1,454,986,289 1,416,123,826 Business-type Activities 2021 2020 $ 475,396,975 $ 478,930,144 629,992,624 611,566,663 1,105,389,599 1,090,496,807 Total 2021 2020 $ 877,551,522 $ 852,763,788 1,682,824,366 1,653,856,845 2,560,375,888 2,506,620,633 Deferred outflows of resources 71,641,854 60,115,067 7,290,543 5,515,756 78,932,397 65,630,823 Long-term liabilities Other liabilities Total liabilities 385,260,387 56,256,857 441,517,244 415,369,055 40,421,302 455,790,357 170,481,474 16,038,594 186,520,068 175,198,877 17,706,416 192,905,293 555,741,861 72,295,451 628,037,312 590,567,932 58,127,718 648,695,650 5,064,583 9,951,074 300,035 1,640,558 5,364,618 11,591,632 Deferred inflows of resources Net position: Net investment in capital assets 825,952,184 804,916,527 Restricted 91,916,826 72,942,666 Unrestricted 162,177,306 132,638,269 Total net position $ 1,080,046,316 $ 1,010,497,462 $ 484,983,885 468,440,304 22,716,849 24,872,533 418,159,305 408,153,875 925,860,039 $ 901,466,712 1,310,936,069 1,273,356,831 114,633,675 97,815,199 580,336,611 540,792,144 $ 2,005,906,355 $ 1,911,964,174 Net position consists of three components. The largest portion of Gilbert’s net position (65.4%) is its investment in capital assets (land, buildings, equipment, infrastructure, etc.), less depreciation and any related debt used to acquire those assets that is still outstanding. Gilbert uses these capital assets to provide services to citizens; consequently, these assets are not available for appropriation. Although Gilbert’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt are provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. An additional portion of Gilbert’s net position (5.7%) represents resources that are subject to external restrictions on how they may be used. The remaining portion of net position (28.9%) includes $188.9 million which is invested in joint ventures with the Cities of Mesa and Chandler and the Town of Queen Creek and $391.4 million which may be used to meet the government’s ongoing obligations to citizens, customers, and creditors. 17 Table of Contents Governmental Activities Governmental activities in fiscal year 2021 increased Gilbert’s net position by $69.5 million. Taxes and program revenues (charges for services and grants and contributions that are clearly identifiable to operating functions) were Gilbert’s most significant revenue sources comprising 99.7% of total revenues for governmental activities. Taxes (local and state-shared) were $222.7 million, an increase of $27.0 million from the prior year. Program revenues were $118.9 million, an increase of $10.2 million from the prior year, which was mostly due to an increase in operating grants and contributions specifically related to highways and streets. The other component of the change in net position is expenses. The largest expense functions were public safety, which represented 38.2%, and highways and streets, which represented 23.1% of total governmental activities expenses, which is consistent with prior year. Total expenses increased $18.6 million (7.4%) over the prior fiscal year mainly due to spending CARES and ARPA funding. The following table details the changes in net position for governmental and business-type activities. Changes in Net Position Governmental Activities 2021 Business-type Activities 2020 Total 2021 2020 2021 2020 Revenues Program revenues: Charges for services 15,286,610 $ 106,197,360 $ 100,472,155 $ 123,996,189 $ 115,758,765 Operating grants and contributions $ 17,798,829 43,619,284 $ 53,661,220 1,960,312 1,697,653 45,579,596 55,358,873 Capital grants and contributions 57,446,673 39,674,803 22,185,833 18,318,923 79,632,506 57,993,726 General revenues: Sales taxes 123,929,742 107,533,991 - - 123,929,742 107,533,991 Property taxes 28,603,134 26,569,667 - - 28,603,134 26,569,667 Unrestricted state-shared revenue 66,462,776 57,801,651 - - 66,462,776 57,801,651 Other taxes 3,677,995 3,758,649 - - 3,677,995 3,758,649 Grants and contributions not restricted to specific programs 4,140,341 2,762,422 - - 4,140,341 2,762,422 Unrestricted investment earnings 525,621 10,467,209 31,742 9,820,041 557,363 20,287,250 Gain (loss) on sale of capital assets (4,507,614) (3,973,409) 405,475 147,543 (4,102,139) (3,825,866) 935,773 674,421 74,553 680,116 1,010,326 1,354,537 342,632,554 314,217,234 130,855,275 131,136,431 473,487,829 445,353,665 23,430,414 Other Total revenues Expenses Management and policy 41,160,529 23,430,414 - - 41,160,529 Finance and management services 2,942,943 2,590,722 - - 2,942,943 2,590,722 Court 4,356,048 3,946,778 - - 4,356,048 3,946,778 Development services 11,388,765 10,897,963 - - 11,388,765 10,897,963 Police 65,100,377 65,972,487 - - 65,100,377 65,972,487 41,373,244 Fire 38,173,616 41,373,244 - - 38,173,616 Highw ays and streets 62,500,833 61,413,551 - - 62,500,833 61,413,551 Parks and recreation 28,975,323 26,844,019 - - 28,975,323 26,844,019 Transportation 609,252 655,050 - - 609,252 655,050 Non departmental 6,494,882 5,075,953 - - 6,494,882 5,075,953 8,716,132 9,641,221 - - 8,716,132 9,641,221 - - 52,258,586 49,373,198 52,258,586 49,373,198 Wastew ater - - 31,223,881 30,930,246 31,223,881 30,930,246 Environmental services - - 25,644,481 22,927,911 25,644,481 22,927,911 270,418,700 251,841,402 109,126,948 103,231,355 379,545,648 355,072,757 90,280,908 Interest and fiscal charges on long-term debt Water Total expenses Increase in net position before 72,213,854 62,375,832 21,728,327 27,905,076 93,942,181 Transfers transfers (2,665,000) (96,453) 2,665,000 96,453 - - Change in net position 69,548,854 62,279,379 24,393,327 28,001,529 93,942,181 90,280,908 Net position, beginning 1,010,497,462 948,218,083 901,466,712 873,465,183 1,911,964,174 1,821,683,266 Net position, ending $ 1,080,046,316 $ 1,010,497,462 $ 925,860,039 $ 901,466,712 $ 2,005,906,355 $ 1,911,964,174 18 Table of Contents Business-type Activities Gilbert’s net position for business-type activities increased by $24.4 million mainly due to development related growth, including $21.6 million in system development fee collections. The revenues for business-type activities remained relatively consistent. Expenses increased $5.9 million (5.7%) from the prior year primarily due to an increase in the net pension liability, increased payroll and payroll related expenses, an increase in depreciation expense, and an increased cost for water. Financial Analysis of Gilbert’s Funds As noted earlier, Gilbert maintains fund accounting to demonstrate compliance with budgetary and legal requirements. The following is a brief discussion of financial highlights from the fund financial statements. Governmental Funds The focus of the governmental funds is to provide information on near-term inflows, outflows, and balances of resources available for spending. Such information is useful in assessing Gilbert’s financing requirements. Unrestricted fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. Gilbert operated and separately reported the following major governmental funds:        General Streets Special Revenue Streets and Traffic Capital Projects Parks Capital Projects Municipal Facilities Capital Projects Debt Service Special Assessments Debt Service All nonmajor funds are combined for reporting purposes captioned “Other Governmental Funds”. As of the end of fiscal year 2021, the governmental funds reported ending unrestricted fund balances totaling $207.0 million, an increase of $21.6 million in comparison with the prior fiscal year. See explanations of variances below. General Fund The General Fund is the primary operating fund. At the end of fiscal year 2021, the fund balance of the General Fund was $227.8 million, an increase of $10.1 million from the prior year. This increase is mainly due to the sales tax collected that exceeded the prior year’s collections by $16.4 million and proceeds from the sale of a parcel with proceeds of $9.7 million. These revenues were offset by an increase in public safety expenditures totaling approximately $5.1 million (4.9%) which includes the addition of the ambulance transport service provided by Gilbert. There was also an increase in capital expenditures in the General Fund of $5.3 million, which was due to the purchase of machinery and equipment, including the acquisition of two new fire trucks totaling $2.3 million. Lastly, General Fund non-departmental expenses increased by $16.2 million, primarily due to $15.5 million in grants provided to Gilbert businesses related to funds that were made available through the CARES funding and resources provided to residents through the Emergency Rental Assistance Program. The unrestricted portion of the fund balance was $216.3 million, of which $34.9 million has been assigned for capital replacement, $10.5 million for roads and maintenance, $31.3 million for future capital projects. As a measure of the General Fund’s liquidity, it is useful to compare its available fund balance to total fund expenditures. The General Fund’s unassigned fund balance represents 66.8% of total General Fund expenditures for the current year. The prior year percentage was 76.4%; this decrease reflects a decrease in unassigned fund balance, which is primarily due to the use of one-time revenue recognized in prior year for one-time expenditures in the current fiscal year. 19 Table of Contents Key elements of General Fund sources and uses are as follows:  Overall, revenues exceeded expenditures in the General Fund by $35.4 million. Net other financing sources and uses were ($25.3) million, resulting in an increase in fund balance of $10.1 million. The transfers out of $37.1 million were primarily to finance capital projects ($25.7 million) and to pay scheduled debt payments ($8.0 million). The proceeds from the sale of capital assets of $10.6 million was primarily represented by the sale of two parcels of land, the largest of which was $9.7 million for 36.7 acres of land.  Total revenues of $244.2 million represented an increase of $2.7 million over the prior year due to an increase in sales taxes collected in the current year compared to the prior year, offset by the net change in the fair value of investments.  Total expenditures of $208.8 million represented an increase of $33.6 million over prior year mainly due to highways and streets, parks and recreation, capital outlay and non-departmental expenditures as explained below.  Local sales tax and intergovernmental revenues are the largest revenue sources for the General Fund, accounting for 88.3% of the total revenues, which is consistent with the prior year.  Local sales tax, which accounts for 50.8% of total General Fund revenues, increased $16.4 million (15.2%) from the prior fiscal year due to increased retail sales from new and existing businesses.  Highways and streets expenditures increased $1.5 million (25.7%) due to the increased cost of asphalt patching as compared to the prior year.  Parks and recreation expenditures increased $2.8 million (14.6%) due to a variety of factors including increased cleaning and sanitation costs due to COVID-19 and an increase in personnel of 7 full-time equivalents (FTE) during the fiscal year.  Capital outlay expenditures increased due primarily to the acquisition of six ambulances for Gilbert’s ambulance transport service ($1.4 million) and two fire trucks ($2.3 million).  There was a significant increase in non-departmental expenditures of $16.2 million primarily due to COVID-19 related grants from CARES funding and the Emergency Rental Assistance Program support, both of which directed funds back into the community to support citizens ($5.5 million) and businesses ($10.1 million) during the global pandemic. 20 Table of Contents Streets Special Revenue Fund The Streets Fund contains state-shared highway user revenues funds (HURF) that are required by state statute to be used for highways and streets related purposes. Total revenues in the Streets Fund remained relatively stable from prior year, with a $764 thousand (4.5%) increase due to receiving additional HURF funds. Total expenditures were relatively comparable to the prior fiscal year. Streets and Traffic Capital Projects The Streets and Traffic Capital Projects Fund consists of system development fees and intergovernmental revenues and the expenditure of those funds to purchase or construct capital assets. The fund balance decreased by $3.4 million during the year. This was mainly due to the use of fund balance to purchase or construct capital assets related to streets and traffic capital projects totaling $44.0 million. The larger projects with capital expenditures during the year were related to the road work on Germann Road from Gilbert Road to Val Vista Drive totaling $10.8 million, which is necessary for the addition of an interchange on the San Tan Loop 202 at Lindsay Road. There was also significant work performed during the year on Val Vista Drive from Riggs Road to Hunt Highway totaling $18.3 million. Capital outlay was offset by intergovernmental revenues of $20.2 million mainly for Proposition 400 reimbursements from the Arizona Department of Transportation (ADOT), system development fee collections of $10.4 million and transfers in of $11.8 million to fund capital projects. Parks Capital Projects The Parks Capital Projects Fund accounts for system development fee revenue and the expenditure of those funds for parks infrastructure. The fund balance increased by $13.7 million during the year, which was primarily due to the collection of system development fees of $17.8 million offset by capital outlay of $5.4 million. The largest project with capital expenditures during the year was Gilbert Regional Park of $4.0 million. The remaining fund balance of $26.1 million will be used to fund future parks needs related to growth in Gilbert. 21 Table of Contents Municipal Facilities Capital Projects The Municipal Facilities Capital Projects Fund consists of system development fee revenue and Public Facilities Municipal Property Corporation bond proceeds and the expenditure of those funds to purchase or construct municipal capital assets. The fund balance decreased by $11.7 million during the year resulting in a deficit in fund balance at fiscal year-end of $7.1 million. The deficiency in this fund is primarily due to long-term loans that cover cash deficits for capital expenditures where future system development fee revenue is expected to eliminate the deficiency. The decrease in fiscal year 2021 was due to capital outlay for various projects, the greatest of which was for the Public Safety Training Facility totaling $19.6 million. Total capital outlay of $21.9 million was offset by system development fees collected during the fiscal year of $10.6 million. Debt Service The fund balance increased by $85 thousand during the year. Property taxes and transfers from other funds totaled $44.9 million which matched the debt service of $45.0 million. See Note 7 for additional information. Special Assessments Debt Service The fund balance of $85 thousand decreased from the prior fiscal year by $118 thousand due to the special assessment revenues of $617 thousand being offset by debt service of principal and interest that totaled $727 thousand. Nonmajor Governmental Funds All nonmajor governmental funds are combined into one column on the governmental fund statements. The combined fund balance of these funds increased $757 thousand to a balance at year-end of $3.0 million. Nonmajor funds represent less than 1% of the total governmental fund balance. Proprietary Funds Gilbert’s proprietary funds statements are prepared on the same basis (accrual) as the government-wide financial statements. Gilbert operates, and separately reports, the following proprietary funds: • • • Water Wastewater Environmental Services Water Fund The Water Fund is responsible for producing and distributing potable water that exceeds all county, state and federal drinking water standards. The water system is also sized and pressurized to provide adequate fire suppression to the entire planning area and operates two surface water treatment facilities capable of producing 69 million gallons per day (mgd), and 17 ground water wells capable of producing 43.5 mgd. The SanTan Vista Water Treatment Plant is jointly owned with the City of Chandler, with Gilbert acting as the lead agent. Net position increased by $18.2 million to $496.6 million primarily due to capital contributions from system development fees of $16.3 million. Operating income was $3.6 million, which is slightly higher than prior year of $2.7 million. 22 Table of Contents Wastewater Fund The Wastewater Fund provides wastewater collection and treatment services to residents and businesses in Gilbert through the operation of two wastewater treatment facilities. The services also include the storage and distribution of effluent (treated wastewater). The Phase III Expansion for the Greenfield Water Reclamation Plant (GWRP), a joint venture with the City of Mesa acting as the lead agent, was completed in fiscal year 2021. The expansion included improvements and upgrades that have increased the plant’s capacity from 16 mgd to 30 mgd, as well as maintenance and improvements made to the existing infrastructure of the plant. Net position increased $5.8 million to $376.8 million due primarily to capital contributions from system development fees of $5.3 million. Operating income was $769 thousand, which is slightly higher than the prior year of $172 thousand. Environmental Services Fund Gilbert operates the Environmental Services Fund to provide residential and commercial refuse collection, residential recycling services, street cleaning, storm water infrastructure, and environmental compliance. Residential services are provided exclusively by Gilbert, while the commercial service competes with the private sector for customers. Net position increased by $132 thousand, to $50.4 million. The operating loss of $3.3 million was due to an increase in personnel costs due to the addition of 4 FTEs and various operational and maintenance costs. The current year’s operational loss was offset by transfers in of $2.7 million to offset the increased costs of the recycling market on the residential recycling program. The following graph compares the fiscal year revenues to expenses for the Water, Wastewater and Environmental Services Funds. General Fund Budgetary Highlights There was a difference of ($18.2) million between the original adopted expenditure budget and the final amended expenditure budget. The final amended budget projected that expenditures would exceed revenues by $93.5 million resulting in a $182.1 million reduction to fund balance after other financing sources and uses. The difference between the original adopted budget and final amended budget was mainly due to budgeting $14.2 million more in police expenditures, $26.9 million more in nondepartmental expenditures, and $62.6 million less in contingency, offset by $3.4 million more in transfers out. 23 Table of Contents During the year, actual revenues exceeded the budgeted amount by $35.4 million (16.8%) mainly due to higher than expected sales taxes collected of $26.9 million, higher than expected intergovernmental revenue of $18.4 million due to the non-budgeted CARES funding of $6.2 million, coupled with Emergency Rental Assistance Program funds of $3.8 million. Those increases were offset by $9.7 million lower than expected other entities’ participation collections which varies year by year. Actual expenditures were less than budgeted by $95.6 million (31.4%) mainly due to lower than expenditures in management and policy ($4.8 million), parks and recreation ($2.9 million), fire ($5.2 million), non-departmental ($16.5 million), capital outlay ($3.3 million), and unused contingency ($61.4 million). These were mainly the result of a reduced spending directive due to the uncertainties of how COVID-19 would affect Gilbert financially. This resulted in an excess of revenues over expenditures of $131.0 million more than budgeted. Other financing sources and uses came in $63.3 million lower than expected due to nonbudgeted land sales of $10.6 million and $53.0 million less than expected transfers out to fund municipal facilities, parks, and streets capital projects. This also resulted in the actual net change in fund balance being $194.4 million more than budgeted. Capital Asset and Debt Administration Capital Assets. As of June 30, 2021, Gilbert had $1.7 billion in capital assets, which is an increase of $29.0 million (1.8%) over prior year. This was due to increases in construction-in-progress for streets, municipal facilities, and water offset by the depreciation expense taken. Major capital improvement projects completed during the year included the following: Governmental Activities Public Safety Training Facility of $84.0 million Lindsay Road and Pecos Road to State Route 202 of $11.8 million Advanced Traffic Management System Phase III of $1.3 million Western Powerline Trail of $2.1 million • • • • Business-type Activities Candlewood Lift Station and Force Main Replacement of $8.8 million Ray – Recker Direct Well System construction of $4.9 million Greenfield Water Reclaimed Water Pump Station Expansion of $1.5 million North Water Treatment Plant Acid Storage and Feed Replacement of $1.1 million • • • • The following table presents capital asset balances, net of accumulated depreciation, for the fiscal years ended June 30, 2021 and 2020. Town of Gilbert Capital Assets (net of depreciation) Governmental Activities Land Nondepreciable w ater rights Business-type Activities 2021 2020 2021 $ 132,257,980 $ 146,382,648 $ Total 2020 2021 23,515,126 $ 23,510,321 $ 155,773,106 2020 $ 169,892,969 - - 59,427,744 58,150,151 59,427,744 58,150,151 Construction-in-progress 174,869,102 197,705,823 61,038,529 45,659,772 235,907,631 243,365,595 Buildings 202,087,388 137,578,043 - - 202,087,388 137,578,043 Improvements 19,607,191 20,980,569 - - 19,607,191 20,980,569 Plant, machinery & equip 27,068,728 19,925,635 62,988,447 63,598,824 90,057,175 83,524,459 Depreciable w ater rights - - 37,225,437 37,635,866 37,225,437 37,635,866 496,941,353 519,717,464 385,797,341 383,011,729 882,738,694 902,729,193 Total Capital Assets $ 1,052,831,742 $ 1,042,290,182 629,992,624 $ 611,566,663 $ 1,682,824,366 $ 1,653,856,845 Infrastructure $ 24 Table of Contents Total governmental capital assets and business-type capital assets increased by $10.5 million and $18.4 million, respectively. The change in governmental capital assets can be attributed to the addition of construction-in-progress of $70.8 million, buildings of $75.3 million, infrastructure of $13.2 million and machinery and equipment of $11.2 million, offset by construction-in-progress deletions of ($93.7 million), sale of land of ($15.1 million), and depreciation taken of ($53.6 million). Most of the increase for the business-type capital assets can be attributed to construction-in-progress additions of $40.5 million, offset by depreciation taken ($25.0 million). See Note 5 on pages 56-57 for further information regarding capital assets. Long-term Debt. At June 30, 2021, Gilbert had total bonded debt obligations of $215.0 million related to governmental activities and $125.3 million in business-type activities. Of the total outstanding, $131.8 million is general obligation (GO) bonds backed by the full faith and credit of Gilbert; $4.0 million is special assessment bonds secured by a lien against the land of the benefited property owners in Improvement Districts #19 and #20; all other outstanding debt is secured by pledges of specific revenue sources. The Arizona Constitution and State Statutes limit a municipality’s bonded debt capacity to certain percentages of its limited property valuation and by the type of project to be constructed with GO bonds. For projects involving water, wastewater, artificial lighting, parks, open space, recreational facility improvements, streets, public safety, and fire and emergency facilities, Gilbert can issue GO bonds up to 20% of its limited property valuation. For any other general-purpose improvements, Gilbert may issue bonds up to 6% of its limited property valuation. Gilbert’s available debt margin at June 30, 2021, was $208.6 million in the 6% capacity and $554.3 million in the 20% capacity. See Note 7 on pages 58-62 for additional information on debt. The following schedule shows Gilbert’s outstanding debt as of June 30, 2021 and 2020. Town of Gilbert Outstanding Debt Governmental Activities General Obligation Special Assessment Revenue Obligations Municipal Property Corporation (Revenue Bonds) Business-type Activities 2021 2020 $ 131,830,000 4,000,000 34,220,000 $ 151,825,000 4,510,000 34,955,000 $ 44,955,000 57,760,000 $ 249,050,000 125,305,000 $ 125,305,000 Totals $ 215,005,000 2021 Total 2020 - 2021 2020 - $ 131,830,000 4,000,000 34,220,000 $ 151,825,000 4,510,000 34,955,000 132,865,000 $ 132,865,000 170,260,000 $ 340,310,000 190,625,000 $ 381,915,000 $ Gilbert’s bonds are rated by leading rating agencies that assess the risk of default based on Gilbert’s financial condition. The following schedule shows Gilbert’s bond ratings as of June 30, 2021. Town of Gilbert Long-term Debt Ratings As of June 30, 2021 General Obligation Public Facilities Municipal Property Corporation (Revenue Bonds) Water Resources Municipal Property Corporation (Revenue Bonds) Revenue Obligations Improvement Districts (Special Assessment) 25 Moody's Investor Service Standard and Poors' Ratings Service Fitch Ratings Aaa Aa1 Not rated Aa1 Aa1 AAA AAA AAA AAA AA- AAA AAA AAA AAA Not rated Table of Contents Economic Factors and Next Year’s Budget In the summer of 2021, with businesses and schools fully open despite the setbacks brought on by the COVID-19 pandemic, our community not only endured, but also continued to thrive. Gilbert continuously kept the safety of its team members and the health of its community at the forefront of decision-making while we worked to find innovative new ways to deliver the same exceptional services to our residents and businesses. For fiscal year 2022, we will continue to meet those challenges presented by COVID-19 while dealing with the economic aftershocks of the pandemic. In fiscal year 2021, Gilbert’s economic development initiatives continued to yield positive results for the community. In response to the COVID-19 pandemic, the Gilbert Town Council authorized the creation of #GilbertTogether Business Recovery program focused on relief, recovery, and resiliency. Under the ‘relief’ focus, Gilbert-based businesses who met certain eligibility criteria could receive a grant of up to $35 thousand to help offset financial losses they experienced during the pandemic. Through this offering, nearly 500 Gilbert-based businesses received over $9.5 million in relief grant funding. Recovery assistance was provided through a low-interest loan program offered in partnership with the Desert Financial Credit Union. Gilbert business applied for and received $340 thousand in low-interest loans to further support their needs during this time. Long-term resiliency was supported by providing access to experts and proven programs that enabled businesses to improve operations, receive technical assistance, and provided access to scholarships that allowed Gilbert residents to upskill. Gilbert’s employment areas also saw growth in fiscal year 2021. In the Gateway employment area, Trammell Crow completed the 400,000 square-foot Gilbert Gateway Commerce Park. This new industrial/flex development will be home to a new Lowe’s regional distribution center and is nearly 100% leased. In the central business district, Gilbert Crossroads Business Park completed its two-remaining industrial/flex buildings, adding just over 178,000 square-feet, and bringing the total size of the development to nearly 320,000 square-feet. In the Heritage District, Gilbert facilitated the expansion of the University of Arizona Bachelor of Science in Nursing – Integrated Health. To support the program expansion, the University of Arizona built out approximately 1,800 square-feet of shell space and expanded their current lease agreement through the fall of 2027. A community of excellence demands exceptional governance, and Gilbert’s Council and executive leadership stepped up. Gilbert undertakes a zero-based process for one third of the organization every year, and always applies priority, program, and performance-based approaches. Since 2018, nearly $9 million has been removed due to the zero-based efforts. Directors are tasked with balancing the budget through consensus, rather than presenting requests and waiting to hear back. Only once the directors achieve consensus is the Town Manager presented with the recommended budget. This collaborative approach allows Gilbert to promote transparency, the importance of short- and long-term planning, and maintain a strong return on investment for the zero-based process while staying focused on the citizens and businesses that Gilbert serves in different capacities. Additionally, Gilbert staff and Council align both short-term goals and resources toward the long-term realization of Gilbert’s established strategic initiatives: Strong Economy, Prosperous Community and Exceptional Built Environment. These strategic initiatives guide the formulation of organizational goals and corresponding budget for the following fiscal year. The Council retreat, as well as the budget kickoff in September 2021, allows staff to initiate the process with clear direction and focus governing the priorities for service delivery in fiscal year 2022. The budget for fiscal year 2022 reflects an effort to deliver both effective and efficient services to the Gilbert community. Even given Gilbert’s growth, the budget is balanced, and applies the non-recurring level of construction-related revenues toward non-recurring costs. The adopted budget is based off conservative revenue estimates which provide flexibility in responding to possible economic changes. Budget Highlights for Fiscal Year 2022 With carry forwards and contingency adjustments, the budget of $988.3 million is a decrease of about $5.0 million from fiscal year 2021. The budget also includes a capital projects contingency budget of $100.0 million to allow Council the flexibility and legal authority to respond to community needs. This contingency is consistent with practice in prior years. 26 Table of Contents Tax Rates: The budget reflects a levy of $27.8 million which maintains the $0.99 property tax rate. Balanced Financial Plan: The fiscal year 2022 budget is balanced based upon identified revenues and expenditures. Constitutional Expenditure Limit: The fiscal year 2022 budget reflects expenses that will be under the constitutional expenditure limitation. Staff regularly monitors conformity with the constitutional expenditure requirements and will recommend, if necessary, continuing adjustments and modifications necessary to comply with expenditure limitation requirements. State-Shared Revenues: The fiscal year 2022 budget reflects state-shared revenues based upon census population adjustments and statutory distribution formulas, taking into account currently projected state sales and income tax collections (provided by the Arizona League of Cities and Towns), which reflect the state’s budgeted Highway User Revenue Fund (HURF) distributions. Fund Balance: The revenue summary lists the use of carry over funds in an amount of about $303.0 million. This reflects use of revenues which were received in prior fiscal years in excess of minimum fund balance. Capital Project Financing – System Development Fees: The fiscal year 2022 budget reflects revenues projected from the continued collection of system development fees as allowed under current State Law. Financial Contact This financial report is designed to provide a general overview of Gilbert’s finances and to demonstrate accountability for the use of public funds. This report is also available on Gilbert’s website at www.gilbertaz.gov. Questions about any of the information provided in this report, or requests for additional financial information should be addressed to: Town of Gilbert Accounting Manager 50 E. Civic Center Drive Gilbert, AZ 85296 (480) 503-6930 27 Table of Contents 28 Table of Contents TOWN OF GILBERT, ARIZONA Statement of Net Position June 30, 2021 Primary Government Assets Pooled cash and investments Restricted cash and investments Receivables, net: Taxes Special assessments Accrued interest Restricted accrued interest Accounts Due from other governments Prepaid items Deposits Inventories Internal balances Investment in joint venture Capital assets: Non-depreciable Depreciable, net Total assets Governmental Activities Business-type Activities $ $ Deferred outflows of resources Deferred charge on refundings Pensions and other postemployment benefits Total deferred outflows of resources Liabilities Accounts payable Accrued liabilities Claims payable Deposits held for others Utility deposits Bond interest payable Unearned revenue Noncurrent liabilities: Due within one year Due in more than one year Total liabilities Deferred inflows of resources Pensions and other postemployment benefits Total deferred inflows of resources Net position Net investment in capital assets Restricted for: Capital projects Court/police programs Debt service Highway and streets Other purposes Special districts Transportation Unrestricted Total net position $ 347,310,674 13,756,990 265,468,057 13,662,154 Total $ 612,778,731 27,419,144 Component Unit Industrial Development Authority $ 17,158 - 15,892,816 4,012,888 751,576 10,275,188 7,121,534 2,499,579 50,000 753,855 (2,037,092) 1,766,539 529,070 51,604 5,720,635 745,540 54,459 2,037,092 187,128,364 15,892,816 4,012,888 1,280,646 51,604 15,995,823 7,867,074 2,499,579 50,000 808,314 188,894,903 - 307,127,082 745,704,660 1,454,986,289 143,981,399 486,011,225 1,105,389,599 451,108,481 1,231,715,885 2,560,375,888 17,158 3,274,199 68,367,655 71,641,854 2,224,901 5,065,642 7,290,543 5,499,100 73,433,297 78,932,397 - 21,389,357 10,097,651 4,068,000 1,654,432 973,916 18,073,501 10,673,882 1,086,383 1,534,673 2,743,656 - 32,063,239 11,184,034 4,068,000 1,654,432 1,534,673 3,717,572 18,073,501 10 - 44,048,390 341,211,997 441,517,244 8,948,159 161,533,315 186,520,068 52,996,549 502,745,312 628,037,312 10 5,064,583 5,064,583 300,035 300,035 5,364,618 5,364,618 - 825,952,184 484,983,885 1,310,936,069 - 69,856,805 2,048,494 8,513,848 9,886,272 140,235 418,064 1,053,108 162,177,306 1,080,046,316 22,716,849 418,159,305 925,860,039 92,573,654 2,048,494 8,513,848 9,886,272 140,235 418,064 1,053,108 580,336,611 2,005,906,355 17,148 17,148 The notes to financial statements are an integral part of this statement. 29 $ $ $ Table of Contents TOWN OF GILBERT, ARIZONA Statement of Activities For the Year Ended June 30, 2021 Program Revenues Functions/Programs Primary government Governmental activities General government Management and policy Finance and management services Court Development services Public safety Police Fire Highways and streets Parks and recreation Transportation Non departmental Interest and fiscal charges on long-term debt Total governmental activities Expenses $ 41,160,529 2,942,943 4,356,048 11,388,765 Charges for Services Operating Grants and Contributions Capital Grants and Contributions $ $ $ 8,013 98 596,898 8,121,199 4,771,450 32,029 519,753 82,666 - 65,100,377 38,173,616 62,500,833 28,975,323 609,252 6,494,882 8,716,132 270,418,700 2,023,624 1,207,788 73,883 5,419,240 348,086 17,798,829 4,488,779 3,965,361 29,676,617 115,411 49,884 43,619,284 3,244,740 3,211,088 32,402,703 17,777,278 642,587 85,611 57,446,673 Business-type activities Water Wastewater Environmental services Total business-type activities Total primary government 52,258,586 31,223,881 25,644,481 109,126,948 $ 379,545,648 52,890,264 30,846,958 22,460,138 106,197,360 $ 123,996,189 $ 1,791,799 168,513 1,960,312 45,579,596 $ 16,291,108 5,338,837 555,888 22,185,833 79,632,506 Component unit Industrial Development Authority $ $ $ - $ - 10 - General revenues Sales taxes Property taxes In-Lieu property taxes Franchise taxes Unrestricted state-shared revenue Grants and contributions not restricted to specific programs Unrestricted investment earnings Gain (loss) on sale of capital assets Miscellaneous Transfers Total general revenues and transfers Change in net position Net position - beginning Net position - ending The notes to financial statements are an integral part of this statement. 30 Table of Contents Net (Expense) Revenue and Changes in Net Position Component Unit Industrial Development Authority Primary Government Governmental Activities $ (36,298,400) (2,942,845) (3,727,121) (2,747,813) Business-type Activities $ Total - $ (36,298,400) (2,942,845) (3,727,121) (2,747,813) $ - (55,343,234) (29,789,379) (347,630) (5,663,394) 33,335 (6,011,301) (8,716,132) (151,553,914) - (55,343,234) (29,789,379) (347,630) (5,663,394) 33,335 (6,011,301) (8,716,132) (151,553,914) - (151,553,914) 18,714,585 5,130,427 (2,628,455) 21,216,557 21,216,557 18,714,585 5,130,427 (2,628,455) 21,216,557 (130,337,357) - 123,929,742 28,603,134 1,009,363 2,668,632 66,462,776 4,140,341 525,621 (4,507,614) 935,773 (2,665,000) 221,102,768 69,548,854 1,010,497,462 $ 1,080,046,316 $ 31,742 405,475 74,553 2,665,000 3,176,770 24,393,327 901,466,712 925,860,039 123,929,742 28,603,134 1,009,363 2,668,632 66,462,776 4,140,341 557,363 (4,102,139) 1,010,326 224,279,538 93,942,181 1,911,964,174 $ 2,005,906,355 31 $ (10) $ 1 1 (9) 17,157 17,148 Table of Contents TOWN OF GILBERT, ARIZONA Balance Sheet Governmental Funds June 30, 2021 General Assets Pooled cash and investments Restricted cash and investments Receivables, net Taxes Special assessments Accrued interest Accounts Due from other governments Due from other funds Prepaid items Advances to other funds Total assets $ 221,499,674 182,315 15,587,969 511,975 9,015,976 1,111,777 434,172 2,499,579 9,061,893 $ 259,905,330 Streets Special Revenue Streets and Traffic Capital Projects Parks Capital Projects $ $ $ $ 10,176,248 22,012 1,597,844 11,796,104 $ 53,556,742 115,912 1,114,273 54,786,927 $ 26,712,372 57,813 26,770,185 Liabilities Accounts payable Accrued liabilities Deposits held for others Due to other funds Interest payable Advances from other funds Unearned revenue Bonds payable Total liabilities 10,796,271 9,660,031 1,654,432 4,935,236 27,045,970 969,326 232,819 1,202,145 5,355,175 5,355,175 657,273 657,273 Deferred inflows of resources Unavailable revenue - sales tax Unavailable revenue - special assessments Unavailable revenue - court fines Unavailable revenue - grants Unavailable revenue - other Total deferred inflows of resources 118,929 4,902,328 10,119 5,031,376 - - - Fund balances (deficits) Nonspendable Restricted Assigned Unassigned Total fund balances (deficits) 11,561,472 76,746,986 139,519,526 $ 227,827,984 $ 10,593,959 10,593,959 $ 49,431,752 49,431,752 $ 26,112,912 26,112,912 Total liabilities, deferred inflows of resources and fund balances (deficits) $ 259,905,330 $ 11,796,104 $ 54,786,927 $ 26,770,185 The notes to financial statements are an integral part of this statement. 32 Table of Contents Municipal Facilities Capital Projects $ $ 4,225,979 4,233 4,230,212 Debt Service Special Assessments Debt Service Other Governmental Funds Total Governmental Funds $ $ $ $ $ 1,641,725 13,574,675 280,103 3,743 15,500,246 $ 84,634 4,012,888 184 4,097,706 $ 15,022,688 24,744 4,709 250 3,269,734 18,322,125 $ 332,920,062 13,756,990 15,892,816 4,012,888 720,581 9,016,226 7,093,628 434,172 2,499,579 9,061,893 395,408,835 2,313,120 9,061,893 11,375,013 188 973,916 10,110,000 11,084,104 - 909,601 92,122 434,172 13,138,265 14,574,160 21,000,954 9,984,972 1,654,432 434,172 973,916 9,061,893 18,073,501 10,110,000 71,293,840 - - 4,012,888 4,012,888 191,109 606,182 797,291 118,929 4,012,888 4,902,328 191,109 616,301 9,841,555 $ 1,917,092 (9,061,893) (7,144,801) $ 4,416,142 4,416,142 $ 84,818 84,818 $ 3,147,406 (196,732) 2,950,674 $ 11,561,472 95,704,081 76,746,986 130,260,901 314,273,440 $ 4,230,212 $ 15,500,246 $ 4,097,706 $ 18,322,125 $ 395,408,835 33 Table of Contents 34 Table of Contents TOWN OF GILBERT, ARIZONA Reconciliation of Balance Sheet To the Statement of Net Position June 30, 2021 $ Fund balances of governmental funds 314,273,440 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the governmental funds. Governmental capital assets Accumulated depreciation 1,947,744,830 (895,109,812) 1,052,635,018 The investment in joint venture is not a financial resource and, therefore, is not reported in the funds. 1,766,539 Some receivables are not available to pay for current period expenditures and, therefore, are reported as unavailable revenue in the governmental funds. 9,841,555 Internal service funds are used by management to charge the costs of certain activities, such as equipment maintenance, to the individual funds. The assets and liabilities 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. 7,881,941 Deferred outflows and inflows of resources related to pensions, other postemployment benefits, and deferred charges on debt refundings are applicable to future reporting periods and, therefore, are not reported in the funds. Unamortized deferred outflow on bond refunding Pension and other postemployment benefits-related items 3,274,199 62,831,156 66,105,355 Certain liabilities applicable to the Town's governmental activities are not due and payable in the currentperiod, and accordingly are not reported as fund liabilities in the governmental funds balance sheet. Bonds payable Bonds premium Compensated absences Net other postemployment benefits Net pension (204,895,000) (22,465,283) (17,949,431) (776,496) (126,371,322) (372,457,532) Net position of governmental activities - statement of net position The notes to financial statements are an integral part of this statement. 35 $ 1,080,046,316 Table of Contents TOWN OF GILBERT, ARIZONA Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Year Ended June 30, 2021 General Revenues Taxes Sales Property Franchise Special assessments Licenses and permits Charges for services Intergovernmental Fines and forfeitures Other entities' participation System development fees Gifts and donations Interest earnings Net change in fair value of investments Miscellaneous Total revenues Expenditures Current General government: Management and policy Finance and management services Court Development services Public safety Police Fire Highways and streets Parks and recreation Transportation Non departmental Debt service Principal Interest Fiscal and other charges Capital outlay Total expenditures $ 123,931,932 2,668,632 5,868,065 14,677,657 91,589,038 2,883,491 918,512 102,547 2,848,832 (2,135,561) 833,763 244,186,908 Streets Special Revenue Streets and Traffic Capital Projects Parks Capital Projects $ $ $ 770 17,619,503 6,112 130,317 (130,311) 101,735 17,728,126 20,237,103 10,424,405 593,045 (867,711) 30,386,842 17,750,206 294,045 (115,535) 17,928,716 27,244,616 3,002,850 3,480,526 8,519,611 - - - 71,441,719 37,882,950 7,523,229 22,053,823 21,097,882 14,623,976 - 606,651 926,870 13,647 3,663 6,572,533 208,819,739 102,201 14,726,177 44,042,131 45,575,652 5,428,881 5,446,191 Excess (deficiency) of revenues over expenditures 35,367,169 3,001,949 (15,188,810) 12,482,525 Other financing sources (uses) Transfers in Transfers out Proceeds from the sale of capital assets Total other financing sources (uses) 1,218,444 (37,086,681) 10,593,667 (25,274,570) (1,027,190) (1,027,190) 11,819,916 11,819,916 6,354,431 (5,171,562) 1,182,869 Net change in fund balances 10,092,599 1,974,759 (3,368,894) 13,665,394 Fund balances - beginning Fund balances - ending 217,735,385 $ 227,827,984 The notes to financial statements are an integral part of this statement. 36 $ 8,619,200 10,593,959 $ 52,800,646 49,431,752 $ 12,447,518 26,112,912 Table of Contents Municipal Facilities Capital Projects $ $ 10,596,169 152,220 (404,234) 10,344,155 Debt Service Special Assessments Debt Service Other Governmental Funds Total Governmental Funds $ $ $ 2,747,227 205,373 2,942,826 369,561 60,666 31,329 (22,400) 275 6,334,857 $ 123,931,932 28,603,134 2,668,632 617,024 5,868,065 14,883,800 132,388,470 3,259,164 918,512 38,770,780 163,213 4,204,607 (3,714,163) 935,773 353,498,943 25,855,907 152,917 (35,293) 25,973,531 617,024 1,902 (3,118) 615,808 - - - 1,502,299 250,028 6,069 28,746,915 3,002,850 3,730,554 8,525,680 159,038 91,438 11,202 - - 852,393 119,765 2,138,434 892,305 606,182 49,885 72,453,150 38,002,715 24,892,290 23,051,213 606,182 22,089,502 21,873,747 22,135,425 35,105,000 9,850,669 6,600 44,962,269 510,000 217,075 6,548 733,623 1,253,498 7,670,858 35,615,000 10,067,744 13,148 79,272,991 350,069,934 (11,791,270) (18,988,738) (117,815) (1,336,001) 3,429,009 6,135,879 (6,074,508) 61,371 19,073,408 19,073,408 - 2,384,470 (291,607) 2,092,863 46,986,548 (49,651,548) 10,593,667 7,928,667 (11,729,899) 84,670 (117,815) 756,862 11,357,676 2,193,812 2,950,674 302,915,764 $ 314,273,440 4,585,098 (7,144,801) $ 4,331,472 4,416,142 $ 202,633 84,818 $ 37 Table of Contents 38 Table of Contents TOWN OF GILBERT, ARIZONA Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities For the Year Ended June 30, 2021 Net change in fund balances - total governmental funds $ 11,357,676 Amounts reported for governmental activities in the statement of net position are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. Capital outlay Depreciation expense 79,272,991 (53,569,052) 25,703,939 The net effect of various miscellaneous transactions involving capital assets is to decrease net position. (15,225,652) Repayment of bond principal is reported as expenditures in governmental funds and thus has the effect of reducing fund balance because current financial resources have been used. For the government-wide statements, however, the principal payments reduce the long-term liabilities in the statement of net position and do not result in an expense in the statement of activities. Also, governmental funds report the effect of deferred outflows and resources, premiums, discounts and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. Principal payments Amortization expense 35,615,000 1,364,760 36,979,760 Internal service funds are used by management to charge the costs of certain activities, such as equipment maintenance, 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. 655,337 Compensated absence 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. (1,824,630) Pension/OPEB contributions are reported as expenditures in the governmental funds when made. However, they are reported as deferred outflows of resources in the statement of net position because the reported net pension/OPEB liability is measured a year before the report date. Pension/OPEB expense, which is the change in the net pension/OPEB liability adjusted for changes in deferred outflows and inflows of resources related to pensions/OPEB, is reported in the statement of activities. Pension/OPEB contributions Pension/OPEB expense 29,593,906 (16,496,360) 13,097,546 (402,048) (938,340) (2,190) (428,766) 576,222 (1,195,122) Certain revenues are not reported in the governmental funds because they do not provide current financial resources due to unavailability but are recognized as revenue in the statement of activities. However, other revenues in the governmental funds that provide current financial resources are not included in the statement of activities because they were recognized in a prior period. Special assessments Court fines Sales tax Grants Other $ Change in net position of governmental activities - statement of activities The notes to financial statements are an integral part of this statement. 39 69,548,854 Table of Contents TOWN OF GILBERT, ARIZONA General Fund Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual – Budgetary Basis For the Year Ended June 30, 2021 Budgeted Amounts Original Revenues Taxes Sales Franchise Licenses and permits Charges for services Intergovernmental Fines and forfeitures Other entities' participation Gifts and donations Interest earnings Miscellaneous Total revenues $ 97,000,000 2,445,000 3,675,000 19,643,900 73,230,000 3,054,000 10,606,000 61,000 735,000 426,000 210,875,900 $ Final Non-GAAP Actual 97,000,000 2,445,000 3,675,000 19,643,900 73,230,000 3,054,000 10,606,000 61,000 735,000 426,000 210,875,900 $ 123,931,932 2,668,632 5,868,065 14,677,657 91,589,038 2,883,491 918,512 102,547 2,848,832 833,763 246,322,469 Variance with Final Budget Positive (Negative) $ 26,931,932 223,632 2,193,065 (4,966,243) 18,359,038 (170,509) (9,687,488) 41,547 2,113,832 407,763 35,446,569 Expenditures Current General government Management and policy Finance and management services Court Development services Public safety Police Fire Highways and streets Parks and recreation Non departmental Capital outlay Contingency Total expenditures 30,894,980 3,024,750 3,395,990 8,960,410 32,025,362 3,044,440 3,522,990 9,014,950 27,244,616 3,002,850 3,480,526 8,519,611 4,780,746 41,590 42,464 495,339 58,074,040 39,337,670 7,645,680 24,283,990 10,636,190 12,331,410 124,053,000 322,638,110 72,240,803 43,035,763 7,669,680 24,959,860 37,553,509 9,921,498 61,428,330 304,417,185 71,441,719 37,882,950 7,523,229 22,053,823 21,097,882 6,572,533 208,819,739 799,084 5,152,813 146,451 2,906,037 16,455,627 3,348,965 61,428,330 95,597,446 Excess (deficiency) of revenues over (under) expenditures (111,762,210) (93,541,285) 37,502,730 131,044,015 Other financing sources (uses) Transfers in Transfers out Proceeds from the sale of capital assets Total other financing sources (uses) 1,527,190 (86,752,840) (85,225,650) 1,531,190 (90,131,896) (88,600,706) 1,218,444 (37,086,681) 10,593,667 (25,274,570) (312,746) 53,045,215 10,593,667 63,326,136 $ (196,987,860) $ (182,141,991) 12,228,160 $ 194,370,151 Net change in fund balances Explanation of difference between budgetary change in fund balance at June 30, 2021, and GAAP change in fund balance: Fair market value adjustments on investments are recorded on the GAAP basis but are not recognized on the budget basis Change in fund balance as reported on the statement of revenues, expenses and changes in fund balance The notes to financial statements are an integral part of this statement. 40 (2,135,561) $ 10,092,599 Table of Contents TOWN OF GILBERT, ARIZONA Streets Special Revenue Fund Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual – Budgetary Basis For the Year Ended June 30, 2021 Budgeted Amounts Original Revenues Charges for services Intergovernmental Fines and forfeitures Interest Miscellaneous Total revenues $ Expenditures Current Highways and streets Capital outlay Contingency Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses) Transfers out Total other financing sources (uses) Net change in fund balances $ 16,400,000 45,000 16,445,000 Non-GAAP Actual Final $ 16,400,000 45,000 16,445,000 $ 770 17,619,503 6,112 130,317 101,735 17,858,437 Variance with Final Budget Positive (Negative) $ 770 1,219,503 6,112 85,317 101,735 1,413,437 16,009,630 111,500 500,000 16,621,130 16,214,000 111,500 295,630 16,621,130 14,623,976 102,201 14,726,177 1,590,024 9,299 295,630 1,894,953 (176,130) (176,130) 3,132,260 3,308,390 (1,027,190) (1,027,190) (1,027,190) (1,027,190) (1,027,190) (1,027,190) - (1,203,320) 2,105,070 (1,203,320) $ Explanation of difference between budgetary change in fund balance at June 30, 2021, and GAAP change in fund balance: Fair market value adjustments on investments are recorded on the GAAP basis but are not recognized on the budget basis Change in fund balance as reported on the statement of revenues, expenses and changes in fund balance The notes to financial statements are an integral part of this statement. 41 (130,311) $ 1,974,759 $ 3,308,390 Table of Contents TOWN OF GILBERT, ARIZONA Statement of Net Position Proprietary Funds June 30, 2021 Water Assets Current assets Pooled cash and investments Restricted cash and investments Receivables, net Accrued interest Restricted accrued interest Accounts Due from other governments Deposits Inventories Total current assets Business-type Activities - Enterprise Funds Total Enterprise Environmental Wastewater Services Funds $ 135,229,422 10,795,154 $ 106,256,056 2,867,000 301,527 19 3,440,656 187,852 54,459 150,009,089 175,708 51,585 1,311,011 110,661,360 51,835 968,968 557,688 25,561,070 529,070 51,604 5,720,635 745,540 54,459 286,231,519 30,995 1,258,962 27,906 50,000 753,855 16,512,330 80,612,880 106,515,484 - 187,128,364 - 112,716,174 280,943,178 474,272,232 624,281,321 30,706,880 172,021,833 309,244,197 419,905,557 558,345 33,046,214 33,604,559 59,165,629 143,981,399 486,011,225 817,120,988 1,103,352,507 5,261 191,463 196,724 16,709,054 Deferred outflows of resources Deferred charge on refundings Pensions and other postemployment benefits Total deferred outflows of resources 2,224,901 2,539,239 4,764,140 868,333 868,333 1,658,070 1,658,070 2,224,901 5,065,642 7,290,543 498,884 498,884 Liabilities Current liabilities Accounts payable Accrued liabilities Current portion of accrued compensated absences Claims payable Bond interest payable Bonds payable Utility deposits Total current liabilities 5,178,385 541,924 510,113 1,991,656 5,835,000 1,502,398 15,559,476 4,546,905 192,888 197,922 752,000 2,115,000 7,804,715 948,592 351,571 290,124 32,275 1,622,562 10,673,882 1,086,383 998,159 2,743,656 7,950,000 1,534,673 24,986,753 388,403 112,679 92,027 4,068,000 4,661,109 103,284,768 975,853 83,698 12,425,092 116,769,411 132,328,887 31,413,252 424,082 30,479 4,241,099 36,108,912 43,913,627 517,013 63,938 8,074,041 8,654,992 10,277,554 134,698,020 1,916,948 178,115 24,740,232 161,533,315 186,520,068 141,820 16,009 2,442,999 2,600,828 7,261,937 140,989 140,989 51,342 51,342 107,704 107,704 300,035 300,035 26,968 26,968 282,746,720 213,828,865 $ 496,575,585 168,879,725 22,716,849 185,212,347 $ 376,808,921 33,357,440 17,081,001 50,438,441 484,983,885 22,716,849 416,122,213 923,822,947 196,724 9,722,309 9,919,033 Noncurrent assets Investment in joint venture Capital assets Non-depreciable Depreciable, net Total noncurrent assets Total assets Noncurrent liabilities Utility revenue bonds payable Accrued compensated absences Other postemployment benefits Net pension liability Total noncurrent liabilities Total liabilities Deferred inflows of resources Pensions and other postemployment benefits Total deferred inflows of resources Net position Net investment in capital assets Restricted for capital projects Unrestricted Total net position $ $ 23,982,579 - Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds Net position of business-type activities The notes to financial statements are an integral part of this statement. 42 $ $ 265,468,057 13,662,154 Governmental Activities Internal Service Funds 2,037,092 925,860,039 $ $ 14,390,612 - Table of Contents TOWN OF GILBERT, ARIZONA Statement of Revenues, Expenses, and Changes in Net Position Proprietary Funds For the Year Ended June 30, 2021 Water Operating revenues Charges for services Other Total operating revenues $ Business-type Activities - Enterprise Funds Environmental Total Enterprise Wastewater Services Funds 52,890,264 27,492 52,917,756 $ 30,846,958 10,576 30,857,534 $ 22,460,138 36,485 22,496,623 $ 106,197,360 74,553 106,271,913 Governmental Activities Internal Service Funds $ 30,143,322 3,167,984 33,311,306 Operating expenses General and administrative Personnel services Operation and maintenance Claims incurred Depreciation Allocation of indirect expenses Total operating expenses 1,465,374 10,911,255 17,393,608 16,873,388 2,668,810 49,312,435 1,012,245 4,846,280 10,862,137 12,078,555 1,289,680 30,088,897 1,164,279 8,944,192 9,664,753 4,725,780 1,285,410 25,784,414 3,641,898 24,701,727 37,920,498 33,677,723 5,243,900 105,185,746 2,074,589 2,556,250 5,192,012 22,595,943 35,488 32,454,282 Operating income (loss) 3,605,321 768,637 (3,287,791) 1,086,167 857,024 Nonoperating revenues (expenses) Interest expense Intergovernmental Interest earnings Net change in fair value of investments Gain on sale of capital assets Total nonoperating revenues (expenses) (3,017,391) 1,791,799 1,852,043 (1,649,925) 115,040 (908,434) (1,160,675) 168,513 1,423,850 (1,536,240) 68,675 (1,035,877) 555,888 318,397 (376,383) 221,760 719,662 (4,178,066) 2,516,200 3,594,290 (3,562,548) 405,475 (1,224,649) 158,718 (126,901) 3,360 35,177 Income (loss) before contributions and transfers 2,696,887 (267,240) (2,568,129) (138,482) 892,201 Capital contributions Transfers in Transfers out 16,291,108 (759,302) 5,338,837 724,302 - 2,700,000 - 21,629,945 3,424,302 (759,302) - Change in net position 18,228,693 5,795,899 131,871 24,156,463 892,201 478,346,892 $ 496,575,585 371,013,022 $ 376,808,921 Total net position - beginning Total net position - ending $ 50,306,570 50,438,441 Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds Changes in net position of business-type activities The notes to financial statements are an integral part of this statement. 43 $ $ 236,864 24,393,327 9,026,832 9,919,033 Table of Contents TOWN OF GILBERT, ARIZONA Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2021 Business-type Activities - Enterprise Funds Environmental Total Enterprise Wastewater Services Funds Water Cash flows from operating activities Cash receipts from customers Other operating cash receipts Cash receipts from other funds for services Cash payments from deposits Cash payments to suppliers for goods and services Cash payments to employees for services Cash payments to other funds for services Net cash provided (used) by operating activities $ Cash flows from noncapital financing activities Transfers from other funds Transfers to other funds Proceeds from intergovernmental agreements Net cash provided (used) by noncapital financing activities 30,784,060 10,576 (11,350,258) (4,756,286) (1,289,680) 13,398,412 $ 22,380,046 39,060 (10,750) (10,621,176) (8,361,587) (1,285,410) 2,140,183 $ 105,379,851 84,352 (411,400) (40,625,291) (23,560,982) (5,243,900) 35,622,630 $ 195,567 3,167,984 30,438,202 (27,797,209) (2,378,246) 3,626,298 724,302 170,566 894,868 2,700,000 2,700,000 3,424,302 (759,302) 2,120,017 4,785,017 - (30,229,534) 16,291,108 (4,123,438) (5,545,000) 115,040 (23,491,824) (17,904,108) 5,338,837 (1,555,875) (2,015,000) 68,675 (16,067,471) (6,026,770) 221,760 (5,805,010) (54,160,412) 21,629,945 (5,679,313) (7,560,000) 405,475 (45,364,305) (128,517) 3,360 (125,157) 325,456 325,456 23,781 23,781 (22,891) (22,891) 326,346 326,346 36,787 36,787 (1,892,184) 147,916,760 $ 146,024,576 (1,750,410) 110,873,466 $ 109,123,056 $ (987,718) 24,970,297 23,982,579 $ (4,630,312) 283,760,523 279,130,211 $ 3,537,928 10,852,684 14,390,612 $ $ $ (3,287,791) $ 1,086,167 $ 857,024 Cash flows from investing activities Interest received on investments Net cash provided (used) by investing activities Reconciliation of operating income (loss) to net cash provided by operating activities: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation Changes in assets and liabilities: Accounts receivable Due from other governments Prepaid items Inventories Deferred outflows of resources Accounts payable Claims payable Deposits Accrued expenses Other postemployment benefits Net pension liability Deferred inflows of resources Net cash provided by operating activities $ Internal Service Funds (759,302) 1,949,451 1,190,149 Cash flows from capital and related financing activities Acquisition and construction of capital assets Proceeds from development fees Cash paid for interest and fiscal charges Principal payments on bonds Proceeds from sale of capital assets Net cash provided (used) by capital and related financing activities Net increase (decrease) in cash and cash equivalents Balances - beginning Balances - ending 52,215,745 34,716 (400,650) (18,653,857) (10,443,109) (2,668,810) 20,084,035 Governmental Activities $ 3,605,321 768,637 16,873,388 12,078,555 4,725,780 33,677,723 35,488 (674,519) 7,224 399,194 4,141 (981,961) (198,210) (400,650) 246,836 15,909 1,870,884 (683,522) 20,084,035 (62,898) (329,642) 524,124 58,038 7,375 587,427 (233,204) 13,398,412 (80,092) 2,575 (685,674) 207,856 (10,750) 126,064 12,986 1,553,026 (423,797) 2,140,183 (817,509) 9,799 399,194 4,141 (1,997,277) 533,770 (411,400) 430,938 36,270 4,011,337 (1,340,523) 35,622,630 487,799 2,647 42,002 (206,297) 30,332 2,043,000 (50,000) 46,555 2,807 463,785 (128,844) 3,626,298 The notes to financial statements are an integral part of this statement. 44 $ $ $ $ Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2021 The Town of Gilbert, Arizona (Gilbert) was incorporated on July 6, 1920, under the provisions of Article 13, Section 1 of the Constitution of the State of Arizona. Gilbert operates as a general law community, under the provisions of Title 9, Chapter 2, Article 3 (Common Council provision). Gilbert operates under the CouncilManager form of government, as empowered in Chapter 2, Article 2-51 of the Code of the Town of Gilbert, Arizona. There are seven members of the Council, elected to staggered four-year terms. The voters select the Mayor and the Council membership annually elects the Vice Mayor. Note 1 – Summary of Significant Accounting Policies Gilbert’s accounting policies conform to accounting principles generally accepted in the United States of America (GAAP) as applicable to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. For the year ended June 30, 2021, Gilbert implemented the provisions of GASB Statement No. 84, Fiduciary Activities, which establishes criteria for identifying fiduciary activities for accounting and financial reporting purposes. As a result, Gilbert’s fiduciary fund financial statements have been removed to reflect the implementation of this new guidance. Activities previously reported in agency funds are now recorded in the governmental funds, as they no longer meet the criteria of fiduciary activities under the new pronouncement. A. Reporting Entity Gilbert’s operations include public safety (police, fire, ambulance transport, and animal control), parks and recreation (parks, recreation, library, culture and arts, and social services), highways and streets (street and right-of-way maintenance, traffic control, and transportation), development services (planning, code enforcement, and engineering), and general administration in support of operations. Gilbert also operates three enterprise funds to provide water, wastewater, and environmental services, and two internal service funds that provide equipment and fleet maintenance and employee self-insurance for medical, dental, and workers’ compensation claims. The accompanying financial statements present the activities of Gilbert (the primary government) and its component units. Component units are legally separate entities for which Gilbert is considered to be financially accountable. Blended component units, although legally separate entities, are in substance part of Gilbert’s operations. Therefore, data from these units is combined with data of the primary government. Discretely presented component units, on the other hand, are reported in a separate column in the combined financial statements to emphasize they are legally separate from the Town of Gilbert. Each blended and discretely presented component unit discussed below has a June 30 year-end. Blended Component Units – The Water Resources Municipal Property Corporation (Water MPC) is a legally separate, non-profit corporation which exists solely for the purpose of financing the construction or acquisition of water and wastewater capital improvement projects. The Public Facilities Municipal Property Corporation (Public Facilities MPC) is a legally separate, non-profit corporation which exists solely for the purpose of financing construction of municipal facilities. Each is considered a blended component unit because the Council appoints the five-member board of directors of each MPC, the Council must approve any amendments to the articles of incorporation of each MPC, the Council must approve any debt issues of each MPC, and each MPC provides services solely to the Town of Gilbert. At June 30, 2021, the Water MPC bonded debt is reported within the Water and Wastewater Funds and the Public Facilities MPC bonded debt is reported within the Debt Service Fund (current portion only) and within the governmental activities in the government-wide statement of net position. 45 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2021 Discretely Presented Component Unit – The Industrial Development Authority (IDA) issues industrial revenue bonds to provide financial assistance to private sector entities for the acquisition and construction of eligible industrial and commercial facilities deemed to be in the public interest. The IDA is considered a component unit because the Council appoints the board of directors of the IDA, the Council must approve any amendments to the articles of incorporation of the IDA, and the Council must approve any debt issues of the IDA. The IDA is discretely presented in these combined financial statements because the IDA does not provide services solely to Gilbert. Separate financial statements for the IDA are prepared and presented to the IDA Board annually and can be found on Gilbert’s website. B. Jointly Governed Organizations Phoenix-Mesa Gateway Airport Authority (PMGAA) is a non-profit corporation established and funded by the Towns of Gilbert and Queen Creek, the Cities of Mesa and Phoenix, and the Gila River Indian Community. The purpose of the entity is the development of Phoenix-Mesa Gateway Airport. The airport has three runways, a passenger terminal and is positioned to be a reliever airport to Phoenix’s Sky Harbor International Airport. The Board of Directors consists of the mayors of the respective communities and the governor of the Gila River Indian Community. Gilbert contributed $350,000 in fiscal year 2021 to the PMGAA operating and capital budget. Regional Public Transportation Authority (RPTA) is a voluntary association of local governments, including Maricopa County, Chandler, Mesa, Tempe, Scottsdale, Glendale, Phoenix, and Gilbert. Its purpose is to create a regional public transportation plan for Maricopa County. The Board of Directors consists of the mayors of those municipalities and a member of the County Board of Supervisors. C. Government-wide and Fund Financial Statements The government-wide financial statements (Statement of Net Position and Statement of Activities) report on Gilbert and its component units 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. The government-wide Statement of Net Position reports all financial and capital resources of the government. It is displayed in a format of assets and deferred outflows of resources, less liabilities and deferred inflows of resources equals net position, with the assets and liabilities shown in order of their relative liquidity. Net position is required to be displayed in three components: 1) net investment in capital assets, 2) restricted and 3) unrestricted. Net investment in capital assets is capital assets net of accumulated depreciation, reduced by outstanding balances of any bonds, mortgages, notes or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. Restricted net position has constraints placed on its use by either: 1) externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments, or 2) imposed by law through constitutional provisions or enabling legislation. All net position not otherwise classified as restricted, is shown as unrestricted. The government-wide Statement of Activities demonstrates the degree to which the direct expenses of the various functions or departments are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or department. Interest and fiscal charges on long-term debt are not allocated to the various functions. Program revenues include charges for services, fines and forfeitures, licenses and permit fees, special assessment fees, system development fees, intergovernmental grants and other entities participation. Taxes, investment earnings, and other revenues not identifiable with a particular function or department are included as general revenues. The general revenues support the net costs of the functions and departments not covered by program revenues. 46 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2021 For the most part, the effect of internal activity has been removed from the government-wide financial statements. Net internal activity and balances between governmental activities and business-type activities are shown in the government-wide financial statements. However, certain charges between the enterprise funds’ utility systems and the various functional activities are not eliminated in the government-wide statements, as this would distort the direct costs and program revenues reported for the various functions concerned. Separate financial statements are provided for the governmental funds and proprietary funds. The focus of the fund financial statements is on major funds. Major individual governmental funds and proprietary funds are reported as separate columns in the fund financial statements. Other nonmajor governmental funds, as well as the internal service funds, are summarized into a single column on the fund financial statements and are detailed in the combining statements included as supplementary information. The internal service funds, which provide services to the other funds of the government, are presented in a single combined column in the proprietary fund financial statements. Because the principal users of the internal service funds are the governmental activities, the assets and liabilities of the internal service funds are consolidated into the governmental activities column of the government-wide Statement of Net Position. The costs of the internal service fund services are spread to the appropriate function or department on the government-wide Statement of Activities. The revenues and expenses within the internal service funds are eliminated from the government-wide financial statements to avoid any doubling up effect from these revenues and expenses. D. Measurement Focus and Basis of Accounting The government-wide and proprietary fund 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 a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenue in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the grantor or provider have been met. Governmental funds in the fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized when they become both measurable and available. Gilbert considers all revenues reported in the governmental funds to be available if the revenues are collected within 60 days after year-end. Gilbert’s major revenue sources that are susceptible to accrual are property taxes, sales taxes, franchise taxes, licenses and permits, intergovernmental revenue and investment earnings associated with the current fiscal period. Charges for services, fines and forfeitures, and miscellaneous revenues are recorded as revenue when received as cash because they are generally not measurable until actually received. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on long-term debt, claims and judgements, and compensated absences, which are recognized as expenditures to the extent they are due and payable. General capital asset acquisitions are reported as expenditures in governmental funds. Issuances of general long-term debt and acquisitions under capital lease agreements are reported as other financing sources. Since the governmental fund financial statements are presented on a different measurement focus and basis of accounting than the government-wide statements’ governmental activities column, a reconciliation is presented on the page following each fund statement. These reconciliations briefly explain the adjustments necessary to transform the fund financial statements into the governmental activities column of the government-wide presentation. 47 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2021 Proprietary funds 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. The principal operating revenue of Gilbert’s enterprise funds are user fees and charges to customers for water, wastewater, and environmental services. Operating expenses for these funds include the cost of supplies and repair and maintenance, administrative and payroll expenses, and depreciation. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. The principal operating revenue of Gilbert’s internal service funds are charges to user departments for services provided. E. Fund Accounting Gilbert uses funds to report its financial position and the results of its operations. Fund accounting segregates funds according to their intended purpose and is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts, which includes assets, liabilities, fund equity, revenues and expenditures/expenses. Gilbert uses the following fund categories, further divided by fund type: Governmental Funds Governmental funds are those through which most of the governmental functions are financed. The measurement focus is based upon determination of changes in financial position rather than upon net income determination. Gilbert reports the following major governmental funds: General – The General Fund is the primary operating fund and is used to account for all financial resources except those required to be accounted for in another fund. The General Fund will always be considered a major fund in the basic financial statements. Streets Special Revenue – The Streets Special Revenue Fund accounts for Gilbert’s portion of the Arizona Highway User Revenue Tax (HURF). The revenue is used exclusively for the maintenance and improvement of highways and streets. Streets and Traffic Capital Projects – The Streets and Traffic Capital Projects Fund accounts for the receipt of proceeds restricted or assigned for expenditure on street and traffic capital improvements. Proceeds recorded in this fund include general obligation bonds for street projects, roads and traffic system development fees collected from building permits, and state funds in accordance with the Maricopa Association of Governments Regional Transportation Plan approved by voters as Proposition 400. Parks Capital Projects – The Parks Capital Projects Fund accounts for the receipt of parks system development fees collected from building permits paid and the expenditure of those funds for parks capital improvements. Municipal Facilities Capital Projects – The Municipal Facilities Capital Projects Fund accounts for the receipt of proceeds restricted for expenditure on municipal facilities capital improvements. Proceeds recorded in this fund include general obligation bonds for municipal projects, police and fire SDFs, and previously collected general government SDFs from building permits. Debt Service – The Debt Service Fund accounts for the principal and interest requirements of general obligation, public facilities municipal property corporation revenue bonds, and revenue obligations not recorded in proprietary funds. Financing is provided from the levy of secondary property taxes and revenue-supported transfers. 48 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2021 Special Assessments Debt Service – The Special Assessments Fund accounts for the principal and interest requirements of special assessment bonds not recorded in proprietary funds. Financing is provided by special assessment levies against benefited property owners. Proprietary Funds Proprietary funds are used to account for Gilbert's ongoing activities which are similar to those found in the private sector, where cost-recovery and the determination of net income is useful or necessary for sound fiscal management. The measurement focus is based upon determination of net income, changes in net position, financial position and cash flows. Gilbert reports the following major proprietary funds: Water – The Water Fund accounts for the revenues and expenses from the operation and maintenance of the domestic water system. Wastewater – The Wastewater Fund accounts for the revenues and expenses from the operation of the sanitary wastewater collection and treatment and reclaimed water distribution system. Environmental Services – The Environmental Services Fund accounts for the revenues and expenses of operating the solid waste collection system and environmental compliance. Additionally, Gilbert reports the following fund type: Internal Service – The Internal Service Funds account for operations that provide services to other departments on a cost-reimbursement basis. These services include maintenance of Gilbert’s motorized equipment and self-insurance for employee benefit programs. F. Budgetary Data In December of each year, the Office of Management & Budget (OMB) prepares a revenue estimate based upon local and state-shared revenue forecasts, historic trends, economic indicators, anticipated growth, and year-to-date revenue performance to develop guidelines for departments to follow in prioritizing budget requests. Simultaneously, departments develop operating budget requests and submit them to the OMB. Departments work with the Capital Improvement Program (CIP) Division to finalize project estimates for the CIP and submit them to the OMB for funding. Estimates for debt service, maintenance improvement districts, and internal service funds are prepared by respective departments and submitted to the OMB for review. In April, the Council is presented with a working budget request for preliminary review and discussion and approves a schedule of hearings and dates for adoption of the budget. A public hearing is held in May for discussion and adoption of the preliminary budget. The preliminary budget sets the maximum legal expenditure limit for the upcoming year. A second public hearing is held in June for discussion and adoption of the final budget. The Council typically adopts the final tax levy in June and reports the levy amounts to Maricopa County for collection not later than the third Monday in August. 49 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2021 The Council sets policy and adopts the annual budget at the fund level as a total amount of expenditures. Financial control is set by Council at the fund level, with budgetary control for operating performance administered at the departmental level. Budget adjustments for special revenue funds, excluding the Streets Special Revenue Fund, will be administered by the OMB and will not exceed the available revenues. Grants and restricted appropriations are administered by departments. Directors may authorize transfers within nonpersonnel budget lines at the same fund, department, and project level. Council action is required to approve adjustments between funds, projects, or contingency transactions over $50,000. All annual appropriations lapse at year-end and are considered for inclusion in the subsequent year’s budget on a case-by-case basis. Gilbert prepares its budget on a basis generally consistent with GAAP, with certain exceptions such as longterm liability activity, capital outlay activity, depreciation expense, fair market value adjustments and developer contributions. Budgetary comparison statements for the General Fund and major special revenue funds are presented in the basic financial statements. These statements display original budget, amended budget, and actual results. Budgetary comparison schedules are also included as supplementary schedules for the other governmental funds. G. Pooled Cash and Investments Gilbert maintains pooled cash and investment accounts for funds that are not legally required to be maintained separately. Each fund's equity in pooled cash and investments represents that fund's position in the consolidated accounts and determines that fund's allocation of interest earned in the pool. The Arizona Revised Statutes require a pooled collateral program for public deposits and regulate the investment of surplus cash. Gilbert limits its investments to the Local Government Investment Pool (managed by the Arizona State Treasurer), U.S. government securities, certificates of deposit, bonds, repurchase agreements, corporate notes, asset-backed securities, commercial paper, and money market accounts. Investments are stated at fair value based on quoted market prices. H. Inventories and Prepaid Items Inventories are recorded as assets when purchased and expensed when consumed. These inventories are valued at cost using the weighted average method. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. Prepaid items are recorded as expenses when consumed in the government-wide financial statements and fund financial statements. I. Capital Assets Capital assets, including public domain infrastructure (e.g., roads, bridges, sidewalks and similar assets), are defined as assets with an initial, individual cost of more than $10,000 and an estimated useful life greater than one year. All infrastructure, including infrastructure acquired prior to June 30, 1980, is reported. Capital assets are recorded at cost or estimated historical cost if purchased or constructed. Donated capital assets (including streets, water and wastewater lines installed by developers) are recorded at acquisition value. Gain or loss is recognized when assets are retired from service or otherwise disposed. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend its life are not capitalized. Major improvements are capitalized and depreciated over the remaining useful lives of the related capital assets. 50 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2021 Major outlays for capital assets and improvements are capitalized as projects are constructed. Capital assets are depreciated using the straight-line method based on the following estimated useful lives (land, certain water rights, and construction-in-progress are not depreciated): Buildings Improvements Machinery and equipment Infrastructure Water Rights 10 to 50 years 15 to 80 years 3 to 15 years 3 to 80 years 80 to 100 years J. Deferred Outflows/Inflows of Resources On the government-wide and proprietary funds Statement of Net Position, deferred outflows of resources are reported and represent a consumption of net position that applies to a future period and so will not be recognized as an outflow of resources (expenditure/expense) until then. Gilbert has two items that qualify for reporting in this category. A deferred charge on refunding results from the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. A deferred charge on pension and other postemployment-related items results from the difference between expected and actual experience and also changes in proportion and differences between Gilbert contributions and proportionate share of contributions. These amounts are deferred and will be recognized as an expenditure/expense in future periods. On the governmental funds Balance Sheet, deferred inflows of resources are reported and represent an acquisition of net position that applies to a future period and so will not be recognized as an inflow of resources (revenue) until that time. The governmental funds report unavailable revenues from several sources: special assessments, court fines, sales tax, grants, and other. These amounts are deferred and recognized as an inflow of resources in the period that the amount becomes available. On the government-wide and proprietary funds Statement of Net Position, deferred inflows of resources are reported on pension and other postemployment-related items for the net difference between projected and actual investment earnings on pension and other postemployment plan investments. These amounts are amortized as an expenditure/expense in future periods. K. Compensated Absences Compensated absences payable consists of vacation leave and a calculated amount of sick leave employees earned based on services already rendered. Vacation is based on a graduated scale of years of employment and is credited to each employee as it accrues. Vacation hours vary according to years of employment and job class, and are either taken as time off from work or paid to employees upon separation or retirement. Sick leave accumulated in excess of 520 hours (728 hours for fire personnel) is convertible annually to a partial cash benefit. Sick leave is convertible to a cash benefit upon retirement or death of the employee (at 100%) or upon resignation (at 50%) when the employee has ten or more years of service (calculated at the current hourly rate of pay). For the governmental funds, an expenditure for compensated absences is reported only if they have matured, for example, as a result of employee resignations and retirements. For the government-wide financial statements, as well as the proprietary fund financial statements, all of the outstanding compensated absences are recorded as a liability. 51 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2021 L. Long-Term Obligations In the government-wide financial statements, and proprietary fund types in the fund financial statements, longterm debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net position. Bond premiums and discounts are deferred and amortized over the life of the bonds using the straight line method. Bonds payable are reported net of the applicable bond premium or discount. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as an other financing source. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. The debt service funds are specifically established to account for and service the long-term obligations for the governmental funds and special assessment debt. Each enterprise fund individually accounts for and services the applicable bonds that benefit these funds. Long-term obligations are recognized as a liability of a governmental fund when due, or when resources have been accumulated for payment early in the following year. For other long-term obligations, only that portion expected to be financed from expendable available financial resources is reported as a fund liability of a governmental fund. M. Postemployment Benefits For purposes of measuring the net pension and other postemployment benefits (OPEB) assets and 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. N. Restricted Assets Certain bond proceeds, as well as certain resources set aside for their repayment, are classified as restricted on the Balance Sheet, or Statement of Net Position, because they are maintained separately and their use is limited by applicable debt covenants. O. Fund Balance Classifications Fund balance classifications comprise a hierarchy based primarily on the extent to which Gilbert is bound to observe constraints imposed upon the use of the resources reported in the governmental funds. Nonspendable and Restricted fund balances represent the restricted classifications and Committed, Assigned and Unassigned represent the unrestricted classifications. 52 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2021 Nonspendable fund balance includes amounts that cannot be spent because they are either (a) not in spendable form such as inventory or (b) legally or contractually required to be maintained intact. Restricted fund balance includes amounts that can only be used for specific purposes pursuant to constraints imposed externally by creditors, grantors, contributors, or laws or regulations of other governments; or imposed by law through constitutional provisions or enabling legislation. Committed fund balance includes amounts that can only be used for specific purposes pursuant to constraints imposed internally by formal action of the Council. Formal action by Council through resolution is required to establish, modify or rescind committed fund balance. Assigned fund balance includes amounts that are limited to specific purposes by management. Per the Policies of Responsible Financial Management, Council has authorized the Finance & Management Services Director to assign fund balance amounts to a specific purpose. 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 other governmental fund can report a negative unassigned fund balance. When an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available, as a general rule, restricted resources are considered spent before unrestricted. Within unrestricted, committed amounts would be reduced first, followed by assigned amounts (if available) and then unassigned amounts. P. Statement of Cash Flows A statement of cash flows classifies cash receipts and payments according to whether they stem from operating, noncapital financing, capital and related financing, or investing activities. For purposes of the statement of cash flows, all highly liquid investments (including restricted assets) with an original maturity of three months or less when purchased are considered cash equivalents. Q. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make a number of estimates and assumptions that affect the amounts reported as assets, liabilities, and deferred outflows/inflows of resources and disclosure of contingent assets and liabilities at the date of the Statement of Net Position/Balance Sheet and the reported amounts of revenues and expenditures/expenses during the reporting period. Actual results could differ from those estimates. R. Transactions Between Funds Transactions that would be recorded as revenues and expenditures/expenses if they involved entities external to the governmental unit are recorded as revenues and expenditures/expenses in the respective funds. Transactions constituting a reimbursement of a fund for expenditures/expenses originally recorded in that fund, but properly applicable to another fund, are recorded as expenditures/expenses in the reimbursing fund, and as reductions of the expenditures/expenses in the fund which is reimbursed, excluding indirect administrative costs which are recorded as revenues and expenditures/expenses in the related funds. Indirect administrative expenses represent overhead costs which have been allocated to the enterprise funds based upon a formula approved with the budget. All other interfund transactions are reported as transfers. Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either “due to/from other funds” (i.e., short-term interfund loans due to timing differences) or “advances to/from other funds” (i.e., loans adopted by Council for a particular purpose). Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as “internal balances”. 53 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2021 Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve account in the applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. See Note 4 for further discussion of the interfund receivables/payables at June 30. S. Property Tax Gilbert's property tax levy is adopted by the Council each year and the County levies the taxes on or before the third Monday of August, based on the previous year's limited property value as of the lien date (January 1). Maricopa County, at no charge, levies and collects all property taxes. Levies are due and payable in two installments, on September 1 and March 1, and become delinquent on November 1 and May 1, respectively. Public auctions of properties that have delinquent real estate taxes are held in February following the May 1 delinquency of the second installment. The purchaser is given a certificate of purchase, issued by the County Treasurer. Five years from the date of sale, the holder of a certificate of purchase, which has not been redeemed, may demand of the County Treasurer, a County Treasurer's Deed. Gilbert does not levy property taxes for general operations (primary tax). Secondary property taxes are levied solely for the purpose of retiring the principal, interest, and servicing fees on voter approved general obligation bonded indebtedness. State law requires municipalities to adopt a property tax levy based on the amount of scheduled and projected debt service for the year plus a reasonable amount for delinquencies and certain costs. For fiscal year 2021, Gilbert’s property tax rate is $0.99 per $100 of secondary assessed valuation. Note 2 – Deposits and Investments The Arizona Revised Statutes require a pooled collateral program for public deposits and a Statewide Collateral Pool Administrator (Administrator) in the State Treasurer’s Office. The purpose of the pooled collateral program is to ensure that governmental entities’ public deposits placed in participating depositories are secured with collateral of 102% of the public deposits, less any applicable deposit insurance. An eligible depository may not retain or accept any public deposit unless it has deposited the required collateral with a qualified escrow agent or the Administrator. The Administrator manages the pooled collateral program, including reporting on each depository’s compliance with the program. The investment of public monies is also regulated by the Arizona Revised Statutes Title 35. Gilbert limits its investments to the Local Government Investment Pools 7 and 700 (that only invest in U.S. government securities and managed by the Arizona State Treasurer), U.S. government securities, certificates of deposit, bonds, corporate notes, asset-backed securities, commercial paper, and money market accounts. The State Board of Investment provides oversight for the State Treasurer’s pools. The fair value of a participant’s position in the pool approximates the value of that participant’s pool shares, and the participant’s shares are not identified with specific investments. Participants in the pool are not required to categorize the value of shares in accordance with the fair value hierarchy. Gilbert categorizes its fair value measurements within the fair value hierarchy established by GAAP. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Investments categorized as Level 1 are valued using prices quoted in active markets for those investments. Investments categorized as Level 2 are valued based on significant other observable inputs, which may include, but are not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market corroborated inputs. Gilbert had total investments of $631,643,076 at June 30, 2021. Gilbert categorizes certain investments within the fair value hierarchy established by generally accepted accounting principles as follows: 54 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2021 Investment Type U.S. Government Treasuries U.S. Government Agencies Corporate Notes Certificates of Deposit Asset Backed Securities Municipal Bonds Money Market Total Investments Categorized by Fair Value Level Fair Value $ 252,806,018 168,829,130 59,726,023 11,473,189 8,122,622 5,236,702 43,635,558 $ 549,829,242 External Investment Pools Measured at Fair Value State Treasurer's Investment Pool Total Investments Measured at Fair Value 81,813,834 $ 631,643,076 Fair Value Measurement Using Level 1 Level 2 $ 252,806,018 $ 168,829,130 59,726,023 11,473,189 8,122,622 5,236,702 43,635,558 $ 252,806,018 $ 297,023,224 Interest rate risk – Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. As a means of limiting its exposure to fair value losses arising from rising interest rates, Gilbert’s investment policy limits its investment portfolio to maturities of five years or less. At June 30, 2021, Gilbert’s investment maturities were as follows: Investment Type U.S. Government Treasuries U.S. Government Agencies Corporate Notes Certificates of Deposit Asset Backed Securities Municipal Bonds State Treasurer's Investment Pool Money Market Total Fair Value $ 252,806,018 168,829,130 59,726,023 11,473,189 8,122,622 5,236,702 81,813,834 43,635,558 $ 631,643,076 Investment Maturities (in Years) Less than 1 1-5 $ 60,780,879 $ 192,025,139 17,858,573 150,970,557 10,701,919 49,024,104 8,056,273 3,416,916 8,122,622 5,236,702 55,407,181 26,406,653 43,635,558 $ 196,440,383 $ 435,202,693 Credit risk – Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. Gilbert addresses credit risk through its investment policy by restricting the allowable investment instruments. As of June 30, 2021, the investments in the U.S. Government Treasuries were rated AA+, U.S. Government Agencies were rated AA+, Corporate Note ratings ranged from BBB+ to AAA, Certificates of Deposit ratings ranged from A to AA, asset-backed securities were rated AAA, and Municipal Bond ratings ranged from AA+ to AAA. Gilbert’s investment in the State Treasurer’s Investment Pool did not receive a credit quality rating from a national rating agency. Custodial credit risk – deposits – Custodial credit risk is the risk that in the event of a bank failure, Gilbert’s deposits may not be returned. As of June 30, 2021, Gilbert’s bank balance with JP Morgan was $10,976,802 of which $10,726,802 was exposed to custodial credit risk. JP Morgan’s balance was uninsured but collateralized with securities held by the pledging financial institution’s trustee. These securities are not in Gilbert’s name, but cannot be released without Gilbert’s authorization. At the end of each day, a portion of Gilbert’s bank balance is transferred to a sweep investment account. 55 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2021 Custodial credit risk – investments – The custodial credit risk for investments is the risk that, in the event of the failures of the counterparty (e.g. broker-dealer) to a transaction, Gilbert will not be able to recover the value of its investment or collateral securities that are in the possession of another party. Gilbert’s investment policy limits its exposure to custodial credit risk by requiring that all security transactions entered into by Gilbert be conducted on a delivery-versus-payment basis. Securities are to be held by a third-party custodian. Gilbert’s investment in the State Treasurer’s Investment Pool represents a proportionate interest in the Pool’s portfolio; however, Gilbert’s portion is not identified with specific investments and is not subject to custodial credit risk. Concentration of credit risk – Gilbert’s investment policy limits corporate notes to 20% of total funds and 3% per issuer. As of June 30, 2021, of Gilbert’s investments, 43% were in U.S. Government Treasuries, 29% were in U.S. Government Agencies, 10% were in Corporate Notes, 2% were in Certificates of Deposit, 1% were in Asset Backed Securities, 1% were in Municipal Bonds and 14% were in the State Treasurer’s Investment Pool. Reconciliation of pooled cash and investments as reported on the statement of net position: Primary government: Carrying amount of cash Carrying amount of deposits/investments Total cash and investments Pooled cash and investments Restricted cash and investments Total cash and investments $ 8,554,799 631,643,076 $ 640,197,875 $ 612,778,731 27,419,144 $ 640,197,875 Note 3 – Taxes Receivable and Due from Other Governments The General Fund taxes receivable amount of $15,587,969 at June 30, 2021, includes $1,484,656 in stateshared sales tax and $14,103,313 in local sales tax. Amounts reported as due from other governments for governmental funds at June 30, 2021, are summarized as follows: General Fund Vehicle License Tax SRP Bond Redemption Other Intergovernmental $ 505,554 504,685 101,538 Streets Special Revenue Fund Highway User Revenue Funds 1,597,844 Streets and Traffic Capital Projects Fund Maricopa County Easement Settlement 1,114,273 Nonmajor Funds Maricopa County Attorney's Office - Racketeer Influenced Corrupt Organization Funds U.S. Dept. of Housing and Urban Development CDBG and HOME U.S. Dept. of Homeland Security Grants Regional Public Transportation Authority - Local Reconciliation Refund Grant Reimbursements Other Intergovernmental 1,723,198 700,614 146,068 606,182 93,419 253 Total Governmental Funds $ 56 7,093,628 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2021 Amounts reported as due from other governments for proprietary funds at June 30, 2021, are summarized as follows: Water Fund City of Chandler - Joint Operation of SanTan Vista Water Treatment Plant $ Environmental Services Fund Maricopa Association of Governments CMAQ Funding Town of Queen Creek Household Hazardous Waste 187,852 555,888 1,800 Total Enterprise Funds Internal Service Funds State of Arizona Overpayment Refund City of Chandler Fuel Costs ASRS/PSPRS Retiree Contributions Total Internal Service Funds $ 745,540 $ 4,482 918 22,506 $ 27,906 Note 4 – Interfund Receivables and Payables The composition of interfund balances as of June 30, 2021, is shown below. Due to/from other funds are short-term loans that cover cash deficits and are recorded in the following funds (cash deficits are temporary, until reimbursements are received): Due From 434,172 $ 434,172 General Other Governmental Funds Total $ Due To $ $ 434,172 434,172 Advances to/from other funds are long-term loans that cover cash deficits for capital expenditures and are recorded in the following funds: Advances To Advances From General $ 9,061,893 $ Municipal Facilities Capital Projects 9,061,893 Total $ 9,061,893 $ 9,061,893 57 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2021 Note 5 – Capital Assets A summary of changes in capital assets for governmental activities, for the fiscal year ended June 30, 2021, is as follows: July 1, 2020 Non-depreciable assets: Land Construction-in-progress Total non-depreciable assets Depreciable assets: Buildings Improvements other than buildings Machinery and equipment Infrastructure Total depreciable assets Less accumulated depreciation: Buildings Improvements other than buildings Machinery and equipment Infrastructure Total accumulated depreciation Total depreciable assets, net Governmental activities capital assets, net Additions Deletions 956,509 70,843,280 71,799,789 $ (15,081,177) (93,680,001) (108,761,178) 273,407,269 75,325,062 72,616,603 1,121,087,788 1,542,436,722 75,301,802 1,413,092 11,229,363 13,183,332 101,127,589 (2,472,750) (2,472,750) 348,709,071 76,738,154 81,373,216 1,134,271,120 1,641,091,561 (135,829,226) (54,344,493) (52,690,968) (601,370,324) (844,235,011) 698,201,711 (10,792,457) (2,786,470) (4,066,170) (35,959,443) (53,604,540) 47,523,049 2,452,650 2,452,650 (20,100) (146,621,683) (57,130,963) (54,304,488) (637,329,767) (895,386,901) 745,704,660 $ 1,042,290,182 $ 119,322,838 $ (108,781,278) $ 1,052,831,742 $ 146,382,648 197,705,823 344,088,471 $ June 30, 2021 $ 132,257,980 174,869,102 307,127,082 Depreciation expense was charged to governmental functions in the government-wide financial statement as follows: Management and policy Finance and management services Legal and court Development services Police Fire Highways and streets Parks and recreation Total depreciation expense not including internal service funds Capital assets held by Gilbert's internal service funds are charged to the various functions based on their usage of the assets Total depreciation expense - governmental activities 58 $ 519,387 389,159 459,768 2,367,732 2,833,630 3,610,321 37,321,167 6,067,888 $ 53,569,052 35,488 $ 53,604,540 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2021 A summary of changes in capital assets for business-type activities, for the fiscal year ended June 30, 2021, is as follows: July 1, 2020 Non-depreciable assets: Land Water rights Construction-in-progress Total non-depreciable assets $ Depreciable assets: Plant and equipment Infrastructure Water rights Total depreciable assets Less accumulated depreciation: Plant and equipment Infrastructure Water rights Total accumulated depreciation Total depreciable assets, net Business-type activities capital assets, net $ 23,510,321 58,150,151 45,659,772 127,320,244 Additions $ 4,805 1,277,593 40,535,233 41,817,631 $ Deletions June 30, 2021 (25,156,476) (25,156,476) $ 23,515,126 59,427,744 61,038,529 143,981,399 148,035,168 629,381,738 40,354,519 817,771,425 7,290,105 19,484,374 26,774,479 (2,050,142) (2,050,142) 153,275,131 648,866,112 40,354,519 842,495,762 (84,436,344) (246,370,009) (2,718,653) (333,525,006) 484,246,419 (7,900,482) (16,698,762) (410,429) (25,009,673) 1,764,806 2,050,142 2,050,142 - (90,286,684) (263,068,771) (3,129,082) (356,484,537) 486,011,225 611,566,663 $ 43,582,437 $ (25,156,476) $ 629,992,624 Note 6 – Construction-in-Progress and Commitments Governmental activities construction-in-progress and related construction commitments at June 30, 2021, were as follows: Streets and traffic Parks Municipal facilities Redevelopment Fleet Total Constructionin-Progress $ 80,822,031 65,794,434 2,595,853 25,651,523 5,261 $ 174,869,102 Commitments $ 18,325,757 1,012,940 3,263,261 1,080,665 $ 23,682,623 Business-type activities construction-in-progress and related construction commitments at June 30, 2021, were as follows: Constructionin-Progress $ 40,853,237 19,626,946 558,346 $ 61,038,529 Water system Wastewater system Environmental services Total 59 Commitments $ 8,447,056 7,791,661 $ 16,238,717 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2021 Note 7 – Long-Term Debt General Obligation Bonds Gilbert issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities including street improvements and the Public Safety Training Facility. General obligation bonds have been issued for both governmental and business-type activities. Currently, there are no outstanding general obligation bonds for business-type activities. General obligation bonds are direct obligations and pledge the full faith and credit of Gilbert. General obligation bonds outstanding at June 30, 2021, were as follows: Governmental 2017 General Obligation and General Obligation Refunding Bonds, Series 2017, 3.0% to 5.0%, original amount $121,670,000, annual retirements due July 1, 2017, through July 1, 2036 $ 58,610,000 2020 General Obligation and General Obligation Refunding Bonds, Series 2020, 2.0% to 4.0%, original amount $76,750,000, annual retirements due July 1, 2020, through July 1, 2039 Total 73,220,000 $ 131,830,000 Annual debt service requirements to maturity for general obligation bonds are as follows: Year Ending 2022 2023 2024 2025 2026 2027-2031 2032-2036 2037-2039 Governmental Activities Principal Interest $ 22,275,000 $ 4,908,338 18,530,000 3,855,538 4,170,000 3,114,338 4,360,000 2,922,688 4,565,000 2,722,238 25,845,000 10,577,388 31,245,000 5,175,663 20,840,000 1,024,281 $ 131,830,000 $ 34,300,472 Under the provisions of the Arizona Constitution, outstanding general obligation bonded debt for combined water, wastewater, electric, parks and open space, streets, and public safety purposes may not exceed 20% of Gilbert's net full cash (NFC) valuation, nor may outstanding general obligation bonded debt for all other purposes exceed 6% of Gilbert's NFC valuation. The following is a summary of legal borrowing capacity at June 30, 2021: 60 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2021 Water, Wastewater, Electric, Streets, Fire, Police, and Parks and Open Space Special Purpose Bonds NFC - Assessed Valuation $ 3,477,450,021 All Other General Obligation Bonds NFC - Assessed Valuation 20% constitutional limit Less general obligation bonds outstanding Less premium adjustment Available 20% limitation borrowing capacity 6% constitutional limit Less general obligation bonds outstanding Less premium adjustment Available 6% limitation borrowing capacity $ 695,490,004 (131,830,000) (9,400,564) $ 554,259,440 $ 3,477,450,021 $ 208,647,001 - $ 208,647,001 Special Assessment Bonds with Governmental Commitment As trustee for the improvement districts, Gilbert is responsible for collection of assessments levied against the owners of property within the improvement districts and for disbursement of these amounts for retirement of the respective bonds issued to finance the improvements. At June 30, 2021, the special assessments receivable, together with amounts paid in advance and interest to be received over the life of the assessment period, were adequate for the scheduled maturities of the bonds payable and the related interest. Special assessment bonds are collateralized by properties within the districts. In the event of default by the owner, Gilbert may enforce an auction sale to satisfy the debt service requirements of the improvement bonds. Gilbert is contingently liable on special assessment bonds to the extent that proceeds from auction sales are insufficient to retire outstanding bonds. Special assessment bonds outstanding at June 30, 2021, were as follows: Governmental 2002 Improvement District #19 Bonds, 5.2%, original amount $6,510,000, annual retirements due January 1, 2005, through January 1, 2027 $ 2009 Improvement District #20 Bonds, 5.1%, original amount $8,675,000, annual retirements due January 1, 2012, through January 1, 2029 Total 3,935,000 $ Annual debt service requirements to maturity for special assessment bonds are as follows: Year Ending 2022 2023 2024 2025 2026 2027-2029 Governmental Activities Principal Interest $ 420,000 $ 193,350 440,000 171,410 465,000 148,323 490,000 123,958 510,000 98,445 1,675,000 130,693 $ 4,000,000 $ 866,179 61 65,000 4,000,000 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2021 Municipal Property Corporation (MPC) Revenue Bonds The Public Facilities MPC exists solely for the purpose of financing the cost of acquisition of certain interests in real property for public safety and parks and recreation facilities, the cost of design and construction of Fire and Rescue Station #9 (the 2017 issue); and the refunding of certain maturities of outstanding bonds (the 2011, 2014, and 2017 issues). The Water MPC exists solely for the purpose of financing the construction of water and wastewater capital improvement projects. Also see Note 16 regarding Pledged Revenues. Municipal property corporation revenue bonds outstanding at June 30, 2021, were as follows: 2011 Public Facilities Municipal Property Corporation Revenue Refunding Bonds, 3.0% to 4.75%, original amount $20,980,000, annual retirements due July 1, 2013 through July 1, 2021 Governmental Business-Type $ $ 2,750,000 - 2014 Public Facilities Municipal Property Corporation Revenue Refunding Bonds, 2.0% to 5.0%, original amount $28,080,000, annual retirements due July 1, 2016 through July 1, 2021 6,590,000 - 2017 Public Facilities Municipal Property Corporation Revenue Refunding Bonds, 3.0% to 5.0%, original amount $43,075,000, annual retirements due July 1, 2018 through July 1, 2027 29,165,000 - 2017 Public Facilities Municipal Property Corporation Revenue Bonds, 4.0% to 5.0%, original amount $6,450,000, annual retirements due July 1, 2022 through July 1, 2027 6,450,000 - 2016 Water Resources Municipal Property Corporation, Senior Lien Utility System Revenue and Revenue Refunding Bonds, 2.25% to 5.0%, original amount $115,940,000, annual retirements due July 1, 2017 through July 1, 2036 - 95,225,000 2018 Water Resources Municipal Property Corporation, Senior Lien Utility System Revenue Bonds, 3.0% to 5.0%, original amount $37,460,000 annual retirements due July 1, 2018 through July 1, 2031 - 30,080,000 Total $ 62 44,955,000 $ 125,305,000 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2021 Annual debt service requirements to maturity for MPC revenue bonds are as follows: Year Ending 2022 2023 2024 2025 2026 2027-2031 2032-2036 2037 Governmental Activities Principal Interest $ 14,590,000 $ 1,991,212 5,500,000 1,508,250 5,770,000 1,243,250 6,055,000 954,750 6,360,000 652,000 6,680,000 334,000 $ 44,955,000 $ 6,683,462 Business-type Activities Principal Interest $ 7,950,000 $ 5,288,563 8,340,000 4,881,313 8,780,000 4,453,313 9,200,000 4,003,813 9,655,000 3,532,438 55,115,000 10,963,706 22,815,000 2,441,150 3,450,000 69,000 $ 125,305,000 $ 35,633,296 University Revenue Obligations The University Revenue Obligations were issued specifically for the purpose of providing funds to design and construct a four-story building to be utilized for educational purposes. These obligations are payable solely from the revenues generated by excise taxes and state-shared revenue. Subordinate lien pledged revenue obligations outstanding at June 30, 2021, were as follows: Governmental Subordinate Lien Pledged Revenue Obligations, Series 2015, 3.0% to 5.0% original amount $36,980,000, annual retirements due July 1, 2017 through July 1, 2045 $ 34,220,000 Annual debt service requirements to maturity for subordinate lien pledged revenue obligations are as follows: Year Ending 2022 2023 2024 2025 2026 2027-2031 2032-2036 2037-2041 2042-2045 Governmental Activities Principal Interest $ 770,000 $ 1,468,456 810,000 1,428,956 850,000 1,387,456 895,000 1,343,831 935,000 1,298,081 5,440,000 5,730,238 6,610,000 4,558,878 7,910,000 3,237,325 10,000,000 1,298,750 $ 34,220,000 $ 21,751,971 63 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2021 Changes in Long-term Liabilities Long-term liability activity for the year ended June 30, 2021, was as follows: Balance July 1, 2020 Governmental activities: Bonds payable: General obligation bonds Special assessment bonds with government commitment Revenue bonds Revenue obligations Unamortized bond premium Total bonds payable Compensated absences Other postemployment benefits Net pension liability Total long-term liabilities Business-type activities: Bonds payable: Revenue bonds Unamortized bond premium Total bonds payable Compensated absences Other postemployment benefits Net pension liability Total long-term liabilities $ 151,825,000 Additions Reductions Balance June 30, 2021 - $ (19,995,000) $ $ 131,830,000 Due Within One Year $ 4,000,000 44,955,000 34,220,000 22,465,283 237,470,283 18,183,278 792,505 128,814,321 22,275,000 4,510,000 57,760,000 34,955,000 25,420,362 274,470,362 16,329,370 633,392 123,935,931 10,986,960 159,113 4,878,390 (510,000) (12,805,000) (735,000) (2,955,079) (37,000,079) (9,133,052) - 420,000 14,590,000 770,000 38,055,000 5,993,390 - $ 415,369,055 $ 16,024,463 $ (46,133,131) $ 385,260,387 $ 44,048,390 $ 132,865,000 18,877,751 151,742,751 2,585,386 141,845 20,728,895 $ 2,142,606 36,270 4,011,337 $ (7,560,000) (1,534,731) (9,094,731) (1,812,885) - $ 125,305,000 17,343,020 142,648,020 2,915,107 178,115 24,740,232 $ 7,950,000 7,950,000 998,159 - $ 175,198,877 $ 6,190,213 $ (10,907,616) $ 170,481,474 $ 8,948,159 Internal service funds predominantly serve the governmental funds. Accordingly, long-term liabilities for them are included as part of the above totals for governmental activities. At year-end, $233,847 of internal service funds compensated absences, $2,442,999 of net pension liability, and $16,009 of other postemployment benefits liability are included in the above amounts. Long-term compensated absences, other postemployment benefits, and the net pension liability of governmental activities are expected to be liquidated by the operating funds (primarily the General Fund and the Streets Special Revenue Fund) as they come due. Gilbert does not have any outstanding notes from direct borrowings or direct placements, no assets pledged as collateral for debt, nor any outstanding lines of credit. 64 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2021 Note 8 – Risk Management Traditional Commercial Insurance Programs Gilbert operates with traditional commercial insurance programs against major losses in cybercrime, property, plant, and equipment liability. Administrative responsibility for the safety program resides with the Office of the Town Manager, and administrative responsibility for risk management (including education) resides with the Risk Management Division of the Town Attorney’s Office. Insurance is procured annually on a competitive quotation basis, using the services of an independent broker as a consultant. Risk Management processes all claims and evaluates their validity to determine if insurance reporting is warranted, or if the claim can be resolved administratively. Claims settled administratively, which are generally less than the deductibles of the appropriate policy, are paid from the funds where the claims occurred. During fiscal year 2021, there was no reduction in insurance coverage from prior years. Additionally, settlements and judgements have not exceeded insurance coverage during any of the last three fiscal years. Self-Insurance Gilbert established an Internal Service Fund to account for the Employee Benefit Self-Insurance Trusts (Trusts), which finance the uninsured risk of loss related to medical, dental, and workers' compensation claims. The Trusts are overseen by the Health Trust Board and the Workers’ Compensation Trust Board. Gilbert purchases commercial stop loss insurance to limit the claims liability to the Trusts. The stop loss insurance provides reimbursement to the Trusts for medical claims incurred by an individual member in excess of $250,000 after an additional $150,000 aggregate plan risk retention, workers’ compensation claims in excess of $750,000, and presumptive loss claims in excess of $2,000,000. Premiums are paid into the Trusts by funds and are available to pay claims and administrative costs of the program and fund claim reserves. As with any risk retention program, Gilbert is contingently liable with respect to claims beyond those actuarially projected. The claims liability of $4,068,000 reported as claims payable in the Trusts at June 30, 2021, is based on the requirements of Governmental Accounting Standards Board Statement No. 10, which requires that a liability be reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. Claim liabilities are calculated considering the effects of inflation, recent claim settlement trends including frequency and amount of payouts and other economic and social factors. Liabilities include an amount for claims that have been incurred but not reported (IBNR). Changes in the Trusts’ claim liability amount in fiscal years 2021 and 2020 were: Year Ended June 30, 2021 Risk of Loss Health $ Dental Workers' Compensation 2020 Health Current Year Claims and Changes in Estimates Beginning of Fiscal Year Balance 1,936,000 $ 19,217,387 Balance at Fiscal Year End Claim Payments $ (18,825,387) $ 2,328,000 89,000 1,178,185 (1,156,185) 111,000 - 2,200,371 (571,371) 1,629,000 $ 2,025,000 $ 22,595,943 $ (20,552,943) $ 4,068,000 $ 1,594,000 $ 18,959,100 $ (18,617,100) $ 1,936,000 Dental 106,000 Workers' Compensation 1,007,178 $ (1,024,178) - 1,700,000 65 $ 19,966,278 89,000 $ (19,641,278) $ 2,025,000 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2021 Note 9 – Pensions and Other Postemployment Benefits Gilbert contributes to the following pension and OPEB plans:       Elected Officials Retirement Plan (EORP) Pension Arizona State Retirement System (ASRS) Pension ASRS Health Insurance Premium Supplement (OPEB) ASRS Long-Term Disability (OPEB) Public Safety Retirement System (PSPRS) Pension PSPRS Health Insurance Premium Benefit (OPEB) Gilbert also provides postemployment medical care, prescription drug, and dental care for retired employees through a single-employer defined benefit medical and dental plan. The ASRS, PSPRS, and EORP OPEB plan information is not disclosed in detail in this note due to their relative insignificance to the financial statements. See Note 10 for information on Gilbert’s OPEB plan. The ASRS and PSPRS plans are component units of the State of Arizona. Pension and OPEB Statement of Net Position and Statement of Activities Deferred Outflow of Resources: OPEB - Town Pension - ASRS Pension - PSPRS Pension - EORP Total Governmental Activities Business-Type Activities $ 666,225 13,218,896 54,267,303 215,231 68,367,655 $ 792,505 65,870,537 61,219,990 1,723,794 $ 129,606,826 $ $ $ Liabilities: OPEB - Town Pension - ASRS Pension - PSPRS Pension - EORP Total $ Deferred Inflow of Resources: OPEB - Town Pension - ASRS Pension - PSPRS Pension - EORP Total $ 1,334,982 3,728,186 1,415 5,064,583 Total 149,734 4,915,908 5,065,642 $ 178,115 24,740,232 $ 24,918,347 $ $ $ $ $ 300,035 300,035 $ 815,959 18,134,804 54,267,303 215,231 73,433,297 970,620 90,610,769 61,219,990 1,723,794 $ 154,525,173 $ 1,635,017 3,728,186 1,415 5,364,618 Gilbert reported $29,593,906 of pension and OPEB contributions as expenditures in the governmental funds related to all pension plans to which it contributed for fiscal year 2021. A. Arizona State Retirement System Plan Description – Gilbert employees not covered by the other pension plans described below participate in the ASRS. The ASRS administers a cost-sharing multiple-employer defined benefit pension plan, a costsharing multiple-employer defined benefit health insurance premium supplement (OPEB) plan, and a costsharing multiple-employer defined benefit long-term disability (OPEB) plan. The ASRS is governed by the Arizona State Retirement System Board according to the provisions of A.R.S. Title 38, Chapter 5, Articles 2 and 2.1. The ASRS issues a publicly available financial report that includes financial statements and required supplementary information. This report is available on their website at www.azasrs.gov. 66 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2021 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: Years of service and age required to receive benefit Final average salary based on Benefit percent per year of service Retirem ent Initial Mem bership Date: Before July 1, 2011 On or After July 1, 2011 Sum of years and age equals 80 30 years, age 55 10 years, age 62 25 years, age 60 5 years, age 50* 10 years, age 62 Any years, age 65 5 years, age 50* Any years, age 65 Highest 36 consecutive 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 retirement benefit option chosen determines the survivor benefit. For all other members, the beneficiary is entitled to the member’s account balance that includes the member’s contributions and employer’s contributions, plus interest earned. Contributions – In accordance with state statutes, annual actuarial valuations determine active member and employer contribution requirements. 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, 2021, statute required active ASRS members to contribute at the actuarially determined rate of 12.22% (12.04% for retirement and 0.18% for long term disability) of the members’ annual covered payroll, and statute required Gilbert to contribute at the actuarially determined rate of 12.22% (11.65% for retirement, 0.39% for health insurance premium benefit, and 0.18% for long-term disability) of the members’ annual covered payroll. In addition, Gilbert was required by statute to contribute at the actuarially determined rate of 10.21% (10.14% for retirement and 0.07% for long-term disability) of annual covered payroll of retired members who worked for Gilbert in positions that an employee who contributes to the ASRS would typically fill. During fiscal year 2021, Gilbert paid for ASRS pension contributions as follows: 63% from the general fund, 32% from major funds, and 5% from other funds. The contributions to the pension plan for fiscal year 2021 were $7,263,134. Pension Liability – At June 30, 2021, Gilbert reported a liability of $90,610,769 for its proportionate share of the ASRS’ net pension liability. The net pension liability was measured as of June 30, 2020. The total pension liability used to calculate the net pension liability was determined using updated procedures to roll forward the total pension liability from an actuarial valuation as of June 30, 2019, to the measurement date of June 30, 2020. Gilbert’s proportion of the net pension liability was based on Gilbert’s actual contributions to the plan relative to the total of all participating employers’ contributions for the year ended June 30, 2020. Gilbert’s proportion measured as of June 30, 2020, was 0.523%, which was an increase of 0.003% from its proportion measured as of June 30, 2019. 67 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2021 Gilbert’s reported liability at June 30, 2021, increased by $14,917,072 from the prior year liability of $75,693,697 because of changes in the ASRS’ net pension liability and Gilbert’s proportionate share of that liability. The ASRS’ publicly available financial report provides details on the change in the net pension liability. The allocation of pension liability to the funds is based on employer contributions for the fiscal year. Pension Expense and Deferred Outflows/Inflows of Resources – For the year ended June 30, 2021, Gilbert recognized pension expense for ASRS of $9,836,710. At June 30, 2021, Gilbert reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows of Resources Differences between expected and actual experience Net difference between projected and actual earnings on pension plan investments Changes in proportion and differences between Gilbert contributions and proportionate share of contributions Gilbert contributions subsequent to the measurement date Total $ $ 819,731 Deferred Inflows of Resources $ - 8,739,515 - 1,312,424 7,263,134 18,134,804 - $ The $7,263,134 reported as deferred outflows of resources related to ASRS pensions resulting from Gilbert’s contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2022. Gilbert did not have deferred inflows of resources related to ASRS pension during the year. 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: Year Ending June 30 2022 2023 2024 2025 2026 Thereafter $ Amount 2,202,539 2,804,869 3,161,176 2,703,086 - Actuarial Assumptions – The significant actuarial assumptions used to measure the total pension liability are as follows: Actuarial valuation date Actuarial rollforward date Actuarial cost method Investment rate of return Projected salary increases Inflation Permanent benefit increase Mortality rates June 30, 2019 June 30, 2020 Entry age normal 7.5% 2.7% - 7.2% 2.3% Included 2017 SRA Scale U-MP Actuarial assumptions used in the June 30, 2019 valuation were based on the results of an actuarial experience study for the 5-year period ended June 30, 2016. 68 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2021 The long-term expected rate of return on ASRS pension plan investments was determined to be 7.5% using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of geometric real rates of return for each major asset class are summarized in the following table: Target Allocation 50% 20% 10% 20% 100% Asset Class Equity Fixed income - credit Fixed income - Interest rate sensitive Real estate Long-Term Expected Geometric Real Rate of Return 6.39% 5.44% 0.22% 5.85% Discount Rate – At June 30, 2020, the discount rate used to measure the ASRS total pension liability was 7.5%. 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 statute. 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. Sensitivity of Gilbert’s Proportionate Share of the ASRS Net Pension Liability to Changes in the Discount Rate – The following presents Gilbert’s proportionate share of the net pension liability calculated using the discount rate of 7.5%, as well as what Gilbert’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower (6.5%) or 1 percentage point higher (8.5%) than the current rate: 1% Decrease (6.5%) Gilbert's proportionate share of the net pension liability $ 123,908,997 Current Discount Rate (7.5%) $ 90,610,769 1% Increase (8.5%) $ 62,775,161 Pension Plan Fiduciary Net Position – Detailed information about the pension plan’s fiduciary net position is available in the separately issued ASRS financial report. The report is available on the ASRS website at www.azasrs.gov. 69 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2021 B. Public Safety Personnel Retirement System Plan Description – The PSPRS administers agent and cost-sharing multiple-employer defined benefit pension plans and agent multiple-employer defined benefit health insurance premium benefit (OPEB) plans. Gilbert public safety employees who are regularly assigned hazardous duty participate in the PSPRS or employees who became members on or after July 1, 2017, may participate in the Public Safety Personnel Defined Contribution Retirement Plan (PSPDCRP). A nine-member board known as the Board of Trustees and the participating local boards govern the PSPRS according to the provisions of A.R.S. Title 38, Chapter 5, Article 4. Employees who became PSPRS members on or after July 1, 2017, participate in the cost-sharing plans (PSPRS Tier 3 Risk Pool) which are not further disclosed because of their relative insignificance to Gilbert’s financial statements. The PSPRS issues a publicly available financial report that includes financial statements and required supplementary information. This report is available on their website at www.psprs.com. Benefits Provided – The PSPRS provides retirement, health insurance premium supplement, disability, and survivor benefits. State statute establishes benefits terms. Retirement and disability benefits are calculated on the basis of age, average monthly compensation, and service credit as follows: Retirement and survivor benefits are subject to automatic cost-of-living adjustments based on inflation. PSPRS also provides temporary disability benefits of 50% of the member’s compensation for up to 12 months. 70 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2021 Employees Covered by Benefit Terms – At June 30, 2021, the following employees were covered by the agent pension plan’s benefit terms: Police Inactive employees or beneficiaries currently receiving benefits Inactive employees entitled to but not yet receiving benefits Active employees Total Fire 82 59 189 330 27 21 155 203 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, 2021, are indicated below. Rates are a percentage of active members’ annual covered payroll. Active MemberPension Police PSPRS Tier 1 PSPRS Tier 2 PSPRS Tier 3 Defined benefit only PSPRS Tier 3 Defined contribution only Fire PSPRS Tier 1 PSPRS Tier 2 PSPRS Tier 3 Defined benefit only PSPRS Tier 3 Defined contribution only Active MemberHealth 7.65% 11.65% 9.21% 0.14% GilbertPension GilbertHealth 31.76% 31.76% 0.27% 0.27% 26.39% 0.14% 10.41% 27.00% 7.65% 11.65% 22.79% 22.79% 0.29% 0.29% 16.90% 0.14% 9.21% 0.14% 10.41% 17.51% In addition, the statute required Gilbert to contribute at the actuarially determined rate indicated above for employees participating in the PSPRS Tier 3 Risk Pool and PSPDCRP members in addition to Gilbert’s required contributions to the PSPRS Tier 3 Risk Pool and PSPDCRP. For the agent plans, actual contributions made to the pension plan for the year ended June 30, 2021, exceeded the annual pension cost due to an additional payment made towards the unfunded liability (100% from the General Fund): Police Pension contributions made $ 18,652,558 Fire $ 5,715,102 Pension Liability – At June 30, 2021, Gilbert reported $61,219,990 in net pension liability. The net pension liabilities were measured as of June 30, 2020, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. 71 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2021 Actuarial Assumptions – The significant actuarial assumptions used to measure the total pension liability are as follows: Actuarial valuation date Actuarial cost method Investment rate of return Wage inflation Price inflation Cost-of-living adjustment Mortality rates June 30, 2020 Entry age normal 7.3% 3.5% 2.5% 1.75% PubS-2010 tables Actuarial assumptions used in the June 30, 2020, valuation were based on the results of an actuarial experience study for the 5-year period ended June 30, 2017. The long-term expected rate of return on PSPRS pension plan investments was determined to be 7.3% using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expenses and inflation) are developed for each major asset class. The target allocation and best estimates of geometric real rates of return for each major asset class are summarized in the following table: Target Allocation 23% 15% 18% 7% 2% 22% 12% 1% 100% Asset Class U.S. public equity International public equity Global private equity Other assets (capital appreciation) Core bonds Private credit Diversifying strategies Cash Long-Term Expected Geometric Real Rate of Return 4.93% 6.09% 8.42% 5.61% 0.22% 5.31% 3.22% -0.60% Pension Discount Rates – At June 30, 2020, the discount rate used to measure total pension liability was 7.3%. The projection of cash flows used to determine the 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 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. 72 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2021 Changes in the Agent Plans Net Pension Liability Police Total Pension Liability Balances at June 30, 2020 Adjustment to beginning of year Changes for the year: Service cost Interest on the total pension liability Differences between expected results and actual experience in the measurement of the total pension liability Contributions - employer Contributions - employee Net investment income Benefit payments Administrative expense Net changes Balances at June 30, 2021 $ 152,920,976 - 3,349,250 (6,409,473) 12,340,070 165,261,046 $ Total Pension Liability Contributions - employer Contributions - employee Net investment income Benefit payments Administrative expense Net changes Balances at June 30, 2021 $ 4,166,829 11,233,464 Fire Balances at June 30, 2020 Adjustment to beginning of year Changes for the year: Service cost Interest on the total pension liability Differences between expected results and actual experience in the measurement of the total pension liability Increase/ (Decrease) Plan Fiduciary Net Position $ 100,805,751 - $ 73 $ - $ 25,390,957 1,845,450 1,512,207 (6,409,473) (123,284) 20,823,368 124,456,116 $ 82,657,955 (546,663) $ $ 3,349,250 (25,390,957) (1,845,450) (1,512,207) 123,284 (8,483,298) 40,804,930 Net Pension Liability $ - 11,097,287 1,297,110 1,130,134 (2,514,806) (92,147) 10,370,915 93,028,870 49,288,228 1,392,489 4,166,829 11,233,464 Increase/ (Decrease) Plan Fiduciary Net Position 3,696,610 7,536,882 3,919,493 (2,514,806) 12,638,179 113,443,930 103,632,748 (1,392,489) Net Pension Liability 18,147,796 546,663 3,696,610 7,536,882 $ 3,919,493 (11,097,287) (1,297,110) (1,130,134) 92,147 2,267,264 20,415,060 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2021 Sensitivity of the Net Pension Liability to Changes in the Discount Rate – The following presents Gilbert’s net pension liability calculated using the discount rate of 7.3%, as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower (6.3%) or 1 percentage point higher (8.3%) than the current rate: 1% Decrease (6.3%) Police net pension liability Fire net pension liability $ 66,368,477 38,924,927 Current Discount Rate (7.3%) $ 40,804,930 20,415,060 1% Increase (8.3%) $ 20,277,705 5,466,699 Pension Plan Fiduciary Net Position – Detailed information about the pension plan’s fiduciary net position is available in the separately issued PSPRS financial report. The report is available on the PSPRS website at www.psprs.com. Pension Expense – For the year ended June 30, 2021, Gilbert recognized $7,595,420 as pension expense for Police and $2,441,653 as pension expense for Fire. Pension Deferred Outflows/Inflows of Resources – At June 30, 2021, Gilbert reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows of Resources Police Differences between expected and actual experience Changes in assumptions or other inputs Net difference between projected and actual earnings on pension plan investments Gilbert contributions subsequent to the measurement date Total $ $ 4,817,340 5,003,549 5,514,528 18,652,558 33,987,975 Deferred Inflows of Resources $ $ Deferred Outflows of Resources Fire Differences between expected and actual experience Changes in assumptions or other inputs Net difference between projected and actual earnings on pension plan investments Gilbert contributions subsequent to the measurement date Total 74 $ $ 6,371,210 3,764,549 4,428,467 5,715,102 20,279,328 Deferred Inflows of Resources $ $ 3,728,186 3,728,186 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2021 The $18,652,558 for Police and the $5,715,102 for Fire reported as deferred outflows of resources related to PSPRS pension resulting from contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2022. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year Ending June 30 2022 2023 2024 2025 2026 Thereafter $ Police 3,853,024 3,948,196 3,121,463 2,673,664 1,260,606 478,464 $ Fire 1,923,530 2,469,276 2,445,855 2,010,697 891,201 1,095,481 Note 10 – Postemployment Healthcare Benefits Under authority of Town Council, Gilbert provides postretirement insurance benefits, for certain retirees and their dependents in accordance with the Town of Gilbert, Arizona Self-Insured Trust Fund for Health Insurance Benefits. The plan is a single-employer defined benefit OPEB plan administered by Gilbert. No assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB Statement No. 75. Generally, retiree contributions are used to pay for postemployment benefits. Benefits Provided – Gilbert provides postemployment medical care, prescription drug, and dental care for retired employees through a single-employer defined benefit medical and dental plan (the Plan). The Plan provides medical and dental benefits for eligible retirees, their spouses and dependents through Gilbert’s group health and dental insurance plans, which cover active and retired members. To be eligible for benefits, the retired employee must retire under one of the state retirement plans for public employees, must have a minimum of ten years of service with Gilbert, and be covered under Gilbert’s medical plan during their active status. Plan benefits and coverage levels are reviewed annually by Town staff and the Board of Trustees for recommendation to and approval from Town Council. The Board of Trustees makes corresponding premium recommendations to the Town Council based on revenues needed to cover the projected cost to operate the plan which are subject to approval by the Town Council. As of June 30, 2021, there are 57 retirees that are currently receiving medical and/or dental benefits. Contributions – Gilbert requires retirees to pay 125% of the premium of the plan selected by the retiree. Gilbert makes no contributions for retirees other than allowing them to participate through Gilbert’s pooled benefits. Town retirees are eligible to receive benefits through age 65, up until they have access to Medicare. By providing retirees access to Gilbert’s healthcare plans, Gilbert is in effect providing a subsidy to retirees. This implied subsidy exists because on average, retiree healthcare costs are higher than active employee healthcare costs. Gilbert pays for and reports retiree benefits on a pay-as-you-go basis, which is the practice of paying for these benefits as they become due each year. As of June 30, 2021, retirees contributed $499,019, which was in excess of claims paid by $161,305. Gilbert’s regular insurance providers underwrite the retiree policies. Retirees may not convert the benefit into an in-lieu payment to secure coverage under independent plans. The Plan does not issue a separate financial report. 75 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2021 Employees Covered by Benefit Terms – The following employees were covered as of the effective date of the OPEB valuation: Inactive employees or beneficiaries currently receiving benefits Inactive employees entitled to but not yet receiving benefits Active employees Total 57 1,259 1,316 Total OPEB Liability – The Plan’s total OPEB liability of $970,620 was measured as of June 30, 2021. Actuarial Assumptions and Other Inputs – Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and includes the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit cost between the employer and plan members to that point. The total OPEB liability in the June 30, 2021 actuarial valuation was determined using the following actuarial assumptions and other inputs, applied to all periods included in the measurement, unless otherwise specified: Measurement date Actuarial valuation date Interest rate Inflation rate Projected salary increases Health care cost trend rate: Medical and prescription drug June 30, 2021 June 30, 2021 1.92% 2.40% 3.00% 6.00% graded down to an ultimate rate of 5.00% over 5 years Consistent with medical/drug trends None N/A Retiree contribution increase ASRS subsidy increases Cost of living adjustments The discount rate was based on the Fidelity General Obligation AA 20-year yield as of the measurement date. Mortality rates for active employees were based on the PubG.H-2010 (general employees) and PubS.H-2010 (public safety) Employee Mortality Table, Generational with Projection Scale MP-2018 for males/females. Mortality rates for retirees were based on the PubG.H-2010 (current retirees and general employees) PubS.H2010 (public safety) Healthy Annuitant Mortality Table, Generational with Projection Scale MP-2018 for males/females. Changes in the Total OPEB Liability Balances at June 30, 2020 Changes for the year: Service cost Interest Differences between expected and actual experience Changes in assumptions/inputs Benefit payments Net changes Balances at June 30, 2021 76 $ 775,237 $ 88,914 22,369 181,231 (194,875) 97,744 195,383 970,620 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2021 Sensitivity of the Total OPEB Liability to Changes in the Discount Rate – The following presents the total OPEB liability of the Plan, as well as what the Plan’s total OPEB liability would be if it were calculated using a discount rate that is 1 percentage point lower or 1 percentage point higher than the current rate: Current Discount Rate (1.92%) 1% Decrease (0.92%) Total OPEB Liability $ 1,173,542 $ 970,620 1% Increase (2.92%) $ 799,302 Sensitivity of the Total OPEB Liability to Changes in the Healthcare Cost Trend Rates – The following presents the total OPEB liability of the Plan, as well as what the Plan’s total OPEB liability would be if it were calculated using healthcare cost trend rates that are 1 percentage point lower or 1 percentage point higher than the current rate: Current Trend 1% Decrease Rate 1% Increase Total OPEB Liability $ 764,239 $ 970,620 $ 1,230,453 OPEB Expense and Deferred Outflows/Inflows of Resource Related to OPEB – For the year ended June 30, 2021, the Plan recognized OPEB expense of $830. At June 30, 2021, the Plan reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: Deferred Outflows of Resources Changes between expected and actual experience Changes in assumptions or other inputs Total $ $ 167,179 648,780 815,959 Deferred Inflows of Resources $ $ 1,472,621 162,396 1,635,017 The amounts reported as deferred outflows of resources and inflows of resources will be recognized in pension expense as follows: Year Ending June 30 2022 2023 2024 2025 2026 Thereafter $ 77 Amount (208,197) (208,197) (208,197) (192,192) (2,274) - Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2021 Note 11 – Fund Balance Classifications of the Governmental Funds Major Capital Project Funds Fund Balances: Nonspendable: Advances Prepaid items Restricted for: Capital projects Court/public safety programs Debt service Highways and streets Contract agreements Parks & recreation programs Transportation Special districts Assigned to: Capital replacement Capital projects Highways and streets Management and policy Unassigned: Total fund balances Streets Special Revenue General $ 9,061,893 2,499,579 - $ 10,593,959 - 34,850,195 31,301,451 10,534,382 60,958 139,519,526 $ 227,827,984 Streets & Traffic $ 49,431,752 - $ 10,593,959 26,112,912 - $ 49,431,752 Municipal Facilities Parks $ Major Debt Service Funds $ 26,112,912 $ 1,917,092 (9,061,893) $ (7,144,801) Debt Service Special Assessments $ $ - - 4,416,142 $ 4,416,142 $ Other Gov't $ Total - $ 9,061,893 2,499,579 84,818 - 2,092,551 65,675 74,560 446,926 467,694 77,461,756 2,092,551 4,500,960 10,593,959 65,675 74,560 446,926 467,694 - (196,732) 34,850,195 31,301,451 10,534,382 60,958 130,260,901 $ 2,950,674 $ 314,273,440 84,818 Note 12 – Capital Contributions During the year ended June 30, 2021, the enterprise funds external capital contributions consisted of the following: Development fees $ Water 16,291,108 78 $ Wastewater 5,338,837 $ Total 21,629,945 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2021 Note 13 – Interfund Transfers As of June 30, 2021, interfund transfers were as follows: Transfers In Governmental Funds: General Streets Special Revenue Streets and Traffic Capital Projects Parks Capital Projects Municipal Facilities Capital Projects General Debt Service Other Governmental Funds Total Governmental Funds $ Enterprise Funds: Water Wastewater Environmental Services Total Enterprise Funds 1,218,444 11,819,916 6,354,431 6,135,879 19,073,408 2,384,470 46,986,548 Transfers Out $ 724,302 2,700,000 3,424,302 Total Transfers $ 50,410,850 37,086,681 1,027,190 5,171,562 6,074,508 291,607 49,651,548 759,302 759,302 $ 50,410,850 The interfund transfers generally fall within one of the following categories: 1) subsidy transfers; 2) transfers to cover debt service payments; 3) transfers to fund capital project costs; or 4) transfers to fund capital replacement. There were no significant transfers during fiscal year 2021 that were either non-routine in nature or inconsistent with the activities of the fund making the transfer. Note 14 – Individual Fund Disclosures Individual funds with deficiencies in fund balance/net position at June 30, 2021, were as follows: Governmental funds Municipal Facilities Capital Projects Grants $ 7,144,801 180,802 The deficiency in the Municipal Facilities Capital Projects Fund, a major governmental fund, is primarily due to long-term loans that cover cash deficits for capital expenditures. Future system development fee revenue is expected to eliminate the deficiency. The deficiency in the Grants Fund, a non-major governmental fund, is primarily due to unavailable revenue related to various grants. Future grant revenue is expected to eliminate the deficiency. Internal service funds Equipment Maintenance $ 354,497 The deficiency in the Equipment Maintenance Fund, an internal service fund, is due to the net pension liability. 79 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2021 Note 15 – Contingent Liabilities Gilbert is a defendant in various lawsuits. Although the outcome of these lawsuits is not presently determinable, in the opinion of Gilbert’s legal counsel, the resolution of these matters will not have a material adverse effect on the financial condition of Gilbert. Note 16 – Pledged Revenues Gilbert has pledged future water system development fees revenue and future water and wastewater revenues, net of specified operating expenses, to repay $153,400,000 in utility system revenue and revenue refunding bonds issued since 2016. Proceeds from the utility system revenue bonds provided financing for water and wastewater system improvements, and the proceeds from the revenue refunding bonds were used to advance refund $75,326,000 of outstanding 2007 utility system revenue bonds. The bonds are payable from water and wastewater system development fees and water and wastewater net revenues and are payable through 2036. Annual principal and interest payments on the bonds are expected to require less than 29 percent of revenue described above. The total principal and interest remaining to be paid on the bonds is $150,244,638. Principal and interest paid for the current year was $13,437,313. Total water and wastewater system SDF revenue was $14,232,149 and water and wastewater net revenues were $33,415,625. Gilbert has pledged future excise taxes and state-shared revenues to repay $98,585,000 in public facilities municipal property corporation (MPC) revenue bonds issued since 2011; $20,980,000 in public facilities MPC revenue refunding bonds issued in 2011, $28,080,000 in public facilities MPC revenue refunding bonds issued in 2014, $43,075,000 in public facilities MPC revenue refunding bonds issued in 2017, and $6,450,000 in public facilities MPC revenue bonds issued in 2017. Proceeds from the bonds provided financing of the multipurpose public safety complex, the South Area Service Center facility, a police property facility, a sports complex, various other parks and recreation facilities, a parking facility, and a fire and rescue station. Proceeds from the 2011 refunding bonds were used to advance refund $21,670,000 of outstanding 2001 public facilities MPC revenue bonds. Proceeds from the 2014 refunding bonds were used to advance refund $30,205,000 of outstanding 2006 public facilities MPC revenue bonds. Proceeds from the 2017 refunding bonds were used to advance refund $56,845,000 of outstanding 2009 public facilities MPC revenue bonds. The bonds are payable through 2028. In addition, Gilbert has pledged future excise taxes and state-shared revenues to repay $36,980,000 in revenue obligations issued in 2015. Proceeds from the obligations provided financing to design and construct a four-story building for educational purposes. Annual principal and interest payments on the bonds and obligations are expected to require less than 9 percent of excise taxes and state-shared revenues. The total principal and interest remaining to be paid on the bonds and obligations is $96,526,519. Principal and interest paid for the current year was $19,068,981, and the total excise taxes and state-shared revenues were $222,921,775. Note 17 – Investment in Joint Venture In fiscal year 2021, Gilbert, in joint effort with Mesa and Queen Creek, completed improvements as part of the Phase III Expansion for the Greenfield Water Reclamation Plant (GWRP) located on the northwest corner of Greenfield and Queen Creek Roads. This project included process improvements and upgrades to increase the plant’s capacity from 16 million gallons per day (mgd) to 30 mgd, as well as maintenance and improvements to the existing infrastructure of the plant. Mesa, Gilbert and Queen Creek participate in ownership of the plant and are charged for operating expenses based on gallons of flow. Gilbert’s investment in joint venture is reflected as a separate line item in the proprietary funds financial statements. Separate financial statements for the joint venture are not prepared. 80 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2021 Total investment (net of depreciation) as of June 30, 2021, was: Mesa's share Gilbert's share Queen Creek's share Total $ 164,990,022 106,515,484 32,300,317 $ 303,805,823 Gilbert and the City of Chandler entered into an agreement to build a joint water treatment plant to provide each with 24 mgd of water. The plant was completed in two phases with each phase providing 12 mgd to both Gilbert and Chandler. Phase I was completed in fiscal year 2009 and Phase II in fiscal year 2018. Gilbert’s investment in joint venture is reflected as a separate line item in the proprietary funds financial statements. Separate financial statements for the joint venture are not prepared. Total investment (net of depreciation) as of June 30, 2021, was: Gilbert's share Chandler's share Total $ 80,612,880 73,987,682 $ 154,600,562 In August 2008, Gilbert entered into an Intergovernmental Agreement with the Cities of Mesa and Apache Junction, Superstition Fire & Medical (F&M), and the Town of Queen Creek (the Parties) to plan, design, construct, operate, maintain and finance the TOPAZ Regional Wireless Cooperative Network (Trunked Open Arizona Network – 700/800 MHz Network procured and built by the City of Mesa). On May 1, 2012 and October 26, 2015, Rio Verde Fire District (FD) and Fort McDowell Yavapai Nation (Fort McDowell), respectively, joined TOPAZ. The City of Mesa acts as the lead agency and is responsible for the planning, budgeting, construction, operation and maintenance of the network, in addition to providing all management personnel and financing arrangements. The Parties participate in ownership of the network and are charged for operating and capital expenses based on a six-month rolling average of airtime. Gilbert’s investment in joint venture is reflected within the governmental activities in the government-wide statement of net position. Separate financial statements are not prepared. Total investment (net of depreciation) as of June 30, 2021, was: Mesa's share Gilbert's share Apache Junction's share Superstition F&M's share Queen Creek's share Fort McDowell's share Rio Verde FD's share Total 81 $ $ 6,008,990 1,766,539 514,183 159,911 106,112 37,442 12,312 8,605,489 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2021 Note 18 – Tax Abatements Gilbert has made a commitment as part of our economic development program to reimburse certain public improvement costs through transaction privilege taxes generated out of the respective development area. Additional information regarding this agreement may only be disclosed when a sufficient number of participants can be aggregated together. Gilbert has an insufficient number of participants within the development area to authorize such disclosure, as detailed information on such commitments is prohibited from disclosure under Arizona Revised Statute 42-2002 Disclosure of Confidential Information Prohibited. Note 19 – Subsequent Events On November 2, 2021, Gilbert voters authorized the issuance of $515,000,000 in General Obligation Bonds to fund streets, transportation, and infrastructure-related improvements. The bonds are expected to be issued in three increments over the next eight years. The voters also authorized a new franchise agreement with Southwest Gas Corporation (Utility) to continue to grant the Utility authority to serve the residents of Gilbert and recoup the costs of the Utility’s use of pubic rightof-way. The new agreement is for a period of 25 years, beginning June 10, 2022, and ending June 9, 2047. 82 Table of Contents REQUIRED SUPPLEMENTARY INFORMATION 83 Table of Contents 84 Table of Contents TOWN OF GILBERT, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION June 30, 2021 Schedule of the Proportionate Share of the Net Pension Liability Arizona State Retirement System Fiscal Year Proportion of the net pension liability Proportionate share of the net pension liability Covered payroll (1) Proportionate share of the net pension liability as a percentage of covered payroll Plan fiduciary net position as a percentage of the total pension liability 2021 2020 2019 2018 2017 0.52% $ 90,610,769 55,508,515 0.52% $ 75,693,697 52,965,805 0.49% $ 69,364,217 49,511,839 0.49% $ 76,832,504 48,187,902 0.49% $ 78,813,297 45,764,166 163% 143% 140% 159% 172% 69.33% 73.24% 73.40% 69.92% 67.06% Fiscal Year Proportion of the net pension liability Proportionate share of the net pension liability Covered payroll (1) Proportionate share of the net pension liability as a percentage of covered payroll Plan fiduciary net position as a percentage of the total pension liability 2016 2015 2014 through 2012 0.49% $ 75,695,863 43,765,044 0.47% $ 69,412,268 42,295,765 Information not available (2) 172% 164% 68.35% 69.49% (1) The covered payroll amount will be as of the measurement date of the net pension liability. For fiscal year 2021, the measurement date of the net pension liability is June 30, 2020. (2) The pension schedules in this required supplementary information are intended to show information for ten years. Additional years’ information will be displayed as it becomes available. 85 Table of Contents TOWN OF GILBERT, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION June 30, 2021 Schedule of Changes in the Net Pension Liability and Related Ratios Public Safety Personnel Retirement System – Police Fiscal Year 2021 Total pension liability: Service cost Interest on the total pension liability Changes in benefit terms Differences between expected and actual experience in the measurement of the total pension liability Changes in assumptions or other inputs Benefit payments, including refunds of employee contributions Net change in total pension liability Total pension liability - beginning Total pension liability - ending (a) Plan fiduciary net position: Contributions - employer Contributions - employee Net investment income Benefit payments, including refunds of employee contributions Administrative expense Other changes Net change in plan fiduciary net position Plan fiduciary net position - beginning Adjustment to beginning of year Plan fiduciary net position - ending (b) Net pension liability - ending (a) - (b) $ 4,166,829 11,233,464 - $ 4,173,615 10,325,605 - 2019 $ 4,056,282 9,457,916 - 2018 $ 4,361,408 8,535,995 1,136,619 3,349,250 - 1,313,900 3,858,110 847,849 - 928,575 3,680,906 (6,409,473) 12,340,070 152,920,976 165,261,046 (4,223,688) 15,447,542 137,473,434 152,920,976 (5,340,286) 9,021,761 128,451,673 137,473,434 (3,648,774) 14,994,729 113,456,944 128,451,673 25,390,957 1,845,450 1,512,207 7,682,173 1,487,218 5,637,557 7,551,083 1,973,907 6,242,434 12,682,256 2,271,326 8,763,809 (6,409,473) (123,284) 22,215,857 103,632,748 (1,392,489) 124,456,116 (4,223,688) (98,934) 10,484,326 93,189,007 (40,585) 103,632,748 (5,340,286) (95,708) 106,036 10,437,466 82,751,541 93,189,007 (3,648,774) (77,945) 153,768 20,144,440 62,607,101 82,751,541 $ 40,804,930 $ 49,288,228 $ 44,284,427 $ 45,700,132 75.31% 67.77% 67.79% 64.42% $ 17,973,970 $ 20,212,530 $ 18,572,542 $ 18,694,661 227.02% 243.85% 238.44% 244.46% Plan fiduciary net position as a percentage of the total pension liability Covered payroll (1) 2020 Gilbert's net pension liability as a percentage of covered payroll (1) The covered payroll amount will be as of the measurement date of the net pension liability. For fiscal year 2021, the measurement date of the net pension liability is June 30, 2020. (2) The pension schedules in this required supplementary information are intended to show information for ten years. Additional years’ information will be displayed as it becomes available. 86 Table of Contents TOWN OF GILBERT, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION June 30, 2021 Fiscal Year 2017 $ 3,466,239 7,222,969 9,149,421 2016 $ 3,570,214 6,604,564 - 2015 $ 3,293,404 5,414,469 605,849 547,040 4,549,861 713,111 - 2,479,128 5,473,070 (3,515,621) 21,419,909 92,037,035 113,456,944 (2,400,631) 8,487,258 83,549,777 92,037,035 (2,087,138) 15,178,782 68,370,995 83,549,777 4,426,923 2,243,118 365,916 3,280,061 2,107,439 2,037,534 3,103,356 2,088,159 6,306,779 (3,515,621) (53,053) 113,260 3,580,543 59,026,558 62,607,101 (2,400,631) (50,099) 75,447 5,049,751 53,976,807 59,026,558 (2,087,138) (50,793) 49,298 9,409,661 44,567,146 53,976,807 $ 50,849,843 $ 33,010,477 $ 29,572,970 55.18% 64.13% 64.60% $ 19,247,567 $ 19,071,843 $ 18,990,156 264.19% 173.08% 155.73% 2014 through 2012 Information not available (2) 87 Table of Contents TOWN OF GILBERT, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION June 30, 2021 Schedule of Changes in the Net Pension Liability and Related Ratios Public Safety Personnel Retirement System – Fire Fiscal Year 2021 Total pension liability: Service cost Interest on the total pension liability Changes in benefit terms Differences between expected and actual experience in the measurement of the total pension liability Changes in assumptions or other inputs Benefit payments, including refunds of employee contributions Net change in total pension liability Total pension liability - beginning Total pension liability - ending (a) Plan fiduciary net position: Contributions - employer Contributions - employee Net investment income Benefit payments, including refunds of employee contributions Administrative expense Other changes Net change in plan fiduciary net position Plan fiduciary net position - beginning Adjustment to beginning of year Plan fiduciary net position - ending (b) Net pension liability - ending (a) - (b) $ 3,696,610 7,536,882 - $ 3,690,094 7,024,670 - 2019 $ 3,661,929 6,428,184 - 2018 $ 3,652,130 5,586,910 434,841 3,919,493 - (1,850,677) 1,934,990 (1,694,618) - 3,761,967 444,609 (2,514,806) 12,638,179 100,805,751 113,443,930 (2,462,421) 8,336,656 92,469,095 100,805,751 (1,925,561) 6,469,934 85,999,161 92,469,095 (1,094,738) 12,785,719 73,213,442 85,999,161 11,097,287 1,297,110 1,130,134 3,866,247 1,241,407 4,444,022 5,035,275 1,365,916 4,953,004 5,192,069 1,860,471 6,959,055 (2,514,806) (92,147) 10,917,578 82,657,955 (546,663) 93,028,870 (2,462,421) (78,196) 7,011,059 75,671,432 (24,536) 82,657,955 (1,925,561) (76,084) 7,224 9,359,774 66,311,658 75,671,432 (1,094,738) (61,976) 636 12,855,517 53,456,141 66,311,658 $ 20,415,060 $ 18,147,796 $ 16,797,663 $ 19,687,503 82.00% 82.00% 81.83% 77.11% $ 15,790,177 $ 16,590,770 $ 16,176,854 $ 16,132,031 129.29% 109.38% 103.84% 122.04% Plan fiduciary net position as a percentage of the total pension liability Covered payroll (1) 2020 Gilbert's net pension liability as a percentage of covered payroll (1) The covered payroll amount will be as of the measurement date of the net pension liability. For fiscal year 2021, the measurement date of the net pension liability is June 30, 2020. (2) The pension schedules in this required supplementary information are intended to show information for ten years. Additional years’ information will be displayed as it becomes available. 88 Table of Contents TOWN OF GILBERT, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION June 30, 2021 Fiscal Year 2017 $ 2,728,554 4,550,994 7,610,545 2016 $ 2,785,128 4,138,400 - 2015 $ 2,545,607 3,408,433 (131,651) (1,091,858) 3,069,903 (1,235,512) - 2,247,902 1,333,403 (529,722) 16,338,416 56,875,026 73,213,442 (277,805) 5,410,211 51,464,815 56,875,026 (171,217) 9,232,477 42,232,338 51,464,815 3,183,837 1,792,809 300,260 1,845,382 1,903,578 1,653,304 1,954,145 1,667,772 5,045,090 (529,722) (43,606) 96,335 4,799,913 48,656,228 53,456,141 (277,805) (40,728) (229,513) 4,854,218 43,802,010 48,656,228 (171,217) (40,631) 8,455,159 35,346,851 43,802,010 $ 19,757,301 $ 8,218,798 $ 2014 through 2012 Information not available (2) 7,662,805 73.01% 85.55% 85.11% $ 15,444,728 $ 15,274,115 $ 15,508,151 127.92% 53.81% 49.41% 89 Table of Contents TOWN OF GILBERT, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION June 30, 2021 Schedule of Pension Contributions: Arizona State Retirement System Actuarially determined contribution Contributions in related to the actuarially determined contributions Contribution deficiency (excess) Covered payroll Contributions as a percentage of covered payroll Actuarially determined contribution Contributions in related to the actuarially determined contributions Contribution deficiency (excess) Covered payroll Contributions as a percentage of covered payroll 2021 2020 Fiscal Year 2019 2018 2017 $ 7,263,134 $ 6,355,725 $ 5,921,577 $ 5,338,739 $ 5,187,460 $ 7,263,134 - $ 6,355,725 - $ 5,921,577 - $ 5,338,739 - $ 5,187,460 - $ 62,344,498 $ 55,508,515 $ 52,965,805 $ 49,511,839 $ 48,187,902 11.65% 11.45% 11.18% 10.78% 10.77% 2016 2015 Fiscal Year 2014 2013 2012 $ 5,278,569 $ 5,137,457 $ 4,763,978 $ 4,162,425 $ 3,880,631 $ 5,278,569 - $ 5,137,457 - $ 4,763,978 - $ 4,162,425 - $ 3,880,631 - $ 45,764,166 $ 43,765,044 $ 42,295,765 $ 38,356,312 $ 36,582,049 11.53% 11.74% 11.26% 10.85% 10.61% 90 Table of Contents TOWN OF GILBERT, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION June 30, 2021 Schedule of Pension Contributions: Public Safety Retirement System – Police 2020 Fiscal Year 2019 2018 2017 5,649,219 $ 6,410,919 $ 6,170,252 $ 4,501,937 18,652,558 $ (13,000,000) 20,376,341 $ (14,727,122) 11,245,894 $ (4,834,975) 7,330,436 $ (1,160,184) 12,700,837 $ (8,198,900) $ 17,797,726 $ 17,973,970 $ 20,212,530 $ 18,572,542 $ 18,694,661 104.80% 113.37% 55.64% 39.47% 67.94% 2016 2015 Fiscal Year 2014 2013 2012 $ 2,930,117 $ 2,384,390 2021 Actuarially determined contribution Contributions in related to the actuarially determined contributions Contribution deficiency (excess) Covered payroll Contributions as a percentage of covered payroll Actuarially determined contribution Contributions in related to the actuarially determined contributions Contribution deficiency (excess) Covered payroll Contributions as a percentage of covered payroll $ 5,652,558 $ $ 4,021,770 $ 3,414,607 $ 3,231,755 $ 4,449,337 (427,567) $ 3,414,607 - $ 3,231,755 - $ 2,930,117 - $ 2,384,390 - $ 19,247,567 $ 19,071,843 $ 18,990,156 $ 17,477,557 $ 16,492,849 23.12% 17.90% 17.02% 16.77% 14.46% Public Safety Retirement System – Fire 2020 Fiscal Year 2019 2018 2017 3,495,945 $ 4,009,743 $ 4,644,867 $ 3,266,367 5,715,102 $ (2,000,000) 6,652,405 $ (3,156,460) 7,556,014 $ (3,546,271) $ 5,096,285 (451,418) 5,307,483 $ (2,041,116) $ 16,301,459 $ 15,790,177 $ 16,590,770 $ 16,176,854 $ 16,132,031 35.06% 42.13% 45.54% 31.50% 32.90% 2021 Actuarially determined contribution Contributions in related to the actuarially determined contributions Contribution deficiency (excess) Covered payroll Contributions as a percentage of covered payroll $ 3,715,102 $ 2016 Actuarially determined contribution Contributions in related to the actuarially determined contributions Contribution deficiency (excess) Covered payroll Contributions as a percentage of covered payroll 2015 Fiscal Year 2014 2013 2012 $ 1,793,907 $ 1,479,746 $ 2,241,688 $ 1,982,159 $ 2,037,266 $ 3,088,477 (846,789) $ 1,982,159 - $ 2,037,266 - $ 1,793,907 - $ 1,479,746 - $ 15,444,728 $ 15,274,115 $ 15,508,151 $ 13,954,822 $ 13,335,971 20.00% 12.98% 13.14% 12.86% 11.10% 91 Table of Contents TOWN OF GILBERT, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION June 30, 2021 Schedule of Changes in the Town’s Total OPEB Liability and Related Ratios: Town of Gilbert Defined Benefit Plan Fiscal Year 2021 Total OPEB liability: Service cost Interest on the total OPEB liability Differences between expected and actual experience in the measurement of the total OPEB liability Changes in assumptions/inputs Benefit payments, including refunds of employee contributions Net change in total OPEB liability Total OPEB liability - beginning Total OPEB liability - ending $ Covered payroll (1) Gilbert's total OPEB liability as a percentage of covered payroll $ 2020 88,914 22,369 $ 69,208 17,841 2019 $ 87,269 54,575 2017 through 2012 2018 $ 84,727 58,026 181,231 (194,875) 24,230 74,733 (1,604,373) 159,488 (1,296,953) 1,184,917 97,744 195,383 775,237 970,620 176,849 362,861 412,376 775,237 118,124 (1,184,917) 1,597,293 $ 412,376 $ 96,758 127,475 1,469,818 1,597,293 $ 89,785,462 $ 83,544,308 $ 81,110,979 $ 72,406,115 1.1% 0.9% 0.5% $ Information not available (2) 2.2% (1) The covered payroll amount will be as of the measurement date of the total OPEB liability. For fiscal year 2021, the measurement date of the total OPEB liability is June 30, 2021. (2) The OPEB schedule in this required supplementary information is intended to show information for ten years. Additional years’ information will be displayed as it becomes available. (3) No assets are accumulated in a trust that meets the criteria of a trust as defined in GASB Statement No. 75, Accounting and Reporting for Postemployment Benefits Other than Pensions, to pay for the related benefits of this plan. 92 Table of Contents TOWN OF GILBERT, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION June 30, 2021 Notes to Pension Plan Schedules Note 1 – Actuarially Determined Contribution Rates Arizona State Retirement System (ASRS) The actuarial assumptions used in the June 30, 2019 valuation for ASRS were based on the results of an actuarial experience study for the five-year period ended June 30, 2016. The major changes in assumptions were the discount rate, the actuarial method, the inflation rate, the investment rate, and the mortality table. The ASRS Board adopted the experience study recommended changes which were applied to the June 30, 2017 actuarial valuation. Public Safety Personnel Retirement System (PSPRS) Actuarial determined contribution rates for the Public Safety Personnel Retirement System are calculated as of June 30 two years prior to the end of the fiscal year in which contributions are made. The actuarial methods and assumptions used to establish the contribution requirements are as follows: Actuarial cost method Amortization method Remaining amortization period as of the 2017 actuarial valuation Asset valuation method Actuarial assumptions: Investment rate of return Projected salary increases Wage growth Retirement age Mortality Entry age normal PSPRS members with initial membership date before July 1, 2017: Level percent-of-pay, closed PSPRS members with initial membership on or after July 1, 2017: Level dollar closed 18 years PSPRS members with initial membership date before July 1, 2017: 7-year smoothed market value; 80%/120% market corridor PSPRS members with initial membership on or after July 1, 2017: 5-year smoothed market value; 80%/120% market corridor PSPRS members with initial membership date before July 1, 2017: In the 2017 actuarial valuation, the investment rate of return was decreased from 7.5% to 7.4%. In the 2016 actuarial valuation, the investment rate of return was decreased from 7.85% to 7.5%. In the 2013 actuarial valuation, the investment rate of return was decreased from 8.0% to 7.85%. PSPRS members with initial membership on or after July 1, 2017: 7.0%. In the 2017 actuarial valuation, projected salary increased were decreased from 4.0%-8.0% to 3.5%-7.5%. In the 2014 actuarial valuation, projected salary increases were decreased from 4.5%-8.5% to 4.0%-8.0%. In the 2013 actuarial valuation, projected salary increases were decreased from 5.0%-9.0% to 4.5%-8.5%. In the 2017 actuarial valuation, wage growth was decreased from 4.0% to 3.5%. In the 2014 actuarial valuation, wage growth was decreased from 4.5% to 4.0%. In the 2013 actuarial valuation, wage growth was decreased from 5.0% to 4.5%. Experience-based table of rates that is specific to the type of eligibility condition. Last updated for the 2012 valuation pursuant to the experience study of the period July 1, 2006 – June 30, 2011. In the 2017 actuarial valuation, changed to RP-2014 tables, with 75% of MP-2016 fully generational projection scales. RP-2000 mortality table (adjusted by 105% for both males and females) 93 Table of Contents TOWN OF GILBERT, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION June 30, 2021 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 and EORP 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 and EORP 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 increased the PSPRS required contributions beginning in fiscal year 2019 for members who retired or will retire after the law’s effective date. 94 Table of Contents NONMAJOR FUNDS OTHER GOVERNMENTAL FUNDS Special Revenue Funds Special Revenue Funds are used to account for revenues and expenditures from specific taxes or other earmarked sources. Such funds are usually required by statute or ordinance to finance particular functions or activities. Grants – accounts for miscellaneous grants received from federal, state and local governments that require segregation of revenues and expenditures. Special Districts – accounts for taxes received from and expenditures of the street light maintenance improvement districts and parkway maintenance improvement districts. Other Special Revenue – accounts for revenues received from various agencies and sources, including seized funds from law enforcement agencies that are required to be used for specific purposes. Capital Projects Funds Capital Projects Funds are established to account for the acquisition and construction of major capital facilities other than those financed by proprietary funds. Other Capital Projects – accounts for the design and construction of redevelopment infrastructure and related funding. 95 Table of Contents TOWN OF GILBERT, ARIZONA Combining Balance Sheet Nonmajor Governmental Funds June 30, 2021 Special Revenue Special Districts Grants Assets Pooled cash and investments Receivables, net Taxes Accrued interest Accounts Due from other governments Total assets Liabilities Accounts payable Accrued liabilities Due to other funds Unearned revenue Total liabilities $ 11,926,216 $ 940,102 12,866,318 $ 497,471 8,368 270,142 12,080,030 12,856,011 $ 505,217 $ 24,744 529,961 $ 50,762 11,505 62,267 Capital Projects Other Special Revenue Other Capital Projects Total Nonmajor Governmental Funds $ 2,334,612 $ 256,643 $ 15,022,688 $ 4,709 250 2,329,632 4,669,203 $ 256,643 $ 24,744 4,709 250 3,269,734 18,322,125 $ 104,725 72,249 164,030 1,058,235 1,399,239 $ 256,643 256,643 $ 909,601 92,122 434,172 13,138,265 14,574,160 Deferred inflows of resources Unavailable revenue - grants Unavailable revenue - other Total deferred inflows of resources 191,109 191,109 - 606,182 606,182 - 191,109 606,182 797,291 Fund balances (deficits) Restricted Unassigned Total fund balances (deficits) $ 10,339 (191,141) (180,802) $ 467,694 467,694 $ 2,669,373 (5,591) 2,663,782 $ - $ 3,147,406 (196,732) 2,950,674 Total liabilities, deferred inflows, and fund balances (deficits) $ 12,866,318 $ 529,961 $ 4,669,203 $ 256,643 $ 18,322,125 96 Table of Contents TOWN OF GILBERT, ARIZONA Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended June 30, 2021 Capital Projects Special Revenue Special Districts Grants Revenues Property taxes Charges for services Intergovernmental Fines and forfeitures Gifts and donations Interest earnings Net change in fair value of investments Miscellaneous Total revenues $ Expenditures Current General government Management and policy Court Development services Public safety Police Fire Highways and streets Parks and recreation Transportation Non departmental Capital outlay Total expenditures 2,234,239 2,234,239 $ 2,747,227 2,747,227 Other Special Revenue Other Capital Projects $ $ 205,373 708,587 369,561 60,666 31,329 (22,400) 275 1,353,391 Total Nonmajor Governmental Funds - $ 2,747,227 205,373 2,942,826 369,561 60,666 31,329 (22,400) 275 6,334,857 1,469,281 5,476 6,069 - 33,018 244,552 - - 1,502,299 250,028 6,069 369,946 110,689 5,166 29,109 64,427 2,060,163 1,823,123 858,599 2,681,722 482,447 9,076 4,597 606,182 49,885 3,843 1,433,600 310,145 1,185,228 1,495,373 852,393 119,765 2,138,434 892,305 606,182 49,885 1,253,498 7,670,858 Excess (deficiency) of revenues over expenditures 174,076 65,505 (80,209) (1,495,373) (1,336,001) Other financing sources (uses) Transfers in Transfers out Total other financing sources (uses) 676,550 (273,028) 403,522 - 189,126 (18,579) 170,547 1,518,794 1,518,794 2,384,470 (291,607) 2,092,863 Net change in fund balances Fund balances (deficits) - beginning Fund balances (deficits) - ending 577,598 (758,400) (180,802) 65,505 402,189 467,694 90,338 2,573,444 2,663,782 23,421 (23,421) - 756,862 2,193,812 2,950,674 $ $ 97 $ $ $ Table of Contents 98 Table of Contents BUDGETARY COMPARISON SCHEDULES 99 Table of Contents TOWN OF GILBERT, ARIZONA Streets and Traffic Capital Projects Fund Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual – Budgetary Basis For the Year Ended June 30, 2021 Budgeted Amounts Original Revenues Intergovernmental System development fees Interest Total revenues $ 25,511,000 3,000,000 65,000 28,576,000 Non-GAAP Actual Final $ 25,511,000 3,000,000 65,000 28,576,000 $ 20,237,103 10,424,405 593,045 31,254,553 Variance with Final Budget Positive (Negative) $ (5,273,897) 7,424,405 528,045 2,678,553 Expenditures Current General government Highways and streets Non departmental Capital outlay Contingency Total expenditures 843,120 131,611,320 132,454,440 755,803 927,000 113,812,516 19,589,058 135,084,377 606,651 926,870 44,042,131 45,575,652 149,152 130 69,770,385 19,589,058 89,508,725 Excess (deficiency) of revenues over (under) expenditures (103,878,440) (106,508,377) (14,321,099) 92,187,278 29,053,970 (3,746,940) 25,307,030 29,053,970 (3,746,940) 25,307,030 11,819,916 11,819,916 (17,234,054) 3,746,940 (13,487,114) (81,201,347) (2,501,183) Other financing source (uses) Transfers in Transfers out Total other financing sources (uses) Net change in fund balances $ (78,571,410) Explanation of difference between budgetary ending fund balance at June 30, 2021, and GAAP ending fund balance: Fair market value adjustments on investments are recorded on the GAAP basis but are not recognized on the budget basis Change in fund balance as reported on the statement of revenues, expenses and changes in fund balance 100 $ (867,711) $ (3,368,894) $ 78,700,164 Table of Contents TOWN OF GILBERT, ARIZONA Parks Capital Projects Fund Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual – Budgetary Basis For the Year Ended June 30, 2021 Budgeted Amounts Original Revenues System development fees Interest Total revenues $ 7,500,000 65,000 7,565,000 Non-GAAP Actual Final $ 7,500,000 65,000 7,565,000 $ 17,750,206 294,045 18,044,251 Variance with Final Budget Positive (Negative) $ 10,250,206 229,045 10,479,251 Expenditures Current General government Parks and recreation Non departmental Capital outlay Contingency Total expenditures 278,000 3,690 22,838,160 23,119,850 255,794 3,690 15,228,959 8,213,267 23,701,710 13,647 3,663 5,428,881 5,446,191 242,147 27 9,800,078 8,213,267 18,255,519 Excess (deficiency) of revenues over (under) expenditures (15,554,850) (16,136,710) 12,598,060 28,734,770 Other financing sources (uses) Transfers in Transfers out Total other financing sources (uses) 13,163,770 (5,174,330) 7,989,440 13,163,770 (5,174,330) 7,989,440 6,354,431 (5,171,562) 1,182,869 (6,809,339) 2,768 (6,806,571) (8,147,270) 13,780,929 Net change in fund balances $ (7,565,410) Explanation of difference between budgetary ending fund balance at June 30, 2021, and GAAP ending fund balance: Fair market value adjustments on investments are recorded on the GAAP basis but are not recognized on the budget basis Change in fund balance as reported on the statement of revenues, expenses and changes in fund balance 101 $ (115,535) $ 13,665,394 $ 21,928,199 Table of Contents TOWN OF GILBERT, ARIZONA Municipal Facilities Capital Projects Fund Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual – Budgetary Basis For the Year Ended June 30, 2021 Budgeted Amounts Original Revenues System development fees Interest Total revenues $ 7,000,000 5,000 7,005,000 Non-GAAP Actual Final $ 7,000,000 5,000 7,005,000 $ 10,596,169 152,220 10,748,389 Variance with Final Budget Positive (Negative) $ 3,596,169 147,220 3,743,389 Expenditures Current Public safety Police General government Parks and recreation Non departmental Capital outlay Contingency Total expenditures 223,300 216,495 159,038 57,457 298,720 256,150 20,595,140 21,373,310 294,478 221,983 24,712,152 19,489,296 44,934,404 91,438 11,202 21,873,747 22,135,425 203,040 210,781 2,838,405 19,489,296 22,798,979 Excess (deficiency) of revenues over (under) expenditures (14,368,310) (37,929,404) (11,387,036) 26,542,368 Other financing sources (uses) Transfers in Transfers out Total other financing sources (uses) 33,150,410 (6,390,560) 26,759,850 33,150,410 (7,166,727) 25,983,683 6,135,879 (6,074,508) 61,371 (27,014,531) 1,092,219 (25,922,312) 12,391,540 $ (11,945,721) (11,325,665) Net change in fund balances $ Explanation of difference between budgetary ending fund balance at June 30, 2021, and GAAP ending fund balance: Fair market value adjustments on investments are recorded on the GAAP basis but are not recognized on the budget basis Change in fund balance as reported on the statement of revenues, expenses and changes in fund balance 102 (404,234) $ (11,729,899) $ 620,056 Table of Contents TOWN OF GILBERT, ARIZONA Debt Service Fund Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual – Budgetary Basis For the Year Ended June 30, 2021 Non-GAAP Actual Variance with Final Budget Positive (Negative) $ $ Budgeted Amounts Original Revenues Property taxes Interest earnings Total revenues $ 25,880,000 75,000 25,955,000 Final $ 25,880,000 75,000 25,955,000 25,855,907 152,917 26,008,824 (24,093) 77,917 53,824 Expenditures Debt service Principal Interest Fiscal and other charges Total expenditures 35,065,000 9,974,540 41,000 45,080,540 35,110,000 9,929,540 41,000 45,080,540 35,105,000 9,850,669 6,600 44,962,269 5,000 78,871 34,400 118,271 Excess (deficiency) of revenues over (under) expenditures (19,125,540) (19,125,540) (18,953,445) 172,095 Other financing sources (uses) Transfers in Total other financing sources (uses) 19,094,080 19,094,080 19,870,247 19,870,247 19,073,408 19,073,408 (796,839) (796,839) 744,707 119,963 Net change in fund balances $ (31,460) $ Explanation of difference between budgetary ending fund balance at June 30, 2021, and GAAP ending fund balance: Fair market value adjustments on investments are recorded on the GAAP basis but are not recognized on the budget basis Change in fund balance as reported on the statement of revenues, expenses and changes in fund balance 103 (35,293) $ 84,670 $ (624,744) Table of Contents TOWN OF GILBERT, ARIZONA Special Assessments Debt Service Fund Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual – Budgetary Basis For the Year Ended June 30, 2021 Budgeted Amounts Original Revenues Special assessments Interest earnings Total revenues $ Expenditures Debt service Principal Interest Fiscal and other charges Total expenditures Excess (deficiency) of revenues over (under) expenditures Net change in fund balances $ 5,342,840 5,342,840 Non-GAAP Actual Final $ 5,342,840 5,342,840 $ 617,024 1,902 618,926 Variance with Final Budget Positive (Negative) $ (4,725,816) 1,902 (4,723,914) 4,510,000 219,630 30,000 4,759,630 4,510,000 219,630 30,000 4,759,630 510,000 217,075 6,548 733,623 4,000,000 2,555 23,452 4,026,007 583,210 583,210 (114,697) (697,907) 583,210 (114,697) 583,210 Explanation of difference between budgetary ending fund balance at June 30, 2021, and GAAP ending fund balance: Fair market value adjustments on investments are recorded on the GAAP basis but are not recognized on the budget basis Change in fund balance as reported on the statement of revenues, expenses and changes in fund balance 104 $ (3,118) $ (117,815) $ (8,749,921) Table of Contents TOWN OF GILBERT, ARIZONA Grants Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual – Budgetary Basis For the Year Ended June 30, 2021 Budgeted Amounts Original Revenues Intergovernmental Total revenues $ Final 8,312,270 8,312,270 Expenditures Current General government Management and policy Court Development services Public safety Police Fire Highways and streets Parks and recreation Non departmental Capital outlay Contingency Total expenditures $ 8,312,270 8,312,270 Actual $ 2,234,239 2,234,239 Variance with Final Budget Positive (Negative) $ (6,078,031) (6,078,031) 1,512,930 - 2,878,558 - 1,469,281 5,476 6,069 1,409,277 (5,476) (6,069) 57,690 513,270 7,500 5,000,000 7,091,390 526,918 513,270 7,500 291,000 3,993,832 8,211,078 369,946 110,689 5,166 29,109 64,427 2,060,163 156,972 402,581 (5,166) (29,109) 7,500 226,573 3,993,832 6,150,915 Excess (deficiency) of revenues over (under) expenditures 1,220,880 101,192 174,076 72,884 Other financing sources (uses) Transfers in Transfers out Total other financing sources (uses) (1,220,880) (1,220,880) 679,056 (1,220,880) (541,824) 676,550 (273,028) 403,522 (2,506) 947,852 945,346 Net change in fund balances $ - 105 $ (440,632) $ 577,598 $ 1,018,230 Table of Contents TOWN OF GILBERT, ARIZONA Special Districts Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual – Budgetary Basis For the Year Ended June 30, 2021 Budgeted Amounts Original Revenues Property taxes Total revenues $ 2,748,230 2,748,230 Final $ 2,748,230 2,748,230 Actual $ 2,747,227 2,747,227 Variance with Final Budget Positive (Negative) $ (1,003) (1,003) Expenditures Current General government Highways and streets Parks and recreation Non departmental Total expenditures 1,939,000 1,107,450 10,000 3,056,450 1,939,000 1,107,450 10,000 3,056,450 1,823,123 858,599 2,681,722 115,877 248,851 10,000 374,728 Excess (deficiency) of revenues over (under) expenditures (308,220) (308,220) 65,505 373,725 Net change in fund balances $ (308,220) 106 $ (308,220) $ 65,505 $ (375,731) Table of Contents TOWN OF GILBERT, ARIZONA Other Special Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual – Budgetary Basis For the Year Ended June 30, 2021 Non-GAAP Actual Variance with Final Budget Positive (Negative) $ $ Budgeted Amounts Original Revenues Charges for services Intergovernmental Fines and forfeitures Gifts and donations Interest earnings Miscellaneous Total revenues $ 185,000 696,000 474,000 99,190 1,454,190 Final $ 185,000 696,000 474,000 99,190 1,454,190 205,373 708,587 369,561 60,666 31,329 275 1,375,791 20,373 12,587 (104,439) (38,524) 31,329 275 (78,399) Expenditures Current General government Management and policy Court Public safety Police Fire Parks and recreation Transportation Non departmental Capital outlay Total expenditures 108,410 568,340 118,410 568,340 33,018 244,552 85,392 323,788 578,460 64,410 39,270 860,000 56,390 2,275,280 693,615 64,410 39,270 860,000 56,390 3,850 2,404,285 482,447 9,076 4,597 606,182 49,885 3,843 1,433,600 211,168 55,334 34,673 253,818 6,505 7 970,685 Excess (deficiency) of revenues over (under) expenditures (821,090) (950,095) (57,809) 892,286 Other financing sources (uses) Transfers in Transfers out Total other financing sources (uses) 150,000 (15,000) 135,000 150,000 (19,000) 131,000 189,126 (18,579) 170,547 39,126 421 39,547 (819,095) 112,738 Net change in fund balances $ (686,090) $ Explanation of difference between budgetary ending fund balance at June 30, 2021, and GAAP ending fund balance: Fair market value adjustments on investments are recorded on the GAAP basis but are not recognized on the budget basis Change in fund balance as reported on the statement of revenues, expenses and changes in fund balance 107 (22,400) $ 90,338 $ 931,833 Table of Contents TOWN OF GILBERT, ARIZONA Other Capital Projects Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual – Budgetary Basis For the Year Ended June 30, 2021 Variance with Final Budget Positive (Negative) Budgeted Amounts Original Revenues Total revenues $ Final - $ Actual - $ - $ - Expenditures Current General government Highways and streets Capital outlay Contingency Total expenditures 902,850 7,711,780 8,614,630 730,080 8,363,806 972,084 10,065,970 310,145 1,185,228 1,495,373 419,935 7,178,578 972,084 8,570,597 Excess (deficiency) of revenues over (under) expenditures (8,614,630) (10,065,970) (1,495,373) 8,570,597 Other financing sources (uses) Transfers in Total other financing sources (uses) 8,223,320 8,223,320 8,223,320 8,223,320 1,518,794 1,518,794 (6,704,526) (6,704,526) Net change in fund balances $ (391,310) 108 $ (1,842,650) $ 23,421 $ 1,866,071 Table of Contents INTERNAL SERVICE FUNDS Internal Service Funds are used to account for the financing of goods or services provided by one department to other departments of the government, on a cost reimbursement basis. Equipment Maintenance – to account for the revenues and expenses from the maintenance of Gilbert's motorized equipment. Employee Benefit Self-Insurance – to account for and finance Gilbert’s uninsured risks of loss for medical, dental, and workers’ compensation claims. 109 Table of Contents TOWN OF GILBERT, ARIZONA Combining Statement of Net Position Internal Service Funds June 30, 2021 Assets Current assets Pooled cash and investments Receivables, net Accrued interest Accounts Due from other governments Deposits Inventories Total current assets Equipment Maintenance Employee Benefit SelfInsurance Total Internal Service Funds $ $ $ 1,358,349 13,032,263 14,390,612 2,852 5,400 753,855 2,120,456 28,143 1,258,962 22,506 50,000 14,391,874 30,995 1,258,962 27,906 50,000 753,855 16,512,330 5,261 191,463 196,724 2,317,180 14,391,874 5,261 191,463 196,724 16,709,054 Deferred outflows of resources Pensions and other postemployment benefits Total deferred outflows of resources 498,884 498,884 - 498,884 498,884 Liabilities Current liabilities Accounts payable Accrued liabilities Current portion of accrued compensated absences Claims payable Total current liabilities 342,705 108,033 92,027 542,765 45,698 4,646 4,068,000 4,118,344 388,403 112,679 92,027 4,068,000 4,661,109 141,820 16,009 2,442,999 2,600,828 3,143,593 4,118,344 141,820 16,009 2,442,999 2,600,828 7,261,937 26,968 26,968 - 26,968 26,968 196,724 (551,221) (354,497) 10,273,530 10,273,530 196,724 9,722,309 9,919,033 Noncurrent assets Non-depreciable Depreciable, net Total noncurrent assets Total assets Noncurrent liabilities Accrued compensated absences Other postemployment benefits Net pension liability Total noncurrent liabilities Total liabilities Deferred inflows of resources Pensions and other postemployment benefits Total deferred inflows of resources Net position Net investment in capital assets Unrestricted Total net position $ 110 $ $ Table of Contents TOWN OF GILBERT, ARIZONA Combining Statement of Revenues, Expenses, and Changes in Net Position Internal Service Funds For the Year Ended June 30, 2021 Operating revenues Charges for services Other Total operating revenues Equipment Maintenance Employee Benefit SelfInsurance Total Internal Service Funds $ $ $ Operating expenses General and administrative Personnel services Operation and maintenance Claims incurred Depreciation Total operating expenses 8,028,959 1,270 8,030,229 22,114,363 3,166,714 25,281,077 30,143,322 3,167,984 33,311,306 97,668 2,517,708 5,192,012 35,488 7,842,876 1,976,921 38,542 22,595,943 24,611,406 2,074,589 2,556,250 5,192,012 22,595,943 35,488 32,454,282 Operating income/(loss) 187,353 669,671 857,024 Nonoperating revenues (expenses) Interest earnings Net change in fair value of investments Gain (loss) on sale of capital assets Total nonoperating revenues (expenses) 4,610 (11,035) 3,360 (3,065) 154,108 (115,866) 38,242 158,718 (126,901) 3,360 35,177 Change in net position 184,288 707,913 892,201 Total net position - beginning Total net position - ending $ 111 (538,785) (354,497) $ 9,565,617 10,273,530 $ 9,026,832 9,919,033 Table of Contents TOWN OF GILBERT, ARIZONA Combining Statement of Cash Flows Internal Service Funds For the Year Ended June 30, 2021 Cash flows from operating activities Cash receipts from customers Other operating cash receipts Cash receipts from other funds for services Cash payments to suppliers for goods and services Cash payments to employees for services Net cash provided (used) by operating activities Equipment Maintenance Employee Benefit SelfInsurance Total Internal Service Funds $ $ $ Cash flows from capital and related financing activities Acquisition and construction of capital assets Proceeds from sale of capital assets Net cash provided (used) by capital and related financing activities Reconciliation of operating income to net cash provided by operating activities: Operating income/(loss) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation Changes in assets and liabilities: Accounts receivable Due from other governments Inventories Deferred outflows of resources Accounts payable Claims payable Deposits Accrued expenses Other postemployment benefits Net pension liability Deferred inflows of resources Net cash provided (used) by operating activities 195,567 3,167,984 30,438,202 (27,797,209) (2,378,246) 3,626,298 - (128,517) 3,360 (125,157) - (125,157) (6,072) (6,072) 42,859 42,859 36,787 36,787 $ 306,469 1,051,880 1,358,349 $ 3,231,459 9,800,804 13,032,263 $ 3,537,928 10,852,684 14,390,612 $ 187,353 $ 669,671 $ 857,024 $ 112 3,166,714 22,596,949 (22,541,167) (33,896) 3,188,600 (128,517) 3,360 Cash flows from investing activities Interest received on investments Net cash provided (used) by investing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of the year 195,567 1,270 7,841,253 (5,256,042) (2,344,350) 437,698 35,488 - 35,488 658 7,203 42,002 (206,297) (8,366) 41,909 2,807 463,785 (128,844) 437,698 487,141 (4,556) 38,698 2,043,000 (50,000) 4,646 3,188,600 487,799 2,647 42,002 (206,297) 30,332 2,043,000 (50,000) 46,555 2,807 463,785 (128,844) 3,626,298 $ $ Table of Contents STATISTICAL SECTION This part of Gilbert's Comprehensive Annual Financial Report presents detailed information as a context for understanding what the information in the financial statements and note disclosures says about Gilbert's overall financial health. Contents Page Financial Trends 114 These schedules contain trend information to help the reader understand how Gilbert's financial performance has changed over time. Revenue Capacity 121 These schedules contain information to help the reader assess Gilbert's most significant local revenue source, sales tax. Debt Capacity 124 These schedules present information to help the reader assess the affordability of Gilbert's current levels of outstanding debt and Gilbert's ability to issue additional debt in the future. Demographic and Economic Information 129 These schedules offer demographic and economic indicators to help the reader understand the environment within which Gilbert's financial activities take place. Operating Information 131 These schedules contain service and infrastructure data to help the reader understand how the information in Gilbert's financial report relates to the services Gilbert provides and the activities it performs. Other Information 134 Sources: Unless otherwise noted, the information in these schedules is derived from the Comprehensive Annual Financial Report for the relevant year. 113 Table of Contents Schedule 1 Town of Gilbert, Arizona Net Position by Component Last Ten Fiscal Years (accrual basis of accounting) (1,000's) 2012 Governmental activities Net investment in capital assets Restricted Unrestricted Total governmental activities net position Business-type activities Net investment in capital assets Restricted Unrestricted Total business-type activities net position Primary government Net investment in capital assets Restricted Unrestricted Total primary government net position $ $ $ $ 2013 695,983 52,219 83,273 831,475 $ 316,268 71,376 236,097 623,741 $ $ 1,012,251 123,595 319,370 $ 1,455,216 $ $ 2014 687,910 60,525 107,172 855,607 $ 325,357 70,879 263,978 660,214 $ $ 1,013,267 131,404 371,150 $ 1,515,821 $ $ 2015 680,717 80,924 92,357 853,998 $ 351,797 65,577 281,391 698,765 $ $ 1,032,514 146,501 373,748 $ 1,552,763 $ $ 688,900 82,546 30,276 801,722 $ 363,333 54,084 290,870 708,287 $ $ 1,052,233 136,630 321,146 $ 1,510,009 114 2016 $ $ 2017 735,369 83,227 49,960 868,556 $ 411,831 34,054 304,198 750,083 $ $ 1,147,200 117,281 354,158 $ 1,618,639 $ $ 2018 753,973 72,780 60,983 887,736 $ 399,537 42,814 342,616 784,966 $ $ 1,153,510 115,594 403,598 $ 1,672,702 $ $ 2019 790,285 76,701 45,964 912,950 $ 392,632 34,499 389,336 816,467 $ $ 1,182,917 111,200 435,299 $ 1,729,416 $ $ 2020 792,864 87,450 67,904 948,218 804,917 72,943 132,638 $ 1,010,497 825,952 91,917 162,177 $ 1,080,046 462,857 30,972 379,636 873,465 $ $ $ 1,255,721 118,422 447,540 $ 1,821,683 $ 2021 $ 468,440 24,873 408,154 901,467 $ 1,273,357 97,815 540,792 $ 1,911,964 $ $ 484,984 22,717 418,159 925,860 $ 1,310,936 114,634 580,336 $ 2,005,906 Table of Contents 115 Table of Contents Schedule 2 Town of Gilbert, Arizona Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) (1,000's) Expenses Governmental activities General government Management and policy Support services Finance and management services Court Development services Public safety Police Fire Highways and streets Parks and recreation Transportation Non departmental Interest and fiscal charges on long-term debt Total governmental activities expenses Business-type activities Water Wastewater Environmental services Total business-type activities expenses Total primary government expenses Program Revenues Governmental activities Charges for services Development services Police Fire Highways and streets Parks and recreation Other activities Operating grants and contributions Capital grants and contributions Total governmental activities program revenues 2012 $ 2,983 8,632 1,216 5,410 8,551 2013 $ 10,461 4,150 5,474 6,850 2014 $ 13,378 4,347 5,975 9,062 2015 $ 19,090 1,814 4,053 7,082 2016 $ 20,049 2,110 4,164 7,611 2017 $ 19,454 2,109 4,300 9,400 2018 $ 19,176 2,000 4,078 10,312 2019 $ 24,948 1,883 3,898 9,449 2020 $ 23,430 2,591 3,947 10,898 2021 $ 41,161 2,943 4,356 11,389 40,467 24,906 43,438 19,932 1,269 2,910 15,785 175,499 42,759 25,867 44,048 20,858 461 3,114 15,142 179,184 45,931 28,853 45,781 22,493 842 4,104 15,216 195,982 47,541 28,071 46,932 28,429 778 4,423 12,780 200,993 50,115 31,972 48,726 25,647 1,051 5,311 12,911 209,666 63,151 42,513 51,931 25,202 1,132 13,690 10,506 243,389 54,117 34,969 52,545 29,985 1,151 7,976 10,793 227,102 55,328 35,263 54,632 35,840 886 3,915 9,890 235,933 65,972 41,373 61,414 26,844 655 5,076 9,641 251,841 65,100 38,174 62,501 28,975 609 6,495 8,716 270,419 37,695 22,662 14,918 75,275 38,339 22,170 15,588 76,097 39,927 23,615 16,113 79,655 41,817 25,620 16,720 84,157 44,360 26,530 17,719 88,609 42,329 26,791 16,857 85,978 44,605 27,244 18,183 90,032 47,167 27,844 21,689 96,700 49,373 30,930 22,928 103,231 52,259 31,224 25,644 109,127 $ 250,773 $ 255,281 $ 275,637 $ 285,150 $ 298,275 $ 329,366 $ 317,134 $ 332,632 $ 355,073 $ 379,546 $ $ $ $ $ $ $ $ $ $ 5,347 5,584 129 1,497 3,595 861 21,045 26,060 64,117 7,240 5,512 185 1,516 3,706 1,017 21,270 36,089 76,535 6,783 5,477 254 1,440 3,765 1,066 22,326 19,186 60,297 116 6,608 4,526 224 1,643 4,146 829 24,171 37,214 79,361 6,826 5,343 197 1,745 4,366 873 38,666 65,535 123,551 6,900 7,484 231 1,951 4,603 844 33,204 41,877 97,094 7,227 3,826 360 1,887 4,700 748 28,381 32,904 80,033 8,318 3,609 386 16 4,355 1,136 30,012 36,203 84,037 6,867 1,827 827 13 4,800 953 53,661 39,675 108,623 8,121 2,024 1,208 74 5,419 953 43,619 57,447 118,865 Table of Contents 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 36,692 22,740 17,924 37,222 114,578 178,696 36,455 23,083 16,760 34,153 110,451 186,986 37,867 23,852 17,308 36,252 115,279 175,576 37,501 24,625 18,007 29,017 109,150 188,511 39,457 25,116 18,141 1,051 43,655 127,421 250,972 $ 40,696 26,032 18,270 953 34,134 120,084 217,178 42,868 26,517 18,437 1,184 30,615 119,622 199,655 45,508 28,686 20,633 1,720 27,032 123,578 207,616 48,782 29,772 21,918 1,698 18,319 120,489 229,111 52,890 30,847 22,460 1,960 22,186 130,343 249,208 (86,115) 38,812 (47,303) $ (146,295) 34,107 $ (112,188) $ (147,069) 29,589 $ (117,479) $ (151,895) 26,879 $ (125,017) $ (143,219) 17,257 $ (125,961) $ (151,554) 21,216 $ (130,338) 77,070 19,424 1,187 2,989 45,028 3,204 2,651 136 1,162 98 152,949 $ $ $ $ $ Business-type activities Charges for services Water Wastewater Environmental services Operating grants and contributions Capital grants and contributions Total business-type activities program revenues Total primary government program revenues $ Net (Expense)/Revenue Governmental activities Business-type activities Total primary government net expense $ (111,381) 39,303 $ (72,078) General Revenues and Other Changes in Net Position Governmental activities Taxes Sales taxes $ 54,513 Property taxes 21,502 In-Lieu property taxes 1,331 Franchise taxes 2,463 Unrestricted state-shared revenue 33,882 Unrestricted grants and contributions 1,349 Unrestricted investment earnings 1,910 Gain/(loss) on sale of capital assets 178 Miscellaneous 4,744 Transfers (690) Total governmental activities 121,182 Business-type activities Unrestricted investment earnings 1,244 Gain on sale of capital assets 39 Miscellaneous 1,765 Transfers 690 Total business-type activities 3,738 Total primary government $ 124,920 Change in Net Position Governmental activities Business-type activities Total primary government $ $ 9,801 43,041 52,842 $ $ $ $ $ (102,649) 34,354 $ (68,295) $ (135,685) 35,624 $ (100,061) $ (121,632) 24,993 $ (96,639) $ $ $ $ $ $ $ $ 61,813 19,184 1,377 3,083 38,355 1,193 722 932 121 126,780 1,061 1,179 (121) 2,119 128,899 24,131 36,473 60,604 $ $ $ 66,757 18,315 1,287 2,616 41,323 904 1,508 29 1,226 110 134,076 1,742 30 1,266 (110) 2,928 137,004 (1,609) 38,552 36,943 $ $ $ 117 71,773 19,423 1,201 2,737 44,263 2,595 1,224 106 847 184 144,353 1,457 172 1,310 (184) 2,755 147,108 22,722 27,748 50,469 $ $ $ $ 2,666 158 259 (98) 2,984 155,933 66,834 41,796 108,630 $ $ $ 82,797 20,761 1,159 2,814 52,861 2,400 859 154 1,224 446 165,475 1,009 92 121 (446) 776 166,251 19,180 34,883 54,063 $ $ $ $ 89,497 21,549 1,124 2,911 52,193 2,444 1,549 1,333 1,352 (64) 173,888 1,894 39 172 64 2,169 176,057 26,820 31,758 58,579 $ $ $ $ 98,648 25,220 1,024 2,954 53,777 3,036 10,153 1,466 1,153 (242) 197,189 11,494 183 366 242 12,284 209,473 45,293 39,163 84,456 $ $ $ $ 107,534 26,570 1,015 2,744 57,802 2,762 10,467 (3,973) 674 (96) 205,498 9,820 148 680 96 10,744 216,242 62,279 28,002 90,281 $ $ $ $ 123,930 28,603 1,009 2,669 66,463 4,140 526 (4,508) 936 (2,665) 221,103 32 405 75 2,665 3,177 224,280 69,549 24,393 93,942 Table of Contents Schedule 3 Town of Gilbert, Arizona Program Revenues by Function Last Ten Fiscal Years (1,000's) 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Function/Program Governmental activities General government Management and policy $ Support services Finance and management services Court Development services Public safety Police Fire Highways and streets Parks and recreation Transportation Non departmental 7,689 6,892 25,634 15,314 624 135 7,669 4,079 41,280 14,475 662 51 7,207 3,697 28,218 12,461 712 51 8,975 3,766 44,497 13,012 639 51 10,645 4,170 69,791 29,861 635 50 11,551 3,877 54,059 18,190 626 50 7,829 4,203 44,943 12,158 630 50 8,544 4,687 43,133 15,035 648 1,136 18,366 13,783 50,476 15,561 643 562 9,757 8,384 62,153 23,312 643 484 Subtotal governmental activities 64,118 76,535 60,297 79,361 123,551 97,094 80,033 84,037 108,623 118,865 Business-type activities Water Wastewater Environmental services 56,904 39,735 17,938 55,662 38,029 16,760 57,750 40,220 17,308 55,590 35,552 18,008 68,102 41,178 18,141 61,546 37,232 21,307 64,056 36,232 19,334 65,489 36,344 21,746 64,204 34,111 22,173 70,973 36,354 23,016 Subtotal business-type activities 114,577 110,451 115,278 109,150 127,421 120,084 119,622 123,578 120,489 130,343 $ 178,695 $ 186,986 $ 175,575 $ 188,511 $ 250,972 $ 217,178 $ 199,655 $ 207,616 $ 229,111 $ 249,208 Total primary government 16 242 11 670 6,891 $ 36 251 792 7,240 $ 59 262 823 6,807 $ 962 27 824 6,608 118 $ 690 24 859 6,826 $ 991 20 831 6,900 $ 2,235 27 731 7,227 $ 1,830 7 700 8,318 $ 1,503 12 573 7,145 $ 4,862 629 8,641 Table of Contents Schedule 4 Town of Gilbert, Arizona Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) (1,000's) General fund Nonspendable Assigned Unassigned Total general fund $ $ 2012 2013 2014 2015 2016 2017 2018 2019 2020 23,213 $ 10,797 44,250 78,260 $ 23,527 $ 10,092 59,555 93,174 $ 25,380 $ 24,470 $ 19,866 $ 18,995 $ 17,877 $ 23,061 $ 15,833 $ 11,561 12,081 17,046 13,681 32,766 41,371 41,631 68,002 76,747 61,764 67,057 85,498 82,885 72,453 89,787 133,901 139,520 99,225 $ 108,573 $ 119,046 $ 134,646 $ 131,701 $ 154,479 $ 217,735 $ 227,828 All other governmental funds $ 2 $ 1 $ 83 $ 2 $ 4 $ - $ - $ Nonspendable 2 $ 1 $ 100,572 89,654 92,337 96,837 87,005 Restricted 139,725 134,441 110,470 101,628 26,159 36,258 18,764 22,462 38,337 Assigned 34,387 15,971 (23,199) (23,609) (25,466) (23,981) (19,897) Unassigned (19,353) (18,311) (17,424) (16,448) Total all other governmental funds $ 103,534 $ 102,304 $ 85,718 $ 95,320 $ 105,449 $ 154,760 $ 132,102 $ 93,047 $ 85,180 $ 119 2021 95,704 (9,259) 86,445 Table of Contents Schedule 5 Town of Gilbert, Arizona Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) (1,000's) 2012 Revenues Taxes Sales Property Franchise Special assessments Licenses and permits Charges for services Intergovernmental Fines and forfeitures Other entities' participation System development fees Gifts and donations Investment earnings Net change in fair value of investments a Miscellaneous Total revenues $ Expenditures Current General government Management and policy Support services Finance and management services Court Development services Public safety Police Fire Highways and streets Parks and recreation Transportation Non departmental Debt service Principal Interest Payment to refunded bond escrow agent Bond issuance costs Fiscal and other charges Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses) Transfers in Transfers out Proceeds from sale of capital assets Revenue obligations issued Premium on revenue obligations Bonds issued Premium on bonds Payment to refunded bond escrow agent Total other financing sources and uses Net change in fund balances Debt service as a percentage of noncapital expenditures a $ 2013 2014 2015 2016 2017 2018 2019 2020 2021 54,503 $ 24,045 2,463 879 3,995 8,164 61,468 4,442 1,300 17,957 186 1,889 n/a 4,947 186,238 61,890 $ 21,548 2,374 1,299 5,434 9,573 72,904 4,710 2,252 17,836 119 706 n/a 933 201,578 66,772 $ 20,681 2,700 2,090 4,748 10,027 68,046 4,469 1,977 13,435 155 1,494 n/a 1,255 197,849 71,794 $ 21,953 2,737 1,184 4,791 10,440 76,284 4,476 382 18,836 192 1,210 n/a 953 215,232 77,108 $ 22,000 3,389 2,233 4,787 11,147 77,007 4,618 1,666 22,944 187 2,639 n/a 14,797 244,523 82,980 $ 23,707 2,814 696 4,785 11,161 87,364 4,336 2,252 18,101 120 836 n/a 5,683 244,835 89,516 $ 24,468 2,911 958 4,645 12,151 84,923 4,065 1,585 17,617 195 1,523 n/a 1,796 246,352 98,671 $ 25,220 2,954 818 5,735 12,816 86,480 3,305 4,380 21,966 183 9,890 n/a 1,153 273,572 107,552 $ 26,570 2,744 744 4,689 13,154 117,277 3,084 9,799 20,971 280 10,085 n/a 674 317,624 123,932 28,603 2,669 617 5,868 14,884 132,388 3,259 919 38,771 163 4,205 (3,714) 936 353,500 3,676 9,160 1,722 4,617 7,514 12,584 4,235 4,753 5,999 15,336 4,413 5,089 6,078 20,485 1,943 3,493 6,069 20,997 2,134 3,608 6,239 22,001 2,270 3,657 7,049 21,858 2,338 3,600 7,200 22,942 2,396 3,752 7,701 26,854 2,681 3,491 8,194 28,747 3,003 3,731 8,526 36,384 21,552 10,815 12,688 1,269 2,910 38,817 22,543 10,637 13,895 461 3,114 41,947 24,993 11,969 15,614 841 4,104 43,084 25,631 12,478 21,836 774 4,423 44,402 28,295 12,831 18,591 1,046 5,311 54,397 32,048 14,680 19,660 1,135 13,690 53,174 35,698 14,545 24,351 1,151 7,976 58,327 35,828 15,769 30,482 888 3,915 69,450 35,883 23,184 20,588 652 5,076 72,453 38,003 24,892 23,051 606 22,090 23,055 15,992 402 9 34,500 186,265 24,705 15,411 13 30,849 188,016 25,630 14,252 13 38,804 209,083 23,750 13,108 209 307 58,849 236,439 30,105 13,773 37 36,573 223,942 34,935 11,583 779 9 34,111 252,004 33,965 11,758 12,096 408 14 50,895 281,026 34,190 11,242 35 71,644 299,112 49,055 9,868 853 13 127,093 382,934 35,615 10,068 13 79,273 350,071 (27) 13,562 (11,234) (21,207) 20,581 (7,169) (34,674) (25,539) (65,310) 3,429 25,195 (25,885) 37,925 4,111 (41,627) (281) 25,774 (25,653) 121 45,891 (45,781) 590 700 23,401 (23,216) 36,980 2,706 28,080 4,417 (32,211) 40,157 21,406 (21,385) 21 23,334 (22,881) 121,670 14,139 (64,182) 72,080 29,999 (30,063) 1,226 49,525 7,546 (49,162) 9,070 63,086 (63,324) 1,691 1,453 36,774 (36,871) 38,470 76,750 5,577 120,701 46,987 (49,652) 10,594 7,929 (308) $ 13,683 $ (10,534) $ 18,950 $ 20,601 $ 64,911 $ (25,604) $ (24,086) $ 55,390 $ 11,358 25.7% 25.5% 23.4% 20.8% 23.4% 21.3% 25.1% 20.0% 23.0% 16.9% Previous years' fair market value adjustment was netted with investment earnings 120 Table of Contents Schedule 6A Town of Gilbert, Arizona Sales Tax Collections by Category Fiscal Years 2012 - 2016 a 2012 Construction Manufacturing Communications & Utilities 2015 2016 5,718,727 $ 727,755 5,774,403 965,523 28,390,526 4,072,187 6,078,364 299,270 1,211,864 520,302 25,830 112,496 4,586 600,794 7,867,067 $ 763,152 5,931,935 1,100,749 30,784,509 4,402,299 7,944,973 377,228 1,369,608 487,279 25,667 154,772 2,271 594,043 8,837,079 $ 939,861 6,120,225 1,207,006 33,078,748 4,867,638 7,952,365 487,680 1,676,438 505,146 22,721 398,169 4,311 674,274 7,663,801 $ 882,509 6,342,578 1,320,977 37,463,617 5,526,275 8,286,878 533,870 2,018,647 629,740 30,529 438,257 3,020 652,973 7,326,040 1,042,710 6,327,257 1,486,450 40,406,219 6,177,869 9,290,919 569,390 2,223,706 784,957 37,823 557,582 18,977 858,177 $ 54,502,627 $ 61,805,552 $ 66,771,661 $ 71,793,671 $ 77,108,076 Restaurant & Bar Real Estate, Rental & Leasing Accommodation b Services Other b Transportation & Warehousing Finance & Insurance Public Administration Arts & Entertainment Gilbert's local sales tax rate 2014 $ Wholesale Retail Total 2013 1.5% 1.5% 1.5% 1.5% 1.5% Source: Arizona Department of Revenue a Effective July 1, 2016, the Arizona Department of Revenue changed the way taxpayers report city tax on their tax returns and simultaneously changed the manner in which they summarize the tax data in their reports to the cities. As a result, Gilbert no longer receives the tax data in the same categories that were recorded in the past. See Schedule 6B for fiscal years 2017 forward. b Effective July 1, 2020, Accommodation (Bed Tax), Accommodation (Base 1.5% Tax) and Retail - Food for Home Consumption categories have passed the confidentiality requirements and now are separately stated. Note: State and local laws prohibit the disclosure of individual taxpayer information. 121 Table of Contents Schedule 6B Town of Gilbert, Arizona Sales Tax Collections by Category Fiscal Years 2017 - 2021 a 2017 2018 2019 2020 Accommodation (Bed Tax) Accommodation (Base 1.5% Tax) d Amusement Communications & Utilities Construction Contracting Maintenance, Repair, Replacement & Alterationb Personal Property Rental Publications, Advertising & Job Printing Rental of Commercial Property/Non-Residential Residential Rental Restaurant & Bar Retail d Retail - Food for Home Consumption Tax License Feesc Other $ 599,950 $ 793,681 5,625,248 9,611,076 89,165 1,392,591 174,054 4,116,417 3,367,073 6,974,438 49,491,813 14,632 730,191 598,668 $ 844,634 5,763,531 10,833,291 1,535,298 165,942 4,435,844 3,652,056 7,638,319 53,366,713 13,246 668,812 728,224 $ 922,856 5,707,201 13,167,940 1,706,431 166,146 4,790,946 4,238,867 8,549,495 57,710,844 9,646 972,655 Total $ 82,980,329 $ 89,516,354 $ 98,671,251 $ 107,551,991 Gilbert's local sales tax rate 1.5% 1.5% 1.5% 820,336 709,163 5,784,555 12,919,742 1,755,690 140,170 4,944,404 4,569,549 8,442,741 66,602,568 863,073 1.5% 2021 $ 955,504 531,419 587,909 5,860,873 12,949,937 1,973,489 124,149 5,368,895 5,149,541 9,968,916 66,654,843 13,722,892 83,565 $ 123,931,932 1.5% Source: Arizona Department of Revenue a Effective July 1, 2016, the Arizona Department of Revenue changed the way taxpayers report city tax on their tax returns and simultaneously changed the manner in which they summarize the tax data in their reports to the cities. As a result, Gilbert no longer receives the tax data in the same categories that were reported in the past. See Schedule 6A for Fiscal Years 2012 - 2016 data. b Maintenance, Repair, Replacement & Alteration has been combined with Construction Contracting due to disclosure laws concerning confidentiality. c Effective July 1, 2019, Tax License Fees were combined with Other due to disclosure laws concerning confidentiality. d Effective July 1, 2020, Accommodation (Bed Tax), Accommodation (Base 1.5% Tax) and Retail - Food for Home Consumption categories have passed the confidentiality requirements and now are separately stated. Note: State and local laws prohibit the disclosure of individual taxpayer information 122 Table of Contents Schedule 7 Town of Gilbert, Arizona Direct and Overlapping Sales Tax Rates Last Ten Fiscal Years 2012 2013a 2014 2015 2016 2017 2018 2019 2020 2021 Town Direct Rates: Hotel/Transient Lodging All Others 4.50% 1.50% 4.50% 1.50% 4.50% 1.50% 4.50% 1.50% 4.50% 1.50% 4.50% 1.50% 4.30% 1.50% 4.30% 1.50% 4.30% 1.50% 4.30% 1.50% County Rates: Hotel/Transient Lodging All Others 1.77% 0.70% 1.77% 0.70% 1.77% 0.70% 1.77% 0.70% 1.77% 0.70% 1.77% 0.70% 1.77% 0.70% 1.77% 0.70% 1.77% 0.70% 1.77% 0.70% State Rates: Hotel/Transient Lodging All Others 6.50% 6.60% 6.50% 6.60% 5.50% 5.60% 5.50% 5.60% 5.50% 5.60% 5.50% 5.60% 5.50% 5.60% 5.50% 5.60% 5.50% 5.60% 5.50% 5.60% Source: Gilbert Finance & Management Services Department a The temporary state sales tax increase passed by voters in 2010 expired on May 31, 2013. for all others to 5.60% on June 1, 2013. Note: Gilbert sales tax rate may be changed with the approval of Council. 123 The state sales tax for hotel/transient lodging decreased to 5.50% and Table of Contents Schedule 8 Town of Gilbert, Arizona Ratios of Outstanding Debt by Type Last Ten Fiscal Years Fiscal Year General Obligation Bonds Special Assessment Bonds Governmental Activities Municipal Street and Property Highway User Corporation Revenue Revenue Bonds Bonds Business-type Activities General Obligation Bonds Revenue Obligations - $ - 2012 $ 159,547,197 $ 2013 147,640,933 2014 135,775,830 11,056,456 $ 10,469,338 9,445,797 20,836,060 $ 18,130,241 16,864,197 152,243,537 $ 142,828,198 133,835,907 2015 2016 2017 123,420,395 105,296,311 157,102,290 8,306,402 6,504,185 6,126,440 13,754,807 10,538,003 7,174,209 126,607,711 118,310,093 109,229,636 39,685,688 39,685,688 39,637,764 - - - 2018 2019 2020 2021 140,551,095 122,209,904 168,454,903 147,475,574 5,464,645 4,912,850 4,526,056 4,014,261 3,664,605 - 95,342,840 81,835,435 64,161,400 49,482,365 38,887,844 38,122,923 37,328,003 36,498,083 - - - Notes: See Schedule 13 for personal income and population data. Details regarding Gilbert's outstanding debt can be found in the notes to the financial statements. Amounts include unamortized bond discounts/premiums. 124 3,877,755 $ 2,115,170 247,585 Special Assessment Bonds - $ - Water and Wastewater Revenue Bonds Municipal Property Corporation Revenue Bonds 15,164,911 $ 118,853,753 $ 13,757,813 111,081,450 104,083,879 Total Primary Government Percentage of Personal Income Per Capita 481,579,670 446,023,143 400,253,194 7.72 % $ 6.31 6.09 2,277 2,066 1,807 98,190,924 135,410,861 134,594,390 409,965,927 415,745,141 453,864,729 5.89 5.52 5.30 1,804 1,789 1,833 170,517,212 160,502,481 151,742,751 142,648,020 454,428,241 407,583,593 426,213,113 380,118,303 5.13 4.64 4.17 3.72 1,835 1,571 1,618 1,443 Table of Contents Schedule 9 Town of Gilbert, Arizona Ratios of General Bonded Debt Outstanding Last Ten Fiscal Years General Bonded Debt Outstanding a Fiscal Year 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 a b $ 163,424,952 149,756,103 136,023,415 123,420,395 105,296,311 157,102,290 140,551,095 122,209,904 168,454,903 147,475,574 $ Less Amount Available in Debt Service Fund Net General Bonded Debt Outstanding 9,335,818 9,599,968 8,942,949 10,165,593 6,952,183 2,186,272 6,020,480 1,870,513 1,846,926 1,925,381 $ 154,089,134 140,156,135 127,080,466 113,254,802 98,344,128 154,916,018 134,530,615 120,339,391 166,607,977 145,550,193 $ Secondary Assessed Property Value b Limited Property Value b 1,861,193,961 1,675,360,422 1,594,806,737 1,829,471,839 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 1,845,325,449 1,979,359,269 2,105,762,268 2,256,162,227 2,428,289,285 2,618,569,519 Percentage of Applicable Property Value 8.28 % 8.37 7.97 6.19 5.33 7.83 6.39 5.33 6.86 5.56 Per Capita $ 729 649 574 498 423 626 543 464 632 552 Includes unamortized bond discounts/premiums Maricopa County Assessor's Office Notes: In accordance with Proposition 117, The Arizona Property Tax Assessed Valuation Amendment , property taxes are calculated based on the limited property value beginning with tax year 2015. See Schedule 13 for population data. General obligation bonds principal and interest payments are paid for with secondary property taxes. 125 Table of Contents Schedule 10 Town of Gilbert, Arizona Direct and Overlapping Governmental Activities Debt As of June 30, 2021 Governmental Unit Debt repaid with property taxes Maricopa County b Maricopa County Community College District c Maricopa County Special Health District Gilbert Unified School District No. 41 Higley Elementary School District No. 60 Chandler Unified School District No. 80 Mesa Unified School District No. 4 East Valley Institute of Technology District No. 401 d $ Debt Outstanding Estimated Percentage Applicable a None 184,715,000 640,695,000 112,360,000 86,925,000 385,946,110 275,525,000 None 5.71% 5.71% 5.71% 69.27% 88.26% 13.33% 3.49% 11.57% Estimated Share of Direct and Overlapping Debt $ Subtotal, overlapping debt Town of Gilbert direct debt e None 10,547,226 36,583,684 77,831,772 76,720,005 51,446,616 9,615,823 None 262,745,126 237,470,283 100.00% 237,470,283 $ Total direct and overlapping debt 500,215,409 Source: The various jurisdictions a b Proportion applicable to Town of Gilbert, Arizona is computed on the ratio of limited property valuation for fiscal year 2020/21. Excludes various other non-property tax supported debt such as Public Finance Corporation lease revenue bonds, Stadium District revenue bonds, Stadium District loans, Housing Authority loans and capital leases. c Excludes non-property tax supported debt such as revenue bonds. d Based on the East Valley Institute of Technology's secondary assessed valuation and does not include amount of secondary assessed valuation in Pinal County. e Includes: General Obligation bonds, Special Assessments bonds, Revenue obligations, Revenue bonds and unamortized bond premiums. Note: Overlapping governments are those that coincide, at least in part, with the geographic boundaries of Gilbert. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of Gilbert. This process recognizes that, when considering Gilbert'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. 126 Table of Contents Schedule 11 Town of Gilbert, Arizona Legal Debt Margin Information Last Ten Fiscal Years 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 20% Limitation Debt limit equal to 20% of net full cash assessed valuation $ Total net debt applicable to 20% limit Premium adjustment Legal 20% debt margin (available borrowing capacity) $ Total net debt applicable to the 20% limit as a percentage of 20% debt limit 369,996,694 $ 333,373,568 $ 317,092,733 $ 346,856,631 $ 369,065,090 $ 395,871,854 $ 524,748,518 $ 566,219,031 $ 622,820,366 $ 695,490,004 163,335,000 149,675,000 135,310,000 122,715,000 105,250,000 143,945,000 128,090,000 110,445,000 151,825,000 131,830,000 - - - - - 9,675,637 9,516,726 8,090,801 11,071,074 9,400,564 554,259,440 206,661,694 $ 183,698,568 $ 181,782,733 $ 224,141,631 $ 263,815,090 $ 251,926,854 $ 387,141,792 $ 447,683,230 $ 459,924,292 $ 44.14% 44.90% 42.67% 35.38% 28.52% 36.36% 26.22% 20.93% 26.15% 110,999,008 $ 100,012,071 $ 95,127,820 $ 104,056,989 $ 110,719,527 $ 118,761,556 $ 157,424,555 $ 169,865,709 $ 186,846,110 $ 20.31% 6% Limitation Debt limit equal to 6% of net full cash assessed valuation $ Total net debt applicable to 6% limit Legal 6% debt margin (available borrowing capacity) Total net debt applicable to the 6% limit as a percentage of 6% debt limit - $ 110,999,008 $ 0.00% - 100,012,071 $ 0.00% - 95,127,820 $ 0.00% - 104,056,989 $ 0.00% Note: The Constitution of the State of Arizona establishes two levels of bonded indebtedness limits based upon the type of improvement constructed with the debt. The twenty percent bond type is restricted to water, wastewater, electric, parks and open space improvements, streets, public safety, and fire and emergency facilities. The six percent bond type is all other general purpose improvements. In 2017, HB 2452: bonding; amortized premium; segregated fund passed, requiring the net premium associated with a general obligation bond to be amortized for all debt limitation purposes on a pro-rata basis each year. 127 - 110,719,527 $ 0.00% - 118,761,556 $ 0.00% - 157,424,555 $ 0.00% - 169,865,709 $ 0.00% - 186,846,110 $ 0.00% 208,647,001 - 208,647,001 0.00% Table of Contents Schedule 12 Town of Gilbert, Arizona Pledged-Revenue Coverage Last Ten Fiscal Years Public Facilities Municipal Property Corp. Revenue Bonds Special Assessment Bonds & Subordinate Lien Pledged Revenue Obligations Special Fiscal Assessment Year Collections 2012 $ 2013 878,981 $ 1,298,984 Excise Taxes & State-Shared Debt Service Principal Interest Coverage 400,000 $ 574,655 0.90 585,000 553,258 1.14 Revenue $ c Coverage 97,342,250 $ 9,335,000 $ 7,149,316 5.91 109,637,647 9,695,000 6,873,353 6.62 2014 2,089,887 1,020,000 507,965 1.37 117,627,904 10,080,000 6,458,288 7.11 1,184,368 1,135,000 470,225 0.74 125,743,087 7,515,000 6,030,998 9.28 2016 2,232,678 1,795,000 394,755 1.02 133,104,631 8,000,000 7,457,791 8.61 2017 695,541 375,000 321,073 1.00 146,007,063 9,660,000 6,877,081 8.83 2018 952,679 660,000 294,670 1.00 159,912,939 14,355,000 4,721,073 8.38 2019 818,092 550,000 264,095 1.00 170,885,312 12,745,000 5,213,731 9.52 2020 744,007 385,000 239,908 1.19 193,995,174 13,300,000 4,610,856 10.83 2021 617,024 510,000 217,075 0.85 222,921,775 15,110,000 3,958,981 11.69 Less: Net Fiscal Operating Operating Available Year Revenues a Expenses a Revenue 2012 b Interest 2015 Water and Wastewater Revenue Bonds c a Debt Service Principal $ Water Resources Municipal Property Corp. Revenue Bonds Debt Service Principal Interest Coverage $ Net Water Available System Wastewater System Revenue b Dev't Fee Dev't Fee 15,154,154 $ Debt Service Principal Interest Coverage 61,087,190 $ 34,505,518 $ 26,581,672 $ 1,385,000 $ 723,213 12.61 24,473,459 $ 13,590,998 $ 3,550,000 $ 6,096,337 5.52 2013 60,627,063 36,124,117 24,502,946 1,430,000 681,663 11.60 22,391,283 12,466,409 - 3,700,000 5,542,403 3.77 2014 62,873,206 37,514,942 25,358,264 1,500,000 610,163 12.02 23,248,101 10,567,046 - 3,875,000 5,198,059 3.73 2015 63,338,422 40,316,645 23,021,777 - - N/A 23,021,777 10,461,708 - 4,075,000 4,894,864 3.73 2016 64,659,329 42,119,371 22,539,958 - - N/A 22,539,958 11,873,824 - 4,275,000 4,683,019 3.84 2017 66,788,603 41,921,216 24,867,387 - - N/A 24,867,387 9,914,166 - 4,830,000 4,984,570 3.54 2018 69,487,792 45,014,122 24,473,670 - - N/A 24,473,670 9,944,975 5,308,292 8,480,000 4,970,948 2.95 2019 74,465,811 44,686,700 29,779,111 - - N/A 29,779,111 9,434,032 5,189,779 7,225,000 6,207,163 3.31 2020 78,919,231 48,227,311 30,691,920 - - N/A 30,691,920 6,679,195 3,394,980 7,560,000 5,865,313 3.04 2021 83,775,290 50,449,389 33,415,625 - - N/A 33,415,625 8,936,917 5,295,232 7,950,000 5,487,313 3.55 Combined operating revenues and expenses for the Water and Wastewater Funds, as applicable. Combined operating revenues and expenses for the Water and Wastewater Funds less debt service payments for the Water and Wastewater Revenue Bonds. These bonds were paid off in fiscal year 2014. Note: Details regarding Gilbert's outstanding debt can be found in the notes to the financial statements. 128 Table of Contents Schedule 13 Town of Gilbert, Arizona Demographic and Economic Statistics Last Ten Fiscal Years Personal Income b Fiscal Year Population 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 211,491 215,938 221,506 227,217 232,399 247,600 247,600 259,386 263,461 n/a Per Capita Income c (in thousands) (estimate) a $ 6,240,000 7,064,000 6,568,000 6,962,000 7,534,000 8,558,000 8,858,000 8,775,000 10,222,000 n/a $ (estimate) Median Age c School Enrollment d 28,413 31,035 28,184 30,639 32,418 34,565 35,777 33,831 38,800 38,800 31.5 33.1 37.5 32.7 33.2 33.1 34.4 35.2 34.8 34.8 38,696 38,573 38,573 37,240 34,079 35,449 34,552 33,393 34,188 33,055 Unemployment Rate e 5.40 % 5.70 5.20 4.30 4.20 3.70 3.50 3.80 8.00 4.90 Sources: a 2009 through 2016 Census.gov; 2017 and 2018 Office of Management & Budget; 2019 Maricopa Association of Governments; 2021 not available before publication b Estimated based on population and per capita income. c 2009 through 2015: American Community Survey; 2016 through 2021: Census.gov d Gilbert Public Schools e laborstats.az.gov through 2019; azcommerce.com 2020 through 2021 129 Table of Contents Schedule 14 Town of Gilbert, Arizona Top Ten Principal Employers Current Fiscal Year Compared to Nine Years Ago Employer Fiscal Year 2021 Percentage of Total Town Employees Rank Employment Gilbert Unified School District Banner Health Town of Gilbert Fry's Food and Drug Go Daddy Software, Inc. Higley Unified School District Dignity Health Wal-Mart Stores, Inc. Chandler Unified School District Deloitte Mercy Gilbert Medical Center State of Arizona 3,868 2,008 1,650 1,311 1,257 955 872 868 718 675 ----- Total 14,182 1 2 3 4 5 6 7 8 9 10 Source: Maricopa Association of Governments 130 Fiscal Year 2012 Percentage of Total Town Employees Rank Employment 5.34 % 2.77 2.28 1.81 1.73 1.32 1.20 1.20 0.99 0.93 ----- 4,173 1,448 1,119 944 850 701 --704 568 --762 504 19.57 % 11,773 1 2 3 4 5 8 7 9 6 10 7.32 % 2.54 1.96 1.66 1.49 1.23 --1.24 1.00 --1.34 0.88 20.66 % Table of Contents Schedule 15 Town of Gilbert, Arizona Full-time Equivalent Employees by Function Last Ten Fiscal Years Function 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Governmental Funds General government Management and policy 22.2 88.5 95.8 120.0 128.6 131.6 132.6 136.1 142.5 155.8 Support services 62.0 - - - - - - - - - Finance and management services 19.3 29.0 19.0 19.0 21.0 21.0 25.0 25.5 26.5 28.5 Court 51.9 49.9 51.9 32.9 32.9 32.9 33.9 33.9 33.9 34.1 Development services 72.5 69.6 68.8 73.3 66.7 68.7 83.7 84.5 93.3 94.3 Police 346.0 346.0 349.0 354.0 358.0 369.0 385.5 409.5 429.5 447.5 Fire 197.0 197.0 201.0 201.0 203.0 210.0 217.0 216.0 223.0 256.6 Public safety Highways and streets 49.3 51.0 58.0 58.0 51.7 51.7 53.7 55.7 55.7 57.7 Parks and recreation 102.0 106.8 121.8 118.7 125.3 126.2 128.3 128.5 169.1 176.4 Water 120.0 118.2 118.0 116.5 125.0 130.0 131.0 133.5 135.7 135.9 Wastewater 41.7 41.7 44.7 45.4 42.5 42.5 43.5 45.5 48.5 49.5 Environmental services 78.5 79.0 83.5 84.0 94.3 96.3 97.3 100.3 101.8 103.8 26.0 26.0 26.0 26.0 26.0 26.0 26.0 26.0 26.0 26.0 1,188.4 1,202.7 1,237.5 1,248.8 1,275.0 1,305.9 1,357.5 1,395.0 1,485.6 1,566.1 Enterprise Funds Internal Service Funds Equipment maintenance Total Source: Gilbert Office of Management & Budget 131 Table of Contents Schedule 16 Town of Gilbert, Arizona Operating Indicators by Function Last Ten Fiscal Years 2012 Function General government: Management and policy % of population satisfied with value received from tax dollar Number of recruitments Employee turnover Legal and court Case filings % of cases charged after review Development services Building permits issued Value of permits issued (in millions) Public Safety: Police Number of arrests Crimes per 1,000 population Fire Number of emergency calls Response time average (enroute to on-scene) b Total dispatch time (dispatch to on scene) b Highways and streets Average pavement condition index a N/A 79 6.8% 2013 2014 2015 2016 a N/A 148 8.3% a N/A 149 9.3% 2018 2019 71% 156 10.3% 79% 199 10.4% 2020 a N/A 200 9.6% 2021 77% 110 8.0% 75% 155 7.5% 26,271 72% 31,794 72% 28,896 72% 29,499 71% 32,091 70% 29,501 74% 26,147 74% 24,244 70% 20,813 74% 21,620 74% 3,474 $ 474.9 3,418 $ 534.4 3,254 $ 472.5 3,364 $ 496.0 3,584 $ 553.8 4,157 $ 532.2 4,607 $ 531.6 4,441 $ 746.3 4,278 $ 607.8 6,060 $ 702.5 9,003 18.3 8,734 16.5 8,474 16.6 8,900 15.5 8,702 15.3 8,250 15.5 8,360 15.2 8,061 13.2 7,889 13.0 8,275 12.1 14,133 3 min 49 sec 15,509 3 min 47 sec 16,185 3 min 51 sec 17,777 3 min 57 sec 18,923 3 min 55 sec 19,422 5 min 9 sec 20,506 3 min 32 sec 4 min 48 sec 20,903 3 min 25 sec 4 min 44 sec 20,680 3 min 25 sec 4 min 46 sec 22,160 3 min 36 sec 5 min 01 sec N/A N/A N/A N/A 74% 175 9.7% 2017 N/A N/A 69% 210 9.8% 91 80 75 75 72 74 72 73 72 72 16,880 N/A 48,725 16,277 N/A 52,714 16,440 N/A 52,616 N/A 11,747 62,815 N/A 19,835 69,423 N/A 18,000 71,651 N/A 16,000 98,286 N/A 16,670 113,245 N/A 14,993 133,868 N/A 14,976 34,697 Parks and recreation Facility reservation requests c Facility reservations c Participants in recreation programs d Transportation Average daily ridership 560 635 685 687 669 679 784 668 522 296 Water Daily average water production (mg) Average # of meters read per month Number of utility locates 43 73,469 15,190 43 71,952 23,277 43 72,712 20,235 43 73,199 20,100 43 82,871 21,197 46 83,945 26,850 47 84,243 27,380 47 84,147 23,157 50 83,650 22,357 54 86,038 29,719 Wastewater Daily average wastewater influent (mg) Annual effluent produced/reused (bg) 12.20 4,457 12.79 4,667 12.82 4,646 13.21 4,822 14.03 4,815 14.91 4,931 15.41 5,115 16.20 5,784 16.54 5,307 17.32 5,162 109,472 18,653 115,536 18,695 113,965 19,851 112,778 19,418 114,144 19,894 110,520 22,567 113,745 24,058 129,737 21,120 130,713 22,325 137,888 22,252 Environmental services Solid waste tonnage Recycle tonnage Source: Various Town departments a Survey completed every other year b Beginning in 2017, the Fire Department began reporting total dispatch time instead of average time enroute to on-scene c Indicator no longer being tracked; beginning in 2015, tracking actual facility reservations d Only includes adult sports, youth ball programs, adaptive recreation, and town-sponsored special events. Effective July 1, 2021, participants are accounted for per session instead of per meeting date. 132 Table of Contents Schedule 17 Town of Gilbert, Arizona Capital Asset Statistics by Function Last Ten Fiscal Years 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 164 164 180 185 217 224 251 249 263 299 10 10 10 10 10 10 10 11 11 11 Highways and streets Street centerline miles (estimate) a Traffic control signals 979 175 989 177 905 180 1,032 185 1,055 185 908 194 920 201 926 206 943 210 945 214 Parks and recreation Total acres of park land, trails, open space, municipal areas and support facilities, operated and maintained 652 653 605 605 605 645 645 645 725 725 1,216 1,219 1,261 1,304 1,660 1,322 1,335 1,366 1,100 785 970 976 1,006 1,019 1,038 887 896 923 774 835 61 61 66 67 57 56 71 63 62 63 Function Public safety: Police Number of police cars Fire Fire stations Water Miles of water main b, c, d Wastewater Miles of wastewater main b, c Environmental services Garbage trucks e Source: Various Town departments a The street centerline miles were previously estimated using different methods, such as end of warranty and beginning of Town ownership. Beginning in 2015, the estimate is based on acceptance letter date. b Beginning in 2017, estimates were updated to exclude miles not owned by Gilbert c Beginning in 2020, estimates were updated to exclude preliminary miles (Initial Acceptance Letter is not completed) d Beginning in 2021, estimates were updated to exclude water mains less than 8" in diameter e Prior to fiscal year 2016, wheel loaders were included in the statistic Note: No capital asset statistics are available for the general government or transportation functions. 133 Table of Contents Schedule 18 Town of Gilbert, Arizona Property Value, Construction and Bank Deposits Last Ten Fiscal Years Fiscal Year 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Residential Construction a Number of Permits Value 2,331 2,015 1,613 1,668 1,764 1,754 1,604 1,535 1,194 2,161 $ 408,322,951 385,182,885 315,632,904 350,707,421 402,071,499 336,676,752 312,805,353 467,961,355 435,133,652 495,787,159 Commercial Construction a Number of Permits Value 182 224 284 268 278 264 199 155 208 219 $ 31,550,416 102,447,825 99,959,286 81,934,987 71,594,349 119,477,874 129,703,582 164,601,167 85,390,836 103,066,452 Other Construction a Number of Permits Value 961 1,179 1,357 1,428 1,542 2,139 2,804 2,751 2,876 3,680 $ 35,017,191 $ 46,773,456 56,890,360 63,344,257 80,164,565 76,023,423 89,093,501 113,774,277 87,276,267 103,670,431 Secondary Assessed Property Value b 1,861,193,961 1,675,360,422 1,594,806,737 1,829,471,839 N/A N/A N/A N/A N/A N/A Limited Property Value b Maricopa County Bank Deposits c N/A $ 61,673,751,000 N/A 65,485,982,000 N/A 70,253,713,000 N/A 76,889,448,000 1,845,325,449 84,014,143,000 1,979,359,269 92,567,543,000 2,105,762,268 98,288,781,000 2,256,162,227 107,879,366,000 2,428,289,285 132,017,181,000 2,618,569,519 158,003,339,000 Sources: Development Services Department b Maricopa County Assessor's Office c Federal Deposit Insurance Corporation a Note: In accordance with Proposition 117, The Arizona Property Tax Assessed Valuation Amendment, property taxes are calculated based on the limited property value beginning with tax year 2015. 134 Table of Contents Schedule 19 Town of Gilbert, Arizona System Development Fees Fiscal Year 2021 System Development Fee Type Police Beginning System Development Other Balance Fees Collected Revenue $ 1,977,490 $ 3,244,740 $ Ending Expenditures 6,806 $ Balance (3,385,736) $ 1,843,300 Fire (8,065,099) 3,211,088 - (746,874) (5,600,885) a General Government (5,216,281) 4,140,341 - (2,385,069) (3,461,009) a Parks and Recreation 13,949,967 17,750,206 178,510 (5,765,770) 26,112,913 Roads 1,522,563 7,548,386 108,466 (45,663) 9,133,752 Traffic Signal 12,677,328 2,876,019 - (2,361,027) 13,192,320 c 414,937 8,396,917 33,559 (10,629,485) (1,784,072) b Water Resources (25,334,816) 7,354,191 - (1,555,727) (19,536,352) b Wastewater 24,457,596 5,338,837 - (7,079,584) 22,716,849 c (33,954,935) $ 42,616,816 Water Totals $ 16,383,685 Wastewater system development fee - Greenfield $ 2,586 $ 59,860,725 $ 327,341 $ Equivalent Residential Unit Wastewater system development fee - Neely $ 157 Source: Gilbert Finance & Management Services Department a The negative ending balances for the fire and general government system development fees are funded by the general fund. The general fund had a cash balance of $221,499,674 at June 30, 2021. b The negative ending balance for the water and water resources system development fees are funded by the water fund. The water fund had a cash balance of $135,229,422 c Negative revenue due to fair market value adjustments are included with expenditures. 135 Table of Contents Schedule 20 Town of Gilbert, Arizona Property Tax Levies and Collections Last Ten Fiscal Years Fiscal Year 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Tax Levy $ 21,380,254 $ 19,253,745 18,327,289 19,487,085 19,495,256 20,913,149 21,667,785 22,353,420 24,017,440 25,917,731 County Resolutions (96,162) $ (99,396) (57,876) (72,483) (32,290) (80,844) (53,647) (44,819) (28,727) (28,414) Initial Year Collections Net Current Tax Levy Collections 21,284,092 $ 19,154,349 18,269,413 19,414,602 19,462,966 20,832,305 21,614,138 22,308,601 23,988,712 25,889,316 20,772,494 18,962,640 18,056,441 19,230,809 19,286,314 20,645,301 21,411,196 22,129,563 23,702,115 25,661,002 Percent Of Levy 97.60 % 99.00 98.83 99.05 99.09 99.10 99.06 99.20 98.81 99.12 136 County Resolutions $ (217,974) $ (143,945) (89,343) (128,555) (83,121) (141,929) (86,816) (99,817) (38,012) (28,414) Cumulative Collections Net Delinquent Total Tax Levy Collections Collections 21,162,280 $ 19,109,800 18,237,946 19,358,530 19,412,135 20,771,220 21,580,969 22,253,603 23,979,428 25,889,316 385,308 $ 144,108 179,463 126,706 124,981 125,051 168,618 119,943 274,286 - 21,157,802 19,106,748 18,235,904 19,357,515 19,411,295 20,770,352 21,579,814 22,249,506 23,976,401 25,661,002 Percent of Levy 99.98 % 99.98 99.99 99.99 100.00 100.00 99.99 99.98 99.99 99.12 Table of Contents Schedule 21 Town of Gilbert, Arizona Principal Property Taxpayers Fiscal Year 2021 Limited Property Valuation Principal Taxpayer Type of Business Westcor Santan Village LLC Southwest Gas Corporation (T&D) American Furniture Warehouse Co. Branch Brook Gardens Gilbert Road Owner LLC TC/P Gilbert Gateway LLC Vestar CTC Phase 11 LLC Power & Ray LLC Target Corporation LIV Northgate LLC Breit Olympus MF Redstone LLC Santan MP LP Earnhardt Arizona Properties LLC Breit Olympus MF Vistara LLC AZ Flats at San Tan Apartments LLC 155 Rivulon Boulevard LLC BB Val Vista LLC 275 Rivulon Boulevard LLC San Privada Apartments LLC Lowe's HIW Inc. Santan Apts. LLLP Breit Olympus MF Heritage LLC LIT Industrial Limited Partnership Smith's Food & Drug Centers Inc. Arizona Public Service Company Shopping Center Utility Retail Real Estate Development / Holdings Utility Real Estate Development / Holdings Retail Real Estate Development / Holdings Real Estate Development / Holdings Real Estate Development / Holdings Real Estate Development / Holdings Real Estate Development / Holdings Real Estate Development / Holdings Retail Real Estate Development / Holdings Real Estate Development / Holdings Real Estate Development / Holdings Real Estate Development / Holdings Real Estate Development / Holdings Retail Real Estate Development / Holdings Real Estate Development / Holdings Real Estate Development / Holdings Retail Utility As % of Gilbert's Total Limited Property Valuation $ 15,757,314 8,754,504 7,573,759 6,397,440 5,669,310 5,614,998 5,521,802 5,331,377 5,126,349 4,890,984 4,774,208 4,754,284 4,624,110 4,614,940 4,579,710 4,321,926 4,039,971 3,949,376 3,867,577 3,805,710 3,768,295 3,730,860 3,701,161 3,652,226 3,623,992 0.60 % 0.33 0.29 0.24 0.22 0.21 0.21 0.20 0.20 0.19 0.18 0.18 0.18 0.18 0.17 0.17 0.15 0.15 0.15 0.15 0.14 0.14 0.14 0.14 0.14 $ 132,446,183 5.06 % Source: Maricopa County. Top taxpayers based on Net Assessed Limited Property Value of Real and Secured Personal Property for tax year 2021. Note: Information included for current fiscal year only as this is what is required for continuing disclosure requirements for Gilbert's bond issues. 137 Table of Contents 138 50 E. Civic Center Drive, Gilbert, AZ 85296 (480) 503-6871 | gilbertaz.gov