FISCAL YEAR ENDED JUNE 30, 2023 ANNUAL COMPREHENSIVE FINANCIAL REPORT Fiscal Year Ended June 30, 2023 Table of Contents INSTRUCTIONS FOR NAVIGATING IN THE ANNUAL COMPREHENSIVE FINANCIAL REPORT 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 Annual Comprehensive Financial Report For the Fiscal Year Ended June 30, 2022 Executive Director/CEO Table of Contents Annual Comprehensive Financial Report Year Ended June 30, 2023 Brigette Peterson, Mayor Kathy Tilque, Vice Mayor Bobbi Buchli, Council Member Chuck Bongiovanni, Council Member Jim Torgeson, Council Member Scott Anderson, Council Member Yung Koprowski, Council Member Patrick Banger, Manager Prepared by the Finance & Management Services Department Håkon Johanson, Finance & Management Services Director Table of Contents TOWN OF GILBERT, ARIZONA Annual Comprehensive Financial Report For the Year Ended June 30, 2023 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 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 Lease Receivables 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 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 55 58 59 59 60 61 62 67 68 78 81 81 82 82 83 83 83 84 87 88 90 92 93 94 95 Table of Contents TOWN OF GILBERT, ARIZONA Annual Comprehensive Financial Report For the Year Ended June 30, 2023 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 98 99 102 103 104 105 106 107 108 109 110 112 113 114 117 118 120 121 122 123 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 Table of Contents Table of Contents Introductory Section ________________________________ Letter of Transmittal Organizational Report Chart Table of Contents December 27, 2023 Honorable Mayor, Members of the Council, and Gilbert Citizens: I am pleased to submit to you the Annual Comprehensive Financial Report for the Town of Gilbert (Gilbert), for the fiscal year ended June 30, 2023. 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 fairly stated in all material respects. 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, 2023. 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 atlarge 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 2023, the Manager administered Gilbert's operations through a staff of 1,684 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, solid waste and recycling, environmental compliance, 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, 2023 is 280,391, 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) 503-6000 gilbertaz.gov 1 Table of Contents Population 300,000 275,000 250,000 225,000 200,000 175,000 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 FACTORS AFFECTING FINANCIAL CONDITION Public Safety Personnel Retirement System (PSPRS) Funding Gilbert’s goal is to be at least 90% funded in both police and fire pension systems. After years of dedicated effort to pay down large unfunded liabilities in the PSPRS, Gilbert met and exceeded this goal in the prior fiscal year. Gilbert was the largest municipality in the state of Arizona to reach this level of funding, and it was accomplished without raising taxes. Gilbert fell slightly below the 90% goal in fiscal year 2023 with fire and police funded at 87.0% and 88.7%, respectively. Public Infrastructure Financing Gilbert recognized significant transportation and water-related infrastructure needs and was able to secure the bond funding necessary to move forward with both types of projects. Gilbert citizens voted and approved $515.0 million in transportation bonds; $188.9 million of which were issued in the spring of 2022. The Water Resources Municipal Property Corporation Board and Gilbert’s Town Council approved bond funding in the amount of $473.0 million. The full amount was issued in the spring of 2022. Utility Rates After successful completion of a utility rate study, new rates were approved by Council in April of 2023 to support the infrastructure and operational needs for the Wastewater and Solid Waste funds. Growth and Construction 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, water resources, and wastewater. The fees are based on build-out system requirements to serve the projected population and land uses. During fiscal year 2023, a total of $25.0 million was collected in SDFs compared to $31.9 million in fiscal year 2022. See below for explanations for decreases, which were planned for in the fiscal year 2023 budget. There were 854 new residential permits and 144 commercial permits issued in fiscal year 2023, which represents a decrease from the prior fiscal year in residential of 504 and an increase in commercial permits of 11, respectively. The total value of all new construction in fiscal year 2023, including commercial, was $424.1 million, representing a decrease of $17.4 million from fiscal year 2022. The decreased activity in fiscal year 2023 was largely the result of a slow down in residential permits issued from 1,358 in fiscal year 2022 to 854 in fiscal year 2023 due to Gilbert approaching buildout. This was also accompanied by a decrease in permits for other types of construction from 3,164 in fiscal year 2022 to 2,075 in fiscal year 2023 due to permits pulled for multiple apartment complexes in the prior year, which slowed down in fiscal year 2023. 2 Table of Contents Economic Development With just over 280,000 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) Best Place to Live in Arizona (Ranking Arizona, 2022) 7th Safest City in America (WalletHub, 2022) 7th Best City for First-Time Home Buyers (WalletHub, 2023) 9th Best Place to Raise a Family (WalletHub, 2023) 12th Best Big City to Live in America (Stacker, 2023) Gold Certified City for Data Management (What Works Cities, 2021) Gilbert is a community committed to education; 48.1% of residents age 25 and older hold a bachelor’s degree or higher, compared with about 33.6% statewide and 36.2% nationally. Notable employers like Banner Health, Banner MD Anderson Cancer Center, Dignity Health, Deloitte, Footprint, Silent-Aire, Northrop Grumman, Zero Electric Vehicles, Li-Cycle, Lockheed Martin, and the worldwide headquarters of Isagenix benefit from this commitment to education and have helped keep Gilbert’s fiscal year 2023 unemployment rate at 3.3%, as compared to 3.8% for the state. Knowledge assets that support the community include Park University, the University of Arizona, Arizona State University Polytechnic Campus, Chandler-Gilbert Community College, A.T. Still University, and numerous other colleges, universities, and technical schools within a 30-minute commute. Additionally, there are more than 40 charter/private schools in Gilbert and three A+ rated school districts – Gilbert, Higley, and Chandler that 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 re-accreditation through the International Economic Development Council in 2022, after initially being accredited in 2013, and was the first Arizona economic development organization and the second municipality in the nation, to do so. In fiscal year 2023, the business development lines of service saw strong performance, with a lot of effort focused on building inventory to support employment-oriented users. Most notable was the attraction of Corning Incorporated, one of the world's leading innovators in materials science. This announcement brings a new optical cable manufacturing facility to Gilbert that will occupy 317,000 square-feet and is projected to create 250 jobs for the community. In addition, The Ranch, a proposed 300+ acre employment and mixed-use development received rezoning approval from Gilbert Town Council. This project is anticipated to bring over 3 million square-feet of employment industrial space to support job growth in Gilbert. These projects, along with the other successes in the fiscal year, demonstrate the community’s commitment to creating the place where the market wants to invest. The team also continued to focus on supporting Gilbert based businesses through the #GilbertTogether Business Recovery Program (#GilbertTogether). Through the end of fiscal year 2023, the business resiliency component of #GilbertTogether has provided over 2,000 hours of business coaching and awarded over 280 scholarships to Gilbert residents. Fiscal year 2023 marked the halfway point since the adoption of the Redevelopment Plan in fiscal year 2019, and in that time, eight developments have been constructed representing over 287,000 square feet of new building area. There is also an additional 800,000+ square feet of new office, retail, and residential projects currently approved for development. During fiscal year 2023, the Downtown Heritage District welcomed three new restaurants and three new retail establishments in this vibrant entertainment district. Additionally, the development and disposition agreement for the new mixed-use “South Anchor” project was approved by the Gilbert Town Council. When completed, this project is proposed to include 200+/residential units and 15,000 square feet of retail space at the southern gateway to the Downtown Heritage District. Park University also initiated an expansion of 6,045 additional square-feet of rentable area at the Gilbert-owned University Building to support their program growth. On the tourism front, hotel demand grew at a steady pace and pre-pandemic seasonality appears to have returned. Marketing campaigns continue to keep Gilbert top-of-mind for overnight and regional day visitors, and above average room rates have produced record revenue. March 2023 exceeded 90% occupancy for the first time since 2018. At the end of the fiscal year, occupancy remained strong and demand in the short-term rental market remained constant. 3 Table of Contents 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 (Sky Harbor), 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, Sky Harbor Airport is served by 20 airlines. Sky Harbor is one of the busiest airports in the nation for passenger traffic, seeing nearly 45 million passengers in fiscal year 2022. Phoenix-Mesa Gateway Airport is located on Gilbert’s eastern border and handled 1.9 million passengers in fiscal year 2023 with flights to over 60 destinations throughout the United States and Canada. The airport also provides air cargo services and is located within a Foreign Trade Zone. Transaction Privilege (Sales) Tax Trend Sales tax revenues represented 47.7% of General Fund revenues for fiscal year 2023, totaling approximately $154.0 million. Local sales taxes are collected by the Arizona Department of Revenue and remitted to Gilbert weekly. The graph below depicts sales tax receipts by source for the past five fiscal 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 2023, 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 15%, and commercial properties are assessed at 17.5%. This illustrates how crucial the additions of commercial properties are to the tax base. The limited property valuation increased by 6.8% in fiscal year 2023 from $2.807 billion to $2.999 billion. The following graph depicts the changes in the limited property valuation in Gilbert for the past ten years: Limited Property Value (Millions) $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 4 Table of Contents State-Shared Revenues State-shared revenues totaled $105.7 million for the General Fund and $20.4 million for the Streets Special Revenue Fund in fiscal year 2023. Excluding the change in fair market value of investments, state-shared revenues represented approximately 32.7% of total General Fund revenues and 97.1% of total Streets Special Revenue Fund revenues. Stateshared 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 can 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, promote openness and transparency, and 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 September of 2023. These policies are reviewed annually to ensure their continued relevance and adherence. The Town Council sets policy and adopts the annual budget at the fund level as a total amount of expenditures. Financial control is set by the Town Council at the fund level, with budgetary control for operating performance administered at the Department level by the Town Manager. All annual appropriations lapse at year-end and are considered for inclusion in the subsequent year’s budget on a case-by-case basis. 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 short-term goals and resources toward the long-term realization of Gilbert’s established strategic focus areas: Strong Economy, Prosperous Community and Exceptional Built Environment. Gilbert’s mission and vision is to be the “City of the Future” as we 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. 5 Table of Contents Gilbert also focuses on continuous improvements through its Employees Driving Gilbert’s Excellence (EDGE) program, which takes the best parts of Continuous Quality Improvement and Lean Six Sigma. It teaches our employees to participate in organizational transformation by aligning people, process, and technology in an ongoing effort to deliver efficiency and effectiveness from a customer-centric point of view. When combined with clearly defined Wildly Important Goals, (WIGs) we are constantly evaluating the work we do and asking ourselves, “Is this the most important thing we can do right now for our customer?” Since departments are so diverse, it is hard to find a “one size fits all” approach. We believe that through the marrying of our organizational transformation approach (EDGE) and The 4 Disciplines of Execution WIGs, we are equipping the organization with a variety of quality tools and agile techniques in to: • Yield a Return on Investment • Reduce Costs • Increase Staff Capacity to Deliver Results • Improve Service Delivery • Increase Customer Satisfaction • Empower Staff to Innovate • Enhance the Organizational Culture 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 or change. The main dashboard contains live “what if” variables that can be easily changed to help decisionmakers 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 Annual Comprehensive Financial Report for the fiscal year ended June 30, 2022. This was the 32nd consecutive year that Gilbert has received this prestigious award. To be awarded a Certificate of Achievement, we must publish an easily readable and efficiently organized Annual Comprehensive 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 Annual Comprehensive 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. 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 24 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 eight 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, Financial Services Officer; Anthony St. George, Accounting Manager; Emily Harmon, Senior Accountant; and Matthew Masters, Accountant II, 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 ORGANIZATIONAL REPORT CHARTT Citizens of Gilbert Mayor and Council Town Clerk Town Manager Municipal Court Town Attorney Advisory Boards and Commissions Utilities Board Industrial Development Authority Deferred Compensation Board Self-Insured Trust Boards Parks and Recreation Board Mayor's Youth Advisory Committee Judicial Selection and Advisory Comittee Fire Public Safety Retirement Pension Board Police Public Safety Retirement Pension Board Redevelopment Commission Planning Commission Water Resources Municipal Property Corp. Public Facilities Municipal Property Corp. Veterans Advisory Board Task Forces and Ad Hoc Committees 8 Table of Contents ORGANIZATIONAL REPORT CHARTT Town Clerk Town Manager Municipal Court Town Attorney Digital Government Assistant to the Town Manager Intergovernmental Relations Chief Performance Officer Assistant Town Manager Assistant Town Manager Assistant Town Manager Information Technology Police Finance and Management Services Human Resources Fire and Rescue Parks and Recreation Development Services Public Works Management and Budget Economic Development = Employment contracts directly with Council 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 Supplementary 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, the businesstype 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, 2023, 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, 2023, and the respective changes in financial position and, where applicable, cash flows thereof, and the respective budgetary comparison for the General Fund and Streets Special Revenue Fund 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 GASB Statement No. 96, Subscription-Based Information Technology Arrangements, for the year ended June 30, 2023, 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 27, 2023, 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 27, 2023 13 Table of Contents 14 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS This section of Gilbert’s Annual Comprehensive Financial Report presents a narrative overview and comparative analysis of the financial activities of Gilbert for the fiscal years ended June 30, 2023 and 2022. Readers are encouraged to consider the information presented here in conjunction with the basic financial statements that immediately follow, along with the letter of transmittal and other portions of this Annual Comprehensive Financial Report. 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 $2.3 billion, which is an increase over the prior year of $128.6 million, due to increases in both governmental and business-type activities. Included in net position of $2.3 billion, is $1.5 billion of net investment in capital assets, $133.7 million of amounts restricted for various purposes, and $647.1 million of unrestricted net position. Included in unrestricted net position is $170.2 million invested in joint ventures with the Cities of Mesa, Chandler, and the Town of Queen Creek, and $476.9 million which may be used to fund ongoing operations in future years. Governmental activities increased net position by $94.3 million, which was primarily due to taxes totaling $284.1 million and investment income of $17.8 million, offset by net program expenses of $205.4 million. The business-type activities increased net position by $34.3 million, primarily due to capital grants and contributions in the Water and Wastewater funds of $18.8 million and $5.7 million, respectively. Net position includes $919.9 million net investment in capital assets in governmental activities such as streets, parks, and municipal buildings and a $577.3 million net investment in business-type activities in water, wastewater and solid waste infrastructure and equipment. Amounts increased in the governmental activities by $34.2 million from the prior year which is attributed to ongoing capital projects including various street improvements ($24.2 million) and municipal center renovations ($7.0 million). Amounts increased in the business-type activities by $36.3 million in fiscal year 2023 primarily due to the construction of various capital projects including water treatment plant construction ($47.5 million), wastewater recharge facility upgrades ($7.1 million), improvements to transmission mains ($5.8 million), and waterline replacements ($5.1 million), which was offset by depreciation expense of $28.0 million. The combined fund balance for all governmental funds is $630.2 million. Unrestricted fund balance is classified as Committed, Assigned, and Unassigned. The unrestricted portion of all governmental funds is $307.8 million, which represents an increase of $68.9 million from the prior year. The increase is primarily due to increases in the following compared to the prior year: change in in fair value of investments of $18.9 million, investment earnings of $13.0 million, sales tax collections of $12.6 million, and property and state-shared tax of $21.8 million. The General Fund unrestricted fund balance is $309.4 million, of which $128.5 million has been assigned for capital replacement, capital improvement projects, and highways and streets. The General Fund unassigned balance of $180.9 million is approximately 77.1% of total fund expenditures. Gilbert’s total bonded debt outstanding at the end of the fiscal year was $922.0 million, as compared to $955.5 million at the end of fiscal year 2022. This represents a decrease of $33.5 million due to regularly scheduled debt payments made throughout the fiscal year. Gilbert’s total net pension liability at the end of the fiscal year was $132.1 million, as compared to $76.4 million at the end of fiscal year 2022. Gilbert made contributions in excess of the annual required contribution to the Public Safety Personnel Retirement System (PSPRS) of $1.8 million during the fiscal year. Overview of the Financial Statements This discussion and analysis is 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. 15 Table of Contents 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. 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 solid waste. 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 29-31 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 32-39. 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 solid waste. 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, workers’ compensation, and general liability self-insurance. 16 Table of Contents 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 112-114. The proprietary fund statements can be found on pages 42-44. 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 45-84. 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, 2023 and 2022. Town of Gilbert Condensed Statement of Net Position Current and other assets Capital assets Total assets Governmental Activities 2022 2023 (as restated) $ 726,323,032 $ 659,022,483 1,098,279,359 1,085,216,295 1,824,602,391 1,744,238,778 Business-type Activities Total 2023 2022 $ 899,548,442 $ 941,094,225 773,678,440 701,649,628 1,673,226,882 1,642,743,853 2022 2023 (as restated) $ 1,625,871,474 $ 1,600,116,708 1,871,957,799 1,786,865,923 3,497,829,273 3,386,982,631 Deferred outflows of resources 48,899,016 44,995,792 6,128,587 8,021,440 55,027,603 53,017,232 Long-term liabilities Other liabilities Total liabilities 511,873,238 61,469,588 573,342,826 476,312,088 66,842,187 543,154,275 651,579,815 27,890,322 679,470,137 657,659,546 21,745,955 679,405,501 1,163,453,053 89,359,910 1,252,812,963 1,133,971,634 88,588,142 1,222,559,776 Deferred inflows of resources 21,184,235 61,370,353 867,985 6,630,520 22,052,220 68,000,873 Net position: Net investment in capital assets Restricted Unrestricted Total net position 919,930,069 885,750,306 123,034,184 115,550,048 236,010,093 183,409,588 $ 1,278,974,346 $ 1,184,709,942 $ 577,320,244 541,025,300 10,630,053 13,500,206 410,203,766 411,067,050 999,017,347 $ 964,729,272 1,497,250,313 1,426,775,606 133,664,237 129,050,254 647,077,143 593,613,354 $ 2,277,991,693 $ 2,149,439,214 Net position consists of three components. The largest portion of Gilbert’s net position (65.7%) 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 (5.9%) represents resources that are subject to external restrictions on how they may be used. The remaining portion of net position (28.4%) includes $170.2 million which is invested in joint ventures with the Cities of Mesa, Chandler, and the Town of Queen Creek. The remaining $476.9 million 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 2023 increased Gilbert’s net position by $94.3 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 94.9% of total revenues for governmental activities. Taxes (local and state-shared) were $284.1 million, which represents an increase of $34.4 million from the prior year. Program revenues were $108.4 million, a decrease of $15.3 million from the prior year, which was mostly due to a decrease in capital 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 43.4%, and highways and streets, which represented 21.6% of total governmental activities expenses, which is consistent with prior year. Total expenses increased $38.7 million (14.1%) over the prior fiscal year. The following table details the changes in net position for governmental and business-type activities. Changes in Net Position Governmental Activities 2023 Business-type Activities 2022 Total 2023 2022 2023 2022 Revenues Program revenues Charges for services 22,222,563 $ 128,401,689 $ 111,151,614 $ 151,886,599 $ 133,374,177 Operating grants and contributions $ 41,985,234 23,484,910 $ 40,308,725 3,104,074 2,606,936 45,089,308 42,915,661 Capital grants and contributions 42,935,057 61,138,815 24,865,411 29,360,416 67,800,468 90,499,231 Sales taxes 155,493,976 142,901,420 - - 155,493,976 142,901,420 Property taxes 32,588,000 30,355,662 - - 32,588,000 30,355,662 Unrestricted state-shared revenue 92,189,540 72,666,521 - - 92,189,540 72,666,521 Other taxes 3,800,885 3,746,779 - - 3,800,885 3,746,779 General revenues Grants and contributions not restricted to specific programs 895,733 2,125,348 - - 895,733 2,125,348 Investment income 17,805,233 (14,992,902) 10,509,505 (6,500,296) 28,314,738 (21,493,198) Gain on sale of capital assets 1,152,603 238,370 74,984 240,840 1,227,587 479,210 Other 1,030,614 1,079,701 462,841 558,561 1,493,455 1,638,262 413,361,785 361,791,002 167,418,504 137,418,071 580,780,289 499,209,073 Management and policy 34,670,470 32,299,069 - - 34,670,470 32,299,069 Finance and management services 3,395,952 3,089,623 - - 3,395,952 3,089,623 Court 4,983,766 4,623,035 - - 4,983,766 4,623,035 Development services 12,751,814 11,876,375 - - 12,751,814 11,876,375 Police 81,159,390 67,491,794 - - 81,159,390 67,491,794 Fire 54,960,568 48,219,681 - - 54,960,568 48,219,681 Total revenues Expenses Highw ays and streets 67,635,517 63,021,711 - - 67,635,517 63,021,711 Parks and recreation 37,450,429 32,718,736 - - 37,450,429 32,718,736 Transportation 725,221 - - - 725,221 - Non departmental 4,016,081 3,523,440 - - 4,016,081 3,523,440 12,075,106 8,221,060 - - 12,075,106 8,221,060 Water - - 67,785,692 55,761,046 67,785,692 55,761,046 Wastew ater - - 38,774,386 36,907,806 38,774,386 36,907,806 Solid Waste - - 31,843,418 27,860,956 31,843,418 27,860,956 313,824,314 275,084,524 138,403,496 120,529,808 452,227,810 395,614,332 Interest and fiscal charges on long-term debt Total expenses - Increase in net position before 99,537,471 86,706,478 29,015,008 16,888,263 128,552,479 103,594,741 Transfers transfers (5,273,067) (157,874) 5,273,067 157,874 - - Change in net position 94,264,404 86,548,604 34,288,075 17,046,137 128,552,479 103,594,741 Net position, beginning 1,184,709,942 1,098,161,338 964,729,272 947,683,135 2,149,439,214 2,045,844,473 Net position, ending $ 1,278,974,346 $ 1,184,709,942 $ 999,017,347 $ 964,729,272 $ 2,277,991,693 $ 2,149,439,214 18 Table of Contents Business-type Activities Gilbert’s net position for business-type activities increased by $34.3 million during the fiscal year mainly due to development related growth, including $9.7 million in system development fee collections and $15.2 million in water, wastewater, and solid waste infrastructure contributed by developers. The revenues for business-type activities increased 21.8% over the prior year mainly due to an increase in charges for service in the Water and Wastewater funds which was due to rate increases for water of 30% in April of last fiscal year and wastewater rate increase of 30% in April 2023. Expenses increased $17.9 million (14.8%) from the prior year primarily due to the impacts of inflation, which increased costs of operation and maintenance such as water and fuel, accompanied by an increase in depreciation expense. 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 2023, the governmental funds reported ending unrestricted fund balances totaling $307.8 million, an increase of $68.9 million from 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 2023, the fund balance of the General Fund was $319.2 million, compared to $252.0 million in the prior year. The unrestricted portion of the fund balance was $309.4 million, of which $54.4 million has been assigned for capital replacement, $56.2 million for future capital projects, and $17.9 million for highways and streets. The remainder of $180.9 million supports our minimum fund balance policy and can be used for future operations. 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 77.1% of total General Fund expenditures for the current year, which is comparable to the prior year of 78.9%. Overall, the General Fund’s performance resulted in revenues and other financing sources exceeding expenditures and other financing uses by $67.2 million. Total revenues increased $50.9 million, or 18.7% compared to the prior year, while expenditures increased $40.1 million, or 20.7%. Gilbert’s largest revenue sources are local sales tax and intergovernmental revenues, which accounted for 82.1% of the total revenues in fiscal year 2023, which is consistent with the prior year. The largest General Fund expenditures are salaries, benefits, and associated costs, representing 65.6% of total expenditures, which is also consistent with prior year. 19 Table of Contents Key General Fund revenues showing an increase over the prior year were sales tax revenue collected of $12.6 million and state shared income tax of $16.8 million. The significant increase for sales tax is a result of increased consumer spending from stimulus funds in the economy and increased tax receipts resulting from the higher cost of goods. The increase in state shared income tax is attributable to an increase in per capita income to $48,791 in fiscal year 2023 compared to $39,073 in fiscal year 2022. Other revenue sources that contributed to the increase over the prior year were: other entities’ participation of $11.4 million largely due to funds contributed for completion of the Lindsay Road and Loop 202 interchange, change in fair value of investments of $8.5 million, investment earnings of $6.1 million and other financing source of $12.9 million resulting from the implementation of a new Governmental Accounting Standards pronouncement to record subscription-based technology arrangements (see Note 8). These increases in revenue were offset by increases in expenditures over the prior year of $40.1 million primarily due to increases in police and fire expenditures of $10.8 million and $7.8 million, respectively. These increases were the result of increased salary and related expenditures from market adjustments and annual performance review pay increases. In addition, capital outlay expenditures increased $14.2 million largely due to recognizing the cost of subscription-based technology arrangements. These increases were offset by a decrease of $4.2 million in non departmental expenditures in the current year, as AZCares funding from the COVID pandemic was largely exhausted in the prior year. The graphs below depict General Fund revenues by source and General Fund expenditures by function. 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 street related purposes. Total revenues in the Streets Fund remained relatively stable from prior year, with a $2.2 million (11.8%) increase due to receiving additional HURF funds. Total expenditures increased $3.5 million (22.8%) compared to the prior fiscal year due to increased operating expenditures primarily due to the effects of inflation. 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 $7.3 million during the year. This was due capital outlay expenditures exceeding revenues for the year. The larger projects with capital expenditures during the year were related to the road work on Ocotillo Road from Greenfield Road to Higley Road totaling $6.3 million and significant work performed on Somerton Boulevard from Williams Field Road to Recker Road totaling $4.0 million. Capital outlay was partially offset by system development fee collections of $4.3 million, interest earnings of $6.5 million, and transfers in of $8.1 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 $4.7 million during the year, which was primarily due to the collection of system development fees of $7.5 million, offset by capital outlay of $1.9 million. The largest projects with capital expenditures during the year were trail improvements for the Western Powerline Trail from Val Vista Road to Greenfield Road of $847 thousand and the first phase of development for Gilbert Regional Park for $813 thousand. The remaining fund balance of $35.4 million will be used to fund future parks needs related to growth in Gilbert. 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 increased by $472 thousand during the year, resulting in a deficit in fund balance at fiscal year-end of $3.1 million. The deficiency in this fund is primarily due to long-term loans from the General Fund to cover cash deficits for previous capital expenditures where future system development fee revenue is expected to eliminate the deficiency. The increase in fund balance was primarily due to transfers from the General Fund to fund construction projects within the fund. The largest project with capital expenditures during the year was the Municipal Center 1 Renovation totaling $7.0 million. Total expenditures of $18.5 million were offset by transfers in of $18.1 million. Debt Service The Debt Service Fund is used to account for the accumulation of resources for, and the payment of, principal, interest, and related costs for outstanding bonds. The fund balance decreased by $369 thousand during the year. Revenues and other financing sources and expenditures offset each other where property tax revenue and transfers from other funds totaled $38.9 million, while debt service payments were $38.9 million. See Note 8 for additional information. Special Assessments Debt Service The Special Assessments Debt Service Fund is used to account for the accumulation of resources for, and the payment of, principal, interest, and related costs for outstanding improvement district bonds. The fund balance of $101 thousand increased from the prior fiscal year by $11 thousand due to regularly scheduled debt payments, offset by the administrative fee charged for early redemption of a portion of the special assessment debt. See Note 8 for additional information. 21 Table of Contents 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 $1.9 million from the prior year to a balance at year-end of $7.4 million. Nonmajor funds represent approximately 1.2% of the total governmental funds 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 Solid Waste 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. The North Water Treatment Plant has reached its useful life and a new treatment plant located directly east of the current plant is under construction. Net position increased by $28.6 million to $558.0 million primarily due to an increase in charges for services over the prior year of $9.1 million due to rate increases of 30% implemented at the end of fiscal year 2022 and system development fees and developer contributions received during the fiscal year of $18.8 million. Operating income was $13.5 million, which is higher than prior year of $4.2 million. 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 Greenfield Water Reclamation Plant (GWRP) is a joint venture with the Cities of Mesa and Queen Creek, with Mesa acting as the lead agent and plant operator. Net position increased $7.6 million to $393.3 million primarily due to system development fees and developer contributions of $5.7 million. The operating loss of $2.3 million was primarily due inflation increasing the operation and maintenance costs of the two treatment plants. Solid Waste Fund Gilbert operates the Solid Waste 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 decreased by $889 thousand, to $47.4 million. The operating loss of $2.0 million was due increased salary and related expenditures from market adjustments and annual performance review pay increases of $1.8 million compared to prior year and inflation increasing the costs of operation and maintenance such as fuel and equipment by $1.5 million. These expense increases were offset by an increase in charges for services revenue resulting from rate increases of 30% for collections and 59% for the environmental compliance fee that were implemented towards the end of fiscal year 2022. 22 Table of Contents The following graph compares the fiscal year revenues to expenses for the Water, Wastewater and Solid Waste Funds. General Fund Budgetary Highlights There was a difference of ($57.0) million between the original adopted expenditure budget and the final amended expenditure budget. The final amended budget projected that expenditures would exceed revenues by $47.3 million resulting in a $152.5 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 the utilization of $69.9 million in contingency during the year which was primarily allocated to governmental capital project funds in addition to increases in General Fund budgets for police ($9.7 million) and fire ($3.9 million). During the year, actual revenues exceeded the budgeted amount by $57.1 million (21.4%) mainly due to higher than expected sales taxes collected of $26.0 million and intergovernmental revenues of $12.7 million. Actual expenditures were less than budgeted by $94.0 million (30.0%) mainly due to lower than expected expenditures in management and policy ($9.1 million), parks and recreation ($5.5 million), nondepartmental ($13.9 million), capital outlay ($5.2 million), and unused contingency ($49.6 million). This resulted in an excess of revenues over expenditures of $151.0 million more than budgeted. Other financing sources and uses came in $70.8 million lower than expected as a result the timing of redevelopment, municipal facilities, and streets and traffic capital projects. This also resulted in the actual net change in fund balance being $221.8 million more than budgeted. Capital Asset and Debt Administration Capital Assets. As of June 30, 2023, Gilbert had $1.9 billion in capital assets, net of accumulated depreciation, which is an increase of $85.1 million (4.8%) over prior year. This was due to increases in construction-in-progress for streets, redevelopment districts, municipal facilities, water, and wastewater projects, as well as purchases of non-depreciable water rights. These increases were offset by the depreciation expense taken. Major capital improvement projects completed during the year included the following: Governmental Activities     Gilbert Regional Park of $40.1 million Germann Road from Gilbert to Val Vista of $26.4 million Desert Sky Park of $22.6 million Heritage District Parking Garage of $18.8 million 23 Table of Contents Business-type Activities     Reservoir, Pump Station, and Well Conversion of $18.3 million South Recharge Site of $9.1 million Zone 1 Transmission Mains Rehabilitation of $7.7 million Tankersley Water Line Replacement Installation of $6.9 million The following table presents capital asset balances, net of accumulated depreciation, for the fiscal years ended June 30, 2023 and 2022. Town of Gilbert Capital Assets (net of depreciation) Governmental Activities 2022 (as restated) 2023 Land Business-type Activities 2023 2022 24,188,051 $ 2023 2022 (as restated) $ 164,249,944 $ 146,430,538 $ 140,142,173 24,107,771 $ 170,618,589 - - 65,898,010 64,690,356 65,898,010 64,690,356 Construction-in-progress 61,616,133 172,562,545 118,648,153 94,065,167 180,264,286 266,627,712 Buildings 198,680,268 188,981,350 - - 198,680,268 188,981,350 Improvements 84,383,711 17,661,744 - - 84,383,711 17,661,744 Plant, machinery & equipment 33,108,306 30,557,930 51,959,870 58,010,469 85,068,176 88,568,399 Infrastructure 562,498,213 534,956,542 476,579,777 423,960,857 1,039,077,990 958,917,399 Intangible right-to-use subscription ass Nondepreciable w ater rights $ Total 11,562,190 354,011 - - 11,562,190 354,011 Depreciable w ater rights - - 36,404,579 36,815,008 36,404,579 36,815,008 Total Capital Assets $ 1,098,279,359 $ 1,085,216,295 $ 773,678,440 $ 701,649,628 $ 1,871,957,799 $ 1,786,865,923 Total governmental capital assets and business-type capital assets increased by $13.1 million and $72.0 million, respectively. The change in governmental capital assets can be attributed to the addition of land of $9.9 million, buildings of $23.2 million, improvements other than buildings of $69.6 million, infrastructure of $65.5 million, and intangible right-to-use subscription assets of $12.9 million. These were offset by construction-in-progress deletions of ($148.6 million) and depreciation taken of ($61.3 million). Most of the increase for the business-type capital assets can be attributed to the addition of construction-in-progress of $81.5 million and infrastructure of $72.1 million, which were offset by depreciation taken of ($28.0 million) and construction-in-progress deletions of ($56.9 million). See Note 6 on pages 60-61 for further information regarding capital assets. Long-term Debt. At June 30, 2023, Gilbert had total bonded debt obligations of $339.9 million related to governmental activities and $582.0 million in business-type activities. Of the total debt outstanding, $279.9 million is general obligation (GO) bonds backed by the full faith and credit of Gilbert, $2.5 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, 2023, was $246.6 million in the 6% capacity and $523.0 million in the 20% capacity. See Note 8 on pages 62-67 for additional information on debt. 24 Table of Contents The following schedule shows Gilbert’s outstanding debt as of June 30, 2023 and 2022. Town of Gilbert Outstanding Debt Governmental Activities General Obligation Special Assessment Revenue Obligations Municipal Property Corporation (Revenue Bonds) Business-type Activities 2023 2022 $ 279,935,000 2,490,000 32,640,000 $ 298,465,000 2,840,000 33,450,000 $ 24,865,000 30,365,000 $ 365,120,000 582,020,000 $ 582,020,000 Totals $ 339,930,000 2023 Total 2022 - 2023 2022 - $ 279,935,000 2,490,000 32,640,000 $ 298,465,000 2,840,000 33,450,000 590,360,000 $ 590,360,000 606,885,000 $ 921,950,000 620,725,000 $ 955,480,000 $ 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, 2023. Town of Gilbert Long-term Debt Ratings As of June 30, 2023 General Obligation Public Facilities Municipal Property Corporation (Revenue Bonds) Water Resources Municipal Property Corporation (Revenue Bonds) Revenue Obligations Improvement Districts (Special Assessment) 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 Economic Factors and Next Year’s Budget Gilbert continued to grow during fiscal year 2023 with citizens and businesses continuing to receive high quality town services. Inflation was a significant hurdle for many departments and some user rates had to be adjusted to compensate for the changes in operational costs. Gilbert is also keeping a close eye on regional water discussions to ensure that our water portfolio and infrastructure are ready for the future. We want to ensure that a shortage at the river does not equal a shortage at the tap for our residents and businesses. Gilbert is also taking steps to reduce water usage by removing underutilized turf at Gilbertowned facilities, implementing new water reduction incentive programs, and encouraging general water conservation. We will also remain financially prepared to meet economic challenges that may arise as the economy evolves and potentially transitions into a slower growth or recessionary phase of the typical cycle. With a population of 280,391 residents, Gilbert is Arizona’s fifth largest city. In 2023, Gilbert Fire and Rescue became Autism Certified, which builds upon the certifications received by the Police and Parks and Recreation Departments in 2022. Cactus Yards was named Outstanding Park of the year again in 2023. Gilbert stands proud as the Best Place to Live in Arizona (Ranking Arizona, 2022) and the #2 Best Place to Raise a Family in the Phoenix Area (Niche, 2023). Gilbert was also ranked the #1 Best City for Early Retirement (Smart Asset, 2022) and the #3 Healthiest Midsize Employer in Arizona (Phoenix Business Journal, 2023). As the nation continues to rebound from the COVID-19 pandemic, the Town of Gilbert was ranked as #3 for Cities Whose Unemployment Rates are Bouncing Back Most (WalletHub, 2022). From fiscal year 2013 to fiscal year 2022, private investment in Gilbert’s four employment areas exceeded over $1.3 billion. Science, Technology, Engineering, and Mathematics (STEM) and STEM related job growth has outpaced total job growth in the community over the last five years; 15.0% for STEM/STEM related growth versus 10.0% for total job growth (Lightcast, Inc., 2017-2022). Over the last five years, Gilbert has added $4.7 million square-feet of office, industrial/flex, and retail space to its inventory, representing an increase of 18.4% (Costar, Q2 2018 – Q2 2023). 25 Table of Contents In fiscal year 2023, Gilbert’s economic development initiatives continued to yield positive results for the community, with each of Gilbert’s employment areas seeing significant investment and growth. In the Northwest employment area, SunCap Property Group completed three new speculative light industrial/flex buildings at the Gilbert Spectrum development, totaling over 300,000 square-feet. This same group also received approval to construct an additional 120,000 square-foot building on the site, which will complete the build-out of the Spectrum development project. In the Central Business District, Corning announced the development of a new 300,000 square-foot fiber optic cable manufacturing facility that will create over 200 new jobs for the community. Property at the north east corner of Germann and Lindsay Roads also received approval for a 1.4 million square-foot industrial park. Additionally, the Gateway employment area saw the completion of the Warner Commons, a 380,000 square-foot light industrial park and approval for The Ranch project, a 3+ million square-foot light industrial park planned for the north west corner of Warner and Power Roads. The Heritage District also saw additional investment with the selection of a developer for the prominent “South Anchor” site and the completion of the University of Arizona’s fourth floor expansion. The #GilbertTogether long-term resiliency efforts continued as well, providing access to experts and proven programs that enabled businesses to improve operations, receive technical assistance, and provide access to scholarships that allowed Gilbert residents to upskill. At the conclusion of fiscal year 2023, Gilbert businesses had received nearly 2,000 hours of technical assistance and one-on-one coaching, and over 280 scholarships had been awarded to Gilbert residents. A community of excellence demands exceptional governance. Gilbert undertakes a zero-based budgeting process for one third of the organization every year, and always applies priority, program, and performancebased approaches. Since fiscal year 2018, over $7.6 million has been removed due to the zero-based efforts. Due to inflation, the cumulative zero-based savings reduced from the prior year. Directors are tasked with balancing the budget through consensus. The directors must achieve consensus before the Town Manager is 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 we all serve 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 of 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. Council retreats, as well as the budget kickoff in September 2022, allow staff to initiate the process with clear direction and focus governing the priorities for service delivery in fiscal year 2024. The budget for fiscal year 2024 reflects an effort to deliver both effective and efficient services to our 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 volatility. Budget Highlights for Fiscal Year 2024 With carry forwards and contingency adjustments, the maximum budget of $2,049,501,300 was adopted for fiscal year 2024. Most of the increase from fiscal year 2023 is from increased activity in the Capital Improvement Program, especially related to the voter-approved transportation bond projects and additional water projects to be funded by the Water Municipal Property Corporation bonds issued in the prior fiscal year. The budget includes a capital projects contingency budget of $100 million to allow Council the flexibility and legal authority to respond to community needs. This contingency is consistent with practice in prior years. Tax Rates: The budget reflects a levy of $31.3 million which lowers the property tax rate to $0.98 per $100 of limited property valuation. Balanced Financial Plan: The fiscal year 2024 budget is balanced based upon identified revenues and expenditures. 26 Table of Contents Constitutional Expenditure Limit: The fiscal year 2024 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 2024 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 HURF distributions. Fund Balance: The Revenue Summary in the Annual Budget lists the use of carry over funds in an amount of $1.1 billion. This reflects use of revenues which were received in prior fiscal years in excess of minimum fund balance. Revenues from the bonds sold in 2022 for both transportation and water related projects are included in this carry over number. Capital Project Financing – System Development Fees: The fiscal year 2024 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 Tanya Wright, Financial Services Officer 50 East Civic Center Drive Gilbert, AZ 85296 (480) 503-6000 27 Table of Contents 28 Table of Contents TOWN OF GILBERT, ARIZONA Statement of Net Position June 30, 2023 Assets Pooled cash and investments Restricted cash and investments Receivables, net Taxes Special assessments Accrued interest Restricted accrued interest Accounts Due from other governments Leases Prepaid items Deposits Inventories Internal balances Investment in joint venture Capital assets Non-depreciable Depreciable, net Total assets Deferred outflows of resources Deferred charge on refundings Pensions and other postemployment benefits Total deferred outflows of resources Primary Government Component Unit Governmental Activities Business-type Activities Industrial Development Authority $ $ 658,914,781 4,211,627 Total 706,731,643 12,253,973 $ 1,365,646,424 16,465,600 $ 17,114 - 20,965,379 2,501,596 1,581,286 10,639,925 5,839,052 16,419,123 2,577,952 50,000 1,081,378 (315,481) 1,856,414 1,642,494 29,963 8,425,265 897,925 878,513 67,818 315,481 168,305,367 20,965,379 2,501,596 3,223,780 29,963 19,065,190 6,736,977 16,419,123 3,456,465 50,000 1,149,196 170,161,781 - 208,046,671 890,232,688 1,824,602,391 208,734,214 564,944,226 1,673,226,882 416,780,885 1,455,176,914 3,497,829,273 17,114 1,765,248 47,133,768 48,899,016 1,779,921 4,348,666 6,128,587 3,545,169 51,482,434 55,027,603 - 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 17,178,211 6,255,357 10,233,000 1,596,467 704,353 25,502,200 23,140,042 416,944 1,996,930 2,336,406 - 40,318,253 6,672,301 10,233,000 1,596,467 1,996,930 3,040,759 25,502,200 10 - 37,932,950 473,940,288 573,342,826 20,785,788 630,794,027 679,470,137 58,718,738 1,104,734,315 1,252,812,963 10 Deferred inflows of resources Pensions and other postemployment benefits Leases Total deferred inflows of resources 5,231,552 15,952,683 21,184,235 867,985 867,985 6,099,537 15,952,683 22,052,220 - 919,930,069 577,320,244 1,497,250,313 - 95,148,886 2,004,654 7,785,872 12,403,997 634,396 521,337 10,630,053 - 105,778,939 2,004,654 7,785,872 12,403,997 634,396 - 411,067,050 999,017,347 521,337 2,842,480 1,692,562 647,077,143 $ 2,277,991,693 17,104 17,104 Net position Net investment in capital assets Restricted for Capital projects Court/police programs Debt service Highway and streets Other purposes Special districts Tourism Transportation Unrestricted Total net position 2,842,480 1,692,562 236,010,093 $ 1,278,974,346 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, 2023 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 $ 34,670,470 3,395,952 4,983,766 12,751,814 Charges for Services Operating Grants and Contributions Capital Grants and Contributions $ $ $ 35,442 495,509 5,349,901 3,176,756 23,406 - - 81,159,390 54,960,568 67,635,517 37,450,429 725,221 4,016,081 12,075,106 313,824,314 3,195,276 6,143,782 46,608 7,954,465 263,927 23,484,910 1,939,344 2,672,248 33,899,909 223,727 49,844 41,985,234 2,091,884 1,351,977 26,986,404 11,826,416 678,376 42,935,057 Business-type activities Water Wastewater Solid Waste Total business-type activities Total primary government 67,785,692 38,774,386 31,843,418 138,403,496 $ 452,227,810 64,345,893 34,753,378 29,302,418 128,401,689 $ 151,886,599 2,833,661 270,413 3,104,074 $ 45,089,308 18,810,658 5,713,651 341,102 24,865,411 $ 67,800,468 Component unit Industrial Development Authority $ $ $ $ 10 - - General revenues and transfers Sales taxes Property taxes In-Lieu property taxes Franchise taxes Unrestricted state-shared revenue Grants and contributions not restricted to specific programs Investment income Gain 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 Primary Government Component Unit Governmental Activities Business-type Activities Industrial Development Authority $ $ (31,458,272) (3,395,952) (4,464,851) (7,401,913) Total - $ (31,458,272) (3,395,952) (4,464,851) (7,401,913) $ - (73,932,886) (44,792,561) (6,702,596) (17,445,821) (46,845) (3,702,310) (12,075,106) (205,419,113) - (73,932,886) (44,792,561) (6,702,596) (17,445,821) (46,845) (3,702,310) (12,075,106) (205,419,113) - (205,419,113) 18,204,520 1,963,056 (2,199,898) 17,967,678 17,967,678 18,204,520 1,963,056 (2,199,898) 17,967,678 (187,451,435) - 155,493,976 32,588,000 1,039,806 2,761,079 92,189,540 895,733 17,805,233 1,152,603 1,030,614 (5,273,067) 299,683,517 94,264,404 1,184,709,942 $ 1,278,974,346 $ 10,509,505 74,984 462,841 5,273,067 16,320,397 34,288,075 964,729,272 999,017,347 155,493,976 32,588,000 1,039,806 2,761,079 92,189,540 895,733 28,314,738 1,227,587 1,493,455 316,003,914 128,552,479 2,149,439,214 $ 2,277,991,693 31 $ (10) $ 5 5 (5) 17,109 17,104 Table of Contents TOWN OF GILBERT, ARIZONA Balance Sheet Governmental Funds June 30, 2023 Streets Special Revenue General Assets Pooled cash and investments Restricted cash and investments Receivables, net Taxes Special assessments Accrued interest Accounts Due from other governments Lease Due from other funds Prepaid items Advances to other funds Total assets $ 298,298,337 197,019 20,501,245 765,105 10,204,277 971,420 16,419,123 554,330 2,577,952 7,164,026 $ 357,652,834 $ $ Streets and Traffic Capital Projects Parks Capital Projects 12,454,588 - $ 248,804,488 - 29,855 2,052,942 14,537,385 596,737 $ 249,401,225 $ $ 35,520,522 85,404 35,605,926 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 7,570,256 6,020,047 1,596,467 1,350,223 16,536,993 1,213,603 83,304 1,296,907 1,949,784 1,949,784 228,405 228,405 Deferred inflows of resources Unavailable revenue - sales tax Unavailable revenue - special assessments Unavailable revenue - court fines Unavailable revenue - grants Unavailable revenue - other Deferred inflows related to leases Total deferred inflows of resources 79,929 5,535,804 360,487 15,952,683 21,928,903 - - - Fund balances (deficits) Nonspendable Restricted Assigned Unassigned Total fund balances (deficits) 9,741,978 128,524,866 180,920,094 $ 319,186,938 $ 13,240,478 13,240,478 247,451,441 $ 247,451,441 $ 35,377,521 35,377,521 Total liabilities, deferred inflows of resources and fund balances (deficits) $ 357,652,834 $ 14,537,385 $ 249,401,225 $ 35,605,926 The notes to financial statements are an integral part of this statement. 32 Table of Contents Municipal Facilities Capital Projects $ $ 7,527,115 8,877 7,535,992 General Debt Service Special Assessments Debt Service Other Governmental Funds Total Governmental Funds $ $ $ 29,847,609 - $ 640,346,355 4,211,627 208,266 15,774 10,910 2,791,704 32,874,263 20,965,379 2,501,596 1,538,534 10,215,187 5,816,066 16,419,123 554,330 2,577,952 7,164,026 $ 712,310,175 $ 7,792,679 4,014,608 255,868 36,540 12,099,695 $ 101,017 2,501,596 242 2,602,855 $ 4,751,757 5,864,026 10,615,783 704,353 850,000 1,554,353 93 93 515,988 102,264 554,330 24,151,977 25,324,559 16,229,886 6,205,615 1,596,467 554,330 704,353 5,864,026 25,502,200 850,000 57,506,877 - - 2,501,596 2,501,596 188,907 188,907 79,929 2,501,596 5,535,804 188,907 360,487 15,952,683 24,619,406 $ 3,709,916 (6,789,707) (3,079,791) $ 5,183,110 5,362,232 10,545,342 $ 101,166 101,166 $ 7,552,322 (191,525) 7,360,797 9,741,978 312,615,954 133,887,098 173,938,862 $ 630,183,892 $ 7,535,992 $ 12,099,695 $ 2,602,855 $ 32,874,263 $ 712,310,175 33 Table of Contents 34 Table of Contents TOWN OF GILBERT, ARIZONA Reconciliation of Balance Sheet To the Statement of Net Position June 30, 2023 $ Fund balances of governmental funds 630,183,892 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/amortization 2,106,472,635 (1,008,988,145) 1,097,484,490 The investment in joint venture is not a financial resource and, therefore, is not reported in the funds. 1,856,414 Some receivables are not available to pay for current period expenditures and, therefore, are reported as unavailable revenue in the governmental funds. 8,666,723 Internal service funds are used by management to charge the costs of certain activities, such as equipment maintenance, to the individual funds. The assets, deferred outflows, liabilities, and deferred inflows 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. 5,888,066 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 1,765,248 41,580,123 43,345,371 Certain liabilities applicable to the Town's governmental activities are not due and payable in the current period, and accordingly are not reported as fund liabilities in the governmental funds balance sheet. Bonds payable Bonds premium Compensated absences Subscription-based information technology arrangements Net other postemployment benefits Net pension (339,080,000) (31,054,666) (21,157,923) (11,439,995) (901,222) (104,816,804) (508,450,610) Net position of governmental activities - statement of net position The notes to financial statements are an integral part of this statement. 35 $ 1,278,974,346 Table of Contents TOWN OF GILBERT, ARIZONA Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Year Ended June 30, 2023 Streets Special Revenue General Revenues Taxes Sales Property Special assessments Franchise 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 $ 154,011,290 2,761,079 2,883,959 23,853,266 111,362,182 2,762,393 16,657,091 188,945 8,089,791 (259,666) 847,854 323,158,184 $ Streets and Traffic Capital Projects 20,350,740 7,744 367,391 55,414 180,125 20,961,414 $ 59,664 4,262,732 6,466,948 1,169,622 11,958,966 Parks Capital Projects $ 7,496,043 880,160 7,109 8,383,312 34,277,677 3,567,358 3,962,374 9,715,070 - - - 72,354,228 50,112,533 6,551,496 28,489,297 3,950,045 18,980,628 - 11,750 - 1,587,784 2,750 1,853,988 19,697,281 234,531,347 37,475 19,018,103 26,891,288 26,903,038 1,905,305 3,495,839 Excess (deficiency) of revenues over expenditures 88,626,837 1,943,311 (14,944,072) 4,887,473 Other financing sources (uses) Transfers in Transfers out Subscription-based information technology arrangements Proceeds from the sale of capital assets Total other financing sources (uses) 2,707,606 (41,718,240) 12,939,972 4,644,293 (21,426,369) 70,000 (1,525,110) 132,557 (1,322,553) 8,120,202 (520,387) 7,599,815 2,625,371 (2,844,925) (219,554) Net change in fund balances 67,200,468 620,758 (7,344,257) 4,667,919 12,619,720 13,240,478 254,795,698 $ 247,451,441 Fund balances - beginning Fund balances - ending 251,986,470 $ 319,186,938 The notes to financial statements are an integral part of this statement. 36 $ $ 30,709,602 35,377,521 Table of Contents Municipal Facilities Capital Projects $ $ 3,552,914 99,199 (10,528) 3,641,585 Debt Service Special Assessments Debt Service Other Governmental Funds Total Governmental Funds $ $ $ 1,498,686 3,006,329 332,645 4,644,308 289,236 114,791 158,593 (29,459) 304,232 10,319,361 $ 155,509,976 32,588,000 490,470 2,761,079 2,883,959 24,190,092 136,416,894 3,059,373 16,657,091 15,311,689 303,736 16,569,382 813,248 1,332,211 408,887,200 29,581,671 503,682 (119,278) 29,966,075 490,470 4,181 3,618 34 498,303 - - - 1,779,691 427,642 - 36,057,368 3,567,358 4,390,016 9,715,070 6,029 13,401 - - 834,330 59,703 2,071,239 1,001,267 725,221 1,098,397 73,194,587 50,172,236 27,615,113 31,078,348 725,221 5,064,593 18,475,617 18,495,047 24,880,000 13,980,131 8,625 38,868,756 350,000 135,965 1,207 487,172 1,408,470 9,405,960 27,083,988 14,116,096 9,832 68,415,436 351,205,262 (14,853,462) (8,902,681) 11,131 913,401 57,681,938 18,091,927 (2,766,039) 15,325,888 9,271,220 9,271,220 - 1,744,982 (733,956) 1,011,026 42,631,308 (50,108,657) 12,939,972 4,776,850 10,239,473 472,426 368,539 11,131 1,924,427 67,921,411 5,436,370 7,360,797 562,262,481 $ 630,183,892 (3,552,217) (3,079,791) $ 10,176,803 10,545,342 $ 90,035 101,166 $ 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, 2023 Net change in fund balances - total governmental funds $ 67,921,411 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/amortization expense. Capital outlay Depreciation/amortization expense 68,415,436 (61,195,977) 7,219,459 The net effect of various miscellaneous transactions involving capital assets (i.e., sales, trade-ins, and donations) is to decrease net position. (3,891,788) Issuance of debt is reported as a financing source (use) in the governmental funds and thus contribute to the change in fund balance. In the government-wide statements, however, issuing debt increases long-term liabilities in the statement of net position and does not affect the statement of activities. (12,939,972) Repayment of liability 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 27,083,988 2,050,822 29,134,810 Internal service funds are used by management to charge the costs of certain activities, such as equipment maintenance and self-insurance, to the individual funds. The adjustments for internal service funds "close" those funds by charging the additional amounts to participating governmental activities to completely cover the internal service funds' costs for the year. 124,833 Capital assets contributed by developers are not shown on the governmental fund statements but are included in the assets of the Town. On the statement of activities, these donations are shown as capital contributions. 9,362,436 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. (1,225,734) 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 16,715,199 (18,517,746) (1,802,547) (353,819) 220,536 (16,000) 150,292 360,487 361,496 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 94,264,404 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, 2023 Variance with Budgeted Amounts 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 Original Final Non-GAAP Actual $ 128,000,000 2,425,000 3,865,000 20,457,450 98,706,000 2,640,000 8,761,000 75,000 695,000 715,000 266,339,450 $ 128,000,000 2,425,000 3,865,000 20,457,450 98,706,000 2,640,000 8,761,000 75,000 695,000 715,000 266,339,450 $ 154,011,290 2,761,079 2,883,959 23,853,266 111,362,182 2,762,393 16,657,091 188,945 8,089,791 847,854 323,417,850 Final Budget Positive (Negative) $ 26,011,290 336,079 (981,041) 3,395,816 12,656,182 122,393 7,896,091 113,945 7,394,791 132,854 57,078,400 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 41,721,752 3,596,550 3,729,200 10,529,410 43,358,443 3,750,990 4,193,980 11,305,260 34,277,677 3,567,358 3,962,374 9,715,070 9,080,766 183,632 231,606 1,590,190 66,895,260 49,988,868 7,231,780 31,267,390 26,870,350 9,309,790 119,500,000 370,640,350 76,617,738 53,881,148 7,231,780 33,969,761 17,863,250 11,875,703 49,594,761 313,642,814 72,354,228 50,112,533 6,551,496 28,489,297 3,950,045 6,707,709 219,687,787 4,263,510 3,768,615 680,284 5,480,464 13,913,205 5,167,994 49,594,761 93,955,027 Excess (deficiency) of revenues over expenditures (104,300,900) (47,303,364) 103,730,063 151,033,427 Other financing sources (uses) Transfers in Transfers out Proceeds from the sale of capital assets Total other financing sources (uses) 1,920,110 (106,854,529) (104,934,419) 2,775,212 (107,952,606) (105,177,394) 2,707,606 (41,718,240) 4,644,293 (34,366,341) (67,606) 66,234,366 4,644,293 70,811,053 $ (209,235,319) $ (152,480,758) 69,363,722 $ 221,844,480 Net change in fund balances Explanation of difference between budgetary ending fund balance at June 30, 2023, 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 Capital outlay related to subscription-based information technology arranagements Debt service principal and interest related to subscription-based information technology arranagements Other financing sources related to subscription-based information technology arranagements 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 (259,666) (12,989,572) (1,853,988) 12,939,972 $ 67,200,468 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, 2023 Non-GAAP Actual Variance with Final Budget Positive (Negative) $ $ Budgeted Amounts Original Revenues Intergovernmental Fines and forfeitures Interest earnings Miscellaneous Total revenues $ 18,350,000 45,000 18,395,000 Final $ 18,350,000 45,000 18,395,000 20,350,740 7,744 367,391 180,125 20,906,000 2,000,740 7,744 322,391 180,125 2,511,000 Expenditures Current Highways and streets Capital outlay Contingency Total expenditures 19,523,620 210,000 500,000 20,233,620 19,785,180 260,300 258,140 20,303,620 18,980,628 37,475 19,018,103 804,552 222,825 258,140 1,285,517 Excess (deficiency) of revenues over expenditures (1,838,620) (1,908,620) 1,887,897 3,796,517 Other financing sources (uses) Transfers in Transfers out Proceeds from the sale of capital assets Total other financing sources (uses) (1,525,110) (1,525,110) 70,000 (1,525,110) (1,455,110) 70,000 (1,525,110) 132,557 (1,322,553) 132,557 132,557 (3,363,730) 565,344 Net change in fund balances $ (3,363,730) Explanation of difference between budgetary change in fund balance at June 30, 2023, and GAAP change in fund balance: Changes in fair value of investments are recognized as revenue for GAAP purposes but are not recognized as revenue 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 $ 55,414 $ 620,758 $ 3,929,074 Table of Contents TOWN OF GILBERT, ARIZONA Statement of Net Position Proprietary Funds June 30, 2023 Water Assets Current assets Pooled cash and investments Restricted cash and investments Receivables, net Accrued interest Restricted accrued interest Accounts Due from other governments Prepaid items Deposits Inventories Total current assets Business-type Activities - Enterprise Funds Total Enterprise Wastewater Solid Waste Funds 706,731,643 12,253,973 $ 18,568,426 - 63,609 1,446,407 28,009,174 1,642,494 29,963 8,425,265 897,925 878,513 67,818 730,927,594 42,752 424,738 22,986 50,000 1,081,378 20,190,280 97,162,149 - 168,305,367 - 160,701,319 340,348,386 572,192,923 1,183,029,844 47,352,232 195,600,250 340,114,631 432,196,130 680,663 28,995,590 29,676,253 57,685,427 208,734,214 564,944,226 941,983,807 1,672,911,401 225,749 569,120 794,869 20,985,149 Deferred outflows of resources Deferred charge on refundings Pensions and other post-employment benefits Total deferred outflows of resources 1,779,921 2,073,284 3,853,205 767,974 767,974 1,507,408 1,507,408 1,779,921 4,348,666 6,128,587 403,194 403,194 Liabilities Current liabilities Accounts payable Accrued liabilities Advances from other funds Accrued compensated absences Claims payable Bond interest payable Bonds payable Utility deposits Total current liabilities 16,250,514 195,364 510,768 1,692,906 17,400,000 1,932,753 37,982,305 5,280,204 72,976 214,030 643,500 2,335,000 8,545,710 1,609,324 148,604 325,990 64,177 2,148,095 23,140,042 416,944 1,050,788 2,336,406 19,735,000 1,996,930 48,676,110 948,325 49,742 1,300,000 88,456 10,233,000 12,619,523 577,527,306 948,874 96,531 11,888,255 590,460,966 628,443,271 26,163,602 406,108 36,387 4,402,473 31,008,570 39,554,280 612,659 72,665 8,639,167 9,324,491 11,472,586 603,690,908 1,967,641 205,583 24,929,895 630,794,027 679,470,137 154,188 19,724 2,310,260 2,484,172 15,103,695 412,425 412,425 153,362 153,362 302,198 302,198 867,985 867,985 81,101 81,101 335,160,684 222,866,669 $ 558,027,353 212,814,230 10,630,053 169,812,179 $ 393,256,462 29,345,330 18,072,721 47,418,051 577,320,244 10,630,053 410,751,569 998,701,866 742,288 5,461,259 6,203,547 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 Net other post-employment benefits Net pension liability Total noncurrent liabilities Total liabilities Deferred inflows of resources Pensions and other post-employment benefits Total deferred inflows of resources Net position Net investment in capital assets Restricted for capital projects Unrestricted Total net position $ 593,522,570 9,275,467 $ 86,709,915 2,978,506 1,396,458 4,528 4,970,343 897,925 701,812 67,818 610,836,921 182,427 25,435 2,008,515 176,701 92,081,499 71,143,218 $ $ 26,499,158 - 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 $ Governmental Activities Internal Service Funds $ 315,481 999,017,347 $ Table of Contents TOWN OF GILBERT, ARIZONA Statement of Revenues, Expenses, and Changes in Net Position Proprietary Funds June 30, 2023 Water Operating revenues Charges for services Intergovernmental Other Total operating revenues Business-type Activities - Enterprise Funds Total Enterprise Wastewater Solid Waste Funds 128,401,689 2,624,074 462,841 131,488,604 Internal Service Funds $ 64,345,893 2,353,661 87,574 66,787,128 $ 34,753,378 270,413 375,267 35,399,058 $ 29,302,418 29,302,418 Operating expenses General and administrative Personnel services Operation and maintenance Claims incurred Depreciation Allocation of indirect expenses Total operating expenses 2,144,274 11,249,720 17,890,397 18,885,046 3,131,970 53,301,407 1,456,156 5,768,903 14,493,358 14,358,173 1,632,190 37,708,780 1,847,861 10,947,096 11,819,867 4,607,113 2,104,890 31,326,827 5,448,291 27,965,719 44,203,622 37,850,332 6,869,050 122,337,014 6,954,657 2,984,530 7,979,099 30,022,530 60,725 48,001,541 Operating income (loss) 13,485,721 (2,309,722) (2,024,409) 9,151,590 (3,505,411) Nonoperating revenues (expenses) Interest expense Intergovernmental Interest earnings Net change in fair value of investments Gain (loss) on sale of capital assets Total nonoperating revenues (expenses) (14,114,945) 481,639 16,716,175 (9,854,820) 5,278 (6,766,673) (943,775) 2,407,371 582,666 54,140 2,100,402 662,097 (3,984) 11,163 669,276 (15,058,720) 481,639 19,785,643 (9,276,138) 70,581 (3,996,995) 442,951 (20,348) 422,603 Income (loss) before contributions and transfers 6,719,048 (209,320) (1,355,133) 5,154,595 (3,082,808) Capital contributions Transfers in Transfers out 18,809,019 5,168,216 (2,109,350) 5,713,651 2,089,353 - 341,102 124,850 - 24,863,772 7,382,419 (2,109,350) 2,237,300 (33,020) Change in net position 28,586,933 7,593,684 (889,181) 35,291,436 (878,528) Total net position - beginning $ Governmental Activities 529,440,420 385,662,778 48,307,232 $ 558,027,353 $ 393,256,462 $ 47,418,051 $ 998,701,866 Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds Changes in net position of business-type activities $ (1,003,361) 34,288,075 Total net position - ending The notes to financial statements are an integral part of this statement. 43 $ 963,410,430 41,195,793 387,502 2,912,835 44,496,130 7,082,075 $ 6,203,547 Table of Contents TOWN OF GILBERT, ARIZONA Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2023 Water Cash flows from operating activities Cash receipts from customers Other operating cash receipts Cash receipts from other funds for services Cash receipts from deposits Proceeds from intergovernmental agreements 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 Business-type Activities - Enterprise Funds Total Enterprise Wastewater Solid Waste Funds $ 34,276,922 375,267 373,682 (17,283,208) (5,830,777) (1,632,190) 10,279,696 Cash flows from noncapital financing activities Transfers from other funds Transfers to other funds Net cash provided (used) by noncapital financing activities 5,168,216 (2,109,350) 3,058,866 2,089,353 2,089,353 124,850 124,850 7,382,419 (2,109,350) 5,273,069 2,237,300 (33,020) 2,204,280 Cash flows from capital and related financing activities Acquisition and construction of capital assets Acquisition and construction of investment in joint venture 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 (49,896,043) 7,514,174 (16,320,529) (6,115,000) 5,278 (64,812,120) (26,085,432) (295,732) 2,187,503 (1,344,225) (2,225,000) 54,140 (27,708,746) (989,013) 119,255 (869,758) (76,970,488) (295,732) 9,701,677 (17,664,754) (8,340,000) 178,673 (93,390,624) (515,106) (515,106) 5,706,562 5,706,562 2,949,466 2,949,466 634,065 634,065 9,290,093 9,290,093 405,314 405,314 (24,227,244) 627,025,281 $ 602,798,037 (12,390,231) 102,078,652 $ 89,688,421 $ 3,654,581 22,844,577 26,499,158 $ (32,962,894) 751,948,510 718,985,616 $ 2,582,262 15,986,164 18,568,426 $ 13,485,721 $ $ (2,024,409) $ 9,151,590 $ (3,505,411) Net increase (decrease) in cash and cash equivalents Balances - beginning of year Balances - end of the year Reconciliation of operating income (loss) to net cash provided (used) by operating activities Operating Income Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities Depreciation Changes in assets, deferred outflows of resources, liabilities, and deferred inflows of resources Accounts receivable Due from other governments Prepaid items Inventories Deferred outflows of resources Accounts payable Claims payable Deposits Accrued expenses Other post-employment benefits Net pension liability Deferred inflows of resources Net cash provided (used) by operating activities Schedule of non-cash capital and related financing activities Contributions of capital assets Purchase of machinery, equipment, and vehicles on account (2,309,722) 29,194,905 7,858 (12,808,256) (10,524,193) (2,104,890) 3,765,424 $ 128,235,577 462,841 79,195 2,491,667 (50,404,977) (28,130,685) (6,869,050) 45,864,568 Internal Service Funds $ 64,763,750 87,574 71,337 2,117,985 (20,313,513) (11,775,715) (3,131,970) 31,819,448 Cash flows from investing activities Investment income Net cash provided (used) by investing activities $ Governmental Activities $ 366,832 2,912,835 42,158,466 (42,002,483) (2,947,876) 487,774 18,885,046 14,358,173 4,607,113 37,850,332 60,725 417,857 (235,676) 29,553 (68) 903,862 (308,327) 71,337 (510,003) 4,756 1,938,431 (2,863,041) $ 31,819,448 (476,456) 103,269 (7,835) 297,248 (1,325,859) (186,531) 3,211 843,054 (1,018,856) $ 10,279,696 $ (107,513) 469,253 859,472 7,858 (219,372) 1,057 2,052,603 (1,880,638) 3,765,424 (166,112) (132,407) 21,718 (68) 1,670,363 (774,714) 79,195 (915,906) 9,024 4,834,088 (5,762,535) 45,864,568 915,739 26,264 (51,443) 148,041 141,765 2,863,482 (56,775) 2,298 468,788 (525,699) 487,774 $ 11,294,845 14,838,759 $ $ The notes to financial statements are an integral part of this statement. 44 3,526,148 3,153,980 341,102 - $ $ 15,162,095 17,992,739 $ $ - Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2023 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, 2023, Gilbert implemented the provisions of GASB Statement No. 96, Subscription-Based Information Technology Arrangements, which (1) defines a subscription-based information technology arrangement (SBITA); (2) establishes that a SBITA results in a right-to-use subscription asset―an intangible asset―and a corresponding subscription liability; (3) provides the capitalization criteria for outlays other than subscription payments, including implementation costs of a SBITA; and (4) requires note disclosures regarding a SBITA. As a result, Gilbert’s financial statements have been modified to reflect the implementation of this new standard. Beginning balances of net capital assets and long-term obligations for SBITAs payable reported in the governmental activities have been restated accordingly by $354,011. 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 solid waste, and two internal service funds that provide equipment and fleet maintenance and employee self-insurance for medical, dental, workers’ compensation, and general liability 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 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. The Water MPC is an integral part of the Town of Gilbert and 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, 2023, 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, 2023 The SPARK App League (SPARK) is a legally separate, non-profit organization which exists solely for the purpose of driving invention and innovation in computer programming for Gilbert junior high and high school students. SPARK was created in 2012 and is the first mobile development contest, hosted in partnership with Arizona State University’s Ira A. Fulton Schools of Engineering, in collaboration with the Smithsonian’s Lemelson Center for the Study of Invention and Innovation, and sponsored by Waymo. The contest focuses on the thinking behind programming by helping teachers and students create a working video game while collaborating with teams. Students compete against each other in a two-day Game Jam. At June 30, 2023, the SPARK activity is reported within the Other Special Revenue funds in the Nonmajor Fund Financial Statements and within the governmental activities in the government-wide statement of net position. 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, Phoenix, and Apache Junction, 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 2023 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, capital related accounts payable, 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. 46 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2023 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. 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, deferred outflows of resources, liabilities, and deferred inflows of resources 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 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, acquisitions under lease contracts, and subscription-based information technology arrangements are reported as other financing sources. 47 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2023 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. 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 solid waste. Operating expenses for these funds include the cost of supplies and repair and maintenance, administrative and payroll expenses, and depreciation/amortization. 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, deferred outflows of resources, liabilities, deferred inflows of resources, 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. 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. 48 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2023 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. Special Assessments Debt Service – The Special Assessments Debt Service 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. Solid Waste – The Solid Waste 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 property, liability, health, dental, and workers’ compensation insurance 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. 49 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2023 In April, 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. On June 3, 1980, Arizona voters approved Arizona Constitution, Article IX, §20, prescribing an expenditure limitation for all local governments. The expenditure limitation’s purpose is to control expenditures of local revenues and limit future increases in spending to adjustments for inflation and population growth. Certain types of expenditures are excluded from the limitation. Article 9, Sections 20 and 21 of the Arizona Constitution require the Economic Estimates Commission to determine each year the expenditure limitation for the following fiscal year for each local government. The limitation is calculated based upon the amount of fiscal year 1979-80 actual payments of local revenues, referred to as the “base limit”. Each year, the base limits for local jurisdictions are adjusted for population and inflation to reach the current expenditure limitations. Gilbert’s fiscal year 2023 Expenditure Limitation was $500,348,278. Local governments may carry forward to future years’ revenues, which are not subject to the expenditure limitation and were not expended in the year of receipt. 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 while the Town Manager or his/her designee may authorize transfers between personnel and non-personnel budget lines within the same fund. The OMB Director or his/her designee is authorized to approve any adjustments between funds, projects, or contingency transactions up to $50,000. 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 market value. 50 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2023 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. A 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/amortized over the remaining useful lives of the related capital assets. 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 Right-to-use subscription assets Water rights 10 to 50 years 5 to 30 years 2 to 25 years 3 to 80 years 1 to 10 years 80 to 100 years Intangible right-to-use subscription assets are amortized over the shorter of the subscription term or the useful life of the underlying assets. 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 assets 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, changes in assumptions and other inputs, and 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. 51 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2023 On the government-wide and proprietary funds Statement of Net Position, deferred inflows of resources are reported and represent an acquisition of net assets that applies to a future period and so will not be recognized as an inflow of resources (revenue) until then. Gilbert has two items that qualify for reporting in this category. A deferred inflow of pension and other postemployment-related items is reported for the net difference between projected and actual investment earnings on pension, changes in proportion and differences between Gilbert's proportionate share of contributions, and other postemployment plan investments. These amounts are amortized as an expenditure/expense in future periods. A deferred inflow for leases is reported for the fair value of lease receivables plus any payments received at or prior to the commencement of the lease term that relate to future periods. The amounts are deferred and will be recognized as revenue in future periods. On the governmental funds Balance Sheet, deferred inflows of resources are reported and represent an acquisition of net assets that applies to a future period and 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. 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. L. Leases and subscription-based information technology arrangements Leases As lessor, Gilbert recognizes lease receivables for building space, cell tower, license, and right-of-way use agreements as the primary types of lessor activities. If there is no stated value in the lease contract (or if the stated rate is not the rate Gilbert charges the lessee) and the implicit rate cannot be determined, Gilbert uses its own estimated incremental borrowing rate based on the Daily Treasury Par Yield Curve Rate obtained from the U.S. Treasury as the discount rate to measure the lease receivables. Gilbert did not have any lease liabilities as of June 30, 2023. Subscription-based information technology arrangements Gilbert recognizes subscription liabilities with an initial, individual value of $10,000 or more. Gilbert uses its estimated incremental borrowing rate to measure subscription liabilities unless it can readily determine the interest rate implicit in the arrangement. Gilbert’s estimated incremental borrowing rate is calculated as described above. 52 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2023 M. 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 another 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 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. N. 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. O. 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. P. 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. 53 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2023 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. Q. 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. R. 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. S. 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”. 54 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2023 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. T. 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, collects, and remits all property taxes. Levies are due and payable in two installments, on October 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 2023, Gilbert’s property tax rate is $0.99 per $100 of limited property value. 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 $1,379,172,241 at June 30, 2023. 55 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2023 Gilbert categorizes certain investments within the fair value hierarchy established by generally accepted accounting principles as follows: Investment Type U.S. Government Treasuries U.S. Government Agencies Corporate Notes Bank Note Commercial Paper Asset Backed Securities Municipal Bonds Money Market Total Investments Categorized by Fair Value Level Fair Value $ 944,374,915 90,441,219 84,546,540 3,737,704 137,557,204 1,518,314 2,158,522 40,072,108 $ 1,304,406,526 External Investment Pools Measured at Fair Value State Treasurer's Investment Pool Total Investments Measured at Fair Value $ Fair Value Measurement Using Level 1 Level 2 $ 944,374,915 $ 90,441,219 84,546,540 3,737,704 137,557,204 1,518,314 2,158,522 40,072,108 $ 944,374,915 $ 360,031,611 74,765,715 1,379,172,241 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, 2023, Gilbert’s investment maturities were as follows: Investment Type U.S. Government Treasuries U.S. Government Agencies Corporate Notes Bank Note Commercial Paper Asset Backed Securities Municipal Bonds State Treasurer's Investment Pool Money Market Total Fair Value 944,374,915 90,441,219 84,546,540 3,737,704 137,557,204 1,518,314 2,158,522 74,765,715 40,072,108 $ 1,379,172,241 $ Investment Maturities (in Years) Less than 1 1-5 $ 472,683,708 $ 471,691,207 37,677,089 52,764,130 17,074,192 67,472,348 3,737,704 137,557,204 24,097 1,494,217 2,158,522 48,383,875 26,381,840 40,072,108 $ 753,472,273 $ 625,699,968 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, 2023, the investments were rated as follows: U.S. Government Treasuries AA+, U.S. Government Agencies AA+, Corporate Notes ranged from A- to AAA, Bank Notes A, Asset Backed Securities AAA, Commercial Paper A-1 to A-1+, and Municipal Bonds AAA. Gilbert’s investment in the State Treasurer’s Investment Pool did not receive a credit quality rating from a national rating agency. 56 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2023 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, 2023, Gilbert’s bank balance with JP Morgan was $12,046,026 of which $11,796,026 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. 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, 2023, of Gilbert’s investments, 71% were in U.S. Government Treasuries, 7% were in U.S. Government Agencies, 6% were in Corporate Notes, 10% were in Commercial Paper, and 6% 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 $ $ 57 2,939,783 1,379,172,241 1,382,112,024 1,365,646,424 16,465,600 1,382,112,024 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2023 Note 3 – Taxes Receivable and Due from Other Governments The General Fund taxes receivable amount of $20,501,245 at June 30, 2023, includes $1,587,391 in stateshared sales tax and $18,913,854 in local sales tax. Amounts reported as due from other governments for governmental funds at June 30, 2023, are summarized as follows: General Fund Vehicle License Tax City of Chandler - cost share for capital project Other intergovernmental Total General Fund $ 594,210 360,487 16,723 971,420 Streets Special Revenue Fund Highway User Revenue Funds Total Streets Special Revenue Fund 2,052,942 2,052,942 Nonmajor Funds Maricopa County Attorney's Office - Racketeer Influenced Corrupt Organization Funds U.S. Department of Housing and Urban Development CDBG and HOME Other grant reimbursements Total Nonmajor Funds 2,025,068 516,963 249,673 2,791,704 Total Governmental Funds $ 5,816,066 Amounts reported as due from other governments for proprietary funds at June 30, 2023, are summarized as follows: Water Fund City of Chandler - joint operation of SanTan Vista Water Treatment Plant Bureau of Reclamation - Lower Colorado Conservation and Efficiency Program City of Chandler - cost share for capital project Total Enterprise Funds Internal Service Funds Town of Queen Creek vehicle repairs Total Internal Service Funds 58 $ $ 416,286 480,000 1,639 897,925 $ $ 22,986 22,986 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2023 Note 4 – Interfund Receivables and Payables The composition of interfund balances as of June 30, 2023, is shown below. Due to/from other funds are short-term loans that cover cash deficits and are recorded in the following Governmental Funds (cash deficits are temporary, until reimbursements are received): General Other Governmental Funds Total $ $ Due To 554,330 554,330 Due From $ 554,330 $ 554,330 Advances to/from other funds are long-term loans that cover cash deficits for capital expenditures and are recorded in the following funds: Governmental Funds General Municipal Facilities Capital Projects Total Governmental Funds Internal Service Funds Self-Insurance Total Advances To Advances From $ $ $ 7,164,026 7,164,026 7,164,026 $ 5,864,026 5,864,026 1,300,000 7,164,026 Note 5 – Lease Receivables Gilbert leases building space, cell tower, license, and right-of-way use to third parties under the provisions of various agreements. Gilbert’s agreements that meet the definition of a lease according to GASB Statement No. 87, convey to its lessees the right to use certain assets that Gilbert owns in exchange-like transactions for consideration in amounts that are fixed in substance, other than short-term leases. Gilbert has various longterm lease agreements and therefore the total lease receivable balance at June 30, 2023, is not expected to be collected within the next year. During the fiscal year ended June 30, 2023, Gilbert recognized total lease-related revenues of $2,445,453. This was comprised of lease revenue of $2,141,817 and interest revenue of $313,636. Lease-related revenues are recorded as charges for service in the General Fund. Gilbert’s lease contracts include variable lease payments, that are not included in the lease receivable because they are not fixed in substance. During the fiscal year ended June 30, 2023, Gilbert recognized revenues of $3,105,795 for variable lease payments not included in the measurement of the lease receivables. 59 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2023 Note 6 – Capital Assets A summary of changes in capital assets for governmental activities, for the fiscal year ended June 30, 2023, is as follows: July 1, 2022 (as restated) Non-depreciable assets: Land Construction-in-progress Total non-depreciable assets Depreciable assets: Buildings Improvements other than buildings Machinery and equipment Infrastructure Intangible right-to-use subscription assets Total depreciable assets Less accumulated depreciation/amortization Buildings Improvements other than buildings Machinery and equipment Infrastructure Intangible right-to-use subscription assets Total accumulated depreciation/amortization Total depreciable assets, net Governmental activities capital assets, net $ 140,142,173 172,562,545 312,704,718 Additions $ 9,900,312 37,619,791 47,520,103 $ Deletions June 30, 2023 (3,611,947) (148,566,203) (152,178,150) $ 146,430,538 61,616,133 208,046,671 349,125,468 77,542,276 86,259,081 1,209,007,273 354,011 1,722,288,109 23,219,226 69,624,399 7,738,179 65,512,420 12,939,972 179,034,196 (29,167) (1,733,517) (1,762,684) 372,344,694 147,137,508 92,263,743 1,274,519,693 13,293,983 1,899,559,621 (160,144,118) (59,880,532) (55,701,151) (674,050,731) (949,776,532) 772,511,577 (13,520,308) (2,902,432) (5,131,420) (37,970,749) (1,731,793) (61,256,702) 117,777,494 29,167 1,677,134 1,706,301 (56,383) (173,664,426) (62,753,797) (59,155,437) (712,021,480) (1,731,793) (1,009,326,933) 890,232,688 $ 1,085,216,295 $ 165,297,597 $ (152,234,533) $ 1,098,279,359 Depreciation and amortization expense were 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/amortization expense - governmental activities 60 $ 2,239,272 389,159 459,768 2,341,980 4,654,668 5,454,013 39,414,394 6,242,723 61,195,977 60,725 $ 61,256,702 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2023 A summary of changes in capital assets for business-type activities, for the fiscal year ended June 30, 2023, is as follows: July 1, 2022 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 $ 24,107,771 64,690,356 94,065,167 182,863,294 Additions $ 80,280 1,207,654 81,465,552 82,753,486 $ Deletions June 30, 2023 (56,882,566) (56,882,566) $ 24,188,051 65,898,010 118,648,153 208,734,214 155,616,465 705,429,758 40,354,519 901,400,742 2,116,040 72,146,978 74,263,018 (867,767) (867,767) 156,864,738 777,576,736 40,354,519 974,795,993 (97,605,996) (281,468,901) (3,539,511) (382,614,408) 518,786,334 (8,058,547) (19,528,058) (410,429) (27,997,034) 46,265,984 759,675 759,675 (108,092) (104,904,868) (300,996,959) (3,949,940) (409,851,767) 564,944,226 701,649,628 $ 129,019,470 $ (56,990,658) $ 773,678,440 Note 7 – Construction-in-Progress and Commitments Governmental activities construction-in-progress and related construction commitments at June 30, 2023, were as follows: Constructionin-progress Commitments Redevelopment $ 2,349,996 $ 3,740,522 Municipal facilities 33,602,252 23,446,100 Streets & traffic 22,291,289 35,075,315 Parks 3,097,247 1,174,021 Intangible right-to-use subscription assets 49,600 198,400 Fleet 225,749 $ 61,616,133 $ 63,634,358 Total Business-type activities construction-in-progress and related construction commitments at June 30, 2023, were as follows: Constructionin-Progress $ 81,695,192 36,272,298 680,663 $ 118,648,153 Water system Wastewater system Solid waste Total 61 Commitments $ 362,590,567 20,611,416 463,966 $ 383,665,949 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2023 Gilbert had contractual commitments related to subscription-based information technology arrangements for which the subscription term had not yet commenced at June 30, 2023, for cloud-based software related to compensation data. At June 30, 2023, Gilbert had made payments of $49,600 to the vendor and had remaining contractual commitments with the vendor of $198,400, including the subscription liabilities that will be recognized at the commencement of the subscription terms during the subsequent fiscal year. Note 8 – 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, transportation, infrastructure-related 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, 2023, 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 $ 42,430,000 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 48,595,000 2022 General Obligation Bonds, Series 2022 Bonds, Series 2022, 3.375% to 5.0%, original amount $188,910,000, annual retirements due July 15, 2023, through July 15, 2041 188,910,000 Total $ 279,935,000 Annual debt service requirements to maturity for general obligation bonds are as follows: Year Ending 2024 2025 2026 2027 2028 2029-33 2034-38 2039-42 Governmental Activities Principal Interest $ 21,805,000 $ 11,100,950 22,630,000 10,011,675 25,440,000 8,832,600 10,470,000 7,958,350 10,980,000 7,446,600 62,890,000 29,232,725 77,115,000 15,023,103 48,605,000 3,248,058 $ 279,935,000 $ 92,854,061 62 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2023 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, 2023: Water, Wastewater, Electric, Streets, Fire, Police, and Parks and Open Space Special Purpose Bonds NFC - Assessed Valuation $ 4,109,629,003 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 $ 821,925,801 (279,935,000) (19,026,138) $ 522,964,663 $ 4,109,629,003 $ 246,577,740 - $ 246,577,740 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, 2023, 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 for special assessment bonds to the extent that proceeds from auction sales are insufficient to retire outstanding bonds. Special assessment bonds outstanding at June 30, 2023, 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 2,445,000 $ 63 45,000 2,490,000 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2023 Annual debt service requirements to maturity for special assessment bonds are as follows: Year Ending 2024 2025 2026 2027 2028 2029 Governmental Activities Principal Interest $ 370,000 $ 117,595 390,000 98,203 405,000 77,918 425,000 56,743 440,000 34,680 460,000 11,730 $ 2,490,000 $ 396,869 Municipal Property Corporation (MPC) Revenue Bonds The Public Facilities MPC exists solely for the purpose of financing the cost of acquisition and construction of real property for public safety and parks and recreation facilities. The Water MPC exists solely for the purpose of financing the construction of water and wastewater capital improvement projects. Also, see Note 17 regarding Pledged Revenues. Municipal property corporation revenue bonds outstanding at June 30, 2023, were as follows: 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 Governmental Business-Type $ $ 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 20,375,000 4,490,000 - - 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 - 83,275,000 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 - 25,740,000 2022 Water Resources Municipal Property Corporation, Senior Lien Utility System Revenue Bonds, 4.0% to 5.0%, original amount $473,005,000 annual retirements due July 15, 2023 through July 15, 2047 - 473,005,000 $ Total 64 24,865,000 $ 582,020,000 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2023 Annual debt service requirements to maturity for MPC revenue bonds are as follows: Year Ending 2024 2025 2026 2027 2028 2029-2033 2034-2038 2039-2043 2044-2048 Governmental Activities Principal Interest $ 5,770,000 $ 1,243,250 6,055,000 954,750 6,360,000 652,000 6,680,000 334,000 $ 24,865,000 $ 3,184,000 $ $ Business-type Activities Principal Interest 19,735,000 $ 25,984,588 20,715,000 24,973,338 21,760,000 23,911,463 22,885,000 22,832,613 23,955,000 21,698,798 135,140,000 90,705,856 139,230,000 57,965,150 158,560,000 24,528,750 40,040,000 4,131,800 582,020,000 $ 296,732,356 University Revenue Obligations Bonds 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 from excise taxes and state-shared revenue. Subordinate lien pledged revenue obligations outstanding at June 30, 2023, 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 $ 32,640,000 Annual debt service requirements to maturity for subordinate lien pledged revenue obligations are as follows: Year Ending 2024 2025 2026 2027 2028 2029-2033 2034-2038 2039-2043 2044-2046 Governmental Activities Principal Interest $ 850,000 $ 1,387,456 895,000 1,343,831 935,000 1,298,081 985,000 1,250,081 1,035,000 1,199,581 5,930,000 5,242,978 7,095,000 4,062,378 8,625,000 2,588,172 6,290,000 482,000 $ 32,640,000 $ 18,854,559 65 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2023 Subscription-based Information Technology Arrangements Gilbert has obtained the right to use software primarily related to electronic control weapons and body worn cameras used by the police department, an enterprise resource planning software, and other software under the provisions of various subscription-based information technology arrangements. The total amount of subscription assets and the related accumulated amortization are as follows: Total intangible right-to-use subscription assets Less: accumulated amortization Carrying value $ 13,293,983 (1,731,793) $ 11,562,190 The following schedule details minimum subscription payments to maturity for the SBITAs liability at June 30, 2023: Year Ending Principal Interest 2024 $ 1,789,394 $ 308,495 2025 1,657,269 258,575 2026 1,647,603 212,419 2027 1,692,704 167,318 2028 883,455 120,979 2029-33 3,769,570 248,166 $ 11,439,995 $ 1,315,952 Changes in Long-term Liabilities Long-term liability activity for the year ended June 30, 2023, was as follows: Balance July 1, 2022 (as restated) 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 Subscriptions liabilities Net 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 Net other postemployment benefits Net pension liability Total long-term liabilities $ 298,465,000 Reductions Balance June 30, 2023 $ (18,530,000) $ Additions $ - 279,935,000 Due Within One Year $ 2,840,000 30,365,000 33,450,000 33,546,799 398,666,799 20,124,982 354,011 873,363 56,292,933 13,608,527 12,939,972 47,583 50,834,131 (350,000) (5,500,000) (810,000) (2,492,133) (27,682,133) (12,332,942) (1,853,988) - $ 476,312,088 $ 77,430,213 $ (41,869,063) $ 511,873,238 $ 37,932,950 $ 590,360,000 44,025,933 634,385,933 2,981,247 196,559 20,095,807 $ 2,260,985 9,024 4,834,088 $ (8,340,000) (2,620,025) (10,960,025) (2,223,803) - $ 582,020,000 41,405,908 623,425,908 3,018,429 205,583 24,929,895 $ 19,735,000 19,735,000 1,050,788 - $ 657,659,546 $ 7,104,097 $ (13,183,828) $ 651,579,815 $ 20,785,788 66 2,490,000 24,865,000 32,640,000 31,054,666 370,984,666 21,400,567 11,439,995 920,946 107,127,064 21,805,000 370,000 5,770,000 850,000 28,795,000 7,348,557 1,789,393 - Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2023 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, $242,644 of internal service funds compensated absences, $2,310,260 of net pension liability, and $19,724 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. Note 9 – Risk Management Traditional Commercial Insurance Programs Gilbert operates with traditional commercial insurance programs to protect against major losses in cybercrime, property, public entity, storage tank, drone, 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 2023, 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. Effective July 1, 2022, Gilbert’s Town Council approved and established the Risk Management Self-Insurance Retention Trust beginning fiscal year 2023. The purpose of the Trust Fund is to provide funding for payment of benefits, losses and claims as set forth in A.R.S. 11-981(A), including legal costs administrative costs, claims adjusting costs, losses (including those related to personal injury and property damage), reserves for anticipated losses and lawsuits, insurance costs (including premiums), external audit, and other expenses related to the operation of the Risk Management Self-Insurance Program. Self-Insurance Gilbert established an Internal Service Fund to account for the Self-Insurance Trusts (Trusts), which finance the uninsured risk of loss related to medical, dental, workers' compensation, and general liability claims. The Trusts are overseen by the Health Trust Board, the Workers’ Compensation Trust Board, and the General Liability 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 $2,000,000 for presumptive loss claims and $750,000 per occurrence for other types of claims, and general liability claims in excess of $2,000,000 per occurrence. 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 $10,233,000 reported as claims payable in the Trusts at June 30, 2023, 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). 67 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2023 Changes in the Trusts’ claim liability amount in fiscal years 2023 and 2022 were: Year Ended June 30, 2023 Beginning Balance Risk of Loss Health $ Dental Workers' Compensation General Liability 2022 Health Current Year Claims and Changes in Estimates 3,572,000 $ 23,096,037 Claim Payments $ (23,763,037) Ending Balance $ 2,905,000 96,000 1,284,071 (1,283,071) 97,000 3,701,518 2,835,268 (1,673,786) 4,863,000 - 2,807,154 (439,154) 2,368,000 $ 7,369,518 $ 30,022,530 $ (27,159,048) $ 10,233,000 $ 2,328,000 $ 24,448,766 $ (23,204,766) $ 3,572,000 Dental Workers' Compensation $ 111,000 1,311,168 (1,326,168) 96,000 1,629,000 3,657,034 (1,584,516) 3,701,518 4,068,000 $ 29,416,968 $ (26,115,450) $ 7,369,518 Note 10 – 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 Personnel 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 11 for information on Gilbert’s OPEB plan. The ASRS and PSPRS plans are component units of the State of Arizona. 68 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2023 Pension and OPEB Statement of Net Position and Statement of Activities Deferred Outflow of Resources OPEB - Town Pension - ASRS Pension - PSPRS Fire Pension - PSPRS Police Pension - EORP Total Governmental Activities Business-Type Activities $ $ $ Liabilities OPEB - Town Pension - ASRS Pension - PSPRS Fire Pension - PSPRS Police Pension - EORP Total 276,682 12,062,147 19,211,179 15,416,315 167,445 47,133,768 $ Deferred Inflow of Resources OPEB - Town Pension - ASRS Pension - PSPRS Fire Total $ 338,445 16,349,050 19,211,179 15,416,315 167,445 51,482,434 205,583 24,929,895 $ 25,135,478 1,126,529 90,800,515 18,113,446 21,564,017 1,578,981 $ 133,183,488 $ $ $ $ $ 910,887 1,756,155 2,564,510 5,231,552 (17,684) 8,996,912 4,732,445 5,116,585 127,085 18,955,343 $ $ 920,946 65,870,620 18,113,446 21,564,017 1,578,981 $ 108,048,010 $ Pension/OPEB Expense OPEB - Town Pension - ASRS Pension - PSPRS Fire Pension - PSPRS Police Pension - EORP $ 61,763 4,286,903 4,348,666 Total $ $ $ 203,337 664,648 867,985 (6,826) 3,152,549 3,145,723 $ $ $ $ 1,114,224 2,420,803 2,564,510 6,099,537 (24,510) 12,149,461 4,732,445 5,116,585 127,085 22,101,066 Gilbert reported $16,715,199 of pension and OPEB contributions as expenditures in the governmental funds related to all pension plans to which it contributed for fiscal year 2023. 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. 69 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2023 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: Retirem ent Initial Mem bership Date: Years of service and age required to receive benefit Final average salary based on Benefit percent per year of service Before July 1, 2011 Sum of years and age equals 80 10 years, age 62 5 years, age 50* Any years, age 65 On or After July 1, 2011 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% 30 years, age 55 25 years, age 60 10 years, age 62 5 years, age 50* Any years, age 65 * 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, 2023, statute required active ASRS members to contribute at the actuarially determined rate of 12.17% (12.03% for retirement and 0.14% for long term disability) of the members’ annual covered payroll, and statute required Gilbert to contribute at the actuarially determined rate of 12.17% (11.92% for retirement, 0.11% for health insurance premium benefit, and 0.14% 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 9.68% (9.62% for retirement and 0.06% 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 2023, Gilbert paid for ASRS pension contributions as follows: 64% from the general fund, 33% from major funds, and 3% from other funds. The contributions to the pension plan for fiscal year 2023 were $9,457,505. Pension Liability – At June 30, 2023, Gilbert reported a liability of $90,800,515 for its proportionate share of the ASRS’ net pension liability. The net pension liability were measured as of June 30, 2022. The total 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, 2021, to the measurement date of June 30, 2022. 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, 2022. Gilbert’s proportion measured as of June 30, 2022, was 0.556%, which represents a slight decrease of 0.001% from its proportion measured as of June 30, 2021. 70 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2023 Gilbert’s reported liability at June 30, 2023, increased by $17,676,258 from the prior year liability of $73,124,257 because of changes in the ASRS’ net pension liability and Gilbert’s share of the net pension 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, 2023, Gilbert recognized pension expense for ASRS of $12,149,461. At June 30, 2023, Gilbert reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Differences between expected and actual experience Changes in assumptions 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 Deferred Outflows of Resources $ 773,674 4,506,606 Deferred Inflows of Resources $ - 1,611,265 9,457,505 16,349,050 2,391,773 $ $ 29,030 2,420,803 The $9,457,505 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, 2024. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to ASRS pensions will be recognized in pension expense as follows: Year Ending June 30 2024 2025 2026 2027 2028 Thereafter $ Amount 5,896,973 (1,101,696) (4,152,681) 3,828,146 - Actuarial Assumptions – The significant actuarial assumptions used to measure the total pension liability are as follows: Actuarial valuation date June 30, 2021 Actuarial rollforward date June 30, 2022 Actuarial cost method Entry age normal Investment rate of return 7.0% Projected salary increases 2.9% - 8.4% Inflation 2.3% Permanent benefit increase Included Mortality rates 2017 SRA Scale U-MP Actuarial assumptions used in the June 30, 2021 valuation were based on the results of an actuarial experience study for the 5-year period ended June 30, 2020. 71 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2023 The long-term expected rate of return on ASRS pension plan investments was determined to be 7.0% using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage. and by adding expected inflation. The target allocation and best estimates of geometric real rates of return for each major asset class are summarized in the following table: 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 3.90% 5.30% (0.20%) 6.00% Discount Rate – At June 30, 2022, the discount rate used to measure the ASRS total pension liability was 7.0%. The projection of cash flows used to determine the discount rate assumed that contributions from participating employers will be made based on the actuarially determined rates based on the ASRS Board’s funding policy, which establishes the contractually required rate under Arizona 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 7.0%, 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 (6.0%) or 1 percentage point higher (8.0%) than the current rate: Current 1% Decrease Discount Rate 1% Increase (6.0%) (7.0%) (8.0%) Gilbert's proportionate share of the net pension liability $ 133,973,461 $ 90,800,515 $ 54,801,024 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. 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. 72 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2023 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: Before January 1, 2012 Retirem ent and Disability: Years of service and age required to receive benefit Final average salary based on Benefit percent Normal retirement Initial Mem bership Date: On or after January 1, 2012 and before July 1, 2017 On or after July 1, 2017 20 years of service, any age 15 years of service, age 62 25 years of service or 15 years of credited service, age 52.5 15 years of credited service, age 52.5* 15 or more years of service, age 55 Highest 36 months of last 20 years Highest 60 months of last 20 years Highest 60 months of last 15 years 50% less 2.0% for each year of credited service less than 20 years OR plus 2.0% to 2.5% for each year of credited service over 20 years, not to exceed 80% 1.5% to 2.5% per year of credited service, not to exceed 80% Accidental disability retirement 50% plus normal retirement, w hichever is greater Catastrophic disability retirement 90% for the first 60 months then reduced to either 62.5% or normal retirement, w hichever is greater Ordinary disability retirement Normal retirement calculated w ith actual years of credited service or 20 years of credited service, w hichever is greater, multiplied by years of credited service (not to exceed 20 years) divided by 20 Survivor Benefit: Retired members Active members 80% to 100% of retired member's pension benefit 80% to 100% of accidental disability benefit or 100% of average monthly compensation if death w as the result of injuries received on the job * With actuarially reduced benefits. Retirement and survivor benefits are subject to automatic cost-of-living adjustments based on inflation. PSPRS also provides temporary disability benefits of 50% of the member’s compensation for up to 12 months. Employees Covered by Benefit Terms – At June 30, 2023, the following employees were covered by the agent pension plan’s benefit terms: Police Fire Inactive employees or beneficiaries currently receiving benefits 100 33 Inactive employees entitled to but not yet receiving benefits 57 25 Active employees 172 142 Total 329 200 73 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2023 Contributions and Annual OPEB Cost – State statutes establish the pension contribution requirements for active PSPRS employees. In accordance with state statutes, annual actuarial valuations determine employer contribution requirements for PSPRS pension and health insurance premium benefits. The combined active member and employer contribution rates are expected to finance the costs of benefits employees earn during the year, with an additional amount to finance any unfunded accrued liability. Contribution rates for the year ended June 30, 2023, are indicated below. Rates are a percentage of active members’ annual covered payroll. Active 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% 10.35% 9.00% 0.12% GilbertPension GilbertHealth 19.40% 19.40% 0.15% 0.15% 14.74% 0.12% 10.85% 15.77% 7.65% 10.74% 21.47% 21.47% 0.23% 0.23% 16.60% 0.12% 9.00% 0.12% 10.85% 17.63% 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, 2023, exceeded the annual pension cost due to an additional payment made towards the unfunded liability (100% from the General Fund): Pension contributions made Police 4,009,448 $ $ Fire 5,760,518 Pension Liability – At June 30, 2023, Gilbert reported $21,564,017 and $18,113,446 in net pension liabilities for PSPRS Police and Fire, respectively. The net pension liabilities were measured as of June 30, 2022, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. 74 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2023 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, 2022 Entry age normal 7.2% 3.25 - 15.0% 2.5% 1.85% PubS-2010 tables Actuarial assumptions used in the June 30, 2022, valuation were based on the results of an actuarial experience study for the 5-year period ended June 30, 2021. The long-term expected rate of return on PSPRS pension plan investments was determined to be 7.2% using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of 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 24% 16% 20% 7% 2% 20% 10% 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 3.49% 4.47% 7.18% 4.83% 0.45% 5.10% 2.68% (0.35%) Pension Discount Rates – At June 30, 2022, the discount rate used to measure total pension liability was 7.2% which was a decrease of 0.1% from the discount rate used as of June 30, 2021. 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. 75 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2023 Changes in the Agent Plans Net Pension Liability/(Asset) Police Total Pension Liability Balances at June 30, 2022 Changes for the year Service cost Interest on the total pension liability Differences between expected results and actual experience Changes of assumptions Contributions - employer Contributions - employee Net investment income Benefit payments, including refunds of employee contributions Administrative expense Net changes Balances at June 30, 2023 $ 174,358,791 $ 4,152,107 12,796,854 3,763,762 1,349,730 (6,423,066) 15,639,387 189,998,178 Fire Total Pension Liability Balances at June 30, 2022 Changes for the year Service cost Interest on the total pension liability Differences between expected results and actual experience Changes of assumptions Contributions - employer Contributions - employee Net investment income Benefit payments, including refunds of employee contributions Administrative expense Net changes Balances at June 30, 2023 $ 125,871,085 $ 3,888,663 9,387,813 2,203,529 804,047 (2,319,150) 13,964,902 139,835,987 Increase/ (Decrease) Plan Fiduciary Net Pension Net Position Liability / (Asset) $ 174,951,496 $ 5,239,645 1,728,667 (6,937,364) (6,423,066) (125,217) (6,517,335) 168,434,161 $ (592,705) $ 4,152,107 12,796,854 3,763,762 1,349,730 (5,239,645) (1,728,667) 6,937,364 125,217 22,156,722 21,564,017 Increase/ (Decrease) Plan Fiduciary Net Position $ 123,938,273 $ 3,792,437 1,388,147 (4,987,202) (2,319,150) (89,964) (2,215,732) 121,722,541 Net Pension Liability $ 1,932,812 $ 3,888,663 9,387,813 2,203,529 804,047 (3,792,437) (1,388,147) 4,987,202 89,964 16,180,634 18,113,446 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 7.2%, as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower (6.2%) or 1 percentage point higher (8.2%) than the current rate: Current 1% Decrease Discount Rate 1% Increase (6.2%) (7.2%) (8.2%) Police net pension liability / (asset) $ 50,228,252 $ 21,564,017 $ (1,539,614) Fire net pension liability / (asset) 39,946,428 18,113,446 377,294 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. 76 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2023 Pension Expense – For the year ended June 30, 2023, Gilbert recognized $5,116,585 as pension expense for Police and $4,732,445 as pension expense for Fire. Pension Deferred Outflows/Inflows of Resources – At June 30, 2023, Gilbert reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: 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 Deferred Outflows of Resources $ 5,983,624 2,906,216 Deferred Inflows of Resources $ - 2,517,027 4,009,448 15,416,315 - $ 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 $ Deferred Outflows of Resources $ 8,526,278 3,097,051 Deferred Inflows of Resources $ 2,564,510 - 1,827,332 5,760,518 19,211,179 2,564,510 $ $ The $4,009,448 for Police and the $5,760,518 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, 2024. 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 2024 2025 2026 2027 2028 Thereafter $ Police 2,523,847 2,076,048 662,990 5,291,733 852,249 - 77 $ Fire 2,158,736 1,723,578 604,082 4,066,574 1,104,238 1,228,943 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2023 Note 11 – 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, 2023, there were 50 retirees 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, 2023, retirees contributed $539,625, which was in excess of claims paid by $190,803. 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. 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 50 1,434 1,484 Total OPEB Liability – The Plan’s total OPEB liability of $1,126,529 was measured as of June 30, 2023. 78 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2023 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, 2023 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 Retiree contribution increase ASRS subsidy increases June 30, 2023 June 30, 2022 3.86% 2.40% 3.00% 5.50% graded down to an ultimate rate of 5.00% over 5 years Consistent with medical/drug trends None 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-2021 for males/females. Mortality rates for retirees were based on the PubG.H-2010 (current retirees and general employees) PubS.H2010 (public safety) Healthy Retiree Mortality Table, Generational with Projection Scale MP-2021 for males/females. Changes in the Total OPEB Liability Balances at June 30, 2022 $ 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, 2023 $ 1,069,922 85,927 45,046 (67,481) (138,189) 131,304 56,607 1,126,529 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: Total OPEB Liability 1% Decrease (2.86%) $ 1,321,131 79 Current Discount Rate (3.86%) $ 1,126,529 1% Increase (4.86%) $ 958,766 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2023 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 $ 927,997 $ 1,126,529 $ 1,370,663 OPEB Expense and Deferred Outflows/Inflows of Resource Related to OPEB – For the year ended June 30, 2023, the Plan recognized OPEB expense of ($24,510). At June 30, 2023, the Plan reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: Deferred Outflows of Resources $ 98,692 239,753 $ 338,445 Differences between expected and actual experience Changes in assumptions or other inputs Total Deferred Inflows of Resources $ 867,628 246,596 $ 1,114,224 The amounts reported as deferred outflows of resources and inflows of resources will be recognized in pension expense as follows: Year Ending June 30 2024 2025 2026 2027 2028 Thereafter $ 80 Amount (286,787) (270,780) (80,862) (78,588) (29,381) (29,381) Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2023 Note 12 – Fund Balance Classifications of the Governmental Funds The fund balance classifications of the governmental funds as of June 30, 2023, were as follows: 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 Settlement agreements Parks & recreation programs Transportation Tourism Special districts Assigned to Capital replacement Capital projects Highways and streets Management and policy Debt Service Unassigned Total fund balances Streets Special Revenue General 7,164,026 2,577,952 - $ - $ 13,240,478 - 54,401,353 56,175,875 17,938,315 9,323 180,920,094 $ 319,186,938 Streets & Traffic - - 247,451,441 - Parks $ 35,377,521 - - $ 13,240,478 $247,451,441 $ 35,377,521 Major Debt Service Funds Municipal Facilities Debt Service Special Assessments $ $ $ - - - Other Gov't $ - Total $ 7,164,026 2,577,952 3,709,916 - 5,183,110 - 101,166 - 2,031,217 79,933 299,954 84,839 1,692,562 2,842,480 521,337 286,538,878 2,031,217 5,284,276 13,240,478 79,933 299,954 84,839 1,692,562 2,842,480 521,337 (6,789,707) 5,362,232 - - (191,525) 54,401,353 56,175,875 17,938,315 9,323 5,362,232 173,938,862 $ (3,079,791) $ 10,545,342 $ 7,360,797 $ 630,183,892 $ 101,166 It is Gilbert’s policy to maintain a minimum unrestricted fund balance of the General Fund of 90 days working capital of the current fiscal year, which is equal to approximately 25% of General Fund budgeted ongoing expenditures, plus one year’s worth of General Fund debt service payments. Note 13 – Capital Contributions During the year ended June 30, 2023, the enterprise funds external capital contributions consisted of the following: Contributions from developers Development fees Total $ $ Water 11,294,845 7,514,174 18,809,019 Wastewater 3,526,148 2,187,503 $ 5,713,651 $ 81 Solid Waste $ 341,102 $ 341,102 $ $ Total 15,162,095 9,701,677 24,863,772 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2023 Note 14 – Interfund Transfers As of June 30, 2023, 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 Debt Service Other Governmental Funds Total Governmental Funds Enterprise Funds Water Wastewater Solid Waste Total Enterprise Funds Internal Service Funds Equipment Maintenance Self-Insurance Total Internal Service Funds Total Transfers Transfers Out $ 2,707,606 70,000 8,120,202 2,625,371 18,091,927 9,271,220 1,744,982 42,631,308 $ 41,718,240 1,525,110 520,387 2,844,925 2,766,039 733,956 50,108,657 $ 5,168,216 2,089,353 124,850 7,382,419 $ 2,109,350 2,109,350 $ 36,000 2,201,300 2,237,300 $ 33,020 33,020 $ 52,251,027 $ 52,251,027 The interfund transfers generally fall within one of the following categories: 1) subsidy transfers primarily from the General Fund to the Self-Insurance Fund; 2) transfers to cover debt service payments primarily from the General Fund to the Debt Service Fund; 3) transfers to fund capital project costs primarily from the General Fund and Capital Projects Funds to other Capital Projects Funds; or 4) charge for reclaimed water usage primarily from the Water Fund to the Wastewater Fund. There were no significant transfers during fiscal year 2023 that were either non-routine in nature or inconsistent with the activities of the fund making the transfer. Note 15 – Individual Fund Disclosures Individual funds with deficiencies in fund balance/net position at June 30, 2023, were as follows: Governmental funds Municipal Facilities Capital Projects Grants $ 3,079,791 178,686 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. 82 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2023 Note 16 – Contingent Liabilities Gilbert is a defendant in various lawsuits. Although the outcomes of these lawsuits are 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 17 – Pledged Revenues Gilbert has pledged future water system development fees revenue and future water and wastewater revenues, net of specified operating expenses, to repay $626,405,000 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 2016 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 2048. Principal and interest payments on the bonds are expected to require less than 40 percent of revenue described above. The total principal and interest remaining to be paid on the bonds is $861,299,391. Principal and interest paid for the current year was $26,233,053. Total water and wastewater system SDF revenue was $9,701,677 and water and wastewater net revenues were $56,175,146. Gilbert has pledged future excise taxes and state-shared revenues to repay $49,525,000 in public facilities municipal property corporation (MPC) revenue bonds issued since 2017; $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 2017 revenue bonds provided financing of a fire and rescue station. 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 2027. 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. Principal and interest payments on the bonds and obligations are expected to require less than 4 percent of excise taxes and state-shared revenues. The total principal and interest remaining to be paid on the bonds and obligations is $77,989,206. Principal and interest paid for the current year was $9,266,956, and the total excise taxes and state-shared revenues were $278,807,974. Note 18 – 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. Total investment (net of depreciation) as of June 30, 2023, was: Mesa's share Gilbert's share Queen Creek's share Total $ 149,300,720 97,162,149 27,068,981 $ 273,531,850 83 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2023 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, 2023, was: Gilbert's share Chandler's share Total $ 71,143,218 64,751,046 $ 135,894,264 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, 2023, 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 $ $ 5,715,329 1,856,414 502,216 158,277 105,803 48,670 11,801 8,398,510 Note 19 – 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. 84 Table of Contents REQUIRED SUPPLEMENTARY INFORMATION 85 Table of Contents 86 Table of Contents TOWN OF GILBERT, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION June 30, 2023 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 2023 2022 2021 2020 2019 0.56% $ 90,800,515 65,568,734 0.56% $ 73,124,257 62,344,498 0.52% $ 90,610,769 55,508,515 0.52% $ 75,693,697 52,965,805 0.49% $ 69,364,217 49,511,839 138% 117% 163% 143% 140% 74.26% 78.58% 69.33% 73.24% 73.40% 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 2018 2017 2016 2015 2014 0.49% $ 76,832,504 48,187,902 0.49% $ 78,813,297 45,764,166 0.49% $ 75,695,863 43,765,044 0.47% $ 69,412,268 42,295,765 Information not available (2) 159% 172% 172% 164% 69.92% 67.06% 68.35% 69.49% (1) The covered payroll amount will be as of the measurement date of the net pension liability. For fiscal year 2023, the measurement date of the net pension liability is June 30, 2022. (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. 87 Table of Contents TOWN OF GILBERT, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION June 30, 2023 Schedule of Changes in the Net Pension Liability and Related Ratios Public Safety Personnel Retirement System – Police Fiscal Year 2023 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 / (asset) - ending (a) - (b) Plan fiduciary net position as a percentage of the total pension liability Covered payroll (1) Gilbert's net pension liability / (asset) as a percentage of covered payroll $ 2022 4,152,107 12,796,854 - $ 4,070,093 12,099,505 - 2021 $ 4,166,829 11,233,464 - 2020 $ 4,173,615 10,325,605 - 2019 $ 4,056,282 9,457,916 - 3,763,762 1,349,730 97,134 - 3,349,250 - 1,313,900 3,858,110 847,849 - (6,423,066) 15,639,387 174,358,791 189,998,178 (7,168,987) 9,097,745 165,261,046 174,358,791 (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 5,239,645 1,728,667 (6,937,364) 19,610,018 1,581,158 36,645,254 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 (6,423,066) (125,217) (6,517,335) 174,951,496 168,434,161 (7,168,987) (172,063) 50,495,380 124,456,116 174,951,496 (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 (592,705) $ 40,804,930 $ 49,288,228 $ 44,284,427 88.65% 100.34% 75.31% 67.77% 67.79% $ 18,498,054 $ 17,797,726 $ 17,973,970 $ 20,212,530 $ 18,572,542 116.57% -3.33% 227.02% 243.85% 238.44% $ 21,564,017 $ (1) The covered payroll amount will be as of the measurement date of the net pension liability. For fiscal year 2023, the measurement date of the 90-net pension liability is June 30, 2022. (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, 2023 Fiscal Year 2018 $ 4,361,408 8,535,995 1,136,619 2017 $ 3,466,239 7,222,969 9,149,421 2016 $ 3,570,214 6,604,564 - 2015 $ 2014 Information 3,293,404 not 5,414,469 available (2) 605,849 928,575 3,680,906 547,040 4,549,861 713,111 - 2,479,128 5,473,070 (3,648,774) 14,994,729 113,456,944 128,451,673 (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 12,682,256 2,271,326 8,763,809 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 (3,648,774) (77,945) 153,768 20,144,440 62,607,101 82,751,541 (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 $ 45,700,132 $ 50,849,843 $ 33,010,477 $ 29,572,970 64.42% 55.18% 64.13% 64.60% $ 18,694,661 $ 19,247,567 $ 19,071,843 $ 18,990,156 244.46% 264.19% 173.08% 155.73% 89 Table of Contents TOWN OF GILBERT, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION June 30, 2023 Schedule of Changes in the Net Pension Liability and Related Ratios Public Safety Personnel Retirement System – Fire Fiscal Year 2023 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) Plan fiduciary net position as a percentage of the total pension liability Covered payroll (1) $ 2022 3,888,663 9,387,813 - $ 3,607,805 8,442,872 - 2021 $ 3,696,610 7,536,882 - 2020 $ 3,690,094 7,024,670 - 2019 $ 3,661,929 6,428,184 - 2,203,529 804,047 3,168,376 - 3,919,493 - (1,850,677) 1,934,990 (1,694,618) - (2,319,150) 13,964,902 125,871,085 139,835,987 (2,791,898) 12,427,155 113,443,930 125,871,085 (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 3,792,437 1,388,147 (4,987,202) 5,838,307 1,341,353 26,646,654 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 (2,319,150) (89,964) (2,215,732) 123,938,273 121,722,541 (2,791,898) (125,013) 30,909,403 93,028,870 123,938,273 (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 1,932,812 $ 20,415,060 $ 18,147,796 $ 16,797,663 87.05% 98.46% 82.00% 82.00% 81.83% $ 16,768,912 $ 16,301,459 $ 15,790,177 $ 16,590,770 $ 16,176,854 108.02% 11.86% 129.29% 109.38% 103.84% $ 18,113,446 $ 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 2023, the measurement date of the net pension liability is June 30, 2022. (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. 90 Table of Contents TOWN OF GILBERT, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION June 30, 2023 Fiscal Year 2018 $ 3,652,130 5,586,910 434,841 2017 $ 2,728,554 4,550,994 7,610,545 2016 $ 2,785,128 4,138,400 - 2015 $ Information 2,545,607 not 3,408,433 available (2) (131,651) 3,761,967 444,609 (1,091,858) 3,069,903 (1,235,512) - 2,247,902 1,333,403 (1,094,738) 12,785,719 73,213,442 85,999,161 (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 5,192,069 1,860,471 6,959,055 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 (1,094,738) (61,976) 636 12,855,517 53,456,141 66,311,658 (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 $ 19,687,503 $ 19,757,301 77.11% 73.01% 85.55% 85.11% $ 16,132,031 $ 15,444,728 $ 15,274,115 $ 15,508,151 122.04% 127.92% 53.81% 49.41% $ 8,218,798 $ 2014 7,662,805 91 Table of Contents TOWN OF GILBERT, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION June 30, 2023 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 2023 2022 Fiscal Year 2021 2020 2019 $ 9,457,505 $ 7,874,805 $ 7,263,134 $ 6,355,725 $ 5,921,577 $ 9,457,505 - $ 7,874,805 - $ 7,263,134 - $ 6,355,725 - $ 5,921,577 - $ 79,341,485 $ 65,568,734 $ 62,344,498 $ 55,508,515 $ 52,965,805 11.92% 12.01% 11.65% 11.45% 11.18% 2018 2017 Fiscal Year 2016 2015 2014 $ 5,338,739 $ 5,187,460 $ 5,278,569 $ 5,137,457 $ 4,763,978 $ 5,338,739 - $ 5,187,460 - $ 5,278,569 - $ 5,137,457 - $ 4,763,978 - $ 49,511,839 $ 48,187,902 $ 45,764,166 $ 43,765,044 $ 42,295,765 10.78% 10.77% 11.53% 11.74% 11.26% 92 Table of Contents TOWN OF GILBERT, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION June 30, 2023 Schedule of Pension Contributions Public Safety Retirement System – Police Fiscal Year 2023 2022 2021 Actuarially determined contribution Contributions in related to the actuarially determined contributions Contribution deficiency (excess) $ 4,009,448 $ 4,446,932 $ $ 4,009,448 - $ 4,446,932 - Covered payroll Contributions as a percentage of covered payroll $ 20,667,258 19.40% 6,170,252 $ 6,410,919 18,652,558 $ (13,000,000) 20,376,341 $ (14,727,122) 11,245,894 $ (4,834,975) $ 18,498,054 $ 17,797,726 $ 17,973,970 $ 20,212,530 24.04% 104.80% 113.37% 55.64% $ $ 2019 5,649,219 2018 5,652,558 2020 2017 Fiscal Year 2016 4,501,937 $ 4,021,770 $ 3,414,607 $ 3,231,755 4,449,337 (427,567) $ 3,414,607 - $ 2015 2014 Actuarially determined contribution Contributions in related to the actuarially determined contributions Contribution deficiency (excess) $ 7,330,436 $ (1,160,184) 12,700,837 $ (8,198,900) $ Covered payroll Contributions as a percentage of covered payroll $ 18,572,542 $ 18,694,661 $ 19,247,567 $ 19,071,843 $ 18,990,156 39.47% 67.94% 23.12% 17.90% 17.02% 3,231,755 - Public Safety Retirement System – Fire 2023 Actuarially determined contribution Contributions in related to the actuarially determined contributions Contribution deficiency (excess) $ Covered payroll Contributions as a percentage of covered payroll 2022 Fiscal Year 2021 3,958,607 $ 3,513,087 $ 5,760,518 $ (1,801,911) $ 3,513,087 - $ 18,437,853 31.24% $ 4,009,743 5,715,102 $ (2,000,000) 6,652,405 $ (3,156,460) 7,556,014 $ (3,546,271) $ 16,768,912 $ 16,301,459 $ 15,790,177 $ 16,590,770 20.95% 35.06% 42.13% 45.54% 2017 Fiscal Year 2016 $ 2019 3,495,945 2018 3,715,102 2020 2015 2014 Actuarially determined contribution Contributions in related to the actuarially determined contributions Contribution deficiency (excess) $ 4,644,867 $ 3,266,367 $ 2,241,688 $ 1,982,159 $ 2,037,266 $ 5,096,285 (451,418) 5,307,483 $ (2,041,116) $ 3,088,477 (846,789) $ 1,982,159 - $ Covered payroll Contributions as a percentage of covered payroll $ 16,176,854 $ 16,132,031 $ 15,444,728 $ 15,274,115 $ 15,508,151 31.50% 32.90% 20.00% 12.98% 13.14% 93 2,037,266 - Table of Contents TOWN OF GILBERT, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION June 30, 2023 Schedule of Changes in the Town’s Total OPEB Liability and Related Ratios: Town of Gilbert Defined Benefit Plan Fiscal Year 2023 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-employee payroll (1) $ 2022 85,927 45,046 $ 101,360 23,174 2021 $ 88,914 22,369 2020 $ 2019 69,208 17,841 $ 87,269 54,575 (67,481) (138,189) (249,173) (46,068) 181,231 (194,875) 24,230 74,733 (1,604,373) 159,488 131,304 56,607 1,069,922 1,126,529 270,009 99,302 970,620 $ 1,069,922 $ 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 $ 112,964,370 $ 92,479,026 $ 89,785,462 $ 83,544,308 $ 81,110,979 1.0% 1.2% 1.1% 0.9% 0.5% Gilbert's total OPEB liability as a percentage of covered payroll Fiscal Year 2017 through 2014 2018 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-employee payroll (1) $ 72,406,115 Gilbert's total OPEB liability as a percentage of covered payroll $ Information not available (2) 84,727 58,026 (1,296,953) 1,184,917 96,758 127,475 1,469,818 1,597,293 2.2% (1) The covered-employee payroll amount will be as of the measurement date of the total OPEB liability. For fiscal year 2023, the measurement date of the total OPEB liability is June 30, 2023. (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. 94 Table of Contents TOWN OF GILBERT, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION June 30, 2023 Notes to Pension Plan Schedules Note 1 – Actuarially Determined Contribution Rates Arizona State Retirement System (ASRS) The actuarial assumptions used in the June 30, 2021 valuation for ASRS were based on the results of an actuarial five-year period ended June 30, 2020. The major changes in assumptions were decreasing the discount rate from 7.5% to 7.0% and changing the projected salary increases from 2.7%-7.2% to 2.9%-8.4%. The ASRS Board adopted the experience study recommended changes which were applied to the June 30, 2020 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 2021 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 10 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 2019 actuarial valuation, the investment rate of return was decreased from 7.4% to 7.3%. In the 2017 actuarial valuation, the investment rate of return was decreased from 7.5% to 7.4%. In the 2016 actuarial valuation, the investment rate of return was decreased from 7.85% to 7.5%. In the 2013 actuarial valuation, the investment rate of return was decreased from 8.0% to 7.85%. PSPRS members with initial membership on or after July 1, 2017: 7.0%. 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 2019 actuarial valuation, changed to PubS-2010 tables. 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). 95 Table of Contents TOWN OF GILBERT, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION June 30, 2023 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. 96 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. 97 Table of Contents TOWN OF GILBERT, ARIZONA Combining Balance Sheet Nonmajor Governmental Funds June 30, 2023 Special Revenue Liabilities Accounts payable Accrued liabilities Due to other funds Unearned revenue Total liabilities $ 22,700,868 $ 766,636 23,467,504 $ 332,237 3,979 463,882 22,657,185 23,457,283 Other Special Revenue Special Districts Grants Assets Pooled cash and investments Receivables, net Taxes Accrued interest Accounts Due from other governments Total assets Capital Projects $ 547,564 $ 27,348 574,912 $ 41,554 2,971 9,050 53,575 Other Capital Projects $ 6,475,533 $ 180,918 15,774 10,910 2,025,068 8,708,203 $ 18,553 95,314 81,398 1,494,792 1,690,057 Total Nonmajor Governmental Funds $ 123,644 $ 123,644 $ 123,644 123,644 $ 29,847,609 $ 208,266 15,774 10,910 2,791,704 32,874,263 $ 515,988 102,264 554,330 24,151,977 25,324,559 Deferred inflows of resources Unavailable revenue - grants Total deferred inflows of resources 188,907 188,907 - - - 188,907 188,907 Fund balances (deficits) Restricted Unassigned Total fund balances (deficits) $ 12,839 (191,525) (178,686) $ 521,337 521,337 $ 7,018,146 7,018,146 - $ 7,552,322 (191,525) 7,360,797 Total liabilities and fund balances (deficits) $ 23,467,504 $ 574,912 $ 8,708,203 123,644 $ 32,874,263 98 $ $ 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, 2023 Capital Projects Special Revenue Special Districts Grants Revenues Taxes Sales Property 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 Public safety Police Fire Highways and streets Parks and recreation Transportation Non departmental Capital outlay Total expenditures 3,944,626 3,944,626 $ 3,006,329 775 3,007,104 $ 1,498,686 332,645 699,682 289,236 114,791 158,593 (29,459) 303,457 3,367,631 Total Nonmajor Governmental Funds Other Capital Projects Other Special Revenue $ - $ 1,498,686 3,006,329 332,645 4,644,308 289,236 114,791 158,593 (29,459) 304,232 10,319,361 1,732,422 - - 47,269 427,642 - 1,779,691 427,642 377,842 39,605 19,738 1,048,512 174,161 3,392,280 1,940,466 970,049 2,910,515 456,488 20,098 11,480 725,221 49,885 1,738,083 130,773 1,234,309 1,365,082 834,330 59,703 2,071,239 1,001,267 725,221 1,098,397 1,408,470 9,405,960 Excess (deficiency) of revenues over expenditures 552,346 96,589 1,629,548 (1,365,082) 913,401 Other financing sources (uses) Transfers in Transfers out Total other financing sources (uses) 14,000 (714,356) (700,356) - 100,000 (19,600) 80,400 1,630,982 1,630,982 1,744,982 (733,956) 1,011,026 Net change in fund balances Fund balances - beginning Fund balances - ending (148,010) (30,676) (178,686) 96,589 424,748 521,337 1,709,948 5,308,198 7,018,146 265,900 (265,900) - 1,924,427 5,436,370 7,360,797 $ $ 99 $ $ $ Table of Contents 100 Table of Contents BUDGETARY COMPARISON SCHEDULES 101 Table of Contents TOWN OF GILBERT, ARIZONA Streets and Traffic Capital Projects Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual – Budgetary Basis For the Year Ended June 30, 2023 Budgeted Amounts Original Revenues Intergovernmental System development fees Interest earnings Total revenues $ 12,840,000 5,000,000 70,000 17,910,000 Non-GAAP Actual Final $ 12,840,000 5,000,000 70,000 17,910,000 $ Variance with Final Budget Positive (Negative) 59,664 4,262,732 6,466,948 10,789,344 $ (12,780,336) (737,268) 6,396,948 (7,120,656) Expenditures Current Highways and streets Capital outlay Contingency Total expenditures 169,010 260,995,190 261,164,200 169,037 266,320,967 10,575,077 277,065,081 11,750 26,891,288 26,903,038 157,287 239,429,679 10,575,077 250,162,043 Excess (deficiency) of revenues over expenditures (243,254,200) (259,155,081) (16,113,694) 243,041,387 Other financing source (uses) Transfers in Transfers out Total other financing sources (uses) 34,326,395 (20,679,280) 13,647,115 34,326,395 (20,679,280) 13,647,115 8,120,202 (520,387) 7,599,815 (26,206,193) 20,158,893 (6,047,300) $ (229,607,085) $ (245,507,966) (8,513,879) $ 236,994,087 Net change in fund balances Explanation of difference between budgetary change in fund balance at June 30, 2023, and GAAP change in fund balance: Changes in fair value of investments are recognized as revenue for GAAP purposes but are not recognized as revenue on the budget basis Change in fund balance as reported on the statement of revenues, expenses and changes in fund balance 102 1,169,622 $ (7,344,257) Table of Contents TOWN OF GILBERT, ARIZONA Parks Capital Projects Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual – Budgetary Basis For the Year Ended June 30, 2023 Budgeted Amounts Original Revenues System development fees Interest earnings Total revenues $ 7,500,000 65,000 7,565,000 Non-GAAP Actual Final $ 7,500,000 65,000 7,565,000 $ 7,496,043 880,160 8,376,203 Variance with Final Budget Positive (Negative) $ (3,957) 815,160 811,203 Expenditures Current Parks and recreation Non departmental Capital outlay Contingency Total expenditures 7,584,040 13,457,460 21,041,500 7,534,461 2,750 12,964,174 975,866 21,477,251 1,587,784 2,750 1,905,305 3,495,839 5,946,677 11,058,869 975,866 17,981,412 Excess (deficiency) of revenues over expenditures (13,476,500) (13,912,251) 4,880,364 18,792,615 Other financing sources (uses) Transfers in Transfers out Total other financing sources (uses) 16,299,534 (2,893,370) 13,406,164 16,299,534 (2,893,370) 13,406,164 2,625,371 (2,844,925) (219,554) (13,674,163) 48,445 (13,625,718) (506,087) 4,660,810 Net change in fund balances $ (70,336) $ Explanation of difference between budgetary change in fund balance at June 30, 2023, and GAAP change in fund balance: Changes in fair value of investments are recognized as revenue for GAAP purposes but are not recognized as revenue on the budget basis Change in fund balance as reported on the statement of revenues, expenses and changes in fund balance 103 7,109 $ 4,667,919 $ 5,166,897 Table of Contents TOWN OF GILBERT, ARIZONA Municipal Facilities Capital Projects Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual – Budgetary Basis For the Year Ended June 30, 2023 Non-GAAP Actual Variance with Final Budget Positive (Negative) $ $ Budgeted Amounts Original Revenues System development fees Interest earnings Total revenues $ 4,961,010 5,000 4,966,010 Final $ 4,961,010 5,000 4,966,010 3,552,914 99,199 3,652,113 (1,408,096) 94,199 (1,313,897) Expenditures Current Public safety Police Parks and recreation Non departmental Capital outlay Contingency Total expenditures 23,100 194,960 122,000 61,030,998 61,371,058 35,789 29,890 127,500 68,395,256 8,033,070 76,621,505 6,029 13,401 18,475,617 18,495,047 29,760 29,890 114,099 49,919,639 8,033,070 58,126,458 Excess (deficiency) of revenues over expenditures (56,405,048) (71,655,495) (14,842,934) 56,812,561 Other financing sources (uses) Transfers in Transfers out Total other financing sources (uses) 59,430,495 (2,017,280) 57,413,215 59,430,495 (2,834,362) 56,596,133 18,091,927 (2,766,039) 15,325,888 (41,338,568) 68,323 (41,270,245) 1,008,167 $ (15,059,362) 482,954 Net change in fund balances $ Explanation of difference between budgetary change in fund balance at June 30, 2023, and GAAP change in fund balance: Changes in fair value of investments are recognized as revenue for GAAP purposes but are not recognized as revenue on the budget basis Change in fund balance as reported on the statement of revenues, expenses and changes in fund balance 104 (10,528) $ 472,426 $ 15,542,316 Table of Contents TOWN OF GILBERT, ARIZONA Debt Service Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual – Budgetary Basis For the Year Ended June 30, 2023 Budgeted Amounts Variance with Final Budget Positive (Negative) Original Final Non-GAAP Actual $ 29,600,000 35,000 29,635,000 $ 29,600,000 35,000 29,635,000 $ 29,581,671 503,682 30,085,353 Expenditures Debt service Principal Interest Fiscal and other charges Total expenditures 32,080,000 6,772,540 30,000 38,882,540 24,880,000 13,980,180 22,360 38,882,540 24,880,000 13,980,131 8,625 38,868,756 49 13,735 13,784 Excess (deficiency) of revenues over expenditures (9,247,540) (9,247,540) (8,783,403) 464,137 Other financing sources (uses) Transfers in Total other financing sources (uses) 16,282,000 16,282,000 16,282,000 16,282,000 9,271,220 9,271,220 (7,010,780) (7,010,780) 7,034,460 487,817 Revenues Property taxes Interest earnings Total revenues Net change in fund balances $ 7,034,460 $ Explanation of difference between budgetary change in fund balance at June 30, 2023, and GAAP change in fund balance: Changes in fair value of investments are recognized as revenue for GAAP purposes but are not recognized as revenue on the budget basis Change in fund balance as reported on the statement of revenues, expenses and changes in fund balance 105 (119,278) $ 368,539 $ $ (18,329) 468,682 450,353 (6,546,643) Table of Contents TOWN OF GILBERT, ARIZONA Special Assessments Debt Service Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual – Budgetary Basis For the Year Ended June 30, 2023 Non-GAAP Actual Variance with Final Budget Positive (Negative) $ $ Budgeted Amounts Original Revenues Special assessments Charges for services Interest earnings Total revenues $ Expenditures Debt service Principal Interest Fiscal and other charges Total expenditures Excess (deficiency) of revenues over expenditures Net change in fund balances $ 3,751,410 3,751,410 Final $ 3,751,410 3,751,410 490,470 4,181 3,618 498,269 (3,260,940) 4,181 3,618 (3,253,141) 3,580,000 171,410 35,000 3,786,410 3,580,000 171,410 35,000 3,786,410 350,000 135,965 1,207 487,172 3,230,000 35,445 33,793 3,299,238 (35,000) (35,000) 11,097 46,097 (35,000) 11,097 (35,000) $ Explanation of difference between budgetary change in fund balance at June 30, 2023, and GAAP change in fund balance: Changes in fair value of investments are recognized as revenue for GAAP purposes but are not recognized as revenue on the budget basis Change in fund balance as reported on the statement of revenues, expenses and changes in fund balance 106 34 $ 11,131 $ 46,097 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, 2023 Actual Variance with Final Budget Positive (Negative) 3,944,626 3,944,626 $ (30,776,144) (30,776,144) 2,449,929 1,732,422 717,507 181,850 5,000,000 7,090,340 580,877 368,925 52,145 1,207,993 237,302 2,193,169 7,090,340 377,842 39,605 19,738 1,048,512 174,161 3,392,280 203,035 329,320 32,407 159,481 63,141 2,193,169 3,698,060 Excess (deficiency) of revenues over expenditures 27,630,430 27,630,430 552,346 (27,078,084) Other financing sources (uses) Transfers in Transfers out Total other financing sources (uses) (27,630,430) (27,630,430) 14,000 (27,691,653) (27,677,653) 14,000 (714,356) (700,356) 26,977,297 26,977,297 Net change in fund balances $ Budgeted Amounts Revenues Intergovernmental Total revenues Original Final $ 34,720,770 34,720,770 $ 34,720,770 34,720,770 1,908,490 Expenditures Current General government Management and policy Public safety Police Fire Parks and recreation Non departmental Capital outlay Contingency Total expenditures 107 - $ (47,223) $ $ (148,010) $ (100,787) 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, 2023 Budgeted Amounts Variance with Final Budget Positive (Negative) Original Final Actual $ 3,008,890 3,008,890 $ 3,008,890 3,008,890 $ 3,006,329 775 3,007,104 Expenditures Current Highways and streets Parks and recreation Non departmental Total expenditures 1,923,700 1,295,950 20,490 3,240,140 1,941,470 1,304,330 20,490 3,266,290 1,940,466 970,049 2,910,515 1,004 334,281 20,490 355,775 Excess (deficiency) of revenues over expenditures (231,250) (257,400) 96,589 353,989 Revenues Property taxes Miscellaneous Total revenues Net change in fund balances $ (231,250) 108 $ (257,400) $ 96,589 $ $ (2,561) 775 (1,786) 353,989 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, 2023 Non-GAAP Actual Variance with Final Budget Positive (Negative) $ $ Budgeted Amounts Original Revenues Sales taxes Charges for services Intergovernmental Fines and forfeitures Gifts and donations Interest earnings Miscellaneous Total revenues $ 1,000,000 140,000 713,380 385,000 63,890 1,000 - Final $ 1,000,000 140,000 713,380 385,000 63,890 1,000 - 1,498,686 332,645 699,682 289,236 114,791 158,593 303,457 498,686 192,645 (13,698) (95,764) 50,901 157,593 303,457 2,303,270 2,303,270 3,397,090 1,093,820 82,880 588,310 115,130 588,310 47,269 427,642 67,861 160,668 279,090 58,300 20,000 1,051,890 61,880 - 729,004 65,300 30,320 1,051,890 61,880 50,000 456,488 20,098 11,480 725,221 49,885 - 272,516 45,202 18,840 326,669 11,995 50,000 2,142,350 2,691,834 1,738,083 953,751 Excess (deficiency) of revenues over expenditures 160,920 (388,564) 1,659,007 2,047,571 Other financing sources (uses) Transfers in Transfers out Total other financing sources (uses) 100,000 (15,000) 100,000 (20,000) 100,000 (19,600) 400 85,000 80,000 80,400 400 (308,564) 1,739,407 Expenditures Current General government Management and policy Court Public safety Police Fire Parks and recreation Transportation Non departmental Capital outlay Total expenditures Net change in fund balances $ 245,920 $ Explanation of difference between budgetary change in fund balance at June 30, 2023, and GAAP change in fund balance: Changes in fair value of investments are recognized as revenue for GAAP purposes but are not recognized as revenue on the budget basis Change in fund balance as reported on the statement of revenues, expenses and changes in fund balance 109 (29,459) $ 1,709,948 $ 2,047,971 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, 2023 Variance with Final Budget Positive (Negative) Budgeted Amounts Original Revenues Total revenues $ Expenditures Current Highways and streets Capital outlay Contingency Total expenditures Final - $ Actual - $ - $ - 398,714 27,422,758 - 396,206 22,328,069 10,001,967 130,773 1,234,309 - 265,433 21,093,760 10,001,967 27,821,472 32,726,242 1,365,082 31,361,160 Excess (deficiency) of revenues over expenditures (27,821,472) (32,726,242) (1,365,082) (31,361,160) Other financing sources (uses) Transfers in Total other financing sources (uses) 27,821,472 27,821,472 1,630,982 (26,190,490) 27,821,472 27,821,472 1,630,982 (26,190,490) Net change in fund balances $ - 110 $ (4,904,770) $ 265,900 $ 5,170,670 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. Self-Insurance – to account for and finance Gilbert’s uninsured risks of loss for medical, dental, workers’ compensation, and general liability claims. 111 Table of Contents TOWN OF GILBERT, ARIZONA Combining Statement of Net Position Internal Service Funds June 30, 2023 Equipment Maintenance Self-Insurance Total Internal Service Funds $ 2,124,016 $ 16,444,410 $ 18,568,426 4,912 22,986 1,081,378 3,233,292 37,840 424,738 50,000 16,956,988 42,752 424,738 22,986 50,000 1,081,378 20,190,280 225,749 569,120 794,869 4,028,161 16,956,988 225,749 569,120 794,869 20,985,149 Deferred outflows of resources Pensions and other post-employment benefits Total deferred outflows of resources 403,194 403,194 - 403,194 403,194 Liabilties Current liabilities Accounts payable Accrued liabilities Advances from other funds Accrued compensated absences Claims payable Total current liabilities 720,565 44,577 88,456 853,598 227,760 5,165 1,300,000 10,233,000 11,765,925 948,325 49,742 1,300,000 88,456 10,233,000 12,619,523 154,188 19,724 2,310,260 2,484,172 3,337,770 11,765,925 154,188 19,724 2,310,260 2,484,172 15,103,695 81,101 81,101 - 81,101 81,101 742,288 270,196 1,012,484 5,191,063 5,191,063 742,288 5,461,259 6,203,547 Assets Current assets Pooled cash and investments Receivables, net Accrued interest Accounts Due from other governments Deposits Inventories Total current assets Noncurrent assets Non-depreciable Depreciable, net Total noncurrent assets Total assets Noncurrent liabilities Accrued compensated absences Net other post-employment benefits Net pension liability Total noncurrent liabilities Total liabilities Deferred inflows of resources Pensions and other post-employment benefits Total deferred inflows of resources Net position Net investment in capital assets Unrestricted Total net position $ 112 $ $ 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, 2023 Equipment Maintenance Self-Insurance Total Internal Service Funds Operating revenues Charges for services Intergovernmental Other Total operating revenues $ 11,200,220 387,502 15,588 11,603,310 $ 29,995,573 2,897,247 32,892,820 $ 41,195,793 387,502 2,912,835 44,496,130 Operating expenses General and administrative Personnel services Operation and maintenance Claims incurred Depreciation Total operating expenses 115,680 2,645,625 7,979,099 60,725 10,801,129 6,838,977 338,905 30,022,530 37,200,412 6,954,657 2,984,530 7,979,099 30,022,530 60,725 48,001,541 Operating income (loss) 802,181 (4,307,592) (3,505,411) Nonoperating revenues (expenses) Interest earnings Net change in fair value of investments Total nonoperating revenues (expenses) 53,529 (2,905) 50,624 389,422 (17,443) 371,979 442,951 (20,348) 422,603 Income (loss) before contributions and transfers 852,805 (3,935,613) (3,082,808) 36,000 - 2,201,300 (33,020) 2,237,300 (33,020) 888,805 (1,767,333) (878,528) Transfers in Transfers out Change in net position Total net position - beginning Total net position - ending $ 113 123,679 1,012,484 $ 6,958,396 5,191,063 $ 7,082,075 6,203,547 Table of Contents TOWN OF GILBERT, ARIZONA Statement of Cash Flows Internal Service Funds June 30, 2023 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 Self-Insurance Total Internal Service Funds $ $ $ Cash flows from noncapital financing activities Transfers from other funds Transfers to other funds Net cash provided (used) by noncapital financing activities 114 366,832 2,912,835 42,158,466 (42,002,483) (2,947,876) 487,774 2,201,300 (33,020) 2,168,280 2,237,300 (33,020) 2,204,280 (515,106) - (515,106) (515,106) - (515,106) 48,601 48,601 356,713 356,713 405,314 405,314 $ 451,504 1,672,512 2,124,016 2,130,758 14,313,652 $ 16,444,410 2,582,262 15,986,164 $ 18,568,426 $ 802,181 $ $ Cash flows from investing activities Investment income Net cash provided (used) by investing activities Reconciliation of operating income (loss) to net cash provided (used) by operating activities Operating income / (loss) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities Depreciation Changes in assets, deferred outflows of resources, liabilities, and deferred inflows of resources Accounts receivable Due from other governments Inventories Deferred outflows of resources Accounts payable Claims payable Accrued expenses Other post-employment benefits Net pension liability Deferred inflows of resources Net cash provided (used) by operating activities 2,897,247 30,958,247 (33,905,498) (344,231) (394,235) 36,000 36,000 Cash flows from capital and related financing activities Acquisition and construction of capital assets Net cash provided (used) by capital and related financing activities Net increase (decrease) in cash and cash equivalents Balances - beginning of year Balances - end of the year 366,832 15,588 11,200,219 (8,096,985) (2,603,645) 882,009 $ (4,307,592) (3,505,411) 60,725 - 60,725 (20,671) (51,443) 148,041 49,238 (51,449) 2,298 468,788 (525,699) 882,009 936,410 26,264 92,527 2,863,482 (5,326) (394,235) 915,739 26,264 (51,443) 148,041 141,765 2,863,482 (56,775) 2,298 468,788 (525,699) 487,774 $ $ Table of Contents STATISTICAL SECTION This part of Gilbert's Annual Comprehensive 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 117 These schedules contain trend information to help the reader understand how Gilbert's financial performance has changed over time. Revenue Capacity 123 These schedules contain information to help the reader assess Gilbert's most significant local revenue source, sales tax. Debt Capacity 126 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 131 These schedules offer demographic and economic indicators to help the reader understand the environment within which Gilbert's financial activities take place. Operating Information 133 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 136 Sources: Unless otherwise noted, the information in these schedules is derived from the Annual Comprehensive Financial Report for the relevant year. 115 Table of Contents 116 Table of Contents Schedule 1 Town of Gilbert, Arizona Net Position by Component Last Ten Fiscal Years (accrual basis of accounting) (1,000's) 2014 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 $ $ $ $ 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 2015 $ $ $ $ 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 2016 $ $ $ $ 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 2017 $ $ $ $ 753,973 72,780 60,983 887,736 399,537 42,814 342,616 784,966 $ 1,153,510 115,594 403,598 $ 1,672,702 117 2018 $ $ $ $ 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 2019 $ $ $ $ 2020 844,068 91,917 162,177 $ 1,098,162 885,750 115,550 183,410 $ 1,184,710 919,930 123,034 236,010 $ 1,278,974 462,857 30,972 379,636 873,465 $ $ $ $ $ $ 1,273,357 97,815 540,792 $ 1,911,964 $ 506,807 22,717 418,159 947,683 $ 1,350,875 114,634 580,336 $ 2,045,845 $ 2023 804,917 72,943 132,638 $ 1,010,497 468,440 24,873 408,154 901,467 $ 2022 792,864 87,450 67,904 948,218 $ 1,255,721 118,422 447,540 $ 1,821,683 $ 2021 (as restated) $ 541,025 13,500 410,204 964,729 $ 1,426,775 129,050 593,614 $ 2,149,439 $ $ 577,320 10,630 411,067 999,017 $ 1,497,250 133,664 647,077 $ 2,277,991 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 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 Solid Waste Total business-type activities expenses Total primary government expenses Program Revenues Governmental activities Charges for services Development services Police Fire Parks and recreation Other activities Operating grants and contributions Capital grants and contributions Total governmental activities program revenues 2014 $ 13,378 4,347 5,975 9,062 2015 $ 19,090 1,814 4,053 7,082 2016 $ 2017 20,049 2,110 4,164 7,611 $ 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 2022 $ 32,299 3,090 4,623 11,876 2023 $ 34,670 3,396 4,984 12,752 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 67,492 48,220 63,022 32,719 3,523 8,221 275,085 81,159 54,961 67,636 37,450 725 4,016 12,075 313,824 39,927 23,615 16,113 79,655 $ 275,637 41,817 25,620 16,720 84,157 $ 285,150 44,360 26,530 17,719 88,609 $ 298,276 42,329 26,791 16,857 85,978 $ 329,366 44,605 27,244 18,183 90,032 $ 317,134 47,167 27,844 21,689 96,700 $ 332,632 49,373 30,930 22,928 103,231 $ 355,073 52,259 31,224 25,644 109,127 $ 379,546 55,761 36,908 27,861 120,530 $ 395,615 67,786 38,774 31,843 138,403 $ 452,228 $ $ $ $ $ $ $ $ $ $ 6,783 5,477 254 3,765 2,506 22,326 19,186 60,297 6,608 4,526 224 4,146 2,472 24,171 37,214 79,361 6,826 5,343 197 4,366 2,618 38,666 65,535 123,551 118 6,900 7,484 231 4,603 2,795 33,204 41,877 97,094 7,227 3,826 360 4,700 2,635 28,381 32,904 80,033 8,318 3,609 386 4,355 1,152 30,012 36,203 84,037 6,867 1,827 827 4,800 966 53,661 39,675 108,623 8,121 2,024 1,208 5,419 1,027 43,619 57,447 118,865 5,864 3,338 4,908 7,036 1,076 40,309 61,139 123,670 5,350 3,195 6,144 7,955 841 41,985 42,935 108,405 Table of Contents Schedule 2 Continued 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 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 43,655 127,420 250,971 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 55,270 31,695 24,187 2,607 29,360 143,119 266,789 64,346 34,753 29,302 3,104 24,865 156,370 264,775 Business-type activities Charges for services Water Wastewater Solid Waste 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 $ (135,685) 35,624 $ (100,061) General Revenues and Other Changes in Net Position Governmental activities Taxes Sales taxes $ 66,757 Property taxes 18,315 In-Lieu property taxes 1,287 Franchise taxes 2,616 Unrestricted state-shared revenue 41,323 Unrestricted grants and contributions 904 Unrestricted investment earnings 1,508 Gain/(loss) on sale of capital assets 29 Miscellaneous 1,226 Transfers 110 Total governmental activities 134,076 Business-type activities Unrestricted investment earnings 1,742 Gain on sale of capital assets 30 Miscellaneous 1,266 Transfers (110) Total business-type activities 2,928 Total primary government $ 137,004 Change in Net Position Governmental activities Business-type activities Total primary government $ $ (1,609) 38,552 36,943 $ $ $ $ $ $ $ $ $ $ (121,632) 24,993 $ (96,639) $ (86,115) 38,812 $ (47,304) $ (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) $ (151,414) 22,589 $ (128,825) $ (205,419) 17,968 $ (187,451) $ $ $ $ $ $ $ $ $ $ $ $ 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 $ $ $ 77,070 19,424 1,187 2,989 45,028 3,204 2,651 136 1,162 98 152,949 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 54,063 119 $ $ $ 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 $ $ $ 142,901 30,356 1,086 2,660 72,667 2,125 (14,993) 238 1,080 (158) 237,962 (6,500) 241 559 158 (5,542) 232,420 86,548 17,047 103,595 $ $ $ 155,494 32,588 1,040 2,761 92,190 896 17,805 1,153 1,031 (5,273) 299,684 10,510 75 463 5,273 16,320 316,004 94,264 34,288 128,552 Table of Contents Schedule 3 Town of Gilbert, Arizona Program Revenues by Function Last Ten Fiscal Years (1,000's) 2014 Function/Program 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 $ 59 262 823 6,807 2015 $ 962 27 824 6,608 2016 $ 690 24 859 6,826 2017 $ 991 20 831 6,900 2018 $ 2,235 27 731 7,227 2019 $ 1,830 7 700 8,318 2020 $ 1,503 12 573 7,145 2021 $ 4,862 629 8,641 2022 $ 5,651 4 679 5,864 2023 $ 3,212 519 5,350 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 6,495 9,000 76,106 16,230 3,241 400 7,227 10,168 60,933 20,005 678 314 Subtotal governmental activities 60,297 79,361 123,551 97,095 80,033 84,037 108,624 118,865 123,670 108,405 Business-type activities Water Wastewater Solid Waste 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 78,518 40,082 24,519 85,990 40,737 29,644 Subtotal business-type activities 115,278 109,150 127,421 120,085 119,622 123,578 120,488 130,343 143,119 156,371 $ 175,575 $ 188,511 $ 250,972 $ 217,180 $ 199,655 $ 207,616 $ 229,112 $ 249,208 $ 266,789 $ 264,776 Total primary government 120 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) 2014 General fund Nonspendable Assigned Unassigned Total general fund $ $ 2015 2016 2017 2018 2019 2020 2021 2022 2023 25,380 $ 24,470 $ 19,866 $ 18,995 $ 17,877 $ 23,061 $ 15,833 $ 11,561 $ 11,722 $ 9,742 12,081 17,046 13,681 32,766 41,371 41,631 68,002 76,747 86,881 128,525 61,764 67,057 85,498 82,885 72,453 89,787 133,901 139,520 153,384 180,920 99,225 $ 108,573 $ 119,045 $ 134,646 $ 131,701 $ 154,479 $ 217,736 $ 227,828 $ 251,987 $ 319,187 All other governmental funds Nonspendable $ 83 $ 2 $ 4 $ 2 $ 1 $ - $ - $ Restricted 92,337 96,837 87,005 139,725 134,441 110,470 101,628 18,764 22,462 38,337 Assigned 34,387 15,971 Unassigned (25,466) (23,981) (19,897) (19,353) (18,311) (17,424) (16,448) Total all other governmental funds $ 85,718 $ 95,320 $ 105,449 $ 154,761 $ 132,102 $ 93,046 $ 85,180 $ 121 - $ 70 $ 95,704 311,522 312,616 5,369 5,362 (9,259) (6,686) (6,981) 86,445 $ 310,275 $ 310,997 Table of Contents Schedule 5 Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) (1,000's) 2014 Revenues Taxes Sales Property Special assessments Franchise 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 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 $ 66,772 20,681 2,090 2,700 4,748 10,027 68,046 4,469 1,977 13,435 155 1,494 n/a 1,255 197,849 2015 $ 71,794 21,953 1,184 2,737 4,791 10,440 76,284 4,476 382 18,836 192 1,210 n/a 953 215,232 2016 $ 77,108 22,000 2,233 3,389 4,787 11,147 77,007 4,618 1,666 22,944 187 2,639 n/a 14,797 244,522 2017 $ 82,980 23,707 696 2,814 4,785 11,161 87,364 4,336 2,252 18,101 120 836 n/a 5,683 244,835 2018 $ 89,516 24,468 958 2,911 4,645 12,151 84,923 4,065 1,585 17,617 195 1,523 n/a 1,796 246,353 $ 2019 2020 2021 2022 2023 98,671 25,220 818 2,954 5,735 12,816 86,480 3,305 4,380 21,966 183 9,890 n/a 1,153 273,571 $ 107,552 26,570 744 2,744 4,689 13,154 117,277 3,084 9,799 20,971 280 10,085 n/a 674 317,623 $ 123,932 28,603 617 2,669 5,868 14,884 132,388 3,259 919 38,771 163 4,205 (3,714) 936 353,500 $ 142,924 30,356 1,351 2,660 4,068 20,552 141,466 3,231 5,280 19,270 281 3,527 (18,134) 1,383 358,215 $ 155,510 32,588 490 2,761 2,884 24,190 136,417 3,059 16,657 15,312 304 16,569 813 1,332 408,886 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 30,834 3,162 4,037 8,949 36,057 3,567 4,390 9,715 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 62,456 42,359 24,480 26,627 8,178 73,195 50,172 27,615 31,078 725 5,065 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 50,895 281,027 34,190 11,242 35 71,644 299,111 49,055 9,868 853 13 127,093 382,935 35,615 10,068 13 79,273 350,071 29,495 8,312 662 15 60,593 310,158 27,084 14,116 10 68,415 351,205 Excess (deficiency) of revenues over (under) expenditures (11,234) (21,207) 20,580 (7,169) (34,674) (25,540) (65,312) 3,429 48,057 57,681 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 Subscription-based information technology arrangements Total other financing sources and uses 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) 9,071 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 62,268 (64,425) 262 188,910 12,917 199,932 42,631 (50,109) 4,777 12,940 10,239 64,911 $ (25,603) $ (24,087) 11,358 $ 247,989 21.3% 25.1% 20.0% 16.9% 15.1% Net change in fund balances Debt service as a percentage of noncapital expenditures a $ (10,534) 23.4% $ 18,950 20.8% $ 20,601 $ 23.4% Previous years' fair market value adjustment was netted with investment earnings 122 $ 55,389 23.0% $ $ 67,921 14.6% Table of Contents Schedule 6A Town of Gilbert, Arizona Sales Tax Collections by Category Fiscal Years 2014 - 2016 a 2015 2014 2016 Construction Manufacturing Communications & Utilities Wholesale Retail Restaurant & Bar Real Estate, Rental & Leasing Accommodation b Services Other b Transportation & Warehousing Finance & Insurance Public Administration Arts & Entertainment $ 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 Total $ 66,771,661 $ 71,793,671 $ 77,108,076 Gilbert's local sales tax rate 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. 123 Table of Contents Schedule 6B Town of Gilbert, Arizona Sales Tax Collections by Category Fiscal Years 2018 - 2023 a 2017 2018 2019 2020 Accommodation (Bed Tax) Accommodation (Base 1.5% Tax) b Amusement Communications & Utilities Construction Contracting Maintenance, Repair, Replacement & Alterationc Personal Property Rental Publications, Advertising & Job Printing Rental of Commercial Property/Non-Residential Residential Rental Restaurant & Bar Retail Retail - Food for Home Consumptionb Tax License Feesd 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 $ 123,931,932 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 2021 1.5% 2022 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 1.5% 2023 1,798,155 $ 994,743 1,063,321 5,992,184 14,942,241 2,514,789 171,133 6,080,132 6,143,339 13,025,145 75,134,162 14,986,376 55,700 1,824,487 1,012,435 1,216,207 6,586,617 16,546,790 4,042,002 169,121 6,649,908 7,818,929 13,606,325 79,354,172 16,686,956 (3,973) $ 142,901,420 $ 155,509,976 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 reported in the past. See Schedule 6A for Fiscal Years 2014 2016 data. 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. c Maintenance, Repair, Replacement & Alteration has been combined with Construction Contracting due to disclosure laws concerning confidentiality. d Effective July 1, 2019, Tax License Fees were combined with Other due to disclosure laws concerning confidentiality. Note: State and local laws prohibit the disclosure of individual taxpayer information. 124 Table of Contents Schedule 7 Town of Gilbert, Arizona Direct and Overlapping Sales Tax Rates Last Ten Fiscal Years 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Town Direct Rates: Hotel/Transient Lodging All Others 4.50% 1.50% 4.50% 1.50% 4.50% 1.50% 4.50% 1.50% 4.30% 1.50% 4.30% 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 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% 5.50% 5.60% 5.50% 5.60% Source: Gilbert Finance & Management Services Department Note: Gilbert sales tax rate may be changed with the approval of Council. 125 Table of Contents Schedule 8 Town of Gilbert, Arizona Ratios of Outstanding Debt by Type Last Ten Fiscal Years Governmental Activities Special Assessment Bonds Street and Highway User Revenue Bonds Municipal Property Corporation Revenue Bonds Business-type Activities Municipal Property General Corporation Obligation Revenue Bonds Bonds Fiscal Year General Obligation Bonds 2014 $ 2015 2016 135,775,830 $ 123,420,395 105,296,311 9,445,797 $ 8,306,402 6,504,185 16,864,197 $ 13,754,807 10,538,003 133,835,907 $ - $ 126,607,711 39,685,688 118,310,093 39,685,688 2017 2018 2019 157,102,290 140,551,095 122,209,904 6,126,440 5,464,645 4,912,850 7,174,209 3,664,605 - 109,229,636 95,342,840 81,835,435 39,637,764 38,887,844 38,122,923 - 2020 2021 2022 2023 168,454,903 147,475,574 326,043,366 305,883,180 4,526,056 4,014,261 2,852,466 2,490,000 - 64,161,400 49,482,365 34,137,804 27,883,243 37,328,003 36,498,083 35,633,163 34,728,243 - Revenue Obligations 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. 126 Total Primary Government Percentage of Personal Income Per Capita 400,253,194 409,965,927 415,745,141 6.09 % 5.89 5.52 1,807 1,804 1,789 134,594,390 170,517,212 160,502,481 453,864,729 454,428,241 407,583,593 5.30 5.13 4.64 1,833 1,835 1,571 151,742,751 142,648,020 634,385,933 623,425,908 426,213,113 380,118,303 1,033,052,732 994,410,574 4.17 3.72 9.72 9.17 1,618 1,388 3,723 3,547 247,585 $ 104,083,879 $ 98,190,924 135,410,861 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 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 a b Less Amount Available in Debt Service Fund $ 136,023,415 123,420,395 105,296,311 157,102,290 140,551,095 122,209,904 168,454,903 147,475,574 326,043,366 305,883,180 $ 8,942,949 10,165,593 6,952,183 2,186,272 6,020,480 1,870,513 1,846,926 1,925,381 2,392,952 2,692,144 Net General Bonded Debt Outstanding $ 127,080,466 113,254,802 98,344,128 154,916,018 134,530,615 120,339,391 166,607,977 145,550,193 323,650,414 303,191,036 $ Secondary Assessed Property Value b Limited Property Value b 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 2,807,360,551 2,998,786,660 Percentage of Applicable Property Value 7.97 % 6.19 5.33 7.83 6.39 5.33 6.86 5.56 11.53 10.11 Per Capita $ 574 498 423 626 543 464 632 552 1,182 1,081 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. 127 Table of Contents Schedule 10 Town of Gilbert, Arizona Direct and Overlapping Governmental Activities Debt As of June 30, 2023 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 87,320,000 574,205,000 131,680,000 69,865,000 329,255,555 274,455,000 None 5.77% 5.77% 5.77% 68.90% 87.66% 13.33% 0.37% 11.74% Estimated Share of Direct and Overlapping Debt $ Subtotal, overlapping debt Town of Gilbert direct debt e None 5,038,364 33,131,629 90,727,520 61,243,659 43,889,765 1,015,484 None 235,046,420 370,984,666 100.00% 370,984,666 $ Total direct and overlapping debt 606,031,086 Source: The various jurisdictions a Proportion applicable to Town of Gilbert, Arizona is computed on the ratio of limited property valuation for fiscal year 2023. b 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 Obligation bonds, 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. 128 Table of Contents Schedule 11 Town of Gilbert, Arizona Legal Debt Margin Information Last Ten Fiscal Years 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 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 317,092,733 $ 346,856,631 $ 369,065,090 $ 395,871,854 $ 524,748,518 $ 566,219,031 $ 622,820,366 $ 695,490,004 $ 761,061,261 $ 821,925,801 135,310,000 122,715,000 105,250,000 143,945,000 128,090,000 110,445,000 151,825,000 131,830,000 298,465,000 279,935,000 - - - 9,675,637 9,516,726 8,090,801 11,071,074 9,400,564 20,134,505 19,026,138 522,964,663 181,782,733 $ 224,141,631 $ 263,815,090 $ 242,251,217 $ 387,141,792 $ 447,683,230 $ 459,924,292 $ 554,259,440 $ 442,461,756 $ 42.67% 35.38% 28.52% 38.81% 26.22% 20.93% 26.15% 20.31% 41.86% 95,127,820 $ 104,056,989 $ 110,719,527 $ 118,761,556 $ 157,424,555 $ 169,865,709 $ 186,846,110 $ 208,647,001 $ 228,318,378 $ 36.37% 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 - $ 95,127,820 $ 0.00% - 104,056,989 $ 0.00% - 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 $ 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 prorata basis each year. 129 - 228,318,378 $ 0.00% 246,577,740 - 246,577,740 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 2014 $ Excise Taxes & State-Shared Debt Service Principal Interest Coverage Revenue % $ Debt Service Principal Interest Coverage 2,089,887 $ 1,020,000 $ 507,965 1.37 117,627,904 $ 10,080,000 $ 6,458,288 7.11 2015 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 2022 1,351,411 1,160,000 193,350 1.00 245,000,143 6,060,000 3,210,356 26.43 2023 490,470 350,000 135,965 1.01 278,807,974 6,350,000 2,916,956 30.09 Water and Wastewater Revenue Bonds c Water Less: Net Fiscal Operating Operating Available Year Revenues a Expenses a Revenue 2014 2015 $ 62,873,206 $ 37,514,942 $ 25,358,264 $ 63,338,422 40,316,645 23,021,777 Water Resources Municipal Property Corp. Revenue Bonds Debt Service Principal 1,500,000 $ - % Interest Coverage 610,163 12.02 - N/A % $ Net Water Available System Wastewater System Revenue b Dev't Fee Dev't Fee 23,248,101 $ 10,567,046 $ - 23,021,777 10,461,708 - Debt Service $ Principal Interest Coverage 3,875,000 $ 5,198,059 3.73 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 33,325,901 - - N/A 33,325,901 8,936,917 5,295,232 7,950,000 5,487,313 3.54 2022 84,754,618 53,871,428 30,883,190 - - N/A 30,883,190 9,634,948 3,022,095 8,340,000 5,089,813 3.24 2023 112,578,635 56,403,489 56,175,146 - - N/A 56,175,146 7,514,174 2,187,503 8,780,000 17,453,053 2.51 a 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. c These bonds were paid off in fiscal year 2014. b Note: Details regarding Gilbert's outstanding debt can be found in the notes to the financial statements. 130 % Table of Contents Schedule 13 Town of Gilbert, Arizona Demographic and Economic Statistics Last Ten Fiscal Years Personal Income b Fiscal Year Population 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 221,506 227,217 232,399 247,600 247,600 259,386 263,461 273,796 277,486 280,391 Per Capita Income c (in thousands) (estimate) a $ 6,568,000 6,962,000 7,534,000 8,558,000 8,858,000 8,775,000 10,222,000 10,623,000 10,843,000 13,680,000 $ (estimate) Median Age c School Enrollment d 28,184 30,639 32,418 34,565 35,777 33,831 38,800 38,800 39,073 48,791 37.5 32.7 33.2 33.1 34.4 35.2 34.8 34.8 35.3 36.4 38,573 37,240 34,079 35,449 34,552 33,393 34,188 33,055 33,644 33,210 Unemployment Rate e Sources: a Fiscal years 2014 through 2016 Census.gov; fiscal years 2017 and 2018 Office of Management & Budget; fiscal years 2019-2023 Maricopa Association of Governments. b Estimated based on population and per capita income. c Fiscal years 2009 through 2015: American Community Survey; fiscal years 2016 through 2023: Census.gov d 2022-2023 obtained fom https://azed.gov/accountability-research/data (School by grade tab) e laborstats.az.gov through fiscal year 2019; azcommerce.com fiscal years 2020 through 2023 131 5.20 % 4.30 4.20 3.70 3.50 3.80 8.00 4.90 2.80 3.30 Table of Contents Schedule 14 Town of Gilbert, Arizona Top Ten Principal Employers Current Fiscal Year Compared to Nine Years Ago Employer Fiscal Year 2023 Percentage of Total Town Employees Rank Employment Gilbert Public Schools Banner Health/MD Anderson Town of Gilbert Fry's Food Stores Higley Unified School District Northrop Grumman Walmart Inc. (Walmart/Sams Club) Dignity Health Deloitte Silent Aire USA Inc BH Drywall GoDaddy Software, Inc. Hunter Contracting Chandler Unified School District 2,918 2,539 1,815 1,484 1,296 1,152 1,111 1,052 835 778 --------- Total 14,980 1 2 3 4 5 6 7 8 9 10 Fiscal Year 2014 Percentage of Total Town Employees Rank Employment 2.92 % 2.54 1.82 1.48 1.30 1.15 1.11 1.05 0.84 0.78 --------- 3,649 2,219 1,297 952 ----470 1,500 ----997 858 848 565 14.99 % 13,355 1 2 4 6 10 3 5 7 8 9 4.56 % 2.77 1.62 1.19 ----0.68 1.87 ----1.25 1.07 1.06 0.71 16.78 % Source: Maricopa Association of Governments (MAG) 2023 and 2014 Employer Database; Total Employment - Lightcast 2023 Total Jobs 132 Table of Contents Schedule 15 Town of Gilbert, Arizona Full-time Equivalent Employees by Function Last Ten Fiscal Years Function 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Governmental Funds General government Management and policy 95.8 120.0 128.6 131.6 132.6 136.1 142.5 155.8 157.8 166.1 Finance and management services 19.0 19.0 21.0 21.0 25.0 25.5 26.5 28.5 28.5 29.0 Court 51.9 32.9 32.9 32.9 33.9 33.9 33.9 34.1 34.1 34.1 Development services 68.8 73.3 66.7 68.7 83.7 84.5 93.3 94.3 98.3 102.3 Police 349.0 354.0 358.0 369.0 385.5 409.5 429.5 447.5 466.5 489.5 Fire Public safety 201.0 201.0 203.0 210.0 217.0 216.0 223.0 256.6 264.6 283.6 Highways and streets 58.0 58.0 51.7 51.7 53.7 55.7 55.7 57.7 57.7 59.7 Parks and recreation 121.8 118.7 125.3 126.2 128.3 128.5 169.1 176.4 182.4 186.2 Water 118.0 116.5 125.0 130.0 131.0 133.5 135.7 135.9 136.9 141.9 Wastewater 44.7 45.4 42.5 42.5 43.5 45.5 48.5 49.5 49.5 53.5 Solid Waste 83.5 84.0 94.3 96.3 97.3 100.3 101.8 103.8 106.8 106.8 Equipment maintenance 26.0 26.0 26.0 26.0 26.0 26.0 26.0 26.0 26.0 29.0 Self-Insurance 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.0 1,237.5 1,248.8 1,275.0 1,305.9 1,357.5 1,395.0 1,485.6 1,566.1 1,609.1 1,683.7 Enterprise Funds Internal Service Funds Total Source: Gilbert Office of Management & Budget 133 Table of Contents Schedule 16 Town of Gilbert, Arizona Operating Indicators by Function Last Ten Fiscal Years 2014 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 e Crimes per 1,000 population Fire Number of emergency calls Response time average (enroute to scene) b onb 2015 75% 155 7.5% n/a 148 8.3% 28,896 72% 29,499 71% 3,254 $ 472.5 3,364 $ 496.0 8,474 16.6 16,185 3 min 51 sec 2016 a 2017 a 2018 2019 71% 156 10.3% 79% 199 10.4% n/a 200 9.6% 74% 175 9.7% n/a 149 9.3% 32,091 70% 29,501 74% 26,147 74% 24,244 70% 3,584 553.8 4,157 $ 532.2 4,607 $ 531.6 8,900 15.5 8,702 15.3 8,250 15.5 8,360 15.2 17,777 3 min 57 sec 18,923 3 min 55 sec 19,422 $ n/a 5 min 9 sec 2020 2021 a 2022 2023 a 69% 210 9.8% n/a 261 14.6% n/a 282 10.7% 20,813 74% 21,620 74% 19,102 62% 23,181 76% 4,441 $ 746.3 4,278 $ 607.8 6,060 $ 702.5 4,655 $ 441.5 3,073 $ 424.1 8,061 13.2 7,889 13.0 8,275 12.1 7,997 12 7,648 11 20,506 20,903 20,680 3 min 32 sec 4 min 48 sec 3 min 25 sec 4 min 44 sec 3 min 25 sec 4 min 46 sec 22,160 3 min 36 sec 5 min 01 sec 24,672 3 min 53 sec 5 min 08 sec 25,437 3 min 30 sec 4 min 48 sec n/a n/a n/a 75 75 72 74 72 73 72 72 73 73 Facility reservation requests c 16,440 n/a n/a n/a n/a n/a n/a n/a n/a n/a Facility reservations c n/a 52,616 11,747 62,815 19,835 69,423 18,000 71,651 16,000 98,286 16,670 113,245 14,993 133,868 14,976 34,697 16,305 122,581 18,380 124,865 Total dispatch time (dispatch to on scene) Highways and streets Average pavement condition index Parks and recreation Participants in recreation programs d Transportation Average daily ridership 685 687 669 679 784 668 522 296 322 385 Water Daily average water production (mg) Average # of meters read per month Number of utility locates 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 50 91,196 31,943 48 91,595 25,191 Wastewater Daily average wastewater influent (mg) Annual effluent produced/reused (mg) 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 17.21 5,852 18.13 5,867 113,965 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 22,252 142,802 19,131 138,850 18,944 Solid Waste & Recycle (SWR) Solid waste tonnage Recycle tonnage Source: Various Town departments a Survey completed every other year; 2023 results not available at time of compilation b Beginning in 2017, the Fire Department began reporting total dispatch time instead of average time enroute to on-scene: 2023 report generated for this criteria see pdf in backup 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. e Excludes warrants Effective July 1, 2021, participants are accounted for per session instead of per meeting date. 134 a Table of Contents Schedule 17 Town of Gilbert, Arizona Capital Asset Statistics by Function Last Ten Fiscal Years 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 180 185 217 224 251 249 263 299 309 332 10 10 10 10 10 11 11 11 11 11 Highways and streets Street centerline miles (estimate) a Traffic control signals 905 180 1,032 185 1,055 185 908 194 920 201 926 206 943 210 945 214 980 222 1,001 224 Parks and recreation Total acres of park land, trails, open space, municipal areas and support facilities, operated and maintained 605 605 605 645 645 645 725 725 693 693 Water Miles of water main b, c, d 1,261 1,304 1,660 1,322 1,335 1,366 1,100 701 710 728 Wastewater Miles of wastewater main b, c 1,006 1,019 1,038 887 896 923 774 795 802 811 66 67 57 56 71 63 62 63 70 73 Function Public safety Police Number of police cars Fire Fire stations Solid Waste 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. 135 Table of Contents Schedule 18 Town of Gilbert, Arizona Property Value, Construction and Bank Deposits Last Ten Fiscal Years Fiscal Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Residential Construction a Number of Permits Value 1,613 $ 1,668 1,764 1,754 1,604 1,535 1,194 2,161 1,358 854 315,632,904 350,707,421 402,071,499 336,676,752 312,805,353 467,961,355 435,133,652 495,787,159 263,268,046 332,291,531 Commercial Construction Number of Permits Value 284 $ 268 278 264 199 155 208 219 133 144 a a Other Construction Number of Permits Value 99,959,286 81,934,987 71,594,349 119,477,874 129,703,582 164,601,167 85,390,836 103,066,452 55,502,862 34,633,762 1,357 $ 1,428 1,542 2,139 2,804 2,751 2,876 3,680 3,164 2,075 56,890,360 $ 63,344,257 80,164,565 76,023,423 89,093,501 113,774,277 87,276,267 103,670,431 122,769,529 57,173,755 Secondary Assessed Property Value b 1,594,806,737 1,829,471,839 n/a n/a n/a n/a n/a n/a n/a n/a Limited Property Value b Maricopa County Bank Deposits c 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 2,807,360,551 178,327,411,000 2,998,786,660 163,826,070,000 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. 136 Table of Contents Schedule 19 Town of Gilbert, Arizona System Development Fees Fiscal Year 2023 System Development Fee Type Policea Beginning System Development Other Balance Fees Collected Revenue $ Fire 2,823,990 $ 1,305,204 (5,375,008) General Government - $ Ending Expenditures 75,469 $ (494,747) $ Balance 3,709,916 1,351,977 - (1,840,995) (5,864,026) c 895,733 13,202 (908,935) - Parks and Recreationa 30,709,602 7,496,043 887,269 (3,715,393) 35,377,521 Roadsa 10,713,179 3,173,185 292,210 (279,067) 13,899,507 Traffic Signala 13,492,978 1,089,547 391,238 (999,611) 13,974,152 Waterb (5,926,069) 4,262,034 5,000,000 (12,813,773) (9,477,808) d Water Resources (17,405,268) 3,252,140 - (1,527,512) (15,680,640) d Wastewatera 13,500,206 2,187,503 463,653 (5,521,309) 10,630,053 (28,101,342) $ 46,568,675 Totals $ 42,533,610 Wastewater system development fee - Greenfield $ 2,856 Wastewater system development fee - Neely $ 157 $ 25,013,366 $ 7,123,041 $ Equivalent Residential Unit Source: Gilbert Finance & Management Services Department a The beginning balance was adjusted downward due to a misstatement in Other Revenue in the fiscal year 2022 table as a result of showing a fair market value loss as a positive amount. b The beginning balance was adjusted upward by $543,084 to correct for a misstatement on the fiscal year 2022 table. c The negative ending balances for the fire system development fees are funded by the general fund. The general fund had a cash balance of $298,298,337 at June 30, 2023. d 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 $593,522,570 at June 30, 2023. 137 Table of Contents Schedule 20 Town of Gilbert, Arizona Property Tax Levies and Collections Last Ten Fiscal Years Fiscal Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Tax Levy $ County Resolutions 18,327,289 $ 19,487,085 19,495,256 20,913,149 21,667,785 22,353,420 24,017,440 25,917,731 27,784,120 29,686,793 (57,876) $ (72,483) (32,290) (80,844) (53,647) (44,819) (28,727) (28,414) (87,560) (85,585) Initial Year Collections Net Current Tax Levy Collections 18,269,413 $ 19,414,602 19,462,966 20,832,305 21,614,138 22,308,601 23,988,712 25,889,316 27,696,560 29,601,208 18,056,441 19,230,809 19,286,314 20,645,301 21,411,196 22,129,563 23,702,115 25,661,002 27,432,417 29,316,884 Percent Of Levy 98.83 % 99.05 99.09 99.10 99.06 99.20 98.81 99.12 99.05 99.04 Source: Maricopa County Assesor 138 County Resolutions $ (90,213) $ (128,928) (83,434) (142,292) (87,156) (100,692) (36,693) (50,547) (91,415) (85,585) Cumulative Collections Net Delinquent Total Tax Levy Collections Collections 18,237,076 $ 179,504 $ 126,738 19,358,157 124,984 19,411,822 125,054 20,770,857 168,611 21,580,629 121,609 22,252,728 277,445 23,980,747 205,093 25,867,184 257,339 27,692,705 29,601,208 18,235,945 19,357,547 19,411,298 20,770,355 21,579,807 22,251,172 23,979,560 25,866,095 27,689,756 29,316,884 Percent of Levy 99.99 % 100.00 100.00 100.00 100.00 99.99 100.00 100.00 99.99 99.04 Table of Contents Schedule 21 Town of Gilbert, Arizona Principal Property Taxpayers Fiscal Year 2023 Principal Taxpayer Type of Business Westcor SanTan Village LLC LIV Northgate LLC American Furniture Warehouse Co SP TIC 3 LLC/SP TIC 2 LLC/SP TIC 1 LLC/EtAl USCIF Artis Park Lucero Venture LCG2 Santan Apts LLC Frankel Family Trust TGA Germann Road Apartments LLC BCI IV Gilbert Commerce Park LLC IH6 Property Phoenix LP Southwest Gas Corporation Gilbert Gateway Towne Center Holdings LLC Target Corporation Breit Olympus MF Redstone LLC 410 Rivulon Boulecard LLC Breit Olympus MF Vistara LLC Williams Field Development LLC AZ Flats at San Tan Apartments LLC Vestar Crossroads Gilbert LLC Acero Val Vista LLC Epicenter Residential Owner Smiths Food & Drug Centers Inc Eastgroup Properties LP Sy Gilbert Commons I LLC Shopping Center 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 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 Real Estate Development / Holdings Real Estate Development / Holdings Retail Real Estate Development / Holdings Real Estate Development / Holdings Limited Property Valuation As % of Gilbert's Total Limited Property Valuation $ 32,814,606 10,783,113 7,622,800 7,053,178 6,621,633 6,508,175 6,281,579 5,966,173 5,846,617 5,737,828 5,633,045 5,412,224 5,337,811 5,263,564 5,209,037 5,087,963 5,069,728 5,049,130 5,018,825 4,997,635 4,944,568 4,895,982 4,787,758 4,716,852 1.09 0.36 0.25 0.24 0.22 0.22 0.21 0.20 0.19 0.19 0.19 0.18 0.18 0.18 0.17 0.17 0.17 0.17 0.17 0.17 0.16 0.16 0.16 0.16 % $ 166,659,824 5.56 % Source: Maricopa County Assessor. Top taxpayers based on Net Assessed Limited Property Value of Real and Secured Personal Property for tax year 2023. Notes: Information included for current fiscal year only as this is what is required for continuing disclosure requirements for Gilbert's bond issues. Only the top 24 taxpayer's information was available at the time of this report. 139 Table of Contents 140 Gilbert, Arizona Finance & Management Services 50 East Civic Center Drive Gilbert, AZ 85296 (480) 503-6000 | gilbertaz.gov