Comprehensive Annual Financial Report City of Scottsdale, Arizona For the Fiscal Year Ended June 30, 2018 Table of Contents City of Scottsdale, Arizona Comprehensive Annual Financial Report for the fiscal year ended June 30, 2018 Prepared by: City Treasurer’s Office Jeffery M. Nichols, CPA City Treasurer/Chief Financial Officer Joyce L. Gilbride, CPA Accounting Director Table of Contents City of Scottsdale, Arizona Comprehensive Annual Financial Report For the Fiscal Year ended June 30, 2018 Table of Contents INTRODUCTORY SECTION Letter of Transmittal - City Treasurer....................................................................................................... 1 Certificate of Achievement - Government Finance Officers Association.......................................... 9 List of Elected and Appointed Officials................................................................................................. 11 Organizational Chart.................................................................................................................................. 13 FINANCIAL SECTION Independent Auditor’s Report.................................................................................................................. 15 Management’s Discussion and Analysis.................................................................................................. 17 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Position................................................................................................................. 34 Statement of Activities....................................................................................................................... 36 Fund Financial Statements: Balance Sheet - Governmental Funds.............................................................................................. 37 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position.................................................................................................................................... 39 Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds.......................................................................................................................... 40 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities............................... 42 Statement of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - General Fund................................................................................................... 43 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual - General Fund.................................................................. 45 Statement of Fund Net Position - Proprietary Funds................................................................... 46 Reconciliation of the Proprietary Funds Statement of Fund Net Position to the Statement of Net Position...................................................................................................... 48 City of Scottsdale, Arizona i Statement of Revenues, Expenses, and Changes in Fund Net Position Proprietary Funds................................................................................................................................ 49 Reconciliation of the Proprietary Funds Statement of Revenues, Expenses, and Changes in Fund Net Position to the Statement of Activities............................................. 50 Statement of Cash Flows - Proprietary Funds............................................................................... 51 Statement of Fiduciary Net Position - Fiduciary Funds............................................................... 53 Notes to Financial Statements: I. Summary of Significant Accounting Policies.................................................................................. 54 II. Reconciliation of Government-wide and Fund Financial Statements........................................ 65 III. Stewardship, Compliance, and Accountability............................................................................... 75 IV. Detailed Notes on All Funds A. Cash and Investments.................................................................................................................... 79 B. Endowments.................................................................................................................................... 83 C. Receivables....................................................................................................................................... 83 D. Capital Assets.................................................................................................................................. 85 E. Interfund Balances and Interfund Transfers ............................................................................. 87 F. Leases................................................................................................................................................ 88 G. Service Concession Arrangements.............................................................................................. 90 H. Bonds, Loans, and Other Payables.............................................................................................. 90 V. Other Information A. Risk Management......................................................................................................................... 102 B. Contingent Liabilities .................................................................................................................. 102 C. Tax Abatement Agreements ...................................................................................................... 103 D. Joint Ventures................................................................................................................................ 104 E. Pollution Remediation................................................................................................................. 105 F. Related Organization................................................................................................................... 106 G. Retirement and Pension Plans.................................................................................................... 106 H. Other Postemployment Benefits............................................................................................... 122 City of Scottsdale, Arizona ii I. Postemployment Benefits Other Than Pensions (OPEB)...................................................... 123 Required Supplementary Information............................................................................................ 127 Combining and Individual Fund Statements and Schedules: Combining Balance Sheet - Nonmajor Governmental Funds........................................................... 137 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds............................................................................................................ 138 Combining Balance Sheet - Nonmajor Special Revenue Governmental Funds............................. 139 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Special Revenue Governmental Funds.............................................................................. 141 Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual: Transportation - Special Revenue Fund......................................................................................... 143 Community Development Block Grant - Special Revenue Fund.............................................. 144 HOME - Special Revenue Fund..................................................................................................... 145 Grants - Special Revenue Fund....................................................................................................... 146 Section 8 - Special Revenue Fund................................................................................................... 147 Preserve Privilege Tax - Special Revenue Fund............................................................................ 148 Streetlight Districts - Special Revenue Fund................................................................................. 149 Special Programs - Special Revenue Fund..................................................................................... 150 Tourism Development - Special Revenue Fund........................................................................... 151 Combining Balance Sheet - Nonmajor Debt Service Governmental Funds.................................. 152 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Debt Service Governmental Funds.................................................................................... 153 Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual: General Obligation Bond Debt Service Fund.............................................................................. 154 Municipal Property Corporation Debt Service Fund.................................................................. 155 Debt Service Stabilization Debt Service Fund............................................................................. 156 Scottsdale Preserve Authority Debt Service Fund....................................................................... 157 City of Scottsdale, Arizona iii Combining Balance Sheet - Nonmajor Capital Projects Governmental Funds.............................. 158 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Capital Projects Governmental Funds............................................................................... 159 Combining Balance Sheet - Nonmajor Permanent Governmental Funds...................................... 160 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Permanent Governmental Funds....................................................................................... 161 Combining Statement of Fund Net Position - Internal Service Funds........................................... 163 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position Internal Service Funds............................................................................................................................. 164 Combining Statement of Cash Flows - Internal Service Funds........................................................ 165 Combining Statement of Fiduciary Net Position - Fiduciary Funds................................................ 167 Combining Statement of Changes in Assets and Liabilities - Agency Funds................................. 168 Other Supplementary Information: Schedule of Changes in Long-Term Debt............................................................................................ 170 STATISTICAL SECTION Financial Trends Net Position by Component - Last Ten Fiscal Years (accrual basis of accounting)...................... 174 Changes in Net Position - Last Ten Fiscal Years (accrual basis of accounting)............................. 175 Fund Balances of Governmental Funds - Last Ten Fiscal Years (modified accrual basis of accounting).................................................................................................. 178 Changes in Fund Balances of Governmental Funds - Last Ten Fiscal Years (modified accrual basis of accounting).................................................................................................. 179 Tax Revenues by Source - Last Ten Fiscal Years (modified accrual basis of accounting)............ 182 Revenue Capacity Taxable Sales Subject to Privilege (Sales) Tax by Category - Last Ten Fiscal Years....................... 183 Direct and Overlapping Sales Tax Rates - Last Ten Fiscal Years...................................................... 184 Sales Tax Revenue Payers by Industry - Current Year and Nine Years Ago................................... 185 Property Tax Rates - Direct and Overlapping Governments - Last Ten Fiscal Years................... 186 City of Scottsdale, Arizona iv Principal Property Taxpayers - Current Year and Nine Years Ago................................................... 187 Assessed Value of Taxable Property - Last Ten Fiscal Years............................................................ 188 Property Tax Levies and Collections - Last Ten Fiscal Years............................................................ 189 Debt Capacity Ratios of Outstanding Debt by Type - Last Ten Fiscal Years........................................................... 190 Ratios of Net General Bonded Debt Outstanding - Last Ten Fiscal Years.................................... 191 Direct and Overlapping Governmental Activities Debt as of June 30, 2018................................. 192 Legal Debt Margin Information - Last Ten Fiscal Years.................................................................... 193 Pledged-Revenue Coverage - Last Ten Fiscal Years............................................................................ 195 Demographic and Economic Information Demographic and Economic Statistics - Last Ten Fiscal Years........................................................ 196 Principal Employers - Current Year and Nine Years Ago.................................................................. 197 Operating Information Full-time Equivalent City Government Employees by Function - Last Ten Fiscal Years............. 198 Operating Indicators by Division - Last Ten Fiscal Years.................................................................. 199 Capital Asset Statistics by Function - Last Ten Fiscal Years.............................................................. 202 City of Scottsdale, Arizona v Table of Contents City of Scottsdale, Arizona vi Table of Contents Letter of Transmittal For the Fiscal Year Ended June 30, 2018 October 23, 2018 To the Honorable Mayor, Members of the City Council, and Citizens of the City of Scottsdale, Arizona: The Comprehensive Annual Financial Report of the City of Scottsdale, Arizona, (the City) for the fiscal year ended June 30, 2018, is submitted in accordance with City Charter and Arizona Revised Statutes. Both require the City to issue an annual report on its financial position and activity and to have the report audited by certified public accountants independent of City government. This report was prepared by the City’s Accounting Department in conformity with U.S. generally accepted accounting principles (GAAP) and audited in accordance with U.S. generally accepted auditing standards by a firm of licensed certified public accountants. This report consists of management’s representations concerning the finances of the City. Consequently, management assumes full responsibility for the completeness and reliability of the information contained in this report. To provide a reasonable basis for making these representations, management of the City has established a comprehensive internal control framework designed for this purpose. Because the cost of internal control should not exceed anticipated benefits the objective is to provide reasonable, rather than absolute assurance that the financial statements are free of any material misstatements. To the best of management’s knowledge and belief, the enclosed data is accurate in all material aspects and is reported in a manner that presents fairly the financial position and results of operations of the various funds and component units of the City. Heinfeld, Meech & Co., P.C., a firm of licensed certified public accountants, performed the annual independent audit. The goal of the audit was to provide reasonable assurance that the basic financial statements of the City are free of material misstatement. The independent auditor concluded, based upon the audit, that the City’s financial statements for the fiscal year ended June 30, 2018, are fairly stated in conformity with GAAP. This is the most favorable conclusion and is commonly known as an unmodified or “clean” opinion. The independent auditor’s report is located at the front of the financial section of this report. The independent audit of the financial statements of the City was part of a broader, federally mandated Single Audit designed to meet the special needs of federal grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair representation of the financial statements, but also on the audited government’s internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of federal awards. These reports are available in the City’s separately issued Single Audit Report and may be obtained from the City’s website. City of Scottsdale, Arizona 1 Table of Contents This letter of transmittal provides a non-technical summary of City finances, economic prospects, and achievements. Management’s Discussion and Analysis (MD&A) immediately follows the independent auditor’s report and provides a narrative introduction, overview, and analysis of the City’s basic financial statements. MD&A complements this letter of transmittal and should be read in conjunction with it. CITY OF SCOTTSDALE PROFILE History Scottsdale was founded in 1888 when retired Army Chaplain Major Winfield Scott homesteaded what is now the center of the City. The City incorporated in 1951 and the City Charter, under which it is presently governed, was adopted in 1961. Portions of the City’s charter have been modified several times by vote of the citizens. Current Profile Scottsdale is centrally located in Maricopa County, Arizona, with its boundaries encompassing 184.5 square miles, stretching 31 miles from north to south, and 11.4 miles at its widest point. The City is bordered on the west by Phoenix, the state capital, by Tempe on the south, and by the Salt River-Pima Maricopa Indian Community on the east. Scottsdale and its neighboring cities form the greater metropolitan Phoenix area which is the economic, political, and population center of the state. The City has experienced significant increases in population over the years, with the 1950 census reporting 2,021 residents, and the 2010 census reporting 217,365. At July 1, 2018 the City’s population was estimated at 242,500 residents, making it the sixth largest municipality by population in Arizona. Government and Organization Scottsdale operates under a council-manager form of government as provided by its Charter. The Mayor and six City Council members are elected at large on a non-partisan ballot and serve overlapping four-year terms. The City Council directly appoints six officers (City Attorney, City Auditor, City Clerk, City Manager, City Treasurer, and Presiding Judge) who have full responsibility for carrying out City Council policies and administering day-to-day operations. The City provides a full range of municipal services including police and fire protection, sanitation service, water and sewer services, construction and maintenance of streets, and recreational activities including libraries and cultural events. Budgetary Controls The annual budget serves as the foundation for Scottsdale’s financial planning and control. The City Council formally adopts the budget and legally allocates, or appropriates, available monies for the City’s various funds. On or before the second regular Council meeting in May, the City Manager submits to the City Council a proposed budget for the fiscal year commencing the following July 1. The budget includes proposed expenditures and the means of financing them. Three public hearings are held prior to the final budget adoption in order to obtain taxpayer comments. Each year in June, the budget is legally enacted through passage of an ordinance. The ordinance sets the maximum legal expenditure limit for the ensuing fiscal year. Additional expenditures may be authorized if directly necessitated by a natural or man-made disaster as prescribed in the Arizona State Constitution, Article 9, Section 20. During fiscal year 2018, there were no such supplemental budgetary appropriations authorized. City of Scottsdale, Arizona 2 Table of Contents The expenditure appropriations in the adopted budget are by division; however, divisional appropriations may be amended during the year. On the recommendation of the City Manager and with the approval of the City Council: 1) transfers may be made from the appropriations for contingencies to divisions; and 2) unexpended appropriations may be transferred from one division to another. LOCAL ECONOMY Business Scottsdale has a diverse economy built on medical research, high-tech innovation, tourism and corporate headquarters. The Scottsdale Airpark is one of the largest employment centers in the state of Arizona with more than 2,900 businesses employing approximately 51,000 employees in 2 million square feet of commercial space. The high-tech innovation center SkySong, located just a few miles from downtown, is designed to help companies grow through a unique partnership with nearby Arizona State University. Downtown Scottsdale is home to a number of technology and healthcare companies and one of the most successful shopping centers in the southwest United States – Scottsdale Fashion Square. Farther north, the Scottsdale Cure Corridor is a partnership of premier healthcare providers and biomedical companies seeking to advance medicine and patient care through cutting-edge research. Tourism Tourism is one of Scottsdale’s largest and most vibrant industries, and is a significant contributor to the City’s economy. With a variety of lodging properties in the area, including several world-class resorts and “boutique” hotels, along with spectacular spas, trend-setting dining and one-of-a kind Sonoran desert golf courses, Scottsdale is one of the most popular tourist destinations in Arizona. Sales Tax Scottsdale’s largest revenue source is sales tax generated from a variety of business categories including automotive, construction, food stores, hotels, department stores, retail stores, restaurants, utilities, and rentals. Sales tax is generated directly from the City’s own applied tax rate and indirectly as the City receives a share of sales tax generated from the State of Arizona’s applied tax rate. The City experienced a year-over-year increase of 12.9 percent in sales tax revenue for fiscal year 2018, with the highest reported tax revenues in the miscellaneous retail stores, rentals, and automotive categories. Property Values Scottsdale is a safe, family-friendly community and benefits from a robust assessed valuation of the properties contained within its boundaries. These strong assessed valuations contribute to Scottsdale residents experiencing lower property tax rates and higher median housing values than many of the surrounding municipalities in the Phoenix metropolitan area. Scottsdale property owners will see an increase in the City’s combined property tax rate in the coming year of $0.0176 over the prior year. This increase is due to a two percent statutory adjustment for fiscal years 2012 through 2017 and an increase in debt service payments. City of Scottsdale, Arizona 3 Table of Contents LONG-TERM FINANCIAL PLANNING Scottsdale’s Five-Year Financial Plan is based on sound financial reserves, low debt burden, and conservative revenue growth forecasts. The City anticipates a moderate increase in revenues over the next several years with a continued focus on efficient spending to maintain essential City services to the community such as police, fire, transportation, and social services. Adopted Comprehensive Financial Policies Financial policies establish the guidance for Scottsdale’s overall fiscal planning and management. They set forth guidelines against which current budgetary performance can be measured and proposals for future programs can be evaluated. The City has 47 adopted financial policies governing operations, capital management, debt management, reserves, and financial reporting. Regular review and refinement of these policies is done in conjunction with financial plan development and policies that are adopted annually by the City Council. Financial Resources Planning Scottsdale’s strategic financial planning begins with a determination of the City’s fiscal capacity based on longterm financial forecasts of available revenues. Conservative financial forecasts, coupled with financial trend analysis techniques and reserve analysis, help preserve the fiscal well-being of Scottsdale. Strategic financial planning is a critical element to maintain long-term financial stability. Multi-Year Operating Budget Planning Multi-year budgeting encompasses long-range operating expenditure plans (including the operating impacts of capital projects), which are linked to community expectations and broad goals of the City Council. While the City is required to adopt a one-year budget to meet State statutory requirements, Scottsdale builds a fiveyear financial plan to help anticipate future impacts and ensure achievement of the City’s long-term objectives. Strategic Capital Improvement Project Planning Scottsdale Capital Improvement Projects are planned for five or more years and analyzed using City specific prioritization criteria. The operating cost impacts of projects are also planned and considered in developing future operating budgets. Projects with significant operating impacts are carefully timed to avoid contingent liabilities that future operating resources cannot meet. All capital funding sources are conservatively estimated to avoid over-committing to capital construction using revenues that are not certain. To the extent debt financing is used, capital project plans are sized to conform to existing debt management policies. In fiscal year 2017, the Council Capital Improvement Plan Subcommittee was established to review the City’s Capital Improvement Plan (CIP) and make recommendations to the City Council. Their work plan includes identifying capital projects to be funded by General Fund and Transportation 0.2 percent sales tax funding. The subcommittee consists of three members of City Council with the Chair position rotating every six months. City of Scottsdale, Arizona 4 Table of Contents Debt Management Scottsdale has a financial policy that prohibits the issuance of debt for operating expenses. With that as a governing framework, all debt issuances are for the purpose of financing infrastructure or long-lived assets. Each debt issuance is evaluated against policies addressing: debt service as a percent of operating expenditures; tax and revenue bases for the repayment of debt; overall debt burden on the community; and statutory limitations and market factors affecting interest costs. In all cases, a long-term analysis is made considering the debt capacity that fits the financial wherewithal (and willingness) of our community to pay for the capital projects. Sizing of the City’s Capital Improvement Plan based on debt capacity in conjunction with conservatively estimated revenues helps stabilize per capita debt and lower annual debt service costs to the City over the long-term. In recent years the City has issued two types of debt: voter approved General Obligation bonds and non-voter approved Municipal Property Corporation bonds and Certificates of Participation (see Section IV.H. of the Notes to the Financial Statements for further information). The City retained credit ratings of “Aaa,” “AAA,” and “AAA” from the three major credit rating agencies (Moody’s Investors Service, Standard and Poor’s Rating Group, and Fitch Investors Services, respectively) on the City’s outstanding General Obligation bonds where debt service is supported by property taxes. Scottsdale is one of a handful of cities in the nation to earn this distinction. Ratings for the City’s bonds, where debt service is supported by enterprise revenues or excise taxes, are also highly rated by the three major credit rating agencies. A summary of the City’s bond ratings follows: City of Scottsdale Bonded Debt Ratings As of June 30, 2018 Moody's Investors Service Standard and Poor's Rating Group Fitch Investors Services General Obligation (GO) Aaa AAA AAA Water and Sewer Revenue (W&S) Aaa AAA AAA Municipal Property Corp (MPC) Aa1 AAA AAA Scottsdale Preserve Authority (SPA) Aa2 AA+ AA+ ACCOMPLISHMENTS AND PRIORITIES The following highlights some of the accomplishments achieved by the City in fiscal year 2018: • Launched a rebranding effort to focus attention on Old Town Scottsdale and its unique character. • Recharged 4.8 million gallons per day of ultra-pure recycled water back into our local aquifer. • Constructed new trailheads to improve access into the northern reaches of the McDowell Mountain Preserve. • Attracted new companies and helped others expand, resulting in 1,183 new jobs. • Developed Scottsdale EZ, a single, mobile-optimized system to report problem issues. • Refurbished Fire Station 605 and built Fire Station 613. City of Scottsdale, Arizona 5 Table of Contents The following are some of the major policy items included in the City of Scottsdale’s adopted fiscal year 2019 budget. Each support core services and the priorities and policy direction of the City Council: • $22.0 million to address the unfunded liability for public safety pensions. • $5.7 million for the first phase of a three-year plan to address employee salaries that have fallen below market comparisons. • $4.6 million in sales tax collected on food for home consumption transferred to the Capital Improvement Plan to ensure the City’s assets are properly maintained. • $2.3 million to address rising employee healthcare costs. Additionally, an estimated $223 million will be spent on capital improvements in the upcoming fiscal year. These projects address critical infrastructure needs and City Council priorities in a variety of areas. Some of the notable projects include: • Thomas Groundwater Treatment Facility: $23.6 million • Pima Road: Pinnacle Peak to Happy Valley: $19.3 million • Build/Rebuild Fire Stations: $10.9 million • Scottsdale Stadium Renovations: $5.0 million • Street Pavement Replacement: $4.3 million AWARDS AND ACKNOWLEDGEMENTS Certificates of Achievement The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City for its comprehensive annual financial report (CAFR) for the fiscal year ended June 30, 2017, marking the forty-fifth consecutive year the City has achieved this prestigious recognition. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized CAFR that satisfies both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. However, we believe that our current CAFR continues to meet the Certificate of Achievement Program’s requirements and we are submitting it to the GFOA to determine its eligibility for another award. Additionally, the City received the Distinguished Budget Presentation Award for the fiscal year beginning July 1, 2017 from the GFOA for our conformity in budget presentation. We believe that our current budget continues to conform to the program requirements and we expect to receive this award again for the fiscal year beginning July 1, 2018. City of Scottsdale, Arizona 6 Table of Contents Acknowledgments The preparation of this report would not have been possible without the talent, effort, and dedication of Accounting staff and the many members of other departments who responded so positively to the requests for detailed information that accompanies each annual audit. I also wish to express my sincere appreciation to the City Council and the City Manager for their support in maintaining the highest standards of professionalism in planning and conducting the financial affairs of the City of Scottsdale. Respectfully submitted, Jeffery M. Nichols, CPA City Treasurer/Chief Financial Officer City of Scottsdale, Arizona 7 Table of Contents This page is intentionally blank. City of Scottsdale, Arizona 8 Table of Contents City of Scottsdale, Arizona 9 Table of Contents This page is intentionally blank. City of Scottsdale, Arizona 10 Table of Contents Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2018 City of Scottsdale, Arizona List of Elected and Appointed Officials City Council W.J. “Jim” Lane, Mayor Suzanne Klapp Virginia Korte Kathy Littlefield Linda Milhaven Guy Phillips David N. Smith Charter Officers Jim Thompson, City Manager Bruce Washburn, City Attorney Sharron Walker, City Auditor Carolyn Jagger, City Clerk Joseph Olcavage, Presiding Judge Jeffery M. Nichols, City Treasurer/Chief Financial Officer City of Scottsdale, Arizona 11 Table of Contents This page is intentionally blank. City of Scottsdale, Arizona 12 Table of Contents Citizens of Scottsdale Mayor and City Council Boards, Commissions, Task Forces Organization Chart City Attorney City Auditor City Clerk City Manager 13 City of Scottsdale, Arizona Civil City Treasurer Accounting Prosecution Presiding Judge City Court Budget Victim Services Business Services Finance Purchasing Risk Management Public Safety Administrative Services Police Communications Fire Human Resources Information Technology Community & Economic Development Community Services Public Works Water Pipeline & Treatment Agreements Human Services Capital Projects Airport Libraries Facilities Economic Development Parks & Recreation Fleet Planning & Development Preserve Tourism & Events Solid Waste Street Operations Planning & Engineering Reclamation Services Transportation Technology & Admin WestWorld Water Quality Water Services Table of Contents City of Scottsdale, Arizona 14 Table of Contents INDEPENDENT AUDITOR’S REPORT Honorable Mayor and Members of the City Council City of Scottsdale, Arizona Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of City of Scottsdale, Arizona (City), as of and for the year ended June 30, 2018, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes 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. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements 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 entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Scottsdale, Arizona, as of June 30, 2018, and the respective changes in financial position and, where applicable, cash flows thereof and the respective budgetary comparison for the General Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. City of Scottsdale, Arizona 15 Table of Contents Change in Accounting Principle As described in Note I.E., the City implemented the provisions of the Governmental Accounting Standards Board (GASB) Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, for the year ended June 30, 2018, which represents a change in accounting principle. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis and net pension liability and other post employment benefit plan information, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, 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. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The Introductory Section, Combining and Individual Fund Statements and Schedules, Other Supplementary Information and Statistical Section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The Combining and Individual Fund Statements and Schedules and Other Supplementary Information are the responsibility of management and were derived from and relate 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 and Other Supplementary Information are fairly stated in all material respects in relation to the basic financial statements as a whole. The Introductory Section and Statistical Section have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 23, 2018, on our consideration of City of Scottsdale, 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 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 City of Scottsdale, Arizona’s internal control over financial reporting and compliance. Heinfeld, Meech & Co., P.C. Phoenix, Arizona October 23, 2018 City of Scottsdale, Arizona 16 Table of Contents Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2018 This section of the City of Scottsdale, Arizona’s (the City) Comprehensive Annual Financial Report (CAFR) presents a narrative overview and comparative analysis of the financial activities of the City for the fiscal years ended June 30, 2018 and 2017. 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 CAFR. FINANCIAL HIGHLIGHTS • The City’s total assets and deferred outflows of resources exceeded its total liabilities and deferred inflows of resources at the close of fiscal years 2018 and 2017 by $5.10 billion and $4.99 billion (net position), respectively. Of these amounts, $222.7 million and $212.5 million, respectively, represent unrestricted net position which may be used to meet the City’s ongoing obligations to citizens and creditors. • The City’s total net position increased in fiscal year 2018 by $112.0 million compared to an increase in net position of $98.1 million during fiscal year 2017. Total revenues exceeded total expenses in the current year due primarily to an increase in business taxes and charges for services of $25.0 million and $11.4 million, respectively, over the prior year. • As of June 30, 2018, and 2017, the City’s governmental funds reported combined ending fund balances of $244.3 million and $209.8 million, respectively. Approximately 27 percent of the current year amount ($65.2 million) is available for spending at the City’s discretion (unassigned fund balance). • At the end of the current fiscal year, unrestricted fund balance (the total of the committed, assigned, and unassigned components of fund balance) for the General Fund was $72.8 million or approximately 29 percent of total General Fund expenditures of $253.4 million. • The City’s total long-term liabilities decreased by $63.7 million to $1.57 billion during the current fiscal year. This decrease was primarily due to the City making scheduled principal payments on its debt offset by the issuance of $25.5 million in General Obligation Bonds for the renovation and construction of fire stations and pavement replacement. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the City’s basic financial statements, which include three components: (1) Government-wide Financial Statements (2) Fund Financial Statements (3) Notes to the Financial Statements This report also includes supplementary information intended to furnish additional detail to support the basic financial statements themselves. City of Scottsdale, Arizona 17 Table of Contents Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2018 Relationship Between Comprehensive Annual Financial Report (CAFR) and Basic Financial Statements and Required Supplementary Information (RSI) General Information on the government structure, Introductory services and environment Section + Management's Discussion and Analysis CAFR Government-wide Financial Statements Basic Financial Statements and RSI Governmental Fund Financial Statements Proprietary Fund Financial Statements Fiduciary Fund Financial Statements Financial Section Notes to the Financial Statements Additional Required Supplementary Information Information on individual funds and other supplementary information not required by GAAP + Trend data and nonfinancial data Statistical Section Government-wide Financial Statements. The government-wide financial statements are designed to provide readers with a broad overview of the City’s finances, in a manner similar to a private-sector business and, accordingly, to provide information about the City as a whole, presenting both an aggregate current view of the City’s finances and a longer-term view of those assets. Major fund financial statements provide the next level of detail. For governmental funds, these statements reflect how services were financed in the short term as well as what dollars remain for future spending. The major fund financial statements also display the City’s most significant funds. The statement of net position presents financial information on all of the City’s assets, deferred outflows of resources, liabilities, and deferred inflows 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 the financial position of the City is improving or deteriorating. The statement of activities presents information showing how the City’s net position changed during the most recent fiscal 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 are expected to result in cash flows in future fiscal periods, such as revenues pertaining to uncollected taxes and earned but unused vacation and medical leave. City of Scottsdale, Arizona 18 Table of Contents Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2018 Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all, or a significant portion, of their costs through user fees and charges (business-type activities). The governmental activities of the City include general government, public works, community and economic development, public safety, community services, and administrative services. The business-type activities of the City include water and sewer utilities, solid waste management, and airport operations. The government-wide financial statements include not only the City itself (known as the primary government), but also the operations of the City of Scottsdale Municipal Property Corporation (MPC), the Scottsdale Preserve Authority (SPA), and the Scottsdale Mountain, McDowell Mountain Ranch, DC Ranch, Via Linda Road, and Waterfront Commercial Community Facilities Districts. Although legally separate from the City, these component units are blended with the primary government because of their governance or financial relationships to the City. Separate financial statements of the MPC, SPA, and the Scottsdale Mountain, McDowell Mountain Ranch, DC Ranch, Via Linda Road, and Waterfront Commercial Community Facilities Districts may be obtained at the Scottsdale City Treasurer’s Office, 7447 East Indian School Road, Suite 210, Scottsdale, Arizona 85251. The government-wide financial statements can be found on pages 34-36 of this report. Fund Financial Statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into the following three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental Funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements; however, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, and provide the balances of spendable resources available at the end of the fiscal year. Such information reflects financial resources available in the near future to finance the City’s programs. 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. This comparison highlights the longterm impact of the government’s near-term financing decisions. Both the governmental funds balance sheet and the governmental funds statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. City of Scottsdale, Arizona 19 Table of Contents Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2018 The City maintains several individual governmental funds organized according to their purpose (general, permanent, special revenue, debt service, and capital projects). Information is presented separately in the governmental funds balance sheet and in the governmental funds statement of revenues, expenditures, and changes in fund balances for the General Fund, General Obligation Bond Debt Service Fund, and the General Capital Improvement Plan (CIP) Capital Projects Fund, which are considered to be major funds. Data from the remaining governmental funds are combined into a single, aggregated presentation. Individual fund data for each of the nonmajor governmental funds is provided in the form of combining statements in the combining and individual funds statements and schedules section of this report. The basic governmental fund financial statements can be found on pages 37-45 of this report. Proprietary Funds. Proprietary funds are generally used to account for services for which the City charges customers; either outside customers or internal units/divisions of the City. Proprietary funds provide the same type of information as shown in the government-wide financial statements, only in more detail. The City maintains the following two types of proprietary funds: Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for its water, sewer, solid waste, and aviation services. All enterprise funds are considered to be major funds of the City. Internal service funds are used to report activities that provide supplies and services for certain City programs and activities. The City uses internal service funds to account for its fleet of vehicles, personal computer replacement, and health and general liability insurance activities. Because these services predominantly benefit internal units or divisions of the City rather than business-type functions, they have been included within governmental activities in the government-wide financial statements. The internal service funds are combined into a single, aggregated presentation in the proprietary fund financial statements. Individual fund data for the internal service funds is provided in the form of combining statements in a separate section of this report. The basic proprietary fund financial statements can be found on pages 46-52 of this report. Fiduciary Funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the City. The City has three agency funds which are reported under the fiduciary funds. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City’s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. Individual fund data for the fiduciary funds is provided in the form of combining statements in a separate section of this report. The basic fiduciary fund financial statements can be found on page 53 of this report. Notes to the Financial Statements. The notes to the financial statements provide additional information that is necessary to acquire a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 54-126 of this report. City of Scottsdale, Arizona 20 Table of Contents Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2018 Other Information. In addition to the basic financial statements and accompanying notes, this report also presents required supplementary information concerning the City’s proportionate share of the cost-sharing pension plan’s net pension liability, the changes in the City’s net pension liabilities regarding the agency plan, schedules of contributions to the pension plans, and changes in the City’s total other post-employment benefits (OPEB) liability. Required supplementary information can be found on pages 127-133 of this report. Combining Statements. The combining statements referred to earlier in connection with nonmajor governmental funds, internal service funds, and fiduciary funds are presented on pages 134-168. Other Supplementary Information. The supplemental schedule of changes in long-term debt provides a comprehensive overview of the City’s total debt and can be found on pages 169-172. Statistical Information. The statistical section, found on pages 173-202, presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information indicates about the City’s overall financial health. GOVERNMENT-WIDE FINANCIAL ANALYSIS While this document contains information about the funds used by the City to provide services to its citizens, the Statement of Net Position and the Statement of Activities serve to provide an answer to the question of how the City, as a whole, did financially throughout the year. These statements include all assets/deferred outflows of resources and liabilities/deferred inflows of resources using the accrual basis of accounting similar to the private sector. The basis for this accounting takes into account all of the current year’s revenues and expenses regardless of when the cash is received or paid. These two statements report the City’s net position and change in net position. The change in net position reflects whether the financial position of the City, as a whole, has improved or diminished; however, in evaluating the overall financial position of the City, non-financial information such as changes in the City’s tax base and the condition of the City’s capital assets should also be considered. Analysis of Net Position. As noted earlier, net position over time may serve as a useful indicator of a government’s financial position. For the City, total assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $5.10 billion, and $4.99 billion at the close of the fiscal years 2018 and 2017, respectively. City of Scottsdale, Arizona 21 Table of Contents Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2018 The following table is a condensed summary of the City’s net position for governmental and business-type activities: Net Position June 30, 2018 and 2017 (in thousands) ASSETS AND DEFERRED OUTFLOWS OF RESOURCES Current and other assets Capital assets Total assets Total deferred outflows of resources Total assets and deferred outflows of resources Governmental Activities 2018 2017 $ 549,376 $ 4,370,921 4,920,297 94,580 5,014,877 509,419 4,349,523 4,858,942 107,682 4,966,624 LIABILITIES AND DEFERRED INFLOWS OF RESOURCES Long-term liabilities outstanding Other liabilities Total liabilities Total deferred inflows of resources Total liabilities and deferred inflows of resources 1,176,604 123,482 1,300,086 15,450 1,315,536 NET POSITION Net investment in capital assets Restricted Unrestricted Total net position 3,604,063 123,057 (27,779) 3,699,341 $ $ Business-type Activities 2018 2017 $ Total 2017 1,028,916 $ 5,769,133 6,798,049 108,013 6,906,062 1,014,840 5,718,635 6,733,475 124,337 6,857,812 479,540 $ 1,398,212 1,877,752 13,433 1,891,185 505,421 1,369,112 1,874,533 16,655 1,891,188 1,136,539 195,936 1,332,475 22,281 1,354,756 440,809 48,223 489,032 2,863 491,895 452,199 59,790 511,989 4,684 516,673 1,617,413 171,705 1,789,118 18,313 1,807,431 1,588,738 255,726 1,844,464 26,965 1,871,429 3,530,134 125,366 (43,632) 3,611,868 1,099,864 48,926 250,500 1,399,290 $ 1,069,475 48,911 256,129 1,374,515 4,703,927 171,983 222,721 5,098,631 $ 4,599,609 174,277 212,497 4,986,383 $ $ 2018 $ The largest portion (92.3 percent) of the City’s net position reflects its net investment in capital assets (e.g., land, buildings, water and sewer system, and streets and storm drains) less any related outstanding debt used to acquire those assets. These amounted to $4.70 billion and $4.60 billion at June 30, 2018 and 2017, respectively. Although the City’s investment in capital assets is reported net of related debt, the resources needed to repay this debt must be provided from other sources because the City uses these assets to provide services to citizens and therefore cannot liquidate them. An additional portion (3.4 percent) of the City’s net position ($172.0 million at June 30, 2018 and $174.3 million at June 30, 2017) represents resources that are subject to external restrictions on how they may be used. Unrestricted net position (4.4 percent of the City’s total net position at June 30, 2018 and 4.3 percent at June 30, 2017), $222.7 million and $212.5 million, respectively, may be used to meet the government’s ongoing obligations to its citizens and creditors. Analysis of Changes in Net Position. The City restated fiscal year 2018 beginning net position for governmental activities due to the implementation of GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other than Pensions, and to record several permanent endowments that were identified. More information on these adjustments can be found in Note I. F. on page 65 of this report. City of Scottsdale, Arizona 22 Table of Contents Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2018 Total revenues exceeded total expenses in the current year, resulting in an increase in the City’s total net position of $112.0 million in fiscal year 2018 compared to an increase in net position of $98.1 million during fiscal year 2017. The reasons for this overall increase are explained in the governmental and business-type activities discussion herein and depicted in the table that follows: Changes in Net Position For the fiscal years ended June 30, 2018 and 2017 (in thousands) REVENUES Program revenues Charges for services Operating grants and contributions Capital grants and contributions General revenues Property taxes Business taxes Intergovernmental - taxes Intergovernmental - other Interest and investment income Other Total revenues EXPENSES General Government Mayor and City Council City Clerk City Attorney City Auditor City Court City Manager City Treasurer Public Works Community and Economic Development Public Safety Community Services Administrative Services Streetlight and Services Districts Gain on In-Substance Defeasance of Debt Interest on Long-Term Debt Bond Issuance Costs Water Utility Sewer Utility Airport Solid Waste Total expenses Increase in net position before transfers Transfers Change in net position Net position - beginning Net effect of prior period adjustments Net position - beginning restated Net position - ending Governmental Activities 2018 2017 Business-type Activities 2018 2017 $ $ 47,449 30,760 60,819 $ 46,200 29,724 107,334 182,225 23,865 $ 172,124 17,539 Total 2018 $ 229,674 30,760 84,684 2017 $ 218,324 29,724 124,873 64,718 222,738 54,268 12,031 2,218 10,548 505,549 64,417 197,727 50,731 11,120 1,132 10,568 518,953 144 2,291 208,525 158 916 190,737 64,718 222,882 54,268 12,031 4,509 10,548 714,074 64,417 197,885 50,731 11,120 2,048 10,568 709,690 638 695 6,486 800 5,530 3,062 6,071 42,205 102,153 153,256 54,710 21,173 605 28,724 426,108 79,441 7,756 87,197 869 845 6,460 802 5,421 2,288 5,792 40,035 102,813 172,452 54,155 19,326 589 (32) 28,462 672 440,949 78,004 7,635 85,639 96,493 52,142 7,624 19,735 175,994 32,531 (7,756) 24,775 95,745 50,535 4,151 20,181 170,612 20,125 (7,635) 12,490 638 695 6,486 800 5,530 3,062 6,071 42,205 102,153 153,256 54,710 21,173 605 28,724 96,493 52,142 7,624 19,735 602,102 111,972 111,972 869 845 6,460 802 5,421 2,288 5,792 40,035 102,813 172,452 54,155 19,326 589 (32) 28,462 672 95,745 50,535 4,151 20,181 611,561 98,129 98,129 3,611,868 3,526,229 276 3,612,144 3,526,229 $ 3,699,341 $ 3,611,868 1,374,515 1,362,025 1,374,515 1,362,025 $ 1,399,290 $ 1,374,515 City of Scottsdale, Arizona 23 4,986,383 4,888,254 276 4,986,659 4,888,254 $ 5,098,631 $ 4,986,383 Table of Contents Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2018 Governmental Activities. Net position for governmental activities increased $87.2 million after transfers during fiscal year 2018 compared to an increase of $85.6 million after transfers in fiscal year 2017. Total revenues decreased $13.4 million or 2.6 percent from the prior fiscal year and expenses decreased $14.8 million or 3.4 percent. Overall, revenues exceeded expenses resulting in an increase in net position. The City experienced a decrease in total revenue from governmental activities from the prior year caused primarily by a 43.3 percent decrease in capital grants and contributions. However, both business taxes and interest and investment income saw increases of 12.6 percent and 95.9 percent, respectively, over the prior year. These increases reflect the continuing economic growth the City and State of Arizona have experienced over the past several years. General revenues such as property, franchise, and privilege taxes are not shown by program, but are used to support program activities citywide. Total general revenues for governmental activities were $366.5 million in fiscal year 2018 compared to $335.7 million in fiscal year 2017. Property taxes were slightly higher in fiscal year 2018 at $64.7 million compared to $64.4 million in fiscal year 2017. As previously noted, business taxes, which include privilege and franchise taxes, increased $25.0 million or 12.6 percent from the previous year. This increase is a combination of the lag in collections the previous year due to the Arizona Department of Revenue (ADOR) taking over the administration, collection, and reporting of privilege tax on behalf of the City in January 2017, and the positive economic growth the City has continued to experience. As well, interest and investment income increased $1.1 million over the prior year due to an increase in yields on the City’s short and long-term investment portfolios. For governmental activities overall, without regard to program, business taxes (44 percent), are the largest single source of funds, followed by property taxes (13 percent), capital grants and contributions (12 percent), intergovernmental revenues (including state shared revenues) (13 percent), and charges for services (9 percent). Governmental Activities Revenues by Source Fiscal Year 2017/18 (in thousands) Interest and Investment Income $2,218 1% Charges for Services $47,449 9% Operating Grants and Contributions $30,760 6% Intergovernmental $66,299 13% Capital Grants and Contributions $60,819 12% Business Taxes $222,738 44% Other Revenue $10,548 2% City of Scottsdale, Arizona 24 Property Taxes $64,718 13% Table of Contents Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2018 The other component of the change in net position is expense. The Public Safety Division, which is comprised of the Police and Fire Departments, is the largest expense function (36 percent), followed by the Community and Economic Development Division (24 percent), and Community Services Division (13 percent). The Public Safety Division provides police and fire/emergency services throughout the City. The division confronts community crime, responds to community needs, and reduces the incidence and severity of emergencies through timely and skilled all-hazard services. Expenses decreased by $19.2 million or 11.1 percent during fiscal year 2018 largely due to the prior year refund of excess pension contributions resulting from the Parker decision, which capped the employee contribution rates for certain participants. The Community and Economic Development Division is charged with stimulating economic activity and offering a diverse range of value-added programs to build, revitalize, and sustain Scottsdale’s unique lifestyle and character. The division has five departments: Economic Development, Planning and Development, Tourism and Events, Transportation, and WestWorld. Overall, expenses decreased by $0.7 million or 0.6 percent during fiscal year 2018. The City’s Community Services Division is responsible for improving and maintaining facilities and sponsors services that provide opportunities for family interaction, cultural enrichment, development of lifetime skills, promoting healthy lifestyles, and serving as a catalyst for community involvement. They also provide assistance and guidance to those in need through federal, state, local, and private resources. The division has four departments: Parks and Recreation, Human Services, Library Systems, and Preserve Management. Overall, expenses were $0.6 million or 1.0 percent higher than the prior fiscal year due primarily to an increase in personnel expenses. Business-type Activities. Net position for business-type activities increased by $24.8 million after transfers during fiscal year 2018 compared to $12.5 million after transfers in fiscal year 2017. Total revenues increased by $17.8 million or 9.3 percent due to an increase in charges for services driven primarily by a 7 percent higher usage rate by water and sewer customers. Capital grants and contributions increased by $6.3 million compared to the prior year due to higher federal and state airport grants and developer contributions received. Interest and investment income increased by $1.4 million due to higher yields on investments. Overall, total revenues exceeded expenses resulting in an increase in net position for the fiscal year. City of Scottsdale, Arizona 25 Table of Contents Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2018 As shown in the Business-type Activities Revenues by Source chart, charges for services provided the largest share of revenues (87 percent) followed by capital grants and contributions (12 percent). Business-type Activities Revenues by Source Fiscal Year 2017/18 (in thousands) Interest and Investment Income $2,291 1% Capital Grants and Contributions $23,865 12% Business Taxes $144 0% Charges for Services $182,225 87% As shown below in the Business-type Activities Program Revenues and Expenses chart, the largest of the City’s business-type activities, water and sewer utilities, had expenses of $96.5 million and $52.1 million, respectively, in fiscal year 2018, followed by solid waste with $19.7 million and airport with $7.6 million. Business-type Activities Program Revenues and Expenses Fiscal Year 2017/18 (in thousands) $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0 Water Utility Sewer Utility Solid Waste Program Revenues Program Expenses City of Scottsdale, Arizona 26 Airport Table of Contents Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2018 The Water and Sewer Utility’s combined expenses increased by 1.6 percent in fiscal year 2018 compared to fiscal year 2017. The increase was primarily driven by higher contractual services and commodities expenses. The City’s Water Resources Department plans, manages, and operates a safe, reliable water supply and wastewater reclamation system and provides efficient, high quality customer service to Scottsdale citizens. The Water Resources Department provided 90,817 water service connections to customers in fiscal year 2018. Total Solid Waste program expenses decreased 2.2 percent or $0.4 million in fiscal year 2018 compared to fiscal year 2017 due to lower full time wages, refuse container expenses, and vehicle purchases offset by higher vehicle maintenance expenses in the current year. The Solid Waste Department provided delivery of safe, efficient, and environmentally sound refuse collection services to 82,236 residential customers in fiscal year 2018. The Airport’s total expenses increased by 83.7 percent or $3.5 million in fiscal year 2018 compared to fiscal year 2017. The increase was primarily driven by a loss from a capital asset disposal. The Aviation Department operates the City’s general aviation reliever facility with no commercial commuter or airline service and is home to many of the Valley’s corporate aircraft. More than 166,000 take-offs and landings occurred in fiscal year 2018 at Scottsdale Airport. FINANCIAL ANALYSIS OF THE CITY’S FUNDS As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Funds are created and segregated for the purpose of carrying out specific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations. Activity not required to be reported in a separate fund is included in the General Fund. Governmental funds are used to account for taxsupported activities. Governmental Funds. The focus of the City’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable and non-spendable resources. Such information may be useful in assessing the City’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government’s net resources available for discretionary use, as it represents the portion of fund balance which has not yet been limited to use for a particular purpose by either an external party, the City Council, or the City Treasurer who has been delegated authority to assign resources for use for particular purposes by the City Council. Types of governmental funds reported by the City include the General Fund, Permanent Funds, Special Revenue Funds, Debt Service Funds, and Capital Project Funds. As of the end of the current fiscal year, the City’s governmental funds reported a combined ending fund balance of $244.3 million, an increase of $34.5 million in comparison to the balance at June 30, 2017 of $209.8 million. Approximately 27 percent or $65.2 million of this amount at June 30, 2018 constitutes unassigned fund balance. The remainder of fund balance is either nonspendable, restricted, or committed to indicate that it is not available for new spending. City of Scottsdale, Arizona 27 Table of Contents Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2018 Revenues for governmental functions totaled $458.1 million in fiscal year 2018, an increase of 9.1 percent ($38.4 million) from the previous year total of $419.7 million. In fiscal year 2018, expenditures for governmental functions totaled $461.1 million, a decrease of 1.3 percent ($6.3 million) from the fiscal year 2017 total of $467.4 million. For the current fiscal year, expenditures exceeded revenues for governmental functions by $3.0 million. This was chiefly due to higher principal payments on debt. The General Fund is the chief operating fund of the City. At the end of the current fiscal year, the unassigned fund balance of the General Fund was $72.8 million, while the total fund balance was $73.1 million; the unassigned and total balances for the General Fund at the end of fiscal year 2017 were $58.5 million and $58.8 million, respectively. As a measure of the General Fund’s liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total fund expenditures. Unassigned fund balance represents 28.7 percent of the total General Fund expenditures of $253.4 million in fiscal year 2018 and represented 23.1 percent of the total General Fund expenditures of $252.8 million in fiscal year 2017. Total fund balance represented 28.8 percent and 23.3 percent of total fund expenditures for fiscal years 2018 and 2017, respectively. Overall, the General Fund’s performance resulted in revenues exceeding expenditures in the fiscal year ended June 30, 2018 by $29.8 million. Revenues increased $23.1 million or 8.9 percent compared to the prior year while expenditures increased only $0.6 million or 0.2 percent. Key revenues showing an increase over the prior year included transaction privilege tax and state shared revenues. Expenditures were relatively unchanged over the prior year with the exception of a decrease for Public Safety whose prior year expenditures included the return of excess pension contributions as mandated by the Parker lawsuit. As a result of increased revenues (primarily privilege taxes) and a minimal increase in expenditures the fund balance of the City’s General Fund increased in fiscal year 2018 by $14.3 million. The General Obligation Bond Debt Service Fund is used to account for the accumulation of resources for, and the payment of, general obligation debt principal, interest, and related costs. At the end of the current fiscal year, the fund balance of the General Obligation Bond Debt Service Fund was $2.5 million, a decrease of $9.0 million from the $11.5 million balance at June 30, 2017. The fund balance was intentionally drawn down in fiscal year 2018 to comply with Arizona House Bill 2011, which requires cash reserves to be no more than ten percent of annual principal and interest payments. The General CIP Construction Capital Projects Fund accounts for the resources used to acquire, construct, and improve major capital facilities from amounts transferred from the City’s General Fund. This fund also represents other City Council approved capital programs including transfers for tourism related capital projects, in-lieu parking, and in-lieu stormwater. At the end of the current fiscal year, the fund balance of the General CIP Construction Capital Projects fund was $38.3 million, an increase of $5.6 million from the $32.7 million at June 30, 2017. Higher transfers-in, as mandated by the City’s financial policies, was the primary reason for the increase. City of Scottsdale, Arizona 28 Table of Contents Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2018 Proprietary Funds. The City’s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. At the end of the fiscal years 2018 and 2017, the unrestricted net position for the Water and Sewer Utility Fund was $256.8 million and $244.6 million, respectively; the Airport Fund was $(12.9) million and $5.2 million, respectively; and the Solid Waste Fund was $3.4 million and $3.8 million, respectively. The internal service funds, which are used to account for certain governmental activities, had unrestricted net position of $20.8 million and $19.1 million, respectively. The total growth in net position for the enterprise funds was $24.0 million and $11.4 million for fiscal years 2018 and 2017, respectively. Factors concerning the finances of these funds have been addressed previously in the discussion of the City’s business-type activities. GENERAL FUND BUDGETARY HIGHLIGHTS The City adopts an annual appropriated budget for its General Fund. A budgetary comparison statement has been provided for the General Fund to demonstrate compliance with this budget. General Fund revenues for fiscal year 2018 were $12.0 million more than projected. The most significant differences between final estimated revenues and actual revenues were as follows (in thousands): Revenue Source Estimated Actual Revenues Revenues Difference Transaction Privilege Taxes Interest Earnings Court Fines and Fees State Revenue Sharing $ 120,666 1,615 3,283 29,726 $ 128,133 $ 2,634 4,168 30,549 7,467 1,019 885 823 The increase in transaction privilege taxes was caused by the timing of collections by the Arizona Department of Revenue as well as car dealerships remaining in Scottsdale longer than expected, higher online sales, and increases in property rental revenue. Increased interest earnings were due to a to a greater yield on investments than expected due to strong market conditions as well as higher than anticipated returns associated with a change in the City’s investment strategy. Higher than projected court fines were due to a greater number of civil and criminal case filings as well as an increase in collections through the Compliance Assistance Program. Increased state shared funds were also the result of the positive local economy. Expenditures were $6.2 million less than the revised fiscal year 2018 budget largely due to the following: • Employees being promoted or retiring with replacement employees often coming in at a lower salary. • Part time positions held vacant for long periods of time which resulted in higher vacancy savings. • Jail services and photo enforcement contract spending coming in lower than anticipated. • Lower need than projected for operating supplies such as fire protective equipment, police radios, chemicals, laboratory equipment, furniture, and other supplies. City of Scottsdale, Arizona 29 Table of Contents Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2018 CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets. The City’s total capital assets for its governmental and business-type activities as of June 30, 2018 and 2017 totaled $5.8 billion and $5.7 billion, respectively (net of accumulated depreciation). This investment in capital assets includes land, buildings and improvements, streets and storm drains, water and sewer systems, water rights, vehicles, machinery and equipment, furniture and fixtures, and construction in progress. The total increase in the City’s capital assets (net of accumulated depreciation) between fiscal years 2018 and 2017 was $50.5 million or 0.9 percent. Both the Buildings and Land Improvements and Streets and Storm Drains categories experienced a net reduction in overall asset value due to annual depreciation exceeding capital additions. Capital Assets, Net of Depreciation June 30, 2018 and 2017 (in thousands) Land Buildings and Land Improvements Streets and Storm Drains Machinery and Equipment Water Rights Water System Sewer System Motor Vehicles Furniture, Fixtures, and Office Equipment Construction in Progress Total Governmental Activities 2018 2017 $ 3,177,449 $ 3,143,211 368,094 381,561 702,507 721,697 37,650 37,579 45,295 39,620 39,926 25,855 $ 4,370,921 $ 4,349,523 Business-type Activities 2018 2017 $ 50,381 $ 50,381 25,016 28,538 3,490 3,610 87,171 87,171 752,541 750,787 398,502 396,395 550 73 453 278 80,108 51,879 $ 1,398,212 $ 1,369,112 Total 2018 2017 $ 3,227,830 $ 3,193,592 393,110 410,099 702,507 721,697 41,140 41,189 87,171 87,171 752,541 750,787 398,502 396,395 45,845 39,693 453 278 120,034 77,734 $ 5,769,133 $ 5,718,635 Significant capital asset events during fiscal year 2018 included the following: • Land: $33.2 million for land donated by developers that coincides with public street improvements for finalized permits, and $1.0 million for land acquired for street and pedestrian right-of-way. • Streets: $11.9 million for new road improvements donated by developers, $11.8 million for street preservation, and $7.6 million related to streets, traffic control, sidewalks and storm drains. • Vehicles: $4.5 million for eight trolley buses (99 percent grant/externally funded), $2.4 million for three fire ladder/pumper trucks, and $0.7 million for solid waste vehicles. Additional information on the City’s capital assets can be found in Note IV.D. on pages 85-87 of this report. Long-term Debt. At the end of the fiscal years 2018 and 2017, the City had total long-term liabilities of $1,571.1 million and $1,634.9 million, respectively. Of these amounts, $525.5 million and $547.3 million, for fiscal years 2018 and 2017 respectively, are general obligation bonds backed by the full faith and credit of the City. The remainder includes water and sewer revenue bonds, Municipal Property Corporation bonds, Scottsdale Preserve Authority bonds, certificates of participation, net pension liabilities, and other obligations of $1,045.6 million and $1,087.6 million for fiscal years 2018 and 2017, respectively. City of Scottsdale, Arizona 30 Table of Contents Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2018 The State constitution imposes debt limitations on the City equal to 6 percent and 20 percent of the assessed valuation of properties within the City. The City’s available debt margin at June 30, 2018 and 2017 was $401.3 million and $359.0 million, respectively, in the 6 percent capacity and $864.0 million and $754.5 million, respectively, in the 20 percent capacity. Additional information on the debt limitations and capacities may be found in Section IV.H. of the Notes to the Financial Statements and also in Tables XVIa and XVIb in the Statistical Section of this report. Long-term Liabilities June 30, 2018 and 2017 (in thousands) Governmental Activities General Obligation Bonds $ 2018 525,465 $ Business-type Activities 2017 547,295 2018 $ Total 2017 - $ - $ 2018 525,465 $ 2017 547,295 - - 19,715 23,085 19,715 23,085 Municipal Property Corporation Bonds 187,918 199,118 306,822 321,912 494,740 521,030 Scottsdale Preserve Authority Bonds 11,950 16,315 - - 11,950 16,315 Certificates of Participation 4,914 7,264 - - 4,914 7,264 Obligation Bonds 18,800 21,355 - - 18,800 21,355 Issuance Premiums 65,413 68,045 30,939 33,486 96,352 101,531 814,460 859,392 357,476 378,483 1,171,936 1,237,875 32 95 - - 32 95 Service Concession Arrangements 2,375 2,529 - - 2,375 2,529 Risk Management Claims 22,933 20,351 - - 22,933 20,351 Compensated Absences 25,516 25,374 3,531 3,467 29,047 28,841 Total Other Postemployment Benefit 2,194 1,616 - - 2,194 309,094 1,176,604 307,803 1,217,160 Water and Sewer Revenue Bonds Community Facilities Districts General Total Bonds Payable Capital Lease Net Pension Liabilities Total Long-term Liabilities $ $ $ 33,523 394,530 $ 35,762 417,712 $ 342,617 1,571,134 $ 1,616 343,565 1,634,872 During fiscal year 2018, the City’s total long-term liabilities decreased overall by $63.7 million due to the City making scheduled principal payments on its debt that exceeded new issuances of debt. In accordance with GASB Statement No. 68, Accounting and Financial Reporting for Pensions, the City’s proportionate share of its unfunded pension liabilities for pension plans in which it participates is also included in its outstanding long-term liabilities. The City’s net pension liabilities at the end of fiscal years 2018 and 2017 were $342.6 million and $343.6 million, respectively. Additional information on the City’s pensions can be found on page 106. Additional information in the City’s long-term liabilities can be found in Section IV.H. of the Notes to the Financial Statements on pages 90-101 of this report. City of Scottsdale, Arizona 31 Table of Contents Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2018 ECONOMIC FACTORS AND NEXT YEAR’S BUDGET As the local economy continues its steady growth, the City continues its fiscally conservative approach to spending. The adopted fiscal year 2019 budget reflects the City’s effort to invest in attracting and retaining excellent employees, addresses several critical one-time facilities needs, and projected increases in the overall cost of maintaining quality services to citizens. In June 2018, the City Council approved a $1,366.8 million budget, which is a 6.8 percent increase over the prior year budget of $1,279.8 million. The adopted fiscal year 2019 budget includes $802.8 million for operations, including contingencies and reserves, and $564.0 million for capital improvements. REQUESTS FOR INFORMATION This financial report is designed to provide a general overview of the City’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be directed to the Scottsdale City Treasurer’s Office, 7447 E. Indian School Road, Suite 210, Scottsdale, AZ 85251. Or visit our website at: http://www.scottsdaleaz.gov/finance City of Scottsdale, Arizona 32 Table of Contents Basic Financial Statements City of Scottsdale, Arizona 33 Table of Contents Statement of Net Position June 30, 2018 (in thousands) Governmental Activities ASSETS Cash and Investments Receivables (net of allowance for uncollectibles) Property and Other Local Taxes Charges for Services Fines Intergovernmental and Grants Interest Other Internal Balances Supplies Inventory Prepaid Items Prepayments Pollution Remediation Recoveries Restricted Assets Cash with Fiscal Agent Customer Advances and Deposits Joint Venture Construction Deposits Advanced Construction Payments Advanced Lease Payments Water and Sewer System Replacement Revenue Bond Reserve Service Concession Arrangements Equity in Joint Ventures Capital Assets Not Being Depreciated Land, Water Rights, and Construction in Progress Capital Assets, Net of Accumulated Depreciation Facilities, Infrastructure, and Equipment Total Assets $ DEFERRED OUTFLOWS OF RESOURCES Deferred Amounts on Refundings Pension-Related Amounts OPEB-Related Amounts Total Deferred Outflows of Resources $ 281,360 $ 188,766 Total $ 470,126 28,751 11,289 34,900 1,139 9,852 3,870 1,189 27,599 - 19 19,036 3,541 773 2,425 (3,870) 1,051 46,279 28,770 19,036 11,289 38,441 1,912 12,277 1,189 1,051 27,599 46,279 83,576 64,105 1,746 76,168 1,010 3,888 3,213 1,367 40,346 4,692 90,836 159,744 1,010 3,888 3,213 1,367 40,346 4,692 64,105 92,582 3,217,375 217,660 3,435,035 1,153,546 4,920,297 1,180,552 1,877,752 2,334,098 6,798,049 26,959 67,397 224 94,580 9,435 3,998 13,433 36,394 71,395 224 108,013 (continued) City of Scottsdale, Arizona 34 Business-type Activities $ $ Table of Contents Statement of Net Position June 30, 2018 (in thousands) Governmental Activities LIABILITIES Accounts Payable Accrued Payroll and Benefits Accrued Compensated Absences Interest Payable Matured Bonds, Loans, and Other Payables Due to Other Governments Unearned Revenue Liabilities Payable from Restricted Assets Advanced Construction Payments Advanced Lease Payments Customer Advances & Deposits Other Liabilities Noncurrent Liabilities Due Within One Year Accrued Compensated Absences Bonds, Loans, and Other Payables Due in More Than One Year Accrued Compensated Absences Total Other Postemployment Benefit Liability Net Pension Liabilities Bonds, Loans, and Other Payables Pollution Remediation Obligation Total Noncurrent Liabilities $ 16,024 4,454 233 16,110 66,625 5,108 9,398 DEFERRED INFLOWS OF RESOURCES Pension-Related Amounts OPEB-Related Amounts Total Deferred Inflows of Resources NET POSITION Net Investment in Capital Assets Restricted Debt Service Transportation and Preserve Privilege Tax Activities Capital Projects Grants Special Programs Streetlight and Services Districts Community Facilities Districts Endowments Expendable Nonexpendable Repair and Replacement Joint Venture Construction Deposits Unrestricted Total Net Position $ 15,572 585 1 8,015 18,460 - $ 31,596 5,039 234 24,125 85,085 5,108 9,398 3,213 1,367 1,010 - 3,213 1,367 3,545 2,995 11,007 73,830 1,507 19,593 12,514 93,423 14,509 2,194 309,094 765,970 1,176,604 2,024 33,523 337,883 46,279 440,809 16,533 2,194 342,617 1,103,853 46,279 1,617,413 1,300,086 489,032 1,789,118 15,243 207 15,450 2,863 2,863 18,106 207 18,313 3,604,063 1,099,864 4,703,927 19,313 43,940 52,990 2,587 3,505 4 65 4,692 - 24,005 43,940 52,990 2,587 3,505 4 65 34 619 (27,779) 3,699,341 40,346 3,888 250,500 1,399,290 34 619 40,346 3,888 222,721 5,098,631 The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 35 $ Total - 2,535 2,995 Total Liabilities Business-type Activities $ $ Table of Contents Statement of Activities For the Fiscal Year Ended June 30, 2018 (in thousands) Program Revenues FUNCTIONS/PROGRAMS 36 City of Scottsdale, Arizona Governmental Activities General Government Mayor and City Council City Clerk City Attorney City Auditor City Court City Manager City Treasurer Public Works Community and Economic Development Public Safety Community Services Administrative Services Streetlight and Services Districts Interest on Long-Term Debt Total Governmental Activities $ Business-type Activities Water Utility Sewer Utility Airport Solid Waste Total Business-type Activities Total Government Charges for Services Expenses 638 695 6,486 800 5,530 3,062 6,071 42,205 102,153 153,256 54,710 21,173 605 28,724 426,108 $ 96,493 52,142 7,624 19,735 175,994 $ 602,102 149 165 1,082 181 411 2,688 1,569 19,503 11,203 6,820 3,094 584 47,449 Operating Grants and Contributions Capital Grants and Contributions $ $ 117,537 40,666 4,335 19,687 182,225 $ 229,674 7 8 688 17,143 2,854 10,060 30,760 - $ 30,760 $ 112 60,563 144 60,819 Governmental Activities $ *Restated the Governmental Activities Net Position to record endowments. The notes to the financial statements are an integral part of this statement. (482) (530) (5,404) (619) (5,522) (1,963) (3,383) (40,524) (4,944) (139,199) (37,686) (18,079) (21) (28,724) (287,080) $ Total - $ (482) (530) (5,404) (619) (5,522) (1,963) (3,383) (40,524) (4,944) (139,199) (37,686) (18,079) (21) (28,724) (287,080) 9,242 9,947 4,676 23,865 - 30,286 (1,529) 1,387 (48) 30,096 30,286 (1,529) 1,387 (48) 30,096 84,684 (287,080) 30,096 (256,984) 64,718 209,256 13,482 144 - 64,718 209,400 13,482 23,719 30,549 12,031 2,218 10,548 7,756 374,277 87,197 3,612,144 3,699,341 2,291 (7,756) (5,321) 24,775 1,374,515 1,399,290 23,719 30,549 12,031 4,509 10,548 368,956 111,972 4,986,659 5,098,631 General Revenues Taxes Property Taxes Sales and Use Taxes Franchise Taxes Intergovernmental - Unrestricted State Shared Sales State Revenue Sharing Other Interest and Investment Income Other Revenue Transfers Total General Revenues and Transfers Change in Net Position Net Position - Beginning, Restated* Net Position - Ending Business-type Activities $ $ $ Table of Contents Balance Sheet Governmental Funds June 30, 2018 (in thousands) ASSETS City of Scottsdale, Arizona 37 Cash and Investments Cash with Fiscal Agent Receivable (net of allowance for uncollectibles) Interest Privilege Tax Transient Occupancy Tax Property Tax State Shared Sales Tax Franchise Fee Court Receivable Library Receivable Highway User Tax Auto Lieu Tax Intergovernmental Grants Miscellaneous Due from Other Funds Supplies Inventory Total Assets (continued) General $ $ 54,640 1,266 694 15,162 977 869 3,200 10,894 395 392 4,529 10,794 264 104,076 General Obligation Bond Debt Service General CIP Construction Capital Projects Total Nonmajor Governmental Funds $ $ $ $ 2,119 58,196 1,017 61,332 $ 36,936 129 2,207 39,272 $ 136,036 24,114 316 5,781 1,188 110 55 1,449 29,459 3,992 2,862 205,362 Total Governmental Funds $ $ 229,731 83,576 1,139 20,943 1,188 2,104 869 3,255 10,894 395 1,449 392 29,459 3,992 9,598 10,794 264 410,042 Table of Contents Balance Sheet Governmental Funds June 30, 2018 (in thousands) City of Scottsdale, Arizona 38 LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES (DEFICITS) Liabilities Accounts Payable Accrued Payroll and Benefits Due to Other Funds Matured Bond Interest Payable Matured Bonds Payable Unearned Revenue Intergovernmental Other Due to Other Governments Guaranty and Other Deposits Other Total Liabilities General $ Deferred Inflows of Resources Unavailable Revenues Total Liabilities and Deferred Inflows of Resources Fund Balances (Deficits) Nonspendable Restricted Committed Unassigned Total Fund Balances (Deficits) Total Liabilities, Deferred Inflows of Resources, and Fund Balances (Deficits) The notes to the financial statements are an integral part of this statement. $ 4,265 4,346 90 1,175 General Obligation Bond Debt Service General CIP Construction Capital Projects Total Nonmajor Governmental Funds $ $ $ 10,866 47,330 991 6 - 7,087 231 3,673 5,154 18,120 Total Governmental Funds $ 12,343 4,583 3,673 16,110 66,625 1,176 5,103 2,530 2,992 21,677 58,196 9 1,006 7,564 649 3 5 42,486 7,564 1,834 5,106 2,535 2,992 123,365 9,326 665 1 32,373 42,365 31,003 58,861 1,007 74,859 165,730 264 72,809 73,073 2,471 2,471 38,265 38,265 619 112,920 24,602 (7,638) 130,503 883 115,391 62,867 65,171 244,312 104,076 $ 61,332 $ 39,272 $ 205,362 $ 410,042 Table of Contents Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position June 30, 2018 (in thousands) Fund Balances - Total Governmental Funds $ 244,312 Amounts reported for governmental activities in the statement of net position are different because (see Note II.A.): Capital assets used in governmental activities are not financial resources; therefore, are not reported in the funds. 4,313,588 Equity in joint venture is not a financial resource; therefore, is not reported in the funds. 1,744 Prepayments and service concession arrangements are not financial resources; therefore, are not reported in the funds. 91,704 Deferred outflows relating to deferred amounts on refundings, pensions, and other postemployment benefits are not financial resources; therefore, are not reported in the funds. 93,958 Long-term liabilities, including bonds payable, are not due and payable in the current period; therefore, are not reported in the funds. (1,148,183) Deferred inflows, relating to pensions and other postemployment benefits, represent a future acquisition of net position that is not reported in the funds. Also, because the focus of governmental funds is on short-term financing, some assets will not be available to pay for current period expenditures. Those assets are offset by unavailable revenue in the funds. 27,347 Internal Service Funds are used by management to charge the costs of certain activities, such as insurance, computer equipment, and vehicles to individual funds. The assets and liabilities of the Internal Service Funds are included in governmental activities in the statement of net position. Net Position of Governmental Activities 74,871 $ The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 39 3,699,341 Table of Contents Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Fiscal Year Ended June 30, 2018 (in thousands) General REVENUES City of Scottsdale, Arizona 40 Taxes - Local Property Transaction Privilege Transient Occupancy Light and Power Franchise Cable TV Franchise Salt River Project In-Lieu Other Taxes Taxes - Intergovernmental State Shared Sales State Revenue Sharing Auto Lieu Tax Highway User Tax Local Transportation Assistance Fund Business and Liquor Licenses Charges for Current Services Building and Related Permits Recreation Fees WestWorld Equestrian Facility Fees Fire Fees Fines, Fees, and Forfeitures Court City Attorney Service Enhancement Parking Photo Radar Court Enhancement Library Police Property Rental Interest Earnings Net Decrease in the Fair Value of Investments Intergovernmental Federal Grants State Grants Miscellaneous Developer Contributions Streetlight and Services Districts Contributions and Donations Reimbursements from Outside Sources Indirect Costs Other Total Revenues (continued) $ $ 26,918 128,133 8,853 4,391 227 931 General Obligation Bond Debt Service General CIP Construction Capital Projects $ $ 33,292 - Total Nonmajor Governmental Funds - $ 3,367 62,133 19,837 253 - Total Governmental Funds $ 63,577 190,266 19,837 9,106 4,391 227 931 23,719 30,549 10,205 1,709 - - 16,067 657 59 23,719 30,549 10,205 16,067 657 1,768 14,594 4,292 4,804 1,125 - 70 - 2,178 - 14,664 6,470 4,804 1,125 4,168 310 314 2,536 307 3,330 2,634 (2,006) - 303 - 161 2,031 142 418 2,529 1,287 - 4,329 310 314 2,536 2,031 449 418 5,859 4,224 (2,006) 1,767 1,674 6,897 812 283,193 33,292 5 2 380 13,903 227 11,438 835 584 2,333 161 558 55 141,213 13,903 227 13,205 835 584 2,333 1,840 7,455 869 458,078 $ $ $ $ Table of Contents Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Fiscal Year Ended June 30, 2018 (in thousands) General EXPENDITURES City of Scottsdale, Arizona 41 Current General Government Mayor and City Council City Clerk City Attorney City Auditor City Court City Manager City Treasurer Public Works Community and Economic Development Public Safety Community Services Administrative Services Streetlight and Services Districts Debt Service Principal Interest and Fiscal Charges Bond Issuance Costs Capital Outlay Total Expenditures $ 637 735 6,747 816 4,560 2,406 5,820 19,734 24,093 134,105 34,518 16,309 - General Obligation Bond Debt Service General CIP Construction Capital Projects $ $ - Total Nonmajor Governmental Funds - $ 16 1,132 688 159 15,279 23,603 1,970 12,538 605 Total Governmental Funds $ 653 735 6,747 816 5,692 3,094 5,979 35,013 47,696 136,075 47,056 16,309 605 2,567 373 253,420 47,330 21,347 241 68,918 13,158 13,158 18,120 10,332 41,153 125,595 68,017 32,052 241 54,311 461,091 Excess (Deficiency) of Revenues over (under) Expenditures 29,773 (35,626) (12,778) 15,618 (3,013) OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Sale of General Capital Assets Issuance of Long-Term Capital-Related Debt Premium on Long-Term Debt Issued Total Other Financing Sources (Uses) 9,675 (25,376) 214 (15,487) 26,355 80 146 26,581 18,856 (486) 18,370 49,040 (70,410) 25,420 3,350 7,400 103,926 (96,272) 214 25,500 3,496 36,864 Net Change in Fund Balances 14,286 (9,045) 5,592 23,018 33,851 Fund Balances - Beginning, Restated* Fund Balances - Ending *Restated the Total Nonmajor Governmental Funds to record endowments. The notes to the financial statements are an integral part of this statement. $ 58,787 73,073 $ 11,516 2,471 $ 32,673 38,265 $ 107,485 130,503 $ 210,461 244,312 Table of Contents Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities For the Fiscal Year Ended June 30, 2018 (in thousands) Net Change in Fund Balances - Total Governmental Funds $ 33,851 Amounts reported for governmental activities in the statement of activities are different because (see Note II.B.): 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 and reported as depreciation expense. This is the amount by which depreciation exceeded capital outlay in the current period. (28,779) Donations of capital assets and changes in joint venture equity interest are not capitalized on the governmental fund statements, but are shown in the statement of activities. 45,113 Some expenses reported in the statement of activities do not require the use of current financial resources; therefore, are not reported as expenditures in governmental funds. (37,826) Current-year pension and other postemployment benefit contributions are reclassified from expenditures in the governmental funds to deferred outflows of resources in the governmentwide statements. 26,257 Current-year joint venture contributions are are reclassified from expenditures in the governmental funds to an increase in the investment in the joint venture in the government-wide statements. 181 Amounts provided by the State Treasurer directly to the Public Safety Personnel Retirement System on behalf of the City are not recognized in the governmental fund statements but are shown in the statement of activities. 1,886 Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. (1,340) Prepayments are expended in the governmental funds when paid, and are capitalized and amortized in the statement of net position. This is the amount of the amortization expense in the current period. (967) The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds; however, neither transaction has any effect on net position. This is the amount by which principal retirement exceeded debt proceeds in the current period. 39,021 Additional interest accretion calculated on bonds and notes payable and amortization of bond premium and deferred amounts on refundings. 3,328 The change in net position of the Internal Service Funds is attributed to governmental activities. 6,472 Change in Net Position of Governmental Activities $ The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 42 87,197 Table of Contents General Fund Statement of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2018 (in thousands) Budgeted Amounts City of Scottsdale, Arizona 43 REVENUES Taxes - Local Property Transaction Privilege Light and Power Franchise Cable TV Franchise Salt River Project In-Lieu Other Taxes Taxes - Intergovernmental State Shared Sales State Revenue Sharing Auto Lieu Tax Business and Liquor Licenses Charges for Current Services Building and Related Permits Recreation Fees WestWorld Equestrian Facility Fees Fire Fees Fines, Fees, and Forfeitures Court City Attorney Service Enhancement Parking Photo Radar Library Property Rental Interest Earnings Net Decrease in the Fair Value of Investments Intergovernmental Miscellaneous Reimbursements from Outside Sources Indirect Costs Other Total Revenues (continued) Original $ $ 27,197 120,666 8,467 3,637 225 917 Final $ 27,197 120,666 8,467 3,637 225 917 Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ 26,918 128,133 8,853 4,391 227 931 - 26,918 128,133 8,853 4,391 227 931 (279) 7,467 386 754 2 14 23,132 29,726 10,278 1,893 23,132 29,726 10,278 1,893 23,719 30,549 10,205 1,709 - 23,719 30,549 10,205 1,709 587 823 (73) (184) 14,998 4,160 4,764 704 14,998 4,160 4,764 704 14,594 4,292 4,804 1,125 - 14,594 4,292 4,804 1,125 (404) 132 40 421 3,283 309 226 3,020 304 3,103 1,615 - 3,283 309 226 3,020 304 3,103 1,615 - 4,168 310 314 2,536 307 3,330 2,634 - (2,006) 4,168 310 314 2,536 307 3,330 2,634 (2,006) 885 1 88 (484) 3 227 1,019 - 1,751 1,151 6,897 799 273,222 1,751 1,151 6,897 799 273,222 1,767 1,674 6,897 812 285,199 (2,006) 1,767 1,674 6,897 812 283,193 16 523 13 11,977 $ $ $ $ $ Table of Contents General Fund Statement of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2018 (in thousands) Budgeted Amounts City of Scottsdale, Arizona 44 EXPENDITURES Current General Government Mayor and City Council City Clerk City Attorney City Auditor City Court City Manager City Treasurer Public Works Community and Economic Development Public Safety Community Services Administrative Services Debt Service Principal Interest and Fiscal Charges Total Expenditures Original $ Excess of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Sale of General Capital Assets Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending The notes to the financial statements are an integral part of this statement. $ 631 758 6,855 909 4,724 2,433 6,232 19,864 24,650 145,106 35,544 17,853 Final $ 690 775 6,983 927 4,628 2,499 6,108 20,171 24,656 144,966 35,211 16,929 Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ 668 732 6,719 813 4,546 2,398 5,796 19,710 24,040 142,196 34,423 16,254 (31) 3 28 3 14 8 24 24 53 (8,091) 95 55 637 735 6,747 816 4,560 2,406 5,820 19,734 24,093 134,105 34,518 16,309 22 43 264 114 82 101 312 461 616 2,770 788 675 2,504 370 268,433 2,504 370 267,417 2,567 373 261,235 (7,815) 2,567 373 253,420 (63) (3) 6,182 4,789 5,805 23,964 5,809 29,773 18,159 9,116 (20,584) 303 (11,165) 9,116 (20,584) 303 (11,165) 9,675 (25,376) 214 (15,487) - 9,675 (25,376) 214 (15,487) 559 (4,792) (89) (4,322) (6,376) (5,360) 8,477 5,809 14,286 13,837 52,602 46,226 $ 72,574 67,214 $ 72,574 81,051 $ (13,787) (7,978) $ 58,787 73,073 $ 13,837 Table of Contents General Fund Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2018 (in thousands) Explanation of Differences: Items recorded as revenues for GAAP purposes that are not recorded for budget purposes: Net Decrease in the Fair Value of Investments $ The City budgets for certain expenditures on the cash basis, rather than on the modified accrual basis: Payroll Accrual and Compensated Absences Net Increase in Fund Balance - Budget to GAAP (7,815) $ The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 45 (2,006) 5,809 Table of Contents Statement of Fund Net Position Proprietary Funds June 30, 2018 (in thousands) ASSETS AND DEFERRED OUTFLOWS OF RESOURCES Assets Current Assets Cash and Investments Receivables (net of allowance for uncollectibles) Privilege Tax Charges for Services Intergovernmental Interest Miscellaneous Supplies Inventory Restricted Cash, Cash Equivalents, and Investments Cash with Fiscal Agent Customer Advances and Deposits Prepaid Items Other Restricted Assets Joint Venture Construction Deposits Total Current Assets Water and Sewer Utility $ 178,862 Airport Solid Waste $ - $ Governmental Activities Internal Service Funds Total 9,904 $ 188,766 $ 51,629 17,087 715 2,051 - 19 1,649 21 336 - 1,949 37 38 - 19 19,036 1,649 773 2,425 - 254 925 53,408 926 1,051 22,760 84 - - 76,168 1,010 1,051 - 3,888 - - 3,888 - 257,988 24,869 11,928 294,785 52,808 1,892 90,787 46,279 4 - 45 - 1,892 90,836 46,279 2 - 3,213 40,346 4,692 1,367 - - 3,213 1,367 40,346 4,692 - 39,706 87,171 1,248,800 635,013 5,982 631 50,886 (735,940) 9,564 31,765 1,151 494 9 29,222 (10,317) 1,111 5,587 490 89 (3,202) 50,381 87,171 1,248,800 635,013 37,352 1,151 6,966 729 80,108 (749,459) 12,887 87,592 3,497 273 (46,916) Total Capital Assets (net of accumulated depreciation) 1,332,249 61,888 4,075 1,398,212 57,333 Total Noncurrent Assets 1,519,458 63,259 4,120 1,586,837 57,335 1,777,446 88,128 16,048 1,881,622 110,143 9,435 2,926 173 899 9,435 3,998 622 Noncurrent Assets Long-Term Receivables Equity in Joint Ventures Pollution Remediation Recoveries Restricted Cash, Cash Equivalents, and Investments Advanced Construction Payments Advanced Lease Payments Water and Sewer System Replacement Revenue Bond Reserve Capital Assets Land Water Rights Water System Sewer System Buildings and Improvements Motor Vehicles Machinery and Equipment Furniture and Fixtures Construction in Progress Less Accumulated Depreciation Total Assets Deferred Outflows of Resources Deferred Amounts on Refundings Pension-Related Amounts Total Deferred Outflows of Resources $ 12,361 $ 173 (continued) City of Scottsdale, Arizona 46 $ 899 $ 13,433 $ 622 Table of Contents Statement of Fund Net Position Proprietary Funds June 30, 2018 (in thousands) LIABILITIES AND DEFERRED OUTFLOWS OF RESOURCES Liabilities Current Liabilities Accounts Payable Accrued Payroll and Benefits Accrued Compensated Absences - Current Accrued Compensated Absences - Due within one year Due to Other Governments Due to Other Funds Customer Advances and Deposits Interest Payable Matured Bonds and Other Payables Bonds Payable and Other Payables - Due within one year Total Current Liabilities Water and Sewer Utility $ Noncurrent Liabilities Accrued Compensated Absences - Due in more than one year Advanced Construction Payments Advanced Lease Payments Net Pension Liabilities Bonds, Loans, and Other Payables - Due in more than one year Pollution Remediation Obligation Total Noncurrent Liabilities 9,043 420 1,101 926 7,526 17,815 18,818 55,649 Airport $ Solid Waste 6,200 25 1 64 7,121 84 489 645 775 15,404 $ 329 140 342 811 Governmental Activities Internal Service Funds Total $ 15,572 585 1 1,507 7,121 1,010 8,015 18,460 19,593 71,864 $ 3,681 104 204 2 7,804 11,795 1,409 3,213 24,544 314,194 46,279 389,639 129 1,367 1,411 23,689 26,596 486 7,568 8,054 2,024 ` 3,213 1,367 33,523 337,883 46,279 424,289 225 5,059 15,132 20,416 Total Liabilities 445,288 42,000 8,865 496,153 32,211 Deferred Inflows of Resources Pension-Related Amounts 2,097 120 646 2,863 432 NET POSITION Net Investment in Capital Assets 1,036,739 59,050 4,075 1,099,864 57,333 Restricted for Water and Sewer System Replacement Restricted for Debt Service Restricted for Joint Venture Construction Deposits Unrestricted Total Net Position 40,346 4,692 3,888 256,757 1,342,422 (12,869) 46,181 3,361 7,436 40,346 4,692 3,888 247,249 1,396,039 20,789 78,122 $ $ The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 47 $ $ $ Table of Contents Reconciliation of the Proprietary Funds Statement of Fund Net Position to the Statement of Net Position June 30, 2018 (in thousands) Total Enterprise Fund Net Position $ 1,396,039 Amounts reported for business-type activities in the government-wide statement of net position are different because: Internal Service Funds are used by management to charge the costs of certain activities, such as insurance, computer equipment, and motor vehicles to individual funds. A look-back adjustment applies to business-type activities and creates an internal balance. Net Position of Business-type Activities 3,251 $ 1,399,290 The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 48 Table of Contents Statement of Revenues, Expenses, and Changes in Fund Net Position Proprietary Funds For the Fiscal Year Ended June 30, 2018 (in thousands) OPERATING REVENUES Charges for Sales and Services Water Service Fees Sewer Service Fees Proprietary - Non-potable water fees Solid Waste Fees Airport Fees Other Services Other Total Operating Revenues Water and Sewer Utility $ OPERATING EXPENSES Costs for Sales and Services Water Operations Sewer Operations Solid Waste Operations Airport Operations Other Services Indirect Costs Depreciation Total Operating Expenses 102,725 39,641 14,594 1,214 158,174 Airport $ Solid Waste 4,221 114 4,335 $ Governmental Activities Internal Service Funds Total 19,686 1 19,687 $ 102,725 39,641 14,594 19,686 4,221 1,329 182,196 $ 60,630 1,521 62,151 52,410 29,651 5,069 51,106 138,236 2,478 566 1,370 4,414 18,321 1,820 262 20,403 52,410 29,651 18,321 2,478 7,455 52,738 163,053 53,823 7,147 60,970 19,938 (79) (716) 19,143 1,181 NON-OPERATING REVENUES (EXPENSES) Transaction Privilege Tax Property Tax Investment Income Interest Expense Gain (Loss) on Sale of Capital Assets Net Non-Operating Revenue (Expenses) 1,958 (10,483) 29 (8,496) 144 265 (373) (2,841) (2,805) 68 68 144 2,291 (10,856) (2,812) (11,233) 1,047 140 1,187 Income Before Contributions and Transfers 11,442 (2,884) (648) 7,910 2,368 19,189 (7,756) 4,676 - - 23,865 (7,756) 4,758 104 (2) 22,875 1,792 (648) 24,019 7,228 Operating Income (Loss) Capital Contributions Transfers In Transfers Out Change in Net Position Total Net Position - Beginning Total Net Position - Ending $ 1,319,547 1,342,422 $ 44,389 46,181 The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 49 $ 8,084 7,436 $ 1,372,020 1,396,039 $ 70,894 78,122 Table of Contents Reconciliation of the Proprietary Funds Statement of Revenues, Expenses, and Changes in Fund Net Position to the Statement of Activities For the Fiscal Year Ended June 30, 2018 (in thousands) Net Change in Total Enterprise Fund Net Position $ 24,019 Amounts reported for business-type activities in the government-wide statement of net position are different because: Internal Service Funds are used by management to charge the costs of certain activities, such as insurance, computer equipment, and motor vehicles to individual funds. A look-back adjustment applies to business-type activities and creates an internal balance, which reduced the expenses. Change in Net Position of Business-type Activities 756 $ The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 50 24,775 Table of Contents Statement of Cash Flows Proprietary Funds For the Fiscal Year Ended June 30, 2018 (in thousands) Cash Flows from Operating Activities Cash Received from Customers Cash Payments to Suppliers for Goods/Services Cash Payments to Employees for Services Other Cash Receipts Net Cash Provided by (Used for) Operating Activities Water and Sewer Utility $ 156,820 (63,591) (22,459) (144) 70,626 Airport $ 4,031 (1,866) (1,282) 114 997 Solid Waste $ Total 19,576 (13,821) (7,021) 1 (1,265) $ 180,427 (79,278) (30,762) (29) 70,358 Governmental Activities Internal Service Funds $ 61,110 (46,045) (5,028) 1,522 11,559 Cash Flows from Non-Capital Financing Activities Property Tax Transaction Privilege Tax Cash received from other funds Transfers In Transfers Out Net Cash Provided by (Used for) Non-Capital Financing Activities (7,756) (7,756) 139 7,121 7,260 - 139 7,121 (7,756) (496) 1,047 104 (2) 1,149 Cash Flows from Capital and Related Financing Activities Capital Contributions from: Water and Sewer Development Fees Capital Grants Acquisition and Construction of Property and Equipment Water and Sewer Development Fee Credit Agreements Principal Payments on Capital Debt and Other Payables Interest Paid on Capital Debt Investment in Joint Venture and CIP Deposit Sale of Capital Assets Net Cash Used for Capital and Related Financing Activities 6,761 (48,540) (236) (15,835) (11,182) (3,007) 29 (72,010) 3,038 (17,868) 32 (2,841) (17,639) (16) (16) 6,761 3,038 (66,424) (236) (15,835) (11,150) (3,007) (2,812) (89,665) (6,731) 490 (6,241) 1,600 257 53 1,910 - Net Cash Provided by Investing Activities 1,600 257 53 1,910 - Net Increase (Decrease) in Cash and Cash Equivalents (7,540) (9,125) (1,228) (17,893) 6,467 Cash and Cash Equivalents at Beginning of Year 288,987 33,336 11,132 333,455 45,162 Cash Flows from Investing Activities Income Received on Investments Cash and Cash Equivalents at End of Year $ 281,447 $ (continued) City of Scottsdale, Arizona 51 24,211 $ 9,904 $ 315,562 $ 51,629 Table of Contents Statement of Cash Flows Proprietary Funds For the Fiscal Year Ended June 30, 2018 (in thousands) Cash and Cash Equivalents at End of Year includes: Cash and Investments Cash with Fiscal Agent Restricted Cash and Investments Total Cash and Cash Equivalents Water and Sewer Utility $ $ 178,862 53,408 49,177 281,447 19,938 Reconciliation of Operating Income to Net Cash Provided by Operating Activities Cash Flows from Operating Activities Operating Income (Loss) $ Adjustments to Reconcile Operating Income to Net Cash Provided by (Used for) Operating Activities: Depreciation/Amortization Current Year Pension Contributions Change in Equity in Joint Venture RWC Change in Equity in Joint Venture SROG Change in Accounts Receivable Change in Miscellaneous Receivable Change in Inventories Change in Prepaid Expense Change in Customer Deposits Change in Accounts Payable Change in Unearned Revenue Change in Accrued Payroll and Compensated Absences Change in Claims Payable Change in Advanced Construction Payments Change in Advanced Lease Payments Change in Net Pension Liability Change in Deferred Outflows of Resources Related to Pensions Change in Deferred Inflows of Resources Related to Pensions Change in Other Liabilities Total Adjustments Net Cash Provided by (Used for) Operating Activities Supplemental Disclosure of Non-Cash Financing Activities Contributions from Developers Contributions from Other Funds Change in Equity in Joint Venture SROG Total Non-Cash Financing Activities 51,106 (1,683) (9) 5,501 (1,769) 1,662 (734) (32) (3,046) 72 (1,358) (1,189) 3,441 (1,274) 50,688 70,626 $ Airport $ Solid Waste $ 22,760 1,451 24,211 $ (79) $ 1,370 (102) (89) 65 (4) (100) (187) 212 (89) 1,076 997 $ Total $ 9,904 9,904 $ (716) $ 262 (516) (5) (149) 39 (69) 91 (863) 1,119 (458) (549) (1,265) $ Governmental Activities Internal Service Funds $ 188,766 76,168 50,628 315,562 $ $ 51,629 51,629 $ 19,143 $ 1,181 $ 52,738 (2,301) (14) 5,501 (1,918) 1,612 (734) (32) (3,050) 159 (1,358) (100) (2,239) 4,772 (1,821) 51,215 70,358 $ 7,147 (366) 483 (183) 546 (3) 37 2,582 (312) 717 (271) 1 10,378 11,559 $ 12,664 3,007 $ - $ - $ 12,664 3,007 $ 4,758 - $ 15,671 $ - $ - $ 15,671 $ 4,758 The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 52 Table of Contents Statement of Fiduciary Net Position Fiduciary Funds June 30, 2018 (in thousands) Cash and Cash Equivalents Agency Funds ASSETS Total Assets LIABILITIES Escrow Payable Vouchers State Land Department Rebate UUID I-6002 Assessments Total Liabilities The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 53 $ 92 $ 92 $ 92 - $ 92 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Financial Reporting Entity The City of Scottsdale, Arizona (the City) was incorporated in 1951. The current City Charter was adopted in 1961, which established the Council/Manager form of government. The City provides basic government services to its citizens including roads, water, sewer, solid waste management, public transit, parks and recreation facilities, and public safety. The accounting policies of the City conform to accounting principles generally accepted in the United States of America (GAAP) as applicable to governmental units. The financial reporting entity presented in these financial statements consists of the City of Scottsdale, Arizona (the primary government) and its component units. The component units discussed below are included in the City’s reporting entity because of the significance of their operational or financial relationships with the City. The City has operational responsibility for the component units. Component Unit City of Scottsdale Municipal Property Corporation (MPC) Scottsdale Preserve Authority (SPA) Scottsdale Mountain Community Facilities District (CFD) Description and Criteria for Inclusion • • Non-profit corporation created in 1967. • • Governed by Board of Directors confirmed by City Council. • • Non-profit corporation created in 1997. • • Governed by a Board of Directors confirmed by City Council. • • Formed by 1992 petition to City Council. • • Able to levy taxes and issue bonds independent of the City. • • • City Council serves as the Board of Directors. Reporting Method For Separate Financial Statements Blended City of Scottsdale City Treasurer’s Office 7447 E. Indian School Rd. Ste. 210 Scottsdale, AZ 85251 Blended City of Scottsdale City Treasurer’s Office 7447 E. Indian School Rd. Ste. 210 Scottsdale, AZ 85251 Blended City of Scottsdale City Treasurer’s Office 7447 E. Indian School Rd. Ste. 210 Scottsdale, AZ 85251 Sole purpose is to construct, acquire and equip buildings, structures, or land improvements for the City. For financial reporting purposes, transactions are included as a governmental and proprietary fund type as if part of the City’s operation. Sole purpose is to finance land acquisitions for McDowell Sonoran Preserve. For financial reporting purposes, transactions are included as a governmental fund type as if part of the City’s operation. Created to acquire and improve public infrastructure in specified land area. Property owners within the designated area are assessed for District taxes and costs of operation. The City has no liability for District debt. For financial reporting purposes, transactions are included as a governmental fund type as if part of the City’s operation. City of Scottsdale, Arizona 54 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 Component Unit McDowell Mountain Ranch Community Facilities District (CFD) • • • • • • • DC Ranch Community Facilities District (CFD) • • • • • • • Via Linda Road Community Facilities District (CFD) • • • • • • • Waterfront Commercial Community Facilities District (CFD) Reporting Method For Separate Financial Statements Formed by 1994 petition to City Council. Created to acquire and improve public infrastructure in specified land area. Able to levy taxes and issue bonds independent of the City. Property owners within the designated area are assessed for District taxes and costs of operation. City Council serves as the Board of Directors. The City has no liability for District debt. For financial reporting purposes, transactions are included as a governmental fund type as if part of the City’s operation. Blended City of Scottsdale City Treasurer’s Office 7447 E. Indian School Rd. Ste. 210 Scottsdale, AZ 85251 Formed by 1997 petition to City Council. Created to acquire and improve public infrastructure in specified land area. Able to levy taxes and issue bonds independent of the City. Property owners within the designated area are assessed for District taxes and costs of operation. City Council serves as the Board of Directors. The City has no liability for District debt. For financial reporting purposes, transactions are included as a governmental fund type as if part of the City’s operation. Blended City of Scottsdale City Treasurer’s Office 7447 E. Indian School Rd. Ste. 210 Scottsdale, AZ 85251 Formed by 1998 petition to City Council. Created to acquire and improve public infrastructure in specified land area. Able to levy taxes and issue bonds independent of the City. Property owners within the designated area are assessed for District taxes and costs of operation. City Council serves as the Board of Directors. The City has no liability for District debt. For financial reporting purposes, transactions are included as a governmental fund type as if part of the City’s operation. Blended City of Scottsdale City Treasurer’s Office 7447 E. Indian School Rd. Ste. 210 Scottsdale, AZ 85251 Formed by 2005 petition to City Council. Created to acquire and improve public infrastructure in specified land area. Able to levy taxes and issue bonds independent of the City. Property owners within the designated area are assessed for District taxes and costs of operation. City Council serves as the Board of Directors. The City has no liability for District debt. For financial reporting purposes, transactions are included as a governmental fund type as if part of the City’s operation. Blended City of Scottsdale City Treasurer’s Office 7447 E. Indian School Rd. Ste. 210 Scottsdale, AZ 85251 Description and Criteria for Inclusion • • • • • • • City of Scottsdale, Arizona 55 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 B. Government-wide and Fund Financial Statements The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all the nonfiduciary activities of the primary government and its component units. For the most part, the effect of interfund activity has been removed from these statements. 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 support. The statement of activities demonstrates the degree to which the direct expenses for a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include: 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a function or segment. Taxes and other items not included among program revenues are reported instead as general revenues. Indirect costs incurred by governmental activities and reimbursed by business-type activities are included in the program expense reported by the individual business-type functions. Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and trust fund financial statements. 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 revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements have been met. Agency funds do not have a measurement focus, but utilize the accrual basis of accounting for reporting their assets and liabilities. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are earned and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. The City considers revenues to be available if they are collected within 31 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting; however, debt service expenditures, as well as expenditures related to vacation, sick leave, claims, and judgments, are recorded only when payment is due. Capital asset acquisitions are reported as expenditures in the governmental funds. Issuance of long-term debt and acquisitions under capital leases are reported as other financing sources. Because different measurement focuses and bases of accounting are used in the government-wide statement of net position and in governmental fund balance sheets, amounts reported as restricted fund balances in governmental funds may be different from amounts reported as restricted net position in the statement of net position. City of Scottsdale, Arizona 56 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 Property taxes, other local taxes, and licenses available within the current fiscal period are all considered to be susceptible to accrual and have been recognized as revenues of the current fiscal period. Interest is accrued in the same fiscal period in which the revenue is earned. All other revenue items are considered to be measurable and available only when the City receives cash. The government reports the following major governmental funds: The General Fund is the government’s primary operating fund and is used to account for and report all financial resources not accounted for and reported in another fund. The General Obligation Bond Debt Service Fund is used to account for and report the accumulation of financial resources that are restricted to expenditures for the payment of long-term obligation debt principal, interest, and related costs. The General CIP Construction Capital Projects Fund is used to account for and report financial resources that are committed to expenditures for capital outlays including the acquisition, construction, and improvements to major capital facilities or capital equipment from amounts transferred from the City’s General Fund in accordance with the City’s comprehensive financial policies adopted by the City Council annually. This fund also represents other City Council approved capital programs including committing funds for tourism related capital projects as well as activity for the capital in-lieu parking and in-lieu stormwater. The government reports the following major proprietary funds: The Water and Sewer Utility, Airport, and Solid Waste Funds account for the operating revenues and expenses of the City’s water and sewer utility systems, airport, and sanitation services (solid waste, brush removal, container maintenance, etc.), respectively. Additionally, the government reports the following fund types: The Internal Service Funds account for fleet management, computer replacements, and self-insurance services provided to other departments or units of the City on a cost-reimbursement basis. The Agency Funds are purely custodial (assets equal liabilities) and do not involve measurement of results of operations. The City’s agency funds are used to record the Family Self-Sufficiency activity, Crossroads East Development Agreement, and the APS Raintree Underground Utility Improvement District activity. The Permanent Funds account for resources that are legally restricted to the extent that only earnings, not principal, support the City’s programs. In general, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this rule are indirect costs, in-lieu franchise fees, and other charges between the City’s governmental activities and the Water and Sewer Utility Fund, Airport Fund, and Solid Waste Fund, because elimination of these charges would distort the direct costs and program revenues reported in the statement of activities. City of Scottsdale, Arizona 57 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services in connection with the funds’ principal ongoing operations. The principal operating revenues of the City’s enterprise and internal service funds are charges for customer services including: water, sewer, airport, solid waste, vehicle purchase/maintenance amounts, computer replacement, and risk management charges. Operating expenses for enterprise funds and internal service funds include the cost of services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. When both restricted and unrestricted resources are available for specified expenditures, restricted resources are considered spent before unrestricted resources. Within unrestricted resources, committed would be considered spent first (if available), followed by assigned (if available), and then unassigned amounts. D. Assets, Liabilities, Deferred Outflows/Inflows of Resources, and Net Position/Fund Balance 1. Deposits and Investments The City considers all highly liquid investments (including restricted assets) in money market mutual funds, demand deposits, certificates of deposit, bankers’ acceptances, repurchase agreements, commercial paper (A-1/P-1), and U.S. Treasury bills with an original maturity of three months or less to be cash equivalents. For the purposes of the statements of cash flows, all pooled cash and investments are considered to be cash equivalents, although there are investments with maturities in excess of three months when purchased in the portfolio. This is due to the fact that the proprietary funds may deposit or withdraw cash at any time without prior notice or penalty, having the characteristics of demand deposits. GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools provides that governmental entities may report all investments at fair value or they may elect to report certain money market investments and participating interest-earning investment contracts at amortized cost. The City has elected to report all investments at fair value. The City’s policy is to invest in certificates of deposit; bankers’ acceptances; repurchase agreements; commercial paper (A-1, P-1); money market mutual funds; highly rated corporate bonds/notes; obligations of the United States Government, or any of its agencies, and other instrumentalities; highly rated obligations issued or guaranteed by any state or political subdivision thereof or any obligations issued or guaranteed by the City; and the state of Arizona Local Government Investment Pool (LGIP), which is overseen by the Office of the Arizona State Treasurer. 2. Receivables and Payables Activity between funds that is representative of lending/borrowing arrangements outstanding at the end of the fiscal year is classified as “due to/from other funds” (i.e., the current portion of interfund loans). Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as “internal balances.” City of Scottsdale, Arizona 58 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 All accounts receivables are shown net of an allowance for uncollectible amounts. The City’s property tax is levied each year on or before the third Monday in August based on the previous January 1 full cash value as determined by the Maricopa County Assessor. Levies are due and payable in two installments, on October 1 and March 1, and become delinquent after November 1 and after May 1, respectively. A lien attaches to the property on the first day of January preceding the assessment and levy of taxes. Delinquent amounts bear interest at the rate of 16 percent. Public auctions of properties which have delinquent real estate taxes are held in February. Maricopa County, at no charge to the taxing entities, bills and collects all property taxes. Property taxes levied for current operation and maintenance expenses on residential property are limited to one percent of the limited property value of such property. In addition, taxes levied for current operation and maintenance expenses on all types of property are limited to a maximum increase of two percent over the prior year’s levy, adjusted for new construction and annexations. Property taxes levied to pay principal and interest on bonded indebtedness are not limited. 3. Inventories, Prepayments, and Prepaid Items Inventories of the governmental funds are recorded under the consumption method. Inventories are recorded as expenditures when consumed rather than when purchased. Inventories are valued at yearend based on cost, with cost determined using an average cost method. Prepayments of the governmental funds, which are prepared using the modified accrual basis of accounting, are recorded under the purchases method, and are therefore recorded as expenditures when purchased. Within the government-wide statements, which are prepared using the accrual basis of accounting, prepayments are recorded as assets and amortized over the life of the related agreement. Prepaid items contain payments made to vendors applicable to future accounting periods in both the government-wide and proprietary fund financial statements. The cost of a prepaid item is recorded as an expense when consumed rather than purchased. 4. Restricted Assets Certain proceeds of the City’s enterprise fund revenue bonds, as well as certain resources set aside for their repayment, are classified as restricted assets on the statement of net position because they are maintained in separate bank accounts and their use is limited by applicable bond covenants. The revenue bond reserve and water and sewer replacement accounts are used to report resources set aside to meet unexpected contingencies or to fund asset replacements. The joint venture construction deposits with the City of Phoenix are used for capital expansion, rehabilitation, and expansion of the jointly used facilities. Assets are also restricted in enterprise funds for deposits received from water, sewer, and airport customers, as well as unearned revenues related to cash received in advance of services provided. City of Scottsdale, Arizona 59 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 5. Capital Assets Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, sidewalks and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. The government defines capital assets as assets with an initial, individual cost of more than $10,000 and an estimated useful life in excess of two years. Assets contributed (donated) are recorded by reference to historical costs of the donor if recently purchased or constructed, or if such records are not available, at acquisition value. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets’ lives are not capitalized. The City has elected to exclude the values of the library and art collections held in perpetuity from capitalization as the worth of the collections may change over time and because these collections are maintained in perpetuity to be used for purposes other than financial gain. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed. Depreciation and amortization of all assets are recorded and calculated using the straight-line method over the following estimated useful lives: Water System............................................................................................10 to 75 Years Sewer System............................................................................................25 to 50 Years Buildings and Improvements.................................................................25 to 50 Years Streets and Storm Drains.................................................................................30 Years Land Improvements..........................................................................................25 Years Machinery and Equipment......................................................................5 to 20 Years Motor Vehicles...........................................................................................3 to 15 Years Furniture, Fixtures, and Office Equipment..........................................5 to 10 Years The excess purchase price over fair market value of assets acquired in the Water and Sewer Utility Enterprise Fund is amortized on the straight-line method over 20 to 60 years. When capital assets are disposed of, the cost and accumulated depreciation or amortization are removed from the accounts, and any resulting gain or loss is recognized in the government-wide and proprietary fund financial statements. 6. Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the pension 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 within the fair value hierarchy established by generally accepted accounting principles. City of Scottsdale, Arizona 60 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 7. Compensated Absences Compensated absences consist of vacation leave and a calculated amount of medical leave earned by employees based on services already rendered. Employees may accumulate up to a maximum number of hours of vacation depending on years of service, but any vacation hours in excess of the maximum amount unused at the calendar year-end are forfeited. The City’s policy is to pay employees for unused accumulated vacation hours at termination or retirement. The City’s medical leave policy, however, is that only those employees hired full-time before July 1, 1982, receive cash for a portion of unused medical leave at death or retirement. For employees hired after July 1, 1982, the City funds the value of medical leave balances converted to a retiree health savings account for the participant immediately upon retirement. To be eligible for the medical leave conversion, the employee must retire and have accumulated 300 or more hours of medical leave (420 or more hours for shift fire employees) and will be funded at 100 percent for any medical leave hours accrued prior to July 1, 2011. If an employee has not accrued 1,200 hours before July 1, 2011, the employee will be funded the unused medical leave accrued after July 1, 2011, at 50 percent of the employee’s hourly base rate at the time of retirement, up to and including 1,200 hours accrued both before and after July 1, 2011. Shift fire employees will have the same rules apply, except their cap is 1,680 medical leave hours. Vacation pay is calculated based on vacation used and the medical leave conversion is based on an actuarial valuation dated January 1, 2018. The medical leave conversion and vacation pay amounts are accrued in the government-wide and proprietary fund financial statements. A liability for the current amount of compensated absences is recorded as a current liability at June 30, 2018, in the governmental and proprietary funds. The current liability represents compensated absences that have matured but were not paid as of June 30, 2018, that resulted from employee resignations and retirements. The current compensated absences amount in the governmental funds is combined with accrued payroll and other payroll related amounts in the accrued payroll and benefits line item. There is no long-term liability for compensated absences in the governmental funds. 8. Long-term Obligations Long-term debt and other long-term obligations are reported as liabilities in the governmental activities or business-type activities section, as appropriate, in the statement of net position of the governmentwide financial statements, or in the proprietary fund statement of net position in the proprietary fund financial statements. Bond premiums and discounts are amortized over the life of the bonds using the straight-line method. Bonds payable are reported net of the applicable bond premium or discount and bond issuance costs are expensed when incurred. 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 other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. City of Scottsdale, Arizona 61 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 9. Deferred Outflows/Inflows of Resources In addition to assets, the government-wide financial statements and the proprietary fund financial statements include a section for deferred outflows of resources. This represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The City has three items that qualify for this category: deferred amounts on refundings, pension-related amounts, and other postemployment benefits (“OPEB”)related amounts. Deferred amounts on refundings result from the difference between 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. The pension- and OPEB-related amounts result from differences between expected and actual experience, changes of assumptions or other inputs, and contributions made to the pension/OPEB plan by the employer subsequent to the measurement date of the net pension liability/total OPEB liability and before the end of the reporting period. Additionally, the pension related amounts include the difference between projected and actual investment earnings and changes in proportion and differences between employer contributions and proportionate share of contributions. With the exception of the difference between projected and actual investment earnings and contributions made to the pension plan by the employer subsequent to the measurement date of the net pension liability/total OPEB liability and before the end of the reporting period, the pensionand OPEB-related deferred outflows of resources should be recognized in pension/OPEB expense, respectively, beginning in the current reporting period, using a systematic and rational method over a closed period equal to the average of the expected remaining service lives of all employees that are provided with pensions/OPEB through the pension/OPEB plans (active employees and inactive employees) determined as of the beginning of the measurement period. The deferred outflows of resources relating to the difference between projected and actual investment earnings should be recognized in pension expense using a systematic and rational method over a closed five-year period, beginning in the current reporting period. The deferred outflows of resources relating to contributions made to the pension/OPEB plan from the employer subsequent to the measurement date of the net pension liability/total OPEB liability and before the end of the reporting period will reduce the beginning net pension liability/total OPEB liability in the following fiscal year. In addition to liabilities, the government-wide and fund financial statements include a section for deferred inflows of resources. This represents an acquisition of fund balance or net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The City has three items that qualify for this category: unavailable revenue, pension-related amounts, and OPEB-related amounts. City of Scottsdale, Arizona 62 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 Unavailable revenue, which arises only under the modified accrual basis of accounting, is recognized as an inflow of resources in the period that the related amounts become available. The pension-and OPEB-related amounts result from differences between expected and actual experience and changes of assumptions or other inputs. Additionally, the pension related amounts include the difference between projected and actual investment earnings and changes in proportion and differences between employer contributions and proportionate share of contributions. With the exception of the difference between projected and actual investment earnings, the pension-and OPEB-related deferred inflows of resources should be recognized in pension/OPEB expense, respectively, beginning in the current reporting period, using a systematic and rational method over a closed period equal to the average of the expected remaining service lives of all employees that are provided with pensions/OPEB through the pension/OPEB plans (active employees and inactive employees) determined as of the beginning of the measurement period. The deferred inflows of resources relating to the difference between projected and actual investment earnings should be recognized in pension expense using a systematic and rational method over a closed five-year period, beginning in the current reporting period. 10. Development Impact Fee Revenue The City has entered into several agreements whereby it will provide a development fee credit to developers for construction of certain public infrastructure improvements. The funding source for the reimbursements will come from Water and Sewer development fees, which are paid when units of the development are connected to the utility system. The City does not become liable under the agreements until the City has accepted the cost, a development fee has been paid, and a water meter has been set. 11. Fund Balance Policies In the fund financial statements, governmental funds report the fund balance into classifications that comprise a hierarchy based on the extent to which the City is bound to honor constraints on the specific purpose for which those funds can be spent. The classifications of fund balance are Nonspendable, Restricted, Committed, Assigned, and Unassigned. Nonspendable fund balances include amounts that cannot be spent because they are not in a spendable form, such as inventory or prepaid items, or because resources legally or contractually must remain intact. Restricted fund balances are the portion of a fund balance that have externally enforceable limitations on their usage through legislation or limitations imposed by creditors, grantors, laws and regulations of other governments, or enabling legislation. Committed fund balances are self-imposed limitations by the highest level of decision-making authority, namely City Council, prior to the end of the reporting period. City Council approval is required to commit resources or to rescind the commitment through a City Council resolution. Assigned fund balances are limitations imposed internally by management based on the intended use of the funds. In June 2011, through City Council Resolution No. 8751, the City Council authorized the City Treasurer to assign fund balances for specific purposes. City of Scottsdale, Arizona 63 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 Unassigned fund balances represent the residual net resources in excess of the other classifications. The General Fund is the only fund that can report a positive unassigned fund balance and any governmental fund can report a negative unassigned fund balance. When both restricted and unrestricted resources are available for specified expenditures, restricted resources are considered spent before unrestricted resources. Within unrestricted resources, committed would be considered spent first (if available), followed by assigned (if available), and then unassigned amounts. 12. Net Position The government-wide and proprietary fund financial statements utilize a net position presentation. Net position is categorized as net investment in capital assets, restricted, and unrestricted. Net Investment in Capital Assets – This category groups all capital assets, including infrastructure and capital-related deferred outflows of resources, into one component of net position. Accumulated depreciation, the outstanding balances of debt that are attributable to the acquisition, construction, or improvement of these assets, and the capital-related deferred inflows of resources reduce the balance in this category. Restricted Net Position – This category represents net position that has external restrictions imposed by creditors, grantors, contributors, laws or regulations of other governments, and restrictions imposed by law through constitutional provisions or enabling legislation. Unrestricted Net Position – This category represents net position of the City not restricted for a specific purpose. E. Implementation of New Accounting Principles 1. Governmental Accounting Standards Board Statement No. 75 The City adopted the provisions of GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other than Pensions. The scope of this statement addresses accounting and financial reporting OPEB that is provided to state and local governmental employees. The statement establishes standards for recognizing and measuring the liabilities, deferred outflows of resources, deferred inflows of resources, and expense/expenditures. 2. Governmental Accounting Standards Board Statement No. 81 The City adopted the provisions of GASB Statement No. 81, Irrevocable Split-Interest Agreements. This statement establishes recognition and measurement requirements for irrevocable split-interest agreements, which can be further defined as a specific type of giving arrangement used by donors to provide resources to two or more beneficiaries including governments. This pronouncement did not impact the preparation of these financial statements. City of Scottsdale, Arizona 64 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 3. Governmental Accounting Standards Board Statement No. 85 The City adopted the provisions of GASB Statement No. 85, Omnibus 2017. The statement addresses a variety of topics including issues related to blending component units, goodwill, fair value measurement and application, and postemployment benefits. This pronouncement did not impact the preparation of these financial statements. F. Prior Period Adjustments 1. Change in Accounting Principle Net position as of July 1, 2017, has been restated as follows for the implementation of GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other than Pensions. 2. Prior Period Correction The City identified several permanent endowments in which the City has been designated as the beneficiary to utilize the interest earnings for library and human service programs. The table below reflects the restatement amounts on the government-wide statement of net position and the governmental funds balance sheet (in thousands): Government-wide Statement of Net Position Governmental Business-type Activities Activities Net position at June 30, 2017, as previously reported Prior period adjustment - implementation of GASB 75 Prior period adjustment - record endowments Net position at July 1, 2017, as restated II. $ $ 3,611,868 $ (357) 633 3,612,144 $ 1,374,515 1,374,515 Governmental Funds Balance Sheet Permanent Special Revenue Funds Funds $ $ 657 657 $ $ 66,723 (24) 66,699 RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS A. Explanation of certain differences between the governmental funds balance sheet and the government-wide statement of net position The City’s total governmental fund balances, $244,312,000 differs from net position of governmental activities, $3,699,341,000 reported in the statement of net position. The difference primarily results from the long-term economic focus in the statement of net position versus the current financial resources focus in the governmental fund balance sheets. City of Scottsdale, Arizona 65 Table of Contents Reconciliation of Governmental Funds Balance Sheet to the Government-wide Statement of Net Position (in thousands) Internal Service Funds(2) $ $ $ Total Assets and Deferred Outflows of Resources (continued) $ - 51,629 - $ - $ 281,360 83,576 1,139 20,943 1,188 2,104 869 3,255 10,894 395 1,449 392 29,459 3,992 9,598 10,794 264 410,042 4,313,588 1,744 27,599 64,105 4,407,036 254 925 57,333 2 110,143 (3,673) (3,673) 1,139 20,943 1,188 2,104 869 3,255 10,894 395 1,449 392 29,459 3,992 9,852 7,121 1,189 4,370,921 1,746 27,599 64,105 4,923,548 - 26,959 66,775 224 93,958 622 622 - 26,959 67,397 224 94,580 410,042 $ 4,500,994 $ 110,765 $ (3,673) $ 5,018,128 Notes to Financial Statements Deferred Outflows of Resources Deferred Amounts on Refundings Pension-Related Amounts OPEB-Related Amounts Total Deferred Outflows of Resources 229,731 83,576 Statement of Net Position Total Reclassifications and Eliminations(3) For the Fiscal Year Ended June 30, 2018 City of Scottsdale, Arizona 66 ASSETS AND DEFERRED OUTFLOWS OF RESOURCES Assets Cash and Investments Cash with Fiscal Agent Receivables (net of allowance for uncollectibles) Interest Privilege Tax Transient Occupancy Tax Property Tax State Shared Sales Tax Franchise Fee Court Library Highway User Tax Auto Lieu Tax Intergovernmental Grants Miscellaneous Due from Other Funds Supplies Inventory Capital Assets (net of accumulated depreciation) Equity in Joint Ventures Prepayments Service Concession Arrangements Total Assets Total Governmental Funds Long-Term Assets and Deferred Outflows/ Liabilities and Deferred (1) Inflows Table of Contents Reconciliation of Governmental Funds Balance Sheet to the Government-wide Statement of Net Position (in thousands) LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCE/NET POSITION $ $ Total Liabilities and Deferred Inflows of Resources Fund Balances/Net Position Total Fund Balances/Net Position Total Liabilities, Deferred Inflows of Resources, and Fund Balances/Net Position (continued) $ (233) 233 10,803 14,284 - $ 3,681 104 3,251 204 225 7,801 - Statement of Net Position Total Reclassifications and Eliminations(3) $ (3,673) - $ 16,024 4,454 3,251 233 11,007 14,509 7,801 16,110 66,625 7,564 1,834 5,106 2,535 2,992 123,365 1,123,096 1,148,183 2 3 20,191 35,462 (3,673) 7,564 1,834 5,108 2,535 2,995 1,143,287 1,303,337 42,365 42,365 (42,365) 14,811 207 (27,347) 432 432 - 15,243 207 15,450 165,730 1,120,836 35,894 (3,673) 1,318,787 244,312 3,380,158 74,871 - 3,699,341 410,042 $ 4,500,994 $ 110,765 $ (3,673) $ 5,018,128 Notes to Financial Statements Deferred Inflows of Resources Unavailable Revenue Pension-Related Amounts OPEB-Related Amounts Total Deferred Inflows of Resources 12,343 4,583 3,673 16,110 66,625 Internal Service Funds(2) For the Fiscal Year Ended June 30, 2018 City of Scottsdale, Arizona 67 Liabilities Accounts Payable Accrued Payroll and Benefits Due to Other Funds Accrued Compensated Absences - Current Accrued Compensated Absences - Due within one year Accrued Compensated Absences - Due in more than one year Claims Payable - Due within one year Matured Bond Interest Payable Matured Bonds Payable Unearned Revenue Intergovernmental Other Due to Other Governments Guaranty and Other Deposits Other Bonds, Loans, Capital Leases, and Other Payables Total Liabilities Total Governmental Funds Long-Term Assets and Deferred Outflows/ Liabilities and Deferred (1) Inflows Table of Contents Reconciliation of Governmental Funds Balance Sheet to the Government-wide Statement of Net Position (in thousands) (1) When capital assets (land, buildings, equipment, etc.) that are to be used in governmental activities are purchased or constructed, the costs of those assets are reported as expenditures in governmental funds; however, the statement of net position includes those capital assets among the assets of the City as a whole. Cost of capital assets Accumulated depreciation $ 5,787,823 (1,474,235) $ 4,313,588 Equity in joint ventures that are to be used in governmental activities are reported in the governmental funds as expenditures. These assets are included in the statement of net position for the City as a whole. Prepayments at 7/1/17 Amortization of prepayments $ 28,566 (967) 27,599 SCAs at 7/1/17 Land improvements additions for SCAs Amortization of SCAs $ Certain items that are recognized as assets on the statement of net position are expended in governmental funds when paid (such as long-term prepayments), while others arise from the incurrence of long-term liabilities or the receipt of capital assets from elsewhere within the City, such as service concession arrangements (SCAs). These assets are capitalized and amortized over the life of the corresponding agreement. $ $ 67,607 831 (4,333) 64,105 Deferred outflows consist of items that will consume net position in a future reporting period(s) and do not meet the definition of an asset. Deferred amounts on refunding result from the difference between the carrying value of refunded debt and its reacquisition price. The pension- and OPEB-related amounts result from differences between expected and actual experience, changes of assumptions or other inputs, the difference between projected and actual investment earnings, and contributions made to the pension plan from the employer subsequent to the measurement date of the net pension liability and before the end of the reporting period. Deferred amounts on refundings Pension-related amounts OPEB-related amounts (continued) $ $ 26,959 66,775 224 93,958 Notes to Financial Statements 1,744 For the Fiscal Year Ended June 30, 2018 City of Scottsdale, Arizona 68 $ Table of Contents Reconciliation of Governmental Funds Balance Sheet to the Government-wide Statement of Net Position (in thousands) Long-term liabilities applicable to the City's governmental activities are not due and payable in the current period, and accordingly, are not reported as fund liabilities in the governmental funds. All liabilities, both current and long-term, are reported in the statement of net position. Balances at June 30, 2018, were: Capital leases payable Bonds/Certificate of Participation payable Service concession arrangements Issuance premium Accrued vacation and sick leave pay Total OPEB liability Net pension liabilities $ $ (32) (749,047) (2,375) (65,413) (25,087) (2,194) (304,035) (1,148,183) $ $ 384 3,727 1,287 3,290 27 32,226 1,424 42,365 Deferred inflows represent an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. Deferred inflows related to pensions and OPEB may result from differences between expected and actual experience, changes of assumptions or other inputs, the difference between projected and actual investment earnings, and changes in proportion and differences between employer contributions and proportionate share of contributions. $ (14,811) (207) (15,018) $ 74,871 Reduction of amount due from other governmental fund $ (3,673) Reduction of amount due to other governmental fund $ (3,673) Pension-related amounts OPEB-related amounts $ (2) Internal Service Funds are used by management to charge the costs of certain activities, such as fleet management, computer equipment, and self-insurance, to individual funds. The assets and liabilities of the Internal Service Funds are included in governmental activities in the Statement of Net Position. (3) When governmental funds have cash timing differences due to and from balances are established at the fund level, this adjustment eliminates the governmental inter-fund activity. Notes to Financial Statements City of Scottsdale, Arizona 69 Unavailable library revenue Unavailable court revenue Unavailable property tax revenue Unavailable privilege tax revenue Unavailable transient occupancy tax revenue Unavailable intergovernmental revenue Unavailable other revenue For the Fiscal Year Ended June 30, 2018 Because the focus of governmental funds is on short-term financing, some assets will not be available to pay for current period expenditures. Those assets (for example, receivables) are offset by unavailable revenues in the governmental funds and thus are not included in fund balance. Certain tax and other revenues that are considered unavailable under modified accrual for governmental fund statements are recognized as revenue under accrual accounting for the government-wide statements. Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 B. Explanation of certain differences between the governmental funds statement of revenues, expenditures, and changes in fund balances and the government-wide statement of activities The net change in fund balances for governmental funds, $33,851,000 differs from the change in net position for the governmental activities, $87,197,000 reported in the statement of activities. The differences arise primarily from the long-term economic focus in the statement of activities versus the current financial resources focus in the governmental funds. The effect of the differences is illustrated in the next table. City of Scottsdale, Arizona 70 Table of Contents Reconciliation of Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-wide Statement of Activities (in thousands) $ $ $ 63,577 190,266 19,837 9,106 4,391 227 931 94 (846) (1) (15) 11 Capital Related Items(5) $ Internal Service Funds(6) - $ Reclassifications and Eliminations(7) 1,047 - $ Long-Term Debt Transactions(8) - $ Statement of Activities - $ 64,718 189,420 19,836 9,106 4,376 227 942 23,719 30,549 10,205 16,067 657 1,768 114 - - - - 23,719 30,549 10,205 16,067 657 1,882 14,664 6,470 4,804 1,125 42 (1) 15 115 - - (22) - - 14,684 6,469 4,819 1,240 4,329 310 314 2,536 2,031 449 418 5,859 4,224 (2,006) (240) (19) (7) (138) 37 - - - - - 4,089 310 295 2,529 2,031 311 418 5,896 4,224 (2,006) 13,903 227 13,205 835 584 2,333 1,840 7,455 869 458,078 2,247 11 (2,782) 7 1,948 592 - 1,047 (12) (34) - 16,150 238 10,423 835 584 2,333 1,847 7,455 2,805 459,683 $ $ $ $ $ $ Notes to Financial Statements (continued) Long-Term Revenue/ Expenses(4) For the Fiscal Year Ended June 30, 2018 City of Scottsdale, Arizona 71 REVENUES Taxes - Local Property Transaction Privilege Transient Occupancy Light and Power Franchise Cable TV Franchise Salt River Project In-Lieu Other Taxes Taxes - Intergovernmental State Shared Sales State Revenue Sharing Auto Lieu Tax Highway User Tax Local Transportation Assistance Fund Business and Liquor Licenses Charges for Current Services Building and Related Permits Recreation Fees WestWorld Equestrian Facility Fees Fire Fees Fines, Fees, and Forfeitures Court City Attorney Service Enhancement Parking Photo Radar Court Enhancement Library Police Property Rental Interest Earnings Net Decrease in Fair Value of Investments Intergovernmental Federal Grants State Grants Miscellaneous Developer Contributions Streetlight and Services Districts Contributions and Donations Reimbursements from Outside Sources Indirect Costs Other Total Revenues Total Governmental Funds Table of Contents Reconciliation of Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-wide Statement of Activities (in thousands) Net Change for the Year (continued) $ $ $ 653 735 6,747 816 5,692 3,094 5,979 35,013 47,696 136,075 47,056 16,309 605 68,017 32,052 241 54,311 461,091 $ (17) (44) (316) (19) (207) (57) (238) (842) 3,406 12,206 (497) (687) 12,688 Capital Related Items(5) $ $ 2 15 25 19 317 8,257 55,689 5,107 8,139 5,520 (54,311) 28,779 Internal Service Funds(6) $ $ 2 2 40 3 20 6 25 (181) (132) (235) (6) 31 (425) Reclassifications and Eliminations(7) $ $ Long-Term Debt Transactions(8) (12) (42) (4,604) (22) (4,680) $ $ Statement of Activities 98 125 18 (68,017) (3,328) (241) (71,345) $ $ 638 695 6,486 800 5,530 3,062 6,071 42,205 102,153 153,256 54,710 21,173 605 28,724 426,108 $ 7,654 214 25,500 3,496 36,864 $ (21) (21) $ 45,421 45,421 $ 102 4,758 140 5,000 $ (4,646) (4,646) $ (25,500) (3,496) (28,996) $ 7,756 45,533 333 53,622 $ 33,851 $ (12,117) $ 16,642 $ 6,472 $ - $ 42,349 $ 87,197 Notes to Financial Statements OTHER FINANCING SOURCES (USES) / CHANGES IN NET POSITION Net Transfers from Other Funds Capital Contributions Sale of Capital Assets Issuance of Long-Term Capital-Related Debt Premium on Long-Term Debt Issued Total Long-Term Revenue/ Expenses(4) For the Fiscal Year Ended June 30, 2018 City of Scottsdale, Arizona 72 EXPENDITURES/EXPENSES Current General Government Mayor and City Council City Clerk City Attorney City Auditor City Court City Manager City Treasurer Public Works Community and Economic Development Public Safety Community Services Administrative Services Streetlight and Services Districts Debt Service Principal Interest and Fiscal Charges Bond Issuance Costs Capital Outlay Total Expenditures/Expenses Total Governmental Funds Table of Contents Reconciliation of Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-wide Statement of Activities (in thousands) (4) Because some property taxes will not be collected for several months after the City's fiscal year end, they are not considered as "available" revenues in the governmental funds. Similarly, other revenues are not currently available at year-end and are not reported as revenue in the governmental funds. Property tax revenue Court revenue Library revenue Privilege tax revenue Transient occupancy tax revenue Intergovernmental revenue Other receivable revenue $ $ 94 (260) (138) (846) (1) (423) 234 (1,340) $ (967) $ (135) (316) (33,042) (308) (4,333) (38,134) Some expenditures reported in the governmental funds are related to benefits that are allocable to periods beyond the end of the City's current fiscal year. Accrual for long-term compensated absences OPEB expense Pension expense Change in equity interest for joint venture Amortization of service concession arrangements (SCAs) $ Current-year pension and OPEB contributions are reclassified to deferred outflows of resources on the Statement of Activities, and are therefore not a reduction of net position. Current-year pension contributions Current-year OPEB contributions $ $ 26,146 111 26,257 $ 181 $ 1,886 $ 54,311 (5,235) (76,638) (1,217) (28,779) Current-year joint venture contributions are reclassified to an increase in the joint venture asset on the Statement of Net Position, and are therefore not a reduction of net position. The State Treasurer distributes funding directly to the Public Safety Personnel Retirement System (PSPRS) that is used to offset the contributions required to be made by the City to the PSPRS. This amount is recognized as revenue by the City although no cash is received directly from the State Treasurer. (5) When capital assets that are to be used in governmental activities are purchased or constructed, the resources expended for those assets are reported as expenditures in governmental funds; however, in the Statement of Activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. As a result, fund balance decreases by the amount of financial resources expended, whereas net position decreases by the amount of depreciation expense charged for the year and the loss on disposal of capital assets. Capital expenditures Miscellaneous net capital expenditures Depreciation expense Loss on disposal of capital assets (continued) $ Notes to Financial Statements 73 City of Scottsdale, Arizona Some expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. The change in equity of the joint venture is reclassified from governmental fund expenses to an adjustment to the equity on the Statement of Activities. For the Fiscal Year Ended June 30, 2018 Amortization of long-term prepaid leases Table of Contents Reconciliation of Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-wide Statement of Activities (in thousands) Donations of capital assets are not capitalized on the governmental fund statements, but are included in the assets of the City. On the Statement of Activities the donations are shown as capital contributions. Capital contributions $ 45,421 $ 7,228 (756) 6,472 (6) Internal Service funds are used by management to charge the costs of certain activities, such as insurance, computer equipment, and fleet management to the individual funds. The adjustments for internal service funds adjust those funds by charging additional amounts to participating governmental activities and recording an amount due to/from the enterprise funds. Change in net position Internal payable to Enterprise Fund 74 City of Scottsdale, Arizona Reduction in revenues/capital contributions - Governmental Funds Reduction in expenditures/expenses - Governmental Funds $ $ (4,680) 4,680 - $ 68,017 $ (2,800) 6,128 3,328 (8) Repayment of bond principal is reported as an expenditure in governmental funds. Thus, these payments have the effect of reducing fund balance because current financial resources have been used. For the government-wide statements, however, these payments reduce the liabilities in the Statement of Net Position and do not result in an expense in the Statement of Activities. Transferred to the paying agent Principal payments made Interest expense in the statement of activities differs from the amount reported in governmental funds because additional interest was calculated for the amortization of deferred refunding costs and reductions of interest expense were recognized due to the amortization of bond premiums which are expended within the fund statements. Amortization of deferred charges on refundings Amortization of bond premium and discounts $ Bond proceeds are reported as financing sources in 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. Proceeds were received from: Long-Term capital-related debt Premium on bonds $ $ (25,500) (3,496) (28,996) Notes to Financial Statements (7) Interfund transactions between governmental activities are eliminated in the consolidation of these activities for the Statement of Activities. The elimination is reflected as a reduction of revenues and expenditures to eliminate the doubling up effect of these transactions within the governmental activities. For the Fiscal Year Ended June 30, 2018 $ Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 III. STEWARDSHIP, COMPLIANCE, AND ACCOUNTABLILTY A. Budget and Budgetary Accounting The City prepared an annual budget that covered fiscal year 2018. The fiscal year 2018 budget appropriation is established and reflected in the financial statements as follows: The City prepares its budget on a basis generally consistent with GAAP, with such exceptions as eliminating the adjustments for fair value of investments, payroll accruals, and compensated absences. A budgetary comparison statement for the General Fund is presented in the basic financial statements. This statement displays original budget, amended budget, and actual results. Budgetary comparison schedules are also included as supplementary schedules for certain other governmental funds. The City Council formally adopts the budget and legally allocates, or appropriates, available monies for the General Fund, certain Special Revenue Funds (Transportation, Community Development Block Grant, HOME, Grants, Section 8, Preserve Privilege Tax, Streetlight Districts, Special Programs, and Tourism Development), and Debt Service Funds (except for the Community Facilities Districts Debt Service Funds); therefore, these funds have appropriated budgets, and budget to actual information is presented. Community Facilities Districts Funds, Capital Projects Funds, Enterprise Funds, Internal Service Funds, Permanent Funds, and Trust and Agency Funds have non-appropriated budgets. Accordingly, no comparison of budget to actual is presented in the financial statements for these funds. Budgets for the Community Development Block Grant, HOME, Grants, and Section 8 Funds are established pursuant to the terms of the related grant awards. Budgets for the Community Facilities Districts are established in accordance with Arizona Revised Statutes, which do not require their inclusion in the City budget or adoption by the City Council. Budgets for Capital Projects Funds are established for individual projects and unexpended funds are re-appropriated each year until the project is completed and capitalized. Budgets for Enterprise Funds and Internal Service Funds are established in order to help departments control operational costs. Budgets for Trust and Agency Funds as well as Permanent Funds are established in accordance with the trust/agency agreements and endowment requirements, respectively. On or before the second regular Council meeting in May, the City Manager submits to the City Council a proposed budget for the fiscal year commencing the following July 1. The budget includes proposed expenditures and the means of financing them. Three public hearings are held prior to the final budget adoption in order to obtain taxpayer comments. In June, the budget is legally enacted through the passage of an ordinance. The ordinance sets the limit for expenditures during the fiscal year. Additional expenditures may be authorized beyond the limit for expenditures directly necessitated by a natural or man-made disaster as prescribed in the State Constitution, Article 9, Section 20. During fiscal year 2018, there were no supplemental budgetary appropriations to the original budget. The expenditure appropriations in the adopted budget are by division. The maximum legal expenditure permitted for the fiscal year is the total budget as adopted. Divisional appropriations may be amended during the fiscal year. City of Scottsdale, Arizona 75 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 Upon the recommendation of the City Manager and with the approval of the City Council: 1) transfers may be made from the appropriations for contingencies to divisions; and 2) unexpended appropriations may be transferred from one division to another. Management control of budgets is further maintained at a lineitem level within the division. B. Excess of Expenditures over Appropriations The Preserve Privilege Tax Special Revenue Fund exceeded its expenditure appropriation by $4,000. The additional expenditures incurred were funded by available fund balance within the fund. C. Deficit Fund Equity The Community Development Block Grant Special Revenue Fund, HOME Special Revenue Fund, Grants Special Revenue Fund, and the External Sources Capital Project Fund had deficit ending fund balances of $40,000, $185,000, $322,000, and $4,396,000, respectively. These deficits were caused by certain grant reimbursements and pending reimbursements from intergovernmental agreements related to capital projects the City is required to fund, not being available at the end of the fiscal year. Revenue accruals are not recognized in the current fiscal year due to the unavailability of the funds. These reimbursements due will be recognized as revenue when actually received. The Preserve Privilege Tax Capital Projects Fund had a deficit ending fund balance of $5,000 primarily due to timing differences of cash transfers for the payroll accrual. City of Scottsdale, Arizona 76 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 D. Fund Balance Classifications The following table details the fund balance categories and classifications for Governmental Funds: General (in thousands) Nonspendable Inventory Endowments Total Nonspendable General Obligation Bond Debt Service General CIP Construction Capital Projects Total Nonmajor Governmental Funds Total Governmental Funds $ $ $ FUND BALANCES $ 264 264 $ - - 619 619 264 619 883 Restricted Property Tax for Debt Service Transaction Privilege and Highway User Tax for Transportation Improvements Federal Grants for CDBG Federal Grants for Section 8 Housing Transaction Privilege Tax for Preserve Land Purchase and Improvements Property Tax for Community Facility Districts Streetlight Districts General Government-Mayor and City Council Special Programs General Government-City Court Special Programs Public Works Special Programs Community and Economic Development Special Programs Public Safety Special Programs Community Services Special Programs Sales Tax Rebate for District Debt Service Stadium Surcharge for Debt Service Maricopa County Stadium District/State Tourism Authority Contracts for Debt Service GO Bond Proceeds for Capital Improvements Transaction Privilege Tax for Transportation Capital Improvements Federal Grant Capital Improvements for CDBG Contributions for Drainage Capital Improvements Contributions for Stadium Capital Improvements Endowments Total Restricted - 2,471 2,471 - 9,745 69 471 34,094 894 4 7 2,172 99 83 842 302 321 2,234 1,803 20,675 36,515 2 2,280 274 34 112,920 2,471 9,745 69 471 34,094 894 4 7 2,172 99 83 842 302 321 2,234 1,803 20,675 36,515 2 2,280 274 34 115,391 Committed General Fund Contribution for Capital Improvements Stadium Surcharge for Stadium Improvements In-Lieu Parking Fees for Parking Projects In-Lieu Stormwater Fees for Drainage Improvements Transient Occupancy Tax for Tourism Related Capital Improvements Court Enhancement Fees for Court Capital Improvements Risk Management Contributions for Technology Infrastructure General Government-City Court Special Programs Public Works Special Programs Community and Economic Development Special Programs Public Safety Special Programs Community Services Special Programs Transient Occupancy Tax for Tourism Development Excise Tax Debt Reserve Total Committed - - 30,780 256 259 493 6,308 167 2 38,265 5,441 250 3,627 169 1,746 8,669 4,700 24,602 30,780 256 259 493 6,308 167 2 5,441 250 3,627 169 1,746 8,669 4,700 62,867 Unassigned Total Fund Balances $ 72,809 73,073 $ City of Scottsdale, Arizona 77 2,471 $ 38,265 $ (7,638) 130,503 $ 65,171 244,312 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 The City Council has established a minimum fund balance policy of 10 percent of annual operating expenditures to be maintained in the General Fund and the Transportation Nonmajor Special Revenue Fund. Additionally, the City Council has adopted a financial policy to hold a minimum of $5.0 million of excise tax reserve in the Debt Stabilization, Nonmajor Debt Service Fund. The reserves in these funds are to be maintained for unforeseen emergencies or catastrophic impacts to the City. E. Net Position Restrictions Only restrictions imposed by external sources are shown as restricted net position on the government-wide financial statements. The following restrictions apply to the Business-type Activities at June 30, 2018: Net Position Restrictions (in thousands) Water and Sewer Restricted for System Replacement Restricted for Debt Service Restricted for Joint Venture Construction Deposits $ 40,346 4,692 3,888 48,926 $ City of Scottsdale, Arizona 78 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 IV. DETAILED NOTES ON ALL FUNDS A. Cash and Investments The City maintains a cash and investment pool for use by all funds except the Community Facilities Districts, Municipal Property Corporation, Scottsdale Preserve Authority Funds, and the City’s endowment funds, which have investments held separately by a trustee. City Charter, ordinance, and trust agreements authorize the City to invest in certificates of deposit; bankers’ acceptances; repurchase agreements; commercial paper (A-1, P-1); money market mutual funds; highly rated corporate bonds/notes; obligations of the United States Government, its agencies, and other instrumentalities; highly rated obligations issued or guaranteed by any state or political subdivision thereof or any obligations issued or guaranteed by the City; and the State of Arizona Local Government Investment Pool (LGIP), which is overseen by the Office of the Arizona State Treasurer. Deposits At June 30, 2018, the carrying amount of the City’s deposits was $164,857,338, and the bank balance was $181,001,155. The $16,143,817 difference represents outstanding checks, deposits in transit, timing differences in transfers between depository account and investment accounts, and other reconciling items. Custodial Credit Risk Custodial credit risk for deposits is the risk that in the event of a bank failure, the government’s deposits may not be returned to it. As of June 30, 2018, in accordance with City policy, $500,000 of the City’s deposits were covered by federal depository insurance, $20,756,638 were collateralized by securities held by the City’s agent, and $159,744,517 were securities held by the pledging financial institution’s trust department in the name of the City. Thus, the City had no deposits that were exposed to custodial credit risk. 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, the City will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The City’s investment policy limits its exposure to custodial credit risk by requiring that all security transactions entered into by the City be conducted on a delivery-versus-payment basis. Securities are to be held by a third-party custodian. 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, the City’s investment policy limits the City’s investment portfolio to maturities of less than five years unless matched to a specific cash flow. City of Scottsdale, Arizona 79 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 The following table summarizes the City’s interest rate risk, based on maturity dates of various investments (in thousands): Investment Maturities (in Years) Investment Type U.S. Government Securities U.S. Government Agencies U.S. Government Instrumentalities Corporate Notes Commercial Paper Negotiable Certificates of Deposit Money Market Mutual Funds Fair Value $ 128,427 109,571 31,842 56,753 69,755 65,918 52,803 Less than 1 $ 69,625 6,416 14,447 69,755 23,004 52,803 Total Investments $ $ 515,069 1-2 15,517 77,954 3,346 24,011 30,582 - $ 236,050 $ 2-3 22,680 25,201 28,496 18,295 12,332 - $ 151,410 $ $ $ 107,004 3+ 20,605 20,605 Credit Risk Generally, credit risk is the risk that the issuer of an investment will not fulfill its obligation to the holder of the investment. Credit risk is measured by the assignment of a rating by Nationally Recognized Statistical Rating Organizations (NRSROs). The City’s investment policy limits its corporate debt investments and investments in negotiable certificates of deposit to the top three rating categories by Moody’s Investors Service or Standard and Poor’s Corporation, its investments in commercial paper to be rated P-1 by Moody’s Investors Service and A-1 by Standard and Poor’s, and its investments in money market mutual funds to those funds which are registered with the Securities and Exchange Commission under the Investment Company Act of 1940. The City’s investments in the investment types referenced above at June 30, 2018, meet the aforementioned criteria. Presented below are the ratings as of June 30, 2018, for each investment type (in thousands): Total Investment Type U.S. Government Securities $ 128,427 A-1 $ A-1+ - $ A- $ A - $ A+ - $ AA- $ AA - $ AA+ - $ Exempt from Disclosure AAA - $ - $ 128,427 U.S. Government Agencies 109,571 - - - - - - - 109,571 - - U.S. Government Instrumentalities 31,842 - - - - - - - - 31,842 - Corporate Notes 56,753 - - 10,943 16,556 11,255 11,344 2,503 4,152 - - Commercial Paper 69,755 64,244 5,511 - - - - - - - - Negotiable Certificates of Deposit 65,918 15,039 7,965 - 10,022 15,536 17,356 - - - - Money Market Mutual Funds 52,803 - - - - - - - - 52,803 - 515,069 $ 79,283 $ 13,476 $ 10,943 Total Investments $ $ 26,578 $ 26,791 $ 28,700 $ 2,503 $ 113,723 $ 84,645 $ 128,427 Note: A-1 and A-1+ are short-term credit ratings. Concentration of Credit Risk The City investment guidelines place no limit on the amount that the City may invest in any one issuer of obligations of the United States Government, its agencies, and other instrumentalities; however, the overall percentage of callable securities is monitored. Supranational debt (i.e.: an instrumentality of the United States Government) of an issuer is limited to 3 percent of the aggregate portfolio and investment in this sector class cannot exceed 10 percent of the total portfolio. Certificates of deposit and medium-term corporate notes each have a per issuer limit of 5 percent of the aggregate portfolio and investment in each of these sectors is limited to 30 percent of the total portfolio. Commercial paper has a per issuer limit of 3 percent of the aggregate portfolio and investment in this sector is limited to 10 percent of the total portfolio. City of Scottsdale, Arizona 80 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 The following is a listing by issuer of the City’s investments at June 30, 2018: (dollars in thousands) Issuer Investment Type U.S. Treasury U.S. Government Securities Market Value $ Percent of Holdings 128,427 27.80% 4.88% Federal Home Loan Bank (FHLB) U.S. Government Agencies 22,574 Federal Home Loan Mortgage Corporation (FHLMC) U.S. Government Agencies 39,338 8.51% Federal National Mortgage Association (FNMA) U.S. Government Agencies 47,659 10.31% African Development Bank U.S. Government Instrumentalities 2,380 0.51% Asian Development Bank U.S. Government Instrumentalities 3,244 0.70% Inter-American Development Bank U.S. Government Instrumentalities 8,630 1.87% International Bank of Reconstruction and Development U.S. Government Instrumentalities 9,929 2.15% International Finance Corporation U.S. Government Instrumentalities 7,659 1.66% American Honda Finance Corporate Notes 2,541 0.55% Apple Inc. Corporate Notes 4,152 0.90% Bank of New York Mellon Corporate Notes 5,418 1.17% BB&T Corporate Notes 1,687 0.37% Berkshire Hathaway Inc. Corporate Notes 2,503 0.54% Caterpillar Inc. Corporate Notes 2,454 0.53% Chevron Corp. Corporate Notes 1,873 0.41% Cisco Systems Inc. Corporate Notes 5,789 1.25% General Electric Co. Corporate Notes 6,253 1.35% Home Depot Corporate Notes 1,498 0.32% Honeywell International Corporate Notes 933 0.20% IBM Corp. Corporate Notes 5,463 1.18% JP Morgan Chase & Co. Corporate Notes 3,289 0.71% Toyota Motor Credit Corp. Corporate Notes 3,682 0.80% Unilever Capital Corp. Corporate Notes 433 0.09% Walt Disney Co. Corporate Notes 2,819 0.61% Wells Fargo & Co. Corporate Notes 5,966 1.29% Bank of Montreal Chicago Commercial Paper 8,667 1.87% BNP Paribas NY Commercial Paper 9,817 2.12% Cooperatieve Rabobank U.A. Commercial Paper 16,333 3.53% Dexia Credit Local SA NY Commercial Paper 5,511 1.19% ING (US) Funding LLC Commercial Paper 6,523 1.41% J.P. Morgan Securities LLC Commercial Paper 13,086 2.83% MUFG Bank LTD NY Commercial Paper 9,818 2.12% Bank of Montreal Chicago Negotiable Certificates of Deposit 7,985 1.73% Bank of Nova Scotia Houston Negotiable Certificates of Deposit 6,454 1.40% Canadian Imperial Bank NY Negotiable Certificates of Deposit 3,225 0.70% Credit Agricole CIB NY Negotiable Certificates of Deposit 3,316 0.72% Credit Suisse NY Negotiable Certificates of Deposit 3,365 0.73% MUFG Bank LTD NY Negotiable Certificates of Deposit 3,341 0.72% Nordea Bank AB NY Negotiable Certificates of Deposit 5,023 1.09% Skandinaviska Enskilda Banken NY Negotiable Certificates of Deposit 6,444 1.39% Sumitomo Mitsui Bank NY Negotiable Certificates of Deposit 6,467 1.40% Svenska Handelsbanken NY Negotiable Certificates of Deposit 7,965 1.72% Swedbank NY Negotiable Certificates of Deposit 6,589 1.43% WestPac Banking Corp. NY Negotiable Certificates of Deposit Total Investments City of Scottsdale, Arizona 81 $ 5,744 1.24% 462,266 100.00% Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 Investments Total City cash and investments at fair value are as follows (in thousands): Cash on Hand Carrying Amount of City Deposits Investments Endowments $ 19 164,857 515,069 645 Total Cash and Investments $ 680,590 The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The City has the following recurring fair value measurements as of June 30, 2018: Investments Measured at Fair Value (in thousands) Fair Value Measurements Using U.S. Government Securities Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) $ $ $ U.S. Government Agencies U.S. Government Instrumentalities Corporate Notes Commercial Paper Negotiable Certificates of Deposit $ 128,427 - - - 31,842 - 56,753 - 69,755 - 65,918 128,427 $ - 109,571 333,839 $ - Debt securities classified in Level 1 of the fair value hierarchy are valued using the price received from the primary exchange. Debt securities and certain of the negotiable certificates of deposit classified in Level 2 of the fair value hierarchy are also valued using the price received from the primary exchange. The primary exchange for both Level 1 and Level 2 investments has been set based upon where the highest number of trade days for a particular security has occurred. One of the certificates of deposit and all of the commercial paper investments classified in Level 2 of the fair value hierarchy are valued using a matrix pricing technique. Matrix pricing is a method of supplying system-generated prices to assets using yield curves that is defined by SEI Investments Company. Total City cash and investments are reported as follows (in thousands): Primary Government Cash and Investments Cash with Fiscal Agent Other Restricted Cash Family Self-Sufficiency Agency Fund Total Cash and Investments $ 470,126 159,744 50,628 92 $ 680,590 City of Scottsdale, Arizona 82 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 Investment income comprises the following for the fiscal year ended June 30, 2018 (in thousands): Net Interest Net Decrease in the Fair Value of Investments Total Net Investment Income $ 8,296 (3,787) $ 4,509 The net decrease in the fair value of investments for the fiscal year was $(3,787,122). This amount takes into account all changes in fair value (realized and unrealized) that occurred during the year. B. Endowments City of Scottsdale is the sole beneficiary of four permanent endowment funds, held and managed by the Arizona Community Foundation (Foundation). The endowment funds are managed in accordance with Arizona Revised Statute 10-11803, which governs the appropriation for expenditure or accumulation of endowment funds. The spending policy of the Foundation is communicated to the City annually. Distribution pursuant to the spending policy shall be based upon recommendation of the City of Scottsdale, made by and through the Scottsdale City Council. As of June 30, 2018, the amount of donor-restricted endowment funds available for authorization and expenditure is $26,300. C. Receivables Receivables as of June 30, 2018, for the government’s individual major governmental funds, nonmajor governmental funds, and internal service funds in the aggregate, including the applicable allowances for uncollectible accounts, are as follows (in thousands): Governmental and Governmental Activities Internal Service Funds Receivables Property Taxes and Penalties Property Court Subtotal Property Taxes and Penalties General $ Other Local Taxes Privilege Transient Occupancy State Shared Sales Franchise Fee Auto Lieu Highway User Subtotal Other Local Taxes Intergovernmental/Grants Interest and Other Interest Library Miscellaneous Subtotal Interest and Other Gross Receivables Less: Allowances for Uncollectibles Net Total Receivables $ 977 55,468 56,445 General Obligation Bond Debt Service General CIP Construction Capital Projects $ $ 1,017 1,017 Nonmajor and Other Funds - $ 110 110 Total Governmental and Internal Service Funds $ 2,104 55,468 57,572 15,880 869 3,200 392 20,341 - - 5,781 1,188 55 1,449 8,473 21,661 1,188 869 3,255 392 1,449 28,814 - - - 33,451 33,451 694 1,529 4,529 6,752 - 129 2,207 2,336 316 3,116 3,432 1,139 1,529 9,852 12,520 83,538 (46,426) 1,017 - 2,336 - 45,466 - 132,357 (46,426) 37,112 $ 1,017 $ City of Scottsdale, Arizona 83 2,336 $ 45,466 $ 85,931 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 The City has a development agreement relating to biomedical research activities with the Translational Genomics Research Institute (TGen) to repay $2,220,000 with interest through February 2024. Through the use of Community Development Block Grant (CDBG) funds, the City issues Green Housing Rehabilitation Program loans to qualified Scottsdale homeowners. As of June 30, 2018, the loan balances totaled $2,032,383, of which the majority is not expected to be collected within the next year. The City has an intergovernmental agreement with the Arizona State Land Department to reimburse the City for capital expenditures for street improvements of $13,921,086 after the land on which the improvements were made is sold. This receivable is not expected to be collected within the next year. The City and the Arizona Tourism and Sports Authority, doing business as the Arizona Sports and Tourism Authority (AZSTA), have an intergovernmental agreement for the AZSTA to pay for costs related to the Scottsdale municipal spring training facility renovation project. The balance of $10,934,201 is estimated to be paid by 2031 contingent upon revenue receipts collected by AZSTA. In January 2017, the Arizona Department of Revenue took over the administration of the City’s privilege tax collection and reporting; therefore, the City could have additional receivables that are unknown and such data is unavailable. Business-type Activities Enterprise Funds (in thousands) Receivables Privilege Tax Charges for Services Intergovernmental Interest Miscellaneous Water and Sewer Utility $ 17,113 1,892 715 2,051 Gross Receivables Less: Allowances for Uncollectibles Airport $ 21,771 (26) $ Net Total Receivables 21,745 Solid Waste 19 1,649 21 336 $ 2,025 $ 2,025 1,952 37 38 Total Enterprise Fund $ 2,027 (3) $ 2,024 19 19,065 3,541 773 2,425 25,823 (29) $ 25,794 The City has an intergovernmental agreement with the Arizona State Land Department to reimburse the City for capital expenditures for water and sewer improvements of $1,892,003 after the land on which the improvements were made is sold. This receivable is not expected to be collected within the next year. Governmental funds report deferred inflows in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Additionally, governmental funds record unearned revenue when resources have been received, but not yet earned. At the end of the fiscal year, the various components of deferred inflows and unearned revenue reported in the governmental funds were as follows (in thousands): Property Tax Transient Occupancy Tax Court Library Privilege Tax Intergovernmental Other Unavailable $ 1,287 27 3,727 384 3,290 32,226 1,424 Unearned $ 7,564 1,834 Total $ $ 42,365 9,398 City of Scottsdale, Arizona 84 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 D. Capital Assets Capital asset activity for the fiscal year ended June 30, 2018, was as follows (in thousands): Governmental Activities Capital Assets, not being depreciated Land Construction in Progress Total Capital Assets, not being depreciated Beginning Balance $ 3,143,211 25,855 3,169,066 Increases $ Decreases 34,238 54,387 88,625 $ Ending Balance (40,316) (40,316) $ 3,177,449 39,926 3,217,375 Capital Assets, being depreciated Buildings and Land Improvements Streets and Storm Drains Motor Vehicles Machinery and Equipment Total Capital Assets, being depreciated 716,572 1,753,876 77,800 77,327 2,625,575 7,800 31,326 12,085 7,179 58,390 (811) (167) (4,799) (3,491) (9,268) 723,561 1,785,035 85,086 81,015 2,674,697 Less Accumulated depreciation for Buildings and Land Improvements Streets and Storm Drains Motor Vehicles Machinery and Equipment Total Accumulated depreciation 335,011 1,032,179 38,180 39,748 1,445,118 20,958 50,516 6,114 6,197 83,785 (502) (167) (4,503) (2,580) (7,752) 355,467 1,082,528 39,791 43,365 1,521,151 1,180,457 (25,395) (1,516) 1,153,546 Total Capital Assets, being depreciated, net Governmental Activities Capital Assets, net Business-type Activities Capital Assets, not being depreciated Land Water Rights Construction in Progress Total Capital Assets, not being depreciated $ 4,349,523 $ 63,230 Beginning Balance $ 50,381 87,171 51,879 189,431 $ (41,832) Increases $ Decreases 76,489 76,489 $ (48,260) (48,260) $ 4,370,921 Ending Balance $ 50,381 87,171 80,108 217,660 Capital Assets, being depreciated Water System Sewer System Buildings and Land Improvements Machinery and Equipment Motor Vehicles Furniture, Fixtures, and Office Equipment Total Capital Assets, being depreciated 1,213,936 616,142 43,140 6,529 628 486 1,880,861 35,530 18,871 845 437 523 244 56,450 (666) (6,633) (1) (7,300) 1,248,800 635,013 37,352 6,966 1,151 729 1,930,011 Less Accumulated depreciation for Water System Sewer System Buildings and Land Improvements Machinery and Equipment Motor Vehicles Furniture, Fixtures, and Office Equipment 463,149 219,747 14,602 2,919 555 208 33,776 16,764 1,526 557 46 69 (666) (3,792) (1) 496,259 236,511 12,336 3,476 601 276 701,180 52,738 (4,459) 749,459 1,179,681 3,712 (2,841) 1,180,552 Total Accumulated depreciation Total Capital Assets, being depreciated, net Business-type Activities Capital Assets, net $ 1,369,112 $ City of Scottsdale, Arizona 85 80,201 $ (51,101) $ 1,398,212 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 During the fiscal year, the Airport and Water and Sewer Utility Enterprise Funds capitalized net interest costs of $3,657,294. Total interest expense in these funds before capitalization was $16,291,956. Depreciation expense was charged to functions/programs of the primary government as follows (in thousands): Governmental Activities City Clerk City Attorney City Court City Manager Public Works Community and Economic Development Public Safety City Treasurer Community Services Administrative Services Capital Assets Held by the Government's Internal Service Funds are Charged to the Various Functions Based on their Usage of the Assets Total Depreciation Expense - Government Activities $ 2 15 40 55 8,347 51,403 4,255 6 8,548 3,967 7,147 $ 83,785 $ 51,106 1,370 262 $ 52,738 Business-type Activities Water and Sewer System Airport Solid Waste Total Depreciation Expense - Business-type Activities City of Scottsdale, Arizona 86 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 Construction Commitments The City has active construction projects as of June 30, 2018. At year end the government’s commitments with contractors for specific projects are as follows (in thousands): Capital Project Program Classification Aviation Drainage and Flood Control Fire Protection Municipal Facilities Neighborhood and Community Parks Police Preservation Streets Technology Traffic Transit Wastewater Water Total Construction Commitments Governmental Activities General CIP Construction Capital Projects Fund Nonmajor Governmental Funds Internal Service Funds Total Governmental Activities Business-type Activities Water and Sewer Utility Airport Solid Waste Total Business-type Activities Total Construction Commitments E. Spent to Date $ 28,001 2,910 4,092 434 4,361 584 82 1,485 8,886 578 1,572 6,132 4,387 24,511 $ 88,015 Remaining Commitment $ 7,767 1,117 767 286 1,198 685 78 820 3,751 693 94 2,295 7,447 13,106 $ 40,104 $ $ $ 4,915 26,014 91 31,020 28,910 28,001 84 56,995 88,015 $ 2,738 8,801 180 11,719 20,580 7,767 38 28,385 40,104 Interfund Balances and Interfund Transfers Due To and Due From Other Funds “Due to” and “Due from” balances have been recorded to address temporary cash flow needs. The composition of interfund balances as of June 30, 2018, is as follows (in thousands): Receivable Fund General Fund General Fund Total Amount $ $ 7,121 3,673 10,794 Payable Fund Enterprise Fund - Airport Nonmajor Governmental Funds Total City of Scottsdale, Arizona 87 Amount $ $ 7,121 3,673 10,794 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 The Airport Enterprise Fund, the External Sources Capital Project Fund, and the Streetlight Districts Special Revenue Fund had deficit cash balances of $7,120,783, $3,671,206, and $1,531, respectively, due to pending reimbursements from bonds, grants, and intergovernmental agreements. Interfund Transfers Transfers are used to fund capital projects and debt service, to administer other operations, and for indirect administrative cost allocations (including in-lieu franchise fees) charged to Enterprise Funds. Net Transfers (in thousands) Governmental Funds General Debt Service - General Obligation Bond Capital Projects - General CIP Construction Nonmajor Governmental Funds Total Governmental Funds Transfers Out $ 25,376 486 70,410 96,272 Enterprise Funds Water and Sewer Utility Total Enterprise Funds Internal Service Funds Self-Insurance Total Internal Service Funds Total Transfers F. Transfers In $ $ 9,675 26,355 18,856 49,040 103,926 7,756 7,756 - 2 2 104 104 104,030 $ 104,030 Leases Operating Leases City as Lessee The City, as a lessee, has entered into lease agreements involving motor vehicles, a distributed antenna system, and data center facility space. Payments relating to these leases totaled $541,865, the full amount of which consisted of minimum lease payments. The distributed antenna system’s lease increases annually by 3 percent as per the lease agreement’s escalation clause and may be renewed by the City for up to ten years subsequent to the initial lease term’s ending date of March 31, 2020. The data center facility space’s lease increases annually by 5 percent as per the lease agreement’s escalation clause and may be renewed annually by agreement between the City and the lessor subsequent to the initial lease term’s ending date of September 30, 2021. City of Scottsdale, Arizona 88 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 The future lease payments under noncancellable operating lease agreements are as follows (in thousands): Fiscal Year Ending June 30, 2019 2020 2021 2022 2023 Total $ 246 253 264 70 833 $ City as Lessor The City has agreements in which it conveys the right to use land, airport facilities, and other capital assets that it accounts for as operating leases. Minimum future rentals on noncancellable operating leases at June 30, 2018, are as follows (in thousands): Fiscal Year Ending June 30, 2019 2020 2021 2022 2023 Thereafter Total $ $ 3,953 3,837 2,989 1,972 1,802 90,082 104,635 The above amounts do not include contingent rentals, which totaled $2,391,553 for the fiscal year ended June 30, 2018. A summary of the assets leased to third parties under the City’s operating lease agreements at June 30, 2018, are as follows (in thousands): Cost Less: Accumulated Depreciation Carrying Value $ $ 115,429 (25,617) 89,812 Capital Leases The City has entered into a lease agreement as lessee for financing the acquisition of printing and imaging equipment for its administrative operations. This lease agreement qualifies as a capital lease for accounting purposes and is therefore included in the City’s governmental capital assets. The equipment acquired through this lease agreement is recorded at a cost of $296,434, less accumulated amortization of $261,850. Current year amortization expense was $54,346. City of Scottsdale, Arizona 89 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 The present value of net minimum future lease payments under the capital lease agreement are as follows (in thousands): Fiscal Year Ending June 30, 2019 Less: Imputed Total G. $ $ 33 (1) 32 Service Concession Arrangements In 1983, the City entered into a cost-sharing and land use agreement with the United States Bureau of Reclamation (BOR), under which the City would operate and develop the land where the City’s WestWorld operation is located for a period of 50 years (with a mutual option to renew for an additional 25 years). The City entered into this agreement to develop the WestWorld facility for public recreation use and to enhance its revenue stream from rentals, concession sales, and parking fees. Beginning in fiscal year 2001, the BOR required the City to make annual payments for the administration of the agreement, and the present value of those payments as of June 30, 2018, is $1,119,000. The City has also provided consideration in the form of land improvements with a book value of $10,502,000 as of June 30, 2013, upon implementation of GASB Statement No. 60, Accounting and Financial Reporting for Service Concession Arrangements and an additional $50,929,000 through the fiscal year ended June 30, 2018. These improvements were reclassified from capital assets to an intangible asset. The City has recognized an intangible asset (net of accumulated amortization) in the amount of $47,831,000 at fiscal year-end pursuant to the service concession arrangement. In 1985, the City entered into a recreational land use agreement with the BOR, under which the City would develop, operate, and maintain the land where the City’s Tournament Players Club (TPC) golf complex is located for a period of 50 years (with a mutual option to renew for an additional 25 years). The City entered into this agreement to develop the TPC complex for public recreation use and to enhance its revenue stream from facility usage fees and rentals. Beginning in fiscal year 1999, the BOR required the City to make annual payments for the administration of the agreement, and the present value of those payments as of June 30, 2018, is $1,256,000. The City also provided consideration in the form of land improvements with a book value of $10,127,000 as of June 30, 2013, upon implementation of GASB Statement No. 60, Accounting and Financial Reporting for Service Concession Arrangements and an additional $8,746,000 through the fiscal year ended June 30, 2018. These improvements were reclassified from capital assets to an intangible asset. The City has recognized an intangible asset (net of accumulated amortization) in the amount of $16,274,000 at fiscal year-end pursuant to the service concession arrangement. H. Bonds, Loans, and Other Payables The following are brief descriptions of bonds outstanding at June 30, 2018. The totals shown are the principal amount outstanding, net of the amount due July 1, 2018. City of Scottsdale, Arizona 90 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 General Obligation Bonds General Obligation (GO) bonds are issued, after approval by City of Scottsdale voters at an authorized bond election, to finance the construction of water and sewer systems, artificial lighting, parks and open spaces, recreational facilities, and general-purpose improvements. In May 2004, voters authorized $500,000,000 of additional Preservation GO bonds, as well as an additional 0.15 percent sales tax increase to be used to finance Preserve land acquisitions. As of June 30, 2018, the City has $256,544,516 of unissued Preservation GO bonds from the May 2004 authorization. Preservation GO bonds are backed by the full faith and credit of the City and are repaid through the Preserve sales tax approved by voters in May 1995 and May 2004 to be used specifically to finance land acquisitions for the McDowell Sonoran Preserve. Municipal Property Corporation Bonds The City of Scottsdale Municipal Property Corporation (MPC) is a non-profit corporation created by the City in 1967 to finance the construction or acquisition of certain capital improvement projects. The MPC issues its own bonds, which are repaid through the City’s excise tax collections and other unrestricted revenues. The use of property taxes to repay these bonds is specifically prohibited by law. These bonds are recorded as both governmental and business-type activities long-term debt. A portion of the 2006 MPC Excise Tax Revenue Refunding Bonds, the 2010 MPC Excise Tax Revenue Bonds, a portion of the 2015A MPC Excise Tax Revenue Bonds, a portion of the 2015 MPC Excise Tax Revenue Refunding Bonds, the 2017 MPC Excise Tax Revenue Refunding Bonds, and the 2017A MPC Excise Tax Revenue Bonds are recorded in and paid by the Water and Sewer Enterprise Fund. The 2017B MPC Excise Tax Revenue Bonds are recorded in and paid by the Airport Fund. The City of Scottsdale entered into an Intergovernmental Agreement with the Arizona Tourism and Sports Authority, doing business as the Arizona Sports and Tourism Authority (AZSTA), pertaining to the Scottsdale municipal spring training facility renovation project in March 2005. Per this agreement, City of Scottsdale MPC Excise Tax Revenue Bonds were issued for $19,945,322 with one-third of the repayments provided by the City from funds received by the Maricopa County Stadium District (MCSD) and two-thirds of the repayments provided to the City by the AZSTA. The parties acknowledge that the exact amount of revenue accruing to the MCSD or the AZSTA may vary from year to year. Recognizing this, if funds accruing to either are insufficient to cover the estimated finance costs over the term of the bonds, then the parties agree to extend the repayment time as needed until the total amount is repaid. If the repayment time were extended, the City of Scottsdale would utilize excise taxes for the shortfall until such time as the parties fulfilled the full obligation. City of Scottsdale, Arizona 91 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 The City has pledged to repay $584,210,000 in MPC Excise Tax Revenue Bonds issued from 2006 through June 30, 2018, payable through 2037. Bonds issued prior to July 1, 2010, were pledged by revenues that included transient occupancy tax while bonds issued after this date exclude transient occupancy tax. The coverage ratio (revenues to debt service) for 2018 for MPC bonds is 4.32 (excluding the transient occupancy tax). The total principal and interest remaining to be paid on all MPC bonds is $685,281,963. Principal and interest paid for the current year and total excise tax collections (excluding transient occupancy taxes) were $50,197,619 and $216,642,614, respectively. Scottsdale Preserve Authority Bonds The Scottsdale Preserve Authority (SPA) is a non-profit corporation created by the City in 1997 to finance land acquisitions for the McDowell Sonoran Preserve. The SPA issues its own bonds, which are repaid through the 0.2 percent City sales tax approved by voters in May 1995 to be used specifically for this purpose. In May 2004, voters approved an additional 0.15 percent sales tax increase. SPA bonds are recorded as governmental activities long-term debt and are paid out of the SPA Debt Service Fund. The City has pledged to repay $44,870,000 in SPA bonds issued in 2010 and 2011. The bonds are payable through 2022. The coverage ratio (revenues to debt service) for 2018 is 7.86. The total principal and interest remaining to be paid on the bonds is $13,075,750. Principal and interest paid for the current year and total sales tax were $5,099,375 and $40,088,895, respectively. Water and Sewer Revenue Bonds Water and sewer revenue bonds are issued and authorized by the voters for the construction, acquisition, furnishing, and equipping of water and sewer facilities and related systems. The water and sewer revenue bonds are collateralized by revenue in excess of operating and maintenance expenses of the City’s water and sewer utility system and are repaid via user charges or fees for service. Property taxes cannot be used to pay the debt service on these bonds. Water and sewer revenue bond covenants require that the City accumulate sufficient reserves to cover the eventual replacement of the water and sewer system. The City has continued to meet this reserve requirement. At June 30, 2018, the funds restricted for this purpose were $40,346,083. The City has pledged to repay $35,290,000 in water and sewer revenue bonds issued in 2008. The bonds are payable through 2023. The coverage ratio (revenues to debt service) for 2018 is 17.43. The total principal and interest remaining to be paid on the bonds is $22,920,988. Principal and interest for the current year and total customer net revenues were $4,564,688 and $79,556,000, respectively. City of Scottsdale, Arizona 92 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 Certificates of Participation Certificates of Participation are issued to finance acquisition and improvements of real property that is leased to the City. The City’s obligation to make lease payments is subject to, and dependent upon, annual appropriations made by the City Council. In the event any such appropriation is not made, the lease will terminate, and the lessor will have legal right to take possession of the property. The City’s obligation to make lease payments does not constitute a debt or liability of the City within the meaning of any constitutional or statutory limitation. Neither the full faith and credit nor the general taxing power of the City is pledged to make payments of principal or interest due with respect to the Certificates of Participation. Such payments will be made solely from amounts derived under the terms of the lease, including lease payments, and amounts from time to time on deposit under the terms of the declaration of trust. Community Facilities Districts General Obligation Bonds Community Facilities District General Obligation Bonds are issued by Community Facilities Districts (CFDs), which are special purpose districts created specifically to acquire and improve public infrastructure in specified land areas. CFD bonds are repaid by ad valorem taxes levied directly by the districts and collected by the county. Property owners in the districts are assessed for district taxes and thus for all costs associated with the districts. The City has no liability for CFD bonds. CFDs are created only by petition to the City Council by property owners within the district areas. As the Board of Directors for the CFDs, the City Council has adopted a formal policy that CFD debt will be permitted only when the ratio of the full cash value of the unimproved district property to the proposed district debt is a minimum of 3 to 1, and 5 to 1 or higher after construction of improvements. These ratios are verified by an appraisal paid for by the CFD and administered by the City. In addition, cumulative debt of all CFDs cannot exceed 5 percent of the City’s secondary assessed valuation. City of Scottsdale, Arizona 93 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 Bonds payable at June 30, 2018, consisted of the following: Classified in Governmental Activities on the Government-wide Financial Statements: General Obligation Bonds Bonds Outstanding (in thousands) 2002 Refunding Bonds (issued September 26, 2002) due in annual installments of $1,625,000 to $8,795,000 through July 1, 2019; interest at 2 percent to 5 percent. On April 15, 2004, $1,510,000 due 2010 was defeased. Original issue amount $72,000,000. $ 1,725 2010 Various Purpose Bonds (issued April 7, 2010) due in annual installments of $950,000 to $4,800,000 through July 1, 2030; interest at 2 percent to 4 percent. On May 17, 2017, $28,250,000 due 2022 through 2029 was refunded. Original issue amount $50,800,000. 11,550 2011 Preservation Bonds (issued February 9, 2011) due in annual installments of $740,000 to $1,705,000 through July 1, 2034; interest at 3 percent to 5 percent. On May 17, 2017, $14,255,000 due 2023 through 2034 was refunded. Original issue amount $22,525,000. 3,580 2011 Refunding Bonds (issued April 6, 2011) due in annual installments of $640,000 to $7,265,000 through July 1, 2024; interest at 1 percent to 5 percent. Original issue amount $43,115,000. 18,685 2012 Preservation Bonds (issued February 2, 2012) due in annual installments of $1,400,000 to $18,000,000 through July 1, 2034; interest at 2 percent to 4 percent. Original issue amount $50,000,000. 48,600 2012 Refunding Bonds (issued July 11, 2012) due in annual installments of $205,000 to $30,045,000 through July 1, 2025; interest at 2 percent to 5 percent. Original issue amount $83,025,000. 60,800 2013 Preservation Bond (issued February 13, 2013) due in annual installments of $1,000,000 to $8,665,000 through July 1, 2034; interest at 2 percent to 4 percent. Original issue amount $75,000,000. 74,000 2014 Preservation Bond (issued May 7, 2014) due in annual installments of $465,000 to $945,000 through July 1, 2034; interest at 1.75 percent to 4 percent. Original issue amount $14,000,000. 11,870 2014 Refunding Bonds (issued May 7, 2014) due in annual installments of $3,845,000 to $12,230,000 through July 1, 2023; interest at 2 percent to 5 percent. Original issue amount $83,150,000. 57,600 2015 Refunding Bonds (issued April 2, 2015) due in annual installments of $500,000 to $30,565,000 through July 1, 2034; interest at 3 percent to 4 percent. Original issue amount $160,415,000. 142,465 2017A Preservation Bonds (issued March 8, 2017) due in annual installments of $1,825,000 to $2,545,000 through July 1, 2034; interest at 4 percent to 5 percent. Original issue amount $17,410,000. 17,410 2017B Preserve Acquisition Refinancing Bonds (issued May 17, 2017) due in annual installments of $3,510,000 to $5,790,000 through July 1, 2024; interest at 5 percent. Original issue amount $18,495,000. 18,495 (continued) City of Scottsdale, Arizona 94 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 General Obligation Bonds (continued) Bonds Outstanding (in thousands) 2017 Refunding Bonds (issued May 17, 2017) due in annual installments of $1,055,000 to $5,525,000 through July 1, 2034; interest at 3 percent to 5 percent. Original issue amount $39,985,000. $ 2017C Various Purpose Bonds (issued December 6, 2017) due in annual installments of $1,690,000 to $6,800,000 through July 1, 2027; interest at 5 percent. Original issue amount $25,500,000. Total General Obligation Bonds Outstanding 39,985 18,700 $ 525,465 $ 51,940 Some of the above General Obligation Bonds are paid from the .2 percent and .15 percent Preservation Sales Taxes. Municipal Property Corporation Bonds 2006 Municipal Property Corporation Excise Tax Revenue Refunding Bonds (issued November 29, 2006) due in annual installments of $1,200,000 to $4,975,000 through July 1, 2034; interest at 5 percent. Original issue amount $55,450,000. 2013A Municipal Property Corporation Excise Tax Revenue Bonds (issued February 13, 2013) due in annual installments of $830,000 to $2,920,000 through July 1, 2028; interest at 3 percent to 5 percent. Original issue amount $26,295,000. 21,155 2013B Municipal Property Corporation Excise Tax Revenue Bonds (issued February 13, 2013) due in annual installments of $45,000 to $100,000 through July 1, 2033; interest at 3 percent to 5 percent. Original issue amount $1,440,000. 1,190 2013C Municipal Property Corporation Excise Tax Revenue Bonds (issued February 13, 2013) due in annual installments of $1,210,000 to $2,855,000 through July 1, 2033; interest at 3 percent to 5 percent. Original issue amount $37,265,000. 30,855 2014 Municipal Property Corporation Excise Tax Revenue Refunding Bonds (issued May 29, 2014) due in annual installments of $1,730,000 to $3,040,000 through July 1, 2027; interest at 1.75 percent to 5 percent. Original issue amount $22,735,000. 19,800 2015A Municipal Property Corporation Excise Tax Revenue Bonds (issued January 6, 2015) due in annual installments of $205,000 to $865,000 through July 1, 2034; interest at 3 percent to 5 percent. Original issue amount $12,200,000. 10,670 2015A Municipal Property Corporation Taxable Excise Tax Revenue Bonds (issued January 6, 2015) due in annual installments of $275,000 to $1,025,000 through July 1, 2034; interest at 2 percent to 4 percent. Original issue amount $14,615,000. 12,600 2015 Municipal Property Corporation Excise Tax Revenue Refunding Bonds (issued March 26, 2015) due in annual installments of $1,460,000 to $6,877,488 through July 1, 2035; interest at 3 percent to 5 percent. Original issue amount $46,758,269. 39,708 Total Municipal Property Corporation Bonds Outstanding City of Scottsdale, Arizona 95 $ 187,918 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 Scottsdale Preserve Authority Bonds Bonds Outstanding (in thousands) 2010 Scottsdale Preserve Authority Excise Tax Revenue Refunding Bonds (issued October 20, 2010) due in annual installments of $3,110,000 to $6,090,000 through July 1, 2024; interest at 3 percent to 5.25 percent. On May 17, 2017, $19,535,000 due 2021 through 2024 was refunded. Original issue amount $32,855,000. $ 2011 Scottsdale Preserve Authority Excise Tax Revenue Refunding Bonds (issued on April 6, 2011) due in annual installments of $920,000 to $1,350,000 through July 1, 2022; interest at 2 percent to 5 percent. Original issue amount $12,015,000. Total Scottsdale Preserve Authority Bonds 6,950 5,000 $ 11,950 $ 4,914 $ 2,950 Certificates of Participation 2010 Certificates of Participation (issued August 24, 2010) due in semi-annual installments of $984,651 to $1,246,573 beginning January 1, 2012, through July 1, 2020; interest at 2.97 percent. Original issue amount $20,000,000. Community Facilities Districts General Obligation Bonds 2007 Waterfront Commercial Community Facilities District General Obligation Bonds (issued December 11, 2007) due in annual installments of $25,000 to $300,000 beginning July 15, 2009 through July 15, 2032; interest at 4.85 percent to 6.05 percent. Original issue amount $3,805,000. 2012 DC Ranch Community Facilities District General Obligation Refunding Bonds (issued September 18, 2012) due in annual installments of $555,000 to $1,245,000 beginning July 15, 2013 through July 15, 2027; interest at 3.41 percent. Original issue amount $14,670,000. 9,820 2012 McDowell Mountain Ranch Community Facilities District General Obligation Refunding Bonds (issued September 18, 2012) due in annual installments of $1,020,000 to $1,335,000 beginning July 15, 2013 through July 15, 2022; interest at 2.84 percent. Original issue amount $11,555,000. 5,040 2012 Via Linda Community Facilities District General Obligation Refunding Bonds (issued September 18, 2012) due in annual installments of $135,000 to $210,000 beginning July 15, 2013 through July 15, 2023; interest at 2.60 percent. Original issue amount $2,000,000. 990 Total Community Facilities Districts General Obligation Bonds Outstanding Total Bonds Payable Recorded in Governmental Activities City of Scottsdale, Arizona 96 $ 18,800 $ 749,047 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 Classified in Business-type Activities on the Government-wide Financial Statements: Water and Sewer Revenue Bonds Bonds Outstanding (in thousands) 2008 Water and Sewer Revenue Refunding Bonds (issued February 6, 2008) due in annual installments of $190,000 to $4,375,000 through July 1, 2023; interest at 3.25 percent to 5.25 percent. Original issue amount $35,290,000. $ 19,715 $ 87,785 Municipal Property Corporation Bonds 2006 Municipal Property Corporation Excise Tax Revenue Refunding Bonds (issued November 29, 2006) due in annual installments of $3,600,000 to $10,140,000 through July 1, 2030; interest at 5 percent. Original issue amount $110,510,000. 2010 Municipal Property Corporation Excise Tax Revenue Bonds (issued April 7, 2010) due in annual installments of $180,000 to $7,800,000 through July 1, 2036; interest at 3 percent to 5 percent. On March 1, 2017, $55,510,000 due 2023 through 2028 and 2031 through 2036 was refunded. Original issue amount $75,000,000. 15,230 2015A Municipal Property Corporation Excise Tax Revenue Bonds (issued January 6, 2015) due in annual installments of $310,000 to $1,305,000 through July 1, 2034; interest at 3 percent to 5 percent. Original issue amount $18,485,000. 16,165 2015 Municipal Property Corporation Excise Tax Revenue Refunding Bonds (issued March 26, 2015) due in annual installments of $3,788,459 to $5,822,479 through July 1, 2028; interest at 5 percent. Original issue amount $46,811,731. 46,812 2017 Municipal Property Corporation Excise Tax Revenue Refunding Bonds (issued March 1, 2017) due in annual installments of $2,015,000 to $12,630,000 through July 1, 2036; interest at 3 percent to 5 percent. Original issue amount $79,970,000. 79,970 2017A Municipal Property Corporation Excise Tax Revenue Bonds (issued May 24, 2017) due in annual installments of $1,080,000 to $2,730,000 through July 1, 2037; interest at 3 percent to 5 percent. Original issue amount $39,065,000. 37,985 2017B Municipal Property Corporation Excise Tax Revenue Bonds (issued May 24, 2017) due in annual installments of $645,000 to $1,655,000 through July 1, 2037; interest at 3 percent to 5 percent. Original issue amount $23,520,000. 22,875 Total Municipal Property Corporation Bonds Outstanding $ 306,822 Total Bonds Payable Recorded in Business-type Activities $ 326,537 $ 1,075,584 Total Long-Term Bonds Payable City of Scottsdale, Arizona 97 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 Statutory Debt Limitation Under the provisions of the Arizona Constitution, outstanding General Obligation (GO) bonded debt (including outstanding “excess premium,” as defined in Arizona Revised Statutes 35-457, 35-471, and 35-473.01) issued for water, sewer, light, parks, open space purposes, public safety, and transportation facilities may not exceed 20 percent of a city’s assessed valuation. Outstanding GO bonded debt for all other purposes may not exceed 6 percent of a city’s assessed valuation. GO bonds of community facilities districts also are not subject to or included in this calculation. The following summarizes the City’s legal GO bonded debt borrowing capacity at June 30, 2018: General Obligation Bonds Issued to Provide Water, Sewer, Light, Parks, Open Spaces, Public Safety, and Transportation 20% Constitutional Limit $ 1,385,687,229 Less General Obligation (511,046,163) 20% Bonds Outstanding Excess Premium (10,637,251) 6% Constitutional Limit Less General Obligation 6% Bonds Outstanding Excess Premium Available 20% Limitation Borrowing Capacity Available 6% Limitation Borrowing Capacity $ 864,003,815 General Obligation Bonds Issued for All Other Purposes $ 415,706,168 (14,418,837) - $ 401,287,331 Arbitrage Under U.S. Treasury Department regulations, all governmental tax-exempt debt issued after August 31, 1986, is subject to arbitrage rebate requirements. The requirements stipulate, in general, that the earnings from the investment of tax-exempt bond proceeds which exceed related interest expenditures on the bonds must be remitted to the Federal government on every fifth anniversary of each bond issue. The City used an independent consultant to evaluate the City’s outstanding tax-exempt debt for arbitrage liability and determined that there is no arbitrage liability due as of June 30, 2018. Advance Refundings and Defeasances In prior years, the City refinanced other bond issues through the issuance of refunding bonds. The proceeds from the refunding bonds have been deposited in irrevocable trusts at commercial banks and invested in U.S. Government securities which, together with interest earned thereon, will provide amounts sufficient for future redemption or payment of principal and interest of the issues refunded. As a result, the refunded bonds are considered defeased and the liability has been removed from the governmental activities column of the financial statements. City of Scottsdale, Arizona 98 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 The following table reflects refunded debt outstanding at June 30, 2018, net of any amounts to be paid or retired by the trustee on July 1, 2018 (in thousands): Refunded Debt Outstanding 2010 MPC Excise Tax Revenue Bonds 2010 Various Purpose GO Bonds 2010 Scottsdale Preserve Authority Excise Tax Revenue Refunding Bonds 2011 Preservation GO Bonds $ 55,510 28,250 19,535 14,255 $ 117,550 Changes in Long-Term Liabilities The following is a summary of changes in long-term liabilities reported in the government-wide financial statements for the fiscal year ended June 30, 2018 (in thousands): Beginning Balance Governmental Activities Bonds Payable General Obligation Bonds Municipal Property Corporation Bonds Scottsdale Preserve Authority Bonds Certificates of Participation Community Facilities Districts General Obligation Bonds Add Issuance Premiums Total Bonds Payable Capital Lease Service Concession Arrangements Risk Management Claims Compensated Absences Total Other Postemployment Benefit Liability Net Pension Liabilities $ 547,295 199,118 16,315 7,264 21,355 68,045 859,392 95 2,529 20,351 25,374 1,616 307,803 1,217,160 $ Governmental Activities Long-Term Liabilities Additional Obligations and Net Increases Current Maturities, Retirements, and Net Decreases Ending Balance Amounts Due Within One Year $ $ $ $ 25,500 3,496 28,996 37,315 10,479 578 1,291 78,659 $ (47,330) (11,200) (4,365) (2,350) (2,555) (6,128) (73,928) (63) (154) (34,733) (10,337) (119,215) $ $ 525,465 187,918 11,950 4,914 18,800 65,413 814,460 32 2,375 22,933 25,516 2,194 309,094 1,176,604 $ 42,250 14,157 4,540 2,421 2,475 65,843 32 154 7,801 11,007 84,837 Internal Service Funds serve primarily the governmental funds, the long-term liabilities of which are included as part of the governmental activities. For the fiscal year ended June 30, 2018, $429,000 of accrued compensated absences is included in the above amount for Internal Service Funds. For the governmental activities, the General Fund, Special Revenue Funds, Capital Projects Funds, and Internal Service Funds generally liquidate accrued compensated absences, the total OPEB liability, and the net pension liabilities. The compensated absences presented in this note are net of the current liability of $233,000. Business-type Activities Bonds Payable Water and Sewer Revenue Bonds Municipal Property Corporation Bonds Add Issuance Premiums Total Bonds Payable Compensated Absences Net Pension Liabilities Business-type Activities Long-Term Liabilities Beginning Balance Additional Obligations and Net Increases Current Maturities, Retirements, and Net Decreases $ $ $ $ 23,085 321,912 33,486 378,483 3,467 35,762 417,712 $ City of Scottsdale, Arizona 99 1,369 1,369 $ (3,370) (15,090) (2,547) (21,007) (1,305) (2,239) (24,551) Ending Balance $ $ 19,715 306,822 30,939 357,476 3,531 33,523 394,530 Amounts Due Within One Year $ $ 3,540 16,053 19,593 1,507 21,100 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 Debt Service Requirements to Maturity The following is a summary of debt service requirements to maturity for long-term liabilities at June 30, 2018: Governmental Activities (in thousands) Fiscal Year 2019 2020 2021 2022 2023 2024-2028 2029-2033 2034-2038 Total Fiscal Year 2019 2020 2021 2022 2023 2024-2028 2029-2033 2034-2038 Total Fiscal Year 2019 2020 2021 2022 2023 2024-2028 2029-2033 2034-2038 Total General Obligation Bonds Issued to Provide Water, Sewer, Light, Parks, Open Spaces, Public Safety, and Transportation Facilities 20% Limitation Principal Interest Total $ 31,781 $ 19,342 $ 51,123 40,265 18,143 58,408 44,925 16,512 61,437 45,020 14,621 59,641 48,780 12,728 61,508 194,380 38,130 232,510 89,065 11,858 100,923 16,830 599 17,429 General Obligation Bonds Issued For All Other Purposes 6% Limitation Principal Interest Total $ 10,469 $ 437 $ 10,906 2,250 123 2,373 1,700 55 1,755 - Total General Obligation Bonds Principal Interest Total $ 42,250 $ 19,779 $ 62,029 42,515 18,266 60,781 46,625 16,567 63,192 45,020 14,621 59,641 48,780 12,728 61,508 194,380 38,130 232,510 89,065 11,858 100,923 16,830 599 17,429 $ 511,046 $ 131,933 $ $ 525,465 $ 132,548 $ 642,979 14,419 $ 615 $ 15,034 $ 658,013 Municipal Property Corporation Bonds Principal Interest Total $ 14,157 $ 8,369 $ 22,526 15,552 7,773 23,325 10,952 7,042 17,994 9,770 6,518 16,288 10,345 6,042 16,387 61,887 22,244 84,131 54,705 9,126 63,831 10,550 662 11,212 Scottsdale Preserve Authority Excise Tax Revenue Bonds Principal Interest Total $ 4,540 $ 577 $ 5,117 4,780 350 5,130 1,280 131 1,411 1,350 68 1,418 - Capital Leases Principal Interest Total $ 32 $ 1 $ 33 - $ 187,918 $ $ $ 67,776 $ 255,694 11,950 $ 1,126 $ 13,076 Certificates of Participation Principal Interest Total $ 2,421 $ 128 $ 2,549 2,493 56 2,549 - Community Facilities Districts General Obligation Bonds Principal Interest Total $ 2,475 $ 680 $ 3,155 2,550 601 3,151 2,650 519 3,169 2,755 433 3,188 1,470 345 1,815 5,800 943 6,743 1,100 171 1,271 - $ $ 4,914 $ 184 $ 5,098 18,800 $ 3,692 $ (continued) City of Scottsdale, Arizona 100 22,492 32 $ 1 $ 33 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 Governmental Activities (in thousands) Fiscal Year 2019 2020 2021 2022 2023 2024-2028 2029-2033 2034-2038 Total Service Concession Arrangements Principal Interest Total $ 154 $ 188 $ 342 154 205 359 154 223 377 154 242 396 154 262 416 769 1,643 2,412 689 2,051 2,740 147 582 729 Total Governmental Activities Principal Interest Total $ 66,029 $ 29,722 $ 95,751 68,044 27,251 95,295 61,661 24,482 86,143 59,049 21,882 80,931 60,749 19,377 80,126 262,836 62,960 325,796 145,559 23,206 168,765 27,527 1,843 29,370 $ $ 2,375 $ 5,396 $ 7,771 751,454 $ 210,723 $ 962,177 Business-type Activities (in thousands) Fiscal Year 2019 2020 2021 2022 2023 2024-2028 2029-2033 2034-2038 Total Water and Sewer Revenue Bonds Principal Interest Total $ 3,540 $ 1,026 $ 4,566 3,725 849 4,574 3,930 654 4,584 4,145 447 4,592 4,375 230 4,605 - Municipal Property Corporation Bonds Principal Interest Total $ 16,053 $ 14,105 $ 30,158 16,978 13,315 30,293 17,843 12,481 30,324 18,765 11,622 30,387 19,595 10,703 30,298 91,358 39,741 131,099 87,730 17,419 105,149 38,500 3,380 41,880 $ $ 306,822 $ 122,766 $ 429,588 19,715 $ 3,206 $ 22,921 Fiscal Year 2019 2020 2021 2022 2023 2024-2028 2029-2033 2034-2038 Total Business-type Activities Principal Interest Total $ 19,593 $ 15,131 $ 34,724 20,703 14,164 34,867 21,773 13,135 34,908 22,910 12,069 34,979 23,970 10,933 34,903 91,358 39,741 131,099 87,730 17,419 105,149 38,500 3,380 41,880 Total $ 326,537 $ 125,972 $ 452,509 City of Scottsdale, Arizona 101 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 V. OTHER INFORMATION A. Risk Management The City is exposed to various risks of loss related to public and aviation premises liability, self-insured benefits, property, and workers’ compensation. Public liability includes public officials’ errors and omissions, law enforcement liability, and automobile and general liability. The City is self-insured for the first $2,000,000 of public liability, the first $100,000 of property coverage, the first $325,000 of health benefits claims for an individual in a fiscal year, and the first $1,000,000 of workers’ compensation. Coverage in excess of these respective amounts is provided through the purchase of commercial insurance. As for claim expenditures, settlements for each of the past three fiscal years have not exceeded the City’s excess insurance coverage amounts for any claims. The City reports its self-insurance activity in the Self-Insurance Internal Service Fund. Claims liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. The liability claims amount recorded in the accompanying financial statements is based on reported pending claims and an actuarial analysis and projection of the accrued liability amounts necessary to fund the claims. At June 30, 2018, the general liability claims payable totaled $20,630,000 and the self-insured benefits claims payable totaled $2,303,000. The City began to administer all self-insured health and dental plans in January of 2004. Fiscal Year Ended June 30 (in thousands) 2018 B. 2017 Claims Payable, July 1 Current Year Claims Incurred Current Year Claim Payments $ 20,351 37,315 (34,733) $ 17,582 33,599 (30,830) Claims Payable, June 30 $ 22,933 $ 20,351 Contingent Liabilities The City is subject to a number of lawsuits, investigations, and other claims that are incidental to its normal operations. Although the outcome of these lawsuits is not presently determinable, in the opinion of City management, based on advice of the City Attorney, the resolution of these matters will not have a material adverse effect on the financial condition of the City. The City is self-insured for the first $2,000,000 of public liability; coverage in excess of this amount is provided through the purchase of commercial insurance. For more information on the City’s self-insurance, refer to Note V.A. above. In January 2013, the City entered into a settlement agreement with Scottsdale Fashion Square LLC to prepay an existing lease. In addition to a cash payment, the settlement included a provision for a waiver of $2.5 million against future City fees associated with the development of the Scottsdale Fashion Square parcel plus any property acquired in the future that is contiguous to the property. The eligible fees to be waived include water and sewer development fees. Per Arizona Revised Statute 9-463.05, “If a municipality agrees to waive any of the development fees assessed on a development, the municipality shall reimburse the appropriate development fee accounts for the amount that was waived.” As of June 30, 2018, $1,912,163 in fee waivers have been applied. City of Scottsdale, Arizona 102 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 The City has entered into several agreements whereby it will reimburse developers a portion of development costs and interest or sales tax generated on their site for a period of time and up to a maximum dollar amount. The funding source for the reimbursements will come from sales tax collected on the site over the life of the agreements. The City does not become liable under the agreements until a certificate of occupancy is issued or sales tax is generated, collected, and remitted to the City. As of June 30, 2018, these requirements have not been met under any of the agreements. The City’s estimated contingent liability related to the agreements at June 30, 2018, is $19,963,609. C. Tax Abatement Agreements The City enters into transaction privilege tax abatement agreements on an individual basis. The privilege taxes abated consist of a rebate of a portion of the 1 percent unrestricted portion of the City’s privilege tax rate. These abatement agreements are authorized through City Council resolution. There are no specific criteria against which such agreements are evaluated. Rather, the City Council, exercising the authority granted to it by law, and weighing the projected forsaken tax revenues against the potential benefits that would accrue to the City as a result of a particular tax abatement agreement, concludes whether or not the proposed tax abatement would be sufficiently advantageous to the City to warrant such an accord. For the fiscal year ended June 30, 2018, the City abated eligible privilege taxes totaling $121,653 in connection with the following tax abatement agreements, which comprise the entirety of the City’s tax abatement agreements: • A rebate of 70 percent of eligible privilege taxes generated by subject property, less $2,500 per quarter, to a developer for construction of public infrastructure and in recognition of the lost development opportunities occasioned by the preservation of historic features on the property. The City receives the conveyance of a Deed of Restrictive Covenant and Conservation (Historic Preservation) Easement over the subject property and the economic development benefits anticipated from the rehabilitation of the subject property. The amount of taxes abated during the fiscal year was $121,653. • A rebate of 2/3 of eligible privilege taxes to a developer for constructing and operating facilities for the sale and service of three or more premium brand-new car dealerships. The applicable privilege taxes are derived from: ˏˏ Prime contracting activities relating to the construction of the dealerships. ˏˏ Activity transpiring at the dealerships. ˏˏ Activity transpiring at another location owned by the developer, contingent upon the location remaining a motorized vehicle sales facility. No tax has been abated as of June 30, 2018, as the developer has yet to construct and commence the initial operation of the dealerships. As part of the agreement, the City also agreed to waive any City fees related to the initial design and construction of, or the issuance of a certificate of occupancy for, the dealerships. City of Scottsdale, Arizona 103 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 D. Joint Ventures Sub-Regional Operating Group (SROG) The City participates with the cities of Phoenix, Glendale, Mesa, and Tempe in the multi-city SubRegional Operating Group (SROG). SROG was formed pursuant to the Joint Exercise of Powers Agreement (JEPA) in order to govern the construction, operation, and maintenance of jointly used sewage treatment and transportation facilities. The facilities include the 91st Avenue Wastewater Treatment Plant, the Salt River Outfall Sewer, the Southern Avenue Interceptor, and related transportation facilities. The City of Phoenix acts as lead agency and is responsible for the planning, budgeting, construction, operation, and maintenance of the facilities. In addition, the City of Phoenix provides all management, personnel, financing arrangements, and accepts federal grants on behalf of the participants. The JEPA requires each city to pay for its share of the actual cash costs of operating and maintaining the facilities based on relative sewage flows and strengths. The City records its share of SROG’s cash operating expenses and its equity in the joint venture in the City’s Water and Sewer Fund. For the fiscal year ended June 30, 2017, (the latest audited information available from SROG), the City’s net investment in SROG was $92,679,000. SROG’s net cash operating expenses for the fiscal year ended June 30, 2017, were $37,806,567, of which the City’s share was $3,845,300, or 10.2 percent. For the fiscal year ended June 30, 2018, the City paid $3,524,418 for SROG capital contributions and $3,922,302 for SROG operating expenses, including adjustments to the operating and replacement reserves and prior year settlement. The Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2017, for the multicity Sub-Regional Operating Group (the latest SROG CAFR available) may be obtained from the Arizona Municipal Water Users Association, 4041 N. Central Avenue, Suite 900, Phoenix, AZ 85012. Regional Wireless Cooperative (RWC) The City participates in the Regional Wireless Cooperative (RWC), an association of municipalities formed in 2008 to oversee the administration, operation, management, and maintenance of an expanding regional communications network. The RWC was formed through a governance structure founded on the principles of cooperation for the mutual benefit of all members and has expanded to serve a still-growing list of cities, towns, and fire districts, along with many other area entities who serve public safety needs. A regional radio communications network was built to seamlessly serve the interoperable communication needs of first responders and other municipal radio users in and around the Phoenix Metropolitan Region. Financial responsibilities are shared by all members based on their relative size and is measured by the number of subscriber units (radios) on the network. The City of Phoenix is responsible for the day-to-day operations and maintenance of the network, as well as the management of the RWC’s organization and finances. City of Scottsdale, Arizona 104 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 The City records its share of contributions to the RWC, third party contributions paid to the RWC for the benefit of the City, and equity in the joint venture in the City’s proprietary funds and governmentwide financial statements. The equity balance as of June 30, 2017, (the latest audited information available from RWC), was $1,879,621 or 2.3 percent of the RWC’s total net position. The City contributed $218,606 for the fiscal year ended June 30, 2018, and shared in estimated depreciation expenses of $218,064 resulting in an estimated equity balance as of June 30, 2018, of $1,880,163. The RWC Comprehensive Annual Financial Statement is available from the Regional Wireless Cooperative, 200 West Washington Street, 12th Floor, Phoenix, Arizona, 85003-1611. E. Pollution Remediation In the proprietary funds financial statements, a long-term pollution remediation obligation is recognized for the remaining remediation period. In 1981, groundwater contamination was discovered when elevated levels of trichloroethylene (TCE) and other volatile organic chemicals were detected in two active City wells and three future wells. The City immediately shut down the affected wells. Following an investigation by the Environmental Protection Agency (EPA), the North Indian Bend Wash Site which includes the five wells above was placed on the federal Superfund list in 1983. The Superfund law was enacted in order to provide funding and regulatory authority for the study and cleanup of contaminated sites. The EPA, in conjunction with the State of Arizona, directs the cleanup of the North Indian Bend Wash (NIBW) Site that encompasses a groundwater contamination plume in Scottsdale. Following its investigation, the EPA identified three companies, Motorola Solutions Inc. (MSI), SMI Holdings, LLC, formerly Siemens Corporation, and GlaxoSmithKline Corporation, as the primary parties potentially responsible for causing the contamination and directed the companies to pay the costs associated with the cleanup. In 1991, the City, EPA, State of Arizona, Salt River Project (SRP), and the above-referenced participating companies entered into a Consent Decree in order to begin the containment and remediation of the contaminated groundwater plume and provide Scottsdale citizens with a potable water source. The companies agreed to pay for the construction and operation of the Central Groundwater Treatment Facility (CGTF), an air stripping plant that removes contaminants from the affected wells. As the CGTF operator and drinking water provider, the City ensures the water produced by the plant meets all federal and state water quality standards before water is delivered into the City’s distribution system. An Amended Consent Decree was signed by all parties in 2003 to capture additional voluntary and required work at the NIBW Site. No additional obligations were identified for the City. To facilitate groundwater sustainability and plume management, in 2012 the City voluntarily entered into an agreement with MSI to operate an additional groundwater treatment facility that would be designed and constructed to deliver treated water to the Chaparral Water Treatment Plant (CWTP). The North Indian Bend Wash Granular Activated Carbon Treatment Facility (NGTF) was completed in late 2013 and began delivery of water to the CWTP in August 2014. The facility is a granular activated carbon plant that is owned by MSI but operated and maintained by the City to treat a well owned by SRP. The type of treatment chosen was due to the lower concentration of contaminants in the well. All costs are reimbursed to the City by MSI. City of Scottsdale, Arizona 105 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 The measurement of the City’s pollution remediation obligation liability includes all remediation work that the City expects to perform, including work expected to be performed for the participating companies. In order to estimate the CGTF liability, ten projected cash flows, based on the prior ten years of historical costs and weighted equally, were used to calculate an average annual cost. In order to estimate the NGTF liability, five projected cash flows, based on the prior five years of historical costs and weighted equally, were used to calculate an average annual cost. These average costs were then projected over the remaining remediation period of 56 years for CGTF and the NGTF. The Environmental Protection Agency (EPA) estimated in its September 2011 review that future remediation will be required for approximately 50-70 years at each site; the most recent five-year EPA review, approved in September 2016, was silent on the number of required remediation years. Improvements in technology and changes in laws or regulations did not impact the average annual cost. The liability is revalued annually. The fiscal year 2018 reimbursable outlays for operating and monitoring the CGTF were $493,065 and for the NGTF were $141,877. The City has a reimbursement agreement with the responsible parties and the total liability is expected to be fully recovered by the participating companies and therefore a corresponding pollution remediation recoveries receivable has been accrued. F. Related Organization The Industrial Development Authority (IDA) is a non-profit corporation established by the City and granted incorporation by the Arizona Corporation Commission in 1984. The primary function of the IDA is to promote the retention, expansion, and attraction of businesses and commercial enterprises in Scottsdale. The City Council appoints the Board of Directors of the IDA and is also involved in granting and denying IDA bond applications. G. Retirement and Pension Plans All benefitted employees of the City including the Mayor and the City Council are covered by one of four pension plans. All full-time City employees, except public safety personnel (police officers and firefighters) and the Mayor and City Council, participate in the Arizona State Retirement System, a cost-sharing multipleemployer defined benefit pension plan. All public safety personnel participate in the Public Safety Personnel Retirement System, which is an agent multiple-employer defined benefit pension plan. The Mayor and City Council participate in either the Elected Officials’ Retirement Plan (a cost-sharing multiple-employer defined benefit pension plan) or the Elected Officials’ Defined Contribution Retirement System (a defined contribution plan). The City contributes to the Elected Officials’ Retirement Plan; however, the plan is not described below because of its relative insignificance to the financial statements. All plans are component units of the State of Arizona. City of Scottsdale, Arizona 106 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 Arizona State Retirement System General Information about the Pension Plan Plan Description All benefitted City employees, except public safety personnel and the Mayor and City Council, participate in the Arizona State Retirement System (ASRS). ASRS administers a cost-sharing multipleemployer defined benefit pension plan. ASRS was established by the State of Arizona to provide pension benefits for employees of both the state and participating political subdivisions and school districts. ASRS is administered in accordance with Title 38, Chapter 5, Articles 2 and 2.1 of the Arizona Revised Statutes (ARS). ASRS issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing to ASRS Financial Services Division, PO Box 33910, Phoenix, AZ 85067, or by visiting https://www.azasrs. gov/content/annual-reports. Benefits Provided ASRS provides retirement and survivor benefits. State statute establishes benefits terms. A member may retire upon meeting the following age and service requirements: Initial Membership Date Pre-July 1, 2011 July 1, 2011 and after Age Years of Service Age Years of Service 65 N/A 62 10 Age plus years of service total 80 65 62 60 55 N/A 10 25 30 The retirement benefit is based on a percentage of average monthly compensation multiplied by the years of credited service. The compensation generally does not include lump sum payments on termination of employment for accumulated vacation or annual leave, sick leave, compensatory time, or any other form of termination pay (see discussion of pre-January 1, 1984 members below). The multiplier percentage and average monthly compensation are defined in the following schedules: Years of Service 0.00-19.99 years 20.00-24.99 years 25.00-29.99 years 30.00 or more years Multiplier 2.10% 2.15% 2.20% 2.30% Membership Date Pre-July 1, 2011 July 1, 2011 and after City of Scottsdale, Arizona 107 Average Monthly Compensation 36 consecutive months of highest compensation within final 120 months of service 60 consecutive months of highest compensation within final 120 months of service Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 Members who began participation in the Plan prior to January 1, 1984, may choose to have average monthly compensation determined based upon the period of 60 consecutive months during which the member receives the highest compensation within the last 120 months of service, including lump sum payments as described above. Members who attain age 50 with at least five years of total credited service may take an early retirement; however, the amount of their retirement benefit is actuarially reduced. Survivor benefits are applicable if death occurs prior to retirement, and are payable, at the option of the beneficiary, by either of the following methods: 1. 2. A lump sum equal to the sum of (a) and (b): a. the sum of the member’s employee and employer balance plus any service purchase payments, and b. the sum of the member’s employee and employer balance plus any supplemental credits, if any, transferred from the System (closed portion of ASRS) to the Plan, with interest The beneficiary may elect to receive a monthly income, in the single life form, which is actuarially equivalent to the amount in 1. above at 8 percent. Retirees who have been retired one year are eligible for a permanent benefit increase (PBI) up to a maximum of a 4 percent increase. The PBI is paid from a reserve of “Excess Investment Earnings.” If there are no “Excess Investment Earnings” in reserve, then no PBI is paid. Further, PBI enhancements (EPBI) provide retired members with at least ten years of service who have been retired five or more years an additional benefit. For each complete 5-year period the member has been retired, an incremental benefit is paid if monies to pay the benefit are available. This benefit is funded by an interest credit of 8 percent of the reserve for future PBIs. Due to legislation enacted in the 2013 legislative session, PBIs and EPBIs will not be awarded to members hired after September 13, 2013. Contributions The ARS provide statutory authority for determining the employees’ and employers’ contribution amounts as a percentage of the City’s covered payroll. Although the statutes prescribe the basis of making the actuarial calculation, the Arizona legislature is authorized to approve a contribution rate other than the actuarially determined rate. Employees were required to contribute 11.34 percent of their annual pay for the fiscal year ended June 30, 2018, and the City’s required contribution rate was 10.90 percent during the same time period. In addition, the City was required by statute to contribute at the actuarially determined rate of 9.26 percent of annual covered payroll of retired members who worked for the City in positions that would typically be filled by an employee who contributes to the ASRS. The required contribution rate for the fiscal year ended June 30, 2018, was actuarially determined to yield contribution amounts sufficient to finance costs earned by employees during the year and to amortize the Plan’s unfunded actuarially accrued liability over the period specified in the statutes. Contributions to the pension plan from the City were $11,437,000 for the fiscal year ended June 30, 2018. City of Scottsdale, Arizona 108 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At June 30, 2018, the City reported a liability of $164,631,956 for its proportionate share of the collective net pension liability of the ASRS. The collective net pension liability was measured as of June 30, 2017, and the total pension liability used to calculate the collective net pension liability was determined by an actuarial valuation as of June 30, 2016. Update procedures were used to roll forward the total pension liability to the measurement date. The City’s proportion of the collective net pension liability was based on the City’s proportionate share of contributions to the pension plan relative to the contributions of all participating entities for the fiscal year ended June 30, 2017. At June 30, 2017, the City’s proportion was 1.05682 percent, which was a decrease of 0.03017 percent from its proportion measured as of June 30, 2016. For the fiscal year ended June 30, 2018, the City recognized a collective pension expense of $3,680,702. At June 30, 2018, the City reported a collective deferred outflow of resources and a collective deferred inflow of resources related to pensions from the following sources (in thousands): Deferred Outflows of Resources Differences between expected and actual experience Deferred Inflows of Resources $ - $ 4,936 Changes in assumptions 7,150 4,923 Net difference between projected and actual earnings on pension plan investments 1,182 - Changes in proportion and differences between City contributions and proportionate share of contributions - 4,204 11,437 - City contributions subsequent to the measurement date Total $ 19,769 $ 14,063 The $11,437,000 reported as a collective deferred outflow of resources related to pensions resulting from City contributions subsequent to the measurement date will be recognized as a reduction of the collective net pension liability in the fiscal year ending June 30, 2019. Other amounts reported as a collective deferred outflow of resources and a collective deferred inflow of resources related to pensions will be recognized in pension expense as follows (in thousands): Fiscal year ending June 30: 2019 2020 2021 2022 2023 Thereafter $ (8,835) 5,181 1,710 (3,787) - City of Scottsdale, Arizona 109 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 Actuarial Assumptions The total pension liability in the June 30, 2017, actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Actuarial valuation date Actuarial rollforward date Actuarial cost method Amortization method Plan amendments Investment gain/loss Assumption gain/loss Experience gain/loss Asset valuation Discount rate Projected salary increases Inflation Permanent benefit increase Mortality rates June 30, 2016 June 30, 2017 Entry age normal Immediate Five years Average future service lives Average future service lives Fair value 8% 3-6.75% 3% Included 1994 GAM Scale BB The actuarial assumptions used in the June 30, 2016, valuation were based on the results of an actuarial experience study for the five-year period ended June 30, 2012. The long-term expected rate of return on ASRS pension plan investments was determined to be 8.70 percent using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of 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 arithmetic real rates of return for each major asset class are summarized in the following table: Asset Class Target Allocation Equity Fixed income Commodities Real estate Multi-asset Total 58% 25% 2% 10% 5% 100% Long-Term Expected Arithmetic Real Rate of Return 6.73% 3.70% 3.84% 4.25% 3.41% City of Scottsdale, Arizona 110 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 Discount Rate The discount rate used to measure the total pension liability was 8 percent. The projection of cash flows used to determine the discount rate assumed that contributions from participating employers will be made at the actuarially determined rates. 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 the City’s Proportionate Share of the Collective Net Pension Liability to Changes in the Discount Rate The following presents the City’s proportionate share of the collective net pension liability calculated using the discount rate of 8 percent, as well as what the City’s proportionate share of the collective net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (7 percent) or 1-percentage-point higher (9 percent) than the current rate: City's proportionate share of the collective net pension liability 1% Decrease (7.0%) Discount Rate (8.0%) 1% Increase (9.0%) $ 211,307,976 $ 164,631,956 $ 125,630,144 Pension Plan Fiduciary Net Position The pension plan’s fiduciary net position has been determined on the same basis used by the pension plan. The financial statements of ASRS are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America that apply to government accounting of fiduciary funds issued by the Governmental Accounting Standards Board (GASB). Benefits and refunds are recognized when due and payable. Fair value measurements are categorized within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset and give the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). In instances where inputs used to measure fair value fall into different levels in the fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. Investments that are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient are not classified in the fair value hierarchy. Cash and shortterm investments generally include cash, foreign currencies, short-term investment funds, and U.S. Treasury bills that mature within 1 year. These funds are reported at cost, or cost plus accrued interest, which approximates fair value. Detailed information about the pension plan’s fiduciary net position is available in the separately issued ASRS financial report. City of Scottsdale, Arizona 111 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 Public Safety Personnel Retirement System General Information about the Pension Plan Plan Description All of the City’s sworn public safety personnel participate in Public Safety Personnel Retirement System (PSPRS). PSPRS administers an agent multiple-employer defined benefit pension plan and the public safety personnel defined contribution pension plan. The defined contribution plan is only available to police department members who became a member on or after July 1, 2017, and fire department members who became a member on or after January 1, 2012. The defined benefit and defined contribution pension plans are administered in accordance with Title 38, Chapter 5, Articles 4 and 4.1, respectively, of the Arizona Revised Statutes (ARS). PSPRS acts as a common investment and administrative agent that is jointly administered by the Board of Trustees (the Board) and 232 local boards. PSPRS issues a publicly available financial report that includes financial statements and required supplementary information. The report may be obtained by writing to PSPRS, 3010 E. Camelback Road, Suite 200, Phoenix, AZ 85016, calling (602) 255-5575, or by visiting: http://www. psprs.com/investments--financials/annual-reports. Benefits Provided PSPRS provides retirement, disability, and survivor benefits. State statute establishes benefit terms. Retirement benefits for employees who became a member on or before December 31, 2011, (Tier 1 members) commence the first day of the month following termination of employment and are calculated based upon the following: 1. 20 years of credited service: 50 percent of the average monthly benefit compensation for the first 20 years of credited service. 2. Age 62 with 15 years of service, or 20 years of service with less than 20 years of credited service: 50 percent of the average monthly benefit compensation for the first 20 years of credited service. The pension is reduced by 4 percent per year for each year of credited service under 20 years. 3. 20 to 24.99 years of credited service: 50 percent of the average monthly benefit compensation for the first 20 years of credited service plus 2 percent of the average monthly benefit compensation for each year of credited service between 20 and 24.99. 4. 25 or more years of credited service: 50 percent of the average monthly benefit compensation for the first 20 years of credited service plus 2.5 percent of the average monthly benefit compensation for each year of credited service above 20 years - up to a maximum of 80 percent of the average monthly benefit compensation. City of Scottsdale, Arizona 112 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 Retirement benefits for employees who became a member on or after January 1, 2012, and on or before June 30, 2017, (Tier 2 members) commence the first day of the month following termination of employment and are calculated based upon the following: 1. Age 52.5 with 15 years of credited service but less than 25 years: average monthly benefit compensation times a multiplier that varies by years of service, from 1.5 percent to 2.5 percent per year of service, times the number of years of service. 2. Age 52.5 with 25 years of service: 62.5 percent of the average monthly benefit compensation. Benefits will be reduced by 4 percent for each year of credited service under 25 years. 3. 25 or more years of service: 62.5 percent of the average monthly benefit compensation for the first 25 years of credited service plus 2.5 percent of the average monthly benefit compensation for each year over 25 years of credited service - up to a maximum of 80 percent of the average monthly benefit compensation. The pension is reduced by 4 percent per year for each year of credited service under 25 years with a pro-rata reduction for any fractional years. Retirement benefits for employees who became a member on or after July 1, 2017, (Tier 3 members) are included in a new tier of benefits that was established by legislation passed in 2016. This group of members will have the choice of enrolling in either the defined benefit plan (police employees) or a hybrid plan, which has elements of both a defined benefit and defined contribution plan (fire employees). Both police and fire employees who are part of this cohort may also elect to participate in a defined contribution plan in lieu of the respective choices listed above. If enrolling in the defined benefit plan or hybrid plan, benefits (defined benefit portion only for the hybrid plan) commence the first day of the month following termination of employment and are based upon the following: 1. Age 55 with 15 or more years of credited service: average monthly benefit compensation times a multiplier that varies by years of service, from 1.5 percent to 2.5 percent per year of service, times the number of years of service - up to a maximum of 80 percent of the average monthly benefit compensation. 2. An individual who became a member on or after July 1, 2017, and reaches age 52.5 with at least 15 years of credited service may take an early retirement; however, the amount of his or her retirement benefit is actuarially reduced. The phrase “average monthly benefit compensation,” as it is used in the above discussion, is defined in the following schedule: Membership Tier Tier 1 Average Monthly Compensation 36 consecutive months of highest compensation within the last 20 years of service Tier 2 60 consecutive months of highest compensation within the last 20 years of service Tier 3 60 consecutive months of highest compensation within the last 15 years of service City of Scottsdale, Arizona 113 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 Disability benefits are calculated as follows: Accidental Disability Retirement: Catastrophic Disability Retirement: Ordinary Disability Retirement: 50% of average monthly compensation, or normal pension amount, whichever is greater. 90% of average monthly compensation for the first 60 months. Thereafter, the benefit is the greater of 62.5% of average monthly compensation or the member’s accrued normal pension. A percentage of normal pension on employee’s credited service (maximum of 20 years divided by 20). Survivor benefits are paid on behalf of an active member in the amount of 80 percent of the pension based on the calculation for an accidental disability retirement. If the member was killed in the line of duty, the benefit is 100 percent of the member’s average compensation. The benefit amount is allocated to the surviving spouse and, if applicable, eligible children. If there is no surviving spouse, and there is at least one eligible child, the guardian of the eligible child(ren) and the eligible child(ren) are the recipients of the benefit. If there is no surviving spouse or eligible child(ren), the member’s named beneficiary on file will receive the member’s accumulated contributions. Benefits are paid on behalf of an inactive, non-retired member to the member’s named beneficiary in the amount of the member’s accumulated contributions. Death benefits are paid on behalf of a retired member in a manner similar to an active member. The surviving spouse (if married for at least two consecutive years at the time of the member’s death) will receive 80 percent of the member’s pension benefit for lifetime. The surviving children and guardian provisions are the same as those regarding active members, with the exception that the percentages received are based upon the pension amount as opposed to the amounts referenced above for active members. If there is no surviving spouse or eligible child(ren), the member’s named beneficiary on file will receive the member’s accumulated contributions less the pension payments made to the member. A retired member or survivor of a retired member may receive a Cost of Living Adjustment (COLA) from the System if monies are available. COLA eligibility and calculation is contingent upon the member’s hire date. Members, or survivors of retired members, who were hired before July 1, 2017, are eligible to receive a compounding COLA in the base benefit of up to 2 percent per year. The COLA will be based on the average annual percentage change in the Metropolitan Phoenix-Mesa Consumer Price Index published by the United States Department of Labor, Bureau of Statistics. The first payment will be made on July 1, 2018, and every July 1 thereafter. City of Scottsdale, Arizona 114 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 Members, or survivors of retired members, who were hired on or after July 1, 2017, are eligible to receive a compounding COLA in the base benefit, beginning at the earlier of the first calendar year after the seventh anniversary of the retired member’s retirement or when the retired member is or would have been sixty years of age. The COLA will be based on the average annual percentage change in the Metropolitan Phoenix-Mesa Consumer Price Index published by the United States Department of Labor, Bureau of Statistics. COLA adjustments will be received for this cohort if the following conditions are met: Ratio of Actuarial Value of Assets to Liabilities 70-80% 80-90% 90-100% Maximum increase 1.00% 1.50% 2.00% Employees Covered by Benefit Terms At June 30, 2018, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefits Inactive employees entitled to, but not yet receiving benefits Active Employees Total 259 102 616 977 Contributions ARS Title 38, Chapter 5, Article 4, Section 38-843 provides the authority for determining the City and active employee contribution requirements to the PSPRS pension plan. The contribution rates for employers are based on an actuarially determined rate recommended by an independent actuary contracted by the Board. The contribution rates for employees are prescribed by the ARS Section referenced above. For Tier 1 and Tier 2 employees, the actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned during the year by these employees, with an additional amount to finance any unfunded accrued liability. The unfunded accrued liability portion of the rate is paid by the City as a percentage of the pay of all of the City’s active PSPRS members, regardless of start date. For Tier 3 employees, each employer shall make contributions sufficient to pay fifty percent of both the normal cost plus the actuarially determined amount required to amortize the total unfunded accrued liability attributable only to those members hired on or after July 1, 2017. As noted above, the City will also pay an amount to finance any unfunded accrued liability relating to employees hired before July 1, 2017. City of Scottsdale, Arizona 115 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 The City’s contribution rates for fiscal year ended June 30, 2018 were: Police Tier 1 Tier 2 Tier 3 7/1/2017 or later Membership date 7/19/2011 or earlier On or after 7/20/2011 1/1/2012 or later Plan type Defined benefit Defined benefit Defined benefit Defined benefit Defined contribution Employee contribution rate 7.65% 11.65% 11.65% 9.73% 9.00% Employer contribution rate 47.26% 47.26% 47.26% 40.15% 39.42% Fire Tier 1 Tier 2 Tier 3 1/1/2012 or later 7/1/2017 or later Membership date 7/19/2011 or earlier On or after 7/20/2011 Plan type Defined benefit Defined benefit Defined benefit (hybrid) Defined contribution (hybrid) Defined benefit (hybrid) Defined contribution (hybrid) Employee contribution rate 7.65% 11.65% 11.65% 3.00% 10.33% 3.00% 9.00% Employer contribution rate 17.19% 17.19% 17.19% 4.00% 12.69% 3.00% 11.36% Defined contribution Participants’ defined contributions and the earnings on those contributions are immediately vested. A participant is fully vested in employer contributions after ten years of service; the vesting occurs at a rate of ten percent per year. If a participant dies before completing ten years of service, the employer contributions are immediately fully vested. In addition, the City was required by statute to contribute an actuarially determined rate (30.42 percent for police employees and 8.00 percent for fire employees) of annual covered payroll of retired members who worked for the City in positions that would typically be filled by an employee who contributes to PSPRS. The City’s contributions to the pension plan for the fiscal year ended June 30, 2018, were $17,376,660. City of Scottsdale, Arizona 116 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 ARS Title 9, Chapter 8, Article 3, Section 9-952 requires the state treasurer to distribute a fire insurance premium tax to the respective incorporated cities and towns and legally organized fire districts in proportion to the full cash value of the real property and improvements in each incorporated city and town and legally organized fire district which procures the services of a private fire company and in each area served by a department or legally organized fire district. The warrant issued by the state treasurer is identified as the “fire fighters’ relief and pension fund,” to cover the firefighting personnel deposit into the pension plan. The annual tax provided by law is based on a portion of the premiums received on policies and contracts of fire insurance covering property within the state. PSPRS received $1,887,734 of fire insurance premium tax for the City’s fire pension plan for fiscal year ended June 30, 2018. PSPRS accounts for the fire insurance premium tax collected for the City as employer contributions. Net Pension Liability The City’s net pension liability of $177,985,291 was measured as of June 30, 2017, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. Actuarial Assumptions The total pension liability in the June 30, 2017, measurement was determined using the following actuarial assumptions: Actuarial Cost Method Asset Valuation Method Payroll growth Inflation Salary increases Investment rate of return Mortality rates Entry Age Normal Fair Value of Assets 3.50% 2.50% 3.50%-7.50%, including inflation 7.40%, net of investment and administrative expenses RP-2014 mortality tables projected backwards 1 year to 2013 with MP2014 (110% of female healthy annuitant mortality table). Future mortality improvements are assumed each year using 75% of scale MP2016. The actuarial assumptions used in the June 30, 2017, valuation were based on the results of an actuarial experience study of the period July 1, 2011 to June 30, 2016. City of Scottsdale, Arizona 117 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 The long-term expected rate of return on pension plan investments was determined using a buildingblock method in which expected future real rates of return (expected returns, net of pension plan investment expense, and inflation) are developed for each major asset class. These real rates of return 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. For each major asset class that is included in the pension plan’s target asset allocation as of June 30, 2017, these best estimates are summarized in the following table: Asset Class U.S. Equity Non-U.S. Equity Private Equity Fixed Income Private Credit Absolute Return GTAA Real Assets Real Estate Risk Parity Short Term Investments Target Allocation 16.00% 14.00% 12.00% 5.00% 16.00% 2.00% 10.00% 9.00% 10.00% 4.00% 2.00% 100.00% Long-Term Expected Real Rate of Return* 7.60% 8.70% 6.75% 1.25% 5.83% 3.75% 3.96% 4.52% 3.75% 5.00% 0.25% * Geometric Real Rate of Return. Based on inflation assumption of 2.75%. Discount Rate The discount rate used to measure the total pension liability was 7.40 percent. 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 these assumptions, the PSPRS 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. City of Scottsdale, Arizona 118 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 Changes in the Net Pension Liability Public Safety Personnel Retirement System (Police) Changes in the Net Pension Liability (in thousands) Total Pension Liability (a) Balances at 6/30/17 Changes for the year: Service cost Interest Changes of benefit terms Differences between expected and actual experience Changes of assumptions/other inputs Contributions-employer Contributions-employee Net investment income Benefit payments, including refunds of employee contributions Administrative expense Other changes Net changes Balances at 6/30/18 $ $ 303,913 $ 145,977 Net Pension Liability (a)-(b) $ 157,936 7,841 22,479 2,584 (921) 9,028 - 11,888 3,983 17,104 7,841 22,479 2,584 (921) 9,028 (11,888) (3,983) (17,104) (16,239) 24,772 328,685 (16,239) (152) (134) 16,450 162,427 152 134 8,322 166,258 City of Scottsdale, Arizona 119 Increase (Decrease) Plan Fiduciary Net Position (b) $ $ Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 Public Safety Personnel Retirement System (Fire) Changes in the Net Pension Liability (in thousands) Total Pension Liability (a) Balances at 6/30/17 Changes for the year: Service cost Interest Changes of benefit terms Differences between expected and actual experience Changes of assumptions/other inputs Contributions-employer Contributions-employee Net investment income Benefit payments, including refunds of employee contributions Administrative expense Other changes Net changes Balances at 6/30/18 $ $ Increase (Decrease) Plan Fiduciary Net Position (b) 75,250 $ 65,072 Net Pension Liability (a)-(b) $ 10,178 5,009 5,797 639 1,264 1,881 - 2,737 2,551 7,822 5,009 5,797 639 1,264 1,881 (2,737) (2,551) (7,822) (932) 13,658 88,908 (932) (70) 1 12,109 77,181 70 (1) 1,549 11,727 $ $ Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the City’s proportionate share of the net pension liability calculated using the discount rate of 7.40 percent, as well as what the City’s net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (6.40 percent) or 1-percentage-point higher (8.40 percent) than the current rate (in thousands): Police net pension liability (asset) Fire net pension liability (asset) 1% Decrease (6.40%) Discount Rate (7.40%) 1% Increase (8.40%) $ 212,569 27,289 $ $ 128,666 (835) City of Scottsdale, Arizona 120 166,258 11,727 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 Pension Plan Fiduciary Net Position The pension plan’s fiduciary net position has been determined on the same basis used by the pension plan. PSPRS financial statements are prepared using the accrual basis of accounting. Benefits are recognized when due and payable in accordance with the terms of PSPRS. Refunds are due and payable by state law within 20 days of receipt of a written application for a refund. Refunds are recorded when paid. Expenses are recorded when the corresponding liabilities are incurred, regardless of when payment is made. PSPRS investments are reported at fair value. Fair value measurements are categorized within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset and give the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). Investments that are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient are not classified in the fair value hierarchy. Market values are determined as follows: Shortterm investments are reported at cost plus accrued interest. Level 1 debt and equity securities are valued based on prices quoted in active markets for those securities. Level 2 securities are valued using a matrix pricing technique that values securities based on their relationship to benchmark quoted prices. Level 3 securities, whose stated market prices are unobservable by the marketplace, are priced by the investment manager or General Partner using discounted cash flow techniques. The fair value of alternative investments is based on the investments’ net asset value (NAV) per share. These are investments for which exchange quotations are not readily available and are valued at estimated fair value, as determined in good faith by the General Partner of each fund or by the investment manager responsible for that sector. Detailed information about the pension plan’s fiduciary net position is available in the separately issued PSPRS financial report. Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions For the fiscal year ended June 30, 2018, the City recognized pension expense of $30,208,584 related to the defined benefit plan and the defined benefit portion of the hybrid plan and $192,310 related to the defined contribution plan and the defined contribution portion of the hybrid plan. At June 30, 2018, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources (in thousands): Differences between expected and actual experience Deferred Outflows of Resources Deferred Inflows of Resources $ $ 2,208 4,043 Change of assumptions or other inputs 28,838 - Net difference between projected and actual earnings on pension plan investments 3,203 - City contributions subsequent to the measurement date 17,377 - Total $ 51,626 City of Scottsdale, Arizona 121 $ 4,043 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 City contributions subsequent to the measurement date of $17,376,660 were reported as deferred outflows and will be recognized as a reduction of the net pension liability in the fiscal year ending June 30, 2019. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows (in thousands): Fiscal year ending June 30: 2019 2020 2021 2022 2023 Thereafter $ 7,460 9,406 6,133 1,480 2,615 3,112 Elected Officials’ Defined Contribution Retirement System The City contributes to the Elected Officials’ Defined Contribution Retirement System (EODCRS), which includes a defined contribution pension plan for elected officials and judges of certain state, county and local governments. Participants in this plan include only those elected officials who began service subsequent to December 31, 2013, and had no relationship to ASRS or EORP at the inception of service. The Board of Trustees of the PSPRS is also the administrator for the EODCRS. Benefit terms, including contribution requirements, for EODCRS are established by Title 38, Chapter 5, Article 3.1 of the Arizona Revised Statutes (ARS) and may be amended by the State of Arizona. For each member of EODCRS, the City is required to contribute 6 percent of gross compensation to an individual member retirement account. Members are required to contribute 8 percent of gross compensation to their retirement account. Members are immediately vested in both their and the City’s contributions and earnings on those contributions. For the fiscal year ended June 30, 2018, the City recognized pension expense of $1,080. H. Other Postemployment Benefits In addition to the pension benefits described in the previous section (G), the City provides an option of postretirement health care benefits, in accordance with Chapter 14 of the City Code. Employees hired before July 1, 1982, receive cash equal to 50 percent of the first 520 hours of unused medical leave plus 25 percent of all hours in excess of 520. The conversion rate is the employee’s average hourly base pay rate for the five years immediately preceding retirement. The medical leave not paid out in cash is applied to a retirement health savings account at the employee’s hourly rate of pay at the time of retirement. For shift fire employees with more than 420 hours and all other retirees with 300 or more hours of accumulated medical leave hired on or after July 1, 1982, the City will apply the value of the medical leave to a retirement health savings account. Medical leave balances accumulated through June 30, 2011, will be paid at 100 percent of the employee’s hourly rate at the time of retirement. Medical leave balances accumulated July 1, 2011, or after will be paid out at 50 percent of the employee’s hourly rate at retirement. Additionally, the payout is limited to the value of 1,200 combined hours for all retirees, except shift fire employees, who are limited to 1,680 hours earned both before and after July 1, 2011, unless more than 1,200 or 1,680 hours, respectively, were accrued prior to July 1, 2011. Total hours accrued before July 1, 2011, will be paid without limitation. City of Scottsdale, Arizona 122 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 The projected liability for active employees, as of June 30, 2018, was $14,978,456. The projected liability was considered payable within one year or greater and all but the current portion of $158,321 was therefore considered non-current and included in the proprietary fund and government-wide financial statements. Significant actuarial assumptions of the January 1, 2018, actuarial valuation include: a) mortality rates based on the RPH-2017 Total Dataset Mortality Table fully generational using scale MP 2017; b) interest compounded 4.0 percent annually; c) salary increases at a rate of 2 percent to 4 percent based on years of service; and d) Traditional Unit Credit cost method based on participant data as of January 1, 2018. I. Postemployment Benefits Other Than Pensions (OPEB) The cost of postemployment healthcare benefits, from an accrual accounting perspective, should be associated with the periods in which the future costs are earned rather than in the future years when they will be paid (similar to the cost of pension benefits). GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions requires the City to recognize the entire OPEB liability and a comprehensive measure of OPEB expense. The comprehensive measure of OPEB expense includes immediate recognition in OPEB expense of the effects of changes of benefit terms, as well as the incorporation of the amortization of deferred inflows of resources and deferred outflows of resources related to OPEB over a defined, closed period. Plan Description The City’s defined benefit OPEB plan (“the Plan”) provides OPEB for eligible retired employees through a single-employer defined benefit medical plan administered by the City. The City Council, by way of resolution, grants itself the authority, on an annual basis, to reestablish and amend the benefit terms and financing requirements of the Plan. No assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. Benefits Provided The Plan offers medical benefits to its eligible retirees and their dependents through the City’s selfinsured health plan. An eligible retiree is a Public Safety Personnel Retirement System accidental disability retired employee. Eligible retirees can enroll in a City plan up to 60 days after they retire; after that their eligibility for this benefit ceases. The benefit terms are the same as those afforded to active employees; however, retirees participating in the Plan are required to pay 100 percent of the blended actuarial rate, while employees pay less than the full amount. Upon a retiree reaching 65 years of age, the retiree and related dependents are no longer eligible for City coverage. Employees Covered by Benefit Terms At June 30, 2018, the following employees were covered by the benefit terms: As of June 30, 2018, Membership Consisted of: Inactive Employees or Beneficiaries Currently Receiving Benefits Inactive Employees Entitled to but Not Yet Receiving Benefits Active Employees Total 20 660 680 City of Scottsdale, Arizona 123 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 Total OPEB Liability The City’s total OPEB liability of $2,194,370 was measured as of June 30, 2017, and was determined by an actuarial valuation as of that date. Actuarial Assumptions and Other Inputs The total OPEB liability in the June 30, 2017, actuarial valuation was determined using the following actuarial assumptions and other inputs, applied to all periods included in the measurement, unless otherwise specified: Inflation 2.5% 3.5% wage inflation plus merit and longevity increases ranging from 0.0% to 4.0% 3.56% 7.88% for 2019, 8.50% for 2020, and then decreasing 0.5% per year to an ultimate rate of 5.00% for 2027 and later years 100% Salary Increases Discount Rate Healthcare Cost Trend Rates* Retirees' Share of Benefit-Related Costs *The initial trend rate reflects the City’s actual projected cost increases from fiscal year 2018 to 2019. The discount rate was based on the Fidelity 20-Year GO Municipal Bond Index. Mortality rates were based on the RPH-2017 Total Dataset Mortality Table fully generational using scale MP-2017 for current actives and the RPH-2017 Disabled Mortality Table fully generational using scale MP-2017 for disabled retirees. Changes in the Total OPEB Liability Total OPEB Liability (in thousands) Balance at 6/30/17 Changes for the year: Service cost Interest Differences between expected and actual experience Changes of assumptions/other inputs Benefit payments Net changes Balance at 6/30/18 $ 2,083 $ 260 67 (230) 125 (111) 111 2,194 Changes in assumptions reflect the following: 1. Change in the actuarial cost method from Projected Unit Credit with linear proration to decrement to Entry Age Normal Level Percent of Salary. City of Scottsdale, Arizona 124 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 2. Change in the discount rate to be based on a yield for 20-year tax-exempt general obligation municipal bonds with an average rating of AA/Aa or higher (or equivalent quality on another rating scale) taxexempt, high quality 20-year municipal bonds. The prior full valuation used a discount rate of 4.00 percent. The current full valuation uses a discount rate of 2.92 percent as of the beginning of the year and 3.56 percent as of the end of the year. 3. Mortality table has been updated from RPH-2016 Total Dataset Mortality Table fully generational using Scale MP-2016 to RPH-2017 Total Dataset Mortality Table fully generational using Scale MP-2017 for current actives. 4. Mortality table has been updated from RPH-2016 Disabled Mortality Table fully generational using Scale MP-2016 to RPH-2017 Disabled Mortality Table fully generational using Scale MP-2017 for disabled retirees. 5. Disability, withdrawal, and retirement rates have been updated based on the Maricopa County rates first used in the Arizona Public Safety Personnel Retirement System report as of June 30, 2017. 6. Healthcare trend rates have been updated to reflect actual premium increases from fiscal year 2018 to fiscal year 2019, followed by an annual trend of 8.5 percent decreasing by 0.5 percent annually to an ultimate rate of 5.0 percent. Sensitivity of the Total OPEB Liability to Changes in the Discount Rate The following presents the total OPEB liability of the City, as well as what the City’s total OPEB liability would be if it were calculated using a discount rate that is 1-percentage-point lower (2.56 percent) or 1-percentage-point higher (4.56 percent) than the current discount rate (in thousands): Total OPEB Liability 1% Decrease (2.56%) Discount Rate (3.56%) 1% Increase (4.56%) $ $ $ 2,299 2,194 2,086 Sensitivity of the Total OPEB Liability to Changes in the Healthcare Cost Trend Rates The following presents the total OPEB liability of the City, as well as what the City’s total OPEB liability would be if it were calculated using healthcare cost trend rates that are 1-percentage-point lower (6.88 percent decreasing to 4.00 percent) or 1-percentage-point higher (8.88 percent decreasing to 6.00 percent) than the current healthcare cost trend rates (in thousands): Total OPEB Liability 1% Decrease (6.88% decreasing to 4.00%) Healthcare Cost Trend Rates (7.88% decreasing to 5.00%) 1% Increase (8.88% decreasing to 6.00%) $ $ $ 1,963 2,194 City of Scottsdale, Arizona 125 2,461 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2018 OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB For the year ended June 30, 2018, the City recognized OPEB expense of $315,933. At June 30, 2018, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources (in thousands): Differences between expected and actual experience Deferred Outflows of Resources Deferred Inflows of Resources $ $ - 207 Change of assumptions or other inputs 113 - City contributions subsequent to the measurement date 111 - Total $ 224 $ 207 Amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows (in thousands): Fiscal year ending June 30: 2019 $ (11) 2020 (11) 2021 (10) 2022 (10) 2023 (10) Thereafter (42) Medical Reimbursements The federal government may provide the City subsidies per the Medicare Part D Prescription Drug Subsidy Program for providing healthcare for Medicare eligible retirees. Any current and future years’ subsidies are recorded as revenue in the year received and are not recognized as a reduction to the total OPEB liability. City of Scottsdale, Arizona 126 Table of Contents Required Supplementary Information For the Fiscal Year Ended June 30, 2018 Proportionate Share of Collective Net Pension Liability for Cost–Sharing Pension Plan Schedule of the City's Proportionate Share of the Collective Net Pension Liability Arizona State Retirement System Last Four Fiscal Years (dollars in thousands) City's proportion of the net collective pension liability 2018 2017 2016 2015 1.056820% 1.086990% 1.099760% 1.102563% City's proportionate share of the collective net pension liability $164,632 $175,451 $171,304 $163,142 City's covered payroll $107,259 $101,917 $101,962 $99,077 City's proportionate share of the collective net pension liability as a percentage of its covered payroll 153.49% 172.15% 168.01% 164.66% Plan fiduciary net position as a percentage of the total pension liability 69.92% 67.06% 68.35% 69.49% The City implemented GASB Statement No. 68, Accounting and Financial Reporting for Pensions for the fiscal year ended June 30, 2015. Information prior to fiscal year 2015 is not available. City of Scottsdale, Arizona 127 Table of Contents Required Supplementary Information For the Fiscal Year Ended June 30, 2018 Changes in the City’s Net Pension Liability (Asset) and Related Ratios for Agent Pension Plan Public Safety Personnel Retirement System (Police) Schedule of Changes in the City's Net Pension Liability and Related Ratios Last Four Fiscal Years (dollars in thousands) 2018 Total pension liability Service cost Interest Changes of benefit terms Differences between expected and actual experience Changes of assumptions or other inputs Benefit payments, including refunds of employee contributions Net change in total pension liability Total pension liability-beginning Total pension liability-ending (a) 2017 2016 2015 $ 7,841 22,479 2,584 (921) 9,028 (16,239) 24,772 303,913 $ 328,685 $ 6,603 20,570 17,206 (3,203) 11,023 (14,059) 38,140 265,773 $ 303,913 $ 6,537 19,640 87 (14,835) 11,429 254,344 $ 265,773 $ 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 $ 11,888 3,983 17,104 (16,239) (152) (134) 16,450 $ 11,710 4,230 842 (14,059) (122) (36) 2,565 $ $ Plan fiduciary net position-beginning Plan fiduciary net position-ending (b) 145,977 $ 162,427 143,412 $ 145,977 140,588 $ 143,412 124,647 $ 140,588 City's net pension liability-ending ((a) - (b)) $ 166,258 $ 157,936 $ 122,361 $ 113,756 49.42% 48.03% 53.96% 55.27% $ 33,896 $ 33,073 $ 33,075 $ 31,438 490.49% 477.54% 369.95% 361.84% Plan fiduciary net position as a percentage of the total pension liability Covered payroll City's net pension liability as a percentage of covered payroll The City implemented GASB Statement No. 68, Accounting and Financial Reporting for Pensions for the fiscal year ended June 30, 2015. Information for the prior years is not available. City of Scottsdale, Arizona 128 8,970 3,944 5,113 (14,835) (125) (243) 2,824 6,363 16,898 3,987 (896) 22,122 (12,411) 36,063 218,281 $ 254,344 7,997 3,495 17,047 (12,411) (137) (50) 15,941 Table of Contents Required Supplementary Information For the Fiscal Year Ended June 30, 2018 Public Safety Personnel Retirement System (Fire) Schedule of Changes in the City's Net Pension Liability (Asset) and Related Ratios Last Four Fiscal Years (dollars in thousands) 2018 2017 2016 2015 Total pension liability Service cost Interest Changes of benefit terms Differences between expected and actual experience Changes of assumptions or other inputs Benefit payments, including refunds of employee contributions Net change in total pension liability Total pension liability-beginning Total pension liability-ending (a) $ 5,009 5,797 639 1,264 1,881 (932) 13,658 75,250 $ 88,908 $ 4,077 4,655 7,546 (877) 3,303 (1,430) 17,274 57,976 $ 75,250 3,720 4,037 994 (691) 8,060 49,916 $ 57,976 $ 3,509 3,449 (448) 462 1,157 (780) 7,349 42,567 $ 49,916 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 $ 2,737 2,551 7,822 (932) (70) 1 12,109 $ 2,974 2,693 358 (1,430) (52) (53) 4,490 $ 2,247 2,337 2,046 (691) (50) 12 5,901 $ 2,392 2,629 6,294 (780) (51) (60) 10,424 Plan fiduciary net position-beginning Plan fiduciary net position-ending (b) 65,072 $ 77,181 60,582 $ 65,072 54,681 $ 60,582 44,257 $ 54,681 City's net pension liability (asset)-ending ((a) - (b)) $ 11,727 $ 10,178 $ (2,606) $ (4,765) 86.81% 86.47% 104.49% 109.55% $ 23,500 $ 21,498 $ 20,420 $ 19,336 49.90% 47.34% 0.00% 0.00% Plan fiduciary net position as a percentage of the total pension liability Covered payroll City's net pension liability as a percentage of covered payroll The City implemented GASB Statement No. 68, Accounting and Financial Reporting for Pensions for the fiscal year ended June 30, 2015. Information for the prior years is not available. City of Scottsdale, Arizona 129 $ Table of Contents Required Supplementary Information For the Fiscal Year Ended June 30, 2018 Schedule of City Contributions Arizona State Retirement System Last Six Fiscal Years (dollars in thousands) Statutorily required contribution 2018 $ 11,437 Employer contributions in relation to the statutorily required contribution $ (11,437) $ (11,540) Contribution deficiency (excess) $ Covered payroll $ 105,097 $ 107,259 10.88% 10.76% Contributions as a percentage of covered payroll - 2017 11,540 $ - 2016 11,049 $ (11,049) $ - 2015 11,092 (11,092) $ 2014 10,635 $ (10,635) 2013 9,949 (9,949) - $ - $ - $ 101,917 $ 101,962 $ 99,077 $ 97,257 10.84% 10.88% The City implemented GASB Statement No. 68, Accounting and Financial Reporting for Pensions for the fiscal year ended June 30, 2015. Information prior to fiscal year 2013 is not available. City of Scottsdale, Arizona 130 $ 10.73% 10.23% Table of Contents Required Supplementary Information For the Fiscal Year Ended June 30, 2018 Schedule of City Contributions Public Safety Personnel Retirement System (Police) Last Five Fiscal Years (dollars in thousands) Actuarially determined contribution $ Employer contributions in relation to the actuarially determined contribution 2018 15,341 $ 2017 12,328 (15,341) $ (12,328) 2016 11,635 $ (11,635) 2015 8,921 $ (8,921) 2014 7,997 (7,997) Contribution deficiency (excess) $ - $ - $ - $ - $ - Covered payroll $ 34,869 $ 33,896 $ 33,073 $ 33,075 $ 31,438 Contributions as a percentage of covered payroll 44.00% 36.37% 35.18% 26.97% 25.44% The City implemented GASB Statement No. 68, Accounting and Financial Reporting for Pensions, for the fiscal year ended June 30, 2015. Information prior to 2014 is not available. City of Scottsdale, Arizona 131 Table of Contents Required Supplementary Information For the Fiscal Year Ended June 30, 2018 Schedule of City Contributions Public Safety Personnel Retirement System (Fire) Last Five Fiscal Years (dollars in thousands) Actuarially determined contribution $ Employer contributions in relation to the actuarially determined contribution 2018 3,924 $ 2017 2,840 (3,924) $ (2,840) 2016 2,626 $ (2,626) 2015 2,276 $ (2,276) 2014 2,392 (2,392) Contribution deficiency (excess) $ - $ - $ - $ - $ - Covered payroll $ 23,192 $ 23,500 $ 21,498 $ 20,420 $ 19,336 Contributions as a percentage of covered payroll 16.92% 12.09% 12.22% 11.15% 12.37% The City implemented GASB Statement No. 68, Accounting and Financial Reporting for Pensions , for the fiscal year ended June 30, 2015. Information prior to 2014 is not available. City of Scottsdale, Arizona 132 Table of Contents Required Supplementary Information For the Fiscal Year Ended June 30, 2018 Changes in the City’s Total OPEB Liabilities and Related Ratios Total OPEB Liability and Related Ratios Current Fiscal Year (dollars in thousands) 2018 Total OPEB liability Service cost Interest Differences between expected and actual experience Changes of assumptions/other inputs Benefit payments $ 260 67 (230) 125 (111) Net change in total OPEB liability 111 Total OPEB liability-beginning 2,083 Total OPEB liability-ending $ Covered-employee payroll $ 51,137 Total OPEB liability as a percentage of covered-employee payroll 2,194 4.29% The City implemented GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions for the fiscal year ended June 30, 2018. Information for the prior years is not available. Note: No assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions . City of Scottsdale, Arizona 133 Table of Contents NONMAJOR GOVERNMENTAL FUNDS Special Revenue Funds Special Revenue Funds are established to finance particular activities and are created out of receipts from specific taxes, grant awards, contributions received, or other earmarked revenue. All funds in the Special Revenue Funds have either legal restrictions stipulated by an external party or are committed to a specific purpose through formal action from the City Council. Transportation Fund. This fund receives and expends the City’s allocation of the Arizona Highway User Revenue tax and 0.2 percent of transportation privilege tax for transportation improvements. The amount of Highway User Revenue available to each city is allocated on a population basis, which is determined by the latest federal census and must be used for street construction, reconstruction, maintenance, or transit. Community Development Block Grant Fund. This fund receives and expends the City’s Community Development Block Grant revenues. The amount of the grant is awarded annually by the U.S. Department of Housing and Urban Development (HUD). Community Development Block Grant revenues may be used only for those projects approved in the grant budget and are subject to agency expenditure guidelines. HOME Fund. This fund receives and expends monies from the Maricopa County Home Consortium. Expenditures are made to provide affordable housing, expand the capacity of non-profit housing providers, strengthen the ability of local governments to provide housing, and leverage private-sector participation in housing. Grants Fund. This fund receives and expends the City’s grant revenues not accounted for in other funds. The amount of grants received is generally based on applications to granting agencies by the City and on availability of funding by the grantors. Grant revenues may be used only for the stated purpose in the approved grant agreement and are subject to grantor expenditure guidelines. Section 8 Fund. This fund receives and expends the City’s Section 8 Housing revenues. Funding is awarded by the U.S. Department of Housing and Urban Development (HUD) to provide rental housing assistance. Budgets are approved annually by HUD. Section 8 Housing revenues may be used only for assistance approved by HUD and are subject to agency expenditure guidelines. Preserve Privilege Tax Fund. This fund receives a 0.35 percent Preservation Privilege (Sales) Tax revenue approved by the voters in 1995 (0.2 percent) and 2004 (0.15 percent). Revenues are transferred to Capital Projects Funds for land purchases and improvements in the McDowell Sonoran Preserve or are transferred to the Scottsdale Preserve Authority Fund to be used for related debt service payments. Community Facilities Districts (CFD) Funds. These funds account for the non-debt or non-capital related expenditures incurred by community facilities districts. Scottsdale Mountain CFD McDowell Mountain Ranch CFD DC Ranch CFD Via Linda Road CFD Waterfront Commercial CFD City of Scottsdale, Arizona 134 Table of Contents NONMAJOR GOVERNMENTAL FUNDS (Continued) Streetlight Districts Fund. This fund accounts for the property tax revenues received from the streetlight districts generated through the annual streetlight district levy. These funds are restricted for electricity expenditures of each streetlight district. Special Programs Fund. This fund receives monies from a variety of sources. The monies are either restricted by an outside source or committed by City Council and are required to be expended for specific purposes related to the intention of the source of the revenue. Tourism Development Fund. This fund receives revenues generated through transient occupancy taxes and certain lease agreements. The use of these funds has been committed by the City Council for tourism related purposes. Debt Service Funds Debt Service Funds record the accumulation of resources for, and the payment of, long-term debt principal and interest not serviced by the proprietary funds. Municipal Property Corporation Fund. This fund accounts for the principal and interest requirements of the City’s Municipal Property Corporation (MPC) bonds. Financing is provided primarily by transaction privilege tax. Debt Service Stabilization Fund. This fund accounts for revenues received for future debt payments from the Arizona Sports and Tourism Authority, the Maricopa County Stadium District, the San Francisco Giants, and funds committed by the City Council to be used for repayment of debt. Community Facilities Districts (CFD) Funds. These funds account for the principal and interest of general obligation bonds issued by community facilities districts. Although these bonds are not obligations of the City, generally accepted accounting principles indicate that the bonds should be disclosed herein. Scottsdale Mountain CFD McDowell Mountain Ranch CFD DC Ranch CFD Via Linda Road CFD Waterfront Commercial CFD Scottsdale Preserve Authority Fund. This fund accounts for the principal and interest requirements of excise tax revenue bonds issued by the Scottsdale Preserve Authority. Financing is provided by a 0.35 percent Preservation Privilege (Sales) Tax revenue approved by the voters in 1995 (0.2 percent) and 2004 (0.15 percent). City of Scottsdale, Arizona 135 Table of Contents NONMAJOR GOVERNMENTAL FUNDS (Continued) Capital Projects Funds Capital Projects Funds account for the resources used to acquire, construct, and improve major capital assets other than those financed by proprietary funds. Capital Projects Funds allow the City to compile project cost data and demonstrate that legal or contractual requirements regarding the use of the resources are fully satisfied. General Obligation Bonds Fund. This fund accounts for the proceeds and interest of the sale of voterapproved general obligation bonds that are used for authorized capital improvements. Transportation Privilege Tax Fund. This fund accounts for the authorized 0.2 percent Transportation Privilege (Sales) Tax dedicated to transportation capital improvements. Voters approved the tax on November 7, 1989. Preserve Privilege Tax Fund. This fund accounts for the resources used to acquire and improve land within the McDowell Sonoran Preserve. Resources are provided by the 0.15 percent 2004 voter-approved Preserve Privilege Tax. Municipal Property Corporation Bonds Fund. This fund accounts for the activity related to the Municipal Property Corporation bond proceeds and authorized capital improvements. External Sources Fund. This fund accounts for the activity related to monies received from a variety of external sources including federal and state grants and contributions. The revenues are restricted for specific types of capital improvements. Permanent Funds Permanent Funds are used to report resources that are legally restricted to the extent that only earnings, not principal, may be used to support City programs. Rassner Memorial Scottsdale Library Endowment. This fund requires the interest to be used exclusively to support library and literacy programs benefiting the citizens of Scottsdale. Scottsdale Community Endowment. This fund requires the interest to be used exclusively for community projects and programs for the public good within the City. Scottsdale Employee Endowment. This fund requires the interest to be used exclusively to support 501(c)(3) tax-exempt organizations serving the Scottsdale area and City programs. Herbert R. Drinkwater Youth Services Endowment. This fund requires the interest to be used exclusively to support City youth programs. City of Scottsdale, Arizona 136 Table of Contents Combining Balance Sheet Nonmajor Governmental Funds June 30, 2018 (in thousands) ASSETS Cash and Investments Cash with Fiscal Agent Receivables (net of allowance for uncollectibles) Interest Privilege Tax Transient Occupancy Tax Property Tax Franchise Fee Highway User Tax Intergovernmental Grants Miscellaneous Total Assets LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES (DEFICITS) Liabilities Accounts Payable Accrued Payroll and Benefits Due to Other Funds Matured Bond Interest Payable Matured Bonds Payable Unearned Revenue Intergovernmental Other Due to Other Governments Guaranty and Other Deposits Total Liabilities Special Revenue Funds $ $ $ Deferred Inflows of Resources Unavailable Revenues Total Liabilities and Deferred Inflows of Resources Fund Balances (Deficits) Nonspendable Restricted Committed Unassigned Total Fund Balances (Deficits) Total Liabilities, Deferred Inflows of Resources, and Fund Balances (Deficits) $ 66,879 63 145 5,781 1,188 2 55 1,449 3,148 645 2,649 82,004 3,665 205 2 - Debt Service Funds $ $ $ 9,058 24,051 108 10,934 44,151 5,154 18,120 Capital Projects Funds $ $ $ 59,446 171 15,377 3,347 213 78,554 3,422 26 3,671 - Total Nonmajor Governmental Funds Permanent Funds $ $ $ 653 653 - $ $ $ 136,036 24,114 316 5,781 1,188 110 55 1,449 29,459 3,992 2,862 205,362 7,087 231 3,673 5,154 18,120 7,564 474 3 5 11,918 23,274 175 7,294 - 7,564 649 3 5 42,486 2,912 10,990 18,471 - 32,373 14,830 34,264 25,765 - 74,859 47,953 19,902 (681) 67,174 5,187 4,700 9,887 59,746 (6,957) 52,789 619 34 653 619 112,920 24,602 (7,638) 130,503 82,004 $ 44,151 City of Scottsdale, Arizona 137 $ 78,554 $ 653 $ 205,362 Table of Contents Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds For the Fiscal Year Ended June 30, 2018 (in thousands) REVENUES Taxes - Local Property Transaction Privilege Transient Occupancy Light and Power Franchise Taxes - Intergovernmental Highway User Tax Local Transportation Assistance Fund Business and Liquor Licenses Charges for Current Services Recreation Fees Fines, Fees, and Forfeitures Court Court Enhancement Library Police Property Rental Interest Earnings Intergovernmental Federal Grants State Grants Miscellaneous Developer Contributions Streetlight and Services Districts Contributions and Donations Reimbursements from Outside Sources Indirect Costs Other Total Revenues Special Revenue Funds $ 111 62,133 19,837 253 Debt Service Funds $ Capital Projects Funds 3,256 - $ Total Nonmajor Governmental Funds Permanent Funds - $ - $ 3,367 62,133 19,837 253 16,067 657 59 - - - 16,067 657 59 2,178 - - - 2,178 161 2,031 142 418 2,383 602 146 5 641 39 161 2,031 142 418 2,529 1,287 8,106 227 1,083 835 584 2,001 161 558 55 120,642 3,226 6,633 5,797 7,129 332 13,899 39 13,903 227 11,438 835 584 2,333 161 558 55 141,213 16 1,132 688 159 15,279 23,603 1,970 12,495 605 - - 43 - 16 1,132 688 159 15,279 23,603 1,970 12,538 605 55,947 18,120 10,332 28,452 41,153 41,153 43 18,120 10,332 41,153 125,595 Excess (Deficiency) of Revenues over (under) Expenditures 64,695 (21,819) (27,254) (4) 15,618 OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Issuance of Long-Term Capital-Related Debt Premium on Long-Term Debt Issued Total Other Financing Sources (Uses) 1,660 (65,880) (64,220) 25,207 (4,296) 20,911 22,173 (234) 25,420 3,350 50,709 - 49,040 (70,410) 25,420 3,350 7,400 475 (908) 23,455 (4) 23,018 EXPENDITURES Current General Government Mayor and City Council City Court City Manager City Treasurer Public Works Community and Economic Development Public Safety Community Services Streetlight and Services Districts Debt Service Principal Interest and Fiscal Charges Capital Outlay Total Expenditures Net Change in Fund Balances Fund Balances - Beginning, Restated* Fund Balances - Ending $ 66,699 67,174 $ 10,795 9,887 *Restated the Special Revenue and Permanent funds to record endowments. City of Scottsdale, Arizona 138 $ 29,334 52,789 $ 657 653 $ 107,485 130,503 Table of Contents Combining Balance Sheet Nonmajor Special Revenue Governmental Funds June 30, 2018 (in thousands) ASSETS 139 City of Scottsdale, Arizona Cash and Investments Cash with Fiscal Agent Receivables (net of allowance for uncollectibles) Interest Privilege Tax Transient Occupancy Tax Property Tax Franchise Fee Highway User Tax Intergovernmental Grants Miscellaneous Total Assets LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES (DEFICITS) Liabilities Accounts Payable Accrued Payroll and Benefits Due to Other Funds Unearned Revenue Intergovernmental Other Due to Other Governments Guaranty and Other Deposits Total Liabilities Transportation $ $ $ Deferred Inflows of Resources Unavailable Revenues Total Liabilities and Deferred Inflows of Resources Fund Balances (Deficits) Restricted Committed Unassigned Total Fund Balances (Deficits) Total Liabilities, Deferred Inflows of Resources, and Fund Balances (Deficits) (continued) Community Development Block Grant $ 8,653 2,062 1,449 182 12,346 2,363 137 - $ $ $ HOME 355 109 2,032 2,496 97 7 - $ $ $ Grants 43 186 229 185 - $ $ $ Section 8 397 350 747 128 16 - $ $ $ 487 6 493 2 7 - Preserve Privilege Tax Scottsdale Mountain CFD $ $ $ $ 30,284 134 3,719 34,137 43 - $ $ McDowell Mountain Ranch CFD - - $ $ $ - - 2,500 281 4 5 394 44 229 190 413 747 2 11 43 - - 101 2,142 185 322 11 - - - 2,601 2,536 414 1,069 22 43 - - 9,745 9,745 69 (109) (40) (185) (185) (322) (322) 471 471 34,094 34,094 - - 12,346 $ 2,496 $ 229 $ 747 $ 493 $ 34,137 $ - $ - Table of Contents Combining Balance Sheet Nonmajor Special Revenue Governmental Funds June 30, 2018 (in thousands) ASSETS 140 City of Scottsdale, Arizona Cash and Investments Cash with Fiscal Agent Receivables (net of allowance for uncollectibles) Interest Privilege Tax Transient Occupancy Tax Property Tax Franchise Fee Highway User Tax Intergovernmental Grants Miscellaneous Total Assets LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES (DEFICITS) Liabilities Accounts Payable Accrued Payroll and Benefits Due to Other Funds Unearned Revenue Intergovernmental Other Due to Other Governments Guaranty and Other Deposits Total Liabilities DC Ranch CFD Via Linda Road CFD $ $ $ $ Deferred Inflows of Resources Unavailable Revenues Total Liabilities and Deferred Inflows of Resources Fund Balances (Deficits) Restricted Committed Unassigned Total Fund Balances (Deficits) Total Liabilities, Deferred Inflows of Resources, and Fund Balances (Deficits) $ 53 1 54 - $ $ Waterfront Commercial CFD - - $ $ $ 10 1 11 - Streetlight Districts $ $ $ Tourism Development Special Programs 6 6 2 $ $ $ 19,059 11 55 3,148 271 22,544 606 34 - $ $ $ Total 7,601 1,188 152 8,941 241 4 - $ $ $ 66,879 63 145 5,781 1,188 2 55 1,449 3,148 645 2,649 82,004 3,665 205 2 - - - 2 7,049 57 1 7,747 245 7,564 474 3 5 11,918 - - - - 124 27 2,912 - - - 2 7,871 272 14,830 54 54 - 11 11 4 4 3,505 11,233 (65) 14,673 8,669 8,669 47,953 19,902 (681) 67,174 54 $ - $ 11 $ 6 $ 22,544 $ 8,941 $ 82,004 Table of Contents Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Special Revenue Governmental Funds For the Fiscal Year Ended June 30, 2018 (in thousands) REVENUES City of Scottsdale, Arizona 141 Taxes - Local Property Transaction Privilege Transient Occupancy Light and Power Franchise Taxes - Intergovernmental Highway User Tax Local Transportation Assistance Fund Business and Liquor Licenses Charges for Current Services Recreation Fees Fines, Fees, and Forfeitures Court Court Enhancement Library Police Property Rental Interest Earnings Intergovernmental Federal Grants State Grants Miscellaneous Developer Contributions Streetlight and Services Districts Contributions and Donations Reimbursements from Outside Sources Indirect Costs Other Total Revenues Community Development Block Grant Transportation $ 22,044 - $ HOME - $ Grants - $ Section 8 - $ - Preserve Privilege Tax Scottsdale Mountain CFD McDowell Mountain Ranch CFD $ $ $ 40,089 - 11 - 10 - 16,067 657 - - - - - - - - - - - - - - - - - 64 - - - - 518 - - 202 67 558 3 39,598 1,537 1,601 1 1 1,019 227 2 1,656 2,904 5,549 2 5,551 40,607 11 10 EXPENDITURES Current General Government Mayor and City Council City Court City Manager City Treasurer Public Works Community and Economic Development Public Safety Community Services Streetlight and Services Districts Total Expenditures 42 15,004 8,684 1,539 25,269 1,425 1,425 185 185 5 688 68 784 1,200 2,745 5,540 5,540 6 6 11 11 10 10 Excess (Deficiency) of Revenues over (under) Expenditures 14,329 176 (184) 159 11 40,601 - - OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) 300 (19,570) (19,270) (4) (4) - (17) (17) - (33,817) (33,817) - - (4,941) 172 (184) 142 11 6,784 - - Net Change in Fund Balances (Deficits) Fund Balances (Deficits) - Beginning Fund Balances (Deficits) - Ending (continued) $ 14,686 9,745 $ (212) (40) $ (1) (185) $ (464) (322) $ 460 471 $ 27,310 34,094 $ - $ - Table of Contents Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Special Revenue Governmental Funds For the Fiscal Year Ended June 30, 2018 (in thousands) REVENUES City of Scottsdale, Arizona 142 Taxes - Local Property Transaction Privilege Transient Occupancy Light and Power Franchise Taxes - Intergovernmental Highway User Tax Local Transportation Assistance Fund Business and Liquor Licenses Charges for Current Services Recreation Fees Fines, Fees, and Forfeitures Court Court Enhancement Library Police Property Rental Interest Earnings Intergovernmental Federal Grants State Grants Miscellaneous Developer Contributions Streetlight and Services Districts Contributions and Donations Reimbursements from Outside Sources Indirect Costs Other Total Revenues DC Ranch CFD Via Linda Road CFD Waterfront Commercial CFD $ $ $ 67 - 10 - 13 - Streetlight Districts $ Tourism Development Special Programs - $ 253 $ Total 19,837 - $ 111 62,133 19,837 253 - - - - 59 - 16,067 657 59 - - - - 2,178 - 2,178 - - - - 161 2,031 142 418 398 84 1,921 - 161 2,031 142 418 2,383 602 67 10 13 584 584 879 835 345 87 52 7,922 5 21,763 8,106 227 1,083 835 584 2,001 161 558 55 120,642 EXPENDITURES Current General Government Mayor and City Council City Court City Manager City Treasurer Public Works Community and Economic Development Public Safety Community Services Streetlight and Services Districts Total Expenditures 70 70 10 10 10 10 605 605 11 1,132 275 425 1,186 2,606 5,635 14,426 14,426 16 1,132 688 159 15,279 23,603 1,970 12,495 605 55,947 Excess (Deficiency) of Revenues over (under) Expenditures (3) - 3 (21) 2,287 7,337 64,695 OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) - - - - 1,110 (707) 403 250 (11,765) (11,515) 1,660 (65,880) (64,220) Net Change in Fund Balances (3) - 3 (21) 2,690 (4,178) 475 Fund Balances - Beginning, Restated* Fund Balances - Ending 57 $ *Restated the Special Programs Fund to reclassify the endowments to the Permanent Fund. 54 $ - 8 $ 11 25 $ 4 11,983 $ 14,673 12,847 $ 8,669 66,699 $ 67,174 Table of Contents Transportation – Special Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2018 (in thousands) Budgeted Amounts 143 City of Scottsdale, Arizona REVENUES Taxes - Local Transaction Privilege Taxes - Intergovernmental Highway User Tax Local Transportation Assistance Fund Intergovernmental Miscellaneous Reimbursements from Outside Sources Indirect Costs Other Total Revenues Original $ Final 20,933 $ 20,933 Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ 22,044 - 22,044 1,111 16,382 655 16,382 655 16,067 657 - 16,067 657 (315) 2 325 558 5 38,858 325 558 5 38,858 202 67 558 3 39,598 - 202 67 558 3 39,598 (123) 67 (2) 740 EXPENDITURES Current General Government City Treasurer Public Works Community and Economic Development Community Services Total Expenditures 15,095 9,478 1,574 26,147 43 15,069 9,644 1,575 26,331 42 14,982 8,678 1,539 25,241 22 6 28 42 15,004 8,684 1,539 25,269 1 87 966 36 1,090 Excess of Revenues over Expenditures 12,711 12,527 14,357 (28) 14,329 1,830 300 (10,491) 10 (10,181) 300 (10,491) 10 (10,181) 300 (19,570) (19,270) - 300 (19,570) (19,270) (9,079) (10) (9,089) 2,530 2,346 (4,913) (28) (4,941) (7,259) OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Sale of General Capital Assets Total Other Financing Sources (Uses) Net Change in Fund Balance Fund Balance - Beginning Fund Balance - Ending $ 10,513 13,043 $ 28 Explanation of Differences: The City budgets for certain expenditures on the cash basis, rather than on the modified accrual basis: Payroll Accruals $ 14,599 16,945 $ 14,599 9,686 $ 87 59 $ 14,686 9,745 $ (7,259) Table of Contents Community Development Block Grant – Special Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2018 (in thousands) Budgeted Amounts Property Rental Intergovernmental Federal Grants Total Revenues REVENUES Original $ 144 City of Scottsdale, Arizona EXPENDITURES Current Community Services Total Expenditures Excess (Deficiency) of Revenues over (under) Expenditures OTHER FINANCING USES Transfers Out Total Other Financing Uses Net Change in Fund Balance Fund Balance (Deficit) - Beginning Fund Balance (Deficit) - Ending Final 39 39 Budget to GAAP Differences Actual Amounts GAAP Basis $ $ $ $ 64 - 64 25 2,173 2,212 2,176 2,215 1,537 1,601 - 1,537 1,601 (639) (614) 2,212 2,212 2,219 2,219 1,422 1,422 3 3 1,425 1,425 797 797 - (4) 179 (3) 176 183 - (4) (4) (4) (4) - (4) (4) - - (8) 175 (3) 172 183 $ - $ 3 Explanation of Differences: The City budgets for certain expenditures on the cash basis, rather than on the modified accrual basis: Payroll Accruals $ Actual Amounts Budgetary Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ (208) (216) $ (208) (33) $ (4) (7) $ (212) (40) $ 183 Table of Contents HOME – Special Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2018 (in thousands) Budgeted Amounts REVENUES Intergovernmental Federal Grants Total Revenues Original $ 145 City of Scottsdale, Arizona EXPENDITURES Current Community Services Total Expenditures Deficiency of Revenues under Expenditures Fund Balance (Deficit) - Beginning Fund Balance (Deficit) - Ending $ Final 667 667 $ 667 667 Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ 1 1 - 1 1 (666) (666) 667 667 667 667 185 185 - 185 185 482 482 - - (184) - (184) (184) - $ (1) (1) $ (1) (185) $ - $ (1) (185) $ (184) Table of Contents Grants – Special Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2018 (in thousands) Budgeted Amounts REVENUES Intergovernmental Federal Grants State Grants Miscellaneous Contributions and Donations Total Revenues Original $ City of Scottsdale, Arizona 146 EXPENDITURES Current General Government Mayor and City Council City Manager Community and Economic Development Public Safety Community Services Total Expenditures Excess of Revenues over Expenditures OTHER FINANCING USES Transfers Out Total Other Financing Uses Net Change in Fund Balance Fund Balance (Deficit) - Beginning Fund Balance (Deficit) - Ending Final 1,764 208 3,650 5,622 1,775 12 13 3,846 5,646 Budget to GAAP Differences Actual Amounts GAAP Basis $ $ $ $ 1,019 227 2 1,656 2,904 - 1,019 227 2 1,656 2,904 (756) 215 (11) (2,190) (2,742) 2,338 300 857 2,127 5,622 5 691 82 1,245 2,473 4,496 5 689 68 778 1,201 2,741 (1) 6 (1) 4 5 688 68 784 1,200 2,745 2 14 467 1,272 1,755 - 1,150 163 (4) 159 (987) - - (17) (17) - (17) (17) (17) (17) - 1,150 146 (4) 142 (1,004) $ - $ 4 Explanation of Differences: The City budgets for certain expenditures on the cash basis, rather than on the modified accrual basis: Payroll Accruals $ Actual Amounts Budgetary Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ (461) 689 $ (461) (315) $ (3) (7) $ (464) (322) $ (1,004) Table of Contents Section 8 – Special Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2018 (in thousands) REVENUES Intergovernmental Federal Grants Reimbursements from Outside Sources Total Revenues Original $ 147 City of Scottsdale, Arizona EXPENDITURES Current Community Services Total Expenditures Excess (Deficiency) of Revenues over (under) Expenditures Fund Balance - Beginning Fund Balance - Ending Final 6,110 6,110 6,110 6,110 Budget to GAAP Differences $ $ 5,549 2 5,551 - Actual Amounts GAAP Basis $ $ 5,549 2 5,551 (561) 2 (559) 6,110 6,110 6,120 6,120 5,541 5,541 (1) (1) 5,540 5,540 579 579 - (10) 10 1 11 20 $ - $ (1) Explanation of Differences: The City budgets for certain expenditures on the cash basis, rather than on the modified accrual basis: Payroll Accruals $ Actual Amounts Budgetary Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ 460 450 $ 460 470 $ 1 $ 460 471 $ 20 Table of Contents Preserve Privilege Tax – Special Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2018 (in thousands) Budgeted Amounts Taxes - Local Transaction Privilege Interest Earnings Total Revenues Original REVENUES $ Final 37,766 399 38,165 $ 37,766 399 38,165 Actual Amounts Budgetary Basis Budget to GAAP Differences $ $ 40,089 518 40,607 - Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ 40,089 518 40,607 2,323 119 2,442 City of Scottsdale, Arizona 148 EXPENDITURES Current General Government City Treasurer Community Services Total Expenditures 2 2 2 2 6 6 - 6 6 (6) 2 (4) Excess of Revenues over Expenditures 38,163 38,163 40,601 - 40,601 2,438 (35,734) (35,734) (35,734) (35,734) (33,817) (33,817) - (33,817) (33,817) 1,917 1,917 2,429 2,429 6,784 - 6,784 4,355 OTHER FINANCING USES Transfers Out Total Other Financing Uses Net Change in Fund Balance Fund Balance - Beginning Fund Balance - Ending $ 27,604 30,033 $ 28,116 30,545 $ 28,116 34,900 $ (806) (806) $ 27,310 34,094 $ 4,355 Table of Contents Streetlight Districts – Special Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2018 (in thousands) Budgeted Amounts REVENUES Streetlight and Services Districts Total Revenues Original $ EXPENDITURES Current Streetlight and Services Districts Total Expenditures 149 City of Scottsdale, Arizona Deficiency of Revenues under Expenditures Fund Balance - Beginning Fund Balance - Ending $ Final 598 598 $ 598 598 Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ 584 584 - 584 584 (14) (14) 623 623 623 623 605 605 - 605 605 18 18 (25) (25) (21) - (21) 4 25 - $ 25 - $ 25 4 $ - $ 25 4 $ 4 Table of Contents Special Programs – Special Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2018 (in thousands) Budgeted Amounts City of Scottsdale, Arizona 150 REVENUES Taxes - Local Light and Power Franchise Business and Liquor Licenses Charges for Current Services Recreation Fees Fines, Fees, and Forfeitures Court Court Enhancement Library Police Property Rental Interest Earnings Intergovernmental Miscellaneous Developer Contributions Contributions and Donations Reimbursements from Outside Sources Other Total Revenues Original $ Final 269 52 $ 269 52 Actual Amounts Budgetary Basis Budget to GAAP Differences $ $ 253 59 - Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ 253 59 (16) 7 1,904 1,904 2,178 - 2,178 274 170 1,763 150 400 344 33 170 1,763 150 400 344 33 161 2,031 142 418 398 84 - 161 2,031 142 418 398 84 (9) 268 (8) 18 54 51 1,907 307 88 75 7,462 1,907 307 88 75 7,462 879 835 345 87 52 7,922 - 879 835 345 87 52 7,922 (1,028) 835 38 (1) (23) 460 EXPENDITURES Current General Government Mayor and City Council City Court Public Works Community and Economic Development Public Safety Community Services Total Expenditures 8 1,480 250 371 1,755 2,740 6,604 10 1,499 250 609 1,762 2,662 6,792 11 1,129 275 425 1,184 2,604 5,628 3 2 2 7 11 1,132 275 425 1,186 2,606 5,635 (1) 370 (25) 184 578 58 1,164 Excess of Revenues over Expenditures 858 670 2,294 (7) 2,287 1,624 10 (452) (442) 10 (452) (442) 1,110 (707) 403 - 1,110 (707) 403 1,100 (255) 845 416 228 2,697 (7) 2,690 2,469 OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balance Fund Balance - Beginning, Restated* Fund Balance - Ending $ 11,047 11,463 $ 7 Explanation of Differences: The City budgets for certain expenditures on the cash basis, rather than on the modified accrual basis: Payroll Accruals *Restated the Special Programs Fund to reclassify the endowments to the Permanent Fund. $ 12,031 12,259 $ 12,031 14,728 $ (48) (55) $ 11,983 14,673 $ 2,469 Table of Contents Tourism Development – Special Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2018 (in thousands) Budgeted Amounts REVENUES Taxes - Local Transient Occupancy Tax Property Rental Reimbursements from Outside Sources Total Revenues Original $ Final 19,441 1,667 21 21,129 $ 19,441 1,667 21 21,129 Actual Amounts Budgetary Basis Budget to GAAP Differences $ $ 19,837 1,921 5 21,763 - Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ 19,837 1,921 5 21,763 396 254 (16) 634 City of Scottsdale, Arizona 151 EXPENDITURES Current Community and Economic Development Total Expenditures 13,739 13,739 15,243 15,243 14,425 14,425 1 1 14,426 14,426 818 818 Excess of Revenues over Expenditures 7,390 5,886 7,338 (1) 7,337 1,452 OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) (5,492) (5,492) (5,492) (5,492) 250 (11,765) (11,515) - 250 (11,765) (11,515) 250 (6,273) (6,023) 1,898 394 (4,177) (1) (4,178) (4,571) Net Change in Fund Balance Fund Balance - Beginning Fund Balance - Ending $ 12,671 14,569 $ 1 Explanation of Differences: The City budgets for certain expenditures on the cash basis, rather than on the modified accrual basis: Payroll Accruals $ 12,848 13,242 $ 12,848 8,671 $ (1) (2) $ 12,847 8,669 $ (4,571) Table of Contents Combining Balance Sheet Nonmajor Debt Service Governmental Funds June 30, 2018 (in thousands) ASSETS Cash and Investments Cash with Fiscal Agent Receivables (net of allowance for uncollectibles) Property Tax Intergovernmental Total Assets LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES Liabilities Matured Bond Interest Payable Matured Bonds Payable Total Liabilities Municipal Property Corporation $ $ $ 152 City of Scottsdale, Arizona Deferred Inflows of Resources Unavailable Revenues Total Liabilities and Deferred Inflows of Resources Fund Balances Restricted Committed Total Fund Balances Total Liabilities, Deferred Inflows of Resources, and Fund Balances $ Debt Service Stabilization 15,605 15,605 4,405 11,200 15,605 $ $ $ 9,058 10,934 19,992 - Scottsdale Mountain CFD McDowell Mountain Ranch CFD DC Ranch CFD Via Linda Road CFD Waterfront Commercial CFD Scottsdale Preserve Authority $ $ $ $ $ $ $ $ 188 22 210 4 160 164 $ $ 1,436 22 1,458 88 1,155 1,243 $ $ 1,244 36 1,280 183 920 1,103 $ $ 233 5 238 15 185 200 $ $ 613 23 636 92 135 227 $ $ 4,732 4,732 367 4,365 4,732 Total $ $ $ 9,058 24,051 108 10,934 44,151 5,154 18,120 23,274 - 10,934 20 12 23 1 - - 10,990 15,605 10,934 184 1,255 1,126 201 227 4,732 34,264 - 4,358 4,700 9,058 26 26 203 203 154 154 37 37 409 409 - 5,187 4,700 9,887 15,605 $ 19,992 $ 210 $ 1,458 $ 1,280 $ 238 $ 636 $ 4,732 $ 44,151 Table of Contents Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Debt Service Governmental Funds For the Fiscal Year Ended June 30, 2018 (in thousands) Municipal Property Corporation REVENUES Taxes - Local Property Property Rental Interest Earnings Intergovernmental Miscellaneous Total Revenues $ Debt Service Stabilization 1 $ 146 - Scottsdale Mountain CFD McDowell Mountain Ranch CFD DC Ranch CFD Via Linda Road CFD Waterfront Commercial CFD Scottsdale Preserve Authority $ $ $ $ $ $ 129 - 1,318 - 1,268 - 210 - 331 4 - Total $ 3,256 146 5 City of Scottsdale, Arizona 153 1 3,226 3,372 129 1,318 1,268 210 335 - 3,226 6,633 EXPENDITURES Debt Service Principal Interest and Fiscal Charges Total Expenditures 11,200 8,820 20,020 - 160 11 171 1,155 176 1,331 920 368 1,288 185 31 216 135 187 322 4,365 739 5,104 18,120 10,332 28,452 Excess (Deficiency) of Revenues over (under) Expenditures (20,019) 3,372 (42) (13) (20) (6) 13 (5,104) (21,819) OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) 20,103 (84) 20,019 (4,212) (4,212) - - - - - 5,104 5,104 25,207 (4,296) 20,911 - (840) (42) (13) (20) (6) 13 - (908) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending $ - $ 9,898 9,058 $ 68 26 $ 216 203 $ 174 154 $ 43 37 $ 396 409 $ - $ 10,795 9,887 Table of Contents General Obligation Bond Debt Service Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2018 (in thousands) Budgeted Amounts Taxes - Local Property Total Revenues Original REVENUES $ City of Scottsdale, Arizona 154 EXPENDITURES Debt Service Principal Interest and Fiscal Charges Bond Issuance Costs Total Expenditures Final 33,559 33,559 $ 33,559 33,559 Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ 33,292 33,292 - 33,292 33,292 (267) (267) 40,530 19,353 59,883 47,630 21,348 68,978 47,330 21,347 241 68,918 - 47,330 21,347 241 68,918 300 1 (241) 60 Deficiency of Revenues under Expenditures (26,324) (35,419) (35,626) - (35,626) (207) OTHER FINANCING SOURCES Transfers In Issuance of Long-Term Capital-Related Debt Premium on Long-Term Debt Issued Total Other Financing Sources 25,724 25,724 25,724 25,724 26,355 80 146 26,581 - 26,355 80 146 26,581 631 80 146 857 Net Change in Fund Balance (600) (9,695) (9,045) - (9,045) 650 Fund Balance - Beginning Fund Balance - Ending $ 10,966 10,366 $ 11,516 1,821 $ 11,516 2,471 $ - $ 11,516 2,471 $ 650 Table of Contents Municipal Property Corporation Debt Service Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2018 (in thousands) Budgeted Amounts Interest Earnings Total Revenues REVENUES Original $ 155 City of Scottsdale, Arizona EXPENDITURES Debt Service Principal Interest and Fiscal Charges Total Expenditures Final - $ - Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ 1 1 - 1 1 1 1 11,200 8,820 20,020 11,200 8,820 20,020 11,200 8,820 20,020 - 11,200 8,820 20,020 - Deficiency of Revenues under Expenditures (20,020) (20,020) (20,019) - (20,019) 1 OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) 20,020 20,020 20,020 20,020 20,103 (84) 20,019 - 20,103 (84) 20,019 83 (84) (1) - - - - - - Net Change in Fund Balance Fund Balance - Beginning Fund Balance - Ending $ - $ - $ - $ - $ - $ - Table of Contents Debt Service Stabilization Debt Service Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2018 (in thousands) Budgeted Amounts Property Rental Intergovernmental Miscellaneous Total Revenues REVENUES Original $ Final 145 $ 145 Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ 146 - 146 1 City of Scottsdale, Arizona 156 3,487 3,632 3,487 3,632 3,226 3,372 - 3,226 3,372 (261) (260) - - - - - - Excess of Revenues over Expenditures 3,632 3,632 3,372 - 3,372 (260) OTHER FINANCING USES Transfers Out Total Other Financing Uses (4,211) (4,211) (4,211) (4,211) (4,212) (4,212) - (4,212) (4,212) (1) (1) Net Change in Fund Balance (579) (579) (840) - (840) (261) EXPENDITURES Total Expenditures Fund Balance - Beginning Fund Balance - Ending $ 10,542 9,963 $ 9,898 9,319 $ 9,898 9,058 $ - $ 9,898 9,058 $ (261) Table of Contents Scottsdale Preserve Authority Debt Service Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2018 (in thousands) Budgeted Amounts Total Revenues REVENUES Original $ 157 City of Scottsdale, Arizona EXPENDITURES Debt Service Principal Interest and Fiscal Charges Total Expenditures Final - $ - Actual Amounts Budgetary Basis Budget to GAAP Differences $ $ - - Actual Amounts GAAP Basis $ - Variance Between Final Budget and Actual Amounts Budgetary Basis $ - 4,365 1,765 6,130 4,365 751 5,116 4,365 739 5,104 - 4,365 739 5,104 12 12 Deficiency of Revenues under Expenditures (6,130) (5,116) (5,104) - (5,104) 12 OTHER FINANCING SOURCES Transfers In Total Other Financing Sources 6,130 6,130 6,130 6,130 5,104 5,104 - 5,104 5,104 (1,026) (1,026) - 1,014 - - - (1,014) Net Change in Fund Balance Fund Balance - Beginning Fund Balance - Ending $ - $ 1,014 $ - $ - $ - $ (1,014) Table of Contents Combining Balance Sheet Nonmajor Capital Projects Governmental Funds June 30, 2018 (in thousands) ASSETS 158 City of Scottsdale, Arizona Cash and Investments Receivables (net of allowance for uncollectibles) Interest Intergovernmental Grants Miscellaneous Total Assets General Obligation Bonds Transportation Privilege Tax Preserve Privilege Tax Municipal Property Corporation Bonds $ 21,256 $ 38,065 $ 125 $ - $ 70 21,326 $ 101 13,921 52,087 $ 125 $ - External Sources Total $ - $ 1,456 3,347 213 5,016 $ 59,446 $ 171 15,377 3,347 213 78,554 LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES (DEFICITS) Liabilities Accounts Payable Accrued Payroll and Benefits Due to Other Funds Unearned Revenue Other Total Liabilities $ Deferred Inflows of Resources Unavailable Revenues Total Liabilities and Deferred Inflows of Resources Fund Balances (Deficits) Restricted Unassigned Total Fund Balances (Deficits) Total Liabilities, Deferred Inflows of Resources, and Fund Balances (Deficits) $ 648 3 - $ 1,635 16 - $ 126 4 - $ - $ 1,013 3 3,671 $ 3,422 26 3,671 651 1,651 130 - 175 4,862 175 7,294 651 13,921 15,572 130 - 4,550 9,412 18,471 25,765 20,675 20,675 36,515 36,515 (5) (5) - 2,556 (6,952) (4,396) 59,746 (6,957) 52,789 21,326 $ 52,087 $ 125 $ - $ 5,016 $ 78,554 Table of Contents Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Capital Projects Governmental Funds For the Fiscal Year Ended June 30, 2018 (in thousands) REVENUES 159 City of Scottsdale, Arizona Interest Earnings Intergovernmental Federal Grants Miscellaneous Contributions and Donations Total Revenues General Obligation Bonds Transportation Privilege Tax Preserve Privilege Tax $ $ $ EXPENDITURES Current Capital Outlay Total Expenditures Deficiency of Revenues under Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Issuance of Long-Term Capital-Related Debt Premium on Long-Term Debt Issued Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances (Deficits) - Beginning Fund Balances (Deficits) - Ending $ 266 370 - 266 370 - 11,344 11,344 11,775 11,775 (11,078) Municipal Property Corporation Bonds $ External Sources 1 $ 4 Total $ 641 1 5,797 7,129 332 13,262 5,797 7,129 332 13,899 2,362 2,362 84 84 15,588 15,588 41,153 41,153 (11,405) (2,362) (83) (2,326) (27,254) 25,420 3,350 28,770 19,570 19,570 2,366 (4) 2,362 84 (119) (35) 153 (111) 42 22,173 (234) 25,420 3,350 50,709 17,692 8,165 - (118) (2,284) 23,455 2,983 20,675 $ 28,350 36,515 $ - (5) (5) $ 118 - $ (2,112) (4,396) $ 29,334 52,789 Table of Contents Combining Balance Sheet Nonmajor Permanent Governmental Funds June 30, 2018 (in thousands) Cash and Investments Total Assets ASSETS 160 City of Scottsdale, Arizona LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES Liabilities Total Liabilities Fund Balances Nonspendable Restricted Total Fund Balances Total Liabilities, Deferred Inflows of Resources, and Fund Balances Scottsdale Community Endowment Rassner Library Endowment Herbert R. Drinkwater Youth Services Endowment Scottsdale Employee Endowment Total $ $ 445 445 $ $ 134 134 $ $ 41 41 $ $ 33 33 $ $ 653 653 $ - $ - $ - $ - $ - 419 26 445 $ 445 129 5 134 $ 134 39 2 41 $ 41 32 1 33 $ 33 619 34 653 $ 653 Table of Contents Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Permanent Governmental Funds For the Fiscal Year Ended June 30, 2018 (in thousands) Interest Earnings Total Revenues REVENUES Scottsdale Community Endowment Rassner Library Endowment $ 26 26 $ Herbert R. Drinkwater Youth Services Endowment Scottsdale Employee Endowment 8 8 $ 3 3 $ Total 2 2 $ 39 39 City of Scottsdale, Arizona 161 EXPENDITURES Current Community Services Total Expenditures 39 39 2 2 1 1 1 1 43 43 Excess (Deficiency) of Revenues over (under) Expenditures (13) 6 2 1 (4) (13) 6 2 1 (4) Net Change in Fund Balances Fund Balances - Beginning, Restated* Fund Balances - Ending *Restated beginning fund balance to record endowment funds. $ 458 445 $ 128 134 $ 39 41 $ 32 33 $ 657 653 Table of Contents INTERNAL SERVICE FUNDS Internal Service Funds are used to report activities that provide goods or services to other funds, departments, or agencies of the primary government and its component units on a cost-reimbursement basis. Fleet Management Fund This fund accounts for the expenses associated with purchasing and maintaining the City’s motor vehicles. Self-Insurance Fund This fund accounts for the administration of the City’s self-insurance program. This fund provides coverage of unemployment, self-insured benefits, workers’ compensation, and property and liability claims. Computer Replacement Fund This fund accounts for the expenses associated with purchasing the City’s computers, monitors, and printers. City of Scottsdale, Arizona 162 Table of Contents Combining Statement of Fund Net Position Internal Service Funds June 30, 2018 (in thousands) Fleet Management ASSETS AND DEFERRED OUTFLOWS OF RESOURCES Assets Current Assets Cash and Investments Receivables (net of allowance for uncollectibles) Miscellaneous Supplies Inventory Total Current Assets $ Computer Replacement Self-Insurance 15,197 $ 34,509 $ Total 1,923 $ 51,629 123 925 16,245 131 34,640 1,923 254 925 52,808 Noncurrent Assets Equity in Joint Venture Capital Assets Buildings and Improvements Motor Vehicles Machinery and Equipment Construction in Progress Less Accumulated Depreciation Total Noncurrent Assets 2 - - 2 12,887 87,592 1,032 273 (46,380) 55,406 7 7 2,458 (536) 1,922 12,887 87,592 3,497 273 (46,916) 57,335 Total Assets 71,651 34,647 3,845 110,143 Deferred Outflows of Resources Pension-Related Amounts 514 108 - 622 LIABILITIES AND DEFERRED INFLOWS OF RESOURCES Liabilities Current Liabilities Accounts Payable Accrued Payroll and Benefits Accrued Compensated Absences - Due within one year Due to Other Governments Other Payables - Due within one year Total Current Liabilities 2,249 83 162 2 1 2,497 1,421 21 42 7,803 9,287 11 11 3,681 104 204 2 7,804 11,795 168 4,159 4,327 57 900 15,132 16,089 - 225 5,059 15,132 20,416 Total Liabilities 6,824 25,376 11 32,211 Deferred Inflows of Resources Pension-Related Amounts 355 77 - 432 55,404 9,582 7 9,295 1,922 1,912 57,333 20,789 Noncurrent Liabilities Accrued Compensated Absences - Due in more than one year Net Pension Liabilities Other Payables - Due in more than one year Total Noncurrent Liabilities NET POSITION Net Investment in Capital Assets Unrestricted Total Net Position $ 64,986 $ City of Scottsdale, Arizona 163 9,302 $ 3,834 $ 78,122 Table of Contents Combining Statement of Revenues, Expenses, and Changes in Fund Net Position Internal Service Funds For the Fiscal Year Ended June 30, 2018 (in thousands) Fleet Management Operating Revenues Charges for Sales and Services Billings to User Programs Self-Insurance Contributions - Employee Self-Insurance Contributions - Retiree State Contributions Other Total Operating Revenues $ 20,006 697 20,703 Computer Replacement Self-Insurance $ 31,578 7,673 207 145 824 40,427 $ Total 1,021 1,021 $ 52,605 7,673 207 145 1,521 62,151 Operating Expenses Costs of Sales and Services Fleet Management Operations Self-Insurance Administration Self-Insurance Claims Self-Insurance Benefits Insurance and Bond Premiums Depreciation Computer Replacement Total Operating Expenses 11,824 6,772 18,596 2,116 7,937 29,378 2,566 41,997 375 2 377 11,824 2,116 7,937 29,378 2,566 7,147 2 60,970 Operating Income (Loss) 2,107 (1,570) 644 1,181 143 143 1,047 1,047 (3) (3) 1,047 140 1,187 2,250 (523) 641 2,368 4,758 7,008 104 (2) (421) 641 4,758 104 (2) 7,228 Non-Operating Revenues Property Tax Gain (Loss) on Sale of Capital Assets Total Non-Operating Revenues Income Before Contributions and Transfers Capital Contributions Transfers In Transfers Out Change in Net Position Total Net Position - Beginning Total Net Position - Ending $ 57,978 64,986 $ City of Scottsdale, Arizona 164 9,723 9,302 $ 3,193 3,834 $ 70,894 78,122 Table of Contents Combining Statement of Cash Flows Internal Service Funds For the Fiscal Year Ended June 30, 2018 (in thousands) Fleet Management Cash Flows from Operating Activities Cash Received from Customers Cash Payments to Employees for Services Cash Payments to Suppliers for Goods/Services Other Cash Receipts Net Cash Provided by Operating Activities $ 20,008 (3,837) (8,317) 697 8,551 Cash Flows from Non-Capital Financing Activities Property Tax Transfers In Transfers Out Net Cash Provided by Non-Capital Financing Activities Computer Replacement Self-Insurance $ 40,081 (1,191) (37,726) 825 1,989 $ Total 1,021 (2) 1,019 $ 61,110 (5,028) (46,045) 1,522 11,559 - 1,047 104 (2) 1,149 - 1,047 104 (2) 1,149 Cash Flows from Capital and Related Financing Activities Acquisition of Capital Assets Sale of Capital Assets Net Cash Used for Capital and Related Financing Activities (6,090) 490 (5,600) (7) (7) (634) (634) (6,731) 490 (6,241) Net Increase in Cash and Cash Equivalents 2,951 3,131 385 6,467 Cash and Cash Equivalents at Beginning of Year 12,246 31,378 1,538 45,162 Cash and Cash Equivalents at End of Year $ 15,197 $ 34,509 $ 1,923 $ 51,629 $ 2,107 $ (1,570) $ 644 $ 1,181 Reconciliation of Operating Income to Net Cash Provided by (Used for) Operating Activities Operating Income (Loss) Income Provided by (Used for) Operating Activities Depreciation Current Year Pension Contributions Change in Accounts Receivable Change in Inventories Change in Accounts Payable Change in Unearned Revenue Change in Accrued Payroll Change in Compensated Absences Payable Change in Claims Payable Change in Net Pension Liability Change in Deferred Outflows of Resources Related to Pensions Change in Deferred Inflows of Resources Related to Pensions Change in Other Liabilities Total Adjustments 6,772 (304) 1 (183) 69 23 (13) (288) 594 (227) 6,444 (62) 482 477 (3) 10 17 2,582 (24) 123 (44) 1 3,559 375 375 7,147 (366) 483 (183) 546 (3) 33 4 2,582 (312) 717 (271) 1 10,378 Net Cash Provided by Operating Activities $ 8,551 $ 1,989 $ 1,019 $ 11,559 Supplemental Disclosure of Non-Cash Financing Activities Additions to Property, Plant, and Equipment Contributions from other funds $ 4,758 $ - $ - $ 4,758 City of Scottsdale, Arizona 165 Table of Contents FIDUCIARY FUNDS Agency Funds administer resources received and held by the City as the trustee or as the agent for others. Use of these funds facilitates the discharge of responsibilities placed on the governmental unit by virtue of law or other similar authority. Family Self-Sufficiency Agency Fund This fund accounts for monies in escrow for Section 8 Housing Program participants. Crossroads East Development Agreement Agency Fund This fund accounts for monies in escrow for the Arizona State Land Department. APS Raintree Underground Utility Improvement District Agency Fund This fund accounts for monies received pursuant to a development agreement which required assessments to be paid by District property owners to reimburse Arizona Public Service for the undergrounding of utility lines. City of Scottsdale, Arizona 166 Table of Contents Combining Statement of Fiduciary Net Position Fiduciary Funds June 30, 2018 (in thousands) Agency Funds ASSETS Cash and Cash Equivalents Family SelfSufficiency Agency Fund $ 167 City of Scottsdale, Arizona Total Assets LIABILITIES Escrow Payable Vouchers State Land Department Rebate UUID I-6002 Assessments Total Liabilities $ 92 Crossroads East Development Agreement Agency Fund $ - AZ Public Service Raintree UUID Agency Fund $ Total - $ 92 92 - - 92 92 - - - 92 - 92 $ - $ - $ 92 Table of Contents Combining Statement of Changes in Assets and Liabilities Agency Funds For the Fiscal Year Ended June 30, 2018 (in thousands) Family Self-Sufficiency ASSETS Cash and Cash Equivalents Total Assets LIABILITIES Escrow Payable Vouchers State Land Department Rebate UUID I-6002 Assessments Total Liabilities Balance July 1, 2017 Additions Crossroads East Development Agreement Deductions Balance June 30, 2018 Balance July 1, 2017 Additions Deductions Balance June 30, 2018 AZ Public Service Raintree UUID Balance July 1, 2017 Additions Deductions Balance June 30, 2018 $ 135 $ 43 $ 86 $ 92 $ 1,415 $ 1,340 $ 2,755 $ - $ - $ 240 $ 240 $ - $ 135 $ 43 $ 86 $ 92 $ 1,415 $ 1,340 $ 2,755 $ - $ - $ 240 $ 240 $ - $ 135 - $ 43 - $ 86 - $ 92 - $ 1,415 - $ 1,340 - $ 2,755 - $ - $ - $ 1,261 $ 1,261 $ - $ 135 $ 43 $ 86 $ 92 $ 1,415 $ 1,340 $ 2,755 $ - $ - $ 1,261 $ 1,261 $ - City of Scottsdale, Arizona 168 Table of Contents OTHER SUPPLEMENTARY INFORMATION Debt Requirements The Schedule of Changes in Long-Term Debt for the current fiscal year presents the City’s debt by type without regard to fund classification. Debt issued by community facilities districts is included for full disclosure although such debt is not legally an obligation of the City. City of Scottsdale, Arizona 169 Table of Contents Schedule of Changes in Long-Term Debt* For the Fiscal Year Ended June 30, 2018 (in thousands) July 1, 2017 Issued Retired Refunding Bonds Issued Amortizations and Contract Adjustments Bonds Defeased June 30, 2018 Governmental Activities Business-type Activities Final Payment Date GENERAL OBLIGATION BONDS City of Scottsdale, Arizona 170 Governmental Activities 2002 GO Refunding Preservation 2008A GO Various Purpose 2008B GO Preservation 2010 GO Various Purpose 2011 GO Preservation 2011 GO Refunding Various Purpose 2011 GO Refunding Preservation 2012 GO Preservation 2012 GO Refunding Various Purpose 2012 GO Refunding Preservation 2013 GO Preservation 2014 GO Preservation 2014 GO Refunding Various Purpose 2014 GO Refunding Preservation 2015 GO Refunding Various Purpose 2015 GO Refunding Preservation 2017A GO Preservation 2017B GO Preservation Acquisition Refinancing 2017 GO Refunding Various Purpose 2017 GO Refunding Preservation 2017C GO Various Purpose 2008A GO Series Issuance Premium 2008B GO Series Issuance Premium 2010 GO Bonds Issuance Premium 2011 GO Preserve Series Issuance Premium 2011 GO Refunding Series Issuance Premium 2012 GO Preserve Issuance Premium 2012 GO Refunding Series Issuance Premium 2013 GO Preserve Issuance Premium 2014 GO Preserve Issuance Premium 2014 GO Refunding Series Issuance Premium 2015 GO Refunding Series Issuance Premium 2017A GO Preserve Series Issuance Premium 2017B GO Preserve Acquisition Refinancing Series Issuance Premium 2017 GO Refunding Series Issuance Premium 2017C GO Various Purpose Issuance Total General Obligation Bonds REVENUE BONDS Business-type Activities 2008 Utility Revenue Series Refunding 2008 Refunding Series Issuance Premium Total Revenue Bonds $ $ $ $ 3,405 $ 5,400 650 13,450 4,410 1,555 20,665 50,000 24,075 44,020 74,000 12,435 60,479 8,156 86,400 62,305 17,410 18,495 26,826 13,159 92 5 188 51 1,998 1,848 4,904 2,457 483 6,222 12,573 2,751 3,393 6,650 590,910 $ - $ 25,500 3,496 28,996 $ 1,680 $ 5,400 650 1,900 830 1,555 1,980 1,400 7,295 565 9,797 1,238 6,240 6,800 47,330 $ - $ - - $ - - $ - - $ - $ 23,085 $ 1,625 24,710 $ - $ - $ 3,370 $ 3,370 $ - $ - $ - $ - $ *This exhibit includes both Governmental Activities and Business-type Activities debt (paid out of Enterprise Funds). (continued) (92) (5) (14) (3) (286) (109) (613) (145) (29) (1,037) (740) (162) (484) (391) (207) (4,317) $ 1,725 $ 11,550 3,580 18,685 48,600 16,780 44,020 74,000 11,870 50,682 6,918 86,400 56,065 17,410 18,495 26,826 13,159 18,700 174 48 1,712 1,739 4,291 2,312 454 5,185 11,833 2,589 2,909 6,259 3,289 568,259 $ 1,725 $ 11,550 3,580 18,685 48,600 16,780 44,020 74,000 11,870 50,682 6,918 86,400 56,065 17,410 18,495 26,826 13,159 18,700 174 48 1,712 1,739 4,291 2,312 454 5,185 11,833 2,589 2,909 6,259 3,289 568,259 $ - 07/01/19 07/01/18 07/01/18 07/01/30 07/01/22 07/01/18 07/01/24 07/01/34 07/01/21 07/01/25 07/01/34 07/01/34 07/01/23 07/01/23 07/01/28 07/01/34 07/01/34 07/01/24 07/01/29 07/01/34 07/01/27 - $ (271) (271) $ 19,715 $ 1,354 21,069 $ - $ - $ 19,715 1,354 21,069 07/01/23 Table of Contents Schedule of Changes in Long-Term Debt* For the Fiscal Year Ended June 30, 2018 (in thousands) MUNICIPAL PROPERTY CORPORATION BONDS Governmental Activities 2006 MPC Refunding 2013A MPC 2013B MPC 2013C MPC 2014 MPC Refunding 2015A MPC 2015A MPC Taxable 2015 MPC Refunding 2006 Refunding Series Issuance Premium 2013A MPC Series Issuance Premium 2013B MPC Series Issuance Premium 2013C MPC Series Issuance Premium 2014 Refunding Series Issuance Premium 2015A Series Issuance Premium 2015A Taxable Series Issuance Premium 2015 Refunding Series Issuance Premium Subtotal Governmental Activities City of Scottsdale, Arizona 171 Business-type Activities 2006 MPC Refunding 2008A MPC Water/Sewer 2010 MPC Bonds Water/Sewer 2015A MPC Bonds Water/Sewer 2015 MPC Refunding 2017 MPC Refunding 2017A MPC Bonds Water 2017B MPC Bonds Aviation 2006 Refunding Series Issuance Premium 2008A Series Issuance Premium 2010 Water/Sewer Issuance Premium 2015A Series Issuance Premium 2015 Refunding Series Issuance Premium 2017 Refunding Series Issuance Premium 2017A Series Issuance Premium 2017B Series Issuance Premium Subtotal Business-type Activities Total Municipal Property Corporation Bonds SCOTTSDALE PRESERVE AUTHORITY BONDS Governmental Activities 2010 Excise Tax Refunding 2011 Excise Tax Refunding 2010 Excise Tax Revenue Issuance Premium 2011 Excise Tax Revenue Issuance Premium Total Scottsdale Preserve Authority Bonds July 1, 2017 $ $ $ $ Issued Retired Accretions, Amortizations and Contract Adjustments Bonds Defeased June 30, 2018 Governmental Activities Business-type Activities Final Payment Date 53,140 $ 22,405 1,245 32,215 22,735 11,130 13,190 43,058 4,200 3,532 156 3,946 2,033 999 235 7,316 221,535 - $ - 1,200 $ 1,250 55 1,360 2,935 460 590 3,350 11,200 - $ - - $ - - $ (247) (321) (9) (247) (204) (59) (14) (406) (1,507) 51,940 $ 21,155 1,190 30,855 19,800 10,670 12,600 39,708 3,953 3,211 147 3,699 1,829 940 221 6,910 208,828 51,940 $ 21,155 1,190 30,855 19,800 10,670 12,600 39,708 3,953 3,211 147 3,699 1,829 940 221 6,910 208,828 - 07/01/34 07/01/28 07/01/33 07/01/33 07/01/27 07/01/34 07/01/34 07/01/35 95,630 3,725 16,330 16,860 46,812 79,970 39,065 23,520 7,326 157 590 1,513 6,845 10,485 3,272 1,673 353,773 575,308 $ - $ 7,845 3,725 1,100 695 1,080 645 15,090 26,290 $ - $ - $ (564) (157) (45) (89) (622) (552) (163) (84) (2,276) (3,783) $ 87,785 15,230 16,165 46,812 79,970 37,985 22,875 6,762 545 1,424 6,223 9,933 3,109 1,589 336,407 545,235 $ 208,828 $ 87,785 15,230 16,165 46,812 79,970 37,985 22,875 6,762 545 1,424 6,223 9,933 3,109 1,589 336,407 336,407 07/01/30 07/01/18 07/01/30 07/01/34 07/01/28 07/01/36 07/01/37 07/01/37 10,210 $ 6,105 1,022 486 17,823 $ - $ - $ 3,260 $ 1,105 4,365 $ - $ - $ - $ - $ - $ (146) (97) (243) $ 6,950 $ 5,000 876 389 13,215 $ 6,950 $ 5,000 876 389 13,215 $ - 07/01/20 07/01/22 *This exhibit includes both Governmental Activities and Business-type Activities debt (paid out of Enterprise Funds). (continued) Refunding Bonds Issued Table of Contents Schedule of Changes in Long-Term Debt* For the Fiscal Year Ended June 30, 2018 (in thousands) July 1, 2017 CERTIFICATES OF PARTICIPATION Governmental Activities Series 2010-Public Safety Communications Project Total Certificates of Participation Issued Refunding Bonds Issued Retired Accretions, Amortizations and Contract Adjustments Bonds Defeased Governmental Activities June 30, 2018 Business-type Activities Final Payment Date City of Scottsdale, Arizona 172 $ $ 7,264 $ 7,264 $ - $ - $ 2,350 $ 2,350 $ - $ - $ - $ - $ - $ - $ 4,914 $ 4,914 $ 4,914 $ 4,914 $ - 07/01/20 $ - $ 160 $ 135 920 1,155 185 2,555 $ - $ - $ - $ - $ (1) (39) (21) (61) $ - $ 2,950 9,820 5,040 990 354 90 19,244 $ - $ 2,950 9,820 5,040 990 354 90 19,244 $ - 07/15/18 07/15/32 07/15/27 07/15/22 07/15/23 $ 160 $ 3,085 10,740 6,195 1,175 1 393 111 21,860 $ Total Bonds $ 1,237,875 $ 28,996 $ 86,260 $ - $ - $ (8,675) $ 1,171,936 $ 814,460 $ 357,476 CAPITAL LEASES Governmental Activities Copier Equipment - Administrative Services Total Capital Leases $ $ 95 $ 95 $ - $ - $ 63 $ 63 $ - $ - $ - $ - $ - $ - $ 32 $ 32 $ 32 $ 32 $ - 12/31/18 $ - $ - $ 80 $ 74 154 $ - $ - $ - $ - $ - $ - $ 1,119 $ 1,256 2,375 $ 1,119 $ 1,256 2,375 $ - 2032 2035 28,996 $ 86,477 $ - $ - $ (8,675) $ 1,174,343 $ 816,867 $ 357,476 Compensated Absences Total Other Postemployment Benefit Liability Net Pension Liabilities Risk Management Claims $ 25,516 $ 2,194 309,094 22,933 3,531 33,523 - Total Long-Term Debt $ 1,176,604 $ 394,530 COMMUNITY FACILITIES DISTRICT BONDS Governmental Activities Scottsdale Mountain Refunding Series 2002 Waterfront Commercial Series 2007 DC Ranch Refunding Series 2012 McDowell Mtn Ranch Refunding Series 2012 Via Linda Road Refunding Series 2012 Scottsdale Mountain 2002 Issuance Premium DC Ranch 2012 Issuance Premium McDowell Mtn Ranch 2012 Issuance Premium Total Community Facilities District Bonds SERVICE CONCESSION ARRANGEMENTS Governmental Activities Bureau of Reclamation\Westworld Bureau of Reclamation\TPC Total Service Concession Arrangements $ 1,199 $ 1,330 2,529 $ TOTAL BONDS, CAPITAL LEASES, AND SERVICE CONCESSION ARRANGEMENTS $ 1,240,499 $ $ *This exhibit includes both Governmental Activities and Business-type Activities debt (paid out of Enterprise Funds). $ Table of Contents Statistical Section Contents Financial Trends Page 174 These schedules contain trend information to help the reader understand how the City’s financial performance and well-being have changed over time. Revenue Capacity 183 These schedules contain information to help the reader assess the City’s most significant local revenue sources, property tax, and sale and use taxes. Debt Capacity 190 These schedules present information to help the reader assess the affordability of the City’s current levels of outstanding debt and the City’s ability to issue additional debt in the future. Demographic and Economic Information 196 These schedules offer economic and demographic indicators to help the reader understand the environment within which the City’s financial activities take place. Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the City’s financial report relates to the services the City provides and the activities it performs. City of Scottsdale, Arizona 173 198 Table of Contents City of Scottsdale, Arizona Net Position by Component Last Ten Fiscal Years (accrual basis of accounting) (in thousands) 2009 City of Scottsdale, Arizona 174 2010 2011 2012 Governmental Activities $ 2,586,731 Net Investment in Capital Assets Restricted 131,732 Unrestricted 83,884 Total Governmental Activities Net Position $ 2,802,347 $ 2,729,334 97,950 87,698 $ 2,914,982 $ 2,704,433 91,862 108,799 $ 2,905,094 $ 2,800,451 100,275 74,124 $ 2,974,850 Business-type Activities Net Investment in Capital Assets Restricted Unrestricted Total Business-type Activities Net Position $ 991,390 26,568 239,103 $ 1,257,061 $ 941,884 32,244 307,279 $ 1,281,407 $ 1,009,973 36,287 258,395 $ 1,304,655 Primary Government Net Investment in Capital Assets Restricted Unrestricted Total Primary Government Net Position $ 3,578,121 158,300 322,987 $ 4,059,408 $ 3,671,218 130,194 394,977 $ 4,196,389 $ 3,714,406 128,149 367,194 $ 4,209,749 (1) Table I 2013 2014 2016 2017 $ 2,756,186 $ 2,685,105 $ 2,663,269 $ 100,472 109,615 117,485 133,897 180,942 (19,464) (2) $ 2,761,290 (3) $ $ 2,990,555 (1) $ 2,975,662 3,406,976 $ 122,932 (3,679) 3,526,229 (5) $ 3,530,134 125,366 (43,632) 3,611,868 $ 3,604,063 123,057 (27,779) (7) $ 3,699,341 $ 1,036,985 38,576 243,067 $ 1,318,628 $ 1,058,880 41,545 242,763 $ 1,343,188 $ 1,046,345 $ 1,036,650 $ 47,101 46,901 273,321 253,109 $ 1,366,767 (2) $ 1,336,660 (4) $ 1,059,001 $ 47,521 255,503 1,362,025 (6) $ 1,069,475 48,911 256,129 1,374,515 $ 1,099,864 48,926 250,500 $ 1,399,290 $ 3,837,436 138,851 317,191 $ 4,293,478 $ 3,815,066 142,017 376,660 $ 4,333,743 $ 3,731,450 156,716 454,263 $ 4,342,429 4,465,977 170,453 251,824 4,888,254 4,599,609 174,277 212,497 4,986,383 $ 4,703,927 171,983 222,721 $ 5,098,631 In fiscal year 2013, beginning net position was restated due to the implementation of GASB Statements No. 60 and 62. (2) In fiscal year 2014, beginning net position was restated due to the implementation of GASB Statement No. 65. (3) In fiscal year 2015, beginning net position was restated due to the implementation of GASB Statement No. 68 and an adjustment to capital assets. (4) In fiscal year 2015, beginning net position was restated due to the implementation of GASB Statement No. 68 and an adjustment involving prior-year revenue. (5) In fiscal year 2016, beginning net position was restated due to an adjustment to capital assets and the recognition of the City's involvement in a joint venture. (6) In fiscal year 2016, beginning net position was restated due to the recognition of the City's involvement in a joint venture. (7) In fiscal year 2018, beginning net position was restated due to the implementation of GASB Statement No. 65 and to record the City's endowment funds. 2015 $ 3,699,919 164,386 233,645 $ 4,097,950 $ $ $ $ 2018 Table of Contents City of Scottsdale, Arizona Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) (in thousands) 2010(1) 2009 City of Scottsdale, Arizona 175 Expenses Governmental Activities General Government $ 20,646 Public Works Community and Economic Development Public Safety Human Resources 3,545 Community Services 78,523 Information Technology Administrative Services Citizen and Neighborhood Resources 3,802 Economic Vitality 8,553 Finance and Accounting Financial Services 9,913 Fire 31,174 Information Services 13,723 Municipal Services 22,887 Planning and Development 29,029 Planning, Neighborhood, and Transportation Police 92,530 The Downtown Group 4,595 Transportation 87,552 WestWorld 595 Streetlight and Service Districts 631 Gain on In-Substance Defeasance of Debt Interest on Long-Term Debt 42,242 Bond Issuance Costs Total Governmental Activities Expenses 449,940 $ 24,351 37,143 116,155 3,717 53,596 14,876 1,917 20,676 5,848 114,530 538 39,405 432,752 2011(2) $ 21,495 35,605 134,221 111,227 3,047 51,974 13,491 2,905 578 40,358 414,901 2012(3) $ 18,964 34,416 126,622 115,740 54,442 17,318 572 40,647 408,721 Table IIa 2014(4) 2013 $ 20,985 36,405 147,514 118,033 56,382 16,863 569 38,389 435,140 $ 21,084 43,597 134,626 127,026 55,190 17,552 576 35,486 998 436,135 2015 $ 21,210 40,631 138,899 135,647 55,134 17,849 583 34,134 1,643 445,730 2017(5) 2016 $ 22,252 38,291 102,892 136,261 53,322 20,264 589 31,665 405,536 $ 22,477 40,035 102,813 172,452 54,155 19,326 589 (32) 28,462 672 440,949 2018(6) $ 23,282 42,205 102,153 153,256 54,710 21,173 605 28,724 426,108 Business-type Activities Water Utility Sewer Utility Airport Solid Waste Total Business-type Activities Expenses 81,391 33,509 3,482 19,650 138,032 76,178 33,274 3,120 18,889 131,461 83,888 34,533 3,680 18,853 140,954 90,829 41,218 3,681 17,671 153,399 90,205 43,169 3,785 19,146 156,305 91,496 45,421 4,014 19,608 160,539 95,958 44,352 3,703 20,911 164,924 100,854 42,058 3,894 20,786 167,592 95,745 50,535 4,151 20,181 170,612 96,493 52,142 7,624 19,735 175,994 Total Primary Government Expenses $ 587,972 $ 564,213 $ 555,855 $ 562,120 $ 591,445 $ 596,674 $ 610,654 $ 573,128 $ 611,561 $ 602,102 (1) In fiscal year 2010, the City's Governmental Activities were restructured from Departments to Divisions, which resulted in the shift of reporting associated expenses. (2) In fiscal year 2011, Economic Vitality merged with Planning, Neighborhood, and Transportation to become the Community and Economic Development Division. In addition, Finance and Accounting was merged into General Government. (3) In fiscal year 2012, Human Resources and Information Technology were absorbed into the Division's Administrative Services function. (4) In fiscal year 2014, the City adopted GASB Statement No. 65, which mandated the expensing of bond issuance costs as opposed to the previous practice of capitalizing such costs. (5) In fiscal year 2017, the City adopted GASB Statement No. 86, which requires the recognition of a gain/loss when bonds are defeased in-substance using existing resources. (6) In fiscal year 2018, the City instituted the practice of allocating bond issuance costs amongst the relevant functions. Table of Contents City of Scottsdale, Arizona Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) (in thousands) Table IIb City of Scottsdale, Arizona 176 Program Revenue Governmental Activities Charges for Services: General Government Public Works Community and Economic Development Public Safety Human Resources Community Services Information Technology Administrative Services Planning, Neighborhood, and Transportation Economic Vitality Fire Planning and Development Police WestWorld Streetlight and Services Districts Operating Grants and Contributions Capital Grants and Contributions Total Governmental Activities Program Revenues 2009 $ Business-type Activities Charges for Services: Water Utility Sewer Utility Airport Solid Waste Capital Grants and Contributions Total Business-type Activities Revenues Total Primary Government Revenues Net (Expense)/Revenue Governmental Activities Business-type Activities Total Primary Government Net Expense 14,670 4,619 2,275 6,393 5,703 2,682 599 26,272 240,289 303,502 2010 $ 91,546 34,198 2,813 20,049 22,067 170,673 13,982 12,655 5,773 6,837 2,552 289 29,319 190,279 261,686 2011 $ 94,199 35,027 2,879 20,269 9,268 161,642 4,777 4,666 9,604 9,917 973 4,617 2,485 635 478 32,205 41,072 111,429 2012 $ 94,056 34,533 2,816 20,940 17,889 170,234 3,965 3,543 10,958 10,102 5,573 2,549 551 28,144 112,163 177,548 2013 $ 97,944 36,032 3,248 20,744 8,607 166,575 4,340 1,498 14,736 9,139 5,523 3,155 551 31,255 66,917 137,114 2014 $ 100,615 36,939 3,552 20,458 25,638 187,202 4,282 1,580 17,981 10,268 5,914 2,890 400 27,710 38,817 109,842 2015 $ 104,722 39,917 3,635 20,162 22,019 190,455 4,279 1,861 19,474 10,350 6,334 2,827 531 28,397 14,831 88,884 2016 $ 98,495 39,541 4,020 20,232 11,726 174,014 3,970 6,149 17,464 11,459 6,269 2,926 577 29,708 82,162 160,684 2017 $ 110,560 39,741 4,404 20,120 22,545 197,370 3,999 2,041 18,455 11,739 6,268 3,096 602 29,724 107,334 183,258 2018 $ 107,031 40,434 4,390 20,269 17,539 189,663 4,676 1,569 19,503 11,203 6,820 3,094 584 30,760 60,819 139,028 117,537 40,666 4,335 19,687 23,865 206,090 $ 474,175 $ 423,328 $ 281,663 $ 344,123 $ 324,316 $ 300,297 $ 262,898 $ 358,054 $ 372,921 $ 345,118 $ (146,438) 32,641 (113,797) $ (171,066) 30,181 (140,885) $ (303,472) 29,280 (274,192) $ (231,173) 13,176 (217,997) $ (298,026) 30,897 (267,129) $ (326,293) 29,916 (296,377) $ (356,846) 9,090 (347,756) $ (244,852) 29,778 (215,074) $ (257,691) 19,051 (238,640) $ (287,080) 30,096 (256,984) $ $ $ $ $ $ $ $ $ $ Table of Contents City of Scottsdale, Arizona Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) (in thousands) General Revenues and Other Changes in Net Position Governmental Activities Taxes Intergovernmental - Unrestricted Interest and Investment Income Miscellaneous and Special Items Transfers Total Governmental Activities 2009 $ City of Scottsdale, Arizona 177 Business-type Activities Taxes Interest and Investment Income Miscellaneous Transfers Total Business-type Activities Total Primary Government Change in Net Position Governmental Activities Business-type Activities Total Primary Government 221,272 64,145 14,653 5,038 9,932 315,040 2010 $ 117 4,958 408 (9,932) (4,449) 208,083 56,830 1,368 6,730 10,690 283,701 2011 $ 130 4,295 430 (10,690) (5,835) 222,118 49,190 248 11,849 10,179 293,584 2012 $ 134 2,658 1,355 (10,179) (6,032) 227,963 44,035 1,063 20,502 7,366 300,929 Table IIc 2013 $ 132 421 7,610 (7,366) 797 234,582 49,054 985 12,557 7,244 304,422 2014 $ 144 763 (7,244) (6,337) 248,642 52,715 1,274 8,422 6,202 317,255 2015 $ 154 964 (6,202) (5,084) 2016 2017 2018 257,860 56,316 1,372 13,829 6,579 335,956 $ 265,416 57,630 2,955 9,987 7,174 343,162 $ 262,144 61,851 1,132 10,568 7,635 343,330 $ 287,456 66,299 2,218 10,548 7,756 374,277 169 1,346 (6,579) (5,064) 145 2,531 (7,174) (4,498) 158 916 (7,635) (6,561) 144 2,291 (7,756) (5,321) $ 310,591 $ 277,866 $ 287,552 $ 301,726 $ 298,085 $ 312,171 $ 330,892 $ 338,664 $ 336,769 $ 368,956 $ 168,602 28,192 196,794 $ 112,635 24,346 136,981 $ (9,888) 23,248 13,360 $ 69,756 13,973 83,729 $ 6,396 24,560 30,956 $ (9,038) 24,832 15,794 $ (20,890) 4,026 (16,864) $ 98,310 25,280 $ 123,590 $ 85,639 12,490 $ 98,129 $ $ $ $ $ $ $ $ 87,197 24,775 $ 111,972 Table of Contents City of Scottsdale, Arizona Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) (in thousands) General Fund Nonspendable Restricted Committed Assigned Unassigned Reserved Unreserved Total General Fund City of Scottsdale, Arizona 178 All Other Governmental Funds Nonspendable Restricted Committed Assigned Unassigned, Reported in: Special Revenue Funds Capital Project Funds Reserved Unreserved, Reported in: Special Revenue Funds Capital Project Funds Total All Other Governmental Funds 2009 $ $ $ 835 59,587 60,422 27,236 $ $ $ 30,710 102,898 $ 160,844 2011(1) 2010 586 51,518 52,104 2012 Table III 2013 2014 2015 2016 2018(2) 2017 $ 247 281 53,199 $ 264 260 52,105 $ 265 48,679 $ 266 52,354 $ 227 56,017 $ 249 65,347 $ 269 58,518 $ 264 72,809 $ 53,727 $ 52,629 $ 48,944 $ 52,620 $ 56,244 $ 65,596 $ 58,787 $ 73,073 $ 3,000 104,284 6,221 36,609 $ 2,980 108,073 7,345 37,183 $ 114,676 16,298 39,666 $ 105,837 20,848 7,362 $ 113,237 49,554 - $ 116,847 52,508 - $ 105,777 58,644 - $ 619 115,391 62,867 - (640) - 20,193 (447) - (1,394) - (1,194) - (1,083) (4,770) (1,010) (4,720) (2,175) (11,205) (681) (6,957) 151,041 $ 171,239 30,963 102,490 $ 153,646 $ 149,474 $ 155,134 (1) In fiscal year 2011, fund balances were stated in classifications required by GASB Statement No. 54. (2) In fiscal year 2018, beginning fund balance was restated due to the recognition of the City's endowment funds. $ 169,246 $ 132,853 $ 156,938 $ 163,625 $ Table of Contents City of Scottsdale, Arizona Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) (in thousands) City of Scottsdale, Arizona 179 Revenues Taxes - Local Taxes - Intergovernmental Business and Liquor Licenses Charges for Current Services Fines, Fees, and Forfeitures Special Assessments Property Rental Interest Earnings Net Increase (Decrease) in the Fair Value of Investments Intergovernmental Developer Contributions Streetlight and Services Districts Contributions and Donations Reimbursements from Outside Sources Indirect Costs Other Total Revenues (1) Table IVa 2009 2010 2011 2012 2013 2014 2015 2016 $ 219,846 77,408 1,733 15,719 11,459 821 3,527 13,491 31,813 9,425 599 1,519 1,210 14,917 991 $ 204,040 69,336 1,787 15,322 11,637 765 3,353 5,014 (4,696) 17,756 2,518 289 1,275 2,852 14,159 644 $ 221,236 61,754 1,745 15,119 8,579 733 4,204 2,705 (3,397) 52,300 254 478 1,157 4,673 14,800 1,892 $ 228,823 53,834 1,805 16,985 9,133 719 4,630 2,837 (1,403) 67,725 101 551 2,521 12,642 9,096 3,265 $ 236,652 59,813 1,763 20,870 8,472 591 4,232 2,624 (1,639) 53,462 203 551 2,813 5,934 7,595 2,438 $ 249,289 63,816 1,782 24,078 8,343 4,270 2,974 (1,700) 40,116 64 400 2,178 2,446 7,102 1,652 $ 258,851 68,603 1,925 25,855 10,000 5,282 1,934 (562) 19,846 653 531 3,558 3,445 6,987 5,134 $ 404,478 $ 346,051 $ 388,232 $ 413,264 $ 406,374 $ 406,810 $ 412,042 In fiscal year 2016, moved sales of assets from "Other" within the "Revenues" section to "Proceeds from Sale of Assets" within the "Other Financing Sources (Uses)" section. (1) 2017 2018 $ 264,414 70,526 1,894 24,404 10,617 4,922 2,373 582 16,070 319 577 2,268 1,942 6,501 954 $ 264,299 75,978 1,861 25,225 10,532 5,854 2,634 (1,502) 20,725 498 602 2,589 2,266 6,993 1,110 $ 288,335 81,197 1,768 27,063 10,387 5,859 4,224 (2,006) 27,335 835 584 2,333 1,840 7,455 869 $ 408,363 $ 419,664 $ 458,078 Table of Contents City of Scottsdale, Arizona Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) (in thousands) City of Scottsdale, Arizona 180 Expenditures General Government Public Works Community and Economic Development Public Safety Human Resources Community Services Information Technology Administrative Services Finance and Accounting Economic Vitality Planning, Neighborhood, and Transportation Planning and Development WestWorld Information Systems The Downtown Group Fire Police Financial Services Transportation Municipal Services Citizen and Neighborhood Resources Streetlight and Services Districts Debt Service Principal Interest and Fiscal Charges Bond Issuance Costs Capital Outlay 2010(1) 2009 $ 19,216 3,465 70,807 8,246 16,671 3,704 9,904 4,627 30,767 89,802 9,701 15,580 18,800 3,732 632 $ 17,030 31,391 111,459 3,657 45,655 9,469 1,859 6,059 17,110 27,447 538 2011(2) $ 19,783 31,463 42,357 108,003 3,013 43,967 9,357 3,031 578 2012(3) $ 18,523 27,307 38,369 107,934 44,762 14,450 572 Table IVb 2013 $ 19,695 29,658 70,351 111,960 45,346 14,141 569 2014 $ 19,730 33,381 41,063 119,159 45,035 14,950 576 31,308 41,612 155,358 33,701 38,782 497 77,929 37,677 40,091 1,057 107,448 44,700 40,487 774 129,025 63,234 38,789 1,915 181,189 59,387 37,323 998 99,722 Total Expenditures $ 533,932 $ 422,583 $ 447,825 $ 466,903 $ 576,847 $ 471,324 Excess (Deficiency) of Revenues over (under) Expenditures $ (129,454) $ $ $ $ (170,473) $ (76,532) (59,593) (53,639) (64,514) 2015 $ 20,815 34,518 44,550 123,761 44,998 15,050 583 2016 $ 22,623 32,850 42,735 128,527 45,508 15,648 589 2017 $ 22,397 33,636 46,320 137,304 46,224 15,919 589 57,956 31,285 672 75,099 68,017 32,052 241 54,311 $ 480,718 $ 403,131 $ 467,401 $ 461,091 $ (68,676) $ $ $ 5,232 (47,737) In fiscal year 2011, Economic Vitality merged with Planning, Neighborhood, and Transportation to become the Community and Economic Development Division. In addition, Finance and Accounting was merged into General Government. In fiscal year 2012, Human Resources and Information Technology were absorbed into the Division's Administrative Services function. 23,716 35,013 47,696 136,075 47,056 16,309 605 53,313 34,664 26,674 In fiscal year 2010, the City's Governmental Activities were restructured from Departments to Divisions which resulted in the shift of reporting associated expenditures. (3) $ 105,930 36,706 1,643 52,164 (1) (2) 2018 (3,013) Table of Contents City of Scottsdale, Arizona Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) (in thousands) Other Financing Sources (Uses) Transfers In Transfers Out Capital Lease Acquisitions Proceeds of Refunding Bonds Issuance of Long-Term Capital-Related Debt Premium on Long-Term Debt Issued Payment to Refunded Bonds Escrow Agent Sale of Capital Assets 181 City of Scottsdale, Arizona Total Other Financing Sources (Uses) Net Change in Fund Balances Debt Service as a Percentage of Non-capital Expenditures (1) 2009 2010 $ 160,319 (145,357) - $ 108,066 (98,693) 50,800 843 - 14,962 61,016 $ (114,492) 19.3% $ (15,516) 21.0% 2011 $ 79,592 (69,378) 87,985 42,525 10,047 (94,818) 1,091 2012 $ 57,044 $ (2,549) 22.8% 81,579 (75,826) 50,000 2,448 - 2013 $ 58,201 $ 4,562 25.2% Table IVc 78,171 (70,919) 111,250 140,000 22,082 (99,684) - 2014 $ 180,900 $ 10,427 25.8% 89,669 (82,696) 296 105,885 14,000 12,742 (108,099) - $ 31,797 $ (32,717) 26.0% 2016(1) 2015 89,806 (83,211) 207,173 26,815 23,871 (168,069) - $ 96,385 $ 27,709 $ 33.3% In fiscal year 2016, moved "Sale of Capital Assets" from "Other" within the "Revenues" section to "Sale of Capital Assets" within the "Other Financing Sources (Uses)" section. 2017 2018 85,080 (79,079) 4,806 $ 101,427 (94,074) 58,480 17,410 12,955 (68,105) 251 $ 103,926 (96,272) 25,500 3,496 214 10,807 28,344 36,864 16,039 23.4% $ (19,393) 22.7% $ 33,851 24.3% Table of Contents City of Scottsdale, Arizona Tax Revenues By Source Last Ten Fiscal Years (modified accrual basis of accounting) (in thousands) City of Scottsdale, Arizona 182 Fiscal Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Fiscal Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 (1) $ $ Property 60,493 58,354 65,970 65,089 64,908 64,914 64,272 61,956 63,320 63,577 Privilege and Use General $ 85,829 77,878 80,119 84,633 89,002 95,604 100,560 104,995 103,081 116,679 Franchise Taxes Cable TV Light and Power Franchise Franchise 3,606 $ 7,831 3,317 7,834 3,163 7,842 3,445 8,115 3,461 8,424 3,722 8,477 3,748 8,691 3,816 8,826 3,896 8,655 4,391 9,106 The Transient Occupancy tax rate increased from 3% to 5%, effective July 1, 2010. Privilege and Use McDowell Mtn Preserve $ 29,121 26,416 27,199 28,809 30,376 32,655 34,429 36,029 35,489 40,089 Table V Sales and Use Taxes Privilege and Use Transportation $ 16,141 14,608 15,042 15,985 16,852 18,116 19,097 19,938 19,615 22,044 Intergovernmental State Revenue State Shared Sales Sharing $ 18,677 $ 35,103 17,227 30,309 17,844 22,849 16,987 18,347 17,793 22,205 18,922 24,230 19,867 26,316 20,647 26,173 21,755 28,976 23,719 30,549 Privilege and Use Public Safety $ 8,289 7,541 7,765 8,231 8,679 9,330 9,837 10,294 10,140 11,454 $ Other 959 979 1,010 1,086 838 900 906 913 921 931 $ Transient Occupancy 7,577 7,113 13,126 (1) 13,430 13,852 15,303 17,047 17,397 18,951 19,837 Table of Contents City of Scottsdale, Arizona Taxable Sales Subject to Privilege (Sales) Tax by Category Last Ten Fiscal Years (dollars in thousands) 183 City of Scottsdale, Arizona 2009 Automotive $ 918,219 Construction 1,251,432 Food Stores 624,917 Hotel/Motel 416,216 Major Department Stores 864,676 Miscellaneous Retail Stores 1,078,674 Other Taxable Activity 556,842 Rentals 1,217,688 Restaurants 684,188 Utilities 432,570 Total City Sales Tax Table VI 2010 818,517 754,583 611,083 395,229 865,614 1,107,272 449,455 1,144,939 670,311 436,010 2011 $ 862,091 718,652 611,825 401,413 882,376 1,194,790 502,739 1,113,821 713,420 429,035 2012 $ 950,450 786,402 626,883 420,494 897,617 1,299,083 525,480 1,134,785 799,231 430,169 2013 $ 1,074,591 861,934 639,362 440,522 907,857 1,321,572 626,171 1,189,304 794,034 432,356 2014 $ 1,209,388 1,073,279 655,787 488,117 917,406 1,450,611 666,504 1,210,218 844,186 435,579 2015 $ 1,335,511 1,057,986 690,837 525,421 937,370 1,612,954 695,566 1,315,545 925,948 435,879 2016 $ 1,403,834 969,281 713,187 543,121 927,469 1,708,411 728,596 1,417,607 961,340 497,773 2017 $ 1,489,632 901,684 677,978 641,146 888,674 1,785,097 756,718 1,380,366 957,757 451,318 2018 $ 1,558,428 962,050 763,117 682,078 966,996 2,010,364 926,445 1,644,191 1,065,825 467,609 $ 8,045,422 $ 7,253,013 $ 7,430,162 $ 7,870,594 $ 8,287,703 $ 8,951,075 $ 9,533,017 $ 9,870,619 $ 9,930,370 $ 11,047,103 1.65% 1.65% 1.65% 1.65% 1.65% 1.65% 1.65% 1.65% 1.65% 1.65% $ Note: Beginning January 1, 2017, the Arizona Department of Revenue took over all collection and administration of privilege, use, jet fuel, and bed taxes. Table of Contents City of Scottsdale, Arizona Direct and Overlapping Sales Tax Rates Last Ten Fiscal Years Table VII 184 City of Scottsdale, Arizona Privilege (Sales) Tax Rates City Direct County Rate Rate Fiscal Year 2009 1.65% 0.70% 2010 1.65% 0.70% 2011 1.65% 0.70% 2012 1.65% 0.70% 2013 1.65% 0.70% 2014 1.65% 0.70% 2015 1.65% 0.70% 2016 1.65% 0.70% 2017 1.65% 0.70% 2018 1.65% 0.70% Transient Occupancy Tax Rates City Direct County Fiscal Year Rate Rate 2009 3.00% 1.77% 2010 3.00% 1.77% 2011 5.00% 1.77% 2012 5.00% 1.77% 2013 5.00% 1.77% 2014 5.00% 1.77% 2015 5.00% 1.77% 2016 5.00% 1.77% 2017 5.00% 1.77% 2018 5.00% 1.77% State Fiscal Rate Year 5.60% 2009 6.60% (1) 2010 6.60% 2011 6.60% 2012 5.60% (3) 2013 5.60% 2014 5.60% 2015 5.60% 2016 5.60% 2017 5.60% 2018 State Rate 5.50% 6.50% (1) 6.50% (2) 6.50% 5.50% (3) 5.50% 5.50% 5.50% 5.50% 5.50% Use Tax Rates City Direct County Rate Rate 1.45% 0.00% 1.45% 0.00% 1.45% 0.00% 1.45% 0.00% 1.45% 0.00% 1.45% 0.00% 1.45% 0.00% 1.45% 0.00% 1.45% 0.00% 1.45% 0.00% Jet Fuel Tax Rates (cents per gallon) Fiscal City Direct County State Year Rate Rate Rate 2009 $ 0.0180 $ 0.0046 $ 0.0290 2010 0.0180 0.0046 0.0290 2011 0.0180 0.0046 0.0290 2012 0.0180 0.0046 0.0290 2013 0.0180 0.0046 0.0290 2014 0.0180 0.0046 0.0290 2015 0.0180 0.0046 0.0290 2016 0.0180 0.0046 0.0290 2017 0.0180 0.0046 0.0290 0.0180 0.0046 0.0290 2018 (4) Source: City Tax Audit Section Note: The following gives a general description of each tax. Complete details for each tax can be found in Appendix C of the Scottsdale Revised City Code. Privilege (Sales) Tax applies to the sale, lease, license for use, and/or rental transactions. Use Tax applies to the storage or use of items within the City on which no privilege tax has been paid. Transient Occupancy Tax applies to transactions involving transient lodging. Jet Fuel Tax applies to transactions involving the sale of jet fuel. (1) State Rate 5.60% 6.60% (1) 6.60% 6.60% 5.60% (3) 5.60% 5.60% 5.60% 5.60% 5.60% The state tax rate increased, with the exception of jet fuel, on June 1, 2010, due to approval from the voters in the May 2010 election. (2) The transient occupancy tax rate increased from 3% to 5%, effective July 1, 2010. (3) The state tax rate decreased, with the exception of jet fuel, on June 1, 2013, due to approval from the voters in the May 2010 election. (4) Effective August 9, 2017, the City can only tax the first 10 million gallons by each purchaser in a calendar year. Table of Contents City of Scottsdale, Arizona Sales Tax Revenue Payers by Industry Current Year and Nine Years Ago (dollars in thousands) Table VIII City of Scottsdale, Arizona 185 Automotive Construction Food Stores Hotel/Motel Major Department Stores Miscellaneous Retail Stores Other Taxable Activity Rentals Restaurants Utilities Total Number of Filers 1,120 3,741 232 203 63 6,593 6,969 9,044 1,138 422 29,525 Fiscal Year 2018 Percentage Tax of Total Revenue 3.79% $ 26,944 12.67% 16,783 0.79% 12,798 0.69% 10,918 0.21% 16,358 22.34% 34,316 23.60% 17,838 30.63% 28,292 3.85% 17,889 1.43% 8,274 100.00% $ 190,410 Percentage of Total 14.15% 8.81% 6.72% 5.73% 8.59% 18.04% 9.37% 14.86% 9.39% 4.35% Number of Filers 534 8,214 148 64 29 4,813 3,690 3,681 835 245 100.00% 22,253 Fiscal Year 2009 Percentage Tax of Total Revenue 2.40% $ 15,255 36.91% 20,834 0.67% 10,201 0.29% 7,140 0.13% 14,381 21.63% 19,411 16.58% 10,113 16.54% 20,669 3.75% 11,261 1.10% 7,725 100.00% $ 136,990 Percentage of Total 11.14% 15.21% 7.45% 5.21% 10.50% 14.17% 7.37% 15.09% 8.22% 5.64% 100.00% Note: Due to confidentiality issues, the names of the ten largest revenue payers cannot be disclosed. The categories are intended to provide alternative information regarding the sources of the City's revenue. The "Other Taxable Activity" category includes all license fees, penalties, and interest. Beginning January 1, 2017, the Arizona Department of Revenue took over all collection and administration of privilege, use, and jet fuel taxes. Due to the changes in the source of the data and the tax law, the number and classification of filers for the two years above may have differences. Table of Contents City of Scottsdale, Arizona Property Tax Rates Direct and Overlapping Governments Last Ten Fiscal Years Table IX City Direct Rate 186 City of Scottsdale, Arizona Fiscal Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Operating $ 0.3537 0.3650 0.3836 0.4412 0.5027 0.5342 0.5580 0.5293 0.5071 0.4956 Debt Service $ 0.4327 0.3782 0.5140 0.6503 0.7225 0.7604 0.6869 0.6244 0.6219 0.5889 Overlapping Rates Total City $ 0.7864 0.7432 0.8976 1.0915 1.2252 1.2946 1.2449 1.1537 1.1290 1.0845 Operating $ 2.8179 2.4447 2.4017 2.7498 3.0875 3.3548 3.1091 2.8332 2.8566 2.7463 Scottsdale Unified School District Debt Service EVIT Total School $ 1.0742 $ 0.0500 $ 3.9421 1.3382 0.0500 3.8329 1.3529 0.0500 3.8046 1.2503 0.0500 4.0501 1.3390 0.0500 4.4765 1.2239 0.0500 4.6287 1.0045 0.0500 4.1636 1.0263 0.0500 3.9095 1.0033 0.0500 3.9099 0.9864 0.0500 3.7827 Overlapping Rates County-Wide Jurisdictions Fiscal Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 County Operating $ 1.0327 0.9909 1.0508 1.2407 1.2407 1.2807 1.3209 1.3609 1.4009 1.4009 Community College $ 0.9386 0.8844 0.9728 1.2082 1.3778 1.5340 1.5187 1.4940 1.4651 1.4096 County Flood $ 0.1367 0.1367 0.1489 0.1780 0.1780 0.1392 0.1392 0.1592 0.1792 0.1792 County Education Equalization $ 0.3306 0.3564 0.4259 0.4717 0.5123 0.5089 0.5054 0.5010 0.4875 Fire District Assistance $ 0.0053 0.0057 0.0066 0.0084 0.0110 0.0121 0.0113 0.0116 0.0112 0.0102 Central AZ Project $ 0.1000 0.1000 0.1000 0.1000 0.1000 0.1400 0.1400 0.1400 0.1400 0.1400 County Free Library $ 0.0353 0.0353 0.0412 0.0492 0.0492 0.0438 0.0556 0.0556 0.0556 0.0556 County Special Health Care $ 0.0856 0.0914 0.1122 0.1494 0.1683 0.1939 0.1856 0.3021 0.3053 0.2851 Total County $ 2.3342 2.5750 2.7889 3.3598 3.5967 3.8560 3.8802 4.0288 4.0583 3.9681 Total Direct and Overlapping $ 7.0627 7.1511 7.4911 8.5014 9.2984 9.7793 9.2887 9.0920 9.0972 8.8353 Source: Maricopa County Department of Finance Publications On-Line "Tax Rate 2017". Note: The City has Community Facilities Districts (CFDs) that levy property taxes independent of the City to property owners within a designated area. For fiscal year 2018 the rates were as follows: DC Ranch CFD - $0.4568, McDowell Mountain Ranch CFD - $0.7229, Scottsdale Mountain CFD - $0.3821, Via Linda Road CFD - $1.1170, and the Waterfront Commercial CFD - $6.6752. Table of Contents City of Scottsdale, Arizona Principal Property Taxpayers Current Year and Nine Years Ago (dollars in thousands) Table X 2018 City of Scottsdale, Arizona 187 Taxpayer Arizona Public Service Company Scottsdale Fashion Square LLC SDQ FEE LLC Gainey Drive Associates Portales Corporate Center LLC (1) Mayo Clinic Arizona Excel Promenade LLC Qwest Corporation Stockdale Galleria LLC Southwest Gas Corporation Scottsdale Fashion Square Partnership Blackwell Robert L/Etal DC Ranch LLC PR Hotel LLC DTR5 LLC Total $ $ Taxable Assessed Value 59,118 37,514 18,621 14,709 13,642 13,502 13,499 12,355 10,874 10,484 204,318 Rank 1 2 3 4 5 6 7 8 9 10 - 2009 Percentage of Total Taxable Assessed Value 1.037% 0.658% 0.327% 0.258% 0.239% 0.237% 0.237% 0.217% 0.191% 0.184% 3.585% $ $ Taxable Assessed Value 60,195 22,666 22,341 17,222 27,807 43,295 22,652 21,159 19,026 16,215 272,578 Rank 1 4 6 9 3 2 5 7 8 10 Percentage of Total Taxable Assessed Value 0.728% 0.274% 0.270% 0.208% 0.336% 0.523% 0.274% 0.256% 0.230% 0.196% 3.295% Source: The Maricopa County Assessor's Office. Note: The Salt River Project Agricultural Improvement and Power District's (SRP) assessed valuation is not reflected in the total assessed valuation of the City. SRP is subject to a "voluntary contribution" in-lieu of ad valorem taxation. The fiscal year 2018 assessed valuation of the SRP within the City is $20,943,373 as provided by SRP. (1) Portales Corporate Center LLC/Etal was renamed Portales Corporate Center LLC in 2016. Table of Contents City of Scottsdale, Arizona Assessed Value of Taxable Property Last Ten Fiscal Years (dollars in thousands, excluding the Total Direct Tax Rate) Fiscal Year Ended June 30th 2009 P 2009 S Residential Property $ 3,947,876 5,237,939 Personal Property Real Property Commercial Vacant Land Property Historic and Special Use Assessed Value $ $ $ 1,584,811 1,987,377 $ 950,456 1,505,737 1,727 2,073 Table XI 403,064 427,495 Less Tax Exempt Property $ (559,516) (888,204) Total Taxable Assessed Value Total Direct Tax Rate $ $ 6,328,418 8,272,417 0.35 0.43 City of Scottsdale, Arizona 188 2010 P 2010 S 4,409,444 4,989,883 1,879,139 2,436,470 1,177,944 1,765,907 1,845 2,070 259,145 259,145 (717,210) (1,047,474) 7,010,307 8,406,001 0.36 0.38 2011 P 2011 S 4,212,414 4,261,972 1,980,853 2,312,814 1,170,054 1,458,512 4,822 5,622 242,654 242,654 (724,635) (906,165) 6,886,162 7,375,409 0.38 0.51 2012 P 2012 S 3,521,958 3,524,902 1,615,176 1,623,645 969,618 1,021,533 4,217 4,300 224,822 224,822 (665,901) (707,211) 5,669,890 5,691,991 0.44 0.65 2013 P 2013 S 3,232,809 3,236,951 1,402,569 1,405,867 845,953 856,609 3,133 3,133 228,843 228,843 (643,724) (651,408) 5,069,583 5,079,995 0.50 0.72 2014 P 2014 S 3,179,924 3,190,808 1,234,395 1,238,888 763,038 793,269 2,810 2,852 213,781 214,245 (591,625) (612,212) 4,802,323 4,827,850 0.53 0.76 2015 P 2015 S 3,400,223 3,542,585 1,211,532 1,228,899 731,585 792,839 2,849 2,986 208,844 209,029 (569,038) (599,560) 4,985,995 5,176,778 0.56 0.69 2016 P 2016 S 2017 P 2017 S 3,608,260 4,210,065 3,842,636 4,510,655 1,197,395 1,306,932 1,209,059 1,451,267 759,840 912,980 723,452 996,458 3,143 3,541 1,075 1,488 196,631 196,972 217,238 217,243 (603,538) (674,098) (594,547) (757,790) 5,161,731 5,956,392 5,398,913 6,419,321 0.53 0.62 0.51 0.62 2018 P 2018 S 4,071,866 4,794,346 1,268,544 1,650,245 747,981 1,135,084 1,155 1,716 223,277 223,276 (614,085) (876,231) 5,698,738 6,928,436 0.50 0.59 Source: Arizona Department of Revenue Abstract of the Assessment Roll. Table of Contents City of Scottsdale, Arizona Property Tax Levies and Collections Last Ten Fiscal Years (dollars in thousands) City of Scottsdale, Arizona 189 Fiscal Year Ended June 30 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Total Tax Levy for Fiscal Year $ 58,179 57,380 64,327 62,033 62,187 62,367 63,380 59,553 60,954 61,803 Collected within the Fiscal Year of the Levy $ Amount 55,876 55,221 62,237 60,309 60,630 61,227 62,233 58,714 60,056 60,721 Percentage of Levy 96.0% 96.2% 96.8% 97.2% 97.5% 98.2% 98.2% 98.6% 98.5% 98.2% Collections in Subsequent Years $ 1,764 1,622 737 672 791 598 573 546 610 - Table XII Total Collections to Date $ Amount 57,640 56,843 62,974 60,981 61,421 61,825 62,806 59,260 60,666 60,721 Percentage of Levy 99.1% 99.1% 97.9% 98.3% 98.8% 99.1% 99.1% 99.5% 99.5% 98.2% Source: "Total Tax Levy for Fiscal Year" amounts = Maricopa County Tax Levy Reports on County Finance website. "Collections" amounts = Maricopa County Finance Office Secured Tax Levy Report. Amounts represent property taxes recorded in the General, Debt Service, and Self-Insurance Funds. Table of Contents City of Scottsdale, Arizona Ratios of Outstanding Debt by Type Last Ten Fiscal Years (dollars in thousands, except for Per Capita) City of Scottsdale, Arizona 190 Municipal Property Corporation Bonds $ 154,837 153,582 152,578 149,983 222,403 218,942 243,044 232,970 221,535 208,828 Scottsdale Preserve Authority Bonds $ 70,915 67,567 64,309 60,304 56,154 53,100 48,276 43,489 17,823 13,215 Fiscal Year Ended June 30 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 General Obligation Bonds $ 555,701 583,071 579,972 603,426 651,224 647,859 624,616 585,931 590,910 568,259 Fiscal Year Ended June 30 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Business-type Activities Municipal Property Corporation Revenue Bonds Bonds Capital Leases $ 51,629 $ 262,391 $ 53 48,250 332,216 7 44,776 323,107 41,157 313,505 37,803 303,793 34,747 296,418 31,518 309,150 28,176 295,807 24,710 353,773 21,069 336,407 - Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. See Table XVIII - Schedule of Demographic and Economic Statistics for personal income and population data. Table XIII Governmental Activities Community Facilities Special District Assessment Certificates of Participation Bonds Bonds $ 3,000 $ 4,954 $ 40,578 2,250 4,194 38,725 1,500 23,409 36,762 750 18,031 34,685 16,003 32,083 13,914 30,090 11,762 27,437 9,546 24,694 7,264 21,860 4,914 19,244 Total Primary Government $ 1,160,886 1,245,594 1,240,995 1,235,216 1,325,360 1,298,389 1,298,869 1,223,452 1,240,499 1,174,343 Percentage of Personal Income 12.13% 11.62% 11.77% 11.09% 11.63% 11.43% 11.26% 10.26% 9.98% 8.96% Per Capita $ 5,267 5,691 5,709 5,667 5,965 5,776 5,689 5,292 5,212 4,843 Contracts Payable $ 16,828 15,732 14,582 13,375 2,570 - $ Capital Leases 183 329 229 156 95 32 Service Concession Arrangements $ 3,144 2,990 2,837 2,683 2,529 2,375 Table of Contents City of Scottsdale, Arizona Ratios of Net General Bonded Debt Outstanding Last Ten Fiscal Years (dollars in thousands, except Per Capita) City of Scottsdale, Arizona 191 Fiscal Year Ended June 30 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Governmental Activities General Obligation Bonds $ 555,701 583,071 579,972 603,426 651,224 647,859 624,616 585,931 590,910 568,259 Less: Amounts Available in Debt Service Fund $ 10,841 4,932 6,787 5,789 10,105 9,369 12,172 11,529 11,516 2,471 Net General Bonded Debt $ 544,860 578,139 573,185 597,637 641,119 638,490 612,444 574,402 579,394 565,788 Table XIV Percentage of Total Taxable Assessed Value of Property 6.6% 6.9% 7.8% 10.5% 12.6% 13.2% 11.8% 9.6% 9.0% 8.2% (1) Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. See the Schedule of Assessed Value of Taxable Property on Table XI for property value data. See the Schedule of Demographic and Economic Statistics on Table XVIII for population data. (1) Percentage of Total Taxable Assessed Value of Property was corrected using the information from table XI for fiscal years 2008-2010. Per Capita $ 2,472 2,641 2,637 2,742 2,885 2,840 2,683 2,484 2,434 2,333 Table of Contents City of Scottsdale, Arizona Direct and Overlapping Governmental Activities Debt As of June 30, 2018 (dollars in thousands) City of Scottsdale, Arizona 192 Governmental Unit Debt repaid with property taxes Maricopa County Community College District Maricopa County Special Healthcare District Tempe Elementary School District No. 3 Balsz Elementary School District No. 31 Scottsdale Unified School District No. 48 Paradise Valley Unified School District No. 69 Cave Creek Unified School District No. 93 Fountain Hills Unified School District No. 98 Phoenix Union High School District No. 210 Tempe Union High School District No. 213 Western Maricopa Education Center District No. 402 Debt Outstanding $ 445,570 112,000 135,525 11,900 220,989 275,065 37,040 11,670 263,185 91,995 68,620 Table XV Estimated Percentage Applicable 14.8979% 14.8979% 0.0008% 6.0553% 70.1026% 29.8780% 62.7398% 3.7200% 0.3778% 0.0003% 6.9611% Estimated Share of Overlapping Debt $ Subtotal, overlapping debt City direct debt Total direct and overlapping debt 66,381 16,686 1 721 154,919 82,184 23,239 434 994 4,777 350,336 816,867 100.0000% 816,867 $ 1,167,203 Sources: The various entities, Property Tax Rates and Assessed Values, Arizona Tax Research Association, State and County Abstract of the Assessment Roll, Arizona Department of Revenue, and the Finance Department of the County. Note: Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the City. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of the City of Scottsdale. This process recognizes that, when considering the government'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. The percentage of overlapping debt applicable to the City is computed on the ratio of 2017-18 net limited assessed property valuation for the overlapping jurisdiction within the City to the total net limited assessed property valuation of the overlapping jurisdiction. Table of Contents City of Scottsdale, Arizona Legal Debt Margin Information Last Ten Fiscal Years (dollars in thousands) Table XVIa 20% Limitation Debt Limit Equal to 20% of Assessed Valuation 2009 $ Total Net Debt Applicable to 20% Limit 1,654,483 2010 $ 413,095 1,681,200 2011 $ 499,945 2012 2013 1,475,082 $ 1,138,398 $ 1,015,999 498,490 524,675 561,126 2014 $ 2016 (1) 2015 965,570 $ 1,035,356 553,121 532,888 $ 1,191,278 2017 (2) $ 513,768 Excess Premium Legal 20% Debt Margin (Available Borrowing Capacity) $ 193 City of Scottsdale, Arizona Total Net Debt Applicable to the 20% Limit as a Percentage of 20% Debt Limit 6% Limitation Debt Limit Equal to 6% of Assessed Valuation 1,241,388 $ 24.97% $ Total Net Debt Applicable to 6% Limit 496,345 1,181,255 $ 29.74% $ 138,360 504,360 976,592 $ 33.79% $ 78,245 442,524 613,723 $ 46.09% $ 74,250 341,519 454,873 $ 412,449 55.23% $ 69,750 304,799 $ 57.28% $ 289,671 78,009 502,468 $ 51.47% $ 65,944 310,606 677,510 $ 43.13% $ 54,022 357,384 Total Net Debt Applicable to the 6% Limit as a Percentage of 6% Debt Limit (1) $ 357,985 27.88% $ 426,115 15.51% $ 368,274 16.78% $ 271,769 20.42% $ 226,790 $ 223,727 25.59% Restated fiscal year 2016 debt limit and debt margin amounts to reflect the usage of the secondary, as opposed to the primary, valuation amount. (2) Beginning in fiscal year 2017, a change in state law requires the "Excess Premium" to be included with the debt subject to the legal debt margin limitations. 22.77% $ 256,584 $ 37,747 17.39% $ 319,637 10.56% 1,283,864 $ 1,385,687 521,179 511,046 8,180 10,637 754,505 $ 41.23% Excess Premium Legal 6% Debt Margin (Available Borrowing Capacity) 2018 $ 385,159 864,004 37.65% $ 415,706 26,116 14,419 - - 359,043 6.78% $ 401,287 3.47% Table of Contents City of Scottsdale, Arizona Legal Debt Margin Information As of June 30, 2018 (in thousands) Table XVIb Legal Debt Margin Calculation for Fiscal Year 2018 Assessed Valuation as of June 30, 2018 $ 6,928,436 20% Limitation Debt Limit Equal to 20% of Assessed Valuation $ 1,385,687 194 City of Scottsdale, Arizona Debt applicable to limit: General Obligation Bonds 511,046 Excess Premium 10,637 Legal 20% Debt Margin (Available Borrowing Capacity) $ 864,004 6% Limitation Debt Limit Equal to 6% of Assessed Valuation $ 415,706 Debt applicable to limit: General Obligation Bonds 14,419 Excess Premium Legal 6% Debt Margin (Available Borrowing Capacity) $ 401,287 Source: City of Scottsdale City Treasurer Note: Under Arizona law, cities can issue general obligation bonds for purposes of water, sewer, light, parks, open space purposes, public safety, and transportation facilities, but outstanding bonds issued for such purposes may not exceed 20 percent of the City's net assessed valuation. Outstanding general obligation bonded debt for all other purposes may not exceed 6 percent of the City's net assessed valuation. General obligation bonds of community facilities districts are not subject to or included in this computation since they are not bonds of the City of Scottsdale, Arizona. Table of Contents City of Scottsdale, Arizona Pledged-Revenue Coverage Last Ten Fiscal Years (dollars in thousands) Table XVII Water and Sewer Revenue Bonds 195 City of Scottsdale, Arizona Fiscal Year Ended June 30 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Operating Revenue(1) $ 130,782 133,624 132,441 134,336 138,224 142,066 139,242 152,612 148,310 160,161 Less: Operating Expenses $ 71,236 70,165 77,456 78,837 73,647 77,891 79,154 81,586 85,909 87,130 Net Operating Revenue $ 59,546 63,459 54,985 55,499 64,577 64,175 60,088 71,026 62,401 73,031 Development Fee Revenue $ 3,043 3,126 3,859 3,073 12,213 15,139 5,326 5,156 6,072 6,525 Net Revenue $ 62,589 66,585 58,844 58,572 76,790 79,314 65,414 76,182 68,473 79,556 Special Assessment Bonds Fiscal Year Ended June 30 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Special Assessment Collections $ 821 765 733 719 591 - Debt Service Principal $ 845 757 757 755 755 - Debt Service Interest $ 158 121 86 52 17 - Municipal Property Corporation Bonds Debt Service Principal $ 3,660 3,115 3,220 3,380 3,115 3,240 2,940 3,055 3,195 3,370 Debt Service Interest $ 2,507 2,351 2,199 2,056 1,891 1,738 1,599 1,487 1,354 1,195 Coverage 10.15 12.18 10.86 10.77 15.34 15.93 14.41 16.77 15.05 17.43 Excise Tax(4)(5)(6) $ 185,801 170,638 155,515 157,645 170,227 183,376 195,037 194,560 196,729 216,643 Debt Service Principal(7) $ 7,570 9,715 9,785 11,841 12,355 18,200 16,950 20,215 22,550 26,290 Debt Service Interest(7) $ 19,482 18,415 22,185 21,141 21,480 22,994 22,299 23,220 21,599 23,908 Coverage 6.87 6.07 4.86 4.78 5.03 4.45 4.97 4.48 4.46 4.32 Scottsdale Preserve Authority Bonds Coverage(2) 0.82 0.87 0.87 0.89 0.77 N/A N/A N/A N/A N/A 0.2 % and 0.15% Sales Tax(3) $ 29,121 26,416 27,199 28,809 30,376 32,655 34,429 36,029 35,489 40,089 Debt Service Principal $ 3,260 3,365 3,470 3,655 3,800 3,960 4,140 4,340 4,175 4,365 Debt Service Interest $ 3,502 3,374 2,471 2,835 2,680 2,508 2,330 2,143 1,423 734 Coverage 4.31 3.92 4.58 4.44 4.69 5.05 5.32 5.56 6.34 7.86 Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. (1) Includes investment income. (2) Coverage ratio is less than 1.0 due to prepayment of amounts that were in fund balance. (3) In May 2004, the City of Scottsdale, Arizona citizens approved an additional 0.15% Preservation Privilege Tax. This tax was effective July 1, 2004. (4) In fiscal year 2010, Excise Tax was recalculated for prior years using correct items from Table V and the Statement of Revenue, Expenditures, and Changes in Fund Balances for the Governmental Funds. Starting in fiscal year 2011, Transient Occupancy taxes are no longer pledged revenues for MPC bonds issued on or after July 1, 2010, and are excluded from this table from that date forward. (5) (6) A de minimis amount of the Excise Taxes are pledged to specific purposes per various resolutions adopted by the City Council. Due to the immateriality of these amounts, they are not deducted from the pledged revenue calculation above. Includes debt service payments paid out of revenue from the Water and Sewer Fund and the Tourism Fund. (7) Table of Contents City of Scottsdale, Arizona Demographic and Economic Statistics Last Ten Fiscal Years City of Scottsdale, Arizona 196 Fiscal Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 (1) Population 220,410 218,888 217,365 217,965 222,200 224,800 228,300 231,200 238,000 242,500 Personal Income(2) (in thousands) $ 9,573,949 10,715,662 10,542,637 11,135,832 11,393,527 11,358,020 11,536,227 11,921,597 12,428,360 13,109,550 Per Capita Personal Income(3) $ 43,437 48,955 48,502 51,090 51,276 50,525 50,531 51,564 52,220 54,060 Median Age(4) 41.0 45.4 45.4 45.4 45.4 45.1 45.4 46.1 46.3 48.5 Table XVIII Charter and Public School Enrollment(5) 27,029 27,093 27,116 28,177 27,816 27,191 26,233 25,979 25,847 25,847 Fiscal Year End Average Unemployment Rate(6) 4.0% 6.8% 6.5% 6.8% 5.7% 5.4% 4.7% 4.2% 3.8% 3.5% Data Sources and Notes: (1) July 1 Population Estimate, State of Arizona Office of Economic Opportunity. Since 2013, estimates have been rounded to the nearest hundred. (2) Calculated by multiplying Per Capita Personal Income by Total Population divided by 1,000. (3) Sites USA (estimate) 2008-2010; U.S. Census, American Community Survey, 5-Year Estimates used for fiscal year 2011-2018 estimates. (4) U.S. Census; fiscal years 2008-2009 based on Census 2000; fiscal years 2010-2012 based on Census 2010; fiscal years 2013-2018 based on U.S. Census, American Community Survey, 5-Year Estimates. (5) Arizona Department of Education; 2017 data updated to reflect 9 charter and 29 public schools located within Scottsdale city boundaries. At the time of reporting, information for 2018 is not available. 2017 updated based on information received in November 2017. (6) State of Arizona Office of Economic Opportunity, in cooperation with the U.S. Department of Labor, Bureau of Labor Statistics, Local Area Unemployment Statistics. The data is from 2017 calendar year that ended within the 2018 fiscal year. Table of Contents City of Scottsdale, Arizona Principal Employers Current Year and Nine Years Ago 2018 City of Scottsdale, Arizona 197 Employer (2) HonorHealth (3) Vanguard CVS Health(4) City of Scottsdale (5) Scottsdale Unified School District (6) General Dynamics Mission Systems Mayo Clinic (7) Nationwide Specialty Yelp Go Daddy Group Troon Golf LLC Total Employees 6,323 3,365 2,978 2,694 2,668 2,403 2,011 1,240 1,200 882 Rank 1 2 3 4 5 6 7 8 9 10 25,764 Percentage of Total City (1) Employment 4.88% 2.60% 2.30% 2.08% 2.06% 1.85% 1.55% 0.96% 0.93% 0.68% 19.89% Table XIX 2009 Employees 6,650 1,899 2,048 2,808 3,126 3,600 4,900 1,400 Rank 1 8 6 5 4 3 2 10 1,915 1,539 29,885 7 9 Source: City of Scottsdale, Economic Development Department communications with employers, June 2018. (1) Annual Employment according to the United States Census Bureau 2016 (pulled 8/1/18) was 129,646; it was reported in the fiscal year 2009 CAFR as 188,488. (2) Scottsdale Healthcare was renamed HonorHealth in 2015. (3) The Vanguard Group was renamed Vanguard Insurance in 2013 and was then renamed Vanguard in 2014. (4) CVS Caremark was renamed CVS Health in 2014. (5) Scottsdale Unified School District has administrative offices and some schools outside of Scottsdale city limits. 2018 numbers only report Scottsdale-based employees. 2009 included all employees. (6) General Dynamics was renamed General Dynamics C4 Systems in 2011 and was then renamed General Dynamics Mission Systems in 2016. (7) Scottsdale Insurance was renamed Nationwide Specialty in 2015. Percentage of Total City (1) Employment 3.53% 1.01% 1.09% 1.49% 1.66% 1.91% 2.60% 0.74% 1.02% 0.82% 15.87% Table of Contents City of Scottsdale, Arizona Full-time Equivalent City Government Employees by Function Last Ten Fiscal Years City of Scottsdale, Arizona 198 Function Administrative Services Aviation City Treasurer Community and Economic Development Community Services Economic Vitality Financial Services General Government (2) Human Resources (2) Information Technology Planning, Neighborhood, and Transportation Public Safety Public Works Solid Waste Water Resources Total 2009 38.5 16.0 2010(1) 35.0 14.0 92.5 543.1 54.0 110.5 167.1 35.5 81.8 224.0 981.6 233.0 89.0 180.0 2,754.1 489.3 47.0 155.0 30.0 78.8 167.5 953.6 197.0 89.0 189.0 2,537.7 Table XX 2011 35.0 14.0 95.5 214.5 487.6 2012(3) 138.8 14.0 83.5 188.5 459.5 2013 124.6 14.0 93.0 175.5 454.2 2014 127.4 14.0 93.0 176.5 454.2 2015 120.9 14.5 89.7 173.0 448.3 2016 123.6 14.5 89.8 185.1 469.6 2017 125.1 14.5 86.7 186.6 474.6 2018 124.1 15.5 86.7 179.6 476.7 153.0 30.5 75.8 141.0 140.0 140.0 140.4 142.2 142.2 151.2 957.6 206.0 89.0 189.0 2,547.5 933.6 205.0 89.0 202.0 2,454.9 924.6 204.0 89.0 204.0 2,422.9 934.6 204.0 90.0 204.0 2,437.7 930.6 205.0 90.0 205.0 2,417.4 942.7 205.8 90.8 211.3 2,475.4 936.7 206.8 92.8 213.3 2,479.3 937.7 210.8 92.8 214.5 2,489.6 Source: The City of Scottsdale, Arizona's Budget Department. (1) In fiscal year 2010, the Full-time Equivalent Employees for prior years were restated to actual. In addition, the City's Governmental Activities were restructured from Departments to Divisions which resulted in the shift of reporting associated Fulltime Equivalent Employees. (2) In fiscal year 2012, Human Resources and Information Technology were absorbed into the Division's Administrative Services function. (3) In fiscal year 2012, Meter Reading Operations was transferred from City Treasurer to Water Resources. Table of Contents City of Scottsdale, Arizona Operating Indicators by Division(1) Last Ten Fiscal Years Division General Government City Attorney % of cases resolved at first court appearance (arraignment) City Auditor # of reports performed City Clerk # of legal postings # of minutes City Court Charges filed/ charges adjudicated (resolved) City of Scottsdale, Arizona 199 City Treasurer (3) # of Accounts Payable checks issued # of customer contacts (utilities, taxes, and licensing) City Manager % of survey respondents rating the "Overall Quality of Life in Scottsdale" as good (4) to excellent News releases, media updates, traffic alerts, construction updates released to news media (5) Total ad value equivalency generated Acres of land acquired for inclusion in the McDowell Sonoran Preserve % increase of Neighborhood Watch groups annually(6) Administrative Services Communications % of survey respondents rating "Your Neighborhood as a Place to Live" as good to excellent(4) Human Resources Citywide turnover HR operating cost as a % of City payroll Information Technology # of SPAM emails blocked (monthly) from being delivered to the City (An average of 30 seconds per email is expended by staff) Annual disk storage size (DAS, NAS, and SAN) (Terabytes) Purchasing # of purchase orders Community Services # attending Parks and Recreation facilities, Human Services facilities, and Libraries annually # of square feet of medians and rights of way maintained (continued) Table XXI 2009 2010 (2) 2011 2012 2013 2014 2015 2016 2017 2018 34% 32% 40% 37% 37% 34% 39% 39% 35% 35% 13 16 17 14 14 14 16 13 13 15 1,158 71 1,301 87 1,241 66 1,185 63 1,124 63 1,080 65 1,005 57 1,000 61 1,067 56 1,033 70 115,319 / 137,887 107,720 / 113,382 104,301 / 108,003 102,953/ 100,929 93,306/ 90,016 99,063/ 83,441 96,741/ 91,200 100,920/ 92,993 100,092/ 85,295 95,301/ 84,602 36,442 176,680 33,620 175,918 45,592 255,124 45,112 246,319 33,599 254,992 32,865 209,325 32,491 196,549 31,648 190,422 31,268 195,819 32,074 256,784 No Survey No Survey 94% No Survey No Survey 98% No Survey No Survey 96% No Survey N/A N/A 240 N/A 281 N/A N/A $20,000 N/A $78,861 N/A $64,931 N/A $34,863 N/A N/A N/A N/A N/A N/A 25 -56% 399 5% 2,001 5% 4,419 5% 6,400 5% 2,365 2% 0 0% 0 5% 420 5% 0 2% No Survey No Survey 91% No Survey No Survey 93% No Survey No Survey 93% No Survey 6.0% 2.1% 9.5% 1.6% 7.3% 1.8% 7.1% 1.3% 7.3% 1.7% 6.0% 1.4% 7.8% 1.4% 9.6% 1.1% 8.1% 1.2% 9.8% 1.3% 2,200,000 2,100,000 1,775,000 1,870,000 1,588,935 1,335,869 1,395,338 2,686,000 2,117,633 1,512,355 147.8 170.0 266.0 266.0 167.3 45.8 51.4 58.6 67.2 82.8 6,234 5,748 5,310 5,018 4,678 5,019 5,064 5,078 5,143 4,989 8,747,495 17,000,000 8,634,522 17,000,000 8,855,120 23,168,510 8,471,649 23,475,510 8,223,148 22,726,329 7,765,110 22,502,626 7,322,719 22,832,327 6,457,925 22,913,730 5,678,945 22,827,842 4,945,276 22,968,631 Table of Contents City of Scottsdale, Arizona Operating Indicators by Division(1) Last Ten Fiscal Years City of Scottsdale, Arizona 200 Division Community and Economic Development Planning and Development Customer wait-time (in minutes) at One Stop Shop Provide applicant with pre-application meeting within 30 days of submitting request. % of inspections performed within 24 hours of the request # of new Code Enforcement cases processed per year Transportation Total citywide transit ridership Economic Development Targeted job creation - number of companies/number of jobs(8) Tourism Hotel/Motel average occupancy rate Bed Tax growth (% annual change) # of Downtown special events coordinated Aviation Scottsdale Airport - takeoffs and landings WestWorld # of special events at WestWorld Public Safety Police Table XXI 2009 2010(2) 2011 2012 2013 2014 2015 2016 2017 2018 7 7 6 6 12 15 12 12 15 13 100% 100% 20,568 100% 100% 16,452 100% 100% 16,000 100% 100% 16,500 100% 100% 15,603 100% 100% 14,222 100% 100% 15,514 95% 98% 13,781 100% 98% 13,797 99% 98% 12,594 3,472,828 3,103,185 2,539,744 2,499,000 2,599,557 2,589,218 2,635,739 2,297,323 2,186,424 2,178,152 7 / 394 10 / 731 7 / 450 8 / 1,595 36 / 1,593 16 / 1,069 13 / 1,180 9 / 1,183 14 / 1,019 12 / 1,852 59.2% -21% 100 58.0% -6% 110 58.8% 8% 95 61.5% 5% 119 63.0% 3% 126 65.6% 10% 275 67.8% 12% 325 67.9% 1% 277 75.1% 11% 174 69.1% 5% 173 169,972 156,896 136,089 146,058 137,333 148,971 153,285 162,535 164,622 166,425 31 28 20 20 27 24 52 51 55 49 34.3 N/A 29.6 N/A 31.9 N/A 32.8 N/A 29.1 N/A 27.8 N/A 25.5 N/A 25.6 N/A 26.3 N/A 24.7 N/A 5:07 100% 5:01 100% 4:57 100% 5:11 100% 4:54 100% 5:04 100% 5:25 100% 5:12 100% 4:48 100% 4:57 100% 23,953 0.10 4:23 23,996 0.10 4:28 25,586 0.10 4:22 26,344 0.10 4:18 27,075 0.12 4:26 28,544 0.13 4:27 32,425 0.14 4:33 35,098 0.15 4:32 36,407 0.16 4:37 36,877 0.15 4:46 (9) Scottsdale Uniform Crime Report, Part 1 (crimes per thousand) Scottsdale Valley Average Achieve the standard of six minutes or less for response to emergency calls for service (includes medical and accident related calls) Provide initial contact to 100% of citizen traffic concerns within seven days Fire Total incidents Responses per capita Travel time (en-route to on-scene) (continued) Table of Contents City of Scottsdale, Arizona Operating Indicators by Division(1) Last Ten Fiscal Years 201 City of Scottsdale, Arizona Division Public Works and Water Resources Public Works (10) Facility inventory maintained (square feet) # of active Capital Projects # of homes serviced by Residential Refuse Collection # of citizens serviced annually by Household Hazardous Waste collection (11) program Actions to improve safety and efficiency of traffic flow (signal timing changes and traffic control and speed limit studies)(7) Water Resources Water Service Connections Drinking Water Supplied (million gallons per day) Reclaimed Water Supplied (million gallons per day) Sewer Service Connections Sewage Treated (million gallons per day) # of water meters read annually(12) Table XXI 2009 2010(2) 2011 2012 2013 2014 2015 2016 2017 2018 2,334,310 178 78,607 2,929,802 168 79,006 3,006,106 183 79,508 3,029,606 162 79,787 3,322,968 186 80,013 3,313,468 150 80,354 3,348,774 120 80,785 2,925,697 155 81,187 2,925,697 150 81,665 2,925,697 161 82,236 1,923 1,497 2,573 2,591 2,691 2,905 2,362 3,345 2,770 2,509 N/A 8,578 10,397 10,500 5,043 3,687 4,252 6,638 9,737 8,697 87,349 69.4 9.6 77,363 19.7 1,049,008 87,409 68.4 11.2 77,605 21.0 1,050,067 87,458 67.9 8.7 77,850 21.1 1,051,089 87,577 69.2 6.9 78,018 20.9 1,043,335 87,851 67.6 8.9 78,269 20.7 1,055,230 88,348 70.2 9.7 79,014 20.9 1,059,738 88,905 63.9 9.2 79,588 21.2 1,066,385 89,596 67.5 9.1 80,202 20.5 1,078,500 90,172 67.0 11.6 80,704 21.4 1,085,590 90,817 70.9 12.2 81,306 22.1 1,072,498 Source: The City of Scottsdale's Budget Office and applicable City divisions. (1) This presentation is consistent with the organizational structure approved as part of the fiscal year 2018 Budget. It has been noted where changes were approved by the City Council mid-year. (2) In fiscal year 2010, the indicators for prior years were restated to actuals. Effective December 2009, the City Council approved placing Financial Management under the control of the City Treasurer, moving Payroll and Risk Management from Human Resources to the City Treasurer, and moving Purchasing into a new division named Administrative Services. (3) (4) The complete results for the most recent survey, as well as archived copies of prior year surveys can be found at http://www.scottsdaleaz.gov, search "citizen survey" (5) Effective fiscal year 2012 established more appropriate performance measures for the Communications Department activities and products (ad value equivalency). City ceased tracking this statistic effective fiscal year 2016. (6) During fiscal year 2009, the Neighborhood Watch program was reviewed; participants that were no longer eligible for the program were removed, thus reducing the numbers. The statistic for "Actions to improve safety and efficiency of traffic flow (signal timing changes and traffic control and speed limit studies)" has increased due to automation of the process. Prior to fiscal year 2010 changing signal timing was a manual process. Starting June 2009, the process was automated through the Traffic Management Center. (8) Effective fiscal year 2014, only jobs verified through employer to be created or retained within the first 12 months were counted in annual metrics; total announced job creation is significantly higher. (7) (9) In fiscal year 2012, the crime per thousand increase reflects a recalculation in population with the Census 2010 as a basepoint, rather than an increase in crime. In addition, crime stats are for the prior calendar year end, rather than fiscal year end. (10) (11) 3.4 million square feet from fiscal year 2015 was calculated manually. The City hired a consultant who completed a building inventory in fiscal year 2016. Square footage was recalculated based on actual measurements. The statistic for "# of citizens serviced annually by Household Hazardous Waste Collection program" number of events was restored in fiscal year 2011. During fiscal years 2009 and 2010 the number of events was reduced as a budget savings initiative. (12) Effective fiscal year 2012, the City Council approved placing Meter Reading under the control of the Water Resources Division. Table of Contents City of Scottsdale, Arizona Capital Asset Statistics by Function Last Ten Fiscal Years Function Public Safety Police Stations Police Vehicles Fire Stations 2009 2010 2011 2012 2013 Table XXII 2014 2015 2016 2017 2018 4 363 14 4 357 14 4 352 15 4 352 15 4 351 15 4 359 15 4 347 15 4 344 15 4 344 15 4 343 15 20,644,388 2,932 295 20,873,951 2,965 289 20,828,414 2,959 289 20,852,234 2,962 300 20,859,993 2,963 303 20,748,525 2,947 297 20,827,420 2,958 304 21,036,767 2,877 307 21,023,295 2,846 295 21,046,327 2,990 296 Culture and Recreation Parks Parks Acreage Swimming Pools Tennis Courts Community Centers 41 940 4 55 5 41 941 4 55 5 41 941 4 55 5 42 974 4 55 5 42 975 4 55 6 42 975 4 55 6 42 975 4 55 6 42 975 4 55 6 42 975 4 55 6 42 975 4 53 6 Water Water Mains (miles) Fire Hydrants 2,044 10,365 2,061 10,664 2,059 10,687 2,064 10,729 2,070 10,779 2,079 10,874 2,079 10,941 2,094 11,052 2,102 11,135 2,117 11,213 Sewer Sanitary Sewers (miles) Storm Sewers (miles) 1,360.0 166.9 1,421.0 164.0 1,421.0 163.0 1,422.0 168.0 1,424.0 169.0 1,429.0 187.7 1,441.0 275.0 1,452.0 285.0 1,456.0 309.0 1,468.0 316.0 Highways and Streets Square Yards of Pavement Equivalent 12' Wide Lane Miles Traffic Signals City of Scottsdale, Arizona 202 Source: City of Scottsdale, Arizona divisions. City of Scottsdale, Arizona City Treasurer’s Office (480) 312-2437 Visit our website www.ScottsdaleAZ.gov/Finance