COMPREHENSIVE ANNUAL FINANCIAL REPORT City of Scottsdale, Arizona For the Fiscal Year Ended June 30, 2019 Fire Station 613, located at 26380 N. Hayden Rd. City of Scottsdale, Arizona Comprehensive Annual Financial Report for the fiscal year ended June 30, 2019 Prepared by: City Treasurer’s Office Jeffery M. Nichols, CPA City Treasurer/Chief Financial Officer Joyce L. Gilbride, CPA Accounting Director City of Scottsdale, Arizona Comprehensive Annual Financial Report For the Fiscal Year ended June 30, 2019 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 ...................................................................................................................................... 84 D. Capital Assets ................................................................................................................................. 86 E. Interfund Balances and Interfund Transfers ............................................................................. 88 F. Leases....... ........................................................................................................................................ 89 G. Service Concession Arrangements .............................................................................................. 91 H. Bonds, Loans, and Other Payables ............................................................................................. 92 V. Other Information A. Risk Management ........................................................................................................................ 105 B. Contingent Liabilities .................................................................................................................. 105 C. Subsequent Events ...................................................................................................................... 106 D. Tax Abatement Agreements ...................................................................................................... 106 E. Joint Ventures ............................................................................................................................... 107 F. Pollution Remediation ................................................................................................................. 108 G. Related Organization .................................................................................................................. 109 H. Retirement and Pension Plans .................................................................................................. 109 City of Scottsdale, Arizona ii I. Other Postemployment Benefits ................................................................................................ 124 J. Postemployment Benefits Other Than Pensions (OPEB) ..................................................... 125 Required Supplementary Information ........................................................................................... 129 Combining and Individual Fund Statements and Schedules: Combining Balance Sheet - Nonmajor Governmental Funds .......................................................... 139 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds ........................................................................................................... 140 Combining Balance Sheet - Nonmajor Special Revenue Governmental Funds ............................ 141 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Special Revenue Governmental Funds ............................................................................. 143 Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual: Transportation - Special Revenue Fund ........................................................................................ 145 Community Development Block Grant - Special Revenue Fund ............................................. 146 HOME - Special Revenue Fund .................................................................................................... 147 Grants - Special Revenue Fund ...................................................................................................... 148 Section 8 - Special Revenue Fund .................................................................................................. 149 Preserve Privilege Tax - Special Revenue Fund ........................................................................... 150 Streetlight Districts - Special Revenue Fund ................................................................................ 151 Special Programs - Special Revenue Fund .................................................................................... 152 Tourism Development - Special Revenue Fund .......................................................................... 153 Combining and Individual Fund Statements and Schedules: Combining Balance Sheet - Nonmajor Debt Service Governmental Funds.................................. 154 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Debt Service Governmental Funds ................................................................................... 155 Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual: General Obligation Bond Debt Service Fund ............................................................................. 156 Municipal Property Corporation Debt Service Fund ................................................................. 157 Debt Service Stabilization Debt Service Fund ............................................................................ 158 Scottsdale Preserve Authority Debt Service Fund ...................................................................... 159 City of Scottsdale, Arizona iii Combining and Individual Fund Statements and Schedules: Combining Balance Sheet - Nonmajor Capital Projects Governmental Funds ............................. 160 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Capital Projects Governmental Funds .............................................................................. 161 Combining Balance Sheet - Nonmajor Permanent Governmental Funds ..................................... 162 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Permanent Governmental Funds....................................................................................... 163 Combining Statement of Fund Net Position - Internal Service Funds .......................................... 165 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position Internal Service Funds ............................................................................................................................ 166 Combining Statement of Cash Flows - Internal Service Funds....................................................... 167 Combining Statement of Fiduciary Net Position - Fiduciary Funds............................................... 169 Combining Statement of Changes in Assets and Liabilities - Agency Funds ................................ 170 Other Supplementary Information: Schedule of Changes in Long-Term Debt........................................................................................... 172 STATISTICAL SECTION Financial Trends Net Position by Component - Last Ten Fiscal Years (accrual basis of accounting) ..................... 176 Changes in Net Position - Last Ten Fiscal Years (accrual basis of accounting) ............................ 177 Fund Balances of Governmental Funds - Last Ten Fiscal Years (modified accrual basis of accounting)................................................................................................. 180 Changes in Fund Balances of Governmental Funds - Last Ten Fiscal Years (modified accrual basis of accounting)................................................................................................. 181 Tax Revenues by Source - Last Ten Fiscal Years (modified accrual basis of accounting) ........... 184 Revenue Capacity Taxable Sales Subject to Privilege (Sales) Tax by Category - Last Ten Fiscal Years ...................... 185 Direct and Overlapping Sales Tax Rates - Last Ten Fiscal Years ..................................................... 186 Sales Tax Revenue Payers by Industry - Current Year and Nine Years Ago .................................. 187 City of Scottsdale, Arizona iv Property Tax Rates - Direct and Overlapping Governments - Last Ten Fiscal Years .................. 188 Principal Property Taxpayers - Current Year and Nine Years Ago.................................................. 189 Assessed Value of Taxable Property - Last Ten Fiscal Years............................................................ 190 Property Tax Levies and Collections - Last Ten Fiscal Years ........................................................... 191 Debt Capacity Ratios of Outstanding Debt by Type - Last Ten Fiscal Years .......................................................... 192 Ratios of Net General Bonded Debt Outstanding - Last Ten Fiscal Years ................................... 193 Direct and Overlapping Governmental Activities Debt as of June 30, 2019 ................................ 194 Legal Debt Margin Information - Last Ten Fiscal Years ................................................................... 195 Pledged-Revenue Coverage - Last Ten Fiscal Years ........................................................................... 197 Demographic and Economic Information Demographic and Economic Statistics - Last Ten Fiscal Years ....................................................... 198 Principal Employers - Current Year and Nine Years Ago ................................................................. 199 Operating Information Full-time Equivalent City Government Employees by Function - Last Ten Fiscal Years............ 200 Operating Indicators by Division - Last Ten Fiscal Years ................................................................. 201 Capital Asset Statistics by Function - Last Ten Fiscal Years ............................................................. 204 City of Scottsdale, Arizona v City of Scottsdale, Arizona vi Letter of Transmittal Table of Contents For the Fiscal Year Ended June 30, 2019 October 18, 2019 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, 2019, 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, 2019, 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, 2019 the City’s population was estimated at 255,300 residents, making it the fifth 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 2019, 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 over 50,000 employees in 2 million square feet of commercial space. The high-tech innovation center SkySong, located just a few miles from downtown Scottsdale, 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’s sales tax rate increased from 1.65 percent to 1.75 percent in February 2019 due to voters passing a temporary 0.10 percent increase to provide funds for transportation improvement projects. The increase is in effect for ten years. The City has experienced a year-over-year increase of 7.1 percent in sales tax revenue for fiscal year 2019, with the highest reported tax revenues in miscellaneous retail stores, automotive, and rentals categories. The City anticipates a stable sales tax revenue stream through fiscal year 2020, with slowing growth forecasted in subsequent years. City of Scottsdale, Arizona 3 Table of Contents 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 a decrease in the City’s combined property tax rate in the coming year of $0.0609 over the prior year. This decrease in the combined rate is due to the allowable two percent statutory adjustment and a reduction in debt service payments. 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. In fiscal year 2019, the City Council adopted a new Public Safety Personnel Retirement System (PSPRS) Pension Funding Policy as required by state law. This policy outlines how the City will maintain stability of required contributions, how and when the City’s funding requirements will be met, and defines the City’s funded ratio target under the PSPRS and when it will be met. 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. City of Scottsdale, Arizona 4 Table of Contents 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. The City Council Capital Improvement Plan Subcommittee is responsible for reviewing the City’s Capital Improvement Plan (CIP) and making recommendations to the City Council. Their work plan includes identifying capital projects to be funded by General Fund and Transportation 0.3 percent sales tax funding. The subcommittee consists of three members of City Council with the Chair position rotating every six months. Cash Management To capitalize on investment leverage, it is the City’s practice to “pool” available cash from all funds for investment purposes. In accordance with the City’s investment policy, available cash is invested with the goal of safety, meaning protection of principal, as the first priority, ensuring adequate liquidity as the second priority, and maximizing yield as the third priority. The City’s investments generally include federal agencies, treasuries, certificates of deposit, commercial paper, and corporate notes. The average duration of the investments in the City’s portfolio as of June 30, 2019 was 1.77 years. The average yield on investments increased from 1.96 percent in fiscal year 2018 to 2.32 percent in fiscal year 2019. 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). City of Scottsdale, Arizona 5 Table of Contents 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 revenue 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, 2019 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 Noteworthy achievements by the City in fiscal year 2019 include: • Voter-approved bonds financed resurfacing 57 lane miles of City streets, improving driving conditions and reducing maintenance costs. • Two new trailheads were opened and 10 miles of new trails were completed to welcome people to the McDowell Mountain Preserve. • Attracted new companies and helped others expand, resulting in 1,531 new jobs. The City’s adopted fiscal year 2020 budget increases General Fund spending by $16.7 million when compared to the fiscal year 2019 adopted budget. This increase supports core services and the priorities and policy direction of the City Council. Significant items include: • $4.6 million to fund a 2.5 percent market adjustment for employees and an additional $2.2 million for the City’s pay for performance program. • $3.4 million to address public safety pension-related items. • $1.0 million to cover the City’s share of the increase in employee healthcare costs. • $1.0 million for priority items such as custodial contract increases, operating costs for recently completed fire stations, and the Airport Terminal Area Redevelopment Project. City of Scottsdale, Arizona 6 Table of Contents Additionally, an estimated $190.1 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. Significant projects include: • Scottsdale Stadium Phase I Improvements: $41.8 million • Thomas Groundwater Treatment Facility: $28.0 million • Pima Road - Pinnacle Peak to Happy Valley: $21.5 million • Crossroads East Flood Control Phase I: $14.7 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, 2018, marking the forty-sixth 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. 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 certificate. Additionally, the City received the Distinguished Budget Presentation Award for the fiscal year beginning July 1, 2018 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, 2019. Acknowledgements 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 Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2019 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 Solange Whitehead 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 Table of Contents This page is intentionally blank. City of Scottsdale, Arizona 12 Table of Contents Citizens of Scottsdale Mayor & City Council Organization Chart Boards, Commissions & Task Forces City Attorney City Auditor City Clerk City Manager City Treasurer City of Scottsdale, Arizona 13 Civil Accounting Prosecution Budget Risk Management Business Services Victim Services Finance Presiding Judge City Court Purchasing Public Safety Administrative Services Community & Economic Development Community Services Public Works Water Police Communications Airport Human Services Capital Projects Pipeline & Treatment Agreements Fire Human Resources Economic Development Libraries Facilities Planning & Engineering Information Technology Planning & Development Parks & Recreation Fleet Reclamation Services Tourism & Events Planning & Administration Solid Waste Technology & Administration Transportation Preserve Street Operations Water Quality WestWorld 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 the City of Scottsdale, Arizona (the City), as of and for the year ended June 30, 2019, 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, 2019, 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 1, the City implemented the provisions of the Governmental Accounting Standards Board (GASB) Statement No. 88, Certain Disclosures Related to Debt, Including Direct Borrowings and Direct Placements, and Statement No. 89, Accounting for Interest Cost Incurred Before the End of a Construction Period, for the year ended June 30, 2019, which represent changes in accounting principles. 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, net pension liability information, and other postemployment benefit plan information, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, 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 18, 2019, on our consideration of the 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 the City of Scottsdale’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City of Scottsdale, Arizona’s internal control over financial reporting and compliance. Heinfeld, Meech & Co., P.C. Phoenix, Arizona October 18, 2019 City of Scottsdale, Arizona 16 Management’s Discussion and Analysis Table of Contents For the Fiscal Year Ended June 30, 2019 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, 2019 and 2018. 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 2019 and 2018 by $5.22 billion and $5.10 billion (net position), respectively. Of these amounts, $277.8 million and $222.7 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 2019 by $120.1 million compared to an increase in net position of $112.0 million during fiscal year 2018. Total revenues exceeded total expenses in the current year due primarily to an increase in interest and investment income and business taxes of $17.6 million and $14.6 million, respectively, over the prior year. • As of June 30, 2019, and 2018, the City’s governmental funds reported combined ending fund balances of $260.9 million and $244.3 million, respectively. Approximately 32 percent of the current year amount ($82.6 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 $97.1 million or approximately 36 percent of total General Fund expenditures of $270.1 million. • The City’s total long-term liabilities decreased by $108.9 million to $1.46 billion during the current fiscal year. This decrease was due to the City making scheduled principal payments on its debt and lower net pension liabilities. 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 Management’s Discussion and Analysis Table of Contents For the Fiscal Year Ended June 30, 2019 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 Management’s Discussion and Analysis Table of Contents For the Fiscal Year Ended June 30, 2019 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 Management’s Discussion and Analysis Table of Contents For the Fiscal Year Ended June 30, 2019 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) Construction 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 two agency funds that 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 54-128 of this report. City of Scottsdale, Arizona 20 Management’s Discussion and Analysis Table of Contents For the Fiscal Year Ended June 30, 2019 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 multiple-employer pension plan’s net pension liability, the changes in the City’s net pension liabilities regarding the agent multiple-employer pension plans, 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 129-135 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 136-170. 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 171-174. Statistical Information. The statistical section, found on pages 175-204, 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 considers 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 total liabilities and deferred inflows of resources by $5.22 billion, and $5.10 billion at the close of the fiscal years 2019 and 2018, respectively. City of Scottsdale, Arizona 21 Management’s Discussion and Analysis Table of Contents For the Fiscal Year Ended June 30, 2019 The following table is a condensed summary of the City’s net position for governmental and business-type activities: Net Position June 30, 2019 and 2018 (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 2019 2018 $ 568,073 $ 4,378,286 4,946,359 91,310 5,037,669 549,376 4,370,921 4,920,297 94,580 5,014,877 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 1,093,373 133,012 1,226,385 21,072 1,247,457 NET POSITION Net investment in capital assets Restricted Unrestricted Total net position 3,675,567 119,657 (5,012) 3,790,212 $ $ Business-type Activities 2019 2018 $ Total 2018 1,050,846 $ 5,776,889 6,827,735 104,123 6,931,858 1,028,916 5,769,133 6,798,049 108,013 6,906,062 482,773 $ 1,398,603 1,881,376 12,813 1,894,189 479,540 1,398,212 1,877,752 13,433 1,891,185 1,176,604 123,482 1,300,086 15,450 1,315,536 413,453 48,249 461,702 3,931 465,633 440,809 48,223 489,032 2,863 491,895 1,506,826 181,261 1,688,087 25,003 1,713,090 1,617,413 171,705 1,789,118 18,313 1,807,431 3,604,063 123,057 (27,779) 3,699,341 1,093,556 52,204 282,796 1,428,556 $ 1,099,864 48,926 250,500 1,399,290 4,769,123 171,861 277,784 5,218,768 $ 4,703,927 171,983 222,721 5,098,631 $ $ 2019 $ The largest portion (91.4 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 $4.77 billion and $4.70 billion at June 30, 2019 and 2018, 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 3.3 percent of the City’s net position, $171.9 million at June 30, 2019 and $172.0 million at June 30, 2018, represents resources that are subject to external restrictions on how they may be used. Unrestricted net position, 5.3 percent of the City’s total net position at June 30, 2019 and 4.4 percent at June 30, 2018, $277.8 million and $222.7 million, respectively, may be used to meet the government’s ongoing obligations to its citizens and creditors. City of Scottsdale, Arizona 22 Management’s Discussion and Analysis Table of Contents For the Fiscal Year Ended June 30, 2019 Analysis of Changes in Net Position. Total revenues exceeded total expenses in the current year, resulting in an increase in the City’s total net position of $120.1 million in fiscal year 2019 compared to an increase in net position of $112.0 million during fiscal year 2018. 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, 2019 and 2018 (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 Interest on Long-Term Debt 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 2019 2018 Business-type Activities 2019 2018 $ $ 48,215 34,233 35,620 $ 47,449 30,760 60,819 182,203 17,833 $ 182,225 23,865 Total 2019 $ 230,418 34,233 53,453 2018 $ 229,674 30,760 84,684 68,922 237,352 55,456 14,924 11,860 9,130 515,712 64,718 222,738 54,268 12,031 2,218 10,548 505,549 167 10,276 210,479 144 2,291 208,525 68,922 237,519 55,456 14,924 22,136 9,130 726,191 64,718 222,882 54,268 12,031 4,509 10,548 714,074 704 952 6,890 898 5,509 3,691 8,209 47,420 102,680 153,817 56,730 17,974 584 26,364 432,422 83,290 7,581 90,871 638 695 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 96,010 50,462 5,370 21,790 173,632 36,847 (7,581) 29,266 96,493 52,142 7,624 19,735 175,994 32,531 (7,756) 24,775 704 952 6,890 898 5,509 3,691 8,209 47,420 102,680 153,817 56,730 17,974 584 26,364 96,010 50,462 5,370 21,790 606,054 120,137 120,137 638 695 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 3,699,341 3,611,868 276 3,699,341 3,612,144 $ 3,790,212 $ 3,699,341 1,399,290 1,374,515 1,399,290 1,374,515 $ 1,428,556 $ 1,399,290 City of Scottsdale, Arizona 23 5,098,631 4,986,383 276 5,098,631 4,986,659 $ 5,218,768 $ 5,098,631 Management’s Discussion and Analysis Table of Contents For the Fiscal Year Ended June 30, 2019 Governmental Activities. Net position for governmental activities increased $90.9 million after transfers during fiscal year 2019 compared to an increase of $87.2 million after transfers in fiscal year 2018. Total revenues increased $10.2 million or 2.0 percent from the prior fiscal year and expenses increased $6.3 million or 1.5 percent. Overall, revenues exceeded expenses resulting in the increase in net position. The City experienced improved total revenues from governmental activities over the prior year due primarily to a 6.5 percent increase in property taxes, a 6.6 percent increase in business taxes, an 11.3 percent increase in operating grants and contributions, and a greater than 400 percent increase in interest and investment income. These increases reflect the ongoing economic growth experienced locally and nationally over the past several years. Conversely, a decrease (41.4 percent) in capital grants and contributions for governmental activities was noted over the prior year caused by fewer large construction projects completed in fiscal year 2019, resulting in lower developer contributions. 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 $397.6 million in fiscal year 2019 compared to $366.5 million in fiscal year 2018. Property taxes were $68.9 million in fiscal year 2019 compared to $64.7 million in fiscal year 2018. As previously noted, business taxes, which include privilege and franchise taxes, increased $14.6 million or 6.6 percent from the previous year. As well, interest and investment income increased $9.6 million over the prior year due to an increase in yields on the City’s short and long-term investment portfolios caused by strong market conditions for the majority of the fiscal year. For governmental activities overall, without regard to program, business taxes (46 percent), are the largest single source of funds, followed by intergovernmental taxes (including state shared revenues) (14 percent), property taxes (13 percent), and charges for services (9 percent). Governmental Activities Revenues by Source Fiscal Year 2018/19 (in thousands) Interest and Investment Income $11,860 2% Charges for Services $48,215 9% Intergovernmental $70,380 14% Operating Grants and Contributions $34,233 7% Capital Grants and Contributions $35,620 7% Business Taxes $237,352 46% Other Revenue $9,130 2% City of Scottsdale, Arizona 24 Property Taxes $68,922 13% Management’s Discussion and Analysis Table of Contents For the Fiscal Year Ended June 30, 2019 Another 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. Expenses increased by $0.6 million or 0.4 percent during fiscal year 2019 due primarily to an increase in employee compensation. 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 consists of: Economic Development, Planning and Development Services, Tourism and Development Events, Transportation, and WestWorld. Expenses were $0.5 million or 0.5 percent higher than the prior fiscal year due primarily to an increase in employee compensation. 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, and promoting healthy lifestyles. They also assist those in need through federal, state, local, and private resources. The division consists of: Parks and Recreation, Human Services, Libraries, and Preserve. Expenses were $2.0 million or 3.7 percent higher than the prior fiscal year due primarily to an increase in employee compensation. Business-type Activities. Net position for business-type activities increased by $29.3 million after transfers during fiscal year 2019 compared to $24.8 million after transfers in fiscal year 2018. Total revenues increased by $2.0 million or 0.9 percent due primarily to an increase in interest and investment income offset by a decrease in developer contributions and charges for services caused by lower deliveries. Overall, total revenues exceeded expenses resulting in the increase in net position for the fiscal year. City of Scottsdale, Arizona 25 Management’s Discussion and Analysis Table of Contents For the Fiscal Year Ended June 30, 2019 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 (8 percent). Business-type Activities Revenues by Source Fiscal Year 2018/19 (in thousands) Capital Grants and Contributions $17,833 8% Interest and Investment Income $10,276 5% Business Taxes $167 0% Charges for Services $182,203 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 $96.0 million and $50.5 million, respectively, in fiscal year 2019, followed by solid waste with $21.8 million and airport with $5.4 million. Business-type Activities Program Revenues and Expenses Fiscal Year 2018/19 (in thousands) $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0 Water Utility Sewer Utility Solid Waste Program Rev Program Exp City of Scottsdale, Arizona 26 Airport Management’s Discussion and Analysis Table of Contents For the Fiscal Year Ended June 30, 2019 The City’s Water Resources Department manages and operates a safe, reliable water supply and wastewater reclamation system, and in fiscal year 2019 they provided 91,279 water connections to Scottsdale citizens. The Water and Sewer Utility’s combined expenses decreased by 1.5 percent in fiscal year 2019 compared to fiscal year 2018. This was caused primarily by lower electric expenses due to lower water demand and deliveries, and lower purchased water and chemicals, also due to lower water demand and deliveries. The milder weather and ample rain earlier in the year drove a 10.0 percent reduction in deliveries compared to fiscal year 2018. The Solid Waste Department provided delivery of safe, efficient, and environmentally sound refuse collection services to 82,711 residential customers in fiscal year 2019. Total program expenses increased 10.4 percent or $2.1 million in fiscal year 2019 compared to fiscal year 2018 due to an increase in employee compensation and landfill contract expenses. The Aviation Department operates the City’s general aviation reliever facility and is home to many of the Valley’s corporate aircraft. More than 176,000 take-offs and landings occurred in fiscal year 2019 at Scottsdale Airport. Total program expenses decreased by 29.6 percent or $2.3 million in fiscal year 2019 compared to fiscal year 2018, driven primarily by a decrease in contractual services due to construction projects. 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 $260.9 million, an increase of $16.6 million from the prior year total of $244.3 million. Approximately 32 percent or $82.6 million of the current year amount 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 Management’s Discussion and Analysis Table of Contents For the Fiscal Year Ended June 30, 2019 Revenues for governmental functions totaled $492.1 million in fiscal year 2019, an increase of 7.4 percent, or $34.0 million, from the previous year total of $458.1 million. In fiscal year 2019, expenditures for governmental functions totaled $483.4 million, an increase of 4.8 percent, or $22.3 million, from the fiscal year 2018 total of $461.1 million. For the current fiscal year, revenues exceeded expenditures for governmental functions by $8.7 million. This was chiefly due to an increase of $13.6 million in privilege tax revenues, a $6.9 million net increase in the fair value of investments, and an increase of $5.2 million in property taxes over the prior year. These revenues are all indicators of the continued healthy economy experienced by the City and nationally. 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 $97.1 million, while the total fund balance was $97.4 million; the unassigned and total balances for the General Fund at the end of fiscal year 2018 were $72.8 million and $73.1 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 36.0 percent of the total General Fund expenditures of $270.1 million in fiscal year 2019 and represented 28.7 percent of the total General Fund expenditures of $253.4 million in fiscal year 2018. Total fund balance represented 36.1 percent and 28.8 percent of total fund expenditures for fiscal years 2019 and 2018, respectively. Overall, the General Fund’s performance resulted in revenues exceeding expenditures in the fiscal year ended June 30, 2019 by $38.9 million. Total revenues increased $25.8 million or 9.1 percent compared to the prior year while expenditures increased $16.7 million or 6.6 percent. Key General Fund revenues showing an increase over the prior year included the net increase in the fair value of investments ($6.9 million), transaction privilege tax ($6.0 million), and property tax ($4.5 million), as previously mentioned these are indicators of the strong local and national economy. Public Safety experienced the largest growth in General Fund expenditures of $10.0 million due to increased pension costs and salary increases. City Treasurer expenditures increased $2.6 million over the prior year due to a reorganization that moved the Purchasing Department from Administrative Services to the City Treasurer. Conversely, Administrative services saw a decrease of $1.0 million in expenditures over the prior year offset by increases in employee compensation, contractual, and commodity purchases. As a result of increased revenues and a nominal increase in expenditures the fund balance of the City’s General Fund increased in fiscal year 2019 by $24.3 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 $1.4 million, a decrease of $1.1 million from the $2.5 million balance at June 30, 2018. The decrease in fund balance was due to scheduled debt 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 $42.3 million, an increase of $4.0 million from the $38.3 million at June 30, 2018 caused by transfers in exceeding capital expenditures. City of Scottsdale, Arizona 28 Management’s Discussion and Analysis Table of Contents For the Fiscal Year Ended June 30, 2019 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 2019 and 2018, the unrestricted net position for the Water and Sewer Utility Fund was $271.0 million and $256.8 million, respectively; the Airport Fund was $5.9 million and $(12.9) million, respectively; and the Solid Waste Fund was $1.8 million and $3.4 million, respectively. The Internal Service Funds, which are used to account for certain governmental activities, had unrestricted net position of $24.4 million and $20.8 million, respectively. The total growth in net position for the enterprise funds was $28.5 million and $24.0 million for fiscal years 2019 and 2018, 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 2019 were $12.3 million more than projected. Key differences between final estimated revenues and actual revenues were as follows (in thousands): Revenue Source Forecast Actual Variance Transaction Privilege Taxes $126,078 $134,126 $8,048 Intergovernmental – Misc. 2,180 4,149 1,969 Interest Earnings 3,575 4,328 753 Higher than anticipated transaction privilege tax collections were the result of the strong local economy with automotive, retail, and rental categories leading the way. The intergovernmental-miscellaneous variance was due to the unbudgeted $1.97 million fire insurance premium credit received in fiscal year 2019. Lastly, the positive variance in interest earnings was due to a to a greater yield on investments than expected due to positive market conditions for the majority of the fiscal year. General Fund expenditures were $7.3 million less than the revised fiscal year 2019 budget largely due to the following: • Employees being promoted or retiring with replacement employees often coming in at a lower salary. • Jail services and photo enforcement spending less than anticipated. • Lower need than projected for vehicle maintenance and fuel costs as well as items such as investigative equipment, ballistic vests, library e-materials, furniture, and other miscellaneous operating supplies. City of Scottsdale, Arizona 29 Management’s Discussion and Analysis Table of Contents For the Fiscal Year Ended June 30, 2019 CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets. The City’s total capital assets for its governmental and business-type activities as of June 30, 2019 and 2018 was $5.78 billion and $5.77 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 2019 and 2018 was $7.8 million or 0.1 percent. Capital Assets, Net of Depreciation June 30, 2019 and 2018 (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 Business-type Activities Total 2019 2018 $ 3,194,486 $ 3,177,449 357,054 368,094 678,581 702,507 37,385 37,650 45,268 45,295 65,512 39,926 $ 4,378,286 $ 4,370,921 2019 2018 50,381 $ 50,381 57,694 25,016 3,613 3,490 87,171 87,171 754,262 752,541 392,375 398,502 466 550 860 453 51,781 80,108 $ 1,398,603 $ 1,398,212 2019 2018 $ 3,244,867 $ 3,227,830 414,748 393,110 678,581 702,507 40,998 41,140 87,171 87,171 754,262 752,541 392,375 398,502 45,734 45,845 860 453 117,293 120,034 $ 5,776,889 $ 5,769,133 $ Significant capital asset events during fiscal year 2019 included the following: • Land: $14.9 million for land donated by developers that coincides with public street improvements for finalized permits, and $1.9 million for donated easements for streets, sidewalks, and drainage. • Buildings and Land Improvements: ˏˏ $28.1 million for airport terminal improvements and $6.2 for airport runway improvements. ˏˏ $4.3 million for fire station improvements and $5.5 million for bridge, facility, underground utility, and park improvements. • Streets: $7.5 million for new road improvements donated by developers, $13.4 million for street preservation, and $6.2 million related to streets, traffic control, sidewalks and storm drains. • Vehicles: $2.7 million for solid waste vehicles, $2.9 million for public safety vehicles, and $1.6 million for street and water operation vehicles. Additional information on the City’s capital assets can be found in Note IV.D. on pages 86-88 of this report. City of Scottsdale, Arizona 30 Table of Contents Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2019 Long-term Debt. At the end of the fiscal years 2019 and 2018, the City had total long-term liabilities of $1,462.2 million and $1,571.1 million, respectively. Of these amounts, $483.2 million and $525.5 million, for fiscal years 2019 and 2018 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 $979.0 million and $1,045.7 million for fiscal years 2019 and 2018, respectively. 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, 2019 and 2018 was $429.4 million and $401.3 million, respectively, in the 6 percent capacity and $955.0 million and $864.0 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, 2019 and 2018 (in thousands) Governmental Activities General Obligation Bonds Water and Sewer Revenue Bonds Municipal Property Corporation Bonds Scottsdale Preserve Authority Bonds Community Facilities Districts General Obligation Bonds Certificates of Participation - Direct Borrowing Community Facilities Districts General Obligation Bonds - Direct Placements Issuance Premiums Total Bonds Payable Capital Lease Service Concession Arrangements Risk Management Claims $ Compensated Absences Total Other Postemployment Benefit Net Pension Liabilities Total Long-term Liabilities $ 2019 483,215 $ 173,762 7,410 2018 525,465 187,918 11,950 Business-type Activities $ 2019 - $ 16,175 290,768 - Total 2018 19,715 306,822 - $ 2019 483,215 $ 16,175 464,530 7,410 2018 525,465 19,715 494,740 11,950 2,810 2,493 2,950 4,914 - - 2,810 2,493 2,950 4,914 13,515 59,224 742,429 219 2,221 22,447 15,850 65,413 814,460 32 2,375 22,933 28,550 335,493 - 30,939 357,476 - 13,515 87,774 1,077,922 219 2,221 22,447 15,850 96,352 1,171,936 32 2,375 22,933 26,322 2,103 25,516 2,194 3,748 - 3,531 - 30,070 2,103 29,047 2,194 29,630 368,871 $ 33,523 394,530 327,262 1,462,244 $ 342,617 1,571,134 297,632 1,093,373 $ 309,094 1,176,604 $ $ During fiscal year 2019, the City’s total long-term liabilities decreased overall by $108.9 million due to the City making scheduled principal payments on its debt, primarily $42.3 million of general obligation bonds, and $30.2 million of MPC bonds. 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 included in its outstanding long-term liabilities. The City’s net pension liabilities at the end of fiscal years 2019 and 2018 were $327.3 million and $342.6 million, respectively. This decrease was due primarily to the change in assumptions and differences between expected and actual experience for the Arizona State Retirement System. Additional information on the City’s pensions begin on page 109. 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 92-104 of this report. City of Scottsdale, Arizona 31 Management’s Discussion and Analysis Table of Contents For the Fiscal Year Ended June 30, 2019 ECONOMIC FACTORS AND NEXT YEAR’S BUDGET Together with Arizona’s solid economic growth, Scottsdale’s economy continues on a strong and stable fiscal path. In June 2019, the City Council approved a $1,541.8 million budget, which is a 12.8 percent increase over the prior year budget of $1,366.8 million. The adopted fiscal year 2020 budget includes $882.1 million for operations, including grants, contingencies and reserves, and $659.7 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, 2019 (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 $ 316,144 $ 206,319 Total $ 522,463 30,305 11,050 32,651 1,740 10,892 (4,057) 1,130 26,632 - 40 19,630 2,874 1,274 2,886 4,057 2,211 44,582 30,345 19,630 11,050 35,525 3,014 13,778 1,130 2,211 26,632 44,582 80,196 59,731 1,659 48,921 953 6,220 3,181 1,267 41,292 4,692 92,374 129,117 953 6,220 3,181 1,267 41,292 4,692 59,731 94,033 3,259,998 189,333 3,449,331 1,118,288 4,946,359 1,209,270 1,881,376 2,327,558 6,827,735 24,158 66,936 216 91,310 8,683 4,130 12,813 32,841 71,066 216 104,123 (continued) City of Scottsdale, Arizona 34 Business-type Activities $ $ Table of Contents Statement of Net Position June 30, 2019 (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 $ Total Liabilities 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 $ 25,581 6,066 266 14,758 64,632 4,927 10,498 $ 14,956 734 7,565 19,593 - Total $ 40,537 6,800 266 22,323 84,225 4,927 10,498 3,242 3,042 3,181 1,267 953 - 3,181 1,267 4,195 3,042 12,491 76,868 1,767 20,703 14,258 97,571 13,831 2,103 297,632 690,448 1,093,373 1,981 29,630 314,790 44,582 413,453 15,812 2,103 327,262 1,005,238 44,582 1,506,826 1,226,385 461,702 1,688,087 20,601 471 21,072 3,931 3,931 24,532 471 25,003 3,675,567 1,093,556 4,769,123 10,744 54,027 48,184 2,735 3,200 11 124 4,692 - 15,436 54,027 48,184 2,735 3,200 11 124 28 604 (5,012) 3,790,212 41,292 6,220 282,796 1,428,556 28 604 41,292 6,220 277,784 5,218,768 The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 35 Business-type Activities $ $ Table of Contents Statement of Activities For the Fiscal Year Ended June 30, 2019 (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 704 952 6,890 898 5,509 3,691 8,209 47,420 102,680 153,817 56,730 17,974 584 26,364 432,422 $ 96,010 50,462 5,370 21,790 173,632 $ 606,054 142 171 792 203 349 3,036 1,567 20,562 11,107 7,078 2,617 591 48,215 Operating Grants and Contributions Capital Grants and Contributions $ $ 109,947 45,419 5,493 21,344 182,203 $ 230,418 7 5 1,036 77 18,009 6,756 7,982 361 34,233 - $ 34,233 $ 3,443 31,383 80 714 35,620 Governmental Activities $ The notes to the financial statements are an integral part of this statement. (555) (781) (6,098) (695) (5,504) (2,306) (5,173) (42,333) (32,726) (135,874) (40,956) (14,996) 7 (26,364) (314,354) $ Total - $ (555) (781) (6,098) (695) (5,504) (2,306) (5,173) (42,333) (32,726) (135,874) (40,956) (14,996) 7 (26,364) (314,354) 8,476 5,505 3,852 17,833 - 22,413 462 3,975 (446) 26,404 22,413 462 3,975 (446) 26,404 53,453 (314,354) 26,404 (287,950) 68,922 224,177 13,175 167 - 68,922 224,344 13,175 25,187 30,269 14,924 11,860 9,130 7,581 405,225 90,871 3,699,341 3,790,212 10,276 (7,581) 2,862 29,266 1,399,290 1,428,556 25,187 30,269 14,924 22,136 9,130 408,087 120,137 5,098,631 5,218,768 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 Net Position - Ending Business-type Activities $ $ $ Table of Contents Balance Sheet Governmental Funds June 30, 2019 (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 $ $ 86,327 1,265 1,090 14,891 926 855 2,909 10,845 205 436 4,030 5,902 271 129,952 General Obligation Bond Debt Service General CIP Construction Capital Projects Total Nonmajor Governmental Funds $ $ $ $ 967 52,140 1,006 54,113 $ 41,150 177 2,033 43,360 $ 133,771 26,791 473 8,011 1,123 98 50 1,534 29,842 1,275 4,558 207,526 Total Governmental Funds $ $ 262,215 80,196 1,740 22,902 1,123 2,030 855 2,959 10,845 205 1,534 436 29,842 1,275 10,621 5,902 271 434,951 Table of Contents Balance Sheet Governmental Funds June 30, 2019 (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. $ 5,072 5,921 55 1,210 General Obligation Bond Debt Service General CIP Construction Capital Projects Total Nonmajor Governmental Funds $ $ $ 9,890 42,250 1,055 8 - 16,579 275 5,902 4,813 21,172 Total Governmental Funds $ 22,706 6,204 5,902 14,758 64,632 962 4,922 3,237 3,036 24,415 52,140 3 1,066 8,606 892 4 5 58,248 8,606 1,857 4,926 3,242 3,036 135,869 8,169 579 7 29,439 38,194 32,584 52,719 1,073 87,687 174,063 271 97,097 97,368 1,394 1,394 42,287 42,287 604 110,873 22,813 (14,451) 119,839 875 112,267 65,100 82,646 260,888 129,952 $ 54,113 $ 43,360 $ 207,526 $ 434,951 Table of Contents Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position June 30, 2019 (in thousands) Fund Balances - Total Governmental Funds $ 260,888 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. 4,318,665 Changes in equity in joint venture are not financial resources; therefore, are not reported in the funds. 1,657 Prepayments and service concession arrangements are not financial resources; therefore, are not reported in the funds. 86,363 Deferred outflows relating to deferred amounts on refundings, pensions, and other postemployment benefits are not financial resources; therefore, are not reported in the funds. 90,642 Long-term liabilities, including bonds payable, are not due and payable in the current period; therefore are not reported in the funds. (1,065,719) 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. 17,747 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. 79,969 Net Position of Governmental Activities $ The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 39 3,790,212 Table of Contents Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Fiscal Year Ended June 30, 2019 (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 Parking Photo Radar Court Enhancement Library Police Property Rental Interest Earnings Net Increase 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) $ $ 31,383 134,126 8,571 3,293 238 3,102 General Obligation Bond Debt Service General CIP Construction Capital Projects Total Nonmajor Governmental Funds $ $ $ 34,087 - - 3,268 69,697 22,407 261 - Total Governmental Funds $ 68,738 203,823 22,407 8,832 3,293 238 3,102 25,187 30,269 10,791 1,866 - - 17,073 642 52 25,187 30,269 10,791 17,073 642 1,918 15,885 4,554 4,863 2,092 - 54 - 40 2,286 - 15,979 6,840 4,863 2,092 3,846 288 2,243 426 3,559 4,328 4,904 - 547 - 146 1,764 247 2,530 2,081 - 3,992 288 2,243 1,764 426 247 6,089 6,956 4,904 4,149 1,887 6,475 670 308,995 34,087 3 604 12,135 410 8,785 412 591 2,575 528 424 78 148,432 12,135 410 12,934 412 591 2,575 2,415 6,899 751 492,118 $ $ $ $ Table of Contents Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Fiscal Year Ended June 30, 2019 (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 Capital Outlay Total Expenditures $ 730 1,004 7,471 948 4,779 2,708 8,421 20,352 24,884 144,136 36,145 15,279 - General Obligation Bond Debt Service General CIP Construction Capital Projects Total Nonmajor Governmental Funds $ $ $ - - 17 1,018 1,038 172 14,802 23,976 2,114 12,641 584 Total Governmental Funds $ 747 1,004 7,471 948 5,797 3,746 8,593 35,154 48,860 146,250 48,786 15,279 584 2,631 321 244 270,053 42,250 19,786 62,036 14,973 14,973 21,172 9,645 49,178 136,357 66,053 29,752 64,395 483,419 Excess (Deficiency) of Revenues over (under) Expenditures 38,942 (27,949) (14,369) 12,075 8,699 OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Capital Lease Acquisitions Sale of General Capital Assets Total Other Financing Sources (Uses) 10,698 (25,780) 244 191 26,872 - 18,876 (485) - 51,731 (74,470) - 108,177 (100,735) 244 191 (14,647) 26,872 18,391 (22,739) 7,877 24,295 (1,077) 4,022 (10,664) 16,576 Net Change in Fund Balances (Deficits) Fund Balances - Beginning Fund Balances - Ending The notes to the financial statements are an integral part of this statement. $ 73,073 97,368 $ 2,471 1,394 $ 38,265 42,287 $ 130,503 119,839 $ 244,312 260,888 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, 2019 (in thousands) Net Change in Fund Balances - Total Governmental Funds $ 16,576 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 capital outlay exceeded depreciation in the current period. (19,322) Donations of capital assets are not capitalized on the governmental fund statements, but are shown in the statement of activities. 24,399 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. (33,438) 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. 31,430 Current-year joint venture contributions are reclassified from expenditures in the governmental funds to an increase in the investment in the joint venture in the government-wide statements. 181 The State Treasurer distributes funding directly to the Public Safety Personnel Retirement System that is used to offset the contribution required to be made by the City. The fund financial statements recognize the current year contribution; however, the government-wide statements recognize the prior year contribution. 1,888 Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. (4,171) 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. 65,809 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 amounts on refundings and reductions of interest expense were recognized due to the amortization of bond premiums. 3,388 The change in net position of the Internal Service Funds is attributed to governmental activities. 5,098 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 90,871 Table of Contents General Fund Statement of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2019 (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 Parking Photo Radar Library Property Rental Interest Earnings Net Increase in the Fair Value of Investments Intergovernmental Miscellaneous Reimbursements from Outside Sources Indirect Costs Other Total Revenues (continued) Original $ $ 31,558 126,078 8,541 4,144 218 3,103 Final $ 31,558 126,078 8,541 4,144 218 3,103 Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ 31,383 134,126 8,571 3,293 238 3,102 - 31,383 134,126 8,571 3,293 238 3,102 (175) 8,048 30 (851) 20 (1) 24,479 30,278 10,900 1,885 24,479 30,278 10,900 1,885 25,187 30,269 10,791 1,866 - 25,187 30,269 10,791 1,866 708 (9) (109) (19) 15,565 4,307 4,903 1,513 15,565 4,307 4,903 1,513 15,885 4,554 4,863 2,092 - 15,885 4,554 4,863 2,092 320 247 (40) 579 4,169 252 2,265 467 3,373 3,575 - 4,169 252 2,265 467 3,373 3,575 - 3,846 288 2,243 426 3,559 4,328 - 4,904 3,846 288 2,243 426 3,559 4,328 4,904 (323) 36 (22) (41) 186 753 - 1,820 1,181 6,475 781 291,830 2,180 1,181 6,475 421 291,830 4,149 1,887 6,475 670 304,091 4,904 4,149 1,887 6,475 670 308,995 1,969 706 249 12,261 $ $ $ $ $ Table of Contents General Fund Statement of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2019 (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 Capital Outlay Total Expenditures Original $ Final 664 1,038 7,063 960 4,785 2,580 8,903 20,164 25,442 143,374 36,851 21,091 $ 727 1,085 7,698 1,022 4,818 2,749 8,865 20,375 25,573 147,387 37,030 15,290 Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ 727 1,000 7,299 944 4,763 2,696 8,381 20,310 24,812 143,110 36,016 15,223 3 4 172 4 16 12 40 42 72 1,026 129 56 730 1,004 7,471 948 4,779 2,708 8,421 20,352 24,884 144,136 36,145 15,279 85 399 78 55 53 484 65 761 4,277 1,014 67 2,575 316 244 276,050 2,575 316 244 275,754 2,631 321 244 268,477 1,576 2,631 321 244 270,053 (56) (5) 7,277 Excess of Revenues over Expenditures 15,780 16,076 35,614 3,328 38,942 19,538 OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Capital Lease Acquisitions Sale of General Capital Assets Total Other Financing Sources (Uses) 10,298 (24,135) 303 (13,534) 10,298 (24,135) 303 (13,534) 10,698 (25,780) 244 191 (14,647) - 10,698 (25,780) 244 191 (14,647) 400 (1,645) 244 (112) (1,113) 2,246 2,542 20,967 3,328 24,295 18,425 Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending The notes to the financial statements are an integral part of this statement. $ 50,876 53,122 $ 81,051 83,593 $ 81,051 102,018 $ (7,978) (4,650) $ 73,073 97,368 $ 18,425 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, 2019 (in thousands) Explanation of Differences: Items recorded as revenues for GAAP purposes that are not recorded for budget purposes: Net Increase 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 1,576 $ The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 45 4,904 3,328 Table of Contents Statement of Fund Net Position Proprietary Funds June 30, 2019 (in thousands) Water and Sewer Utility 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 Items Joint Venture Construction Deposits Total Current Assets $ 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 Capital Assets (net of accumulated depreciation) Total Noncurrent Assets Total Assets Deferred Outflows of Resources Deferred Amounts on Refundings Pension-Related Amounts Total Deferred Outflows of Resources $ 190,698 Airport $ Solid Waste 7,861 $ Total 7,760 $ 206,319 Governmental Activities Internal Service Funds $ 53,929 17,305 1,181 2,375 - 40 982 39 387 - 2,325 54 124 - 40 19,630 982 1,274 2,886 - 271 859 47,674 863 2,211 1,247 90 - - 48,921 953 2,211 - 6,220 268,527 10,646 10,263 6,220 289,436 55,059 1,892 92,318 44,582 5 - 51 - 1,892 92,374 44,582 2 - 3,181 41,292 4,692 1,267 - - 3,181 1,267 41,292 4,692 - 39,706 87,171 1,283,992 646,129 6,432 1,155 47,790 (787,279) 1,325,096 1,513,053 9,564 65,274 1,151 494 13 2,954 (11,030) 68,420 69,692 1,111 5,587 742 89 1,037 (3,479) 5,087 5,138 50,381 87,171 1,283,992 646,129 70,861 1,151 7,668 1,257 51,781 (801,788) 1,398,603 1,587,883 12,887 89,310 4,472 1,707 (48,755) 59,621 59,623 1,781,580 80,338 15,401 1,877,319 114,682 8,683 3,007 11,690 185 185 938 938 8,683 4,130 12,813 668 668 $ (continued) City of Scottsdale, Arizona 46 $ $ $ Table of Contents Statement of Fund Net Position Proprietary Funds June 30, 2019 (in thousands) Water and Sewer Utility LIABILITIES AND DEFERRED INFLOWS 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 Customer Advances and Deposits Interest Payable Matured Bonds and Other Payables Bonds Payable and Other Payables - Due within one year Unearned Revenue Other Liabilities Total Current Liabilities $ 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 12,255 521 1,280 863 7,093 18,818 19,888 60,718 Airport $ Solid Waste 1,851 34 93 90 472 775 815 4,130 $ 850 179 394 1,423 Governmental Activities Internal Service Funds Total $ 14,956 734 1,767 953 7,565 19,593 20,703 66,271 $ 2,875 127 1 256 1 8,764 35 6 12,065 1,390 3,181 21,680 292,000 44,582 362,833 130 1,267 1,308 22,790 25,495 461 6,642 7,103 1,981 `` 3,181 1,267 29,630 314,790 44,582 395,431 238 4,713 13,683 18,634 Total Liabilities 423,551 29,625 8,526 461,702 30,699 Deferred Inflows of Resources Pension-Related Amounts 2,876 173 882 3,931 625 NET POSITION Net Investment in Capital Assets 1,043,654 44,815 5,087 1,093,556 59,621 Restricted for Water and Sewer System Replacement Restricted for Debt Service Restricted for Joint Venture Construction Deposits Unrestricted Total Net Position 41,292 4,692 6,220 270,985 1,366,843 5,910 50,725 1,844 6,931 41,292 4,692 6,220 278,739 1,424,499 24,405 84,026 $ $ 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, 2019 (in thousands) Total Enterprise Fund Net Position $ 1,424,499 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 4,057 $ 1,428,556 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, 2019 (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 97,259 44,177 12,337 1,170 154,943 Airport $ Solid Waste 5,370 103 5,473 $ Total 21,344 21,344 $ 97,259 44,177 12,337 21,344 5,370 1,273 181,760 Governmental Activities Internal Service Funds $ 65,288 65,288 50,646 27,302 4,800 51,500 134,248 2,388 590 1,546 4,524 20,376 1,509 277 22,162 50,646 27,302 20,376 2,388 6,899 53,323 160,934 52,839 8,270 61,109 20,695 949 (818) 20,826 4,179 NON-OPERATING REVENUES (EXPENSES) Transaction Privilege Tax Property Tax Investment Income Interest Expense Gain on Sale of Capital Assets Net Non-Operating Revenue (Expenses) 9,544 (12,641) 423 (2,674) 167 419 (863) 20 (257) 313 313 167 10,276 (13,504) 443 (2,618) 320 370 690 Income (Loss) Before Contributions and Transfers 18,021 692 (505) 18,208 4,869 13,981 (7,581) 3,852 - - 17,833 (7,581) 896 146 (7) 24,421 4,544 (505) 28,460 5,904 Operating Income (Loss) Capital Contributions Transfers In Transfers Out Change in Net Position Total Net Position - Beginning Total Net Position - Ending $ 1,342,422 1,366,843 $ 46,181 50,725 The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 49 $ 7,436 6,931 $ 1,396,039 1,424,499 $ 78,122 84,026 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, 2019 (in thousands) Net Change in Total Enterprise Fund Net Position $ 28,460 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 806 $ The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 50 29,266 Table of Contents Statement of Cash Flows Proprietary Funds For the Fiscal Year Ended June 30, 2019 (in thousands) Water and Sewer Utility 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 $ 153,168 (55,162) (23,869) 1,138 75,275 Airport $ 5,206 (1,598) (1,336) 103 2,375 Solid Waste $ 20,881 (14,861) (7,623) (1,603) Total $ 179,255 (71,621) (32,828) 1,241 76,047 Governmental Activities - Internal Service Funds $ 63,387 (48,039) (5,612) 1,939 11,675 Cash Flows from Non-Capital Financing Activities Property Tax Transaction Privilege Tax Cash Paid to Other Funds Transfers In Transfers Out Net Cash Provided by (Used for) Non-Capital Financing Activities (7,581) (7,581) 167 (7,121) (6,954) - 167 (7,121) (7,581) (14,535) 320 146 (7) 459 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 4,571 (32,726) (315) (17,815) (14,629) (9,328) 423 (69,819) 4,106 (12,086) (645) (963) 20 (9,568) (838) (838) 4,571 4,106 (45,650) (315) (18,460) (15,592) (9,328) 443 (80,225) (10,422) 588 (9,834) Cash Flows from Investing Activities Income Received on Investments Net Cash Provided by Investing Activities 9,078 9,078 401 401 297 297 9,776 9,776 - Net Increase (Decrease) in Cash and Cash Equivalents 6,953 (13,746) (2,144) (8,937) 2,300 281,447 24,211 9,904 315,562 51,629 Cash and Cash Equivalents at Beginning of Year Cash and Cash Equivalents at End of Year $ 288,400 $ 10,465 (continued) City of Scottsdale, Arizona 51 $ 7,760 $ 306,625 $ 53,929 Table of Contents Statement of Cash Flows Proprietary Funds For the Fiscal Year Ended June 30, 2019 (in thousands) Water and Sewer Utility 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 $ $ 190,698 47,674 50,028 288,400 Reconciliation of Operating Income to Net Cash Provided by Operating Activities Cash Flows from Operating Activities Operating Income (Loss) $ 20,695 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 Intergovernmental Payable 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 of Capital Assets from Developers Contributions of Capital Assets from Other Funds Change in Equity in Joint Venture SROG Total Non-Cash Financing Activities Airport $ Solid Waste $ $ 7,861 1,247 1,357 10,465 $ 949 51,500 (1,835) 84 5,380 (218) (325) (1,160) (63) 1,318 261 (32) (2,864) 1,755 779 54,580 Total $ $ 7,760 7,760 $ (818) 1,546 (114) (72) 7 70 37 (100) (103) 103 52 1,426 Governmental Activities - Internal Service Funds $ $ 206,319 48,921 51,385 306,625 $ 53,929 53,929 $ 20,826 $ 4,179 277 (577) (5) (462) 69 68 (926) 540 231 (785) 53,323 (2,526) 79 5,380 (752) (325) (1,160) (56) 1,457 366 (32) (100) (3,893) 2,398 1,062 55,221 8,270 (413) 67 (1) (283) 35 89 (487) (346) 368 193 4 7,496 $ 75,275 $ 2,375 $ (1,603) $ 76,047 $ 11,675 $ 9,725 (3,140) $ 413 - $ - $ 9,725 413 (3,140) $ 896 - $ 6,585 $ 413 $ - $ 6,998 $ 896 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, 2019 (in thousands) Cash and Cash Equivalents Agency Funds ASSETS Total Assets LIABILITIES Escrow Payable Vouchers Total Liabilities The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 53 $ 67 $ 67 $ 67 $ 67 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2019 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 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 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 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 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 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 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 and the AZ Public Service 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 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 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, repurchase agreements, commercial paper, 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. Maturities in excess of three months when purchased may be deposited or withdrawn by the proprietary funds at any time without prior notice or penalty, therefore 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; repurchase agreements; commercial paper; money market mutual funds; highly rated corporate bonds/notes; obligations of the United States Government, or any of the senior debt of its agencies, sponsored agencies, corporations, sponsored corporations or instrumentalities; obligations issued by this state or any political subdivision thereof, or obligations issued by any other municipality and payable from an identified revenue source; or the pooled investment funds established 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 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 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 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 debt 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 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 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. Major outlays for capital assets and improvements are capitalized as projects are constructed. 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. 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 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 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, 2019. 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, 2019, in the governmental and proprietary funds. The current liability represents compensated absences that have matured but were not paid as of June 30, 2019, 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 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 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/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, the pension-and 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 fiveyear period, beginning in the current reporting period. The deferred outflows of resources relating to 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 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 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 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. City of Scottsdale, Arizona 63 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 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. 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. 13. Use of Estimates The preparation of basic financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets, deferred outflows of resources, liabilities, deferred inflows of resources, revenue and expenses/expenditures, and the disclosure of contingent assets and liabilities at the date of the basic financial statements. Actual results could differ from those estimates. City of Scottsdale, Arizona 64 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 E. Implementation of New Accounting Principles 1. Governmental Accounting Standards Board Statement No. 83 The City adopted the provisions of GASB Statement No. 83, Certain Asset Retirement Obligations. The scope of this statement addresses accounting and financial reporting for certain asset retirement obligations (ARO). An ARO is a legally enforceable liability associated with the retirement of a tangible capital asset. This pronouncement did not impact the preparation of these financial statements. 2. Governmental Accounting Standards Board Statement No. 88 The City adopted the provisions of GASB Statement No. 88, Certain Disclosures Related to Debt, including Direct Borrowings and Direct Placements. The objective of this statement is to improve consistency in the information that is disclosed in notes to financial statements related to debt including direct borrowings and direct placements and to provide financial statement users additional information about debt. This statement requires additional essential information related to debt be disclosed in the notes to the financial statements, including unused lines of credit; assets pledged as collateral of debt; and terms specified in debt agreements related to significant events of default with finance-related consequences, significant termination events with finance-related consequences, and significant acceleration clauses. 3. Governmental Accounting Standards Board Statement No. 89 The City adopted the provisions of GASB Statement No. 89, Accounting for Interest Cost Incurred Before the End of a Construction Period. The statement improves the comparability of information about the capital assets and the cost of borrowing for a reporting period and simplifies the accounting for interest costs incurred before the end of a construction period. II. 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, $260,888,000, differ from the net position of governmental activities, $3,790,212,000 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 funds balance sheet. 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) $ - 53,929 - $ - $ 316,144 80,196 1,740 22,902 1,123 2,030 855 2,959 10,845 205 1,534 436 29,842 1,275 10,621 5,902 271 434,951 4,318,665 1,657 26,632 59,731 4,406,685 271 859 59,621 2 114,682 (5,902) (5,902) 1,740 22,902 1,123 2,030 855 2,959 10,845 205 1,534 436 29,842 1,275 10,892 1,130 4,378,286 1,659 26,632 59,731 4,950,416 - 24,158 66,268 216 90,642 668 668 - 24,158 66,936 216 91,310 434,951 $ 4,497,327 $ 115,350 $ (5,902) $ 5,041,726 Notes to Financial Statements Deferred Outflows of Resources Deferred Amounts on Refundings Pension-Related Amounts OPEB-Related Amounts Total Deferred Outflows of Resources 262,215 80,196 Statement of Net Position Total Reclassifications and Eliminations(3) For the Fiscal Year Ended June 30, 2019 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 Venture 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 $ Deferred Inflows of Resources Unavailable Revenue Pension-Related Amounts OPEB-Related Amounts Total Deferred Inflows of Resources 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) $ 22,706 6,204 5,902 14,758 64,632 (265) 265 12,235 13,593 - $ 2,875 127 4,057 1 256 238 - Statement of Net Position Total Reclassifications and (3) Eliminations $ (5,902) - $ 25,581 6,066 4,057 266 12,491 13,831 14,758 64,632 8,606 1,857 4,926 3,242 3,036 135,869 1,039,891 1,065,719 35 1 6 27,160 34,756 (5,902) 8,606 1,892 4,927 3,242 3,042 1,067,051 1,230,442 38,194 38,194 (38,194) 19,976 471 (17,747) 625 625 - 20,601 471 21,072 174,063 1,047,972 35,381 (5,902) 1,251,514 260,888 3,449,355 79,969 - 3,790,212 434,951 $ 4,497,327 $ 115,350 $ (5,902) $ 5,041,726 Notes to Financial Statements $ Internal Service (2) Funds For the Fiscal Year Ended June 30, 2019 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 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 $ 5,867,449 (1,548,784) $ 4,318,665 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 7/1/18 Amortization of prepayments $ 27,599 (967) 26,632 SCAs at 7/1/18 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. $ $ 64,105 (4,374) 59,731 Deferred outflows of resources 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 refundings result from the difference between the carrying value of refunded debt and its reacquisition price. The pension- and OPEBrelated 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 by 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) $ $ 24,158 66,268 216 90,642 Notes to Financial Statements 1,657 For the Fiscal Year Ended June 30, 2019 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, 2019, 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 $ $ (219) (683,205) (2,221) (59,224) (25,828) (2,103) (292,919) (1,065,719) $ $ 196 3,859 1,151 1,327 29,094 2,567 38,194 Deferred inflows of resources 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 of resources 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. $ (19,976) (471) (20,447) $ 79,969 Reduction of amount due from other governmental fund $ (5,902) Reduction of amount due to other governmental fund $ 5,902 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, 2019 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 accounting for governmental fund statements are recognized as revenue under accrual accounting for the government-wide statements. Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 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, $16,576,000, differs from the change in net position for the governmental activities, $90,871,000, 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) $ $ $ 68,738 203,823 22,407 8,832 3,293 238 3,102 (136) (2,026) (27) 1,050 151 Capital Related Items(5) $ Internal Service Funds(6) - $ Reclassifications and Eliminations(7) 320 - $ Long-Term Debt Transactions(8) - $ Statement of Activities - $ 68,922 201,797 22,380 8,832 4,343 238 3,253 25,187 30,269 10,791 17,073 642 1,918 17 - - - - 25,187 30,269 10,791 17,073 642 1,935 15,979 6,840 4,863 2,092 (80) 13 (187) - - (213) - - 15,686 6,840 4,876 1,905 3,992 288 2,243 1,764 426 247 6,089 6,956 4,904 84 48 3 (188) (19) - - - - - 4,076 336 2,246 1,764 238 247 6,070 6,956 4,904 12,135 410 12,934 412 591 2,575 2,415 6,899 751 492,118 (2,773) 5 1,624 237 (38) (56) (2,298) - 320 (12) (225) - 9,362 415 14,558 649 591 2,575 2,377 6,899 683 489,915 $ $ $ $ $ $ Notes to Financial Statements (continued) Long-Term Revenue/ Expenses(4) For the Fiscal Year Ended June 30, 2019 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 Parking Photo Radar Court Enhancement Library Police Property Rental Interest Earnings Net Increase 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) $ $ $ 747 1,004 7,471 948 5,797 3,746 8,593 35,154 48,860 146,250 48,786 15,279 584 66,053 29,752 64,395 483,419 $ (30) (45) (496) (42) (314) (85) (417) (1,041) 2,868 4,431 (918) (1,117) 2,794 Capital Related (5) Items $ $ 2 15 91 51 147 13,651 51,472 5,027 9,302 3,959 (64,395) 19,322 Internal Service (6) Funds $ $ (13) (9) (100) (8) (65) (21) (102) (321) (307) (1,840) (440) (147) (3,373) Reclassifications and (7) Eliminations $ $ Long-Term Debt (8) Transactions (12) (23) (213) (51) (299) $ $ Statement of Activities (66,053) (3,388) (69,441) $ $ 704 952 6,890 898 5,509 3,691 8,209 47,420 102,680 153,817 56,730 17,974 584 26,364 432,422 $ 7,442 244 191 7,877 $ 15 15 $ 24,399 24,399 $ 139 896 370 1,405 $ (74) (74) $ (244) (244) $ 7,581 25,221 576 33,378 $ 16,576 $ (5,077) $ 5,077 $ 5,098 $ - $ 69,197 $ 90,871 Notes to Financial Statements OTHER FINANCING SOURCES (USES) / CHANGES IN NET POSITION Net Transfers from Other Funds Capital Contributions Capital Lease Acquisitions Sale of Capital Assets Total Long-Term Revenue/ (4) Expenses For the Fiscal Year Ended June 30, 2019 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 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/parking revenue Library revenue Transaction privilege tax revenue Transient occupancy tax revenue Intergovernmental revenue Other receivable revenue $ $ (136) 132 (188) (2,026) (27) (3,032) 1,106 (4,171) $ (967) $ (741) (296) (27,759) (268) (4,374) (33,438) 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 $ $ 31,314 116 31,430 $ 181 $ 1,888 $ 64,395 (6,500) (77,145) (72) (19,322) 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 are therefore not reported as expenditures in governmental funds. For the Fiscal Year Ended June 30, 2019 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 $ 24,399 $ $ 5,904 (806) 5,098 $ $ (299) 299 $ 66,053 $ $ (2,801) 6,189 3,388 $ (244) (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 (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 amounts on refundings and reductions of interest expense were recognized due to the amortization of bond premiums. Amortization of deferred charges on refundings Amortization of bond premium and discounts Capital lease acquisitions 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: Capital lease acquisitions Notes to Financial Statements 74 City of Scottsdale, Arizona Reduction in revenues/capital contributions - Governmental Funds Reduction in expenditures/expenses - Governmental Funds For the Fiscal Year Ended June 30, 2019 (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. Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 III. STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY A. Budget and Budgetary Accounting The City prepared an annual budget that covered fiscal year 2019. The fiscal year 2019 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 2019, there were no supplemental budgetary appropriations to the original budget. City of Scottsdale, Arizona 75 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 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. 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 line-item level within the division. B. Excess of Expenditures over Appropriations The Preserve Privilege Tax Special Revenue Fund exceeded its expenditure appropriation by $3,000. 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 $60,000, $185,000, $244,000, and $5,517,000, 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 $393,000 primarily due to timing differences of cash transfers for accruals. The Municipal Property Corporation Bonds Capital Projects Fund had a deficit ending fund balance of $4,253,000 pending an upcoming bond issuance. D. Fund Balance Classifications The following table details the fund balance categories and classifications for Governmental Funds: City of Scottsdale, Arizona 76 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2019 General (in thousands) Nonspendable Inventory Endowment Funds Total Nonspendable General Obligation Bond Debt Service General CIP Construction Capital Projects Total Nonmajor Governmental Funds Total Governmental Funds $ $ $ FUND BALANCES $ 271 271 $ - - 604 604 271 604 875 Restricted Property Tax for Debt Service Transaction Privilege and Highway User Tax for Transportation Improvements Federal Grants for the Community Development Block Grant Program Federal Grants for Section 8 Housing Transaction Privilege Tax for Preserve Land Purchase and Improvements Property Tax for Community Facility Districts Property Tax Levy for the Streetlight Districts Contributions for Mayor and City Council Special Programs Court Fees for City Court Special Programs Donations for City Court Jury Program Franchise Capital Recovery Fees for Public Works Special Programs APS Improvement District Fees for Public Works Special Programs Contributions for Community and Economic Development Special Programs Allocation from Crime Laboratory Assessment Fund for Police Forensic Laboratory Services Agreement Fees for Police Crime Lab Operations Donations for Fire Special Programs Donations for Police Special Programs Fees for Police Officer Safety Equipment Donations for the Scottsdale Cares Program Donations Human Services Special Programs Facility/Recreation Fees for Senior Center Special Programs Donations for Parks and Recreation Special Programs Donations for Library Special Programs Sales Tax Rebate for District Debt Service Stadium Surcharge for Debt Service GO Bond Proceeds for Capital Improvements Transaction Privilege Tax for Transportation Capital Improvements Contributions for Drainage Capital Improvements Contributions for Library Capital Improvements Contributions for Transportation Capital Improvements Contributions for Stadium Capital Improvements Endowment Funds Total Restricted - 1,394 1,394 - 15,569 99 436 38,354 898 11 6 2,174 5 50 35 90 91 280 9 77 158 166 21 8 22 8 321 2,373 15,771 30,829 2,495 100 26 363 28 110,873 1,394 15,569 99 436 38,354 898 11 6 2,174 5 50 35 90 91 280 9 77 158 166 21 8 22 8 321 2,373 15,771 30,829 2,495 100 26 363 28 112,267 Committed General Fund Contribution for Capital Improvements Stadium Surcharge for Stadium Capital Improvements In-Lieu Parking Fees for Parking Improvements 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 Stormwater Utility Fee for Capital Improvements Contributions for the Court Enhancement Fund Rent Fees for Loloma School Maintenance and Capital Improvements Developer Contributions for the Downtown Cultural Trust Developer Contributions for the Airpark Cultural Trust Rent Fees for the Community Arts Trust to Support the Loloma School Contributions for Historic Preservation and Rehabilitation of Buildings License Fees for the Regulation of the Public Safety Pawn Shop Ordinance Sponsorship Fees for Senior Center Special Programs Sponsorship Fees for Parks and Recreation Special Programs Golf Course Surcharge for Silverado Golf Course Improvements Retail Sale Revenue for McCormick Stillman Railroad Park Operations Allocation of Youth Sports Fee for Maintenance/Improvements of Athletic Fields Allocation of Aquatic Fee for Maintenance/Improvements of Aquatic Facilities Transient Occupancy Tax for Tourism Development Contributions for Forensic Science Laboratory Equipment and Maintenance Excise Tax for Debt Reserve Total Committed - - 33,352 313 318 491 5,150 475 1 2,187 42,287 5,797 257 3,040 74 245 489 199 3 17 649 902 101 46 6,287 7 4,700 22,813 33,352 313 318 491 5,150 475 1 2,187 5,797 257 3,040 74 245 489 199 3 17 649 902 101 46 6,287 7 4,700 65,100 Unassigned Total Fund Balances $ 97,097 97,368 $ City of Scottsdale, Arizona 77 1,394 $ 42,287 $ (14,451) 119,839 $ 82,646 260,888 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 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, 2019: Net Position Restrictions (in thousands) Water and Sewer Restricted for System Replacement Restricted for Debt Service Restricted for Joint Venture Construction Deposits $ $ City of Scottsdale, Arizona 78 41,292 4,692 6,220 52,204 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 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. The City’s endowment funds have investments held separately by a trustee. City Charter, ordinance, and trust agreements authorize the City to invest in certificates of deposit; repurchase agreements; highly rated commercial paper issued by corporations organized and doing business in the United States; money market mutual funds; highly rated corporate bonds/notes denominated in U.S. dollars; obligations issued or guaranteed by the United States government or any of the senior debt of its agencies, sponsored agencies, corporations, sponsored corporations or instrumentalities; bonds, notes or other evidences of indebtedness of this state or any of its counties, incorporated cities or towns, school districts or special taxing districts; bonds, notes or evidences of indebtedness of any county, municipal district, municipal utility or special taxing district of any state that are payable from revenues, earnings or a special tax specifically pledged for the payment of the principal and interest on the obligations; bonds, notes or evidences of indebtedness issued by any county improvement district or municipal improvement district of any state to finance local improvements authorized by law, if the principal and interest of the obligations are payable from assessments on real property within the improvement district; and the pooled investment funds established by the Office of the Arizona State Treasurer. Deposits At June 30, 2019, the carrying amount of the City’s deposits was $19,559,250 and the bank balance was $130,412,985. The $110,853,735 difference represents outstanding checks, deposits in transit, timing differences in transfers between the depository and investment sweep accounts, and other reconciling items. Custodial Credit Risk Custodial credit risk is the risk that in the event of a bank failure, the City’s deposits may not be returned to it. As of June 30, 2019, $57,664,324 of the City’s deposits was exposed to custodial credit risk as follows: $1,265,353 was uninsured and uncollateralized, and $56,398,971 was uninsured and collateralized by securities held by the pledging bank’s trust department not in the City’s name. 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. City of Scottsdale, Arizona 79 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2019 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. 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 Negotiable Certificates of Deposit Money Market Mutual Funds Fair Value $ 228,442 157,610 28,992 57,061 46,590 164,127 Less than 1 $ 51,841 10,053 18,291 17,558 164,127 Total Investments $ $ 682,822 $ 261,870 $ 1-2 41,737 84,846 28,992 20,330 29,032 - $ 204,937 2-3 121,797 62,711 18,440 - $ 3+ 13,067 - $ $ 202,948 13,067 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 to a minimum “A” or better rating, at the time of purchase, from at least two NRSROs; its investments in negotiable certificates of deposit to the top three rating categories by Moody’s Investors Service, Standard and Poor’s Corporation, or any other NRSRO; its investments in commercial paper to the top two ratings by a NRSRO and to those corporations organized and doing business in the United States; and its investments in money market mutual funds to those funds which are allowed by state law and registered under the Investment Company Act of 1940. The City’s investments in the investment types referenced above at June 30, 2019, meet the aforementioned criteria. Presented below are the ratings as of June 30, 2019, for each investment type (in thousands): Investment Type U.S. Government Securities $ Total BBB+ 228,442 $ A-1 - $ A-1+ - $ A- $ A - $ A+ - $ AA- $ AA - $ AA+ - $ AAAm - $ Exempt from Disclosure AAA - $ - $ 228,442 U.S. Government Agencies 157,610 - - - - - - - - 157,610 - - - U.S. Government Instrumentalities 28,992 - - - - - - - - - - 28,992 - Corporate Notes 57,061 6,138 - - 9,791 15,940 5,193 14,360 1,378 4,261 - - - Negotiable Certificates of Deposit 46,590 - 12,490 5,068 - 7,317 9,178 12,537 - - - - - 164,127 Money Market Mutual Funds Total Investments $ 682,822 $ - - 6,138 $ 12,490 $ 5,068 $ - - - - 9,791 $ 23,257 $ 14,371 $ 26,897 Note: A-1 and A-1+ are short-term credit ratings. AAAm is a principal stability fund (i.e. money market fund) credit rating. City of Scottsdale, Arizona 80 $ - - 164,127 - - 1,378 $161,871 $164,127 $ 28,992 $ 228,442 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2019 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. Negotiable or brokered 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. The following is a listing by issuer of the City’s investments at June 30, 2019: (dollars in thousands) Market Value Percent of Holdings Issuer Investment Type U.S. Treasury U.S. Government Securities 228,442 44.05% Federal Home Loan Bank (FHLB) U.S. Government Agencies 57,381 11.06% Federal Home Loan Mortgage Corporation (FHLMC) U.S. Government Agencies 18,388 3.55% Federal National Mortgage Association (FNMA) U.S. Government Agencies 81,841 15.78% African Development Bank U.S. Government Instrumentalities 2,419 0.47% Asian Development Bank U.S. Government Instrumentalities 3,299 0.64% Inter-American Development Bank U.S. Government Instrumentalities 8,773 1.69% International Bank of Reconstruction and Development U.S. Government Instrumentalities 6,716 1.29% International Finance Corporation U.S. Government Instrumentalities 7,785 1.50% American Honda Finance Corporate Notes 2,571 0.50% Apple Inc. Corporate Notes 4,261 0.82% Bank of America Co. Corporate Notes 4,711 0.91% Bank of New York Mellon Corporate Notes 5,509 1.06% BB&T Corporate Notes 1,732 0.33% Berkshire Hathaway Inc. Corporate Notes 1,378 0.27% Caterpillar Inc. Corporate Notes 2,511 0.48% Cisco Systems Inc. Corporate Notes 5,904 1.14% General Electric Co. Corporate Notes 6,138 1.18% Home Depot Corporate Notes 1,520 0.29% Honeywell International Corporate Notes 943 0.18% JP Morgan Chase & Co. Corporate Notes 3,348 0.65% Oracle Corp. Corporate Notes 4,713 0.91% Toyota Motor Credit Corp. Corporate Notes 3,743 0.72% Unilever Capital Corp. Corporate Notes 438 0.08% U.S. Bancorp Corporate Notes 4,755 0.92% Walt Disney Co. Corporate Notes 2,886 0.56% Bank of Montreal Negotiable Certificates of Deposit 5,941 1.15% Bank of Nova Scotia Negotiable Certificates of Deposit 5,884 1.13% Canadian Imperial Bank NY Negotiable Certificates of Deposit 3,232 0.62% Credit Agricole CIB NY Negotiable Certificates of Deposit 3,237 0.62% Credit Suisse NY Negotiable Certificates of Deposit 3,374 0.65% MUFG Bank LTD NY Negotiable Certificates of Deposit 3,418 0.66% Nordea Bank AB NY Negotiable Certificates of Deposit 5,068 0.98% Sumitomo Mitsui Bank NY Negotiable Certificates of Deposit 3,899 0.75% Swedbank NY Negotiable Certificates of Deposit 6,710 1.29% WestPac Banking Corp. NY Negotiable Certificates of Deposit Total Investments City of Scottsdale, Arizona 81 $ $ 5,827 1.12% 518,695 100.00% Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2019 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 19,559 682,822 632 Total Cash and Investments $ 703,032 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, 2019: 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) $ $ $ - 228,442 - U.S. Government Agencies - 157,610 - U.S. Government Instrumentalities - 28,992 - Corporate Notes - 57,061 - Negotiable Certificates of Deposit - 46,590 - $ - $ 518,695 $ The following pricing methodologies are utilized to value the City’s investments: U.S. Government Securities Evaluators gather information from market sources and integrate relative credit information, observed market movements, and sector news into the evaluated pricing applications and models. U.S. Government Agencies A bullet (non-call) spread scale is created for each issuer for maturities going out to forty years; an Option Adjusted Spread (OAS) model is incorporated to adjusted spreads of issues that have early redemption features; and final spreads are added to a U.S Treasury curve. A special cash discounting yield/price routine calculates prices from final yields to accommodate odd coupon payment dates typical of medium-term notes. U.S. Government Instrumentalities Evaluators gather information from market sources and integrate relative credit information, observed market movements, and sector news into the evaluated pricing applications and models. Corporate Notes Evaluators gather information from market sources and integrate relative credit information, observed market movements, and sector news into the evaluated pricing applications and models. Negotiable Certificates of Deposit Multi-dimensional relational model and/or OAS. City of Scottsdale, Arizona 82 - Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 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 $ 522,463 129,117 51,385 67 $ 703,032 Investment income is comprised of the following for the fiscal year ended June 30, 2019 (in thousands): Net Interest Net Increase in the Fair Value of Investments Total Net Investment Income $ $ 13,181 8,955 22,136 The net increase in the fair value of investments for the fiscal year was $8,954,927. This amount takes into account all changes in fair value (realized and unrealized) that occurred during the year. B. Endowments The City 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, made by and through the City Council. As of June 30, 2019, the amount of donor-restricted endowment funds available for authorization and expenditure is $26,500. City of Scottsdale, Arizona 83 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2019 C. Receivables Receivables as of June 30, 2019, 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 $ 926 57,772 58,698 General Obligation Bond Debt Service General CIP Construction Capital Projects $ $ 1,006 1,006 Total Governmental and Internal Service Funds Nonmajor and Other Funds - $ 98 98 $ 2,030 57,772 59,802 15,390 855 2,909 436 19,590 - - 8,011 1,123 50 1,534 10,718 23,401 1,123 855 2,959 436 1,534 30,308 - - - 31,117 31,117 1,090 992 4,030 6,112 - 177 2,033 2,210 473 4,829 5,302 1,740 992 10,892 13,624 84,400 (48,213) 1,006 - 2,210 - 47,235 - 134,851 (48,213) 36,187 $ 1,006 $ 2,210 $ 47,235 $ 86,638 The City has a development agreement relating to biomedical research activities with the Translational Genomics Research Institute (TGen) to repay $2,040,000 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, 2019, the loan balances totaled $2,198,249, 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 has contracts with the Boys and Girls Club to pay a portion of building improvements at the City’s recreation center through November 2024, the amount due as of June 30, 2019 is $127,869. City of Scottsdale, Arizona 84 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2019 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 $5,844,313 is estimated to be paid by 2021 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) Water and Sewer Utility Receivables $ Privilege Tax Charges for Services 17,327 Intergovernmental 1,892 Interest 1,181 Miscellaneous 2,375 Gross Receivables Less: Allowances for Uncollectibles Net Total Receivables Airport $ 22,775 (22) $ 22,753 Solid Waste 40 982 39 387 $ 1,448 $ 1,448 2,326 54 124 Total Enterprise Fund $ 2,504 (1) $ 2,503 40 19,653 2,874 1,274 2,886 26,727 (23) $ 26,704 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 Court Library Privilege Tax Intergovernmental Other Unavailable $ 1,151 3,859 196 1,327 29,094 2,567 Unearned $ 8,606 1,857 Total $ $ 38,194 10,463 City of Scottsdale, Arizona 85 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2019 D. Capital Assets Capital asset activity for the fiscal year ended June 30, 2019, was as follows (in thousands): Governmental Activities Capital Assets, not being depreciated Land Construction in Progress Total Capital Assets, not being depreciated Beginning Balance $ 3,177,449 39,926 3,217,375 Increases $ 17,037 65,495 82,532 Decreases $ Ending Balance (39,909) (39,909) $ 3,194,486 65,512 3,259,998 Capital Assets, being depreciated Buildings and Land Improvements Streets and Storm Drains Motor Vehicles Machinery and Equipment Total Capital Assets, being depreciated 723,561 1,785,035 85,086 81,015 2,674,697 9,796 27,136 7,250 6,281 50,463 (64) (6,385) (2,884) (9,333) 733,293 1,812,171 85,951 84,412 2,715,827 Less Accumulated depreciation for Buildings and Land Improvements Streets and Storm Drains Motor Vehicles Machinery and Equipment Total Accumulated depreciation 355,467 1,082,528 39,791 43,365 1,521,151 20,836 51,062 7,059 6,458 85,415 (64) (6,167) (2,796) (9,027) 376,239 1,133,590 40,683 47,027 1,597,539 1,153,546 (34,952) (306) 1,118,288 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 $ 4,370,921 $ Beginning Balance $ 50,381 87,171 80,108 217,660 47,580 $ Increases $ 53,743 53,743 (40,215) Decreases $ $ 4,378,286 Ending Balance (82,070) (82,070) $ 50,381 87,171 51,781 189,333 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 1,248,800 635,013 37,352 6,966 1,151 729 1,930,011 35,342 11,116 34,342 712 531 82,043 (150) (833) (10) (3) (996) 1,283,992 646,129 70,861 7,668 1,151 1,257 2,011,058 Less Accumulated depreciation for Water System Sewer System Buildings and Land Improvements Machinery and Equipment Motor Vehicles Furniture, Fixtures, and Office Equipment 496,259 236,511 12,336 3,476 601 276 33,622 17,243 1,664 589 84 121 (151) (833) (10) - 529,730 253,754 13,167 4,055 685 397 749,459 53,323 (994) 801,788 1,180,552 28,720 (2) 1,209,270 Total Accumulated depreciation Total Capital Assets, being depreciated, net Business-type Activities Capital Assets, net $ 1,398,212 $ City of Scottsdale, Arizona 86 82,463 $ (82,072) $ 1,398,603 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 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 $ 2 15 42 51 9,260 51,112 4,516 85 8,276 3,786 8,270 $ Total Depreciation Expense - Governmental Activities 85,415 Business-type Activities Water and Sewer System Airport Solid Waste Total Depreciation Expense - Business-type Activities City of Scottsdale, Arizona 87 $ 51,500 1,546 277 $ 53,323 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2019 Construction Commitments The City has active construction projects as of June 30, 2019. 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 Library/Library Improvements 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 $ 12,347 3,404 650 363 3,665 1,031 8,181 34 6,145 15,030 1,548 1,914 8,385 8,879 21,403 $ 92,979 Remaining Commitment $ 521 913 46 15 637 761 20,135 242 940 3,016 351 2,399 5,534 6,534 12,566 $ 54,610 $ $ $ 8,575 39,275 1,506 49,356 30,342 12,347 934 43,623 92,979 $ 8,771 25,833 301 34,905 19,133 521 51 19,705 54,610 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, 2019, is as follows (in thousands): Receivable Fund General Fund Amount $ 5,902 Payable Fund Nonmajor Governmental Funds City of Scottsdale, Arizona 88 Amount $ 5,902 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2019 The External Sources Capital Project Fund, the Municipal Property Corporation Bonds Capital Project Fund, and the HOME Special Revenue Fund had deficit cash balances of $4,684,418, $1,054,065, and $163,851, respectively, due to pending reimbursements from intergovernmental agreements, bonds, and grants. 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) Transfers Out Governmental Funds General Debt Service - General Obligation Bond Capital Projects - General CIP Construction Nonmajor Governmental Funds Total Governmental Funds $ Enterprise Funds Water and Sewer Utility Total Enterprise Funds Internal Service Funds Self-Insurance Total Internal Service Funds $ Total Transfers F. Transfers In 25,780 485 74,470 100,735 $ 10,698 26,872 18,876 51,731 108,177 7,581 7,581 - 7 7 146 146 108,323 $ 108,323 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 $655,614, which include $578,717 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 five additional years subsequent to the first extension term’s ending date of March 31, 2025. 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 89 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 The future lease payments under noncancellable operating lease agreements are as follows (in thousands): Fiscal Year Ending June 30, 2020 2021 2022 2023 2024 Thereafter Total $ 258 270 76 7 8 3 622 $ 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, 2019, are as follows (in thousands): Fiscal Year Ending June 30, 2020 2021 2022 2023 2024 Thereafter Total $ $ 4,191 3,249 2,236 2,297 2,211 100,013 114,197 The above amounts do not include contingent rentals, which totaled $2,612,235 for the fiscal year ended June 30, 2019. A summary of the assets leased to third parties under the City’s operating lease agreements at June 30, 2019, are as follows (in thousands): Cost Less: Accumulated Depreciation Carrying Value $ $ 121,993 (27,550) 94,443 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 $244,173, less accumulated amortization of $30,522. Current year amortization expense was $30,522. City of Scottsdale, Arizona 90 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 The present value of net minimum future lease payments under the capital lease agreement are as follows (in thousands): Fiscal Year Ending June 30, 2020 2021 2022 2023 Less: Imputed Interest Total G. $ $ 67 67 67 34 (16) 219 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, 2019, is $1,039,000. 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, 2019. 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 $44,414,000 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, 2019, is $1,182,000. 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, 2019. 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 $15,317,000 at fiscal year-end pursuant to the service concession arrangement. City of Scottsdale, Arizona 91 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 H. Bonds, Loans, and Other Payables The following are brief descriptions of bonds outstanding at June 30, 2019. The totals shown are the principal amount outstanding, net of the amount due July 1, 2019. 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, 2019, 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 92 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 The City has pledged to repay $584,210,000 in MPC Excise Tax Revenue Bonds issued from 2006 through June 30, 2019, 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 2019 for MPC bonds is 4.25 (excluding the transient occupancy tax). The total principal and interest remaining to be paid on all MPC bonds is $632,597,888. Principal and interest paid for the current year and total excise tax collections (excluding transient occupancy taxes) were $52,684,075 and $223,668,464, respectively. The MPC bond issuances, for both governmental and business-type activities, contain the following provisions that would constitute an event of default by the City: • Non-punctual payment of principal or interest. • Default in the performance or observance of any covenant, agreement, or condition in the indenture or in the bonds not cured within 30 days of notice of default. The City is also considered to be in default if the issue is not curable within 30 days and corrective action is not diligently pursued to the satisfaction of the trustee within 30 days. • Bankruptcy, insolvency, and/or receivership. • Default on any bonds which are on a parity basis with the bonds in question. If any of the events of default transpire, the MPC bond trustee may file a suit or suits in equity or at law and appoint a receiver to collect and properly disburse pledged MPC revenues for debt service payments. Any amounts recovered through such proceedings shall be paid first to the costs and expenses incurred by the trustee, its agents, attorneys and counsel, and of all proper expenses, liabilities and advances incurred or made by the trustee or any registered owner(s) of the bonds in question. If a residual amount were to remain, it would be applied to the then-owed or unpaid amount related to the bonds. If insufficient funds were to exist, the residual amount would be allocated on a pro-rata basis to the then-owed or unpaid amount related to the bonds. 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 2019 is 8.19. The total principal and interest remaining to be paid on the bonds is $7,958,875. Principal and interest paid for the current year and total sales tax were $5,116,875 and $41,908,703, respectively. City of Scottsdale, Arizona 93 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 The SPA bond issuances contain the following provisions that would constitute an event of default by the City: • Non-punctual payment of principal or interest. • Default in the performance or observance of any covenant, agreement, or condition in the indenture or in the bonds not cured within 60 days of notice of default. The City is also considered to be in default if the issue is not curable within 60 days and corrective action is not diligently pursued to the satisfaction of the trustee within 60 days. • Bankruptcy, insolvency, and/or receivership. • Default on any bonds which are on a parity basis with the bonds in question. If any of the events of default transpire, the SPA bond trustee may file a suit or suits in equity or at law and appoint a receiver to collect and properly disburse pledged SPA revenues for debt service payments. Any amounts recovered through such proceedings shall be paid first to the costs and expenses incurred by the trustee, its agents, attorneys and counsel, and of all proper expenses, liabilities and advances incurred or made by the trustee or any registered owner(s) of the bonds in question. If a residual amount were to remain, it would be applied to the then-owed or unpaid amount related to the bonds. If insufficient funds were to exist, the residual amount would be allocated on a pro-rata basis to the then-owed or unpaid amount related to the bonds. 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, 2019, the funds restricted for this purpose were $41,291,717. 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 2019 is 18.83. The total principal and interest remaining to be paid on the bonds is $18,354,800. Principal and interest for the current year and total customer net revenues were $4,566,188 and $85,995,000, respectively. The Water and Sewer Revenue bond issuance contains the following provisions that would constitute an event of default by the City: • Non-punctual payment of principal or interest. • Failure in the performance or observance of any covenants or agreements in the bonds or the authorizing resolution. City of Scottsdale, Arizona 94 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 If any of the events of default transpire, any owner of the bonds then outstanding may appoint a receiver which can take possession of the Water and Wastewater Enterprise System (System); set rates, charges, and tolls; and apply all revenues in the same manner as the City might itself do. The receiver would operate the System for the direct benefit of the owners of the bonds and would use proceeds of System revenue to pay principal and interest on the bonds, as well as all costs incurred in the receivership. The receiver would continue to remain in possession and control of the System until all delinquent amounts and costs of the receivership are paid in full. Certificates of Participation Certificates of Participation (COPS) 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 COPS. 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. The COPS contain the following provisions that would constitute an event of default by the City: • Non-punctual payment of a budgeted and appropriated lease payment. • Failure to pay any other payment required to be paid at the time specified, and the continuation of such failure for a period of five days after notification thereof by the lessor. • Failure to perform or observe any covenant, agreement, or condition for a period of 30 days after notice. If the issue cannot be corrected within 30 days, the applicable period can be extended, but the extended period may not exceed 60 days. • Bankruptcy. If any of the events of default transpire, the lessor, with or without terminating the lease, may retake possession of the leased property and lease or sublease the property for the account of the City. The City would be liable for the difference between the amount due from the City at the end of the lease term and the amount paid by a subsequent purchaser, lessee, or sublessee of the leased property. 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. City of Scottsdale, Arizona 95 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 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. The CFD bond issuances contain the following provisions that would constitute an event of default by the City: • Failure to pay the principal and interest when due and payable. • Default in the performance or observance of any covenant, agreement, or obligation not cured within 30 days of notice of default. No event of default will be deemed to have occurred so long as a course of action has been commenced within 30 days and is diligently prosecuted to completion (applies only to the 2007 Waterfront Commercial CFD bonds). If any non-punctual payment of principal or interest occurs, the CFD bond trustee may recover the costs and expenses of administration and collection related to the unpaid amounts (applies only to the 2007 Waterfront Commercial CFD bonds). City of Scottsdale, Arizona 96 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 Bonds payable at June 30, 2019, consisted of the following: Classified in Governmental Activities on the Government-wide Financial Statements: Bonds Outstanding (in thousands) General Obligation Bonds 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. 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. $ 9,500 2,725 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. 15,575 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. 53,505 2013 Preservation Bonds (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. 73,000 2014 Preservation Bonds (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. 11,285 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. 46,630 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. 129,495 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 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. 39,985 (continued) City of Scottsdale, Arizona 97 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 General Obligation Bonds (continued) Bonds Outstanding (in thousands) 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. $ 17,010 $ 483,215 $ 50,640 Total General Obligation Bonds Outstanding 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. 19,775 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. 1,135 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. 29,445 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. 16,760 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. 10,195 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. 11,995 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. 33,817 Total Municipal Property Corporation Bonds Outstanding City of Scottsdale, Arizona 98 $ 173,762 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 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 3,565 3,845 $ 7,410 $ 2,810 $ 2,493 $ 8,870 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. Certificates of Participation - Direct Borrowing 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 - Direct Placements 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. 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. 3,845 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. 800 Total Community Facilities Districts General Obligation Bonds - Direct Placements Total Bonds Payable Recorded in Governmental Activities City of Scottsdale, Arizona 99 $ 13,515 $ 683,205 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 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. $ 16,175 $ 79,600 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. 13,940 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. 15,450 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. 43,023 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. 36,685 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. 22,100 Total Municipal Property Corporation Bonds Outstanding Total Bonds Payable Recorded in Business-type Activities Total Long-Term Bonds Payable City of Scottsdale, Arizona 100 $ 290,768 $ 306,943 $ 990,148 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 Statutory Debt Limitation Under the provisions of Article 9, section 8 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, sewers, artificial light, parks, playgrounds and recreational facilities, open space preserves, public safety, and streets 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 are not subject to or included in this calculation. The following summarizes the City’s legal GO bonded debt borrowing capacity at June 30, 2019: General Obligation Bonds Issued to Provide Water, Sewers, Artificial Light, Parks, Playgrounds and Recreational Facilities, Open Space Preserves, Public Safety, and Streets and Transportation Facilities 20% Constitutional Limit Less General Obligation 20% Bonds Outstanding Excess Premium Available 20% Limitation Borrowing Capacity $ $ 1,444,653,719 General Obligation Bonds Issued for All Other Purposes (479,265,000) (10,415,231) 6% Constitutional Limit Less General Obligation 6% Bonds Outstanding Excess Premium 954,973,488 Available 6% Limitation Borrowing Capacity $ 433,396,115 (3,950,000) - $ 429,446,115 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, 2019. 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 101 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2019 The following table reflects refunded debt outstanding at June 30, 2019, net of any amounts to be paid or retired by the trustee on July 1, 2019 (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, 2019 (in thousands): Governmental Activities Bonds Payable General Obligation Bonds Municipal Property Corporation Bonds Scottsdale Preserve Authority Bonds Community Facilities Districts General Obligation Bonds Certificates of Participation - Direct Borrowing Community Facilities Districts General Obligation Bonds - Direct Placements Add Issuance Premiums Total Bonds Payable Capital Lease Service Concession Arrangements Risk Management Claims Compensated Absences Total Other Postemployment Benefit Liability Net Pension Liabilities Beginning Balance Additional Obligations and Net Increases Current Maturities, Retirements, and Net Decreases $ $ $ $ Governmental Activities Long-Term Liabilities 525,465 187,918 11,950 2,950 4,914 15,850 65,413 814,460 32 2,375 22,933 25,516 2,194 309,094 1,176,604 $ 244 35,051 12,306 47,601 $ (42,250) (14,156) (4,540) (140) (2,421) (2,335) (6,189) (72,031) (57) (154) (35,537) (11,500) (91) (11,462) (130,832) Ending Balance $ $ Amounts Due Within One Year 483,215 173,762 7,410 2,810 2,493 13,515 59,224 742,429 219 2,221 22,447 26,322 2,103 297,632 1,093,373 $ 42,515 15,552 4,780 150 2,493 2,400 67,890 60 154 8,764 12,491 89,359 $ 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, 2019, $495,000 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 $265,000 in the governmental funds and $1,000 in the Internal Service funds. 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 $ $ $ $ 19,715 306,822 30,939 357,476 3,531 33,523 394,530 $ City of Scottsdale, Arizona 102 1,728 1,728 $ (3,540) (16,054) (2,389) (21,983) (1,511) (3,893) (27,387) Ending Balance $ $ 16,175 290,768 28,550 335,493 3,748 29,630 368,871 Amounts Due Within One Year $ $ 3,725 16,978 20,703 1,767 22,470 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2019 Debt Service Requirements to Maturity The following is a summary of debt service requirements to maturity for long-term liabilities at June 30, 2019: Governmental Activities (in thousands) Fiscal Year 2020 2021 2022 2023 2024 2025-2029 2030-2034 2035-2039 Total Fiscal Year 2020 2021 2022 2023 2024 2025-2029 2030-2034 2035-2039 Total Fiscal Year 2020 2021 2022 2023 2024 2025-2029 2030-2034 2035-2039 Total General Obligation Bonds Issued to Provide Water, Sewers, Artificial Light, Parks, Playgrounds and Recreational Facilities, Open Space Preserves, Public Safety, and Streets and Transportation Facilities 20% Limitation Principal Interest Total $ 40,265 $ 18,143 $ 58,408 44,925 16,512 61,437 45,020 14,621 59,641 48,780 12,728 61,508 52,235 11,013 63,248 162,340 30,817 193,157 85,700 8,756 94,456 - General Obligation Bonds Issued For All Other Purposes 6% Limitation Principal Interest Total $ 2,250 $ 123 $ 2,373 1,700 55 1,755 - Total General Obligation Bonds Principal Interest Total $ 42,515 $ 18,266 $ 60,781 46,625 16,567 63,192 45,020 14,621 59,641 48,780 12,728 61,508 52,235 11,013 63,248 162,340 30,817 193,157 85,700 8,756 94,456 - $ 479,265 $ 112,590 $ $ 483,215 $ 112,768 $ 591,855 3,950 $ 178 $ 4,128 $ 595,983 Municipal Property Corporation Bonds Principal Interest Total $ 15,552 $ 7,773 $ 23,325 10,952 7,042 17,994 9,770 6,518 16,288 10,345 6,042 16,387 10,970 5,532 16,502 62,183 19,499 81,682 50,785 6,841 57,626 3,205 160 3,365 Scottsdale Preserve Authority Excise Tax Revenue Bonds Principal Interest Total $ 4,780 $ 350 $ 5,130 1,280 131 1,411 1,350 68 1,418 - Capital Leases Principal Interest Total $ 59 $ 8 $ 67 62 5 67 65 3 68 33 33 - $ 173,762 $ $ $ 59,407 $ 233,169 7,410 $ 549 $ 7,959 219 $ 16 $ 235 Community Facilities Districts General Obligation Bonds Principal Interest Total $ 150 $ 168 $ 318 160 160 320 165 150 315 175 141 316 185 130 315 1,125 469 1,594 850 105 955 - Certificates of Participation Direct Borrowing Principal Interest Total $ 2,493 $ 56 $ 2,549 - Community Facilities Districts General Obligation Bonds - Direct Placements Principal Interest Total $ 2,400 $ 433 $ 2,833 2,490 359 2,849 2,590 283 2,873 1,295 204 1,499 1,125 162 1,287 3,615 249 3,864 - $ $ $ 2,810 $ 1,323 $ 4,133 2,493 $ (continued) City of Scottsdale, Arizona 103 56 $ 2,549 13,515 $ 1,690 $ 15,205 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2019 Governmental Activities (in thousands) Fiscal Year 2020 2021 2022 2023 2024 2025-2029 2030-2034 2035-2039 Total Service Concession Arrangements Principal Interest Total $ 154 $ 205 $ 359 154 223 377 154 242 396 154 262 416 154 283 437 769 1,764 2,533 608 1,930 2,538 74 299 373 Total Governmental Activities Principal Interest Total $ 68,103 $ 27,259 $ 95,362 61,723 24,487 86,210 59,114 21,885 80,999 60,782 19,377 80,159 64,669 17,120 81,789 230,032 52,798 282,830 137,943 17,632 155,575 3,279 459 3,738 $ $ 2,221 $ 5,208 $ 7,429 685,645 $ 181,017 $ 866,662 Business-type Activities (in thousands) Fiscal Year 2020 2021 2022 2023 2024 2025-2029 2030-2034 2035-2039 Total Water and Sewer Revenue Bonds Principal Interest Total $ 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 $ 16,978 $ 13,315 $ 30,293 17,843 12,481 30,324 18,765 11,622 30,387 19,595 10,703 30,298 20,675 9,764 30,439 91,382 35,238 126,620 78,610 13,626 92,236 26,920 1,912 28,832 $ $ 290,768 $ 108,661 $ 399,429 16,175 $ 2,180 $ 18,355 Fiscal Year 2020 2021 2022 2023 2024 2025-2029 2030-2034 2035-2039 Total Business-type Activities Principal Interest Total $ 20,703 $ 14,164 $ 34,867 21,773 13,135 34,908 22,910 12,069 34,979 23,970 10,933 34,903 20,675 9,764 30,439 91,382 35,238 126,620 78,610 13,626 92,236 26,920 1,912 28,832 Total $ 306,943 $ 110,841 $ 417,784 City of Scottsdale, Arizona 104 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 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, 2019, the general liability claims payable totaled $20,252,000 and the self-insured benefits claims payable totaled $2,195,000. Fiscal Year Ended June 30 (in thousands) 2019 B. 2018 Claims Payable, July 1 Current Year Claims Incurred Current Year Claim Payments $ 22,933 35,051 (35,537) $ 20,351 37,315 (34,733) Claims Payable, June 30 $ 22,447 $ 22,933 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, 2019, $2,106,317 in fee waivers have been applied. City of Scottsdale, Arizona 105 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 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, 2019, these requirements have not been met under any of the agreements. The City’s estimated contingent liability related to the agreements at June 30, 2019, is $21,391,364. C. Subsequent Events In August 2019, the City initiated the financial defeasance of $6.8 million of Series 2010 G.O. Bonds (2021 & 2030 maturities). U.S. Treasury State and Local Government Series securities were purchased with the funds and are held by the trustee for future debt service. In September 2019, the City Council approved the issuance of bonds by the Scottsdale Municipal Property Corporation in an amount not to exceed $43.5 million. Approximately $33.5 million of taxable bonds will be used to renovate Scottsdale Stadium, and $10.0 million of non-taxable bonds were approved for flood control improvements. D. 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 part 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, 2019, the City abated eligible privilege taxes totaling $181,552 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 $181,552. • 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. City of Scottsdale, Arizona 106 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 No tax has been abated as of June 30, 2019, 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. E. 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, 2018, (the latest audited information available from SROG), the City’s net investment in SROG was $92,960,000. SROG’s net cash operating expenses for the fiscal year ended June 30, 2018, were $37,656,149, of which the City’s share was $3,523,567, or 9.4 percent. For the fiscal year ended June 30, 2019, the City paid $4,739,081 for SROG capital contributions and $4,209,593 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, 2018, 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 107 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 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, 2018, (the latest audited information available from RWC), was $1,845,805 or 2.5 percent of the RWC’s total net position. The City contributed $218,383 for the fiscal year ended June 30, 2019 and shared in estimated depreciation expenses of $257,562, resulting in an estimated equity balance as of June 30, 2019, of $1,806,626. The RWC Comprehensive Annual Financial Statement is available from the Regional Wireless Cooperative, 200 West Washington Street, 12th Floor, Phoenix, Arizona, 85003-1611. F. 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 108 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 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, twelve projected cash flows, based on the prior twelve years of historical costs and weighted equally, were used to calculate an average annual cost. In order to estimate the NGTF liability, six projected cash flows, based on the prior six 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 55 years for CGTF and the NGTF. The 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 2019 reimbursable outlays for operating and monitoring the CGTF were $581,976 and for the NGTF were $116,346. 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. G. 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. H. Retirement and Pension Plans All eligible 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 consists of both an agent multiple-employer defined benefit pension plan and a defined contribution 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 109 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2019 Arizona State Retirement System General Information about the Pension Plan Plan Description All eligible 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 multiple-employer 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, 3300 North Central Avenue, Phoenix, AZ 85012, 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 110 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 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 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 7.5 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 11.64 percent of their annual pay for the fiscal year ended June 30, 2019, and the City’s required contribution rate was 11.18 percent during the same time period. In addition, the City was required by statute to contribute at the actuarially determined rate of 10.41 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, 2019, 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 $12,384,000 for the fiscal year ended June 30, 2019. City of Scottsdale, Arizona 111 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At June 30, 2019, the City reported a liability of $147,206,499 for its proportionate share of the collective net pension liability of the ASRS. The collective net pension liability was measured as of June 30, 2018, and the total pension liability used to calculate the collective net pension liability was determined by an actuarial valuation as of June 30, 2017. 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 accrued contributions to the pension plan relative to the contributions of all participating entities for the fiscal year ended June 30, 2018. At June 30, 2018, the City’s proportion was 1.05551 percent, which was a decrease of 0.00131 percent from its proportion measured as of June 30, 2017. For the fiscal year ended June 30, 2019, the City recognized a collective pension expense of $(140,291). At June 30, 2019, 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 4,056 Changes in assumptions $ 812 3,895 13,052 Net difference between projected and actual earnings on pension plan investments - 3,540 Changes in proportion and differences between City contributions and proportionate share of contributions - 2,126 City contributions subsequent to the measurement date Total 12,384 20,335 $ $ 19,530 The $12,384,000 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, 2020. 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: 2020 2021 2022 2023 2024 Thereafter $ (579) (4,043) (5,370) (1,587) - City of Scottsdale, Arizona 112 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2019 Actuarial Assumptions The total pension liability in the June 30, 2018, actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Actuarial valuation date Measurement date Actuarial cost method Amortization method Plan amendments Investment gain/loss Assumption gain/loss Experience gain/loss Proporation/proportionate share gain/loss Asset valuation Discount rate Projected salary increases Inflation Permanent benefit increase Mortality rates June 30, 2017 June 30, 2018 Entry age normal Immediate Five years Average future service lives Average future service lives Average future service lives Fair value 7.5% 2.7-7.2% 2.3% Included 2017 SRA Scale U-MP The actuarial assumptions used in the June 30, 2017, valuation were based on the results of an actuarial experience study for the five-year period ended June 30, 2016. The long-term expected rate of return on ASRS pension plan investments was determined to be 5.07 percent (excluding any expected inflation) 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, excluding any expected inflation. The target allocation and best estimates of geometric real rates of return for each major asset class are summarized in the following table: Asset Class Target Allocation Equity Fixed income Real estate Total 50% 30% 20% 100% Real Return Geometric Basis 5.50% 3.83% 5.85% City of Scottsdale, Arizona 113 Long-Term Contribution to Expected Real Return 2.75% 1.15% 1.17% 5.07% Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2019 Discount Rate The discount rate used to measure the total pension liability was 7.5 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 7.5 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 (6.5 percent) or 1-percentage-point higher (8.5 percent) than the current rate: City's proportionate share of the collective net pension liability 1% Decrease (6.5%) Discount Rate (7.5%) 1% Increase (8.5%) $ 209,846,251 $ 147,206,499 $ 94,871,999 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 114 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 Public Safety Personnel Retirement System General Information about the Pension Plan Plan Descriptions All of the City’s sworn public safety personnel participate in Public Safety Personnel Retirement System (PSPRS). PSPRS administers both an agent multiple-employer defined benefit pension plan and a defined contribution 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 229 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/annualreports. 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 115 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 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 multiplied by a multiplier that varies by years of service, from 1.5 percent to 2.5 percent per year of service, multiplied by 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 contingent upon which retirement plan is chosen by a member. This group of members has an irrevocable 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), or a defined contribution plan in lieu of the respective choices listed above (both police and fire employees). 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 Average Monthly Compensation Tier 1 36 consecutive months of highest covered payroll within the last 20 years of service Tier 2 60 consecutive months of highest covered payroll 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 116 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 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. A retired member or survivor of a retired member may be eligible for 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. City of Scottsdale, Arizona 117 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 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% Maximum increase 1.00% 1.50% 2.00% Employees Covered by Benefit Terms At June 30, 2019, 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 269 112 604 985 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 118 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2019 The City’s contribution rates for fiscal year ended June 30, 2019 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 51.85% 51.85% 51.85% 46.53% 45.80% 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 19.17% 19.17% 19.17% 4.00% 14.56% 3.00% 13.23% 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 (36.80 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, 2019, were $19,951,784. 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 fire 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. In June 2018, PSPRS received $1,920,977 of fire insurance premium tax for the City’s fire pension plan related to the fiscal year ended June 30, 2019. PSPRS accounts for the fire insurance premium tax collected for the City as employer contributions. City of Scottsdale, Arizona 119 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 Net Pension Liability The City’s net pension liability of $180,055,082 was measured as of June 30, 2018, 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, 2018, measurement was determined using the following actuarial assumptions: Actuarial Cost Method Asset Valuation Method Payroll Growth Inflation Salary Increases Tier 1/2 Investment Rate of Return Tier 3 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 7.00%, 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, 2018 valuation were based on the results of an actuarial experience study of the period July 1, 2011 to June 30, 2016. 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, 2018, these best estimates are summarized in the following table: Asset Class U.S. Equity Non-U.S. Equity Private Equity Fixed Income Private Credit GTS Real Assets Real Estate Risk Parity Short Term Investments Target Allocation 16.00% 14.00% 12.00% 5.00% 16.00% 12.00% 9.00% 10.00% 4.00% 2.00% 100.00% Long-Term Expected Real Rate of Return* 7.60% 8.70% 5.83% 1.25% 6.75% 3.96% 4.52% 3.75% 5.00% 0.25% * Geometric Real Rate of Return. Based on inflation assumption of 2.75%. City of Scottsdale, Arizona 120 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2019 Discount Rate The discount rate used to measure the total pension liability was 7.40 percent for Tier 1/2 members and 7.00 percent for Tier 3 members. The projection of cash flows used to determine the discount rates 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. 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 6/30/18 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 6/30/19 $ $ 328,685 $ 162,427 Net Pension Liability (a)-(b) $ 166,258 7,103 24,013 4,880 - 15,491 3,438 11,537 7,103 24,013 4,880 (15,491) (3,438) (11,537) (15,475) 20,521 349,206 (15,475) (176) (34) 14,781 177,208 176 34 5,740 171,998 City of Scottsdale, Arizona 121 Increase (Decrease) Plan Fiduciary Net Position (b) $ $ Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2019 Public Safety Personnel Retirement System (Fire) Changes in the Net Pension Liability (in thousands) Total Pension Liability (a) Balances at 6/30/18 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 6/30/19 $ Increase (Decrease) Plan Fiduciary Net Position (b) 88,908 $ $ 77,181 Net Pension Liability (a)-(b) $ 11,727 5,098 6,729 (2,004) - 6,061 1,981 5,520 5,098 6,729 (2,004) (6,061) (1,981) (5,520) (1,047) 8,776 97,684 (1,047) (85) 16 12,446 89,627 85 (16) (3,670) 8,057 $ $ 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 for Tier 1/2 members and 7.00 percent for Tier 3 members, 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 (6.40/6.00 percent) or 1-percentage-point higher (8.40/8.00 percent) than the current rate (in thousands): Police net pension liability (asset) Fire net pension liability (asset) 1% Decrease (6.40%/6.00%) Discount Rate (7.40%/7.00%) 1% Increase (8.40%/8.00%) $ $ $ 220,481 24,768 City of Scottsdale, Arizona 122 171,998 8,057 132,604 (5,464) Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2019 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, 2019, the City recognized pension expense of $27,684,845 related to the defined benefit plan and the defined benefit portion of the hybrid plan and $212,876 related to the defined contribution plan and the defined contribution portion of the hybrid plan. At June 30, 2019, 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 $ $ 5,955 5,003 Change of assumptions or other inputs 21,698 - Net difference between projected and actual earnings on pension plan investments 3,126 - City contributions subsequent to the measurement date 19,952 - Total $ 50,731 City of Scottsdale, Arizona 123 $ 5,003 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 City contributions subsequent to the measurement date of $19,951,784 were reported as deferred outflows and will be recognized as a reduction of the net pension liability in the fiscal year ending June 30, 2020. 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: 2020 2021 2022 2023 2024 Thereafter $ 10,301 7,028 2,375 3,510 1,466 1,096 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, 2019, the City recognized pension expense of $1,579. I. Other Postemployment Benefits In addition to the pension benefits described in the previous section (H), the City provides an option of postretirement healthcare 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 420 or more 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 124 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 The projected liability for active employees, as of June 30, 2019, was $15,684,444. The projected liability was considered payable within one year or greater and all but the current portion of $182,287 was therefore considered non-current and included in both the proprietary fund and government-wide financial statements. Significant actuarial assumptions of the January 1, 2019, actuarial valuation include: a) mortality rates based on the RPH-2018 Total Dataset Mortality Table fully generational using scale MP 2018; b) interest compounded 4.0 percent annually; c) salary increases at a rate of 3 percent to 4 percent based on years of service; and d) Traditional Unit Credit cost method based on participant data as of January 1, 2019. J. 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. City of Scottsdale, Arizona 125 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2019 Employees Covered by Benefit Terms The following employees were covered by the benefit terms: As of June 30, 2019, Membership Consisted of: Inactive Employees or Beneficiaries Currently Receiving Benefits Inactive Employees Entitled to but Not Yet Receiving Benefits Active Employees Total 20 664 684 Total OPEB Liability The City’s total OPEB liability of $2,103,379 was measured as of July 1, 2018, and was determined by an actuarial valuation as of that date. Actuarial Assumptions and Other Inputs The total OPEB liability in the July 1, 2018, actuarial valuation was determined using the following actuarial assumptions and other inputs, applied to all periods included in the measurement, unless otherwise specified: Inflation Salary Increases 2.5% 3.5% wage inflation plus merit and longevity increases ranging from 0.0% to 4.0% Discount Rate Healthcare Cost Trend Rates* 3.87% Retirees' Share of Benefit-Related Costs 6.83% for 2020, 8.00% for 2021, and then decreasing 0.5% per year to an ultimate rate of 5.00% for 2027 and later years 100% *The initial trend rate reflects the City’s actual projected cost increases from fiscal year 2019 to 2020. The discount rate was based on the Bond Buyer GO 20- Bond Municipal Bond Index. Mortality rates were based on the RPH-2018 Total Dataset Mortality Table fully generational using scale MP-2018 for current actives and the RPH-2018 Disabled Mortality Table fully generational using scale MP-2018 for disabled retirees. City of Scottsdale, Arizona 126 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2019 Changes in the Total OPEB Liability Total OPEB Liability (in thousands) Balance at 6/30/18 Changes for the year: Service cost Interest Differences between expected and actual experience Changes of assumptions/other inputs Benefit payments Net changes Balance at 6/30/19 $ 2,194 $ 241 85 (278) (38) (101) (91) 2,103 Changes in assumptions reflect the following: 1. Change in the discount rate from 3.56 percent as of the beginning of the year to 3.87 percent as of the end of the year. 2. Mortality table has been updated from RPH-2017 Total Dataset Mortality Table fully generational using Scale MP-2017 to RPH-2018 Total Dataset Mortality Table fully generational using Scale MP-2018 for current actives. 3. Mortality table has been updated from RPH-2017 Disabled Mortality Table fully generational using Scale MP-2017 to RPH-2018 Disabled Mortality Table fully generational using Scale MP-2018 for disabled retirees. 4. Healthcare trend rates have been updated to reflect actual premium increases from fiscal year 2019 to fiscal year 2020, followed by an annual trend of 8.0 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 (2.87 percent) or 1-percentage-point higher (4.87 percent) than the current discount rate (in thousands): Total OPEB Liability 1% Decrease (2.87%) Discount Rate (3.87%) 1% Increase (4.87%) $ $ $ 2,198 2,103 City of Scottsdale, Arizona 127 2,005 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2019 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 (5.83 percent decreasing to 4.00 percent) or 1-percentage-point higher (7.83 percent decreasing to 6.00 percent) than the current healthcare cost trend rates (in thousands): Total OPEB Liability 1% Decrease (5.83% decreasing to 4.00%) Healthcare Cost Trend Rates (6.83% decreasing to 5.00%) 1% Increase (7.83% decreasing to 6.00%) $ $ $ 1,885 2,103 2,354 OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB For the year ended June 30, 2019, the City recognized OPEB expense of $296,560. At June 30, 2019, 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 $ $ - 437 Change of assumptions or other inputs 100 34 City contributions subsequent to the measurement date 116 - Total $ 216 $ 471 The $115,803 reported as a deferred outflow of resources related to OPEB resulting from City contributions subsequent to the measurement date will be recognized as a reduction of the total OPEB liability in the fiscal year ending June 30, 2020. 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: 2020 $ (39) 2021 (39) 2022 (39) 2023 (39) 2024 (40) Thereafter (175) City of Scottsdale, Arizona 128 Table of Contents Required Supplementary Information For the Fiscal Year Ended June 30, 2019 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 Five Fiscal Years (dollars in thousands) City's proportion of the net collective pension liability 2019 2018 2017 2016 2015 1.055510% 1.056820% 1.086990% 1.099760% 1.102563% City's proportionate share of the collective net pension liability $147,206 $164,632 $175,451 $171,304 $163,142 City's covered payroll $105,097 $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 140.07% 153.49% 172.15% 168.01% 164.66% Plan fiduciary net position as a percentage of the total pension liability 73.40% 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 129 Required Supplementary Information Table of Contents For the Fiscal Year Ended June 30, 2019 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 Five Fiscal Years (dollars in thousands) 2019 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) $ 7,103 24,013 4,880 (15,475) 20,521 328,685 $ 349,206 $ 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 6,363 16,898 3,987 (896) 22,122 (12,411) 36,063 218,281 $ 254,344 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 $ 15,491 3,438 11,537 (15,475) (176) (34) 14,781 $ 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) 162,427 $ 177,208 145,977 $ 162,427 143,412 $ 145,977 140,588 $ 143,412 124,647 $ 140,588 City's net pension liability-ending ((a) - (b)) $ 171,998 $ 166,258 $ 157,936 $ 122,361 $ 113,756 50.75% 49.42% 48.03% 53.96% 55.27% $ 34,869 $ 33,896 $ 33,073 $ 33,075 $ 31,438 493.27% 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 $ 8,970 3,944 5,113 (14,835) (125) (243) 2,824 $ 7,997 3,495 17,047 (12,411) (137) (50) 15,941 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 130 Required Supplementary Information Table of Contents For the Fiscal Year Ended June 30, 2019 Public Safety Personnel Retirement System (Fire) Schedule of Changes in the City's Net Pension Liability (Asset) and Related Ratios Last Five Fiscal Years (dollars in thousands) 2019 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) $ 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 2018 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 $ $ $ $ $ 2,974 2,693 358 (1,430) (52) (53) 4,490 $ 2015 5,009 5,797 639 1,264 1,881 (932) 13,658 75,250 $ 88,908 2,737 2,551 7,822 (932) (70) 1 12,109 $ 2016 5,098 6,729 (2,004) (1,047) 8,776 88,908 $ 97,684 6,061 1,981 5,520 (1,047) (85) 16 12,446 $ 2017 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) 77,181 $ 89,627 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)) $ 8,057 $ 11,727 $ 10,178 $ $ 91.75% 86.81% 86.47% 104.49% 109.55% $ 23,192 $ 23,500 $ 21,498 $ 20,420 $ 19,336 34.74% 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 (2,606) (4,765) 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 131 Table of Contents Required Supplementary Information For the Fiscal Year Ended June 30, 2019 Schedule of City Contributions Arizona State Retirement System Last Seven Fiscal Years (dollars in thousands) Statutorily required contribution 2019 $ 12,384 Employer contributions in relation to the statutorily required contribution $ (12,384) $ (11,437) $ - 2017 11,540 $ (11,540) Contribution deficiency (excess) $ Covered payroll $ 110,748 $ 105,097 $ 107,259 11.18% 10.88% 10.76% Contributions as a percentage of covered payroll - 2018 11,437 $ - 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% 10.73% 10.23% 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 132 Table of Contents Required Supplementary Information For the Fiscal Year Ended June 30, 2019 Schedule of City Contributions Public Safety Personnel Retirement System (Police) Last Six Fiscal Years (dollars in thousands) Actuarially determined contribution $ Employer contributions in relation to the actuarially determined contribution 2019 17,296 $ (17,296) 2018 15,341 $ (15,341) 2017 12,328 $ (12,328) 2016 11,635 $ (11,635) 2015 8,921 $ (8,921) 2014 7,997 (7,997) Contribution deficiency (excess) $ - $ - $ - $ - $ - $ - Covered payroll $ 31,628 $ 34,869 $ 33,896 $ 33,073 $ 33,075 $ 31,438 Contributions as a percentage of covered payroll 54.69% 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 fiscal year 2014 is not available. City of Scottsdale, Arizona 133 Table of Contents Required Supplementary Information For the Fiscal Year Ended June 30, 2019 Schedule of City Contributions Public Safety Personnel Retirement System (Fire) Last Six Fiscal Years (dollars in thousands) Actuarially determined contribution $ Employer contributions in relation to the actuarially determined contribution 2019 4,577 $ (4,577) 2018 3,924 $ (3,924) 2017 2,840 $ (2,840) 2016 2,626 $ (2,626) 2015 2,276 $ (2,276) 2014 2,392 (2,392) Contribution deficiency (excess) $ - $ - $ - $ - $ - $ - Covered payroll $ 24,376 $ 23,192 $ 23,500 $ 21,498 $ 20,420 $ 19,336 Contributions as a percentage of covered payroll 18.78% 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 fiscal year 2014 is not available. City of Scottsdale, Arizona 134 Table of Contents Required Supplementary Information For the Fiscal Year Ended June 30, 2019 Changes in the City’s Total OPEB Liability and Related Ratios Total OPEB Liability and Related Ratios Last Two Fiscal Years (dollars in thousands) 2019 Total OPEB liability Service cost Interest Differences between expected and actual experience Changes of assumptions/other inputs Benefit payments $ 2018 241 85 (278) (38) (101) $ 260 67 (230) 125 (111) Net change in total OPEB liability (91) 111 Total OPEB liability-beginning 2,194 2,083 Total OPEB liability-ending $ 2,103 $ 2,194 Covered-employee payroll $ 52,970 $ 51,137 Total OPEB liability as a percentage of covered-employee payroll 3.97% 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 135 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, 0.2 percent of privilege tax for transportation improvements, and 0.1 percent of privilege tax dedicated to the Arterial Life Cycle Program. The amount of Arizona 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 voter approved Preservation Privilege (Sales) Tax of 0.2 percent 1995 and 0.15 percent 2004. Revenues are transferred to the Preserve Privilege Tax Capital Projects Funds for land purchases and improvements in the McDowell Sonoran Preserve or are transferred to the Scottsdale Preserve Authority Debt Service Fund to be used for related debt service payments. City of Scottsdale, Arizona 136 Table of Contents NONMAJOR GOVERNMENTAL FUNDS (Continued) 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 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 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, and the San Francisco Giants. This fund also includes commitments 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 City of Scottsdale, Arizona 137 Table of Contents NONMAJOR GOVERNMENTAL FUNDS (Continued) 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). 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 voter approved general obligation bonds that are used for authorized capital improvements. Transportation Privilege Tax Fund. This fund accounts for the portion of Transportation Privilege (Sales) Tax dedicated to transportation capital improvements. Resources are provided by the 0.2 percent 1989 and 0.1 percent 2018 voter approved privilege tax. 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 0.2 percent 1995 and 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 138 Table of Contents Combining Balance Sheet Nonmajor Governmental Funds June 30, 2019 (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 $ $ $ 73,605 62 241 8,011 1,123 20 50 1,534 4,176 722 2,940 92,484 4,277 262 164 - Capital Projects Funds Debt Service Funds $ $ $ 5,187 26,729 78 5,844 1,618 39,456 4,813 21,172 $ $ $ 54,343 232 19,822 553 74,950 12,298 13 5,738 - Permanent Funds Total Nonmajor Governmental Funds $ $ $ $ 636 636 4 - $ $ 133,771 26,791 473 8,011 1,123 98 50 1,534 29,842 1,275 4,558 207,526 16,579 275 5,902 4,813 21,172 8,606 692 4 5 14,010 25,985 200 18,249 4 8,606 892 4 5 58,248 Deferred Inflows of Resources Unavailable Revenues Total Liabilities and Deferred Inflows of Resources 3,301 5,874 20,264 - 29,439 17,311 31,859 38,513 4 87,687 Fund Balances (Deficits) Nonspendable Restricted Committed Unassigned Total Fund Balances (Deficits) 57,775 18,106 (708) 75,173 3,486 4,700 (589) 7,597 49,584 7 (13,154) 36,437 604 28 632 604 110,873 22,813 (14,451) 119,839 Total Liabilities, Deferred Inflows of Resources, and Fund Balances (Deficits) $ 92,484 $ 39,456 City of Scottsdale, Arizona 139 $ 74,950 $ 636 $ 207,526 Table of Contents Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds For the Fiscal Year Ended June 30, 2019 (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 Building and Related Permits Recreation Fees Fines, Fees, and Forfeitures Court Court Enhancement 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 $ Capital Projects Funds Debt Service Funds 126 69,697 22,407 261 $ 3,142 - $ Total Nonmajor Governmental Funds Permanent Funds - $ - $ 3,268 69,697 22,407 261 17,073 642 52 - - - 17,073 642 52 13 2,286 - 27 - - 40 2,286 146 1,764 247 2,390 1,076 140 11 978 16 146 1,764 247 2,530 2,081 8,112 410 759 412 591 1,774 523 424 78 131,263 4,226 7,519 4,023 3,800 783 5 9,616 18 34 12,135 410 8,785 412 591 2,575 528 424 78 148,432 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 17 1,018 1,038 172 14,802 23,976 2,114 12,586 584 - - 55 - 17 1,018 1,038 172 14,802 23,976 2,114 12,641 584 128 56,435 21,172 9,645 30,817 49,050 49,050 55 21,172 9,645 49,178 136,357 Excess (Deficiency) of Revenues over (under) Expenditures 74,828 (23,298) (39,434) (21) 12,075 OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) 967 (67,796) (66,829) 27,654 (6,646) 21,008 23,110 (28) 23,082 - 51,731 (74,470) (22,739) 7,999 (2,290) (16,352) (21) (10,664) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending $ 67,174 75,173 $ 9,887 7,597 City of Scottsdale, Arizona 140 $ 52,789 36,437 $ 653 632 $ 130,503 119,839 Table of Contents Combining Balance Sheet Nonmajor Special Revenue Governmental Funds June 30, 2019 (in thousands) ASSETS 141 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 $ 13,112 3,523 1,534 105 18,274 2,434 167 - $ $ $ HOME 50 - 159 2,198 2,407 45 9 - $ $ $ Grants 185 185 11 164 $ $ $ Section 8 315 378 16 709 42 30 - $ $ $ 446 446 3 5 - Preserve Privilege Tax Scottsdale Mountain CFD McDowell Mountain Ranch CFD $ $ $ $ $ 33,925 216 4,271 38,412 58 - $ $ 42 18 60 - $ $ - - 2,601 46 4 1 5 110 10 185 5 632 709 2 10 58 - - 104 2,357 185 244 - - 18 - 2,705 2,467 370 953 10 58 18 - 15,569 15,569 99 (159) (60) (185) (185) (244) (244) 436 436 38,354 38,354 42 42 - 18,274 $ 2,407 $ 185 $ 709 $ 446 $ 38,412 $ 60 $ - Table of Contents Combining Balance Sheet Nonmajor Special Revenue Governmental Funds June 30, 2019 (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 City of Scottsdale, Arizona 142 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) $ 49 2 51 - $ $ Waterfront Commercial CFD - - $ $ $ 13 13 - Streetlight Districts $ $ $ Tourism Development Special Programs 5 6 11 - $ $ $ 19,742 25 5 50 4,176 490 24,488 548 46 - $ $ $ Total 5,968 212 1,123 125 7,428 1,136 5 - $ $ $ 73,605 62 241 8,011 1,123 20 50 1,534 4,176 722 2,940 92,484 4,277 262 164 - - - - 8,545 56 1 9,196 1,141 8,606 692 4 5 14,010 - - - - 393 - 3,301 - - - - 9,589 1,141 17,311 51 51 - 13 13 11 11 3,200 11,819 (120) 14,899 6,287 6,287 57,775 18,106 (708) 75,173 51 $ - $ 13 $ 11 $ 24,488 $ 7,428 $ 92,484 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, 2019 (in thousands) City of Scottsdale, Arizona 143 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 Building and Related Permits Recreation Fees Fines, Fees, and Forfeitures Court Court Enhancement 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 $ 27,788 - $ HOME - $ Grants - $ Section 8 - $ - Preserve Privilege Tax Scottsdale Mountain CFD McDowell Mountain Ranch CFD $ $ $ 41,909 - 24 - 11 - 17,073 642 - - - - - - - - - - - - - - - - - 62 - - - - 925 - - 113 265 424 46,305 1,304 1,366 234 234 942 410 1,560 2,912 5,632 4 13 5,649 42,834 24 11 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 Capital Outlay Total Expenditures 55 14,644 8,110 1,778 24,587 1,374 1,374 234 234 5 1,038 129 928 701 2,801 5,684 5,684 5 5 9 9 11 11 Excess (Deficiency) of Revenues over (under) Expenditures 21,718 (8) - 111 (35) 42,829 15 - OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) 459 (16,353) (15,894) (12) (12) - (33) (33) - (38,569) (38,569) 27 27 - Net Change in Fund Balances (Deficits) 5,824 (20) - 78 (35) 4,260 42 - Fund Balances (Deficits) - Beginning Fund Balances (Deficits) - Ending (continued) $ 9,745 15,569 $ (40) (60) $ (185) (185) $ (322) (244) $ 471 436 $ 34,094 38,354 $ 42 $ - 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, 2019 (in thousands) REVENUES City of Scottsdale, Arizona 144 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 Building and Related Permits Recreation Fees Fines, Fees, and Forfeitures Court Court Enhancement 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 Streetlight Districts Special Programs $ $ $ $ $ 68 - 11 - 12 - - 261 Tourism Development $ Total 22,407 - $ 126 69,697 22,407 261 - - - - 52 - 17,073 642 52 - - - - 13 2,286 - 13 2,286 - - - - 146 1,764 247 304 151 2,024 - 146 1,764 247 2,390 1,076 68 11 12 591 591 646 412 214 239 55 6,790 15 10 24,456 8,112 410 759 412 591 1,774 523 424 78 131,263 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 Capital Outlay Total Expenditures 71 71 11 11 10 10 584 584 12 1,018 158 286 1,186 2,815 128 5,603 15,451 15,451 17 1,018 1,038 172 14,802 23,976 2,114 12,586 584 128 56,435 Excess (Deficiency) of Revenues over (under) Expenditures (3) - 2 7 1,187 9,005 74,828 OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources and (Uses) - - - - 10 (971) (961) 471 (11,858) (11,387) 967 (67,796) (66,829) Net Change in Fund Balances (Deficits) (3) - 2 7 226 (2,382) 7,999 54 - 11 4 14,673 8,669 67,174 Fund Balances - Beginning Fund Balances - Ending $ 51 $ - $ 13 $ 11 $ 14,899 $ 6,287 $ 75,173 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, 2019 (in thousands) Budgeted Amounts 145 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 21,726 $ 21,726 Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ 27,788 - 27,788 6,062 15,496 655 15,496 655 17,073 642 - 17,073 642 1,577 (13) 150 175 424 5 38,631 150 175 424 5 38,631 113 265 424 46,305 - 113 265 424 46,305 (37) 90 (5) 7,674 EXPENDITURES Current General Government City Treasurer Public Works Community and Economic Development Community Services Total Expenditures 54 15,546 9,771 1,856 27,227 57 15,575 9,564 1,856 27,052 55 14,629 8,095 1,778 24,557 15 15 30 55 14,644 8,110 1,778 24,587 2 946 1,469 78 2,495 Excess of Revenues over Expenditures 11,404 11,579 21,748 (30) 21,718 10,169 300 (10,941) 10 (10,631) 300 (10,941) 10 (10,631) 459 (16,353) (15,894) - 459 (16,353) (15,894) 159 (5,412) (10) (5,263) 773 948 5,854 (30) 5,824 4,906 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 $ 6,177 6,950 $ 30 Explanation of Differences: The City budgets for certain expenditures on the cash basis, rather than on the modified accrual basis: Payroll Accruals $ 9,686 10,634 $ 9,686 15,540 $ 59 29 $ 9,745 15,569 $ 4,906 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, 2019 (in thousands) Budgeted Amounts Property Rental Intergovernmental Federal Grants Total Revenues REVENUES Original $ 146 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 $ $ $ $ 62 - 62 23 2,465 2,504 2,465 2,504 1,304 1,366 - 1,304 1,366 (1,161) (1,138) 2,504 2,504 2,378 2,378 1,373 1,373 1 1 1,374 1,374 1,005 1,005 - 126 (7) (1) (8) (133) - (147) (147) (12) (12) - (12) (12) 135 135 - (21) (19) (1) (20) 2 $ - $ 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 $ (33) (54) $ (33) (52) $ (7) (8) $ (40) (60) $ 2 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, 2019 (in thousands) Budgeted Amounts Intergovernmental Federal Grants Total Revenues Original REVENUES $ 147 City of Scottsdale, Arizona EXPENDITURES Current Community Services Total Expenditures Deficiency of Revenues under Expenditures Fund Balance (Deficit) - Beginning Fund Balance (Deficit) - Ending $ Final 923 923 $ 923 923 Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ 234 234 - 234 234 (689) (689) 923 923 924 924 234 234 - 234 234 690 690 - (1) - - - 1 - $ (185) (186) $ (185) (185) $ - $ (185) (185) $ 1 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, 2019 (in thousands) Budgeted Amounts REVENUES Intergovernmental Federal Grants State Grants Miscellaneous Contributions and Donations Total Revenues Original $ City of Scottsdale, Arizona 148 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 2,673 475 14 4,296 7,458 2,667 475 14 4,296 7,452 Budget to GAAP Differences Actual Amounts GAAP Basis $ $ $ $ 942 410 1,560 2,912 - 942 410 1,560 2,912 (1,725) (65) (14) (2,736) (4,540) 5 1,200 169 2,087 3,997 7,458 5 1,038 119 1,303 2,232 4,697 5 1,038 129 915 700 2,787 13 1 14 5 1,038 129 928 701 2,801 (10) 388 1,532 1,910 - 2,755 125 (14) 111 (2,630) - - (33) (33) - (33) (33) (33) (33) - 2,755 92 (14) 78 (2,663) $ - $ 14 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 $ (315) 2,440 $ (315) (223) $ (7) (21) $ (322) (244) $ (2,663) 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, 2019 (in thousands) REVENUES Intergovernmental Federal Grants Reimbursements from Outside Sources Other Total Revenues Original $ 149 City of Scottsdale, Arizona EXPENDITURES Current Community Services Total Expenditures Deficiency of Revenues under Expenditures Fund Balance - Beginning Fund Balance - Ending Final 5,974 5,974 5,974 5,974 Budget to GAAP Differences $ $ 5,632 4 13 5,649 - Actual Amounts GAAP Basis $ $ 5,632 4 13 5,649 (342) 4 13 (325) 5,974 5,974 5,993 5,993 5,686 5,686 (2) (2) 5,684 5,684 307 307 - (19) (37) 2 (35) (18) $ - $ (2) 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 $ 470 451 $ 470 433 $ 1 3 $ 471 436 $ (18) 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, 2019 (in thousands) Budgeted Amounts Taxes - Local Transaction Privilege Interest Earnings Total Revenues Original REVENUES $ 150 City of Scottsdale, Arizona EXPENDITURES Current General Government City Treasurer 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 - Beginning Fund Balance - Ending $ Final 39,437 686 40,123 $ 39,437 686 40,123 Actual Amounts Budgetary Basis Budget to GAAP Differences $ $ 41,909 925 42,834 - Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ 41,909 925 42,834 2,472 239 2,711 2 2 2 2 5 5 - 5 5 (5) 2 (3) 40,121 40,121 42,829 - 42,829 2,708 (42,644) (42,644) (42,644) (42,644) (38,569) (38,569) - (38,569) (38,569) 4,075 4,075 (2,523) (2,523) 4,260 - 4,260 6,783 26,066 23,543 $ 34,900 32,377 $ 34,900 39,160 $ (806) (806) $ 34,094 38,354 $ 6,783 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, 2019 (in thousands) Budgeted Amounts REVENUES Streetlight and Services Districts Total Revenues Original $ Final 610 610 $ 610 610 Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ 591 591 - 591 591 (19) (19) 151 City of Scottsdale, Arizona EXPENDITURES Current Streetlight and Services Districts Total Expenditures 610 610 610 610 584 584 - 584 584 26 26 Excess of Revenues over Expenditures - - 7 - 7 7 Fund Balance - Beginning Fund Balance - Ending $ - $ 4 4 $ 4 11 $ - $ 4 11 $ 7 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, 2019 (in thousands) Budgeted Amounts City of Scottsdale, Arizona 152 REVENUES Taxes - Local Light and Power Franchise Business and Liquor Licenses Charges for Current Services Building and Related Permits Recreation Fees Fines, Fees, and Forfeitures Court Court Enhancement Police Property Rental Interest Earnings Intergovernmental Miscellaneous Developer Contributions Contributions and Donations Reimbursements from Outside Sources Other Total Revenues Original $ EXPENDITURES Current General Government Mayor and City Council City Court Public Works Community and Economic Development Public Safety Community Services Capital Outlay Total Expenditures Excess (Deficiency) of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balance Fund Balance - Beginning Fund Balance - Ending Final 243 57 243 57 Budget to GAAP Differences $ $ 261 52 - Actual Amounts GAAP Basis $ $ 261 52 18 (5) 2,053 2,053 13 2,286 - 13 2,286 13 233 158 1,735 428 365 114 158 1,735 428 365 114 146 1,764 247 304 151 - 146 1,764 247 304 151 (12) 29 (181) (61) 37 1,395 317 90 57 7,012 1,395 317 90 57 7,012 646 412 214 239 55 6,790 - 646 412 214 239 55 6,790 (749) 412 (103) 149 (2) (222) 8 1,320 250 1,886 2,638 3,149 9,251 12 1,353 250 1,886 2,658 3,065 9,224 12 1,010 158 286 1,185 2,812 128 5,591 8 1 3 12 12 1,018 158 286 1,186 2,815 128 5,603 343 92 1,600 1,473 253 (128) 3,633 (2,239) (2,212) 1,199 (12) 1,187 3,411 10 (975) (965) 10 (975) (965) 10 (971) (961) - 10 (971) (961) 4 4 (3,204) (3,177) 238 (12) 226 3,415 $ 12,550 9,346 $ 12 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 $ 14,728 11,551 $ 14,728 14,966 $ (55) (67) $ 14,673 14,899 $ 3,415 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, 2019 (in thousands) Budgeted Amounts 153 City of Scottsdale, Arizona REVENUES Taxes - Local Transient Occupancy Tax Property Rental Reimbursements from Outside Sources Other Total Revenues Original $ Final 20,413 1,910 20 22,343 $ 20,413 1,910 20 22,343 Actual Amounts Budgetary Basis Budget to GAAP Differences $ $ 22,407 2,024 15 10 24,456 - Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ 22,407 2,024 15 10 24,456 1,994 114 (5) 10 2,113 EXPENDITURES Current Community and Economic Development Total Expenditures 16,425 16,425 16,402 16,402 15,450 15,450 1 1 15,451 15,451 952 952 Excess of Revenues over Expenditures 5,918 5,941 9,006 (1) 9,005 3,065 OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) (6,443) (6,443) (6,443) (6,443) 471 (11,858) (11,387) - 471 (11,858) (11,387) 471 (5,415) (4,944) (525) (502) (2,381) (1) (2,382) (1,879) Net Change in Fund Balance Fund Balances - Beginning Fund Balances - Ending $ 8,363 7,838 $ 1 Explanation of Differences: The City budgets for certain expenditures on the cash basis, rather than on the modified accrual basis: Payroll Accruals $ 8,671 8,169 $ 8,671 6,290 $ (2) (3) $ 8,669 6,287 $ (1,879) Table of Contents Combining Balance Sheet Nonmajor Debt Service Governmental Funds June 30, 2019 (in thousands) ASSETS Cash and Investments Cash with Fiscal Agent Receivables (net of allowance for uncollectibles) Property Tax Intergovernmental Miscellaneous Total Assets 154 City of Scottsdale, Arizona LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES (DEFICITS) Liabilities Matured Bond Interest Payable Matured Bonds Payable Total Liabilities Municipal Property Corporation Debt Service Stabilization Scottsdale Mountain 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) $ 18,341 18,341 4,184 14,157 18,341 $ $ 5,187 5,844 1,618 12,649 - $ $ - - McDowell Mountain Ranch CFD DC Ranch CFD Via Linda Road CFD Waterfront Commercial CFD Scottsdale Preserve Authority $ $ $ $ $ $ $ 1,457 27 1,484 73 1,195 1,268 $ $ 1,249 46 1,295 166 950 1,116 $ $ 238 4 242 13 190 203 $ $ 615 1 616 88 140 228 $ $ Total 4,829 4,829 289 4,540 4,829 $ $ $ 5,187 26,729 78 5,844 1,618 39,456 4,813 21,172 25,985 18,341 5,844 5,844 - 10 1,278 18 1,134 2 205 228 4,829 5,874 31,859 - 2,694 4,700 (589) 6,805 - 206 206 161 161 37 37 388 388 - 3,486 4,700 (589) 7,597 18,341 $ 12,649 $ - $ 1,484 $ 1,295 $ 242 $ 616 $ 4,829 $ 39,456 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, 2019 (in thousands) Taxes - Local Property Property Rental Interest Earnings Intergovernmental Miscellaneous Total Revenues REVENUES Municipal Property Corporation Debt Service Stabilization Scottsdale Mountain CFD $ $ $ 2 140 - 1 - McDowell Mountain Ranch CFD DC Ranch CFD Via Linda Road CFD Waterfront Commercial CFD Scottsdale Preserve Authority $ $ $ $ $ 1,342 - 1,293 - 216 - 290 9 Total - $ 3,142 140 11 City of Scottsdale, Arizona 155 2 4,226 4,366 1 1,342 1,293 216 299 - 4,226 7,519 EXPENDITURES Debt Service Principal Interest and Fiscal Charges Total Expenditures 14,157 8,377 22,534 - - 1,195 144 1,339 950 336 1,286 190 26 216 140 180 320 4,540 582 5,122 21,172 9,645 30,817 Excess (Deficiency) of Revenues over (under) Expenditures (22,532) 4,366 1 3 7 - (21) (5,122) (23,298) OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) 22,532 22,532 (6,619) (6,619) (27) (27) - - - - 5,122 5,122 27,654 (6,646) 21,008 - (2,253) (26) 3 7 - (21) - (2,290) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending $ - $ 9,058 6,805 $ 26 - $ 203 206 $ 154 161 $ 37 37 $ 409 388 $ - $ 9,887 7,597 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, 2019 (in thousands) Budgeted Amounts Taxes - Local Property Total Revenues Original REVENUES $ 156 City of Scottsdale, Arizona EXPENDITURES Debt Service Principal Interest and Fiscal Charges Total Expenditures Final 34,215 34,215 $ 34,215 34,215 Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ 34,087 34,087 - 34,087 34,087 (128) (128) 42,250 19,788 62,038 42,250 19,788 62,038 42,250 19,786 62,036 - 42,250 19,786 62,036 2 2 Deficiency of Revenues under Expenditures (27,823) (27,823) (27,949) - (27,949) (126) OTHER FINANCING SOURCES Transfers In Total Other Financing Sources 26,873 26,873 26,873 26,873 26,872 26,872 - 26,872 26,872 (1) (1) (950) (950) (1,077) - (1,077) (127) Net Change in Fund Balance Fund Balance - Beginning Fund Balance - Ending $ 2,761 1,811 $ 2,471 1,521 $ 2,471 1,394 $ - $ 2,471 1,394 $ (127) 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, 2019 (in thousands) Budgeted Amounts Interest Earnings Total Revenues REVENUES Original $ Final - $ - Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ 2 2 - 2 2 2 2 City of Scottsdale, Arizona 157 EXPENDITURES Debt Service Principal Interest and Fiscal Charges Total Expenditures 14,157 8,378 22,535 14,157 8,378 22,535 14,157 8,377 22,534 - 14,157 8,377 22,534 1 1 Deficiency of Revenues under Expenditures (22,535) (22,535) (22,532) - (22,532) 3 OTHER FINANCING SOURCES Transfers In Total Other Financing Sources 22,535 22,535 22,535 22,535 22,532 22,532 - 22,532 22,532 (3) (3) - - - - - - 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, 2019 (in thousands) Budgeted Amounts Property Rental Intergovernmental Miscellaneous Total Revenues REVENUES Original $ Final 170 $ 170 Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ 140 - 140 (30) City of Scottsdale, Arizona 158 7,121 7,291 7,120 7,290 4,226 4,366 - 4,226 4,366 (2,894) (2,924) - - - - - - Excess of Revenues over Expenditures 7,291 7,290 4,366 - 4,366 (2,924) OTHER FINANCING USES Transfers Out Total Other Financing Uses (6,618) (6,618) (6,618) (6,618) (6,619) (6,619) - (6,619) (6,619) (1) (1) Net Change in Fund Balance 673 672 (2,253) - (2,253) (2,925) EXPENDITURES Total Expenditures Fund Balance - Beginning Fund Balance - Ending $ 10,550 11,223 $ 9,058 9,730 $ 9,058 6,805 $ - $ 9,058 6,805 $ (2,925) 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, 2019 (in thousands) Budgeted Amounts Total Revenues REVENUES Original $ Final - $ - Actual Amounts Budgetary Basis Budget to GAAP Differences $ $ - - Actual Amounts GAAP Basis $ - Variance Between Final Budget and Actual Amounts Budgetary Basis $ - City of Scottsdale, Arizona 159 EXPENDITURES Debt Service Principal Interest and Fiscal Charges Total Expenditures 4,540 582 5,122 4,540 582 5,122 4,540 582 5,122 - 4,540 582 5,122 - Deficiency of Revenues under Expenditures (5,122) (5,122) (5,122) - (5,122) - OTHER FINANCING SOURCES Transfers In Total Other Financing Sources 5,122 5,122 5,122 5,122 5,122 5,122 - 5,122 5,122 - - - - - - - Net Change in Fund Balance Fund Balance - Beginning Fund Balance - Ending $ - $ - $ - $ - $ - $ - Table of Contents Combining Balance Sheet Nonmajor Capital Projects Governmental Funds June 30, 2019 (in thousands) ASSETS Cash and Investments Receivables (net of allowance for uncollectibles) Interest Intergovernmental Grants Total Assets City of Scottsdale, Arizona 160 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 General Obligation Bonds Transportation Privilege Tax Preserve Privilege Tax Municipal Property Corporation Bonds $ 19,557 $ 34,467 $ 319 $ - $ 84 19,641 $ 147 13,921 48,535 $ 319 $ - $ 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) $ 3,869 1 - $ 3,778 7 - $ 707 5 - $ External Sources 3,199 1,054 Total $ - $ 1 5,901 553 6,455 $ 745 4,684 $ 54,343 $ 232 19,822 553 74,950 $ 12,298 13 5,738 3,870 3,785 712 4,253 200 5,629 200 18,249 - 13,921 - - 6,343 20,264 3,870 17,706 712 4,253 11,972 38,513 15,771 15,771 30,829 30,829 (393) (393) (4,253) (4,253) 2,984 7 (8,508) (5,517) 49,584 7 (13,154) 36,437 19,641 $ 48,535 $ 319 $ - $ 6,455 $ 74,950 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, 2019 (in thousands) 161 City of Scottsdale, Arizona REVENUES Charges for Current Services Building and Related Permits Interest Earnings Intergovernmental Federal Grants Miscellaneous Contributions and Donations Reimbursements from Outside Sources Total Revenues General Obligation Bonds $ EXPENDITURES Current Capital Outlay Total Expenditures Deficiency of Revenues under Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances (Deficits) Fund Balances (Deficits) - Beginning Fund Balances (Deficits) - Ending $ 409 Transportation Privilege Tax $ 564 Municipal Property Corporation Bonds Preserve Privilege Tax $ - 409 5 569 - 5,313 5,313 22,608 22,608 (4,904) $ External Sources - $ 27 5 Total $ 27 978 - 4,023 3,800 783 8,638 4,023 3,800 783 5 9,616 6,963 6,963 4,253 4,253 9,913 9,913 49,050 49,050 (22,039) (6,963) (4,253) (1,275) (39,434) - 16,353 16,353 6,575 6,575 - 182 (28) 154 23,110 (28) 23,082 (4,904) (5,686) (388) (4,253) (1,121) (16,352) 20,675 15,771 $ 36,515 30,829 $ - (5) (393) $ (4,253) $ (4,396) (5,517) $ 52,789 36,437 Table of Contents Combining Balance Sheet Nonmajor Permanent Governmental Funds June 30, 2019 (in thousands) Cash and Investments Total Assets ASSETS 162 City of Scottsdale, Arizona LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES Liabilities Accounts Payable Total Liabilities Fund Balances Nonspendable Restricted Total Fund Balances Total Liabilities, Deferred Inflows of Resources, and Fund Balances Rassner Memorial Scottsdale Library Endowment Scottsdale Community Endowment Herbert R. Drinkwater Youth Services Endowment Scottsdale Employee Endowment Total $ $ 428 428 $ $ 134 134 $ $ 41 41 $ $ 33 33 $ $ 636 636 $ 4 4 $ - $ - $ - $ 4 4 404 20 424 $ 428 128 6 134 $ 134 40 1 41 $ 41 32 1 33 $ 33 604 28 632 $ 636 Table of Contents Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Permanent Governmental Funds For the Fiscal Year Ended June 30, 2019 (in thousands) REVENUES Interest Earnings Contributions and Donations Total Revenues Rassner Memorial Scottsdale Library Endowment $ 10 18 28 Scottsdale Community Endowment $ Herbert R. Drinkwater Youth Services Endowment Scottsdale Employee Endowment 4 4 $ 1 1 $ Total 1 1 $ 16 18 34 City of Scottsdale, Arizona 163 EXPENDITURES Current Community Services Total Expenditures 49 49 4 4 1 1 1 1 55 55 Deficiency of Revenues under Expenditures (21) - - - (21) Net Change in Fund Balances (21) - - - (21) Fund Balances - Beginning Fund Balances - Ending $ 445 424 $ 134 134 $ 41 41 $ 33 33 $ 653 632 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 164 Table of Contents Combining Statement of Fund Net Position Internal Service Funds June 30, 2019 (in thousands) ASSETS AND DEFERRED OUTFLOWS OF RESOURCES Assets Current Assets Cash and Investments Receivables (net of allowance for uncollectibles) Miscellaneous Supplies Inventory Total Current Assets Fleet Management $ Computer Replacement Self-Insurance 14,795 $ 37,136 $ Total 1,998 $ 53,929 140 859 15,794 131 37,267 1,998 271 859 55,059 2 - - 2 12,887 89,310 1,075 1,707 (47,722) 57,257 57,259 8 (2) 6 6 3,389 (1,031) 2,358 2,358 12,887 89,310 4,472 1,707 (48,755) 59,621 59,623 73,053 37,273 4,356 114,682 Deferred Outflows of Resources Pension-Related Amounts 549 119 - 668 LIABILITIES AND DEFERRED INFLOWS 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 Other Payables - Due within one year Unearned Revenue Other Liabilities Total Current Liabilities 1,685 102 1 203 1 1,992 1,180 25 53 8,764 35 6 10,063 10 10 2,875 127 1 256 1 8,764 35 6 12,065 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 180 3,909 4,089 58 804 13,683 14,545 - 238 4,713 13,683 18,634 6,081 24,608 10 30,699 518 107 - 625 57,257 9,746 6 12,671 2,358 1,988 59,621 24,405 Noncurrent Assets Equity in Joint Venture Capital Assets Buildings and Improvements Motor Vehicles Machinery and Equipment Construction in Progress Less Accumulated Depreciation Total Capital Assets (net of accumulated depreciation) Total Noncurrent Assets Total Assets Total Liabilities Deferred Inflows of Resources Pension-Related Amounts NET POSITION Net Investment in Capital Assets Unrestricted Total Net Position $ 67,003 City of Scottsdale, Arizona 165 $ 12,677 $ 4,346 $ 84,026 Table of Contents Combining Statement of Revenues, Expenses, and Changes in Fund Net Position Internal Service Funds For the Fiscal Year Ended June 30, 2019 (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 $ 20,881 551 21,432 Computer Replacement Self-Insurance $ 33,191 7,901 231 122 1,376 42,821 $ Total 1,027 8 1,035 $ 55,099 7,901 231 122 1,935 65,288 Operating Expenses Costs of Sales and Services Fleet Management Operations Self-Insurance Administration Self-Insurance Claims Self-Insurance Benefits Insurance and Bond Premiums Depreciation Total Operating Expenses 12,935 7,762 20,697 2,286 6,672 28,379 2,567 1 39,905 507 507 12,935 2,286 6,672 28,379 2,567 8,270 61,109 Operating Income 735 2,916 528 4,179 386 386 320 320 (16) (16) 320 370 690 1,121 3,236 512 4,869 896 - 146 (7) - 896 146 (7) 2,017 3,375 512 5,904 Non-Operating Revenues Property Tax Gain (Loss) on Sale of Capital Assets Net Non-Operating Revenues (Expenses) Income Before Contributions and Transfers Capital Contributions Transfers In Transfers Out Change in Net Position Total Net Position - Beginning Total Net Position - Ending $ 64,986 67,003 $ City of Scottsdale, Arizona 166 9,302 12,677 $ 3,834 4,346 $ 78,122 84,026 Table of Contents Combining Statement of Cash Flows Internal Service Funds For the Fiscal Year Ended June 30, 2019 (in thousands) Fleet Management 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 Operating Activities $ 20,880 (8,712) (4,247) 551 8,472 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 $ 41,480 (39,327) (1,365) 1,380 2,168 $ Total 1,027 8 1,035 $ 63,387 (48,039) (5,612) 1,939 11,675 - 320 146 (7) 459 - 320 146 (7) 459 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 (9,462) 588 (8,874) - (960) (960) (10,422) 588 (9,834) Net Increase (Decrease) in Cash and Cash Equivalents (402) 2,627 75 2,300 15,197 34,509 1,923 51,629 Cash and Cash Equivalents at Beginning of Year Cash and Cash Equivalents at End of Year $ 14,795 $ 37,136 $ 1,998 $ 53,929 $ 735 $ 2,916 $ 528 $ 4,179 Reconciliation of Operating Income to Net Cash Provided by (Used for) Operating Activities Operating Income Income Provided by (Used for) Operating Activities Depreciation Current Year Pension Contributions Change in Inventories Change in Intergovernmental Payable 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 Net Cash Provided by Operating Activities Supplemental Disclosure of Non-Cash Financing Activities Additions to Property, Plant, and Equipment Contributions of Capital Assets from Other Funds 7,762 (338) 67 (1) (41) 19 53 (250) 303 163 7,737 1 (75) (242) 35 4 13 (487) (96) 65 30 4 (748) 507 507 8,270 (413) 67 (1) (283) 35 23 66 (487) (346) 368 193 4 7,496 $ 8,472 $ 2,168 $ 1,035 $ 11,675 $ 896 $ - $ - $ 896 City of Scottsdale, Arizona 167 Table of Contents FIDUCIARY FUNDS Agency Funds administer resources received and held by the City 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. AZ Public Service 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 168 Table of Contents Combining Statement of Fiduciary Net Position Fiduciary Funds June 30, 2019 (in thousands) Agency Funds 169 City of Scottsdale, Arizona ASSETS Cash and Cash Equivalents Family SelfSufficiency Agency Fund $ Total Assets LIABILITIES Escrow Payable Vouchers Total Liabilities $ 67 AZ Public Service Raintree UUID Agency Fund $ Total - $ 67 67 - 67 67 - 67 67 $ - $ 67 Table of Contents Combining Statement of Changes in Assets and Liabilities Agency Funds For the Fiscal Year Ended June 30, 2019 (in thousands) Family Self-Sufficiency ASSETS Cash and Cash Equivalents Receivables Total Assets City of Scottsdale, Arizona 170 LIABILITIES Escrow Payable Vouchers UUID I-6002 Assessments Total Liabilities Balance July 1, 2018 Additions AZ Public Service Raintree UUID Deductions Balance June 30, 2019 Balance July 1, 2018 Additions Deductions Balance June 30, 2019 $ 92 - $ 36 - $ 61 - $ 67 - $ - $ 178 180 $ 178 180 $ - $ 92 $ 36 $ 61 $ 67 $ - $ 358 $ 358 $ - $ 92 - $ 36 - $ 61 - $ 67 - $ - $ 179 $ 179 $ - $ 92 $ 36 $ 61 $ 67 $ - $ 179 $ 179 $ - 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 171 Table of Contents Schedule of Changes in Long-Term Debt* For the Fiscal Year Ended June 30, 2019 (in thousands) July 1, 2018 Issued Retired Refunding Bonds Issued Bonds Defeased Amortizations and Contract Adjustments June 30, 2019 Governmental Business-type Activities Activities Final Payment Date GENERAL OBLIGATION BONDS City of Scottsdale, Arizona 172 Governmental Activities 2002 GO Refunding Preservation 2010 GO Various Purpose 2011 GO Preservation 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 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 $ $ $ $ 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 $ 2,050 855 3,110 7,295 1,000 585 9,694 1,276 6,080 6,890 1,690 42,250 $ - $ - $ - $ - $ - $ (15) (3) (285) (109) (613) (144) (28) (1,037) (739) (162) (485) (392) (365) (4,377) $ - $ 9,500 2,725 15,575 48,600 9,485 44,020 73,000 11,285 40,988 5,642 80,320 49,175 17,410 18,495 26,826 13,159 17,010 159 45 1,427 1,630 3,678 2,168 426 4,148 11,094 2,427 2,424 5,867 2,924 521,632 $ - $ 9,500 2,725 15,575 48,600 9,485 44,020 73,000 11,285 40,988 5,642 80,320 49,175 17,410 18,495 26,826 13,159 17,010 159 45 1,427 1,630 3,678 2,168 426 4,148 11,094 2,427 2,424 5,867 2,924 521,632 $ - 07/01/19 07/01/30 07/01/22 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 19,715 $ 1,354 21,069 $ - $ - $ 3,540 $ 3,540 $ - $ - $ - $ - $ - $ (271) (271) $ 16,175 $ 1,083 17,258 $ - $ - $ 16,175 1,083 17,258 07/01/23 *This exhibit includes both Governmental Activities and Business-type Activities debt (paid out of Enterprise Funds). (continued) Table of Contents Schedule of Changes in Long-Term Debt* For the Fiscal Year Ended June 30, 2019 (in thousands) 173 City of Scottsdale, Arizona 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 Business-type Activities 2006 MPC Refunding 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 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, 2018 $ $ $ $ Issued Retired Bonds Defeased Amortizations and Contract Adjustments June 30, 2019 Governmental Business-type Activities Activities Final Payment Date 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 - $ - 1,300 $ 1,380 55 1,410 3,040 475 605 5,891 14,156 - $ - - $ - - $ (247) (322) (10) (246) (203) (59) (14) (406) (1,507) 50,640 $ 19,775 1,135 29,445 16,760 10,195 11,995 33,817 3,706 2,889 137 3,453 1,626 881 207 6,504 193,165 50,640 $ 19,775 1,135 29,445 16,760 10,195 11,995 33,817 3,706 2,889 137 3,453 1,626 881 207 6,504 193,165 - 07/01/34 07/01/28 07/01/33 07/01/33 07/01/27 07/01/34 07/01/34 07/01/35 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 $ - $ 8,185 1,290 715 3,789 1,300 775 16,054 30,210 $ - $ - $ (563) (45) (89) (623) (551) (163) (84) (2,118) (3,625) $ 79,600 13,940 15,450 43,023 79,970 36,685 22,100 6,199 500 1,335 5,600 9,382 2,946 1,505 318,235 511,400 $ 193,165 $ 79,600 13,940 15,450 43,023 79,970 36,685 22,100 6,199 500 1,335 5,600 9,382 2,946 1,505 318,235 318,235 07/01/30 07/01/30 07/01/34 07/01/28 07/01/36 07/01/37 07/01/37 6,950 $ 5,000 876 389 13,215 $ - $ - $ 3,385 $ 1,155 4,540 $ - $ - $ - $ - $ - $ (146) (97) (243) $ 3,565 $ 3,845 730 292 8,432 $ 3,565 $ 3,845 730 292 8,432 $ - 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, 2019 (in thousands) July 1, 2018 CERTIFICATES OF PARTICIPATION Governmental Activities Series 2010-Public Safety Communications Project Total Certificates of Participation Issued Refunding Bonds Issued Retired Bonds Defeased Amortizations and Contract Adjustments June 30, 2019 Governmental Business-type Activities Activities Final Payment Date City of Scottsdale, Arizona 174 $ $ 4,914 $ 4,914 $ - $ - $ 2,421 $ 2,421 $ - $ - $ - $ - $ - $ - $ 2,493 $ 2,493 $ 2,493 $ 2,493 $ - 07/01/20 $ - $ - $ 140 $ 950 1,195 190 2,475 $ - $ - $ - $ - $ - $ (39) (23) (62) $ 2,810 $ 8,870 3,845 800 315 67 16,707 $ 2,810 $ 8,870 3,845 800 315 67 16,707 $ - 07/15/32 07/15/27 07/15/22 07/15/23 $ 2,950 $ 9,820 5,040 990 354 90 19,244 $ Total Bonds $ 1,171,936 $ - $ 85,436 $ - $ - $ (8,578) $ 1,077,922 $ 742,429 $ 335,493 CAPITAL LEASES Governmental Activities Copier Equipment - City Treasurer Total Capital Leases $ $ 32 $ 32 $ 244 $ 244 $ 57 $ 57 $ - $ - $ - $ - $ - $ - $ 219 $ 219 $ 219 $ 219 $ - 12/31/22 $ - $ - $ 80 $ 74 154 $ - $ - $ - $ - $ - $ - $ 1,039 $ 1,182 2,221 $ 1,039 $ 1,182 2,221 $ - 2032 2035 244 $ 85,647 $ - $ - $ (8,578) $ 1,080,362 $ 744,869 $ 335,493 Compensated Absences Total Other Postemployment Benefit Liability Net Pension Liabilities Risk Management Claims $ 26,322 $ 2,103 297,632 22,447 3,748 29,630 - Total Long-Term Debt $ 1,093,373 $ 368,871 COMMUNITY FACILITIES DISTRICT BONDS Governmental Activities Waterfront Commercial Series 2007 DC Ranch Refunding Series 2012 McDowell Mtn Ranch Refunding Series 2012 Via Linda Road Refunding Series 2012 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 $ 1,119 $ 1,256 2,375 $ TOTAL BONDS, CAPITAL LEASES, AND SERVICE CONCESSION ARRANGEMENTS $ 1,174,343 $ *This exhibit includes both Governmental Activities and Business-type Activities debt (paid out of Enterprise Funds). Table of Contents Statistical Section Contents Page Financial Trends 176 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 185 These schedules contain information to help the reader assess the City’s most significant local revenue sources, property tax, and sales and use taxes. Debt Capacity 192 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 198 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 200 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 175 Table of Contents-Statistical Section Table of Contents City of Scottsdale, Arizona Net Position by Component Last Ten Fiscal Years (accrual basis of accounting) (in thousands) 2010 City of Scottsdale, Arizona 176 2011 2012 Governmental Activities Net Investment in Capital Assets $ 2,729,334 Restricted 97,950 Unrestricted 87,698 Total Governmental Activities Net Position $ 2,914,982 $ 2,704,433 91,862 108,799 $ 2,905,094 $ 2,800,451 100,275 74,124 $ 2,974,850 $ 2,756,186 $ 2,685,105 $ 2,663,269 $ 3,406,976 $ 100,472 109,615 117,485 122,932 133,897 180,942 (19,464) (3,679) (3) $ 3,526,229 (5) $ $ 2,990,555 (1) $ 2,975,662 (2) $ 2,761,290 3,530,134 125,366 (43,632) 3,611,868 Business-type Activities Net Investment in Capital Assets Restricted Unrestricted Total Business-type Activities Net Position $ 941,884 32,244 307,279 $ 1,281,407 $ 1,009,973 36,287 258,395 $ 1,304,655 $ 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 $ 1,059,001 $ 47,101 46,901 47,521 273,321 253,109 255,503 $ 1,366,767 (2) $ 1,336,660 (4) $ 1,362,025 (6) $ 1,069,475 48,911 256,129 1,374,515 Primary Government Net Investment in Capital Assets Restricted Unrestricted Total Primary Government Net Position $ 3,671,218 130,194 394,977 $ 4,196,389 $ 3,714,406 128,149 367,194 $ 4,209,749 $ 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 4,599,609 174,277 212,497 4,986,383 (1) 2013 Table I 2014 2015 $ 3,699,919 164,386 233,645 $ 4,097,950 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. 75 and to record the City's endowment funds. 2016 $ 4,465,977 170,453 251,824 $ 4,888,254 2017 $ $ 2018 $ $ $ $ $ $ 2019 3,604,063 $ 3,675,567 123,057 119,657 (27,779) (5,012) (7) $ 3,790,212 3,699,341 1,099,864 48,926 250,500 1,399,290 $ 1,093,556 52,204 282,796 $ 1,428,556 4,703,927 171,983 222,721 5,098,631 $ 4,769,123 171,861 277,784 $ 5,218,768 Table of Contents-Statistical Section Table of Contents City of Scottsdale, Arizona Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) (in thousands) 2011(1) 2010 City of Scottsdale, Arizona 177 Expenses Governmental Activities $ 24,351 General Government Public Works 37,143 Community and Economic Development Public Safety 116,155 Human Resources 3,717 Community Services 53,596 Information Technology 14,876 Administrative Services 1,917 Economic Vitality 20,676 Finance and Accounting 5,848 Planning, Neighborhood, and Transportation 114,530 Streetlight and Service Districts 538 Gain on In-Substance Defeasance of Debt Interest on Long-Term Debt 39,405 Bond Issuance Costs Total Governmental Activities Expenses 432,752 $ 21,495 35,605 134,221 111,227 3,047 51,974 13,491 2,905 578 40,358 414,901 2012(2) $ 18,964 34,416 126,622 115,740 54,442 17,318 572 40,647 408,721 2014(3) 2013 $ 20,985 36,405 147,514 118,033 56,382 16,863 569 38,389 435,140 Table IIa $ 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(4) 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(5) $ 23,282 42,205 102,153 153,256 54,710 21,173 605 28,724 426,108 2019 $ 26,853 47,420 102,680 153,817 56,730 17,974 584 26,364 432,422 Business-type Activities Water Utility Sewer Utility Airport Solid Waste Total Business-type Activities Expenses 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 96,010 50,462 5,370 21,790 173,632 Total Primary Government Expenses $ 564,213 $ 555,855 $ 562,120 $ 591,445 $ 596,674 $ 610,654 $ 573,128 $ 611,561 $ 602,102 $ 606,054 (1) 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 absorbed into General Government. (2) In fiscal year 2012, Human Resources and Information Technology were absorbed into the Administrative Services division. (3) 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. (4) 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. (5) In fiscal year 2018, the City instituted the practice of allocating bond issuance costs amongst the relevant functions. Table of Contents-Statistical Section Table of Contents City of Scottsdale, Arizona Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) (in thousands) 178 City of Scottsdale, Arizona 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 Streetlight and Services Districts Operating Grants and Contributions Capital Grants and Contributions Total Governmental Activities Program Revenues 2010 $ 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 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 Table IIb 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 2019 $ 117,537 40,666 4,335 19,687 23,865 206,090 4,693 1,567 20,562 11,107 7,078 2,617 591 34,233 35,620 118,068 109,947 45,419 5,493 21,344 17,833 200,036 $ 423,328 $ 281,663 $ 344,123 $ 324,316 $ 300,297 $ 262,898 $ 358,054 $ 372,921 $ 345,118 $ 318,104 $ (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) $ (314,354) 26,404 (287,950) $ $ $ $ $ $ $ $ $ $ Table of Contents-Statistical Section Table of Contents City of Scottsdale, Arizona Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) (in thousands) Table IIc 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 $ 208,083 56,830 1,368 6,730 10,690 283,701 $ 222,118 49,190 248 11,849 10,179 293,584 $ 227,963 44,035 1,063 20,502 7,366 300,929 $ 234,582 49,054 985 12,557 7,244 304,422 $ 248,642 52,715 1,274 8,422 6,202 317,255 $ 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 $ 306,274 70,380 11,860 9,130 7,581 405,225 Business-type Activities Taxes Interest and Investment Income Miscellaneous Transfers Total Business-type Activities 130 4,295 430 (10,690) (5,835) 134 2,658 1,355 (10,179) (6,032) 132 421 7,610 (7,366) 797 144 763 (7,244) (6,337) 154 964 (6,202) (5,084) 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) 167 10,276 (7,581) 2,862 Total Primary Government $ 277,866 $ 287,552 $ 301,726 $ 298,085 $ 312,171 $ 330,892 $ 338,664 $ 336,769 $ 368,956 $ 408,087 Change in Net Position Governmental Activities Business-type Activities Total Primary Government $ 112,635 24,346 $ 136,981 $ $ $ $ $ $ $ 85,639 12,490 $ 98,129 $ 87,197 24,775 $ 111,972 $ 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 City of Scottsdale, Arizona 179 $ (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 90,871 29,266 $ 120,137 Table of Contents-Statistical Section 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 180 All Other Governmental Funds Nonspendable Restricted Committed Assigned Unassigned, Reported in: Special Revenue Funds Debt Service Funds Capital Project Funds Reserved Unreserved, Reported in: Special Revenue Funds Capital Project Funds Total All Other Governmental Funds 2011(1) 2010 $ $ $ 586 51,518 52,104 2012 2013 Table III 2014 2015 2016 2018(2) 2017 2019 $ 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 $ 271 97,097 $ 53,727 $ 52,629 $ 48,944 $ 52,620 $ 56,244 $ 65,596 $ 58,787 $ 73,073 $ 97,368 $ 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 - $ 604 112,267 65,100 - (640) - 20,193 (447) - (1,394) - (1,194) - (1,083) (4,770) (1,010) (4,720) (2,175) (11,205) (681) (6,957) (708) (589) (13,154) 171,239 $ 163,520 30,963 102,490 $ 153,646 $ 149,474 $ 155,134 $ 169,246 (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. $ 132,853 $ 156,938 $ 163,625 $ 151,041 $ Table of Contents-Statistical Section 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 181 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 2010 2011 2012 2013 2014 2015 2016(1) 2017 2018 2019 $ 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 $ 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 $ 310,433 83,962 1,918 29,774 8,960 6,089 6,956 4,904 25,479 412 591 2,575 2,415 6,899 751 $ 346,051 $ 388,232 $ 413,264 $ 406,374 $ 406,810 $ 412,042 $ 408,363 $ 419,664 $ 458,078 $ 492,118 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. Table of Contents-Statistical Section 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 182 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 Streetlight and Services Districts Debt Service Principal Interest and Fiscal Charges Bond Issuance Costs Capital Outlay 2011(1) 2010 $ 17,030 31,391 111,459 3,657 45,655 9,469 1,859 6,059 17,110 27,447 538 $ 19,783 31,463 42,357 108,003 3,013 43,967 9,357 3,031 578 2012(2) $ 18,523 27,307 38,369 107,934 44,762 14,450 572 2013 $ 19,695 29,658 70,351 111,960 45,346 14,141 569 Table IVb 2014 $ 19,730 33,381 41,063 119,159 45,035 14,950 576 2015 $ 20,815 34,518 44,550 123,761 44,998 15,050 583 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 99,722 105,930 36,706 1,643 52,164 Total Expenditures $ 422,583 $ 447,825 $ 466,903 $ 576,847 $ 471,324 $ 480,718 Excess (Deficiency) of Revenues over (under) Expenditures $ $ $ $ (170,473) $ $ (76,532) (59,593) (53,639) (1) (64,514) (68,676) 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 2018 $ 23,716 35,013 47,696 136,075 47,056 16,309 605 In fiscal year 2012, Human Resources and Information Technology were absorbed into the Administrative Services division. $ 28,306 35,154 48,860 146,250 48,786 15,279 584 53,313 34,664 26,674 57,956 31,285 672 75,099 68,017 32,052 241 54,311 66,053 29,752 64,395 $ 403,131 $ 467,401 $ 461,091 $ 483,419 $ 5,232 $ $ $ (47,737) (3,013) 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 absorbed into General Government. (2) 2019 8,699 Table of Contents-Statistical Section 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 2010 $ 108,066 (98,693) 50,800 843 - 183 City of Scottsdale, Arizona Total Other Financing Sources (Uses) Net Change in Fund Balances Debt Service as a Percentage of Non-capital Expenditures (1) 2011 $ 61,016 $ (15,516) 21.0% 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% 78,171 (70,919) 111,250 140,000 22,082 (99,684) - 2014 $ 180,900 $ 10,427 25.8% Table IVc 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% $ 2017 2018 2019 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 $ 108,177 (100,735) 244 191 10,807 28,344 36,864 7,877 16,039 $ 23.4% 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. (19,393) 22.7% $ 33,851 24.3% $ 16,576 22.5% Table of Contents-Statistical Section 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 184 Fiscal Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Fiscal Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (1) $ $ Property 58,354 65,970 65,089 64,908 64,914 64,272 61,956 63,320 63,577 68,738 Privilege and Use General $ 77,878 80,119 84,633 89,002 95,604 100,560 104,995 103,081 116,679 122,152 Franchise Taxes Cable TV Light and Power Franchise Franchise 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 3,293 8,832 Privilege and Use McDowell Mtn Preserve $ 26,416 27,199 28,809 30,376 32,655 34,429 36,029 35,489 40,089 41,909 Sales and Use Taxes Privilege and Use Privilege and Use Transportation Public Safety $ 14,608 $ 7,541 15,042 7,765 15,985 8,231 16,852 8,679 18,116 9,330 19,097 9,837 19,938 10,294 19,615 10,140 22,044 11,454 11,974 27,788 (2) Intergovernmental State Revenue State Shared Sales Sharing $ 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 25,187 30,269 The Transient Occupancy tax rate increased from 3% to 5%, effective July 1, 2010. (2) The Privilege and Use-Transportation tax rate increased from 0.2% to 0.3%, effective February 1, 2019. Table V $ Other 979 1,010 1,086 838 900 906 913 921 931 3,102 $ Transient Occupancy 7,113 13,126 (1) 13,430 13,852 15,303 17,047 17,397 18,951 19,837 22,407 Table of Contents-Statistical Section Table of Contents City of Scottsdale, Arizona Taxable Sales Subject to Privilege (Sales) Tax by Category Last Ten Fiscal Years (dollars in thousands) Table VI City of Scottsdale, Arizona 185 Automotive Construction Food Stores Hotel/Motel Major Department Stores Miscellaneous Retail Stores Other Taxable Activity Rentals Restaurants Utilities 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) $ 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 2019(2) $ 1,792,335 997,164 796,551 730,329 970,656 2,200,161 1,059,397 1,719,075 1,144,395 455,118 Total $ 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 $ 11,865,181 1.65% 1.65% 1.65% 1.65% 1.65% 1.65% 1.65% 1.65% 1.65% 1.75% City Sales Tax (1) Effective January 1, 2017, the Arizona Department of Revenue took over all collection and administration of privilege, use, jet fuel, and bed taxes. (2) Effective February 1, 2019, the transaction privilege tax rate increased to 1.75% and the use tax rate increased to 1.55%. Table of Contents-Statistical Section Table of Contents City of Scottsdale, Arizona Direct and Overlapping Sales Tax Rates Last Ten Fiscal Years Table VII City of Scottsdale, Arizona 186 Fiscal Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Privilege (Sales) Tax Rates City Direct County Rate Rate 1.65% 0.70% 1.65% 0.70% 1.65% 0.70% 1.65% 0.70% 1.65% 0.70% 1.65% 0.70% 1.65% 0.70% 1.65% 0.70% 1.65% 0.70% 1.75% (5) 0.70% Fiscal Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Transient Occupancy Tax Rates City Direct County Rate Rate (2) 3.00% 1.77% 5.00% 1.77% 5.00% 1.77% 5.00% 1.77% 5.00% 1.77% 5.00% 1.77% 5.00% 1.77% 5.00% 1.77% 5.00% 1.77% 5.00% 1.77% State Fiscal Rate Year (1) 6.60% 2010 6.60% 2011 6.60% 2012 (3) 5.60% 2013 5.60% 2014 5.60% 2015 5.60% 2016 5.60% 2017 5.60% 2018 5.60% 2019 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% 1.55% (5) 0.00% State Rate 6.60% (1) 6.60% 6.60% 5.60% (3) 5.60% 5.60% 5.60% 5.60% 5.60% 5.60% Jet Fuel Tax Rates (cents per gallon) State Fiscal City Direct County State Rate Year Rate Rate Rate (1) 6.50% 2010 0.0180 0.0031 0.0305 6.50% 2011 0.0180 0.0031 0.0305 6.50% 2012 0.0180 0.0031 0.0305 (3) 5.50% 2013 0.0180 0.0031 0.0305 5.50% 2014 0.0180 0.0031 0.0305 5.50% 2015 0.0180 0.0031 0.0305 5.50% 2016 0.0180 0.0031 0.0305 5.50% 2017 0.0180 0.0031 0.0305 (4) 5.50% 2018 0.0180 0.0031 0.0305 5.50% 2019 0.0180 0.0031 0.0305 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) 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. (5) Effective February 1, 2019, the City transaction privilege tax rate increased to 1.75% and the use tax rate increased to 1.55%. Table of Contents-Statistical Section 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 187 Automotive Construction Food Stores Hotel/Motel Major Department Stores Miscellaneous Retail Stores Other Taxable Activity Rentals Restaurants Utilities Total Number of Filers 645 3,683 222 256 61 7,151 7,645 8,719 1,099 423 29,904 Fiscal Year 2019 Percentage Tax of Total Revenue 2.16% $ 30,319 12.32% 17,071 0.74% 13,465 0.86% 12,321 0.20% 16,255 23.91% 37,497 25.56% 20,890 29.16% 29,099 3.68% 19,450 1.41% 7,622 100.00% $ 203,989 Percentage of Total 14.86% 8.37% 6.60% 6.04% 7.97% 18.38% 10.24% 14.27% 9.53% 3.74% Number of Filers 497 7,653 170 65 30 4,740 3,717 3,765 843 267 100.00% 21,747 Fiscal Year 2010 Percentage Tax of Total Revenue 2.28% $ 13,868 35.19% 13,168 0.78% 10,101 0.30% 6,622 0.14% 14,802 21.80% 19,892 17.09% 8,948 17.31% 19,565 3.88% 11,272 1.23% 7,365 100.00% $ 125,603 Percentage of Total 11.04% 10.48% 8.04% 5.27% 11.79% 15.84% 7.12% 15.58% 8.98% 5.86% 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. Transient Occupancy taxes are not included in the Tax Revenue for this table. 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. Effective February 1, 2019, the transaction privilege tax rate increased to 1.75% and the use tax rate increased to 1.55%. Table of Contents-Statistical Section Table of Contents City of Scottsdale, Arizona Property Tax Rates Direct and Overlapping Governments Last Ten Fiscal Years Table IX City Direct Rate 188 City of Scottsdale, Arizona Fiscal Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Operating $ 0.3650 0.3836 0.4412 0.5027 0.5342 0.5580 0.5293 0.5071 0.4956 0.5316 Debt Service $ 0.3782 0.5140 0.6503 0.7225 0.7604 0.6869 0.6244 0.6219 0.5889 0.5705 Overlapping Rates Total City $ 0.7432 0.8976 1.0915 1.2252 1.2946 1.2449 1.1537 1.1290 1.0845 1.1021 Operating $ 2.4447 2.4017 2.7498 3.0875 3.3548 3.1091 2.8332 2.8566 2.7463 2.5675 Scottsdale Unified School District Debt Service EVIT Total School $ 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 1.1364 0.0500 3.7539 Overlapping Rates County-Wide Jurisdictions Fiscal Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 County Operating $ 0.9909 1.0508 1.2407 1.2407 1.2807 1.3209 1.3609 1.4009 1.4009 1.4009 Community College $ 0.8844 0.9728 1.2082 1.3778 1.5340 1.5187 1.4940 1.4651 1.4096 1.3754 County Flood $ 0.1367 0.1489 0.1780 0.1780 0.1392 0.1392 0.1592 0.1792 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 0.4741 Fire District Assistance $ 0.0057 0.0066 0.0084 0.0110 0.0121 0.0113 0.0116 0.0112 0.0102 0.0107 Central AZ Project $ 0.1000 0.1000 0.1000 0.1000 0.1400 0.1400 0.1400 0.1400 0.1400 0.1400 County Free Library $ 0.0353 0.0412 0.0492 0.0492 0.0438 0.0556 0.0556 0.0556 0.0556 0.0556 County Special Health Care $ 0.0914 0.1122 0.1494 0.1683 0.1939 0.1856 0.3021 0.3053 0.2851 0.2941 Total County $ 2.5750 2.7889 3.3598 3.5967 3.8560 3.8802 4.0288 4.0583 3.9681 3.9300 Total Direct and Overlapping $ 7.1511 7.4911 8.5014 9.2984 9.7793 9.2887 9.0920 9.0972 8.8353 8.7860 Source: Maricopa County Department of Finance Publications On-Line "Tax Rate 2018". 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 2019 the rates were as follows: DC Ranch CFD - $0.4325, McDowell Mountain Ranch CFD - $0.7004, Scottsdale Mountain CFD - $0.0620, Via Linda Road CFD - $1.1188, and the Waterfront Commercial CFD - $5.6925. Table of Contents-Statistical Section Table of Contents City of Scottsdale, Arizona Principal Property Taxpayers Current Year and Nine Years Ago (dollars in thousands) Table X 2019 City of Scottsdale, Arizona 189 Taxpayer Arizona Public Service Company Scottsdale Fashion Square LLC SDQ FEE LLC XHR Scottsdale Ranch LLC Excel Promenade LLC Portales Corporate Center LLC (1) Qwest Corporation Stockdale Galleria LLC Henkel Corporation Southwest Gas Corporation Gainey Drive Associates JEMB Scottsdale LLC Blackwell Robert L/Etal Pacific Promenade LLC DC Ranch LLC Scottsdale Fiesta Retail Center LLC Total $ $ Taxable Assessed Value 59,713 39,210 19,552 15,721 14,358 14,324 12,417 11,418 10,835 10,821 208,369 Rank 1 2 3 4 5 6 7 8 9 10 - 2010 Percentage of Total Taxable Assessed Value 0.996% 0.654% 0.326% 0.262% 0.239% 0.239% 0.207% 0.190% 0.181% 0.180% 3.474% $ $ Taxable Assessed Value 61,193 66,131 25,786 26,730 26,771 22,213 22,152 17,576 17,529 16,079 302,160 Rank 2 1 5 4 3 6 7 8 9 10 Percentage of Total Taxable Assessed Value 0.728% 0.787% 0.307% 0.318% 0.318% 0.264% 0.264% 0.209% 0.209% 0.191% 3.595% 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 $21,596,981 as provided by SRP. (1) Portales Corporate Center LLC/Etal was renamed Portales Corporate Center LLC in 2016. Table of Contents-Statistical Section 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 2010 P 2010 S Residential Property $ 4,409,444 4,989,883 Personal Property Real Property Commercial Vacant Land Property Historic and Special Use Assessed Value $ $ $ 1,879,139 2,436,470 $ 1,177,944 1,765,907 1,845 2,070 Table XI 259,145 259,145 Less Tax Exempt Property $ (717,210) (1,047,474) Total Taxable Assessed Value Total Direct Tax Rate $ $ 7,010,307 8,406,001 0.36 0.38 City of Scottsdale, Arizona 190 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 3,608,260 4,210,065 1,197,395 1,306,932 759,840 912,980 3,143 3,541 196,631 196,972 (603,538) (674,098) 5,161,731 5,956,392 0.53 0.62 2017 P 2017 S 2018 P 2018 S 3,842,636 4,510,655 4,071,866 4,794,346 1,209,059 1,451,267 1,268,544 1,650,245 723,452 996,458 747,981 1,135,084 1,075 1,488 1,155 1,716 217,238 217,243 223,277 223,276 (594,547) (757,790) (614,085) (876,231) 5,398,913 6,419,321 5,698,738 6,928,436 0.51 0.62 0.50 0.59 2019 P 2019 S 4,301,223 5,014,035 1,335,470 1,726,614 737,727 1,137,771 1,187 1,816 221,801 229,030 (600,412) (885,997) 5,996,996 7,223,269 0.53 0.57 Source: Arizona Department of Revenue Abstract of the Assessment Roll. Table of Contents-Statistical Section Table of Contents City of Scottsdale, Arizona Property Tax Levies and Collections Last Ten Fiscal Years (dollars in thousands) City of Scottsdale, Arizona 191 Fiscal Year Ended June 30 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Total Tax Levy for Fiscal Year $ 57,380 64,327 62,033 62,187 62,367 63,380 59,553 60,954 61,803 66,092 Collected within the Fiscal Year of the Levy $ Amount 55,221 62,237 60,309 60,630 61,227 62,233 58,714 60,056 60,721 64,982 Percentage of Levy 96.2% 96.8% 97.2% 97.5% 98.2% 98.2% 98.6% 98.5% 98.2% 98.3% Collections in Subsequent Years $ 1,622 737 672 791 598 574 545 607 817 - Table XII Total Collections to Date $ Amount 56,843 62,974 60,981 61,421 61,825 62,807 59,259 60,663 61,538 64,982 Percentage of Levy 99.1% 97.9% 98.3% 98.8% 99.1% 99.1% 99.5% 99.5% 99.6% 98.3% 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-Statistical Section 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 192 Municipal Property Corporation Bonds $ 153,582 152,578 149,983 222,403 218,942 243,044 232,970 221,535 208,828 193,165 Scottsdale Preserve Authority Bonds $ 67,567 64,309 60,304 56,154 53,100 48,276 43,489 17,823 13,215 8,432 Fiscal Year Ended June 30 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 General Obligation Bonds $ 583,071 579,972 603,426 651,224 647,859 624,616 585,931 590,910 568,259 521,632 Fiscal Year Ended June 30 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Business-type Activities Municipal Property Revenue Corporation Bonds Bonds Capital Leases $ 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 17,258 318,235 - 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 Special Facilities Assessment District Certificates of Participation Bonds Bonds $ 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 2,493 16,707 Total Primary Government $ 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 1,080,362 Percentage of Personal Income 11.62% 11.77% 11.09% 11.63% 11.43% 11.26% 10.26% 9.98% 8.96% 7.45% Per Capita $ 5,691 5,709 5,667 5,965 5,776 5,689 5,292 5,212 4,843 4,232 Contracts Payable $ 15,732 14,582 13,375 2,570 - $ Capital Leases 183 329 229 156 95 32 219 Service Concession Arrangements $ 3,144 2,990 2,837 2,683 2,529 2,375 2,221 Table of Contents-Statistical Section 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 193 Fiscal Year Ended June 30 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Governmental Activities General Obligation Bonds $ 583,071 579,972 603,426 651,224 647,859 624,616 585,931 590,910 568,259 521,632 Less: Amounts Available in Debt Service Fund $ 4,932 6,787 5,789 10,105 9,369 12,172 11,529 11,516 2,471 1,394 Net General Bonded Debt $ 578,139 573,185 597,637 641,119 638,490 612,444 574,402 579,394 565,788 520,238 Percentage of Total Taxable Assessed Value of Property 6.9% 7.8% 10.5% 12.6% 13.2% 11.8% 9.6% 9.0% 8.2% 7.2% 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) Table XIV Percentage of Total Taxable Assessed Value of Property was corrected using the information from table XI for fiscal year 2010. (1) Per Capita $ 2,641 2,637 2,742 2,885 2,840 2,683 2,484 2,434 2,333 2,038 Table of Contents-Statistical Section Table of Contents City of Scottsdale, Arizona Direct and Overlapping Governmental Activities Debt As of June 30, 2019 (dollars in thousands) City of Scottsdale, Arizona 194 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 $ 312,450 459,125 153,535 30,550 278,536 319,053 32,255 8,800 389,120 82,925 116,510 Table XV Estimated Percentage Applicable 15.6423% 15.6423% 0.0003% 6.1717% 69.7880% 29.9232% 62.5073% 3.6110% 0.3678% 0.0001% 6.7946% Estimated Share of Overlapping Debt $ Subtotal, overlapping debt City direct debt Total direct and overlapping debt 48,874 71,818 1,885 194,385 95,471 20,162 318 1,431 7,916 442,260 744,869 100.0000% 744,869 $ 1,187,129 Sources: Arizona Tax Research Association, State and County Abstract of the Assessment Roll, and Arizona Department of Revenue. Notes: 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 2018-19 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-Statistical Section 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 2010 $ Total Net Debt Applicable to 20% Limit 1,681,200 2011 $ 499,945 2012 2013 1,475,082 $ 1,138,398 $ 1,015,999 498,490 524,675 561,126 2015 2016 (1) 965,570 $ 1,035,356 $ 1,191,278 553,121 532,888 513,768 2014 $ 2017 (2) $ Excess Premium Legal 20% Debt Margin (Available Borrowing Capacity) $ 195 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 1,181,255 $ 29.74% $ Total Net Debt Applicable to 6% Limit 504,360 976,592 $ 33.79% $ 78,245 442,524 613,723 $ 46.09% $ 74,250 341,519 454,873 $ 55.23% $ 69,750 304,799 412,449 $ 57.28% $ 78,009 289,671 502,468 $ 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) $ 426,115 15.51% $ 368,274 16.78% $ 271,769 20.42% $ 226,790 25.59% $ 223,727 22.77% $ 256,584 $ 37,747 17.39% 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. $ 319,637 10.56% 2019 1,283,864 $ 1,385,687 $ 1,444,654 521,179 511,046 479,265 8,180 10,637 10,415 754,505 $ 41.23% Excess Premium Legal 6% Debt Margin (Available Borrowing Capacity) 2018 $ 385,159 864,004 $ 37.65% $ 415,706 954,974 33.90% $ 433,396 26,116 14,419 3,950 - - - 359,043 6.78% $ 401,287 3.47% $ 429,446 0.91% Table of Contents-Statistical Section Table of Contents City of Scottsdale, Arizona Legal Debt Margin Information As of June 30, 2019 (in thousands) Table XVIb Legal Debt Margin Calculation for Fiscal Year 2019 Assessed Valuation as of June 30, 2019 $ 7,223,269 20% Limitation Debt Limit Equal to 20% of Assessed Valuation $ 1,444,654 196 City of Scottsdale, Arizona Debt applicable to limit: General Obligation Bonds 479,265 Excess Premium 10,415 Legal 20% Debt Margin (Available Borrowing Capacity) $ 954,974 6% Limitation Debt Limit Equal to 6% of Assessed Valuation $ 433,396 Debt applicable to limit: General Obligation Bonds 3,950 Excess Premium Legal 6% Debt Margin (Available Borrowing Capacity) $ 429,446 Source: City of Scottsdale City Treasurer Notes: Under Arizona law, cities can issue general obligation bonds for purposes of water, sewer, artificial light, parks, playgrounds and recreational facilities, open space preserves, public safety, and streets 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-Statistical Section Table of Contents City of Scottsdale, Arizona Pledged-Revenue Coverage Last Ten Fiscal Years (dollars in thousands) Table XVII Water and Sewer Revenue Bonds 197 City of Scottsdale, Arizona Fiscal Year Ended June 30 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Operating Revenue(1) $ 133,624 132,441 134,336 138,224 142,066 139,242 152,612 148,310 160,161 164,487 Less: Operating Expenses $ 70,165 77,456 78,837 73,647 77,891 79,154 81,586 85,909 87,130 82,748 Net Operating Revenue $ 63,459 54,985 55,499 64,577 64,175 60,088 71,026 62,401 73,031 81,739 Development Fee Revenue $ 3,126 3,859 3,073 12,213 15,139 5,326 5,156 6,072 6,525 4,256 Net Revenue $ 66,585 58,844 58,572 76,790 79,314 65,414 76,182 68,473 79,556 85,995 Special Assessment Bonds Fiscal Year Ended June 30 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Special Assessment Collections $ 765 733 719 591 - Debt Service Principal $ 757 757 755 755 - Debt Service Interest $ 121 86 52 17 - Municipal Property Corporation Bonds Debt Service Principal $ 3,115 3,220 3,380 3,115 3,240 2,940 3,055 3,195 3,370 3,540 Debt Service Interest $ 2,351 2,199 2,056 1,891 1,738 1,599 1,487 1,354 1,195 1,026 Coverage 12.18 10.86 10.77 15.34 15.93 14.41 16.77 15.05 17.43 18.83 Excise Tax(4)(5)(6) $ 170,638 155,515 157,645 170,227 183,376 195,037 194,560 196,729 216,643 223,668 Debt Service Principal(7) $ 9,715 9,785 11,841 12,355 18,200 16,950 20,215 22,550 26,290 30,210 Debt Service Interest(7) $ 18,415 22,185 21,141 21,480 22,994 22,299 23,220 21,599 23,908 22,474 Coverage 6.07 4.86 4.78 5.03 4.45 4.97 4.48 4.46 4.32 4.25 Scottsdale Preserve Authority Bonds Coverage(2) 0.87 0.87 0.89 0.77 N/A N/A N/A N/A N/A N/A 0.2 % and 0.15% Sales Tax(3) $ 26,416 27,199 28,809 30,376 32,655 34,429 36,029 35,489 40,089 41,909 Debt Service Principal $ 3,365 3,470 3,655 3,800 3,960 4,140 4,340 4,175 4,365 4,540 Debt Service Interest $ 3,374 2,471 2,835 2,680 2,508 2,330 2,143 1,423 734 577 Coverage 3.92 4.58 4.44 4.69 5.05 5.32 5.56 6.34 7.86 8.19 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. (7) Includes debt service payments paid out of revenue from the water and sewer fund and the tourism development fund. Table of Contents-Statistical Section Table of Contents City of Scottsdale, Arizona Demographic and Economic Statistics Last Ten Fiscal Years City of Scottsdale, Arizona 198 Fiscal Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Population(1) 218,888 217,365 217,965 222,200 224,800 228,300 231,200 238,000 242,500 255,300 Personal Income(2) (in thousands) $ 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 14,499,508 Per Capita Personal Income(3) $ 48,955 48,502 51,090 51,276 50,525 50,531 51,564 52,220 54,060 56,794 Median Age(4) 45.4 45.4 45.4 45.4 45.1 45.4 46.1 46.3 46.3 46.9 Table XVIII Charter and Public School Enrollment(5) 27,093 27,116 28,177 27,816 27,191 26,233 25,979 25,847 25,598 25,598 Fiscal Year End Average Unemployment Rate(6) 6.8% 6.5% 6.8% 5.7% 5.4% 4.7% 4.2% 3.8% 3.5% 3.5% Data Sources and Notes: (1) July 1 Population Estimate U.S. Census 2018. 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 2011-2019 estimates. (4) U.S. Census; fiscal years 2008-2009 based on Census 2000; fiscal years 2010-2012 based on Census 2010; fiscal years 2013-2019 based on U.S. Census, American Community Survey, 5-Year Estimates. (5) Arizona Department of Education; 2019 data updated to reflect 9 charter and 29 public schools located within Scottsdale city boundaries. At the time of reporting, information for 2019 is not available. 2018 updated based on information received in November 2018. (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 2018 calendar year that ended within the 2019 fiscal year. Table of Contents-Statistical Section Table of Contents City of Scottsdale, Arizona Principal Employers Current Year and Nine Years Ago 2019 City of Scottsdale, Arizona 199 Employer HonorHealth(2) Vanguard(3) (4) CVS Health City of Scottsdale General Dynamics Mission Systems(5) Mayo Clinic (6) Scottsdale Unified School District (7) Nationwide Specialty Yelp Go Daddy Group Troon Golf LLC Total Employees 6,841 3,300 3,012 2,727 2,500 2,427 2,149 1,462 1,300 719 Rank 1 2 3 4 5 6 7 8 9 10 26,437 Percentage of Total City Employment(1) 4.68% 2.26% 2.06% 1.87% 1.71% 1.66% 1.47% 1.00% 0.89% 0.49% 18.09% Table XIX 2010 Employees 6,650 1,899 2,048 2,538 3,600 4,900 3,126 1,400 Rank 1 8 6 5 3 2 4 10 1,915 1,539 29,615 7 9 Source: City of Scottsdale, Economic Development Department communications with employers, June 2019. (1) Annual Employment according to the Arizona Office of Economic Opportunity (June 2019) was 146,072; it was reported in the fiscal year 2010 CAFR as 182,771. (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) General Dynamics was renamed General Dynamics C4 Systems in 2011 and was then renamed General Dynamics Mission Systems in 2016. (6) Scottsdale Unified School District has administrative offices and some schools outside of Scottsdale city limits. 2019 numbers only report Scottsdale-based employees. 2010 included all employees. (7) Scottsdale Insurance was renamed Nationwide Specialty in 2015. Percentage of Total City Employment(1) 3.64% 1.04% 1.12% 1.39% 1.97% 2.68% 1.71% 0.77% 1.05% 0.84% 16.21% Table of Contents-Statistical Section Table of Contents City of Scottsdale, Arizona Full-time Equivalent City Government Employees by Function Last Ten Fiscal Years City of Scottsdale, Arizona 200 Function Administrative Services Aviation City Treasurer Community and Economic Development Community Services Economic Vitality General Government Human Resources Information Technology Planning, Neighborhood, and Transportation Public Safety Public Works Solid Waste Water Resources Total 2010 35.0 14.0 92.5 489.3 47.0 155.0 30.0 78.8 167.5 953.6 197.0 89.0 189.0 2,537.7 Table XX 2012(1) 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 2019 102.1 15.5 101.7 182.2 476.9 153.0 30.5 75.8 141.0 140.0 140.0 140.4 142.2 142.2 151.2 162.7 957.6 206.0 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 2,489.6 952.7 210.8 96.8 215.9 2,517.3 Source: The City of Scottsdale's Budget Department. (1) Effective fiscal year 2012, Human Resources and Information Technology were absorbed into the Administrative Services division, and the Meter Reading department was moved from Water Resources to City Treasurer. (2) (2) 2011 35.0 14.0 95.5 214.5 487.6 Effective fiscal year 2019, Purchasing was moved from Administrative Services to City Treasurer. Table of Contents-Statistical Section Table of Contents City of Scottsdale, Arizona (1) Operating Indicators by Division Last Ten Fiscal Years City of Scottsdale, Arizona 201 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 Treasurer # of Accounts Payable checks issued # of customer contacts (utilities, taxes, and licensing) (2) # of Purchasing purchase orders City Manager % of survey respondents rating the "Overall Quality of Life in Scottsdale" as good (3) to excellent News releases, media updates, traffic alerts, construction updates released to news media Total ad value equivalency generated(4) Acres of land acquired for inclusion in the McDowell Sonoran Preserve % increase of Neighborhood Watch groups annually Administrative Services Communications % of survey respondents rating "Your Neighborhood as a Place to Live" as good to excellent(3) 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) Community Services McDowell Sonoran Preserve Annual Visitors – All trailheads # of square feet of medians and rights of way maintained (continued) Table XXI 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 32% 40% 37% 37% 34% 39% 39% 35% 35% 35% 16 17 14 14 14 16 13 13 15 14 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 70 946 63 107,720 / 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 83,471/ 78,390 33,620 175,918 5,748 45,592 255,124 5,310 45,112 246,319 5,018 33,599 254,992 4,678 32,865 209,325 5,019 32,491 196,549 5,064 31,648 190,422 5,078 31,268 195,819 5,143 32,074 256,784 4,989 30,401 140,915 4,984 No Survey 94% No Survey No Survey 98% No Survey No Survey 96% No Survey 96% 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 N/A N/A 399 5% 2,001 5% 4,419 5% 6,400 5% 2,365 2% 0 0% 0 5% 420 5% 0 2% 0 7% No Survey 91% No Survey No Survey 93% No Survey No Survey 93% No Survey 97% 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% 9.3% 1.2% 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 1,026,016 170.0 266.0 266.0 167.3 45.8 51.4 58.6 67.2 82.8 86.9 104,290 17,000,000 148,639 23,168,510 177,922 23,475,510 223,538 22,726,329 325,023 22,502,626 659,882 22,832,327 706,682 22,913,730 698,090 22,827,842 732,510 22,968,631 747,000 22,897,463 Table of Contents-Statistical Section Table of Contents City of Scottsdale, Arizona (1) Operating Indicators by Division Last Ten Fiscal Years City of Scottsdale, Arizona 202 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 (5) Targeted job creation - number of companies/number of jobs 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 Scottsdale Uniform Crime Report, Part 1 (crimes per thousand)(6) 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 XXI 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 7 6 6 12 15 12 12 15 13 14 100% 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 99% 98% 13,676 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 1,933,249 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 14 / 1531 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 70.2% 12% 155 156,896 136,089 146,058 137,333 148,971 153,285 162,535 164,622 166,425 176,677 28 20 20 27 24 52 51 55 49 46 29.6 31.9 32.8 29.1 27.8 25.5 25.6 26.3 24.7 25.2 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% 5:05 100% 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 37,750 0.15 4:52 Table of Contents-Statistical Section Table of Contents City of Scottsdale, Arizona (1) Operating Indicators by Division Last Ten Fiscal Years 203 City of Scottsdale, Arizona Division Public Works and Water Resources Public Works (7) 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 (8) program Actions to improve safety and efficiency of traffic flow (signal timing changes and (9) traffic control and speed limit studies) 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) (10) # of water meters read annually Table XXI 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 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 2,961,661 180 82,711 1,497 2,573 2,591 2,691 2,905 2,362 3,345 2,770 2,509 2,629 8,578 10,397 10,500 5,043 3,687 4,252 6,638 9,737 8,697 4,748 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 91,279 66.3 11.9 81,841 22.1 1,099,164 Source: The City of Scottsdale's Budget department and applicable City divisions. (1) This presentation is consistent with the organizational structure approved as part of the fiscal year 2019 Budget. It has been noted where changes were approved by the City Council mid-year. (2) Effective fiscal year 2019 the # of Purchasing purchase orders was moved from Administrative Services to City Treasurer to align with an organizational change made by the City Manager. (3) 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" (4) 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. (5) 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. (6) 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. (7) 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. (8) The statistic for "# of citizens serviced annually by Household Hazardous Waste Collection program" number of events was restored in fiscal year 2011. During fiscal year 2010 the number of events was reduced as a budget savings initiative. (9) The statistic for "Actions to improve safety and efficiency of traffic flow (signal timing changes and traffic control and speed limit studies)" has decreased due to implementation of predefined special timing plans in response to special events, construction, and accidents. Prior to fiscal year 2019, signal timing was changed from cycle to cycle when needed during special events, construction, or accidents based on observations. (10) Effective fiscal year 2012, the City Council approved placing Meter Reading under the control of the Water Resources Division. Table of Contents-Statistical Section 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 2010 2011 2012 2013 2014 Table XXII 2015 2016 2017 2018 2019 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 4 343 15 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 20,071,109 2,851 296 Culture and Recreation Parks Parks Acreage Swimming Pools Tennis Courts Community Centers 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 42 975 4 53 6 Water Water Mains (miles) Fire Hydrants 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 2,124 11,301 Sewer Sanitary Sewers (miles) Storm Sewers (miles) 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 1,483.0 325.0 Highways and Streets Square Yards of Pavement Equivalent 12' Wide Lane Miles Traffic Signals City of Scottsdale, Arizona 204 Source: City of Scottsdale's divisions. Table of Contents City of Scottsdale, Arizona City Treasurer’s Office (480) 312-2437 Visit our website www.ScottsdaleAZ.gov/Finance