Annual Comprehensive Financial Report CITY OF SCOTTSDALE, ARIZONA For the Fiscal Year Ended June 30, 2023 City of Scottsdale, Arizona Annual Comprehensive Financial Report for the fiscal year ended June 30, 2023 Prepared by: City Treasurer’s Office Sonia Andrews, CPA City Treasurer/Chief Financial Officer Anna Marie Henthorn, CPA Accounting Director City of Scottsdale, Arizona Annual Comprehensive Financial Report For the Fiscal Year ended June 30, 2023 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 ................................................................................................. 18 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Position ................................................................................................................ 35 Statement of Activities ...................................................................................................................... 37 Fund Financial Statements: Balance Sheet - Governmental Funds ............................................................................................. 38 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position ................................................................................................................................... 40 Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds ......................................................................................................................... 41 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities .............................. 43 Statement of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - General Fund .................................................................................................. 44 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual - General Fund ................................................................. 46 Statement of Fund Net Position - Proprietary Funds .................................................................. 47 Reconciliation of the Proprietary Funds Statement of Fund Net Position to the Statement of Net Position ..................................................................................................... 49 City of Scottsdale, Arizona i Statement of Revenues, Expenses, and Changes in Fund Net Position Proprietary Funds ............................................................................................................................... 50 Reconciliation of the Proprietary Funds Statement of Revenue, Expenses, and Changes in Fund Net Position to the Statement of Activities ............................................ 51 Statement of Cash Flows - Proprietary Funds .............................................................................. 52 Notes to Financial Statements: I.Summary of Significant Accounting Policies .................................................................................... 54 II.Reconciliation of Government-wide and Fund Financial Statements ......................................... 66 III.Stewardship, Compliance, and Accountability................................................................................ 77 IV. Detailed Notes on All Funds A. Cash and Investments................................................................................................................... 82 B. Endowments................................................................................................................................... 88 C. Receivables ...................................................................................................................................... 88 D. Capital Assets ................................................................................................................................. 91 E. Interfund Balances and Interfund Transfers ............................................................................ 95 F.Leases.......................... ..................................................................................................................... 96 G. Subscription-Based Information Technology Arrangements ................................................ 97 H. Public-Public Partnerships and Public-Private Partnerships .................................................. 99 I. Bonds, Loans, and Other Payables ............................................................................................. 101 V. Other Information A. Risk Management ........................................................................................................................ 112 B. Contingent Liabilities ................................................................................................................. 112 C.Joint Ventures ............................................................................................................................... 113 D. Pollution Remediation ................................................................................................................ 114 E. Related Organization .................................................................................................................. 115 F. Pension, Retirement, and Postemployment Benefits Other than Pensions..........................115 G. Other Postemployment Benefits .............................................................................................. 137 Required Supplementary Information .................................................................................................. 138 City of Scottsdale, Arizona ii Notes to Required Supplementary Information ................................................................................. 145 Combining and Individual Fund Statements and Schedules: Combining Balance Sheet - Nonmajor Governmental Funds .......................................................... 149 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds ........................................................................................................... 150 Combining Balance Sheet - Nonmajor Special Revenue Governmental Funds ............................ 151 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Special Revenue Governmental Funds ............................................................................. 153 Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual: Transportation - Special Revenue Fund ........................................................................................ 155 Community Development Block Grant - Special Revenue Fund ............................................. 156 HOME - Special Revenue Fund .................................................................................................... 157 Grants - Special Revenue Fund ...................................................................................................... 158 Housing Choice Voucher Program - Special Revenue Fund ..................................................... 159 Preserve Privilege Tax - Special Revenue Fund ........................................................................... 160 Streetlight Districts - Special Revenue Fund ................................................................................ 161 Special Programs - Special Revenue Fund .................................................................................... 162 Tourism Development - Special Revenue Fund .......................................................................... 163 Stadium Facility - Special Revenue Fund ...................................................................................... 164 Combining and Individual Fund Statements and Schedules: Combining Balance Sheet - Nonmajor Debt Service Governmental Funds.................................. 165 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Debt Service Governmental Funds ................................................................................... 166 Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual: General Obligation Bond Debt Service Fund ............................................................................. 167 Municipal Property Corporation Debt Service Fund ................................................................. 168 Combining and Individual Fund Statements and Schedules: Combining Balance Sheet - Nonmajor Capital Projects Governmental Funds ............................. 169 City of Scottsdale, Arizona iii Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Capital Projects Governmental Funds .............................................................................. 170 Combining Balance Sheet - Nonmajor Permanent Governmental Funds ..................................... 171 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Permanent Governmental Funds....................................................................................... 172 Combining Statement of Fund Net Position - Internal Service Funds .......................................... 174 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position Internal Service Funds ............................................................................................................................ 175 Combining Statement of Cash Flows - Internal Service Funds....................................................... 176 Other Supplementary Information: Schedule of Changes in Long-Term Debt........................................................................................... 178 Statistical Section Financial Trends Net Position by Component - Last Ten Fiscal Years (accrual basis of accounting) ..................... 184 Changes in Net Position - Last Ten Fiscal Years (accrual basis of accounting) ............................ 185 Fund Balances of Governmental Funds - Last Ten Fiscal Years (modified accrual basis of accounting)................................................................................................. 188 Changes in Fund Balances of Governmental Funds - Last Ten Fiscal Years (modified accrual basis of accounting)................................................................................................. 189 Tax Revenues by Source - Last Ten Fiscal Years (modified accrual basis of accounting) ........... 192 Revenue Capacity Taxable Sales Subject to Privilege (Sales) Tax by Category - Last Ten Fiscal Years ...................... 193 Direct and Overlapping Sales Tax Rates - Last Ten Fiscal Years ..................................................... 194 Sales Tax Revenue Payers by Industry - Current Year and Nine Years Ago .................................. 195 Property Tax Rates - Direct and Overlapping Governments - Last Ten Fiscal Years .................. 196 Principal Property Taxpayers - Current Year and Nine Years Ago.................................................. 197 Assessed Value of Taxable Property - Last Ten Fiscal Years............................................................ 198 Property Tax Levies and Collections - Last Ten Fiscal Years ........................................................... 199 City of Scottsdale, Arizona iv Debt Capacity Ratios of Outstanding Debt by Type - Last Ten Fiscal Years .......................................................... 200 Ratios of Net General Bonded Debt Outstanding - Last Ten Fiscal Years ................................... 201 Direct and Overlapping Governmental Activities Debt as of June 30, 2023 ................................ 202 Legal Debt Margin Information - Last Ten Fiscal Years ................................................................... 203 Pledged-Revenue Coverage - Last Ten Fiscal Years ........................................................................... 205 Demographic and Economic Information Demographic and Economic Statistics - Last Ten Fiscal Years ....................................................... 206 Principal Employers - Current Year and Nine Years Ago ................................................................. 207 Operating Information Full-time Equivalent City Government Employees by Function - Last Ten Fiscal Years............ 208 Operating Indicators by Division - Last Ten Fiscal Years ................................................................. 209 Capital Asset Statistics by Function - Last Ten Fiscal Years ............................................................. 212 City of Scottsdale, Arizona v City of Scottsdale, Arizona vi Letter of Transmittal Table of Contents For the Fiscal Year Ended June 30, 2023 October 26, 2023 To the Honorable Mayor, Members of the City Council, and Citizens of the City of Scottsdale, Arizona: The Annual Comprehensive Financial Report of the City of Scottsdale, Arizona, (the City) for the fiscal year ended June 30, 2023, 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, including its blended component units. 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 that the City’s financial statements for the fiscal year ended June 30, 2023, 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 on the first page 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. This letter of transmittal provides a non-technical summary of the City’s profile, 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, Arizona 1 Table of Contents 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, the Tonto National Forest to the north, and the McDowell Mountains and the Salt River-Pima Maricopa Indian Community on the east. Scottsdale and its neighboring cities form the Phoenix Metro 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, the 2020 census reporting 241,361 residents, and a current estimate of 243,100 residents. The City is the seventh largest municipality by population in Arizona, and the 92nd largest city in the United States. 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 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 2023, 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 and fund level; 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. For example, if the Public Safety Division is over budget and there are savings in the Community Services Division, City Council can authorize a budget transfer between these divisions. LOCAL ECONOMY Business Scottsdale is one of the state’s leading job centers with a robust economy anchored by biomedical science companies, high-tech innovation, tourism, financial services, and corporate headquarters. The Scottsdale Airpark is one of the largest employment centers in the State of Arizona with more than 3,200 businesses employing over 59,000 employees in 2 million square feet of commercial space. The high-tech innovation center SkySong, located a few miles from downtown Scottsdale, is designed to help companies grow through a unique partnership with Arizona State University. Scottsdale’s downtown, Old Town Scottsdale, is an emerging center for high-tech businesses, and home to one of the most successful shopping centers in the southwest United States, Scottsdale Fashion Square. To the 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. Prior to the pandemic, the average unemployment rate in Scottsdale was 3.4 percent in fiscal year 2020. In June 2020, Scottsdale’s unemployment rate increased to 8.9 percent, compared to the state’s rate of 10.3 percent, and the national rate of 11.2 percent. As the economy continued to rebound, the average unemployment for Scottsdale in fiscal year 2023 was 2.8 percent down from 3.0 percent as reported in 2022. Tourism Tourism is one of Scottsdale’s largest and most vibrant industries and is a significant contributor to the City’s economy. With great weather, breathtaking scenery, and a calendar full of special events, Scottsdale is a popular tourist destination in Arizona that welcomes millions of visitors annually. The City boasts many hotels, including several world-class resorts, along with spectacular spas, trend-setting dining, and one of a kind Sonoran Desert golf courses. The City experienced significant tourism revenues resulting from the busiest special event season in Scottsdale’s history and from Arizona hosting the Super Bowl. The City projects a reduction in local tax revenues in anticipation of an economic downturn and slowdown in consumer spending. Transaction Privilege (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 its share of sales tax generated from the State of Arizona’s applied tax rate. Sales tax is remitted to the City by the state on a weekly basis. City of Scottsdale, Arizona 3 Table of Contents Sales tax revenue represented 48.9 percent of General Fund revenues for fiscal year 2023, totaling $199.4 million. The year-over-year increase of 9.7 percent in the General Fund sales tax revenue for fiscal year 2023 was partially due to record-breaking attendance at City-hosted events, including Super Bowl related activities in the City. These activities led to strong consumer spending on travel, entertainment, and dining. Categories with the highest reported tax revenues were miscellaneous retail stores, rentals, and automotive. The City expects a decrease in General Fund sales tax revenue across most categories through fiscal year 2024, when compared to fiscal year 2023 levels, due to the projected downturn in the economy and not having the influx of revenues from specialized events such as the Super Bowl. Property Values Scottsdale is a safe, family-friendly community and benefits from a robust assessed valuation of the properties contained within its boundaries. These strong assessed valuations contribute to Scottsdale residents experiencing lower property tax rates and higher median housing values than many of the surrounding municipalities in the Phoenix metropolitan area. Scottsdale property owners will see an increase in the City’s combined property tax rate in the coming year of $0.0743 over the prior year. This increase in the combined rate is primarily attributed to the secondary tax rate which pays for the City’s expected 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. As a result of the continued recovery from the pandemic’s impact to the local economy, the City anticipates a moderate increase in overall revenues for the five-year financial forecast with anticipated revenues returning to normal historical growth trends. The City will continue to focus on efficient spending to maintain essential City services to the community such as police, fire, transportation, and social services. Achieving and maintaining fiscal stability requires many elements all working in concert with each other. The following identifies key elements of our financial plan. 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 adopted 14 comprehensive financial policies governing revenue management, expenditure management, fiscal planning and budgeting, capital assets, cash and investments, debt, grants, risk management, reserves and fund balance, pension funding, tourism development, economic development, enterprise funds, and accounting, auditing, 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. The City Council has also adopted a 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. In June 2023, the City adopted the annual budget which included funding an additional one-time contribution of $10 million toward the PSPRS pension plans in fiscal year 2024. City of Scottsdale, Arizona 4 Table of Contents Financial Resources Planning Scottsdale’s strategic financial planning begins with a determination of the City’s fiscal capacity based on longterm financial forecasts of available revenues. Conservative financial forecasts, coupled with financial trend analysis techniques and reserve analysis, help preserve the fiscal well-being of Scottsdale. Strategic financial planning is a critical element to maintain long-term financial stability. Multi-Year Operating Budget Planning Multi-year budgeting encompasses long-range operating expenditure plans (including the operating impacts of capital projects), which are linked to community expectations and broad goals of the City Council. While the City is required to adopt a one-year budget to meet state statutory requirements, Scottsdale builds a fiveyear financial plan to help anticipate future impacts and ensure achievement of the City’s long-term objectives. Strategic Capital Improvement Project Planning Scottsdale Capital Improvement Projects are planned for five or more years and analyzed using City-specific prioritization criteria. The operating cost impacts of projects are also planned and considered in developing future operating budgets. Projects with significant operating impacts are carefully timed to avoid contingent liabilities that future operating resources cannot meet. All capital funding sources are conservatively estimated to avoid over-committing to capital construction using revenues that are not certain. To the extent debt financing is used, capital project plans are sized to conform to existing debt management policies. 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 the 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-voterapproved Municipal Property Corporation bonds (see Section IV.I. of the Notes to the Financial Statements for additional information). The City retained credit ratings of “Aaa,” “AAA,” and “AAA” from the three major credit rating agencies (Moody’s Investors Service, S&P Global, and Fitch Ratings, respectively) on the City’s outstanding General Obligation bonds where debt service is supported by property taxes. Scottsdale is one of a select number 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, Arizona 5 Table of Contents City of Scottsdale Bonded Debt Ratings As of June 30, 2023 Moody's Investors Service S&P Global Fitch Ratings General Obligation (GO) Aaa AAA AAA Water and Sewer Revenue (W&S) Aaa AAA AAA Municipal Property Corp (MPC) Aa1 AAA AA+ MAJOR INITIATIVES The City’s adopted fiscal year 2024 budget reflects decreased revenue projections in the local economy resulting from an anticipation of a downturn in the economy and a slowdown of consumer spending. This budget reflects a net increase in the overall General Fund uses of $43.7 million when compared to the fiscal year 2023 adopted budget to provide core services and the priorities/policy direction of the City Council which include: • $68.5 million transfers to the capital improvement project program in accordance with the City’s financial policies • $10.0 million to pay down unfunded police pension liability • $6.8 million for the costs anticipated in implementing a comprehensive classification and compensation study • $4.6 million for the citywide pay for performance program • $4.5 million for the 2 percent market adjustment • $3.7 million for retirement cost increases • $1.1 million for the vacation buyback program for eligible employees • $0.8 million to for increases in health and dental costs Additionally, $368.2 million is included in the capital project adopted budget for the upcoming fiscal year. Many of the projects are part of the 2019 bond package approved by voters, which address critical infrastructure needs. Projects also include City Council and citizen priorities throughout the City. Significant projects include: • $40.9 million for Pima Road, Pinnacle Peak Road to Happy Valley Road street project • $33.7 million for repairing lakes and irrigation at Vista Del Camino park in the Indian Bend Wash • $32.0 million to build a new fire department training facility • $34.4 million in the deep well recharge/recovery project City of Scottsdale, Arizona 6 Table of Contents AWARDS AND ACKNOWLEDGMENTS 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 Annual Comprehensive Financial Report for the fiscal year ended June 30, 2022, marking the fiftieth consecutive year the City has achieved this prestigious recognition. To be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized Annual Comprehensive Financial Report that satisfies both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is only valid for a period of one year. We believe that our current Annual Comprehensive Financial Report continues to meet the Certificate of Achievement Program’s requirements and will be submitted to the GFOA to determine its eligibility for another certificate. As well, the City received the Distinguished Budget Presentation Award for the fiscal year beginning July 1, 2022, 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, 2023. Acknowledgments The preparation of this report would not have been possible without the skill, effort, and dedication of the Accounting Department 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, Sonia Andrews, 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 0123456357ÿ9553ÿ34ÿ 1 715 347 73ÿ1ÿ 3236357 14ÿ3353 5ÿ955 ÿ 31475 433573ÿ71 ÿ!ÿ"#$%&'( )*+,& 914ÿ7ÿ55-ÿ16433523 955 ÿ3147 914ÿ73ÿ9 ÿ.34ÿ53 /-53ÿ012ÿ3133 3-723ÿ4437145 City of Scottsdale, Arizona 9 Table of Contents This page is intentionally blank. City of Scottsdale, Arizona 10 Annual Comprehensive Financial Report For the Fiscal Year Ended June 30, 2023 City of Scottsdale, Arizona List of Elected and Appointed Officials City Council David D. Ortega, Mayor Tammy Caputi Tom Durham Barry Graham Betty Janik Kathy Littlefield Solange Whitehead Charter Officers Jim Thompson, City Manager Sherry R. Scott, City Attorney Lai Cluff, Acting City Auditor Ben Lane, City Clerk Sonia Andrews, City Treasurer/Chief Financial Officer Marianne T. Bayardi, Presiding Judge City of Scottsdale, Arizona 11 Table of Contents Table of Contents This page is intentionally blank. City of Scottsdale, Arizona 12 Table of Contents People of Scottsdale Mayor & City Council City of Scottsdale, Arizona 13 COMMISSIONS Airport Advisory Scottsdale Environmental Advisory Historic Preservation Human Relations Human Services McDowell Sonoran Preserve Neighborhood Advisory Parks and Recreation Planning Tourism Development Transportation Veterans Advisory Citizen Advisory Groups BOARDS Adjustment Building Appeals Development Review Judicial Appointments Library Loss Trust Fund Personnel Public Safety Personnel Retirement - Fire Local Public Safety Personnel Retirement - Police Local Accounting Budget Business Services Finance Purchasing PUBLIC WORKS Capital Project Management Facilities Management Fleet Management Solid Waste Management Transportation & Streets City Treasurer City Attorney Charter Officers City Manager CITY MANAGER’S OFFICE ADMINISTRATIVE SERVICES COMMUNITY & ECONOMIC DEVELOPMENT Human Resources Communications Aviation - Citizen Service Information Technology Planning & Development Services - Diversity & Inclusion Economic Development Government Relations Tourism & Events COMMUNITY SERVICES Human Services Libraries Parks & Recreation Planning & Administration Preserve WestWorld Presiding Judge City Court WATER Water Quality Reclamation Services Planning & Engineering Technology & Administration Water Services Pipeline & Treatment Agreements Assistant City Manager City Auditor City Clerk Police Chief Executive Leadership Assistant City Manager Civil Prosecution Risk Management Victim Services Fire Chief POLICE Office of the Police Chief Uniformed Services Professional Standards & Investigative Services Operational Services FIRE Office of the Fire Chief Emergency Services Professional 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 Audit of Financial Statements Opinions 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 (City), as of and for the year ended June 30, 2023, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Scottsdale, Arizona, as of June 30, 2023, and the respective changes in financial position and, where applicable, cash flows, and the respective budgetary comparison for the General Fund, thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Basis for Opinions We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of City of Scottsdale, Arizona, and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Change in Accounting Principle As described in Note 1, the City implemented the provisions of GASB Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements, Statement No. 99, Omnibus 2022, and Statement No. 100, Accounting Changes and Error Corrections—an amendment of GASB Statement No. 62, for the year ended June 30, 2023, which represents a change in accounting principle. Our opinion is not modified with respect to this matter. Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for one year beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. City of Scottsdale, Arizona 15 Table of Contents Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we: x x x x x Exercise professional judgment and maintain professional skepticism throughout the audit. Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, no such opinion is expressed. Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis, net pension liability information, and other postemployment benefit plan information, as listed in the table of contents, be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. City of Scottsdale, Arizona 16 Table of Contents Supplementary Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The Combining and Individual Fund Financial Statements and Schedules of Changes in Long-Term Debt are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Combining and Individual Fund Financial Statements and Schedules of Changes in Long-Term Debt information is fairly stated in all material respects in relation to the basic financial statements as a whole. Other Information Management is responsible for the other information included in the annual report. The other information comprises the Introductory Section and Statistical Section but does not include the basic financial statements and our auditor's report thereon. Our opinions on the basic financial statements do not cover the other information and we do not express an opinion or any form of assurance thereon. In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on other work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 26, 2023, on our consideration of City of Scottsdale, Arizona’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City of Scottsdale, Arizona’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering City of Scottsdale, Arizona’s internal control over financial reporting and compliance. Heinfeld, Meech & Co., P.C. Scottsdale, Arizona October 26, 2023 City of Scottsdale, Arizona 17 Management’s Discussion and Analysis Table of Contents For the Fiscal Year Ended June 30, 2023 This section of the City of Scottsdale, Arizona’s (the City) Annual Comprehensive Financial Report presents a narrative overview and comparative analysis of the financial activities of the City for the fiscal years ended June 30, 2023, and 2022. Readers are encouraged to consider the information presented here in conjunction with the basic financial statements that immediately follow, along with the letter of transmittal and other portions of this Annual Comprehensive Financial Report. FINANCIAL HIGHLIGHTS • 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 2023 and 2022 by $6.4 billion and $6.1 billion (net position), respectively. Of these amounts, $518.7 million and $416.8 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 2023 by $276.2 million compared to an increase in net position of $277.5 million during fiscal year 2022. Revenues increased by $33.2 million from the prior year while expenses increased by $34.5 million from the prior year. • As of June 30, 2023, and 2022, the City’s governmental funds reported combined ending fund balances of $699.1 million and $512.2 million, respectively. Approximately 28.5 percent of the current year amount ($199.4 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 $226.5 million or approximately 69.5 percent of total General Fund expenditures of $326.1 million. • The City’s total long-term liabilities increased by $26.5 million to $1.35 billion during the current fiscal year. This increase was primarily due to the issuance of General Obligation Bonds partially offset by scheduled bond principal payments being made. 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 18 Management’s Discussion and Analysis Table of Contents For the Fiscal Year Ended June 30, 2023 Relationship Between Annual Comprehensive Financial Report 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 Government-wide Financial Statements Basic Financial Statements and RSI Governmental Fund Financial Statements Proprietary Fund Financial Statements Notes to the Financial Statements Financial Section 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. These statements 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 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 19 Management’s Discussion and Analysis Table of Contents For the Fiscal Year Ended June 30, 2023 Both 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, administrative services, and Scottsdale AZ CARES. 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) 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, 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 35-37 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. The funds of the City can be divided into two categories, governmental funds and proprietary 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 20 Management’s Discussion and Analysis Table of Contents For the Fiscal Year Ended June 30, 2023 The City maintains several individual governmental funds organized according to their purpose (general, special revenue, debt service, capital projects, and permanent). 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, General Capital Improvement Plan (CIP) Construction Capital Projects Fund, Transportation Privilege Tax Capital Projects Fund, and the External Sources Capital Projects Fund which are considered 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 38-46 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 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 47-53 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 54-137 of this report. 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 138-145 of this report. City of Scottsdale, Arizona 21 Management’s Discussion and Analysis Table of Contents For the Fiscal Year Ended June 30, 2023 Combining Statements. The combining statements referred to earlier in connection with nonmajor governmental funds and internal service funds can be found on pages 146-176 of this report. 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 177-181 of this report. Statistical Information. The statistical section 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. This section can be found on pages 183-212 of this report. 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, performed 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 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 $6.37 billion, and $6.10 billion at the close of the fiscal years 2023 and 2022, respectively. City of Scottsdale, Arizona 22 Table of Contents Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2023 The following table is a condensed summary of the City’s net position for governmental and business-type activities: Net Position June 30, 2023 and 2022 (in thousands) Governmental Activities 2023 2022 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 $ 1,039,511 $ 4,866,602 5,906,113 130,218 6,036,331 906,608 4,754,768 5,661,376 148,918 5,810,294 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 1,018,128 157,570 1,175,698 48,498 1,224,196 968,252 161,193 1,129,445 118,516 1,247,961 NET POSITION Net investment in capital assets Restricted Unrestricted Total net position 4,247,801 4,162,863 330,043 266,758 234,291 132,712 $ 4,812,135 $ 4,562,333 Business-type Activities 2023 2022 $ 477,198 $ 1,504,128 1,981,326 17,386 1,998,712 499,312 1,452,376 1,951,688 19,810 1,971,498 327,562 58,209 385,771 53,350 439,121 350,909 53,063 403,972 33,758 437,730 1,221,022 1,195,005 54,119 54,717 284,450 284,046 $ 1,559,591 $ 1,533,768 Total 2023 2022 $ 1,516,709 $ 1,405,920 6,370,730 6,207,144 7,887,439 7,613,064 147,604 168,728 8,035,043 7,781,792 1,345,690 215,779 1,561,469 101,848 1,663,317 1,319,161 214,256 1,533,417 152,274 1,685,691 5,468,823 5,357,868 384,162 321,475 518,741 416,758 $ 6,371,726 $ 6,096,101 The largest portion, 85.8 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 $5.47 billion and $5.36 billion as of June 30, 2023, and 2022, 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, 6.0 percent, of the City’s net position, $384.2 million at June 30, 2023, and 5.3 percent or $321.5 million at June 30, 2022, represents resources that are subject to external restrictions on how they may be used. Unrestricted net position, 8.2 percent of the City’s total net position at June 30, 2023, and 6.8 percent at June 30, 2022, $518.7 million and $416.8 million, respectively, may be used to meet the government’s ongoing obligations to its citizens and creditors. 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 $276.2 million in fiscal year 2023 compared to an increase in net position of $277.5 million during fiscal year 2022. The reasons for this overall increase are explained in the governmental and business-type activities discussion herein and depicted in the table that follows. City of Scottsdale, Arizona 23 Table of Contents Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2023 Changes in Net Position For the fiscal years ended June 30, 2023 and 2022 (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 Governmental Activities 2023 2022 Business-type Activities 2023 2022 $ $ 76,905 53,960 87,927 67,994 356,628 83,737 19,391 10,879 14,493 735,213 73,136 335,445 67,965 18,316 (13,201) 16,088 716,541 261 3,319 256,834 232 (7,590) 242,313 67,994 356,889 83,737 19,391 14,198 14,493 992,047 73,136 335,677 67,965 18,316 (20,791) 16,088 958,854 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 Scottsdale AZ CARES 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 898 1,090 7,679 1,117 6,475 5,639 10,327 110,284 49,554 182,910 80,219 21,486 321 529 15,619 494,147 241,066 8,660 249,726 894 1,211 7,389 1,103 6,558 5,083 9,593 109,623 46,396 175,466 72,628 24,705 2,555 535 16,857 480,596 235,945 7,762 243,707 117,079 66,634 9,257 28,755 221,725 35,109 (8,660) 26,449 109,606 55,167 9,150 26,850 200,773 41,540 (7,762) 33,778 898 1,090 7,679 1,117 6,475 5,639 10,327 110,284 49,554 182,910 80,219 21,486 321 529 15,619 117,079 66,634 9,257 28,755 715,872 276,175 276,175 894 1,211 7,389 1,103 6,558 5,083 9,593 109,623 46,396 175,466 72,628 24,705 2,555 535 16,857 109,606 55,167 9,150 26,850 681,369 277,485 277,485 Net position - beginning Net effect of prior period adjustment Net position - beginning restated 4,562,333 76 4,562,409 4,318,626 4,318,626 1,533,768 (626) 1,533,142 1,499,990 1,499,990 6,096,101 (550) 6,095,551 5,818,616 5,818,616 $ 4,812,135 $ 4,562,333 $ 210,849 38,822 $ 1,559,591 $ 1,533,768 $ 295,874 55,318 84,153 2022 74,217 $ 55,318 52,556 Net position - ending 221,657 31,597 Total 2023 $ 287,754 53,960 126,749 $ 6,371,726 $ 6,096,101 Governmental Activities. Net position for governmental activities increased $249.7 million after transfers during fiscal year 2023 compared to an increase of $243.7 million after transfers in fiscal year 2022. Total revenues increased $18.7 million or 2.6 percent from the prior fiscal year and expenses increased $13.6 million or 2.8 percent. Overall, revenues exceeded expenses resulting in an increase in net position. City of Scottsdale, Arizona 24 Management’s Discussion and Analysis Table of Contents For the Fiscal Year Ended June 30, 2023 The City experienced an increase in total revenues from governmental activities over the prior year due primarily to a net increase of interest and investment income of $24.1 million and an increase of business taxes of $21.2 million. The increase in interest and investment income was due to the City increasing the investment balances by approximately $169.5 million, including business type activities, from year to year coupled with the interest rate more than doubling in the portfolio. The increase in business taxes from the prior year was attributed to sales tax increases in all categories, the highest category, with an increase of $3.0 million, was construction attributed to specialty contractors and new projects. 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 $553.1 million in fiscal year 2023 compared to $497.7 million in fiscal year 2022. Business taxes, which include privilege and franchise taxes, increased $21.2 million or 6.3 percent from the previous year due to an overall increase in consumer spending and from tourism-related events. The charges for services revenue category decreased $2.7 million or 3.5 percent over fiscal year 2022, primarily in the Community and Economic Development Division due to a reduction in building and related permit activity. The City experienced higher than normal development activity in the prior year, fiscal year 2023; is more in line with the prior year trends. The capital grants and contributions decreased by $35.4 million or 40 percent from the previous year, primarily due to only one mile of streets being accepted by the City in fiscal year 2023, and three and half miles being accepted by the City in fiscal year 2022. Additionally, property taxes decreased by $5.1 million or 7 percent over the prior year due to a decrease in the secondary property tax levy by $0.0941 per $100 assessed valuation. The secondary property tax is limited solely to support debt service payments of voter-approved general obligation bonds. For governmental activities overall, without regard to program, business taxes was the largest single source of funds, followed by intergovernmental; charges for services; property taxes; operating grants and contributions; and capital grants and contributions. The other revenue and interest and investment income were the least significant sources of revenue. Governmental Activities Revenues by Source Fiscal Year 2022/23 (in thousands) Interest and Investment Income $10,879 1% Charges for Services $74,217 10% Intergovernmental $103,128 14% Operating Grants and Contributions $55,318 8% Capital Grants and Contributions $52,556 7% Business Taxes $356,628 49% Other Revenue $14,493 2% City of Scottsdale, Arizona 25 Property Taxes $67,994 9% Management’s Discussion and Analysis Table of Contents For the Fiscal Year Ended June 30, 2023 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 (37.0 percent), followed by the Public Works Division (22.3 percent), and the Community Services Division (16.2 percent). The Public Safety Division provides police and fire/emergency services throughout the City. Expenses increased by $7.4 million, or 4.2 percent, during fiscal year 2023 due to increases in the internal service fees for fleet related costs for maintenance; fuel related charges; property liability, and workers compensation rates. The Public Works Division consists of five departments: Capital Project Management, Facilities Management, Fleet Management, Solid Waste Management, and Transportation and Streets. Expenses were $0.7 million, or 0.6 percent, higher than the prior fiscal year due primarily from increases in personnel expenditures resulting from the 5 percent market adjustment the City provided effective this fiscal year. 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. The division consists of: Human Services, Libraries, Parks and Recreation, Planning and Administration, Preserve, and WestWorld. Expenses were $7.6 million, or 10.5 percent, higher than the prior fiscal year due primarily from increases in personnel expenditures resulting from the 5 percent market adjustment the City provided effective this fiscal year and additional payments made for the housing assistance program. Business-type Activities. Net position for business-type activities increased by $26.4 million after transfers during fiscal year 2023 compared to $33.8 million after transfers in fiscal year 2022. Total revenues increased by $14.5 million, or 6.0 percent, due primarily to increases in the interest and investment income revenue category. The increase of interest and investment income was due to the City increasing the investment balances by approximately $169.5 million, including governmental activities, from year to year coupled with the interest rate more than doubling in the portfolio. Overall, total revenues exceeded expenses resulting in an increase in net position for the fiscal year. As shown in the Business-type Activities Revenues by Source chart, charges for services provided the largest share of revenues, followed by capital grants and contributions. The interest and investment income and business taxes were the least significant sources of revenue. Business-type Activities Revenues by Source Fiscal Year 2022/23 (in thousands) Interest and Investment Income $3,319 1% Capital Grants and Contributions $31,597 12% Business Taxes $261 0% Charges for Services $221,657 87% City of Scottsdale, Arizona 26 Management’s Discussion and Analysis Table of Contents For the Fiscal Year Ended June 30, 2023 As shown below in the Business-type Activities Program Revenues and Expenses chart, the largest of the City’s business-type activities, water utility and sewer utility, had expenses of $117.1 million and $66.6 million, respectively, in fiscal year 2023, followed by solid waste with $28.8 million and airport with $9.3 million. Business-type Activities Program Revenues and Expenses Fiscal Year 2022/23 (in thousands) $160,000 $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0 Water Utility Sewer Utility Solid Waste Program Revenues Program Expenses Airport The City’s Water Resources Department manages and operates a safe, reliable water supply and wastewater reclamation system, and in fiscal year 2023 they provided 93,402 water connections to Scottsdale citizens. The water and sewer utility’s combined expenses increased by 11.5 percent or $18.9 million in fiscal year 2023 compared to fiscal year 2022. This was caused primarily by an increase in capital related activity to add waterline and reservoir improvements to the City’s water distribution system. The Solid Waste Department provided delivery of safe, efficient, and environmentally sound refuse collection services to 84,905 residential customers in fiscal year 2023. Total program expenses increased 7.1 percent or $1.9 million in fiscal year 2023 compared to fiscal year 2022 due to increases in the internal service fees for fleet related costs for maintenance and fuel related charges. The Aviation Department operates the City’s general aviation reliever facility and is home to many local corporate aircraft. More than 167,641 take-offs and landings occurred in fiscal year 2023 at Scottsdale Airport, an increase of 8.1 percent from the prior year. Total program expenses increased by 1.2 percent or $0.1 million in fiscal year 2023 compared to fiscal year 2022. The custom inspection fees were the primary factor for the increase driven by the additional airport take-offs and landings this fiscal year from Arizona hosting the Super Bowl and other city events. City of Scottsdale, Arizona 27 Management’s Discussion and Analysis Table of Contents For the Fiscal Year Ended June 30, 2023 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 a particular purpose by the City Council. Types of governmental funds reported by the City include the General Fund, Special Revenue Funds, Debt Service Funds, Capital Project Funds, and Permanent Funds. As of the end of the current fiscal year, the City’s governmental funds reported a combined ending fund balance of $699.1 million, an increase of $186.9 million from the prior year total of $512.2 million. Approximately 28.5 percent, or $199.4 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. Revenues for governmental functions totaled $703.8 million in fiscal year 2023, an increase of 14.3 percent, or $87.8 million, from the previous year total of $616.0 million. In fiscal year 2023, expenditures for governmental functions totaled $650.6 million, an increase of 11.5 percent, or $67.4 million, from the fiscal year 2022 total of $583.2 million. For the current fiscal year, revenues exceeded expenditures for governmental functions by $53.3 million. This was mainly due to increases of $32.6 million in privilege and transient occupancy taxes, $14.1 million in state revenue sharing, and intergovernmental revenues of $19.1 million received in this fiscal year. The additional revenues were offset by additional capital outlay expenditures being spent for the City’s Bond 2019 Program. The General Fund is the chief operating fund of the City. At the end of fiscal year 2023, the unassigned fund balance of the General Fund was $226.5 million, while the total fund balance was $227.0 million; the unassigned and total fund balances for the General Fund at the end of fiscal year 2022 were $191.5 million and $191.9 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 69.5 percent of the total General Fund expenditures of $326.1 million in fiscal year 2023 and represented 57.5 percent of the total General Fund expenditures of $333.0 million in fiscal year 2022. Total fund balance represented 69.6 percent and 57.6 percent of total fund expenditures for fiscal years 2023 and 2022, respectively. City of Scottsdale, Arizona 28 Management’s Discussion and Analysis Table of Contents For the Fiscal Year Ended June 30, 2023 Overall, the General Fund’s performance resulted in revenue and other financing sources exceeding expenditures and other financing uses in the fiscal year ended June 30, 2023, by $35.1 million. Total revenues increased $53.8 million, or 15.2 percent compared to the prior year while expenditures decreased $6.8 million or 2.1 percent. The most significant reason for the increase in revenues was due to the additional transaction privilege tax over the prior year and the change in fair market value of investments. Key General Fund revenues showing an increase over the prior year included $17.6 million for transaction privilege tax, $13.9 million in state revenue sharing, and $3.7 million for interest earnings. The significant increase for the transaction privilege tax is a result of increased consumer spending from stimulus funds in the economy and increased tax receipts resulting from the higher cost of goods. The City experienced flat or increases in all sales tax categories with the highest in the construction category. The City experienced revenue reductions as well. Most significant was $2.7 million in building and related permits due to an abnormally higher amount of projects in fiscal year 2022, with fiscal year 2023 following the more normal trend. The City also experienced less of a reduction in the fair value of investments from $19.5 million in fiscal year 2022 to a reduction of only $3.6 million in fiscal year 2023 as the investment market stabilized. The Community Services Division experienced the largest increase in General Fund expenditures, 12.4 percent, or $5.2 million, primarily due from increases in personnel expenditures resulting from the 5 percent market adjustment the City provided effective this fiscal year and additional payments made for the housing assistance program. The Public Safety Division experienced the largest decrease of $13.9 million due to the City making $40.9 million in one-time retirement payments toward the unfunded liability in the prior fiscal year offset by additional increases in personnel-related costs from the 5 percent market adjustment. As a result of an increase in revenues and other financing sources exceeding expenditures and other financing uses, the fund balance for the City’s General Fund increased in fiscal year 2023 by $50.4 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 $7.3 million, a decrease of $1.4 million from the $8.7 million balance from the prior year. The decrease in fund balance was due to an decrease in the secondary property tax levied to offset the estimated debt payments. The General CIP Construction Capital Projects Fund is used to account 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 $146.7 million, an increase of $74.6 million from the $72.1 million from the prior fiscal year, caused by an additional $47.6 million in cash transfers from the General Fund resulting from increases in construction sales tax, interest income, and sales tax on food as required by the City’s comprehensive financial policies. The Transportation Privilege Tax Capital Projects Fund is used to account for the portion of the transportation privilege (sales) tax dedicated to transportation capital improvements. At the end of the current fiscal year, the fund balance was $95.4 million, an increase of $7.2 million from the $88.2 million balance from the prior year. The increase in fund balance was primarily due to developer contributions received this fiscal year. City of Scottsdale, Arizona 29 Management’s Discussion and Analysis Table of Contents For the Fiscal Year Ended June 30, 2023 The External Sources Capital Projects Fund is used to account for funds received from a variety of external sources including federal and state grants, as well as contributions restricted or committed for capital projects. At the end of the current fiscal year, the fund balance was a deficit of $16.2 million, a decrease of $8.9 million from the deficit balance of $7.3 million from the prior year. The decrease in fund balance was due to timing differences for grant and intergovernmental reimbursements that are expected to be received in the next fiscal year. 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 2023 and 2022, the unrestricted net position for the Water and Sewer Utility Fund was $256.6 million and $272.7 million, respectively; the Airport Fund was $18.5 million and $4.9 million, respectively; and the Solid Waste Fund was $3.3 million and $3.0 million, respectively. The Internal Service Funds, which are used to account for certain governmental activities, had an unrestricted net position of $45.1 million and $30.1 million, respectively. The total growth in net position for the enterprise funds was $23.9 million and $34.8 million for fiscal years 2023 and 2022, 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 and can be found on page 44 of this report. General Fund revenues on a budgetary basis were $39.0 million more than projected for fiscal year 2023. The increase in revenues was primarily due to the City receiving more in transaction privilege tax, interest earnings, and light and power franchise fees than budgeted. The privilege tax was the most significant increase, consisting of $29.3 million more revenues received than projected as the City continued to see increases in consumer spending, partially from tourism-related events. Expenditures of $322.4 million were $6.6 million less than budgeted expenditures of $329.0 million. The largest positive expenditure variances occurred in the Public Safety and Community and Economic Development Divisions. The Public Safety Division experienced saving in retirement contributions and the Community and Economic Development had savings in the overtime category that were budgeted for special events. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets. The City’s total capital assets for its governmental and business-type activities as of June 30, 2023 and 2022 were $6.37 billion and $6.23 billion, respectively (net of accumulated depreciation/ amortization). This investment in capital assets includes land, buildings and improvements, streets and storm drains, water and sewer systems, water rights, vehicles, machinery and equipment, subscription-based information technology arrangements, furniture and fixtures, public-public partnerships, and construction in progress. The total increase in the City’s capital assets (net of accumulated depreciation/amortization) between fiscal years 2023 and 2022 was $140.5 million or 2.3 percent. City of Scottsdale, Arizona 30 Table of Contents Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2023 Capital Assets, Net of Depreciation/Amortization June 30, 2023 and 2022 (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 Subscription-Based Information Technology Arrangements Public-Public Partnership Assets Total Governmental Activities Business-type Activities Total 2023 *2022 $ 3,451,209 $ 3,461,153 452,951 430,154 681,142 710,390 34,454 33,597 43,021 45,365 142,756 72,341 5,377 4,358 55,692 $ 4,866,602 $ 4,757,358 2023 *2022 $ 52,781 $ 52,061 100,282 93,246 4,391 3,978 87,171 87,171 799,331 792,118 390,120 391,131 257 309 746 962 68,889 51,837 160 18 $ 1,504,128 $ 1,472,831 2023 *2022 $ 3,503,990 $ 3,513,214 553,233 523,400 681,142 710,390 38,845 37,575 87,171 87,171 799,331 792,118 390,120 391,131 43,278 45,674 746 962 211,645 124,178 5,537 4,376 55,692 $ 6,370,730 $ 6,230,189 * Restated for the implementation of GASB No. 94, Public-Private and Public-Public Partnerships and Availiability Payment Arrangements Significant capital asset events during fiscal year 2023 included the following: • Land: $7.8 million for land donated by developers that coincides with public street improvements for finalized permits. • Buildings and Land Improvements: ο $31.2 million for the renovation of the Civic Center Plaza ο $4.3 million for the construction of a parking structure at the North Corporation Yard ο $4.0 million for the installation of street level lighting, festoon lighting, bollards, and safety cameras in the Downtown Entertainment District ο $1.2 million for the construction of a DNA evidence storage facility • Streets: $14.4 million related to streets, traffic control, and sidewalks; $7.3 million for improvements to Osborn Road from Hayden Road to Scottsdale Road; $3.6 million for new road improvements donated by developers; and $1.4 million for pedestrian improvements along Camelback Road from Scottsdale Road to Miller Road. • Vehicles: $4.2 million for public safety vehicles, $1.8 million for public works vehicles, and $0.8 million for water and other city vehicles. As of June 30, 2023, the city has construction commitments of $189.4 million for current projects. Additional information on the city’s capital assets can be found in Note IV.D. on page 91-94 of this report. City of Scottsdale, Arizona 31 Table of Contents Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2023 Long-term Debt. At the end of the fiscal years 2023 and 2022, the City had total long-term liabilities of $1.35 billion and $1.32 billion, respectively. Of these amounts, $419.6 million and $398.9 million, for fiscal years 2023 and 2022 respectively, are general obligation bonds backed by the full faith and credit of the City. The remainder includes Municipal Property Corporation bonds, net pension liabilities, and other obligations of $926.1 million and $920.3 million for fiscal years 2023 and 2022, 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, 2023 and 2022 was $542.9 million and $518.5 million, respectively, in the 6 percent capacity and $1.41 billion and $1.34 billion, respectively, in the 20 percent capacity. Additional information on the debt limitations and capacities may be found in Section IV.I. of the Notes to the Financial Statements and in Tables XVIa and XVIb in the Statistical Section of this report. Long-term Liabilities June 30, 2023 and 2022 (in thousands) Governmental Activities General Obligation Bonds Water and Sewer Revenue Bonds Municipal Property Corporation Bonds Community Facilities Districts General Obligation Bonds - Direct Placements Issuance Premiums Total Bonds Payable Contracts Payable Leases Public-Public Partnerships Subscriptions Risk Management Claims Compensated Absences Total Other Postemployment Benefit Liability Net Pension Liabilities Pollution Remediation Obligation $ Total Long-term Liabilities $ 2023 419,615 $ 167,450 2022 398,885 180,705 6,583 28,683 622,331 1,083 2,947 4,620 4,363 21,145 33,145 699 327,796 1,018,129 $ 8,059 29,297 616,946 1,314 2,568 1,760 3,417 26,029 33,141 831 282,246 968,252 Business-type Activities $ $ 2023 - $ 226,540 15,891 242,431 96 144 4,563 34,729 45,599 327,562 $ 2022 4,375 247,455 18,288 270,118 24 4,563 27,400 48,804 350,909 Total $ $ 2023 419,615 $ 393,990 2022 398,885 4,375 428,160 6,583 44,574 864,762 1,083 3,043 4,620 4,507 21,145 37,708 699 362,525 45,599 1,345,691 $ 8,059 47,585 887,064 1,314 2,568 1,760 3,441 26,029 37,704 831 309,646 48,804 1,319,161 * Due to the implementation of GASB No. 94, Public-Private and Public-Public Partnerships and Availiability Payment Arrangements , the Service Concession Arrangements have been changed to Public-Public Partnerships. During fiscal year 2023, the City’s total long-term liabilities increased overall by $26.5 million due primarily to increases in the City’s net pension liabilities. City of Scottsdale, Arizona 32 Management’s Discussion and Analysis Table of Contents For the Fiscal Year Ended June 30, 2023 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 2023 and 2022 were $362.5 million and $309.6 million, respectively. The increase was due to actuarial losses from investments income experienced in the Arizona State Retirement System and (PSPRS) plans. Additional information on the City’s pensions can be found starting on page 115. Additional information on the City’s long-term liabilities can be found in Section IV.I. of the Notes to the Financial Statements on pages 101-111 of this report. ECONOMIC FACTORS AND NEXT YEAR’S BUDGET The strength of the City’s economy has persisted through the pandemic and current fiscal year, which was driven by increases in consumer spending and tourism-related activity. Despite this continued growth, the proposed budget is forecasting a decline in local tax revenues in anticipation of an economic downturn and slowdown in consumer spending. In June 2023, the City Council approved a $2.53 billion budget, which is a $0.42 billion increase from the prior year budget of $2.11 billion. The adopted fiscal year 2024 budget includes $1.11 billion for general operations, grants, operating contingencies/reserves, and $1.42 billion for capital improvements/capital contingencies. 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 East Indian School Road, Suite 210, Scottsdale, AZ 85251, or visit our website at: https://www.scottsdaleaz. gov/finance. City of Scottsdale, Arizona 33 Table of Contents Basic Financial Statements City of Scottsdale, Arizona 34 Table of Contents Statement of Net Position June 30, 2023 (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 Leases Public-Private Partnerships 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 Equity in Joint Ventures Capital Assets Not Being Depreciated/Amortized Land, Water Rights, and Construction in Progress Capital Assets, Net of Accumulated Depreciation/Amortization 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 $ $ 787,734 $ 212,039 Total $ 999,773 44,019 9,924 51,041 3,665 33,110 8,554 (6,051) 1,951 1 24,974 - 24 23,256 2,698 1,635 16,732 9,693 2,252 6,051 1,448 45,599 44,043 23,256 9,924 53,739 5,300 49,842 9,693 10,806 1,951 1,449 24,974 45,599 77,384 3,205 30,005 1,791 7,362 2,786 867 46,757 66,203 107,389 1,791 7,362 2,786 867 46,757 69,408 3,593,965 208,841 3,802,806 1,272,637 5,906,113 1,295,287 1,981,326 2,567,924 7,887,439 16,069 113,860 289 130,218 11,530 5,856 17,386 27,599 119,716 289 147,604 (continued) City of Scottsdale, Arizona 35 Business-type Activities $ $ Table of Contents Statement of Net Position June 30, 2023 (in thousands) 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 Governmental Activities $ Total Liabilities DEFERRED INFLOWS OF RESOURCES Leases Pension-Related Amounts Public-Private Partnerships 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 Stadium Facility Tourism Development Endowments Expendable Nonexpendable Repair and Replacement Joint Venture Construction Deposits Unrestricted Total Net Position $ 45,634 10,008 90 9,514 67,706 4,341 12,621 $ Total 21,420 1,339 1 4,715 25,290 - $ 67,054 11,347 91 14,229 92,996 4,341 12,621 4,745 2,911 2,786 867 1,791 - 2,786 867 6,536 2,911 15,385 88,377 2,111 22,106 17,496 110,483 17,760 699 327,796 568,111 1,018,128 2,452 34,729 220,565 45,599 327,562 20,212 699 362,525 788,676 45,599 1,345,690 1,175,698 385,771 1,561,469 32,383 11,510 2,503 2,102 48,498 15,834 1,317 36,199 53,350 48,217 12,827 38,702 2,102 101,848 4,247,801 1,221,022 5,468,823 10,437 158,375 135,975 2,996 8,371 42 208 5,102 7,901 - 10,437 158,375 135,975 2,996 8,371 42 208 5,102 7,901 27 609 234,291 4,812,135 46,757 7,362 284,450 1,559,591 27 609 46,757 7,362 518,741 6,371,726 The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 36 Business-type Activities $ $ Table of Contents Statement of Activities For the Fiscal Year Ended June 30, 2023 (in thousands) Program Revenues FUNCTIONS/PROGRAMS City of Scottsdale, Arizona 37 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 Scottsdale AZ CARES 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 898 1,090 7,679 1,117 6,475 5,639 10,327 110,284 49,554 182,910 80,219 21,486 321 529 15,619 494,147 $ 117,079 66,634 9,257 28,755 221,725 $ 715,872 175 154 702 222 539 4,612 223 17,655 11,104 35,335 2,971 525 74,217 Operating Grants and Contributions Capital Grants and Contributions $ $ 129,022 51,066 10,489 31,080 221,657 $ 295,874 21 30 66 7 889 20,912 5 21,969 11,058 361 55,318 - $ 55,318 $ 47,416 4,701 439 52,556 Governmental Activities $ (702) (936) (6,947) (829) (6,468) (4,211) (5,715) (41,733) (27,193) (149,837) (33,387) (18,154) (321) (4) (15,619) (312,056) - $ (702) (936) (6,947) (829) (6,468) (4,211) (5,715) (41,733) (27,193) (149,837) (33,387) (18,154) (321) (4) (15,619) (312,056) - 28,479 (4,875) 5,600 2,325 31,529 28,479 (4,875) 5,600 2,325 31,529 84,153 (312,056) 31,529 (280,527) 67,994 342,848 13,780 261 - 67,994 343,109 13,780 35,884 47,853 19,391 10,879 14,493 8,660 561,782 249,726 4,562,409 4,812,135 3,319 (8,660) (5,080) 26,449 1,533,142 1,559,591 35,884 47,853 19,391 14,198 14,493 556,702 276,175 6,095,551 6,371,726 $ *Restated the Governmental and Business-Type Activities Net Position due to implementation of GASB Statement 94: Public-Private and Public-Public Partnerships and Availability Payment Arrangements. The notes to the financial statements are an integral part of this statement. $ Total 16,536 10,693 4,368 31,597 General Revenues Taxes Property Taxes Sales and Use Taxes Franchise Taxes Intergovernmental - Unrestricted State Shared Sales State Revenue Sharing Other Interest and Investment Income Other Revenue Transfers Total General Revenues and Transfers Change in Net Position Net Position - Beginning, Restated* Net Position - Ending Business-type Activities $ $ Table of Contents Balance Sheet Governmental Funds June 30, 2023 (in thousands) ASSETS City of Scottsdale, Arizona 38 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 Highway User Tax Auto Lieu Tax Intergovernmental Grants Leases Miscellaneous Due from Other Funds Supplies Inventory Total Assets (continued) General $ $ 200,846 2,093 21,683 1,173 1,411 3,222 9,693 528 33,055 3,932 17,499 486 295,621 General Obligation Bond Debt Service General CIP Construction Capital Projects Transportation Privilege Tax Capital Projects External Sources Capital Projects Total Nonmajor Governmental Funds $ $ $ $ $ $ 6,856 59,681 1,013 67,550 $ 152,426 4,795 368 157,589 $ 113,227 227 1,945 16,991 132,390 1 17,899 801 319 $ 19,020 $ 242,226 17,703 1,344 10,582 2,320 51 91 231 1,850 4,765 3,940 55 3,277 288,435 Total Governmental Funds $ $ 715,581 77,384 3,665 34,210 2,320 2,237 1,411 3,313 9,924 1,850 528 44,450 4,741 33,110 7,896 17,499 486 960,605 Table of Contents Balance Sheet Governmental Funds June 30, 2023 (in thousands) 39 City of Scottsdale, Arizona 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 Leases Total Deferred Inflows of Resources 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. $ 7,428 9,289 - General Obligation Bond Debt Service General CIP Construction Capital Projects Transportation Privilege Tax Capital Projects External Sources Capital Projects Total Nonmajor Governmental Funds $ $ $ $ $ 6,706 52,975 5,956 8 - 19,789 31 - 1,624 1 14,624 - 7,531 521 2,875 2,808 14,731 Total Governmental Funds $ 42,328 9,850 17,499 9,514 67,706 1,926 4,323 4,740 2,869 30,575 59,681 43 6,007 19,820 16,249 9,955 683 18 5 38 39,165 9,955 2,652 4,341 4,745 2,907 171,497 7,916 30,135 38,051 578 578 4,842 4,842 17,219 17,219 18,978 18,978 8,064 2,248 10,312 57,597 32,383 89,980 68,626 60,259 10,849 37,039 35,227 49,477 261,477 486 226,509 226,995 7,291 7,291 17,884 128,856 146,740 95,429 (78) 95,351 4,234 40 (20,481) (16,207) 609 218,057 26,863 (6,571) 238,958 1,095 342,895 155,759 199,379 699,128 295,621 $ 67,550 $ 157,589 $ 132,390 $ 19,020 $ 288,435 $ 960,605 Table of Contents Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position June 30, 2023 (in thousands) Fund Balances - Total Governmental Funds $ 699,128 Amounts reported for governmental activities in the statement of net position are different because (see Note II. A. for the detailed reconciliation): Capital assets used in governmental activities are not financial resources; therefore, are not reported in the funds. 4,742,251 Equity in joint venture are not financial resources; therefore, are not reported in the funds. 3,200 Prepayments, public-public partnerships, leases, and subscription-based information technology arrangements are not financial resources; therefore, are not reported in the funds. 88,582 Deferred outflows relating to deferred amounts on refundings, pensions, and other postemployment benefits are not financial resources; therefore, are not reported in the funds. 129,279 Long-term liabilities, including bonds payable, are not due and payable in the current period; therefore, are not reported in the funds. (990,726) Deferred inflows relating to pensions, other postemployment benefits, and public-private partnerships represent a future acquisition of net assets 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. 41,691 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. 98,730 Net Position of Governmental Activities $ The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 40 4,812,135 Table of Contents Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Fiscal Year Ended June 30, 2023 (in thousands) General REVENUES City of Scottsdale, Arizona 41 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/(Decrease) in the Fair Value of Investments Intergovernmental Federal Grants State Grants Miscellaneous Developer Contributions Streetlight and Services Districts Contributions and Donations Reimbursements from Outside Sources Indirect Costs Other Total Revenues (continued) $ $ 35,769 199,425 9,864 3,625 200 962 General Obligation Bond Debt Service General CIP Construction Capital Projects $ $ 30,062 - - Transportation Privilege Tax Capital Projects External Sources Capital Projects Total Nonmajor Governmental Funds $ $ $ 17,768 - - 1,803 97,155 36,492 291 5,526 Total Governmental Funds $ 67,634 314,348 36,492 10,155 3,625 200 6,488 35,884 46,051 12,042 2,815 - - - - 1,802 18,111 610 47 35,884 47,853 12,042 18,111 610 2,862 17,561 5,207 5,733 2,804 - 36 - - - 89 3,397 1,133 - 17,686 8,604 6,866 2,804 2,627 211 3,170 53 5,240 8,063 (3,566) - 570 - 766 - 2 - 129 1,703 98 83 4,805 4,628 416 2,756 211 3,170 1,703 151 83 10,045 14,029 (3,150) 6 4,205 1,176 7,191 1,874 408,192 30,062 858 1,464 4,509 300 23,343 2,713 21,076 2,312 1,300 27,403 27,403 362 3,502 525 2,340 813 90 213,353 30,116 368 28,783 7,679 525 3,640 1,989 7,191 2,264 703,817 $ $ $ $ $ $ Table of Contents Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Fiscal Year Ended June 30, 2023 (in thousands) General EXPENDITURES City of Scottsdale, Arizona 42 Current General Government Mayor and City Council City Clerk City Attorney City Auditor City Court City Manager City Treasurer Public Works Community and Economic Development Public Safety Community Services Administrative Services Streetlight and Services Districts Debt Service Principal Interest and Fiscal Charges Bond Issuance Costs Capital Outlay Total Expenditures $ 909 1,082 7,535 1,197 4,893 4,988 10,423 23,791 23,258 177,956 46,962 17,244 - General Obligation Bond Debt Service General CIP Construction Capital Projects Transportation Privilege Tax Capital Projects External Sources Capital Projects Total Nonmajor Governmental Funds $ $ $ $ $ - 11 441 212 1,787 842 - 511 1 - 290 1,428 2 - 21 30 1,803 889 198 23,238 22,283 19,899 17,262 303 529 Total Governmental Funds $ 930 1,082 7,565 1,197 6,696 5,877 10,632 48,271 45,541 198,067 67,439 18,392 529 2,242 254 3,390 326,124 52,975 11,959 845 65,779 29,530 32,823 35,873 36,385 34,646 36,366 15,701 5,705 45,213 153,074 70,918 17,918 845 148,652 650,551 Excess (Deficiency) of Revenues over (under) Expenditures 82,068 (35,717) (31,359) (13,042) (8,963) 60,279 53,266 OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Financing of Leases Financing of Subscription-Based Information Technology Arrangements Financing of Contracts Payable Sale of General Capital Assets Issuance of Long-Term Capital-Related Debt Premium on Long-Term Debt Issued Total Other Financing Sources (Uses) 19,428 (89,889) 916 1,194 21,384 (46,967) 33,439 115 740 34,294 85,072 (540) 21,507 106,039 20,236 20,236 40 40 19,939 (79,113) 1,292 265 (47) 73,590 4,110 20,036 178,154 (169,542) 916 2,486 265 42,844 73,705 4,850 133,678 35,101 (1,423) 74,680 7,194 (8,923) 80,315 186,944 Net Change in Fund Balances Fund Balances (Deficits) - Beginning Fund Balances (Deficits) - Ending The notes to the financial statements are an integral part of this statement. $ 191,894 226,995 $ 8,714 7,291 $ 72,060 146,740 $ 88,157 95,351 $ (7,284) (16,207) $ 158,643 238,958 $ 512,184 699,128 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, 2023 (in thousands) Net Change in Fund Balances - Total Governmental Funds $ 186,944 Amounts reported for governmental activities in the statement of activities are different because (see Note II. B.) for the detailed reconciliation: 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. 40,786 Donations of capital assets are not capitalized on the governmental fund statements, but are shown in the statement of activities. 11,754 Amortization of deferred inflows of resources related to capital assets acquired by the City as a result of public-private partnerships are not shown in the governmental fund statements. On the statement of activities it is recorded as revenue. 87 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. (50,637) Current-year pension and other postemployment benefit contributions are reclassified from expenditures in the governmental funds to deferred outflows of resources in the government-wide statements. 52,269 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. 245 When leases (in which the City is the lessee), public-public partnerships (PPPs) (in which the City is the operator) and subscription-based information technology arrangements (SBITAs) are to be used in governmental activities, an expenditure is recorded in the governmental funds in the amount of the Present Value of the Future Lease Payments (PVFLP)/Present Value of the Future Installment Payments (PVFIP)/Present Value of the Future Subscription Payments (PVFSP), respectively; however, in the statement of activities, the PVFLP, PVFIP, and PVFSP are recognized as intangible assets and amortized over the lease/PPP/subscription term. 7,893 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. (282) Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. (934) Prepayments are expended in the governmental funds when paid, and are capitalized and amortized in the statement of net position. This amount represents the current period amortization expense that exceeds prepayments. (676) 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. (11,304) Additional interest accretion calculated on bonds and notes payable and amortization of bond premium and deferred amounts on refundings. 2,299 When lease assets, subscription-based information technology arrangement assets (SBITAs), and public-public partnerships (PPPs) assets are retired, a loss is recognized on the statement of activities. (11) When lease liabilities and subscription-based information technology arrangement (SBITA) liabilities are retired, a gain is recognized on the statement of activities. 10 The change in net position of the Internal Service Funds is attributed to governmental activities. Change in Net Position of Governmental Activities 11,283 $ The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 43 249,726 Table of Contents General Fund Statement of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2023 (in thousands) Budgeted Amounts City of Scottsdale, Arizona 44 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 Decrease in the Fair Value of Investments Intergovernmental State Grants Miscellaneous Reimbursements from Outside Sources Indirect Costs Other Total Revenues (continued) Original $ $ Actual Amounts Budgetary Basis Final 35,885 170,112 8,455 3,800 220 947 $ 35,885 170,112 8,455 3,800 220 947 $ 35,769 199,425 9,864 3,625 200 962 Budget to GAAP Differences $ Actual Amounts GAAP Basis - $ 35,769 199,425 9,864 3,625 200 962 Variance Between Final Budget and Actual Amounts Budgetary Basis $ (116) 29,313 1,409 (175) (20) 15 35,088 46,440 12,283 1,789 35,088 46,440 12,283 1,789 35,884 46,051 12,042 2,815 - 35,884 46,051 12,042 2,815 796 (389) (241) 1,026 18,090 4,721 4,789 2,266 18,090 4,721 4,789 2,266 17,561 5,207 5,733 2,804 - 17,561 5,207 5,733 2,804 (529) 486 944 538 3,587 287 2,590 19 4,578 1,953 - 3,587 287 2,590 19 4,578 1,953 - 2,627 211 3,170 53 5,210 6,953 - 30 1,110 (3,566) 2,627 211 3,170 53 5,240 8,063 (3,566) (960) (76) 580 34 632 5,000 - 4,327 1,233 7,202 432 371,093 4,327 1,233 7,202 432 371,093 6 4,205 1,176 7,191 1,385 410,129 489 (1,937) 6 4,205 1,176 7,191 1,874 408,192 6 (122) (57) (11) 953 39,036 $ $ $ $ $ Table of Contents General Fund Statement of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2023 (in thousands) Budgeted Amounts City of Scottsdale, Arizona 45 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 $ 958 1,288 8,301 1,290 5,350 5,181 11,345 24,355 26,080 183,473 47,473 15,812 Final $ 935 1,289 8,298 1,435 5,001 4,975 10,535 24,686 24,960 180,413 46,989 19,060 Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ 906 1,070 7,516 1,193 4,838 4,977 10,134 24,157 23,216 177,557 47,315 19,094 3 12 19 4 55 11 289 (366) 42 399 (353) (1,850) 909 1,082 7,535 1,197 4,893 4,988 10,423 23,791 23,258 177,956 46,962 17,244 29 219 782 242 163 (2) 401 529 1,744 2,856 (326) (34) 168 264 331,338 168 264 329,008 416 322,389 1,826 254 3,390 3,735 2,242 254 3,390 326,124 (248) 264 6,619 Excess of Revenues over Expenditures 39,755 42,085 87,740 (5,672) 82,068 45,655 OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Financing of Leases Financing of SBITAs Sale of General Capital Assets Total Other Financing Sources (Uses) 16,050 (81,433) 388 150 (64,845) 16,050 (81,433) 388 150 (64,845) 19,428 (89,889) 21,363 (49,098) 916 1,194 21 2,131 19,428 (89,889) 916 1,194 21,384 (46,967) 3,378 (8,456) (388) 21,213 15,747 Net Change in Fund Balances The notes to the financial statements are an integral part of this statement. $ (25,090) $ (22,760) $ 38,642 $ (3,541) $ 35,101 $ 61,402 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, 2023 (in thousands) Explanation of Differences: Items recorded as revenues/other financing sources for GAAP purposes that are not recorded for budget purposes: Amortized Lease Revenue Lease Interest Revenue Net Decrease in the Fair Value of Investments In-Kind Revenue Financing of Leases Financing of SBITAs Gain on Lease Termination Total Revenue/Other Financing Source Adjustments $ The City budgets for certain expenditures on the cash basis, rather than on the modified accrual basis: Payroll Accrual and Compensated Absences Non-Cash Operating Expenditures Non-Cash Debt Service Expenditures Non-Cash Capital Expenditures Total Expenditure Adjustments Net Decrease in Fund Balance - Budget to GAAP 30 1,110 (3,566) 489 916 1,194 21 194 927 648 50 2,110 3,735 $ (3,541) Differences in Presentation between Budget and GAAP Basis: The City records principal and interest payments related to the subscription-based information technology arrangements, contracts payable, and lease activity on a GAAP basis; however, for budget purposes, they are included in the associated division's expenditures. Additionally, the City records capitalized expenditures as capital outlay on the GAAP basis; however, for budget purposes, they are included in the associated division's expenditures. These differences have no bearing on the fund balance since the overall total expenditures are the same. The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 46 Table of Contents Statement of Fund Net Position Proprietary Funds June 30, 2023 (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 Leases Public-Private Partnerships 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 Lease Receivables Intergovernmental Receivables Public-Private Partnership 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 Capital Assets Land Water Rights Water System Sewer System Buildings and Improvements Motor Vehicles Machinery and Equipment Furniture and Fixtures Construction in Progress Leases Subscription-Based Information Technology Arrangements Less Accumulated Depreciation/Amortization Total Capital Assets (net of accumulated depreciation/amortization) Total Noncurrent Assets Total Assets Deferred Outflows of Resources Deferred Amounts on Refundings Pension-Related Amounts Total Deferred Outflows of Resources $ 193,846 Airport $ Solid Waste 8,801 $ Governmental Activities - Internal Service Funds Total 9,392 $ 212,039 $ 72,153 19,702 24 362 3,192 24 23,256 - 555 1,551 2,247 - 578 2,313 249 35 - 49 5 - 1,133 2,313 249 1,635 2,252 - 658 1,465 28,676 1,396 1,447 1,329 395 - 1 30,005 1,791 1,448 1 7,362 256,782 14,086 12,639 7,362 283,507 74,277 14 1,565 66,084 45,599 14,405 9,444 10 - 109 - 14,419 1,565 9,444 66,203 45,599 5 - 2,786 46,757 867 - - 2,786 867 46,757 - 42,106 87,171 1,480,437 717,460 9,157 1,523 68,576 91 9,564 134,207 1,151 813 222 202 16 1,111 7,735 560 209 111 9 52,781 87,171 1,480,437 717,460 141,942 1,151 10,530 1,954 68,889 116 18,891 103,093 6,676 52 16 191 (1,014,944) 1,391,768 1,554,573 118 (39,217) 107,076 131,802 9 (4,460) 5,284 5,393 318 (1,058,621) 1,504,128 1,691,768 526 (68,511) 60,743 60,748 1,811,355 145,888 18,032 1,975,275 135,025 11,530 4,093 15,623 274 274 1,489 1,489 11,530 5,856 17,386 939 939 $ (continued) City of Scottsdale, Arizona 47 $ $ $ Table of Contents Statement of Fund Net Position Proprietary Funds June 30, 2023 (in thousands) 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 Unearned Revenue Customer Advances and Deposits Interest Payable Matured Bonds and Other Payables Bonds Payable and Other Payables - Due within one year Leases - Due within one year Subscription - Due within one year Other Liabilities Total Current Liabilities Water and Sewer Utility $ Noncurrent Liabilities Accrued Compensated Absences - Due in more than one year Advanced Construction Payments Advanced Lease Payments Net Pension Liabilities Bonds, Loans, and Other Payables - Due in more than one year Pollution Remediation Obligation Leases - Due in more than one year Subscription - Due in more than one year Total Noncurrent Liabilities Total Liabilities Deferred Inflows of Resources Pension-Related Amounts Leases Public-Private Partnerships Total Deferred Inflows of Resources NET POSITION Net Investment in Capital Assets Restricted for Water and Sewer System Replacement Restricted for Joint Venture Construction Deposits Unrestricted Total Net Position $ 20,636 912 1 1,482 1,396 4,326 24,350 21,010 18 54 74,185 Airport $ Solid Waste 63 61 156 395 389 940 990 3 29 3,026 $ 721 366 473 2 1,562 Governmental Activities Internal Service Funds Total $ 21,420 1,339 1 2,111 1,791 4,715 25,290 22,000 23 83 78,773 $ 3,306 248 304 14 9,581 2 110 4 13,569 1,700 2,786 24,538 201,660 45,599 55 61 276,399 250 867 1,646 18,771 12 21,546 502 8,545 6 9,053 2,452 `` 2,786 867 34,729 220,431 45,599 73 61 306,998 207 5,508 11,564 11 115 17,405 350,584 24,572 10,615 385,771 30,974 931 11 942 62 15,823 36,199 52,084 324 324 1,317 15,834 36,199 53,350 209 209 1,164,730 46,757 7,362 256,603 1,475,452 51,046 18,460 69,506 5,246 3,336 8,582 1,221,022 46,757 7,362 278,399 1,553,540 59,671 45,110 104,781 $ The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 48 $ $ $ Table of Contents Reconciliation of the Proprietary Funds Statement of Fund Net Position to the Statement of Net Position June 30, 2023 (in thousands) Total Enterprise Fund Net Position $ 1,553,540 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 6,051 $ The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 49 1,559,591 Table of Contents Statement of Revenues, Expenses, and Changes in Fund Net Position Proprietary Funds For the Fiscal Year Ended June 30, 2023 (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/Amortization Total Operating Expenses 113,013 48,120 14,068 4,887 180,088 Airport $ Solid Waste 10,487 2 10,489 $ Governmental Activities Internal Service Funds Total 31,079 1 31,080 $ 113,013 48,120 14,068 31,079 10,487 4,890 221,657 $ 81,482 1,962 83,444 66,983 44,030 5,253 60,642 176,908 3,092 538 4,964 8,594 28,716 1,400 303 30,419 66,983 44,030 28,716 3,092 7,191 65,909 215,921 61,419 11,305 72,724 3,180 1,895 661 5,736 10,720 NON-OPERATING REVENUES (EXPENSES) Transaction Privilege Tax Property Tax Investment Income Interest Expense Gain (Loss) on Sale of Capital Assets Net Non-Operating Revenue (Expenses) 3,140 (7,589) (48) (4,497) 261 82 (696) (353) 97 97 261 3,319 (8,285) (48) (4,753) 536 129 665 Income (Loss) Before Contributions and Transfers (1,317) 1,542 758 983 11,385 27,229 (8,660) 4,368 - - 31,597 (8,660) 2,379 55 (7) 17,252 5,910 758 23,920 13,812 Operating Income Capital Contributions Transfers In Transfers Out Change in Net Position Total Net Position - Beginning Restated Total Net Position - Ending $ 1,458,200 1,475,452 $ 63,596 69,506 The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 50 $ 7,824 8,582 $ 1,529,620 1,553,540 $ 90,969 104,781 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, 2023 (in thousands) Net Change in Total Enterprise Fund Net Position $ 23,920 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 2,529 $ The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 51 26,449 Table of Contents Statement of Cash Flows Proprietary Funds For the Fiscal Year Ended June 30, 2023 (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 $ 175,321 (72,219) (26,501) 4,675 81,276 Airport $ Solid Waste 10,111 (1,959) (1,535) 2 6,619 $ 30,727 (18,716) (10,388) 1 1,624 Total $ 216,159 (92,894) (38,424) 4,678 89,519 Governmental Activities Internal Service Funds $ 81,264 (57,172) (6,600) 1,962 19,454 Cash Flows from NonCapital Financing Activities Property Tax Transaction Privilege Tax Transfers In Transfers Out Net Cash Provided by (Used for) NonCapital Financing Activities (8,660) (8,660) 261 261 - 261 (8,660) (8,399) 536 55 (7) 584 Cash Flows from Capital and Related Financing Activities Capital Contributions from: Water and Sewer Development Fees Water and Sewer Development Fee Credit Agreements Capital Grants Acquisition and Construction of Property and Equipment Principal Payments on Capital Debt and Other Payables Interest Paid on Capital Debt Investment in Joint Venture Sale of Capital Assets Net Cash Provided by (Used for) Capital and Related Financing Activities 4,624 (1,346) 649 (56,752) (21,303) (9,169) (6,522) (89,819) 3,995 (5,184) (888) (802) (1) (2,880) (1,014) (15) (1,029) 4,624 (1,346) 4,644 (62,950) (22,191) (9,971) (6,538) (93,728) (12,561) 712 (11,849) Cash Flows from Investing Activities Income from Investments Net Cash Provided by (Used for) Investing Activities 2,300 2,300 57 57 70 70 2,427 2,427 - Net Increase (Decrease) in Cash and Cash Equivalents (14,903) 4,057 665 (10,181) 8,189 Cash and Cash Equivalents at Beginning of Year 288,364 7,335 8,727 304,426 63,964 Cash and Cash Equivalents at End of Year $ 273,461 $ (continued) City of Scottsdale, Arizona 52 11,392 $ 9,392 $ 294,245 $ 72,153 Table of Contents Statement of Cash Flows Proprietary Funds For the Fiscal Year Ended June 30, 2023 (in thousands) Cash and Cash Equivalents at End of Year includes: Cash and Investments Cash with Fiscal Agent Restricted Cash and Investments Total Cash and Cash Equivalents Water and Sewer Utility $ $ 193,846 28,676 50,939 273,461 Reconciliation of Operating Income to Net Cash Provided by (Used for) Operating Activities Cash Flows from Operating Activities Operating Income $ 3,180 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 Ventures Change in Accounts Receivable Change in Lease/PPP Receivable Change in Miscellaneous Receivable Change in Intergovernmental Receivable Change in Inventories Change in Prepaid Expense Change in Customer Deposits Change in Accounts Payable Change in Unearned Revenue Change in Accrued Payroll and Compensated Absences Change in Claims Payable Change in Advanced Payments Change in Net Pension Liability Change in Deferred Inflows of Resources Leases/PPPs Change in Deferred Outflows of Resources Related to Pensions Change in Deferred Inflows of Resources Related to Pensions Total Adjustments Net Cash Provided by (Used for) Operating Activities $ $ 81,276 $ 10,212 $ $ $ 1,895 Total $ $ 9,392 9,392 $ 661 4,964 (148) 1 36 (1,508) 22 20 66 (100) 373 1,174 205 (381) 4,724 $ $ 212,039 30,005 52,201 294,245 $ 72,153 72,153 $ 5,736 $ 10,720 303 (838) 19 (352) 304 (86) 2,429 989 (1,805) 963 65,909 (3,108) 20,656 (218) (1,508) (54) (172) (257) 285 (2,135) 41 (312) 7,328 1,189 4,361 (8,222) 83,783 11,305 (518) 1 (204) (78) 1,921 576 (12) 14 (4,885) 1,212 689 (1,287) 8,734 $ 6,619 $ 1,624 $ 89,519 $ 19,454 $ 1 84 - $ 5 - $ 23,302 (14,108) 2,397 (1,241) (48) $ 2,379 (443) $ 85 $ 5 $ 10,302 $ 1,936 The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 53 Solid Waste 8,801 1,329 1,262 11,392 60,642 (2,122) 20,636 98 (54) (172) (257) 263 (2,459) 61 (212) 4,526 15 3,167 (6,036) 78,096 Supplemental Disclosure of Non-Cash Investing, Capital, and Financing Activities Contributions of Capital Assets from Developers $ 23,302 Change in Equity in Joint Venture (14,114) Contributions of Capital Assets from Other Funds Amortization of Bond Premium 2,313 Deferred Amount on Refundings (1,241) Retirement of Assets (48) Total Non-Cash Investing, Capital, and Financing Activities Airport Governmental Activities Internal Service Funds Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 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 approved by City Council • • Non-profit corporation created in 1997 • • Governed by a Board of Directors approved by City Council • Approved for dissolution by City Council June 13, 2023. • • Formed in 1992 by petition to City Council • • Able to levy taxes and issue bonds independent of the City • • • City Council serves as the Board of Directors • Approved for dissolution by City Council June 13, 2023 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, 2023 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 in 1994 by 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 in 1997 by 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 in 1998 by 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 in 2005 by 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, 2023 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 and proprietary funds. 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 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. 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 leases, subscription-based information technology arrangements, public-public partnerships and contracts payables 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, 2023 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 in 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 or restricted 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. Transportation Privilege Tax Capital Projects Fund is used to account 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. External Sources Capital Projects Fund is used to account 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. 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 Permanent Funds account for resources that are legally restricted to the extent that only earnings, not principal, support the City’s programs. City of Scottsdale, Arizona 57 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2023 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. 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, computer replacement, and self-insurance 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 permits it to invest in certificates of deposit; repurchase agreements; prime quality commercial paper; money market mutual funds; highly rated corporate bonds, debentures, notes, or other evidence of indebtedness; 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; obligations issued by this state or any political subdivision thereof; and the pooled investment funds established by the Office of the Arizona State Treasurer. City of Scottsdale, Arizona 58 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2023 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.” 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 year end 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 purchase 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. City of Scottsdale, Arizona 59 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2023 The 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. 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 Lease, public-public partnership, and subscription-based information technology arrangements assets are amortized over the life of the associated contract. The excess purchase price over fair 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. City of Scottsdale, Arizona 60 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2023 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. 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, 2023. 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 as of June 30, 2023, in the governmental and proprietary funds. The current liability represents compensated absences that have matured but were not paid as of June 30, 2023, 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. City of Scottsdale, Arizona 61 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2023 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. 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 assets that applies to a future period(s) and 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 include 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 five-year 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 assets that applies to a future period(s) and will not be recognized as an inflow of resources (revenue) until that time. The City has five items that qualify for this category: unavailable revenue, pension-related amounts, OPEB-related amounts, lease-related amounts, and public-private partnership amounts. City of Scottsdale, Arizona 62 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2023 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 include 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. Lease-related amounts are recognized at the inception of leases in which the City is the lessor. The deferred inflow of resources is recorded in an amount equal to the corresponding lease receivable plus certain additional amounts received from the lessee at or before the commencement of the lease term that relate to future periods, less any lease incentives paid to, or on behalf of, the lessee at or before the commencement of the lease term. The inflow of resources is recognized in a systematic and rational manner over the term of the lease. Public-private partnership (PPP) amounts are recognized upon the contribution of improvements to the underlying PPP asset made by the operator in the PPP to the City. The deferred inflow of resources is recorded in an amount equal to the value of the contributed improvements at the time of the contribution. The inflow of resources is recognized in a systematic and rational manner over the term of the PPP. 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. City of Scottsdale, Arizona 63 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2023 Nonspendable fund balances include amounts that cannot be spent because they are not in a spendable form, such as inventory or prepaid items, or because resources legally or contractually must remain intact. Restricted fund balances are the portion of a fund balance that have externally enforceable limitations on their usage through legislation or limitations imposed by creditors, grantors, laws and regulations of other governments, or enabling legislation. Committed fund balances are self-imposed limitations by the highest level of decision-making authority, namely City Council, prior to the end of the reporting period. City Council approval is required to commit resources or to rescind the commitment through a City Council resolution. Assigned fund balances are limitations imposed internally by management based on the intended use of the funds. In June 2011, through City Council Resolution No. 8751, the City Council authorized the City Treasurer to assign fund balances for specific purposes. 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/amortization, 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. City of Scottsdale, Arizona 64 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2023 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. E. Implementation of New Accounting Principles 1. Governmental Accounting Standards Board Statement No. 94 The City adopted the provisions of GASB Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements. The primary objective of this Statement is to improve the financial reporting by addressing issues related to public-private and public-public partnership arrangements (PPPs). This Statement also provide guidance for accounting and financial reporting for availability payment arrangements (APAs). 2. Governmental Accounting Standards Board Statement No. 99 The City adopted the provisions of GASB Statement No. 99, Omnibus 2022. This Statement establishes accounting and financial reporting requirements for specific issues related to derivative instruments, leases, public-private and public-public partnerships, subscription-based information technology arrangements (SBITAs), LIBOR usage extension, disclosures for nonmonetary transactions, pledging of revenues, government-wide financial statement focus. This pronouncement did not impact the preparation of these financial statements. 3. Governmental Accounting Standards Board Statement No. 100 The City adopted the provisions of GASB Statement No. 100, Accounting Changes and Error Corrections -an amendment of GASB Statement No. 62. The objective of this Statement is to provide more understandable, reliable, relevant, consistent, and comparable information within accounting and financial reporting as it relates to accounting changes and error corrections. City of Scottsdale, Arizona 65 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 F. Prior Period Adjustment 1. Change in Accounting Principle The City’s net position as of July 1, 2022, has been restated as follows for the implementation of GASB No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements. The table below reflects the restatement amounts on the government-wide statement and proprietary fund statements of net position (in thousands): Reporting Units Affected by Adjustments to and Restatements of Beginning Balance Government-wide Net position at June 30, 2022, as previously reported Prior period adjustment - implementation of GASB 94 Net position at June 30, 2022, as restated Funds Governmental Activities Business-type Activities $ $ 4,562,333 76 4,562,409 $ $ 1,533,768 (626) 1,533,142 $ $ Enterprise Fund Airport 64,222 (626) 63,596 The new accounting standard established standards of accounting and financial reporting for publicprivate and public-public partnerships (PPPs) and availability payment arrangements (APAs) for governments. The City previously reported service concession arrangements (SCAs) which are now classified as PPPs. The implementation of this standard modified the City’s financial statements by including PPP related receivables, deferred inflows of resources, capital assets, intangible assets, and liabilities. 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, $699,128,000 differ from the net position of governmental activities, $4,812,135,000 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 66 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) $ - 72,153 - Reclassifications and Eliminations $ - $ 787,734 77,384 3,665 34,210 2,320 2,237 1,411 3,313 9,924 1,850 528 44,450 4,741 33,110 7,896 17,499 486 960,605 4,742,251 3,200 2,769 5,147 24,974 55,692 4,834,033 658 1,465 1 60,499 5 14 230 135,025 (17,499) (17,499) 3,665 34,210 2,320 2,237 1,411 3,313 9,924 1,850 528 44,450 4,741 33,110 8,554 1,951 1 4,802,750 3,205 2,783 5,377 24,974 55,692 5,912,164 - 16,069 112,921 289 129,279 939 939 - 16,069 113,860 289 130,218 960,605 $ 4,963,312 $ 135,964 $ (17,499) $ 6,042,382 Notes to Financial Statements Deferred Outflows of Resources Deferred Amounts on Refundings Pension-Related Amounts OPEB-Related Amounts Total Deferred Outflows of Resources 715,581 77,384 Statement of Net Position Total (3) For the Fiscal Year Ended June 30, 2023 City of Scottsdale, Arizona 67 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 Highway User Tax Auto Lieu Tax Intergovernmental Grants Leases Miscellaneous Due from Other Funds Supplies Inventory Prepaid Items Capital Assets (net of accumulated depreciation) Equity in Joint Venture Lease Assets (net of accumulated amortization) Subscription-Based Information Technology Arrangements (net of accumulated amortization) Prepayments Public-Public Partnerships (net of accumulated amortization) Total Assets Total Governmental Funds Long-Term Assets and Deferred Outflows/ Liabilities and Deferred Inflows(1) Table of Contents Reconciliation of Governmental Funds Balance Sheet to the Government-wide Statement of Net Position (in thousands) LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCE/NET POSITION $ $ Total Liabilities and Deferred Inflows of Resources Fund Balances/Net Position Total Fund Balances/Net Position Total Liabilities, Deferred Inflows of Resources, and Fund Balances/Net Position (continued) $ (90) 90 15,081 17,553 618 1,553 - $ 3,306 248 6,051 304 207 2 110 - Statement of Net Position Total (3) Reclassifications and Eliminations $ (17,499) - $ 45,634 10,008 6,051 90 15,385 17,760 620 1,663 9,514 67,706 9,955 2,652 4,341 4,745 2,907 171,497 955,921 990,726 14 4 26,779 37,025 (17,499) 9,955 2,666 4,341 4,745 2,911 982,700 1,181,749 57,597 32,383 89,980 (57,597) 11,301 2,503 2,102 (41,691) 209 209 - 32,383 11,510 2,503 2,102 48,498 261,477 949,035 37,234 (17,499) 1,230,247 699,128 4,014,277 98,730 - 4,812,135 960,605 $ 4,963,312 $ 135,964 $ (17,499) $ 6,042,382 Notes to Financial Statements Deferred Inflows of Resources Unavailable Revenue Leases Pension-Related Amounts Public-Private Partnerships OPEB-Related Amounts Total Deferred Inflows of Resources 42,328 9,850 17,499 9,514 67,706 Internal Service (2) Funds For the Fiscal Year Ended June 30, 2023 City of Scottsdale, Arizona 68 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 Leases - Due within one year Subscriptions - Due within one year Matured Bond Interest Payable Matured Bonds Payable Unearned Revenue Intergovernmental Other Due to Other Governments Guaranty and Other Deposits Other Bonds, Loans, Capital Leases, and Other Payables Total Liabilities Total Governmental Funds Long-Term Assets and Deferred Outflows/ Liabilities and Deferred Inflows(1) 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. $ 6,571,923 (1,829,672) 4,742,251 $ 3,200 Prepayments at 7/1/22 Prepayments for fiscal year 2023 Prepayments reclassified to SBITA asset Amortization of prepayments $ 25,364 1,022 (445) (967) 24,974 PPPs at 7/1/22 Retirement of PPPs (formerly SCAs) Revaluation of PPPs Land improvements net additions for PPPs Amortization of PPPs $ Leases at 7/1/22 Leases for fiscal year 2023 Amortization of leases $ SBITAs at 7/1/22 SBITAs for fiscal year 2023 Prepayments reclassified to SBITA asset Loss on retirement Amortization of SBITAs $ Cost of capital assets Accumulated depreciation $ 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. $ $ $ 53,925 (53,925) 57,277 3,929 (5,514) 55,692 2,390 1,003 (624) 2,769 4,352 2,961 445 (11) (2,600) 5,147 Deferred outflows of resources consist of items that will consume net assets 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 OPEB-related amounts result from differences between expected and actual experience, changes of assumptions or other inputs, the difference between projected and actual investment earnings, changes in the proportion and differences between City contributions and proportionate share of contributions, 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. (continued) Deferred amounts on refundings Pension-related amounts OPEB-related amounts $ $ 16,069 112,921 289 129,279 Notes to Financial Statements 69 City of Scottsdale, Arizona $ For the Fiscal Year Ended June 30, 2023 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 public-public partnerships (PPPs) (formerly service concession arrangement (SCAs)), leases, and subscription-based information technology arrangements (SBITAs). These assets are capitalized and amortized over the life of the corresponding agreement. 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, 2023, were: Leases Bonds Public-public partnerships Subscription-based information technology arrangements Contracts Payable Issuance premium Accrued vacation and sick leave pay Total OPEB liability Net pension liabilities $ $ (2,933) (593,648) (4,620) (4,138) (1,083) (28,683) (32,634) (699) (322,288) (990,726) $ $ 3,733 1,248 4,022 183 46,571 1,840 57,597 Deferred inflows of resources represent an acquisition of net assets 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. Deferred inflows of resources related to public-private partnerships are recorded in an amount equal to the value of the contributed operator improvements at the time of the contribution. Pension-related amounts OPEB-related amounts Public-private partnerships $ $ (11,301) (2,102) (2,503) (15,906) $ 98,730 $ (17,499) $ 17,499 (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 interfund activity. Reduction of amount due from other governmental fund Reduction of amount due to other governmental fund Notes to Financial Statements City of Scottsdale, Arizona 70 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, 2023 Because the focus of governmental funds is on a short-term basis, 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, 2023 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, $186,944,000 differs from the change in net position for the governmental activities, $249,726,000 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 71 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) REVENUES $ $ $ 67,634 314,348 36,492 10,155 3,625 200 6,488 (176) (7,304) (688) 51 Capital Related Items(5) $ Internal Service Funds(6) - $ Reclassifications and Eliminations(7) 536 - $ Long-Term Debt Transactions(8) - $ Statement of Activities - $ 67,994 307,044 35,804 10,155 3,625 200 6,539 35,884 47,853 12,042 18,111 610 2,862 10 - - - - 35,884 47,853 12,042 18,111 610 2,872 17,686 8,604 6,866 2,804 26 (4) (12) (128) - - (57) - - 17,655 8,600 6,854 2,676 2,756 211 3,170 1,703 151 83 10,045 14,029 (3,150) - 17 1 1 (2) 8 - 87 - - - 2,773 212 3,171 1,703 149 83 10,053 14,029 (3,150) 87 30,116 368 28,783 7,679 525 3,640 1,989 7,191 2,264 703,817 (90) 137 10,437 (3,617) 30 87 (1,216) 87 536 (17) (74) - 30,026 505 39,220 4,062 525 3,640 2,019 7,191 2,334 703,150 $ $ $ $ $ $ Notes to Financial Statements (continued) Long-Term Revenue/ Expenses(4) For the Fiscal Year Ended June 30, 2023 City of Scottsdale, Arizona 72 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 Decrease in Fair Value of Investments Public-Private Partnerships 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) EXPENDITURES/EXPENSES Net Change for the Year (continued) $ $ $ 930 1,082 7,565 1,197 6,696 5,877 10,632 48,271 45,541 198,067 67,439 18,392 529 70,918 17,918 845 148,652 650,551 $ Capital Related Items(5) (9) 22 232 (65) (153) (213) (92) 537 1,311 (14,309) 2,228 1,107 321 (9,083) $ $ 15 45 36 14 62,702 3,113 5,110 11,373 2,228 (148,652) (64,016) Internal Service Funds(6) $ $ (23) (14) (131) (15) (112) (60) (208) (979) (350) (4,999) (1,053) (247) (8,191) Reclassifications and Eliminations(7) $ $ Long-Term Debt Transactions(8) (2) (1) (1) (19) (622) (61) (1,061) (127) (3) (1,897) $ $ Statement of Activities 375 102 359 9 (70,918) (2,299) (845) (73,217) $ $ 898 1,090 7,679 1,117 6,475 5,639 10,327 110,284 49,554 182,910 80,219 21,486 321 529 15,619 494,147 $ 8,612 916 2,486 265 42,844 73,705 4,850 133,678 $ - $ 11,754 (23,230) (11,476) $ 48 2,379 129 2,556 $ (1,823) (1,823) $ (916) (2,486) (265) (73,705) (4,850) 10 (82,212) $ 8,660 12,310 19,743 10 40,723 $ 186,944 $ 7,867 $ 52,627 $ 11,283 $ - $ (8,995) $ 249,726 Notes to Financial Statements OTHER FINANCING SOURCES (USES) / CHANGES IN NET POSITION Net Transfers from Other Funds Capital Contributions Financing of Leases Financing of Subscription-Based Information Technology Arrangements Financing of Contracts Payable Sale of General Capital Assets Issuance of Long-Term Capital-Related Debt Premium on Long-Term Debt Issued Gain on Retirement of Subscription-Based Information Technology Arrangements Liability Total Long-Term Revenue/ Expenses(4) For the Fiscal Year Ended June 30, 2023 City of Scottsdale, Arizona 73 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 Scottsdale AZ CARES Streetlight and Services Districts Debt Service Principal Interest and Fiscal Charges Bond Issuance Costs Capital Outlay Total Expenditures/Expenses Total Governmental Funds Table of Contents Reconciliation of Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-wide Statement of Activities (in thousands) (4) Because some property taxes will not be collected for several months after the City's fiscal year-end, they are not considered as "available" revenues in the governmental funds. Similarly, other revenues are not currently available at year-end and are not reported as revenue in the governmental funds. Taxes-Local Charges for Services/Licenses Fines, Fees, and Forfeitures Intergovernmental Other $ $ (8,117) (108) 17 10,766 (3,492) (934) 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. Long-term subscription prepayment Amortization of long-term prepaid leases $ $ 291 (967) (676) $ $ (37) 110 (41,421) (551) (5,514) (624) (2,600) (50,637) Current-year pension and OPEB contributions are reclassified to deferred outflows of resources and prepayments on the statement of net position, and are therefore not a reduction of net position. Current-year pension contributions Current-year OPEB contributions $ $ 52,198 71 52,269 $ 245 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. (continued) Notes to Financial Statements 74 City of Scottsdale, Arizona Accrual for long-term compensated absences OPEB expense Pension expense Change in equity interest for joint venture Amortization of public-public partnerships Amortization of leased assets Amortization of subscription-based information technology arrangements For the Fiscal Year Ended June 30, 2023 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. 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) When leases (in which the City is the lessee), public-public partnerships (PPPs) (in which the City is the operator) and subscription-based information technology arrangements (SBITAs) are to be used in governmental activities, an expenditure is recorded in the governmental funds in the amount of the Present Value of the Future Lease Payments (PVFLP)/Present Value of the Future Installment Payments (PVFIP)/Present Value of the Future Subscription Payments (PVFSP), respectively; however, in the statement of activities, the PVFLP, PVFIP, and PVFSP are recognized as intangible assets and amortized over the lease term/PPP/subscription term. Capitalized leases Capitalized SBITAs Capitalized PPPs $ $ 1,003 2,961 3,929 7,893 SBITA retirements $ (11) $ (282) $ $ 148,652 (84,636) (23,230) 40,786 $ 11,754 $ 87 When subscription-based information technology arrangement assets (SBITAs) are retired, a loss is recognized on the statement of activities. Capital expenditures Depreciation expense Sale of capital assets 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 Amortization of deferred inflows of resources related to capital assets acquired by the City as a result of public-private partnerships are not shown in the governmental fund statements. On the statement of activities it is recorded as revenue. (continued) Notes to Financial Statements (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 sale of capital assets. For the Fiscal Year Ended June 30, 2023 75 City of Scottsdale, Arizona 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. 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) (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/crediting 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 $ $ 13,812 (2,529) 11,283 $ $ (1,897) (1,897) $ 70,918 $ (3,165) 5,464 2,299 (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. Reduction in revenues/capital contributions - Governmental Funds Reduction in expenditures/expenses - Governmental Funds 76 City of Scottsdale, Arizona 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 accreted interest related to leases and reductions of interest expense were recognized due to the amortization of bond premiums. Amortization of deferred charges on refundings Amortization of bond premiums and discounts $ Bond proceeds and the financing of leases, subscription-based information technology arrangements, and contracts payable 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: Lease acquisitions Subscription-based information technology arrangements Contracts payable Long-Term capital-related debt Premium on bonds $ $ (916) (2,486) (265) (73,705) (4,850) (82,222) $ 10 When subscription-based information technology arrangement (SBITA) liabilities are retired, a gain is recognized on the statement of activities. Retirement of SBITA liabilities Notes to Financial Statements Repayment of principal and defeasance of bond principal via refunding bonds are reported as an expenditure or other financing use, respectively, in governmental funds. 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. For the Fiscal Year Ended June 30, 2023 (8) Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2023 III. STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY A. Budget and Budgetary Accounting The City prepared an annual budget that covered fiscal year 2023. The fiscal year 2023 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, in-kind revenue and expenditure recognition activity, interest associated with leases, amortized lease revenue, accrued compensated absences, and GAAP entries associated with the financing or termination of leases, subscription-based information technology arrangements, public-private partnerships, and long-term contracts payable. 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, Housing Choice Voucher Program, Preserve Privilege Tax, Streetlight Districts, Special Programs, Tourism Development, and Stadium Facility) and Debt Service Funds (except for the Community Facilities Districts and the Debt Service Stabilization 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, and Permanent 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 Housing Choice Voucher Program 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 to help departments control operational costs. Budgets for Permanent Funds are established in accordance with endowment requirements. 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 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 2023, there were no supplemental budgetary appropriations to the original budget. City of Scottsdale, Arizona 77 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2023 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 lineitem level within the division. B. Excess of Expenditures over Appropriations The Housing Choice Voucher Program Special Revenue Fund, Tourism Development Special Revenue Fund, and the Stadium Facility Special Revenue Fund exceeded their expenditure appropriation by $302,000, $168,000, and $287,000 respectively. The additional expenditures incurred were funded by available fund balances within the respective funds. C. Deficit Fund Equity The Community Development Block Grant Special Revenue Fund, Grants Special Revenue Fund, and the External Sources Capital Project Fund had deficit ending fund balances of $20,000, $3,277,000, and $16,207,000, respectively. These deficits were caused by pending grant reimbursements and reimbursements from intergovernmental agreements related to capital projects the City is required to fund. Revenue accruals are not recognized in the current fiscal year due to the unavailability of the funds. These pending reimbursements will be recognized as revenue when received or available. The Preserve Privilege Tax Capital Projects Fund had deficit ending fund balances of $1,000 primarily due to timing differences of cash transfers for accruals. D. Fund Balance Classifications The following table details the fund balance categories and classifications for Governmental Funds: City of Scottsdale, Arizona 78 Table of Contents General (in thousands) Nonspendable Inventory Endowment Funds Total Nonspendable General CIP Construction Capital Projects External Sources Capital Projects Transportation Privilege Tax Capital Projects Total Nonmajor Governmental Funds Total Governmental Funds $ $ FUND BALANCES $ 486 486 $ - 7,291 7,291 $ $ - 17,884 17,884 $ $ - 95,429 95,429 $ $ - 4,234 4,234 $ 609 609 36,330 47,210 196 688 109,936 382 42 11 2,238 10 219 35 408 7 126 508 11 110 191 164 43 10 212 6 2 47 53 120 29 5 1 766 1,932 700 7,809 5,101 2,372 27 218,057 $ 486 609 1,095 7,291 17,884 95,429 4,234 36,330 47,210 196 688 109,936 382 42 11 2,238 10 219 35 408 7 126 508 11 110 191 164 43 10 212 6 2 47 53 120 29 5 1 766 1,932 700 7,809 5,101 2,372 27 342,895 Notes to Financial Statements $ - $ For the Fiscal Year Ended June 30, 2023 City of Scottsdale, Arizona 79 Restricted Property Tax for Debt Service Restricted Land Sale Proceeds for Capital Improvements Transaction Privilege and Highway User Tax for Transportation Capital Improvements External Contributions for Capital Improvements GO Bond Proceeds for Capital Improvements Transaction Privilege and Highway User Tax for Transportation Improvements Federal Grants for the Community Development Block Grant Program Federal Grants for Housing Choice Voucher Program Transaction Privilege Tax for Preserve Land Purchase and Improvements Property Tax for Community Facility Districts Property Tax Levy for the Streetlight Improvement Districts Contributions for Mayor/City Council Special Events and Programs Court Fees for City Court Improvements to Facilities and Operations Contributions for City Court Jury Program Refreshments Franchise Capital Recovery Fees to Offset Relocation Expenses APS Improvement District Fees for Underground Utility Upgrades Contribution for the Stormwater Drainage System Contributions for Community and Economic Development Disbursements from AZ State Crime Laboratory Assessment Fund for Crime Lab Services Annual Payment from IGA with the SRP-MIC for Forensic Lab Services Contributions for the Fire Department Contributions for the Police Department Fees for Police Department 30-Day Tow Program Fees for Police Officer Safety Equipment Contributions for the School Resource Officers Crisis Canine Program Other Forfeitures for Police Department Contributions for the Scottsdale Cares Program Contributions for Human Services Facility/Recreation Fees for Senior Center Special Programs Lease Revenue Restricted for Princess Wall & Sign Lease Lease Revenue Restricted for McDowell Mountain Arcis LLC Lease Contributions for Parks and Recreation Contributions for the Libraries Disbursements from Endowments for the Libraires Disbursements from AZ Supreme Court for Smart and Safe Expungements Disbursements from the Smart and Safe AZ Fund for the Fire Department Disbursements from the Smart and Safe AZ Fund for the Police Department Disbursements from the One AZ Distribution of Opioid Settlement Funds for Human Services Transient Occupancy Tax for Destination Marketing Contributions for Stadium Operations Stadium Surcharge for Debt Service Endowment Funds Total Restricted (continued) General Obligation Bond Debt Service Table of Contents General (in thousands) $ 226,509 226,995 $ $ 7,291 Transportation Privilege Tax Capital Projects $ $ $ 108,690 224 460 49 3,525 1,571 17 8,266 435 3,047 1,692 74 309 497 128,856 146,740 $ (78) 95,351 External Sources Capital Projects $ $ 40 40 (20,481) (16,207) Total Nonmajor Governmental Funds Total Governmental Funds $ $ $ 4,645 99 35 2,861 141 379 280 18 68 1 1,088 858 477 488 54 29 1,374 11,285 2,683 26,863 (6,571) 238,958 $ 108,690 224 460 49 3,525 1,571 40 17 8,266 435 3,047 1,692 74 309 497 4,645 99 35 2,861 141 379 280 18 68 1 1,088 858 477 488 54 29 1,374 11,285 2,683 155,759 199,379 699,128 Notes to Financial Statements Unassigned Total Fund Balances $ General CIP Construction Capital Projects For the Fiscal Year Ended June 30, 2023 City of Scottsdale, Arizona 80 FUND BALANCES Committed General Fund Contribution for Capital Improvements McCormick Railroad Park Improvements In-Lieu Parking Fees for Parking Projects In-Lieu Stormwater Fees for Drainage Improvements Tourism Development Capital Projects Court Capital Improvement Enhancement Projects Forensic Science Intergovernmental Agreement Contribution Risk Management Capital Improvement Contribution Stormwater Utility Fee for Capital Improvements Downtown Fees for Capital Improvements Downtown Special Capital Improvements Greater Airpark Special Capital Improvements Airpark Cultural Trust Capital Improvements Scottsdale AZ CARES Capital Improvements Special Event Parking for Capital Improvements Court Enhancement Fees for Upgrades to Court Operations Rent Fees for Loloma School Maintenance and Capital Improvements In-Lieu Stormwater Fees for Area Drainage Master Studies Downtown Cultural Program for Public Works of Art Rent Fees for the Community Arts Trust to Support the Loloma School Historic Preservation Program for Rehabilitation of Buildings License Fees for the Regulation of the Public Safety Pawn Shop Ordinance Cadet Competition Fees for the Scottsdale Police Department Cadet Program Sponsorship Fees for Events at the Senior Centers Sponsorship Fees for Parks and Recreation Programming Golf Course Surcharge for Silverado Golf Course Improvements Retail Sale Revenue for McCormick Stillman Railroad Park Operations Contribution for Habitat Improvements in the Preserve Allocation of Youth Sports Fee for Maintenance/Improvements of Athletic Fields Allocation of Aquatic Fee for Maintenance/Improvements of Aquatic Facilities Retail Sale Revenue for Library Collection Materials Attendee Fees for Westworld User Area Improvements Transient Occupancy Tax for Tourism Development Excise Tax for Debt Reserve Total Committed General Obligation Bond Debt Service Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2023 The City Council has adopted a financial policy to maintain an operating reserve for the following funds: • General Fund equal to 20 percent of operating uses, excluding transfers out, to provide stability and flexibility to respond to unexpected events. • Transportation, Non-major Special Revenue Fund equal to 10 percent of operating uses, excluding transfers out, to provide funding to address fluctuations in economic cycles and unexpected onetime operating requirements. • Water and Sewer Utility Enterprise Fund equal to 25 percent of operating uses, excluding transfers out and debt service for emergencies, unexpected decline in revenues, and other unanticipated events or opportunities. • Airport Enterprise Fund equal to 25 percent of operating uses, excluding transfers out and debt service for emergencies, unexpected decline in revenues, and other unanticipated events or opportunities. • Solid Waste Enterprise Fund equal to 15 percent of operating uses, excluding transfers out and debt service for emergencies, unexpected decline in revenues, and other unanticipated events or opportunities. The City Council has adopted a financial policy to maintain the following additional reserves: • General Fund Emergency Reserve of 5 percent of operating uses, excluding transfers out. The reserve is intended for unexpected emergencies and events where immediate action must be taken in the best interest of the city’s residents and business owners. • Water and Sewer Utility Enterprise Fund Asset Replacement Reserve equal to 2 percent of undepreciated book value of tangible fixed assets for repair and maintenance of critical infrastructure. • General Obligation Bond Debt Service Fund Reserve of no more than 10 percent of the amount of annual principal and interest needed to service the outstanding debt. • Debt Service Reserve for governmental debt supported by excise taxes, dedicated taxes, or revenues, at a minimum of 25 percent of the next fiscal year’s debt service. • Self-Insurance Reserve at a level that will adequately fund the City’s financial obligations for the payment of property, workers’ compensation, liability and health benefit losses equal to the actuary’s 85 percent confidence level of projected total outstanding claims liability. 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 as of June 30, 2023: Net Position Restrictions (in thousands) Water and Sewer Restricted for System Replacement Restricted for Joint Venture Construction Deposits $ $ 46,757 7,362 54,119 City of Scottsdale, Arizona 81 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2023 IV. DETAILED NOTES ON ALL FUNDS A. Cash and Investments The City maintains a cash and investment pool for use by most funds. The City holds unexpended General Obligation Bond construction proceeds received at issuance in separate investment accounts. Certain activities of the City’s grant funds are also held in separate bank accounts, as well as the Community Facilities Districts and Municipal Property Corporation. The City’s endowment funds have investments held separately by a trustee. The City’s investment policy, which is authorized by City Charter, ordinance, and trust agreements permits the City to invest in certain instruments. These instruments include 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/asset-backed securities 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; and the pooled investment funds established by the Office of the Arizona State Treasurer. Deposits As of June 30, 2023, the carrying amount of the City’s deposits was $123,759,006 and the bank balance was $131,333,074. The $7,574,068 difference represents outstanding checks, deposits in transit, and other reconciling items. Custodial Credit Risk Custodial credit risk is the risk that, in the event of the failure of a depository financial institution, the City will not be able to recover deposits or will not be able to recover collateral securities that are in the possession of an outside party. All deposits are required to be fully collateralized per the City’s investment policy. As of June 30, 2023, $71,921,030 of the City’s deposits was exposed to custodial credit risk and 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 failure 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 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 82 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 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 five years or less and the weighted average maturity of the overall investment portfolio to three years or less. 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 Asset-Backed Securities Commercial Paper Negotiable Certificates of Deposit Fair Value $ 623,313 161,759 15,691 144,040 8,319 2,257 14,808 Less than 1 $ 97,602 76,128 7,419 20,575 27 2,257 14,808 Total Investments $ $ 970,187 218,816 $ $ 1-2 201,685 26,961 8,272 57,391 608 294,917 $ $ 2-3 160,950 58,670 60,291 5,816 - 3+ $ 163,076 5,783 1,868 - 285,727 $ 170,727 Credit Risk Generally, credit risk is the risk that the issuer or other counterparty to an investment will not fulfill its obligations 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 investments in: • 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 with a maximum maturity of five years • Bonds, notes, or other evidence of indebtedness of this state or any of its counties, incorporated cities or towns, school districts or special taxing districts, which carry a minimum “AA-” or “Aa3” or equivalent rating by at least one NRSRO at the time of purchase with a maximum maturity of five years • Fully insured or collateralized certificates of deposit and other evidence of deposit at banks and savings institutions placed in accordance with the procedures prescribed in Arizona Revised Statutes § 35-323.01 with a maximum maturity of 18 months from the time of purchase • Negotiable or brokered certificates of deposit within the top two ratings by at least two NRSROs, at the time of purchase, and a maximum maturity of three years • Commercial paper within the top two ratings of a NRSRO at the time of purchase, issued by corporations organized and doing business in the United States, and a maximum maturity of nine months City of Scottsdale, Arizona 83 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 • Bonds, debentures, notes, or other evidence of indebtedness with a minimum “A” or better rating, at the time of purchase, from at least two NRSROs, and a maximum maturity of five years • Money market funds whose underlying investments are securities 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 as of June 30, 2023, meet the aforementioned criteria. Presented below are the ratings, as determined by S&P unless otherwise noted, as of June 30, 2023, for each investment type (in thousands): Total Investment Type $ A-1+ - $ A- $ A - $ A+ - $ AA- $ AA - $ AA+ - $ Aaa - $ AAAm - $ AAA - $ 623,313 161,759 - 9,783 - - - - - 151,976 - - - - U.S. Government Instrumentalities 15,691 - - - - - - - - - - 15,691 - Corporate Notes 144,040 - - 31,748 20,567 37,470 24,048 9,607 8,005 - - 12,595 - 8,319 - - - - - - - - 635 - 7,684 - Asset-Backed Securities 623,313 A-1 U.S. Government Agencies U.S. Government Securities $ Exempt from Disclosure - $ Commercial Paper 2,257 2,257 - - - - - - - - - - - Negotiable Certificates of Deposit 14,808 2,323 12,485 - - - - - - - - - - Money Market Mutual Funds Total Investments 64,764 - - - - - - - - $ 1,034,951 $ 4,580 $ 22,268 $ 31,748 $ 20,567 $ 37,470 $ 24,048 $ 9,607 $ 159,981 $ - 64,764 - - 635 $ 64,764 $ 35,970 $ 623,313 Note: A-1 and A-1+ are S&P Global Ratings short-term credit ratings. AAAm is a S&P Global Ratings principal stability fund (i.e. money market fund) credit rating. Aaa is a Moody's rating. Concentration of Credit Risk The City’s investment guidelines place the following limits on the amount that the City may invest in various security types: Security Type U.S. Treasury Obligations Federal Agency Obligations With One Agency Instrumentalities (Supranational Debt) With One Issuer Certificates of Deposit With One Financial Institution Negotiable Certificates of Deposit With One Issuer Commercial Paper With One Issuer Corporate Indebtedness With One Issuer Repurchase Agreements With One Counterparty Money Market Funds Arizona Investment Pool Municipal Obligations of State of AZ or Political Subdivisions With One Issuer City of Scottsdale, Arizona 84 Maximum Percent of Portfolio 80% 80% 40% 15% 5% 20% 5% 20% 5% 35% 5% 35% 5% 75% 20% 35% 35% 25% 5% Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 The following is a listing by issuer of the City’s investments as of June 30, 2023: (dollars in thousands) Fair Value Percent of Holdings Issuer Investment Type United States Treasury U.S. Govt. Securities Federal National Mortgage Association (FNMA) U.S. Govt. Agencies 58,794 6.05% Federal Farm Credit Bank (FFCB) Federal Home Loan Bank (FHLB) U.S. Govt. Agencies U.S. Govt. Agencies 3,221 0.33% 30,664 3.16% Federal Home Loan Mortgage Corporation (FHLMC) U.S. Govt. Agencies 69,080 7.12% Asian Development Bank Inter-American Development Bank U.S. Govt Instrumentalities U.S. Govt Instrumentalities 2,498 0.26% 8,272 0.85% International Bank of Reconstruction and Development U.S. Govt Instrumentalities 4,921 0.51% 3M Company Adobe Inc. Corporate Notes Corporate Notes 8,946 0.91% 7,916 0.82% Amazon.com Inc. Corporate Notes 8,558 0.88% Apple Inc. Corporate Notes 8,005 0.83% Bank of America Co. Corporate Notes 10,121 1.04% Bristol-Myers Squibb Co. Corporate Notes 4,311 0.44% Cisco Systems Inc Corporate Notes 8,249 0.85% Deere & Company Corporate Notes 5,264 0.54% Exxon Mobil Corp. Corporate Notes 4,354 0.45% Home Depot Inc Corporate Notes 542 0.06% Intel Corporation Corporate Notes 7,984 0.82% JP Morgan Chase & Co. Corporate Notes 8,942 0.92% Merck & Co Inc Corporate Notes 4,910 0.51% Microsoft Corp. Corporate Notes 12,595 1.30% Morgan Stanley Corporate Notes 3,739 0.39% Novartis AG Corporate Notes 11,445 1.18% Pepsico Inc. Corporate Notes 8,361 0.86% Pfizer Inc. Corporate Notes 1,906 0.20% State Street Corp. Corporate Notes 993 0.10% Target Corp. Corporate Notes 861 0.09% Texas Instruments Inc Corporate Notes 4,479 0.46% The Bank Of New York Mellon Corp. Corporate Notes 4,923 0.51% Toyota Motor Corp. Corporate Notes 5,587 0.58% Wal-Mart Stores Inc. Corporate Notes 1,049 0.11% Carmax Auto Owner Trust Asset-Backed Securities 1,705 0.17% Discover Financial Services Asset-Backed Securities 1,868 0.19% Honda Auto Receivables Asset-Backed Securities 635 0.07% Hyundai Auto Receivables Asset-Backed Securities 1,913 0.20% Toyota Motor Corp. Asset-Backed Securities 2,198 0.23% Mitsubishi UFJ Financial Group Inc Commercial Paper 1,518 0.16% Natixis NY Branch Commercial Paper 739 0.08% Commonwealth Bank Of Australia Negotiable Certificates of Deposit 2,323 0.24% Credit Agricole SA Negotiable Certificates of Deposit 2,323 0.24% Toronto-Dominion Bank Negotiable Certificates of Deposit 10,162 1.04% 970,187 100.00% Total Investments City of Scottsdale, Arizona 85 $ $ 623,313 64.25% Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Investments Total City cash and investments at fair value are as follows (in thousands): Cash on Hand Carrying Amount of City Deposits Investments Endowments $ 17 123,759 1,034,951 636 Total Cash and Investments $ 1,159,363 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, 2023: Investments Measured at Fair Value (in thousands) Fair Value Measurements Using Quoted Prices in Active Markets for Identical Assets (Level 1) U.S. Government Securities $ - Significant Other Observable Inputs (Level 2) $ 623,313 Significant Unobservable Inputs (Level 3) $ - U.S. Government Agencies - 161,759 - U.S. Government Instrumentalities - 15,691 - Corporate Notes - 144,040 - Asset-Backed Securities - 8,319 - Commercial Paper - 2,257 - Negotiable Certificates of Deposit - 14,808 970,187 - $ City of Scottsdale, Arizona 86 $ $ Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2023 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 adjust 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. US. Government Agency Discounts 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 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. Asset-Backed Securities A single cash flow stream model is utilized. Commercial Paper Matrix pricing based upon yields and effective maturity. Negotiable Certificates of Deposit Multi-dimensional relational model and/or OAS. Total City cash and investments as of June 30, 2023 are reported as follows (in thousands): Primary Government Cash and Investments Cash with Fiscal Agent Other Restricted Cash $ 999,773 107,389 52,201 $ 1,159,363 Total Cash and Investments Investment income is comprised of the following for the fiscal year ended June 30, 2023 (in thousands): Net Interest Net Decrease in the Fair Value of Investments $ 19,065 (4,867) Total Net Investment Income $ 14,198 The net decrease in the fair value of investments for the fiscal year was $4,866,987. This amount takes into account all changes in fair value (realized and unrealized) that occurred during the fiscal year. City of Scottsdale, Arizona 87 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 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, 2023, the amount of donor-restricted endowment funds available for authorization and expenditure is $27,300. C. Receivables Receivables as of June 30, 2023, 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 Activities and 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 1,173 64,329 65,502 General Obligation Bond Debt Service General CIP Construction Capital Projects $ $ 1,013 1,013 Transportation Privilege Tax Capital Projects - $ External Sources Capital Projects - $ Nonmajor and Other Funds - $ 51 1,535 1,586 Total Governmental and Internal Service Funds $ 2,237 65,864 68,101 21,683 1,411 3,222 528 26,844 - - 1,945 . 1,945 - 10,582 2,320 91 1,850 14,843 34,210 2,320 1,411 3,313 528 1,850 43,632 - - 4,795 16,991 18,700 8,705 49,191 Interest and Other Interest Leases Miscellaneous Subtotal Interest and Other 2,093 33,055 3,994 39,142 - 368 368 227 227 1 319 320 1,344 55 3,936 5,335 3,665 33,110 8,617 45,392 Gross Receivables Less: Allowances for Uncollectibles 131,488 (54,698) 1,013 - 5,163 - 19,163 - 19,020 - 30,469 (1,305) 206,316 (56,003) Intergovernmental/Grants Net Total Receivables $ 76,790 $ 1,013 $ 5,163 $ 19,163 $ 19,020 $ 29,164 $ 150,313 The following agreements include governmental fund receivables that are not expected to be collected within the next year: • The City has a development agreement relating to biomedical research activities with the Translational Genomics Research Institute (TGen) to repay $320,000 with interest through February 2024. • 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, 2023, is $19,813. City of Scottsdale, Arizona 88 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 • The City has an improvement district for underground utilities with expected reimbursements from impacted property owners to pay $360,685 with interest through November 2032. • 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, 2023, the loan balances totaled $2,091,324, 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 and drainage improvements of $21,786,082 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 is a participant in the One Arizona Distribution of Opioid Settlement Funds agreement which is part of the nationwide Opioid Settlement. The City received $872,000 through June 30, 2023, and anticipates receiving additional payments through 2038. Due to the potential of additional litigation and settlements, the City cannot reasonably estimate the total amount of payments that will be received • The City has various long-term lease agreements and therefore the lease receivables are not expected to be collected within the next year. Business-type Activities and Enterprise Funds (in thousands) Water and Sewer Utility Receivables $ Privilege Tax Charges for Services 19,799 Intergovernmental 2,120 Interest 1,551 Lease 14 Public-Private Partnership Miscellaneous 2,247 Gross Receivables Less: Allowances for Uncollectibles Net Total Receivables Airport $ 24 362 578 35 16,718 9,693 - 25,731 (97) $ 25,634 Solid Waste $ 27,410 $ 27,410 3,213 49 5 Total Enterprise Fund $ 3,267 (21) $ 3,246 24 23,374 2,698 1,635 16,732 9,693 2,252 56,408 (118) $ 56,290 The following agreements include enterprise fund receivables that are not expected to be collected within the next year: City of Scottsdale, Arizona 89 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2023 • 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 $1,565,043 after the land on which the improvements were made is sold. This receivable is not expected to be collected within the next year. • Within the business-type activity the City has various long-term lease agreements and therefore the lease receivables are not expected to be collected within the next year. Governmental funds report deferred inflows in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Additionally, governmental funds record unearned revenue when resources have been received, but not yet earned. At the end of the fiscal year, the various components of deferred inflows and unearned revenue reported in the governmental funds were as follows (in thousands): Property Tax Transient Occupancy Tax Court Privilege Occupancy Tax Intergovernmental Other Unavailable $ 1,248 183 3,733 4,022 46,571 1,840 Unearned $ 9,955 2,652 Total $ $ 57,597 12,607 City of Scottsdale, Arizona 90 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 D. Capital Assets Capital asset activity for the fiscal year ended June 30, 2023, was as follows (in thousands): Beginning Balance, as restated Governmental Activities Capital Assets, not being depreciated Land Construction in Progress Total Capital Assets, not being depreciated $ Increases 3,461,153 72,341 3,533,494 $ Decreases 12,512 151,704 164,216 $ Ending Balance (22,456) (81,289) (103,745) $ 3,451,209 142,756 3,593,965 Capital Assets, being depreciated Buildings and Land Improvements* Streets and Storm Drains Motor Vehicles Machinery and Equipment Total Capital Assets, being depreciated 852,503 2,001,912 94,763 80,496 3,029,674 47,675 26,737 6,814 7,480 88,706 (3,682) (43) (4,435) (3,550) (11,710) 896,496 2,028,606 97,142 84,426 3,106,670 Less Accumulated depreciation for Buildings and Land Improvements* Streets and Storm Drains Motor Vehicles Machinery and Equipment Total Accumulated depreciation 424,264 1,291,522 49,816 46,956 1,812,558 24,128 55,959 8,992 6,739 95,818 (3,194) (17) (4,028) (3,252) (10,491) 445,198 1,347,464 54,780 50,443 1,897,885 1,217,116 (7,112) (1,219) 1,208,785 Lease Assets Buildings and Land Improvements Motor Vehicles Machinery and Equipment Total Lease Assets, being amortized 2,733 1,194 271 4,198 469 550 1,019 (321) (206) (527) 2,733 1,342 615 4,690 Less Accumulated amortization for Buildings and Land Improvements Motor Vehicles Machinery and Equipment Total Accumulated amortization 818 776 214 1,808 262 228 136 626 (321) (206) (527) 1,080 683 144 1,907 2,390 393 - 2,783 Subscription-Based Information Technology Arrangement Assets Subscription-Based Information Technology Arrangements 7,129 3,751 (29) 10,851 Less Accumulated amortization for Subscription-Based Information Technology Arrangements 2,771 2,721 (18) 5,474 4,358 1,030 (11) 5,377 Public-Public Partnership Assets Buildings and Land Improvements - 61,206 - 61,206 Less Accumulated amortization for Buildings and Land Improvements - 5,514 - 5,514 - 55,692 - 55,692 Total Capital Assets, being depreciated, net Total Lease Assets being amortized, net Total Subscription-Based Information Technology Arrangement Assets being amortized, net Total Public-Public Partnership Assets being amortized, net Governmental Activities Capital Assets, net $ 4,757,358 $ 214,219 $ (104,975) $ 4,866,602 *The Building and Land Improvements category beginning balance was increased by $2,726 and accumulated depreciation increased by $136 due to a prior period adjustment for the implementation of GASB Statement No. 94, Public-Private and Public-Public Partnerships and Availability Arrangements . City of Scottsdale, Arizona 91 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 (in thousands): Beginning Balance, as restated Business-type Activities Capital Assets, not being depreciated Land Water Rights Construction in Progress Total Capital Assets, not being depreciated $ Increases 52,061 87,171 51,837 191,069 $ Decreases 720 75,507 76,227 $ Ending Balance (58,455) (58,455) $ 52,781 87,171 68,889 208,841 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 1,432,655 699,328 129,885 9,633 1,151 2,039 2,274,691 47,782 18,132 12,057 1,137 52 79,160 (240) (137) (377) 1,480,437 717,460 141,942 10,530 1,151 1,954 2,353,474 Less Accumulated depreciation for Water System Sewer System Buildings and Land Improvements* Machinery and Equipment Motor Vehicles Furniture, Fixtures, and Office Equipment Total Accumulated depreciation 640,537 308,197 36,639 5,655 842 1,077 992,947 40,569 19,143 5,021 775 52 267 65,827 (193) (136) (329) 681,106 327,340 41,660 6,237 894 1,208 1,058,445 1,281,744 13,333 (48) 1,295,029 Lease Assets Machinery and Equipment - 116 - 116 Less Accumulated amortization for Machinery and Equipment Total Lease Assets, being amortized, net - 18 98 - 18 98 Subscription-Based Information Technology Arrangement Assets Subscription-Based Information Technology Arrangements 167 206 (55) 318 Less Accumulated amortization for Subscription-Based Information Technology Arrangements 149 64 (55) 158 18 142 - 160 Total Capital Assets, being depreciated, net Total Subscription-Based Information Technology Arrangement Assets being amortized, net Business-type Activities Capital Assets, net $ 1,472,831 $ 89,800 $ (58,503) $ 1,504,128 *The Building and Land Improvements category beginning balance was increased by $37,918 and accumulated depreciation increased by $17,463 due to a prior period adjustment for the implementation of GASB Statement No. 94, Public-Private and Public-Public Partnerships and Availability Arrangements . City of Scottsdale, Arizona 92 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Depreciation/Amortization expense was charged to functions/programs of the primary government as follows (in thousands): Governmental Activities City Attorney City Court City Manager Public Works Community and Economic Development Public Safety City Treasurer Community Services Administrative Services Capital Assets Held by the Government's Internal Service Funds are Charged to the Various Functions Based on their Usage of the Assets $ Total Depreciation Expense - Governmental Activities $ 15 45 36 62,701 3,113 5,111 14 11,373 2,228 11,182 95,818 Business-type Activities Water and Sewer System Airport Solid Waste Total Depreciation Expense - Business-type Activities $ 60,597 4,932 298 $ 65,827 Governmental Activities City Clerk City Attorney City Court City Manager Public Works Community and Economic Development Public Safety City Treasurer Community Services Administrative Services Scottsdale AZ CARES Intangible Assets Held by the Government's Internal Service Funds are Charged to the Various Functions Based on their Usage of the Assets $ 1 23 3 28 40 6 660 218 5,625 1,824 310 123 $ Total Amortization Expense - Governmental Activities 8,861 Business-type Activities Water and Sewer System Airport Solid Waste Total Amortization Expense - Business-type Activities $ 45 32 5 $ 82 City of Scottsdale, Arizona 93 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Construction Commitments The City has active construction projects as of June 30, 2023. At year end the government’s commitments with contractors for specific projects are as follows (in thousands): Capital Project Program Classification Aviation Drainage and Flood Control Fire Protection Municipal Facilities Neighborhood and Community Parks Police Preservation Streets Technology Traffic Transit Wastewater Water Total Construction Commitments Governmental Activities General CIP Construction Capital Projects Fund Transportation Privilege Tax Fund External Sources 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 Spent to Date $ 4,586 900 4,346 6,053 7,726 19,164 2,463 727 55,802 3,063 651 1,193 14,122 46,587 $ 167,383 Remaining Commitment $ 908 1,125 26,884 13,819 5,348 17,428 11,551 350 57,838 2,713 649 2,825 13,401 34,550 $ 189,389 $ $ $ City of Scottsdale, Arizona 94 32,420 45,315 5,621 18,028 20 101,404 61,109 4,588 282 65,979 167,383 $ 37,860 51,058 6,728 35,316 9,274 140,236 48,150 916 87 49,153 189,389 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 E. 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, 2023, is as follows (in thousands): Receivable Fund General Fund General Fund Total Amount $ 14,624 2,875 $ 17,499 Payable Fund External Sources Capital Project Fund Nonmajor Governmental Funds Total Amount $ 14,624 2,875 $ 17,499 The External Sources Capital Project Fund, HOME Special Revenue Fund, and Grant Special Revenue Fund had deficit cash balances of $14,624,000, $2,000, and $2,873,000, respectively, due to pending reimbursements from 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 Capital Projects - Transportation Privilege Tax Capital Projects - External Sources 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 City of Scottsdale, Arizona 95 Transfers In 89,889 540 79,113 169,542 $ 19,428 33,439 85,072 20,236 40 19,939 178,154 8,660 8,660 - 7 7 55 55 178,209 $ 178,209 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2023 F. Leases City as Lessee The City, as a lessee, has entered into lease agreements involving a baseball facility, printing and imaging equipment, a street sweeper and accompanying transport trailer, motor vehicles, a distributed antenna system, water quality monitoring and treatment equipment, park equipment, and a data center facility space. The City subleases the baseball facility to a professional baseball team. The payments related to the park equipment are based on a percentage of revenue earned by the City and are therefore not included in the measurement of the lease liability. This amount totaled $373,907 for the fiscal year ended June 30, 2023. The City also made $157,648 of payments on a month-to-month basis after the conclusion of some of the motor vehicle leases; these payments were excluded from the measurement of the lease liability. The total of the City’s lease assets are recorded at a cost of $4,806,273, less accumulated amortization of $1,924,912. The future lease payments under lease agreements are as follows (in thousands): 2024 2025 2026 2027 2028 2029-2033 2034-2038 2039-2043 2044-2048 2049-2053 Total Leases Principal Interest $ 643 $ 146 $ 567 111 516 78 226 53 62 43 93 199 149 176 192 143 261 99 334 41 Total 789 678 594 279 105 292 325 335 360 375 $ 4,132 3,043 $ 1,089 $ City as Lessor The City, as a lessor, has entered into lease agreements involving land, baseball facilities, airport facilities, and building space. The baseball facility is leased from the City of Phoenix and subleased to a professional baseball team. The total amount of inflows of resources, including lease revenue, interest revenue, and other lease-related inflows, recognized during the fiscal year was $9,968,845. This total includes $6,205,966 of variable and other payments not previously included in the measurement of the lease receivable. City of Scottsdale, Arizona 96 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2023 G. Subscription-Based Information Technology Arrangements The City has entered into subscription-based information technology arrangements (SBITAs) involving: Various desktop and server software subscription • Event registration and management software • Electronic workflows software • Cloud backup services software • Document management software • Computer-aided dispatch software • Payroll and human resources services software • E-mail/communication management software • Risk management software • Web-based job board software • Public safety allocation and deployment software • Airport agreement tracking software • Electronic signature software • Public safety detection software • Safety data sheets software • Learning management software • Debt management software • eDiscovery software • Procurement management software • Local business community information and resource service software • Web content management system software • Investigative software and storage • Hardware and software inventory management software • Community Services tracking software • Drawing software • Digital signage and program/event communications software • Project management platform software • Water quality monitoring and treatment software • Audit software • Grants management software • Design software • Fats, oils, and grease compliance software • City of Scottsdale, Arizona 97 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2023 Policy and accreditation software • Core and permit management software • Automated test management software • Business expansion and relocation software • The total of the City’s subscription assets are recorded at a cost of $11,169,587, less accumulated amortization of $5,632,446. The future subscription payments under SBITA agreements are as follows (in thousands): 2024 2025 2026 Subscriptions Principal Interest $ 1,746 $ 168 $ 1,691 108 1,070 40 Total 1,914 1,799 1,110 Total $ 4,507 4,823 $ 316 $ In addition to the amounts presented above, the City also had outflows of resources during the fiscal year totaling $237,753 that were not included in the measurement of the subscription liability. This total consists of a $30,500 variable amount that is based on the number of calls related to the public safety allocation and deployment software and $207,253 for payments related to arrangements that either have interminable subscriptions terms or that are prepaid and otherwise meet SBITA recognition criteria, but are below the City’s capitalization threshold. The City has committed to SBITAs involving public safety records management system/computer aided dispatch software and web content management system software. These SBITAs are currently being implemented, and the City has paid a total of $1,489,322 related to these agreements. These outflows were recorded as prepayments as of June 30, 2023. City of Scottsdale, Arizona 98 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2023 H. Public-Public Partnerships and Public-Private Partnerships City as Operator The City, as the operator, has entered into the following public-public partnerships (PPPs) with the United States Bureau of Reclamation (BOR): Land use agreement at Westworld. Under the agreement, the City operates and develops the land where the City’s WestWorld operation is located for a period of 50 years (through July 28, 2032) (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. The City pays the BOR annually and has recognized an intangible right-to-use asset with a net book value of $39,523,584 at fiscal year-end, which includes land improvements paid for by the City, and a related liability in the amount of $1,963,334. A discount rate of four percent was used to calculate the liability. Recreational land use agreement at Tournament Players Club. Under the agreement, the City operates and develops the land where the City’s Tournament Players Club (TPC) operation is located for a period of 50 years (through June 17, 2035) (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. The City pays the BOR annually and has recognized an intangible rightto-use asset with a net book value of $16,168,514 at fiscal year-end, which includes land improvements paid for by the City, and a related liability in the amount of $2,656,265. A discount rate of four percent was used to calculate the liability. The future payments under PPP agreements are as follows (in thousands) 2024 2025 2026 2027 2028 2029-2033 2034-2035 City as Transferor Total PPPs Principal Interest $ 252 $ 185 $ 284 175 318 163 355 151 394 136 2,330 410 687 42 Total 437 459 481 506 530 2,740 729 $ 5,882 4,620 $ 1,262 $ The City, as the transferor, has entered into public-private partnerships (PPPs) with the following operators: Two fixed-base operators (FBOs) at Scottsdale Airport. Under the agreements, the FBOs have the right to operate the Airport facilities and provide aeronautical services such as flight instruction, aircraft charter service, and aircraft storage for periods of 30 years (through November 4, 2031) (with an option for the operator to extend for an additional 10 years) for one operator and 40 years, (through January 31, 2059) for the other. City of Scottsdale, Arizona 99 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2023 The FBOs pay the City monthly, and the City has recognized a PPP receivable and a related deferred inflow of resources involving these agreements. Additionally, the operators have made improvements totaling $44,918,300 that are recognized as an asset by the City. The carrying value of these improvements at fiscal year-end is $26,236,178 and the City reports a deferred inflow of resources at year-end pursuant to the publicprivate partnership agreement. As of June 30, 2023, the combined PPP receivable and deferred inflow of resources were reported in the amounts of $9,693,330 and $36,198,536, respectively. A discount rate of four percent was used to calculate the PPP receivable. Food services operator at Westworld. Under the agreement, the Westworld operator has the right to use City facilities, such as kitchens and certain related areas, for the preparation of food and alcohol for immediate consumption at Westworld for a period of one year (through June 30, 2024). The Westworld operator pays a percentage fee based on its sales; this fee totaled $160,777 for the fiscal year ended June 30, 2023. Concession services operator at Scottsdale Stadium. Under the agreement, the Scottsdale Stadium (Stadium) operator has the right to provide concession services, alcoholic beverage services, and catering services on an exclusive basis during certain Stadium events for a period of five years (through December 31, 2025) (with a mutual option to renew for up to two additional five-year periods). The Stadium operator pays a percentage fee based on its sales; this fee totaled $260,773 for the fiscal year ended June 30, 2023. Facility operator at the Silverado Golf Course. Under the agreement, the Silverado Golf Course (Silverado) operator has the right to use Silverado to operate the golf course, and provide related ancillary services, such as the operation of a pro-shop and clubhouse; the provision of golfing and golf course management instruction; and the operation of conference, banquet, restaurant, and meeting facilities within the clubhouse for a period of 35 years (through April 14, 2032) (with an option for the operator to extend for up to two additional 10-year periods). Additionally, the operator has made improvements totaling $2,725,775 that are recognized as an asset by the City. The carrying value of these improvements at year-end is $2,534,971, and the City reports a deferred inflow of resources in the amount of $2,502,566 at year-end pursuant to the public-private partnership agreement. The Silverado operator pays a percentage fee based on its sales; this fee totaled $339,532 for the fiscal year ended June 30, 2023. Facility operator at The Scottsdale Center for the Performing Arts, Scottsdale Civic Center, and The Scottsdale Museum of Contemporary Art. Under the agreement, the Scottsdale Center for the Performing Arts, Scottsdale Civic Center, and Scottsdale Museum of Contemporary Art (City-Owned Facilities) operator has the right to manage, operate, and program each of the City-Owned Facilities; related tasks include scheduling, booking, promoting, administering, and creating and presenting exhibitions, events, and programs at the City-Owned Facilities for a period of five years (through June 30, 2025) (with a mutual option to renew for one additional five-year period). The City-Owned Facilities operator pays a percentage fee based on its sales; this fee totaled $8,921 for the fiscal year ended June 30, 2023. In total, the City had inflows of $770,003 for variable payments not included in the measurement of the City’s receivable for installment payments. City of Scottsdale, Arizona 100 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2023 I. Bonds, Loans, and Other Payables The following are brief descriptions of bonds outstanding as of June 30, 2023. The totals shown are the principal amount outstanding, net of the amount due July 1, 2023. 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, public safety, 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, 2023, 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. As of June 30, 2023, the City has $186,091,600 of unissued various purpose GO bonds that were authorized in November 2019. 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, a portion of the 2015A MPC Excise Tax Revenue Bonds, the 2015 MPC Excise Tax Revenue Refunding Bonds, the 2017 MPC Excise Tax Revenue Refunding Bonds, the 2017A MPC Excise Tax Revenue Bonds, the 2021A MPC Excise Tax Revenue Refunding Bonds, and a portion of the 2021B MPC Taxable Excise Tax Revenue Refunding 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 Enterprise Fund. The City has pledged to repay $585,974,252 in MPC Excise Tax Revenue Bonds issued from 2006 through June 30, 2023, payable through 2039. 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 2023 for MPC bonds is 6.45 (excluding the transient occupancy tax). The total principal and interest remaining to be paid on all MPC bonds is $472,532,861. Principal and interest paid for the current year and total excise tax collections (excluding transient occupancy taxes) were $48,731,673 and $314,347,052, respectively. City of Scottsdale, Arizona 101 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2023 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. 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. Community Facilities Districts General Obligation Bonds Community Facilities District General Obligation Bonds are issued by Community Facilities Districts (CFDs), which are special taxing districts created to provide a funding mechanism to finance construction, acquisition, operation, and maintenance of public infrastructure that benefits real property within the CFD. CFD bonds are repaid by ad valorem taxes levied directly by the districts and collected by the county. Property owners in the districts are assessed for district taxes and thus for all costs associated with the districts. The City has no liability for CFD bonds. CFDs are created only by petition to the City Council by property owners within the district areas. As the Board of Directors for the CFDs, the City Council has adopted a formal policy that CFD debt will be permitted only when the full cash value of the property, as reported by the Maricopa County Assessor’s Office, to debt ratio (prior to improvements being installed) is a minimum of 3 to 1 prior to issuance of debt 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. City of Scottsdale, Arizona 102 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2023 Failure to pay the principal and interest when due and payable would constitute an event of default by the City in relation to any of the CFD bond issuances. If such an event of default transpires, the CFD bond trustee may pursue all remedies in law and equity. The following provisions apply only to the 2019 Waterfront Commercial CFD Refunding Bonds: • 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 • Any representation or warranty by the District that proves to have been materially incorrect when made or confirmed • Bankruptcy, insolvency, and/or receivership • Default and/or acceleration of payment of any other District indebtedness • Actual or asserted invalidity or impairment of the District Documents or the Series 2019 Bonds If any non-punctual payment of principal or interest occurs, the Waterfront CFD bond trustee may recover the costs and expenses of administration and collection related to the unpaid amounts. Additionally, the Waterfront CFD bond trustee shall be entitled to a writ of mandamus compelling performance. City of Scottsdale, Arizona 103 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Bonds payable as of June 30, 2023, consisted of the following: Classified in Governmental Activities on the Government-wide Financial Statements: General Obligation Bonds Bonds Outstanding (in thousands) 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. On December 30, 2020, $30,045,000 due in 2025 was refunded. Original issue amount $83,025,000. $ 5,370 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. On December 30, 2020, $63,000,000 due 2025 through 2034 was refunded. Original issue amount $75,000,000. 2,500 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. On December 30, 2020, $6,690,000 due 2027 through 2034 was defeased. Original issue amount $14,000,000. 2,105 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. On December 30, 2020, $3,290,000 due 2029 through 2034 was refunded. Original issue amount $160,415,000. 69,070 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. 5,790 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. 34,000 2017C Various Purpose Bonds (issued December 6, 2017) due in annual installments of $1,690,000 to $6,800,000 through July 1, 2027; interest at 5 percent. Original issue amount $25,500,000. 9,140 2020 Taxable Refunding Bonds (issued December 30, 2020) due in annual installments of $2,155,000 to $33,150,000 through July 1, 2034; interest at 0.15 percent to 1.64 percent. Original issue amount $168,220,000. 155,100 2021 Various Purpose Bonds (issued February 10, 2021) due in annual installments of $1,135,000 to $1,965,000 through July 1, 2040; interest at 2 percent to 4 percent. Original issue amount $31,390,000. 27,675 2021 Various Purpose Taxable Bonds (issued February 10, 2021) due in annual installments of $325,000 to $1,195,000 through July 1, 2040; interest at 1.35 percent to 3 percent. Original issue amount $19,770,000. 17,750 2023 Various Purpose Bonds (issued February 1, 2023) due in annual installments of $1,475,000 to $1,975,000 through July 1, 2042; interest at 4 percent to 5 percent. Original issue amount $34,175,000. 34,175 2023 Various Purpose Taxable Bonds (issued February 1, 2023) due in annual installments of $1,975,000 to $2,525,000 through July 1, 2042; interest at 4.30 percent to 5 percent. Original issue amount $39,530,000. 39,530 Total General Obligation Bonds Outstanding $ Some of the above General Obligation Bonds are paid from the 0.2 percent and 0.15 percent Preservation Sales Taxes. City of Scottsdale, Arizona 104 419,615 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Municipal Property Corporation Bonds Bonds Outstanding (in thousands) 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. $ 38,510 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. 9,275 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. On February 17, 2021, $685,000 due in 2027 was refunded. Original issue amount $12,200,000. 7,390 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. 9,395 2019A Municipal Property Corporation Excise Tax Revenue Bonds (issued October 23, 2019) due in annual installments of $205,000 to $645,000 through July 1, 2039; interest at 3 percent to 5 percent. Original issue amount $9,275,000. 8,095 2019B Municipal Property Corporation Taxable Excise Tax Revenue Bonds (issued October 23, 2019) due in annual installments of $940,000 to $2,125,000 through July 1, 2039; interest at 1.85 percent to 2.9 percent. Original issue amount $33,275,000. 28,105 2021B Municipal Property Corporation Taxable Excise Tax Revenue Refunding Bonds (issued February 17, 2021) due in annual installments of $330,000 to $9,410,000 through July 1, 2035; interest at 0.14 percent to 1.91 percent. Original issue amount $71,325,000. 66,680 Total Municipal Property Corporation Bonds Outstanding $ Community Facilities Districts General Obligation Bonds - Direct Placements Bonds Outstanding (in thousands) 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 through July 15, 2027; interest at 3.41 percent. Original issue amount $14,670,000. $ 2019 Waterfront Commercial Community Facilities District General Obligation Refunding Bonds (issued November 14, 2019) due in annual installments of $172,000 to $225,000 through July 15, 2032; interest at 2.47. Original issue amount $2,563,000. Total Community Facilities Districts General Obligation Bonds - Direct Placements Total Bonds Payable Recorded in Governmental Activities City of Scottsdale, Arizona 105 167,450 4,740 1,843 $ 6,583 $ 593,648 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Classified in Business-type Activities on the Government-wide Financial Statements: Municipal Property Corporation Bonds Bonds Outstanding (in thousands) 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. $ 43,135 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. On February 17, 2021, $1,040,000 due in 2027 was refunded. Original issue amount $18,485,000. 11,195 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. On February 17, 2021, $11,257,479 due 2027 through 2028 was refunded. Original issue amount $46,811,731. 14,865 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. On February 17, 2021, $38,350,000 due 2031 through 2033 and 2035 through 2036 was defeased. Original issue amount $79,970,000. 39,605 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. 30,810 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. 18,590 2021A Municipal Property Corporation Excise Tax Revenue Refunding Bonds (issued February 17, 2021) due in a single installment of $7,920,000 on July 1, 2030; interest at 5 percent. Original issue amount $7,920,000. 7,920 2021B Municipal Property Corporation Taxable Excise Tax Revenue Refunding Bonds (issued February 17, 2021) due in annual installments of $145,000 to $12,750,000 through July 1, 2036; interest at 0.14 percent to 1.96 percent. Original issue amount $63,860,000. 60,420 Total Municipal Property Corporation Bonds Outstanding Total Bonds Payable Recorded in Business-type Activities Total Long-Term Bonds Payable City of Scottsdale, Arizona 106 $ 226,540 $ 226,540 $ 820,188 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2023 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 Title 35, Chapter 3, Articles 3 and 4) issued for water, sewers, artificial light, parks, playgrounds and recreational facilities, open space preserves, public safety facilities, 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 as of June 30, 2023: General Obligation Bonds Issued to Provide Water, Sewers, Artificial Light, Parks, Playgrounds and Recreational Facilities, Open Space Preserves, Public Safety Facilities, and Streets and Transportation Facilities 20% Constitutional Limit $ 1,839,737,004 Less General Obligation (411,487,000) 20% Bonds Outstanding Excess Premium (13,996,067) General Obligation Bonds Issued for All Other Purposes 6% Constitutional Limit $ 551,921,101 Less General Obligation (8,128,000) 6% Bonds Outstanding Excess Premium (929,360) Available 20% Limitation Borrowing Capacity Available 6% Limitation Borrowing Capacity $ 1,414,253,937 $ 542,863,741 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, 2023. 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 107 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 The following table reflects refunded debt outstanding as of June 30, 2023, net of any amounts to be paid or retired by the trustee on July 1, 2023 (in thousands): Refunded Debt Outstanding 2014 Preservation GO Bonds 2015 GO Refunding Bonds 2015A MPC Excise Tax Revenue Bonds 2015 MPC Excise Tax Revenue Refunding Bonds 2017 MPC Excise Tax Revenue Refunding Bonds $ 6,690 3,290 1,725 36,435 38,350 $ 86,490 Contracts Payable The City has entered into contracts related to the financing of an underground utility facilities improvement district, investigative equipment, protective equipment, field maintenance equipment, and I.T. hardware equipment. The following is a summary of debt service to maturity for the longterm contracts as of June 30, 2023: Classified in Governmental Activities on the Government-wide Financial Statements: Contracts Payable (in thousands) Contract payable to PNC Bank for the financing of an underground utility facilities improvement district; due in annual installments through 2033; interest at 5.72 percent. $ 360 Contract payable to Jacobs Technology, Inc. for the financing of investigative equipment; due in annual installments through 2024; interest at 7.50 percent. 285 Contract payable to Axon Enterprise, Inc. for the financing of protective equipment; due in annual installments through 2025; interest at 4.00 percent. 149 Contract payable to John Deere Financial for the financing of field maintenance equipment; due in annual installments through 2027; interest at 2.99 percent. 114 Contract payable to Axon Enterprise, Inc. for the financing of I.T. hardware equipment; due in annual installments through 2025; interest at 4.00 percent. 175 $ City of Scottsdale, Arizona 108 1,083 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 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, 2023 (in thousands): Beginning Balance Governmental Activities Bonds Payable General Obligation Bonds Municipal Property Corporation Bonds Community Facilities Districts General Obligation Bonds - Direct Placements Add Issuance Premiums Total Bonds Payable $ Contracts Payable Leases Public-Public Partnerships Subscriptions Risk Management Claims Compensated Absences Total Other Postemployment Benefit Liability Net Pension Liabilities $ Governmental Activities Long-Term Liabilities 398,885 180,705 8,059 29,297 616,946 1,314 2,568 1,760 3,417 26,029 33,141 831 282,246 968,252 Additional Obligations and Net Increases Current Maturities, Retirements, and Net Decreases $ $ $ 73,705 4,850 78,555 265 932 5,035 2,830 36,284 14,121 45,550 183,572 $ Ending Balance (52,975) (13,255) (1,476) (5,464) (73,170) $ (496) (553) (2,175) (1,884) (41,168) (14,117) (132) (133,695) $ 419,615 167,450 6,583 28,683 622,331 1,083 2,947 4,620 4,363 21,145 33,145 699 327,796 1,018,129 Amounts Due Within One Year $ $ 60,505 13,935 1,310 75,750 511 620 252 1,663 9,581 15,385 103,762 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, 2023, $511,000 of accrued compensated absences is included in the above amount for internal service funds. For the governmental activities, the General Fund, special revenue funds, 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 $90,000 in the governmental funds. Business-type Activities Bonds Payable Water and Sewer Revenue Bonds Municipal Property Corporation Bonds Add Issuance Premiums Total Bonds Payable Leases Subscriptions Compensated Absences Net Pension Liabilities Pollution Remediation Obligation Business-type Activities Long-Term Liabilities Beginning Balance Additional Obligations and Net Increases Current Maturities, Retirements, and Net Decreases $ $ $ $ 4,375 247,455 18,288 270,118 24 4,563 27,400 48,804 350,909 $ City of Scottsdale, Arizona 109 117 205 2,287 7,329 9,938 $ (4,375) (20,915) (2,397) (27,687) (21) (85) (2,287) (3,205) (33,285) Ending Balance $ $ 226,540 15,891 242,431 96 144 4,563 34,729 45,599 327,562 Amounts Due Within One Year $ $ 22,000 22,000 23 83 2,111 24,217 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Debt Service Requirements to Maturity The following is a summary of debt service requirements to maturity for long-term liabilities as of June 30, 2023: Governmental Activities (in thousands) Fiscal Year 2024 2025 2026 2027 2028 2029-2033 2034-2038 2039-2043 2044-2048 2049-2053 Total Fiscal Year 2024 2025 2026 2027 2028 2029-2033 2034-2038 2039-2043 2044-2048 2049-2053 Total Fiscal Year 2024 2025 2026 2027 2028 2029-2033 2034-2038 2039-2043 2044-2048 2049-2053 Total General Obligation Bonds Issued to Provide Water, Sewers, Artificial Light, Parks, Playgrounds and Recreational Facilities, Open Space Preserves, Public Safety Facilities, and Streets and Transportation Facilities 20% Limitation Principal Interest Total $ 60,083 $ 11,884 $ 71,967 55,177 9,717 64,894 41,876 8,673 50,549 36,979 7,528 44,507 35,701 6,325 42,026 113,775 19,619 133,394 47,756 7,352 55,108 20,140 1,760 21,900 - General Obligation Bonds Issued For All Other Purposes 6% Limitation Principal Interest Total $ 422 $ 316 $ 738 418 296 714 424 277 701 431 258 689 439 238 677 2,295 887 3,182 2,399 440 2,839 1,300 95 1,395 - Total General Obligation Bonds Principal Interest Total $ 60,505 $ 12,200 $ 72,705 55,595 10,013 65,608 42,300 8,950 51,250 37,410 7,786 45,196 36,140 6,563 42,703 116,070 20,506 136,576 50,155 7,792 57,947 21,440 1,855 23,295 - $ 411,487 $ $ 10,935 $ 419,615 $ 72,858 $ 484,345 8,128 $ 2,807 $ 75,665 $ 495,280 Municipal Property Corporation Bonds Principal Interest $ 13,935 $ 4,804 $ 14,445 4,398 15,020 3,958 15,680 3,532 16,450 3,091 66,690 9,102 22,460 1,883 2,770 81 - Total 18,739 18,843 18,978 19,212 19,541 75,792 24,343 2,851 - Leases Principal Interest $ 620 $ 139 $ 542 106 490 75 209 52 57 43 93 199 149 176 192 143 261 99 334 41 Total 759 648 565 261 100 292 325 335 360 375 Community Facilities Districts General Obligation Bonds - Direct Placements Principal Interest Total $ 1,310 $ 207 $ 1,517 1,355 164 1,519 1,400 120 1,520 1,445 74 1,519 204 27 231 869 54 923 - $ 167,450 $ 198,299 $ $ 4,020 $ 646 $ 7,229 Public-Public Partnerships Principal Interest Total $ 252 $ 185 $ 437 284 175 459 318 163 481 355 151 506 394 136 530 2,330 410 2,740 687 42 729 - Subscriptions Principal Interest $ 1,663 $ 164 $ 1,661 105 1,039 39 - Total 1,827 1,766 1,078 - Contracts Payable Principal Interest $ 511 $ 57 $ 234 26 70 16 60 13 38 11 170 22 - Total 568 260 86 73 49 192 - $ $ 4,671 $ 1,228 4,620 $ 30,849 $ 1,262 $ 5,882 2,947 $ 4,363 $ 1,073 308 $ (continued) City of Scottsdale, Arizona 110 6,583 $ 1,083 $ 145 $ Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Governmental Activities (in thousands) Fiscal Year 2024 2025 2026 2027 2028 2029-2033 2034-2038 2039-2043 2044-2048 2049-2053 Total Governmental Activities Principal Interest Total $ 78,796 $ 17,756 $ 96,552 74,116 14,987 89,103 60,637 13,321 73,958 55,159 11,608 66,767 53,283 9,871 63,154 186,222 30,293 216,515 73,451 9,893 83,344 24,402 2,079 26,481 261 99 360 334 41 375 Total $ 606,661 $ 109,948 $ 716,609 Business-type Activities (in thousands) Fiscal Year 2024 2025 2026 2027 2028 2029-2033 2034-2038 Total Fiscal Year 2024 2025 2026 2027 2028 2029-2033 2034-2038 Total Municipal Property Corporation Bonds Principal Interest Total $ 22,000 $ 8,257 $ 30,257 17,450 7,240 24,690 18,440 6,427 24,867 19,465 5,561 25,026 20,445 4,894 25,339 90,515 12,922 103,437 38,225 2,392 40,617 Subscriptions Principal Interest $ 83 $ 4 $ 30 3 31 1 - $ 226,540 $ $ 47,693 $ 274,233 144 $ 8 Total Business-type Activities Principal Interest Total $ 22,106 $ 8,268 $ 30,374 17,505 7,248 24,753 18,497 6,431 24,928 19,482 5,562 25,044 20,450 4,894 25,344 90,515 12,922 103,437 38,225 2,392 40,617 $ 226,780 $ 47,717 $ 274,497 City of Scottsdale, Arizona 111 $ Total 87 33 32 152 Leases Principal Interest $ 23 $ 7 25 5 26 3 17 1 5 $ 96 $ 16 $ $ Total 30 30 29 18 5 112 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2023 V. OTHER INFORMATION A. Risk Management The City is exposed to various risks of loss related to public and aviation liability, self-insured benefits, workers’ compensation, and property and casualty claims. Public liability includes public officials’ errors and omissions, law enforcement liability, premises 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 claims. 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. As of June 30, 2023, the general liability claims payable totaled $18,382,000 and the self-insured benefits claims payable totaled $2,762,000. Fiscal Year Ended June 30 (in thousands) 2023 B. 2022 Claims Payable, July 1 Current Year Claims Incurred Current Year Claim Payments $ 26,029 36,284 (41,168) $ 22,981 44,635 (41,587) Claims Payable, June 30 $ 21,145 $ 26,029 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. The City has entered into several agreements whereby it will reimburse developers a portion of development costs, 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. Depending on the terms of the agreement, the City does not become liable for payment until certain milestones are met. The City’s estimated contingent liability related to these agreements as of June 30, 2023, is $22.3 million. City of Scottsdale, Arizona 112 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2023 C. Joint Ventures Sub-Regional Operating Group (SROG) The City participates in the multi-city Subregional Operating Group (SROG). SROG was formed pursuant to the Joint Exercise of Powers Agreement (JEPA) 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 deposits, operating revenues, operating expenses, and its equity in the joint venture in the City’s Water and Sewer Fund. For the fiscal year ended June 30, 2022, the latest audited information available from SROG, the City’s net investment in SROG was $79,213,000 or 13.38 percent of the equity balance. For the fiscal year ended June 30, 2023, the City paid $4,573,400 for SROG capital contributions, shared in estimated revenues of $3,780,639, estimated shared expenditures of $14,308,463, resulting in a total estimated equity balance as of June 30, 2023, of $65,896,899 and cash deposits of $7,361,677. The Annual Comprehensive Financial Report for the Fiscal Year Ended June 30, 2022, for SROG (the latest SROG Annual Comprehensive Financial Report available) may be obtained from the Finance Department, City of Phoenix, Calvin C. Goode Building, Ninth Floor, 251 West Washington Street, Phoenix, AZ 85003. 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 an intergovernmental 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 Greater Phoenix Metropolitan Region. Financial responsibilities are shared by all members based on their relative size as 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 113 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2023 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, 2022, the latest audited information available from RWC, was $3,829,551 or 6.58 percent of the RWC’s total net position. The City contributed $279,319 for the fiscal year ended June 30, 2023, and shared in estimated depreciation expenses of $599,224, resulting in an estimated equity balance as of June 30, 2023, of $3,509,646. The RWC Annual Comprehensive Financial Statement is available from the Regional Wireless Cooperative, 200 West Washington Street, 14th Floor, Phoenix, Arizona, 85003-1611. D. 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 (NIBW) site which includes the five wells above was placed on the federal Superfund list in 1983. The Superfund law was enacted 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 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 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 114 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2023 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. To estimate the CGTF liability, 16 projected cash flows, based on the prior 16 years of historical costs and weighted equally, were used to calculate an average annual cost. To estimate the NGTF liability, ten projected cash flows, based on the prior ten years of historical costs and weighted equally, were used to calculate an average annual cost. These average costs were then projected over the remaining remediation period of 51 years for the 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, released in November 2022, did not quantify the remedial time needed to achieve aquifer restoration. Improvements in technology and changes in laws or regulations did not impact the average annual cost. The liability is revalued annually. The fiscal year 2023 reimbursable outlays for operating and monitoring the CGTF were $679,345 and for the NGTF were $214,753. 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. E. 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. F. Pension, Retirement, and Other Postemployment Benefit 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. In addition to pension benefits, the City provides other postemployment benefits (OPEB) to Public Safety Personnel Retirement System accidental disability retirees through the City’s self-insured health plan. 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. City of Scottsdale, Arizona 115 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 A summary of pension and other postemployment benefit related items as of and for the year-ended June 30, 2023 is presented below (in thousands): Plan Description Governmental Activities PSPRS- Police PSPRS- Fire EODCRS- Elected ASRS OPEB-City Business-Type Activities ASRS Net Pension and OPEB Liability Deferred Outflows of Resources Deferred Inflows of Resources Pension and OPEB Expense $ 163,708 29,066 135,022 699 $ 23,532 30,330 10,296 218 $ 3,196 3,194 5,120 2,102 $ 23,799 3,432 13 15,156 (110) $ 363,224 $ 67,024 $ 14,929 $ 45,788 34,729 Total 2,648 1,317 Pension, Retirement, and OPEB Contributions $ 33,501 3,871 12,330 71 $ 52,981 3,498 3,208 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 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) and is a component unit of the State of Arizona. 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. The ASRS other postemployment benefit plans are not further disclosed due to their relative insignificance to the financial statements. 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 City of Scottsdale, Arizona 116 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2023 The retirement benefit is based on a percentage of average monthly compensation (benefit multiplier) multiplied by the years of credited service. The compensation generally does not include lump sum payments on termination of employment for accumulated vacation leave, sick leave, compensation time pay, termination incentive pay, or any other form of termination pay (see discussion of pre-January 1, 1984, members below). The benefit 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 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 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 combined (member and employer) accumulated contribution balance with compound interest at a rate determined by the board through the day of the payment of the benefit, and b. the amount of the member’s combined (member and employer) accumulated account, along with any supplemental credits transferred from the System (closed portion of ASRS) to the Plan with compound interest at a rate determined by the board through the day of the payment of the benefit. The beneficiary may elect to receive a monthly income, in the single life form, which is actuarially equivalent to the lump sum above. Retirees who have been retired one year are eligible for a permanent benefit increase (PBI) up to a maximum of 4 percent. 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 on or after September 13, 2013. City of Scottsdale, Arizona 117 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 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 12.03 percent of their annual pay for the fiscal year ended June 30, 2023, and the City’s required contribution rate was 11.92 percent during the same period. In addition, the City was required by statute to contribute at the actuarially determined rate of 9.62 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, 2023, 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 $15,538,000 for the fiscal year ended June 30, 2023. Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions As of June 30, 2023, the City reported a liability of $169,751,098 for its proportionate share of the collective net pension liability of the ASRS. The collective net pension liability was measured as of June 30, 2022, and the total pension liability used to calculate the collective net pension liability was determined by an actuarial valuation as of June 30, 2021. 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, 2022. As of June 30, 2022, the City’s proportion was 1.04000 percent, which was an increase of 0.03061 percent over its proportion measured as of June 30, 2021. For the fiscal year ended June 30, 2023, the City recognized a collective pension expense of $18,654,399. As of June 30, 2023, 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 $ Changes in assumptions 1,445 City contributions subsequent to the measurement date Total $ City of Scottsdale, Arizona 118 $ - 8,425 - - 4,471 3,074 1,966 Net difference between projected and actual earnings on pension plan investments Changes in proportion and differences between City contributions and proportionate share of contributions Deferred Inflows of Resources 15,538 28,482 $ 6,437 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2023 The $15,538,000 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, 2024. 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: 2024 2025 2026 2027 2028 Thereafter $ 7,693 (578) (7,763) 7,157 - Actuarial Assumptions The total pension liability in the June 30, 2022, actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Actuarial valuation date Actuarial roll forward date Actuarial cost method Amortization method Plan amendments Investment gain/loss Assumption gain/loss Experience gain/loss Proportion/proportionate share gain/loss Asset valuation Discount rate Projected salary increases Inflation Permanent benefit increase Mortality rates June 30, 2021 June 30, 2022 Entry age normal Immediate Five years Average remaining service lives Average remaining service lives Average remaining service lives Fair value 7.0% 2.9-8.4% 2.3% Included 2017 SRA Scale U-MP The actuarial assumptions used in the June 30, 2021, valuation were based on the results of an actuarial experience study for the five-year period ended June 30, 2020. The ASRS Board adopted the experience study recommended changes which were first applied to the June 30, 2021, actuarial valuation. The expected long-term rate of return on ASRS pension plan investments was determined to be 4.19 percent (excluding investment expense and inflation) using a building-block method in which bestestimate 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 expected long-term rate of return by weighting the expected future real rates of return by the target asset allocation percentage. The target allocation and best estimates of geometric real rates of return for each major asset class are summarized in the following table: City of Scottsdale, Arizona 119 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Asset Class Target Asset Allocation Equity Fixed Income - Credit Fixed Income - Interest Rate Sensitive Real estate Total Real Return Geometric Basis 50% 20% 10% 20% 100% Long-Term Contribution to Expected Real Return 3.90% 5.30% -0.20% 6.00% 1.95% 1.06% -0.02% 1.20% 4.19% Discount Rate The discount rate used to measure the total pension liability was 7.0 percent. The projection of cash flows used to determine the discount rate assumed that contributions from participating employers will be made on 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 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 7.0 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 (6.0 percent) or 1-percentage-point higher (8.0 percent) than the current rate (in thousands): City's proportionate share of the collective net pension liability 1% Decrease (6.0%) Discount Rate (7.0%) 1% Increase (8.0%) $ $ $ 250,463 169,751 102,450 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. 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 gives 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). City of Scottsdale, Arizona 120 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2023 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 short-term investments generally include cash, foreign currencies, short-term investment funds, and U.S. Treasury bills that mature within one year. These investments are reported at cost. Detailed information about the pension plan’s fiduciary net position is available in the separately issued ASRS financial report. Public Safety Personnel Retirement System General Information about the Pension Plan Plan Description All the City’s sworn public safety personnel participate in the 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 230 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 Public Safety Personnel Retirement System, 3010 East Camelback Road, Suite 200, Phoenix, AZ 85016, calling (602) 255-5575, or by visiting: https://www. psprs.com/investments--financials/annual-reports. The PSPRS other postemployment benefit plan is not further disclosed due to its relative insignificance to the financial statements. 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 age and service requirements: 1. 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. 2. 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. 3. 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 121 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2023 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 age and service requirements: 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 age and service requirements: 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: City of Scottsdale, Arizona 122 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2023 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 Disability benefits are calculated as follows: Accidental Disability Retirement: 50% of average monthly compensation, or the monthly Normal Retirement pension that the member is entitled to receive if he or she retired immediately, whichever is greater. Catastrophic Disability Retirement: 90% of Average Monthly Benefit Compensation for the first 60 months. Thereafter, the benefit is the greater of 62.5% of Average Monthly Benefit Compensation and the member’s accrued normal pension. Ordinary Disability Retirement: Normal Retirement pension that the member is entitled to receive, prorated based on Credited Service earned over the required Credited Service for Normal Retirement (maximum ratio of 1). 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 Monthly Benefit 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 refund 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 will receive 80 percent of the member’s pension benefit for life. City of Scottsdale, Arizona 123 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2023 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 on 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. Members, or survivors of retired members, who were hired on or after July 1, 2017, are eligible to receive a compounding COLA on 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 As of June 30, 2023, the following employees were covered by the benefit terms: Inactive plan members or beneficiaries currently receiving benefits Inactive plan members entitled to but not yet receiving benefits Active plan members Total 365 155 577 1,097 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 the City’s active PSPRS members, regardless of start date. City of Scottsdale, Arizona 124 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 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. The City’s contribution rates for fiscal year ended June 30, 2023 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 63.27% 63.27% 63.27% 59.19% 58.46% 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% 11.07% 11.07% 3.00% 10.33% 3.00% 9.00% Employer contribution rate 23.17% 23.17% 23.17% 4.00% 19.93% 3.00% 18.60% 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 or is determined to be eligible for an accidental or catastrophic disability pension 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 (49.46 percent for police employees and 9.60 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, 2023, were $37,372,013. City of Scottsdale, Arizona 125 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2023 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 that procures the services of a private fire company and in each area served by a fire department or legally organized fire district. 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. The warrant issued by the state treasurer is deposited on the City’s behalf into the pension plan. PSPRS received $2,284,183 of fire insurance premium tax for the City’s fire pension plan for the fiscal year ended June 30, 2023. PSPRS accounts for the fire insurance premium tax collected for the City as employer contributions. Net Pension Liability The City’s net pension liability of $192,774,130 was measured as of June 30, 2022, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. Actuarial Assumptions The total pension liability in the June 30, 2022, measurement was determined using the following actuarial assumptions: Actuarial Cost Method Inflation Salary Increases Tier 1/2 Investment Rate of Return Tier 3 Investment Rate of Return Mortality rates Entry Age Normal 2.50% 0.75%-12.50% 7.20% (decreased from 7.3% from prior year) 7.00% Active Lives: PubS-2010 Employee mortality, adjusted by a factor of 1.03 for male members and 1.08 for female members, with generational improvements using 85% of the most recent projection scale (currently Scale MP-2021). 100% of active deaths are assumed to be in the line of duty. Inactive Lives: PubS-2010 Healthy Retiree mortality, adjusted by a factor of 1.03 for male retirees and 1.11 for female retirees, with generational improvements using 85% of the most recent projection scale (currently Scale MP-2021). Beneficiaries: PubS-2010 Survivor mortality, adjusted by a factor of 0.98 for male beneficiaries and adjusted by a factor of 1.06 for female beneficiaries, with generational improvements using 85% of the most recent projection scale (currently Scale MP-2021). Disabled Lives: PubS-2010 Disabled mortality, adjusted by a factor of 1.08 for male disabled members and 1.01 for female disabled members, with generational improvements using 85% of the most recent projection scale (currently Scale MP-2021). The actuarial assumptions used in the June 30, 2022, valuation were based on the results of an actuarial experience study for the five-year period ended June 30, 2021. City of Scottsdale, Arizona 126 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2023 The long-term expected rate of return on pension plan investments can be determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expenses and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of geometric real rates of return for each major asset class included in the pension plan’s target asset allocation adopted as of June 30, 2022, as provided by PSPRS, are summarized in the following table: Asset Class Cash - Mellon Core Bonds Other Assets (Capital Appreciation) Diversifying Strategies International Public Equity Global Private Equity Private Credit U.S. Public Equity Target Allocation 1% 2% 7% 10% 16% 20% 20% 24% 100% Long-Term Expected Real Rate of Return -0.35% 0.45% 4.83% 2.68% 4.47% 7.18%. 5.10% 3.49% Discount Rate The discount rate used to measure the total pension liability was 7.20 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 those assumptions, the PSPRS plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. City of Scottsdale, Arizona 127 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Changes in the Net Pension Liability Public Safety Personnel Retirement System (Police) Changes in the Net Pension Liability (in thousands) Increase (Decrease) Total Pension Plan Fiduciary Liability Net Position (a) (b) Balances at 6/30/22 Changes for the year: Service cost Interest Changes of benefit terms Differences between expected and actual experience Changes of assumptions Contributions-employer Contributions-employee Net investment income Benefit payments, including refunds of employee contributions Administrative expense Other changes Net changes Balances at 6/30/23 $ 419,763 $ 7,411 30,359 3,688 4,494 (22,603) 23,349 443,112 City of Scottsdale, Arizona 128 $ 253,961 $ 56,142 3,216 (11,123) (22,603) (200) 11 25,443 279,404 Net Pension Liability (a)-(b) $ 165,802 $ 7,411 30,359 3,688 4,494 (56,142) (3,216) 11,123 200 (11) (2,094) 163,708 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Public Safety Personnel Retirement System (Fire) Changes in the Net Pension Liability (in thousands) Increase (Decrease) Balances at 6/30/22 Changes for the year: Service cost Interest Changes of benefit terms Differences between expected and actual experience Changes of assumptions Contributions-employer Contributions-employee Net investment income Benefit payments, including refunds of employee contributions Administrative expense Other changes Net changes Balances at 6/30/23 Total Pension Liability (a) Plan Fiduciary Net Position (b) $ 151,232 $ 140,018 $ 5,760 11,338 12,155 347 (3,348) 26,252 177,484 $ 10,807 6,882 (5,847) (3,348) (105) 11 8,400 148,418 Net Pension Liability (a)-(b) $ 11,214 $ 5,760 11,338 12,155 347 (10,807) (6,882) 5,847 105 (11) 17,852 29,066 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 7.20 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 (6.20/6.00 percent) or 1-percentage-point higher (8.20/8.00 percent) than the current rate (in thousands): Police net pension liability Fire net pension liability 1% Decrease (6.20%/6.00%) Discount Rate (7.20%/7.00%) 1% Increase (8.20%/8.00%) $ $ $ 224,304 56,697 City of Scottsdale, Arizona 129 163,708 29,066 114,314 6,513 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2023 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 economic resources measurement focus and 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. Short-term investments are reported at cost plus accrued interest. Derivative instruments’ fair values are determined by the custodial agent. The fair value of limited partnership investments is based on estimated current value and accepted industry practice. Fair value measurements are categorized within the hierarchy established by generally accepted accounting principles. The fair value hierarchy, which has three levels, is based on the valuation inputs used to measure an asset’s fair value. Investments that are measured at fair value using the net asset value (NAV) per share (or its equivalent) as a practical expedient are not classified in the fair value hierarchy. Fair values are determined as follows: • Level 1 - Unadjusted quoted prices for identical instruments in active markets • Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable • Level 3 - Valuations derived from valuation techniques in which significant inputs are unobservable The fair value of alternative investments is based on the investments’ 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. City of Scottsdale, Arizona 130 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions For the fiscal year ended June 30, 2023, the City recognized pension expense of $26,878,452 related to the defined benefit plan and the defined benefit portion of the hybrid plan and $352,481 related to the defined contribution plan and the defined contribution portion of the hybrid plan. As of June 30, 2023, 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 $ $ 34,332 6,390 Changes of assumptions 11,185 - Net difference between projected and actual earnings on pension plan investments 8,345 - City contributions subsequent to the measurement date Total 37,372 91,234 6,390 $ $ City contributions, subsequent to the measurement date, of $37,372,013 were reported as deferred outflows of resources and will be recognized as a reduction of the net pension liability in the fiscal year ending June 30, 2024. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows (in thousands): Fiscal year ending June 30: 2024 2025 2026 2027 2028 Thereafter $ 10,666 8,682 2,962 13,328 2,684 9,150 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. City of Scottsdale, Arizona 131 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2023 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, 2023, the City recognized pension expense of $13,200. 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 132 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2023 Employees Covered by Benefit Terms The following employees were covered by the benefit terms: As of June 30, 2023, Membership Consisted of: Inactive Employees or Beneficiaries Currently Receiving Benefits Inactive Employees Entitled to but Not Yet Receiving Benefits Active Employees Total 14 659 673 Total OPEB Liability The City’s total OPEB liability of $699,000 was measured as of July 1, 2022, as determined by an actuarial valuation as of that date. Actuarial Assumptions and Other Inputs The total OPEB liability in the July 1, 2022, 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 Discount Rate Healthcare Cost Trend Rates* Retirees' Share of Benefit-Related Costs 2.5% 3.25% wage inflation plus merit and longevity increases ranging from 0.0% to 11.75% 4.09% 6.55% for 2023, 7.00% for 2024, and then decreasing 0.5% per year to an ultimate rate of 4.50% for 2029 and later years 100% *The initial trend rate reflects the City’s actual projected cost increases from fiscal year 2023 to 2024. The discount rate was based on the S&P Municipal Bond 20-Year High Grade Rate Index. Mortality rates were based on the following: Healthy Police and Fire retirees: SOA Pub-2010 Public Safety Headcount Weighted Mortality Table fully generational using Scale MP-2021 Disabled Police and Fire retirees: SOA Pub-2010 Public Safety Disabled Headcount Weighted Mortality Table fully generational using Scale MP-2021 Surviving Spouses: SOA Pub-2010 Contingent Survivor Headcount Weighted Mortality Table fully generational using Scale MP-2021 City of Scottsdale, Arizona 133 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2023 Changes in the Total OPEB Liability (in thousands) Total OPEB Liability Balance at 6/30/22 Changes for the year: Service cost Interest Differences between expected and actual experience Changes of assumptions/other inputs Benefit payments Net changes Balance at 6/30/23 $ 831 $ 101 19 (106) (62) (84) (132) 699 Changes in assumptions reflect the following: 1. Change in the discount rate from 2.19 percent as of the beginning of the year to 4.09 percent as of the end of the year. 2. The termination rates for public safety employees have been updated based on the Maricopa County rates from the Police and Fire Public Safety Personnel Retirement System actuarial valuation as of June 30, 2022. 3. The retirement rates for public safety employees have been updated based on the Maricopa County rates from the Police and Fire Public Safety Personnel Retirement System actuarial valuation as of June 30, 2022. 4. The salary scale for public safety employees have been updated based on the Maricopa County rates from the Police and Fire Public Safety Personnel Retirement System actuarial valuation as of June 30, 2022. 5. Healthcare trend rates have been updated to reflect actual premium increases from fiscal year 2023 to fiscal year 2024, followed by an annual trend of 7.0 percent decreasing by 0.5 percent annually to an ultimate rate of 4.5 percent. City of Scottsdale, Arizona 134 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 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 (3.09 percent) or 1-percentage-point higher (5.09 percent) than the current discount rate (in thousands): Total OPEB Liability 1% Decrease (3.09%) Discount Rate (4.09%) 1% Increase (5.09%) $ $ $ 721 699 676 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 (5.50 percent decreasing to 3.50 percent) or 1-percentage-point higher (7.50 percent decreasing to 5.50 percent) than the current healthcare cost trend rates (in thousands): Total OPEB Liability 1% Decrease (5.50% decreasing to 3.50%) Healthcare Cost Trend Rates (6.50% decreasing to 4.50%) 1% Increase (7.50% decreasing to 5.50%) $ $ $ 638 City of Scottsdale, Arizona 135 699 769 Table of Contents Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB For the year ended June 30, 2023, the City recognized OPEB expense of $(109,949). As of June 30, 2023, 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 $ $ - 1,125 Change of assumptions or other inputs 218 977 City benefits paid subsequent to the measurement date 71 - Total $ 289 $ 2,102 The $70,607 reported as a deferred outflow of resources related to OPEB resulting from City benefits paid subsequent to the measurement date will be recognized as a reduction of the total OPEB liability in the fiscal year ending June 30, 2024. 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: 2024 $ (231) 2025 (231) 2026 (230) 2027 (230) 2028 (220) Thereafter (742) City of Scottsdale, Arizona 136 Notes to Financial Statements Table of Contents For the Fiscal Year Ended June 30, 2023 G. Other Postemployment Benefits In addition to pension benefits, the City provides an option for post-retirement 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. The projected liability for active employees, as of June 30, 2023, was $16,697,141. The projected liability was considered payable within one year or greater, and all but the current portion of $39,267 was therefore considered noncurrent and included in both the proprietary fund and government-wide financial statements. Significant actuarial assumptions of the January 1, 2023, actuarial valuation include: a) mortality rates based on the SOA Pub-2010 General (for non-PSPRS-eligible personnel)/Public Safety (for PSPRS-eligible personnel) Headcount Weighted Mortality Table fully generational using Scale MP-2021; 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 December 31, 2022. City of Scottsdale, Arizona 137 Table of Contents 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 Nine Fiscal Years (dollars in thousands) 2022 2021 2020 2019 2018 2017 2016 2015 1.040000% 1.009390% 1.050150% 1.049160% 1.055510% 1.056820% 1.086990% 1.099760% 1.102563% City's proportionate share of the collective net pension liability $169,751 $132,630 $181,954 $152,665 $147,206 $164,632 $175,451 $171,304 $163,142 City's covered payroll $124,179 $110,303 $114,944 $110,748 $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 136.70% 120.24% 158.30% 137.85% 140.07% 153.49% 172.15% 168.01% 164.66% Plan fiduciary net position as a percentage of the total pension liability 74.26% 78.58% 69.33% 73.24% 73.40% 69.92% 67.06% 68.35% 69.49% Note: The Arizona State Retirement System 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. 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. Required Supplementary Information 2023 For the Fiscal Year Ended June 30, 2023 City of Scottsdale, Arizona 138 City's proportion of the collective net pension liability Table of Contents Changes in the City’s Net Pension Liability (Asset) and Related Ratios for Agent Pension Plans Public Safety Personnel Retirement System (Police) Schedule of Changes in the City's Net Pension Liability and Related Ratios Last Nine Fiscal Years (dollars in thousands) 2023 2022 2021 2020 2019 2018 2017 2016 2015 7,411 30,359 3,688 4,494 (22,603) 23,349 419,763 $ 443,112 $ 7,480 29,613 (4,736) (21,540) 10,817 408,946 $ 419,763 $ 7,402 27,559 12,629 (17,538) 30,052 378,894 $ 408,946 $ 8,154 25,834 3,089 9,123 (16,512) 29,688 349,206 $ 378,894 $ 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 $ 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 $ 56,142 3,216 (11,123) (22,603) (200) 11 25,443 $ 19,326 3,063 55,286 (21,540) (260) 21 55,896 $ 18,854 3,649 2,471 (17,538) (202) 35 7,269 $ 17,387 3,343 9,714 (16,512) (171) 9 13,770 $ 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 Adjustment to Beginning of Year Plan fiduciary net position-ending (b) 253,961 $ 279,404 198,065 $ 253,961 190,914 (118) $ 198,065 177,208 (64) $ 190,914 162,427 $ 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)) $ 163,708 $ 165,802 $ 210,881 $ 187,980 $ 171,998 $ 166,258 $ 157,936 $ 122,361 $ 113,756 63.05% 60.50% 48.43% 50.39% 50.75% 49.42% 48.03% 53.96% 55.27% Covered payroll $ 34,540 $ 33,349 $ 35,069 $ 31,628 $ 34,869 $ 33,896 $ 33,073 $ 33,075 City's net pension liability as a percentage of covered payroll 473.97% 497.17% 601.33% 594.35% 493.27% 490.49% 477.54% 369.95% Plan fiduciary net position as a percentage of the total pension liability $ 8,970 3,944 5,113 (14,835) (125) (243) 2,824 6,363 16,898 3,987 (896) 22,122 (12,411) 36,063 218,281 $ 254,344 $ 7,997 3,495 17,047 (12,411) (137) (50) 15,941 31,438 361.84% Note: The Public Safety Personnel Retirement System report may be obtained by writing to Public Safety Personnel Retirement System, 3010 East Camelback Road, Suite 200, Phoenix, AZ 85016, calling (602) 255-5575, or by visiting: http://www.psprs.com/investments--financials/annual-reports. 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. Required Supplementary Information $ For the Fiscal Year Ended June 30, 2023 City of Scottsdale, Arizona 139 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) Table of Contents Public Safety Personnel Retirement System (Fire) Schedule of Changes in the City's Net Pension Liability (Asset) and Related Ratios Last Nine Fiscal Years (dollars in thousands) 2023 2022 2021 2020 2019 2018 2017 2016 2015 5,760 11,338 12,155 347 (3,348) 26,252 151,232 $ 177,484 5,565 10,094 4,095 (2,458) 17,296 133,936 $ 151,232 5,457 8,387 11,517 (1,705) 23,656 110,280 $ 133,936 6,378 7,654 (2,821) 2,644 (1,259) 12,596 97,684 $ 110,280 $ 5,098 6,729 (2,004) (1,047) 8,776 88,908 $ 97,684 $ 5,009 5,797 639 1,264 1,881 (932) 13,658 75,250 $ 88,908 $ 4,077 4,655 7,546 (877) 3,303 (1,430) 17,274 57,976 $ 75,250 $ 3,720 4,037 994 (691) 8,060 49,916 $ 57,976 $ 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 $ 10,807 6,882 (5,847) (3,348) (105) 11 8,400 $ $ $ $ $ $ $ $ Plan fiduciary net position-beginning Adjustment to Beginning of Year Plan fiduciary net position-ending (b) 140,018 $ 148,418 105,188 $ 140,018 98,906 (86) $ 105,188 89,627 (16) $ 98,906 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)) $ 29,066 $ 11,214 $ 28,748 $ 11,374 $ 8,057 $ 11,727 $ 10,178 $ (2,606) $ (4,765) 83.62% 92.58% 78.54% 89.69% 91.75% 86.81% 86.47% 104.49% 109.55% Covered payroll $ 27,018 $ 25,764 $ 25,187 $ 24,376 $ 23,192 $ 23,500 $ 21,498 $ 20,420 $ 19,336 City's net pension liability as a percentage of covered payroll 107.58% 43.53% 114.14% 46.66% 34.74% 49.90% 47.34% 0.00% 0.00% Plan fiduciary net position as a percentage of the total pension liability (asset) $ 4,704 2,502 30,222 (2,458) (140) 34,830 $ 4,219 2,653 1,307 (1,705) (106) 6,368 $ 2,830 2,946 4,863 (1,259) (85) 9,295 6,061 1,981 5,520 (1,047) (85) 16 12,446 2,737 2,551 7,822 (932) (70) 1 12,109 2,974 2,693 358 (1,430) (52) (53) 4,490 2,247 2,337 2,046 (691) (50) 12 5,901 3,509 3,449 (448) 462 1,157 (780) 7,349 42,567 $ 49,916 2,392 2,629 6,294 (780) (51) (60) 10,424 Note: The Public Safety Personnel Retirement System report may be obtained by writing to Public Safety Personnel Retirement System, 3010 East Camelback Road, Suite 200, Phoenix, AZ 85016, calling (602) 255-5575, or by visiting: http://www.psprs.com/investments--financials/annual-reports. 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. Required Supplementary Information $ For the Fiscal Year Ended June 30, 2023 City of Scottsdale, Arizona 140 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) Table of Contents Schedule of City Contributions Arizona State Retirement System Last Ten Fiscal Years (dollars in thousands) Statutorily required contribution 2022 $ 14,892 2021 $ 13,242 (15,538) (14,892) (13,242) Employer contributions in relation to the statutorily required contribution $ - $ - 2020 13,151 $ (13,151) $ - 2019 12,384 $ (12,384) $ - 2018 11,437 $ (11,437) $ - 2017 11,540 $ (11,540) $ $ - Covered payroll $ 130,436 $ 124,179 $ 110,303 $ 114,944 $ 110,748 $ 105,097 $ 107,259 11.91% 11.99% 12.01% 11.44% 11.18% 10.88% 10.76% 2016 11,049 $ (11,049) $ - 2015 11,092 $ (11,092) $ 2014 10,635 (10,635) - $ - $ 101,917 $ 101,962 $ 99,077 10.84% 10.88% 10.73% For the Fiscal Year Ended June 30, 2023 141 City of Scottsdale, Arizona Contribution deficiency (excess) Contributions as a percentage of covered payroll - $ Required Supplementary Information 2023 $ 15,538 Table of Contents Schedule of City Contributions Public Safety Personnel Retirement System (Police) Last Ten Fiscal Years (dollars in thousands) (1) (1) 2022 $ 20,225 Employer contributions in relation to the actuarially determined contribution (33,501) (56,145) $ 2021 19,171 $ (19,171) 2020 18,850 $ (18,850) 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) $ (11,305) $ (35,920) $ - $ - $ - $ - $ - $ - $ - $ - Covered payroll $ 35,260 $ 34,540 $ 33,349 $ 35,069 $ 31,628 $ 34,869 $ 33,896 $ 33,073 $ 33,075 $ 31,438 142 City of Scottsdale, Arizona Contributions as a percentage of covered payroll (1) 95.01% 162.55% 57.49% 53.75% City made additional contributions during fiscal years 2022 and 2023 to pay down total pension liability. 54.69% 44.00% 36.37% 35.18% 26.97% 25.44% For the Fiscal Year Ended June 30, 2023 Contribution deficiency (excess) Required Supplementary Information Actuarially determined contribution 2023 $ 22,196 Table of Contents Schedule of City Contributions Public Safety Personnel Retirement System (Fire) Last Ten Fiscal Years (dollars in thousands) (1) 2022 $ 5,533 Employer contributions in relation to the actuarially determined contribution (6,155) (10,533) $ 2021 4,731 $ (4,731) 2020 4,167 $ (4,167) 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) $ - $ (5,000) $ - $ - $ - $ - $ - $ - $ - $ - Covered payroll $ 28,153 $ 27,018 $ 25,764 $ 25,187 $ 24,376 $ 23,192 $ 23,500 $ 21,498 $ 20,420 $ 19,336 143 City of Scottsdale, Arizona Contributions as a percentage of covered payroll (1) 21.86% 38.99% 18.36% 16.54% City made additional contributions during fiscal year 2022 to pay down total pension liability. 18.78% 16.92% 12.09% 12.22% 11.15% 12.37% For the Fiscal Year Ended June 30, 2023 Contribution deficiency (excess) Required Supplementary Information Actuarially determined contribution 2023 $ 6,155 Table of Contents Changes in the City’s Total OPEB Liability and Related Ratios Total OPEB Liability and Related Ratios Last Six Fiscal Years (dollars in thousands) 2023 $ $ 323 58 (236) (1,100) (137) $ 274 83 (587) 121 (145) 2020 $ 2019 236 89 (261) 126 (116) $ 2018 241 85 (278) (38) (101) $ 260 67 (230) 125 (111) 144 City of Scottsdale, Arizona Net change in total OPEB liability (132) (1,092) (254) 74 (91) 111 Total OPEB liability-beginning 831 1,923 2,177 2,103 2,194 2,083 Total OPEB liability-ending $ 699 $ 831 $ 1,923 $ 2,177 $ 2,103 $ 2,194 Covered-employee payroll $ 53,352 $ 50,459 $ 53,874 $ 55,023 $ 52,970 $ 51,137 Total OPEB liability as a percentage of covered-employee payroll 1.31% 1.65% 3.57% 3.96% 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 . Required Supplementary Information 101 19 (106) (62) (84) 2021 For the Fiscal Year Ended June 30, 2023 Total OPEB liability Service cost Interest Differences between expected and actual experience Changes of assumptions/other inputs Benefit payments 2022 Notes to Required Supplementary Information Table of Contents For the Fiscal Year Ended June 30, 2023 I. ACTUARIALLY DETERMINED CONTRIBUTION RATES The actuarially determined contribution rates for PSPRS are calculated as of June 30 two years prior to the end of the fiscal year in which contributions are made. The actuarial assumptions used are disclosed in the notes to the financial statements. II. FACTORS THAT AFFECT TRENDS Arizona State Retirement System (ASRS) The actuarial assumptions related to funding used in the June 30, 2021, valuation for ASRS were based on the results of an actuarial experience study for the five-year period ended June 30, 2020. The major changes in assumptions involved the investment return, the inflation rate, general wage inflation, and future permanent benefit increases. The ASRS Board adopted the recommended changes from the experience study, which were first applied to the June 30, 2021, actuarial valuation. Public Safety Personnel Retirement System (PSPRS) The actuarial assumptions used in the June 30, 2022, valuation for PSPRS were based on the results of an actuarial experience study for the five-year period ended June 30, 2021. The purpose of the experience study was to review actual experience in relation to the actuarial assumptions in effect. The PSPRS Board adopted the experience study recommended changes which were applied to the June 30, 2022 actuarial valuation. The total liabilities as of June 30, 2022, reflect changes in actuarial assumptions based on the results of an actuarial experience study, including decreasing the discount rate from 7.3 percent to 7.2 percent, changing the wage inflation rate from 3.5 percent to a range of 3.25-15.0 percent, and increasing the cost-of-living adjustment rate from 1.75 percent to 1.85 percent. Arizona courts have ruled those provisions of a 2011 law that changed the mechanism for funding permanent pension benefit increases and increased employee pension contribution rates were unconstitutional or a breach of contract because those provisions apply to individuals who were members as of the law’s effective date. As a result, the PSPRS changed benefit terms to reflect the prior mechanism for funding permanent benefit increases for those members and revised actuarial assumptions to explicitly value future permanent benefit increases. PSPRS also reduced those members’ employee contribution rates. These changes are reflected in the plans’ pension liabilities for fiscal year 2015 (measurement date 2014) for members who were retired as of the law’s effective date and fiscal year 2018 (measurement date 2017) for members who retired or will retire after the law’s effective date. These changes also increased the PSPRS-required pension contributions beginning in fiscal year 2016 for members who were retired as of the law’s effective date. These changes increased the PSPRS-required contributions beginning in fiscal year 2019 for members who retired or will retire after the law’s effective date. City of Scottsdale, Arizona 145 Table of Contents NONMAJOR GOVERNMENTAL FUNDS Special Revenue Funds 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 to be used for a specified purpose. 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. Housing Choice Voucher Program Fund. This fund receives and expends the City’s Housing Choice Voucher Program 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. Housing Choice Voucher Program 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 0.35 percent (0.2 percent 1995 and 0.15 percent 2004). Revenues are transferred to the Preserve Privilege Tax Capital Projects Fund for land purchases and improvements in the McDowell Sonoran Preserve or are transferred to the General Obligation Bond Debt Service Fund to be used for related debt service payments for prior preserve land acquisitions. City of Scottsdale, Arizona 146 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. McDowell Mountain Ranch CFD Scottsdale Mountain 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 restricted or committed by the City Council for tourism-related purposes. Stadium Facility Fund. This fund accounts for certain revenue received for Scottsdale Stadium and contributions from the San Francisco Giants and the Scottsdale Charros. The contributions are restricted by an outside agreement to be used to support the operations, maintenance, and capital improvements for Scottsdale Stadium. 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 consists of amounts committed by the City Council to be used for the repayment of debt, as well as stadium surcharge amounts restricted for the payment of debt service. 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 require that the bonds should be disclosed herein. McDowell Mountain Ranch CFD DC Ranch CFD Via Linda Road CFD Waterfront Commercial CFD City of Scottsdale, Arizona 147 Table of Contents NONMAJOR GOVERNMENTAL FUNDS (Continued) Capital Projects Funds Capital Projects Funds account for the resources used to acquire, construct, and improve major capital assets other than those financed by proprietary funds. Capital Projects Funds allow the City to compile project cost data, comply with the City’s capitalization policy, and demonstrate that legal or contractual requirements of funding sources are fully satisfied. General Obligation Bonds Fund. This fund accounts for the proceeds and interest of the sale of voterapproved general obligation bonds that are used for authorized capital improvements. 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 that are used for authorized 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 148 Table of Contents Combining Balance Sheet Nonmajor Governmental Funds June 30, 2023 (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 Court Highway User Tax Intergovernmental Grants Leases 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 Other Total Liabilities Special Revenue Funds $ $ $ Deferred Inflows of Resources Unavailable Revenues Leases Total Deferred Inflows of Resources Total Liabilities and Deferred Inflows of Resources Fund Balances (Deficits) Nonspendable Restricted Committed Unassigned Total Fund Balances Total Liabilities, Deferred Inflows of Resources, and Fund Balances $ 198,175 9 1,111 10,582 2,320 10 91 231 1,850 4,765 3,940 55 3,277 226,416 2,666 511 2,875 - Debt Service Funds $ $ $ Capital Projects Funds 5,055 17,694 41 22,790 2,808 14,731 $ $ $ Total Nonmajor Governmental Funds Permanent Funds 38,360 233 38,593 4,865 10 - $ $ $ 636 636 - $ $ $ 242,226 17,703 1,344 10,582 2,320 51 91 231 1,850 4,765 3,940 55 3,277 288,435 7,531 521 2,875 2,808 14,731 9,955 683 18 5 38 16,751 17,539 4,875 - 9,955 683 18 5 38 39,165 8,047 2,248 10,295 17 17 - - 8,064 2,248 10,312 27,046 17,556 4,875 - 49,477 179,149 24,180 (3,959) 199,370 2,551 2,683 5,234 36,330 (2,612) 33,718 609 27 636 609 218,057 26,863 (6,571) 238,958 226,416 $ 22,790 City of Scottsdale, Arizona 149 $ 38,593 $ 636 $ 288,435 Table of Contents Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds For the Fiscal Year Ended June 30, 2023 (in thousands) REVENUES Taxes - Local Property Transaction Privilege Transient Occupancy Light and Power Franchise Other Taxes Taxes - Intergovernmental State Revenue Sharing 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 Fines, Fees, and Forfeitures Court Court Enhancement Library Police Property Rental Interest Earnings Net Increase in the Fair Value of Investments Intergovernmental Federal Grants State Grants Miscellaneous Streetlight and Services Districts Contributions and Donations Reimbursements from Outside Sources Other Total Revenues Special Revenue Funds $ 164 97,155 36,492 291 5,526 Debt Service Funds $ Capital Projects Funds 1,639 - $ Total Nonmajor Governmental Funds Permanent Funds - $ - $ 1,803 97,155 36,492 291 5,526 1,802 18,111 610 47 - - - 1,802 18,111 610 47 89 3,397 1,133 - - - 89 3,397 1,133 129 1,703 98 83 4,805 3,731 - 3 - 894 370 46 129 1,703 98 83 4,805 4,628 416 27,403 362 3,502 525 2,340 813 90 210,401 1,642 1,264 46 27,403 362 3,502 525 2,340 813 90 213,353 21 30 1,803 889 198 23,238 22,283 19,899 16,818 9 529 - 408 294 - 36 - 21 30 1,803 889 198 23,238 22,283 19,899 17,262 303 529 970 78 2,036 88,801 14,731 5,627 20,358 43,177 43,879 36 15,701 5,705 45,213 153,074 Excess (Deficiency) of Revenues over (under) Expenditures 121,600 (18,716) (42,615) 10 60,279 OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Financing of Subscription-Based Information Technology Arrangements Financing of Contracts Payable Sale of General Capital Assets Issuance of Long-Term Capital-Related Debt Premium on Long-Term Debt Issued Total Other Financing Sources (Uses) 574 (78,912) 1,292 265 (47) (76,828) 18,623 (23) 18,600 742 (178) 73,590 4,110 78,264 - 19,939 (79,113) 1,292 265 (47) 73,590 4,110 20,036 44,772 (116) 35,649 10 80,315 EXPENDITURES Current General Government Mayor and City Council City Attorney 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 Net Change in Fund Balances (Deficits) Fund Balances (Deficits) - Beginning Fund Balances (Deficits)- Ending $ 154,598 199,370 $ 5,350 5,234 City of Scottsdale, Arizona 150 $ (1,931) 33,718 $ 626 636 $ 158,643 238,958 Table of Contents Combining Balance Sheet Nonmajor Special Revenue Governmental Funds June 30, 2023 (in thousands) ASSETS 151 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 Court Highway User Tax Intergovernmental Grants Leases Miscellaneous Total Assets Community Development Block Grant Transportation $ $ 43,086 440 3,768 1,850 122 49,266 $ $ HOME 739 216 55 2,092 3,102 $ $ Grants 2 2 $ $ 3,722 3 3,725 Housing Choice Voucher Program Preserve Privilege Tax Scottsdale Mountain CFD $ $ $ $ 754 22 776 $ 103,416 508 6,814 110,738 $ McDowell Mountain Ranch CFD - $ $ 81 1 82 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 Other Total Liabilities $ Deferred Inflows of Resources Unavailable Revenues Leases Total Deferred Inflows of Resources 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) $ 1,316 305 - $ 45 12 - $ 2 $ 77 15 2,873 $ 7 18 - $ 8 - $ - $ - 1,621 694 5 2 5 763 2 144 616 3,725 7 35 67 8 - - 435 435 2,056 2,307 52 2,359 3,122 2 3,277 3,277 7,002 21 21 88 794 794 802 - 1 1 1 47,210 47,210 196 (216) (20) - (3,277) (3,277) 688 688 109,936 109,936 - 81 81 49,266 $ 3,102 $ 2 $ 3,725 $ 776 $ 110,738 $ - $ 82 Table of Contents Combining Balance Sheet Nonmajor Special Revenue Governmental Funds June 30, 2023 (in thousands) ASSETS 152 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 Court Highway User Tax Intergovernmental Grants Leases 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 Other Total Liabilities DC Ranch CFD $ $ $ Deferred Inflows of Resources Unavailable Revenues Leases Total Deferred Inflows of Resources 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) $ 35 1 36 - Via Linda Road CFD Waterfront Commercial CFD $ $ $ $ 73 8 81 - $ $ 9 9 - Streetlight Districts $ $ $ Tourism Development Special Programs 34 8 42 - $ $ $ 25,603 46 91 231 4,765 581 31,317 595 130 - $ $ $ 19,198 91 2,320 190 21,799 301 25 - Stadium Facility $ $ $ 5,156 26 259 5,441 317 6 - Total $ $ $ 198,175 9 1,111 10,582 2,320 10 91 231 1,850 4,765 3,940 55 3,277 226,416 2,666 511 2,875 - - - - 9,117 56 1 1 9,900 326 6 8 2 339 9,955 683 18 5 38 16,751 - 4 4 4 - - 1,024 1,024 10,924 183 2,196 2,379 2,705 1 1 340 8,047 2,248 10,295 27,046 36 36 77 77 9 9 42 42 7,964 12,895 (466) 20,393 7,809 11,285 19,094 5,101 5,101 179,149 24,180 (3,959) 199,370 36 $ 81 $ 9 $ 42 $ 31,317 $ 21,799 $ 5,441 $ 226,416 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, 2023 (in thousands) City of Scottsdale, Arizona 153 REVENUES Taxes - Local Property Transaction Privilege Transient Occupancy Light and Power Franchise Other Taxes Taxes - Intergovernmental State Revenue Sharing 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 Fines, Fees, and Forfeitures Court Court Enhancement Library Police Property Rental Interest Earnings Intergovernmental Federal Grants State Grants Miscellaneous Streetlight and Services Districts Contributions and Donations Reimbursements from Outside Sources Other Total Revenues Community Development Block Grant Transportation $ 34,605 - $ HOME - $ Grants - $ - Housing Choice Voucher Program Preserve Privilege Tax Scottsdale Mountain CFD $ $ $ - 62,550 - McDowell Mountain Ranch CFD - $ 10 - 18,111 610 - - - - - - - - - - - - - - - - 10 1,455 125 3 - - - 1,740 - 1 248 190 4 55,233 1,676 1,804 377 377 18,594 362 555 1,370 3 20,884 6,756 31 6,787 64,290 - 11 EXPENDITURES Current General Government Mayor and City Council City Attorney 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 70 20,656 2,145 9 - 1,666 - 1 - 30 887 2,582 5 16,438 1,288 - 6,819 - - 24 - 11 - 47 4 1,823 24,754 1,666 1 21,230 6,819 - 24 11 Excess (Deficiency) of Revenues over (under) Expenditures 30,479 138 376 (346) (32) 64,290 (24) - (20,236) (20,236) - - - - (34,181) (34,181) - 23 23 10,243 138 376 (346) (32) 30,109 (24) 23 OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Financing of Subscription-Based Information Technology Arrangements Financing of Contracts Payable Sale of General Capital Assets Total Other Financing Sources (Uses) Net Change in Fund Balances (Deficits) Fund Balances (Deficits) - Beginning Fund Balances (Deficits) - Ending (continued) $ 36,967 47,210 $ (158) (20) $ (376) - $ (2,931) (3,277) $ 720 688 $ 79,827 109,936 $ 24 - $ 58 81 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, 2023 (in thousands) REVENUES City of Scottsdale, Arizona 154 Taxes - Local Property Transaction Privilege Transient Occupancy Light and Power Franchise Other Taxes Taxes - Intergovernmental State Revenue Sharing 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 Fines, Fees, and Forfeitures Court Court Enhancement Library Police Property Rental Interest Earnings ( ) Intergovernmental Federal Grants State Grants Miscellaneous Streetlight and Services Districts Contributions and Donations Reimbursements from Outside Sources Other Total Revenues DC Ranch CFD Via Linda Road CFD Waterfront Commercial CFD $ $ $ EXPENDITURES Current General Government Mayor and City Council City Attorney 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 Excess (Deficiency) of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Financing of Subscription-Based Information Technology Arrangements Financing of Contracts Payable Sale of General Capital Assets Total Other Financing Sources and (Uses) Net Change in Fund Balances (Deficits) Fund Balances (Deficits) - Beginning Fund Balances (Deficits) - Ending $ 66 - 80 - 8 - Streetlight Districts $ - Special Programs Tourism Development Stadium Facility $ $ $ 291 5,526 36,492 - Total - $ 164 97,155 36,492 291 5,526 - - - - 1,802 47 - - 1,802 18,111 610 47 - - - - 89 3,177 1,133 - 220 - 89 3,397 1,133 - - - - 129 1,703 98 83 309 135 3,569 311 792 86 129 1,703 98 83 4,805 3,731 66 80 8 525 525 2,699 393 160 86 17,860 45 40,417 577 384 2,059 27,403 362 3,502 525 2,340 813 90 210,401 71 - 11 - 11 - 529 21 1,803 2 122 3,461 3,852 - 22,156 - 1,047 - 21 30 1,803 889 198 23,238 22,283 19,899 16,818 9 529 71 11 11 529 908 72 10,241 22,156 15 2 213 1,277 970 78 2,036 88,801 (5) 69 (3) (4) 7,619 18,261 782 121,600 - - - - 551 (10,982) 1,292 265 (47) (8,921) (13,003) (13,003) (510) (510) 574 (78,912) 1,292 265 (47) (76,828) (5) 69 (3) (4) (1,302) 5,258 272 44,772 41 36 8 77 12 9 46 42 21,695 20,393 13,836 19,094 4,829 5,101 154,598 199,370 $ $ $ $ $ $ $ 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, 2023 (in thousands) Budgeted Amounts 155 City of Scottsdale, Arizona REVENUES Taxes - Local Transaction Privilege Taxes - Intergovernmental Highway User Tax Local Transportation Assistance Fund Property Rental Interest Earnings Intergovernmental Miscellaneous Reimbursements from Outside Sources Other Total Revenues Original $ EXPENDITURES Current General Government City Treasurer Public Works Community Services Administrative Services Debt Service Principal Interest and Fiscal Charges Capital Outlay Total Expenditures Excess of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers Out Sale of General Capital Assets Total Other Financing Sources (Uses) Net Change in Fund Balance Final 28,840 $ 28,840 Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ 34,605 34,605 5,765 18,648 640 6 245 18,648 640 6 245 18,111 610 10 1,455 - 18,111 610 10 1,455 (537) (30) 4 1,210 90 3 48,472 90 3 48,472 248 190 4 55,233 - 248 190 4 55,233 158 187 4 6,761 70 26,838 2,102 19 70 24,577 2,102 19 70 22,472 2,158 19 (1,816) (13) (10) 70 20,656 2,145 9 2,105 (56) - 29,029 26,768 24,719 47 4 1,823 35 47 4 1,823 24,754 2,049 19,443 21,704 30,514 (35) 30,479 8,810 (17,104) 20 (17,084) (17,104) 20 (17,084) (20,236) (20,236) - (20,236) (20,236) (3,132) (20) (3,152) $ 2,359 $ 35 $ 4,620 $ 10,278 $ Explanation of Differences: The City budgets for certain expenditures on the cash basis, rather than on the modified accrual basis: Payroll Accruals - Differences in Presentation between Budget and GAAP Basis: The City records capitalized expenditures as capital outlay on the GAAP basis; however, for budget purposes they are included in the associated division's expenditures. These differences have no bearing on the fund balance since the overall total expenditures are the same. (35) $ 10,243 $ 5,658 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, 2023 (in thousands) Budgeted Amounts Property Rental Interest Earnings Intergovernmental Federal Grants Total Revenues REVENUES Original $ 156 City of Scottsdale, Arizona EXPENDITURES Current Community Services 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 Final 63 - Net Increase in Fund Balance - Budget to GAAP $ $ $ $ 73 - 52 3 125 3 10 - 1,731 1,804 (55) - 1,676 1,804 (1,009) (999) 3,216 3,216 3,216 3,216 1,668 1,668 (2) (2) 1,666 1,666 1,548 1,548 (413) (413) 136 2 138 549 423 (10) 413 423 (10) 413 - - - (423) 10 (413) - $ 3 (3) - (2) $ Actual Amounts GAAP Basis 2,740 2,803 $ The City budgets for certain expenditures on the cash basis, rather than on the modified accrual basis: Payroll Accrual and Compensated Absences 63 - Budget to GAAP Differences 2,740 2,803 Explanation of Differences: Items recorded as revenues for GAAP purposes that are not recorded for budget purposes: Lease Interest Revenue Amortized Lease Revenue Total Revenue Adjustments $ Actual Amounts Budgetary Basis Variance Between Final Budget and Actual Amounts Budgetary Basis 2 $ - $ 136 $ 2 $ 138 $ 136 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, 2023 (in thousands) Budgeted Amounts REVENUES Intergovernmental Federal Grants Total Revenues Original $ 157 City of Scottsdale, Arizona EXPENDITURES Current Community Services Total Expenditures Excess of Revenues over Expenditures Net Change in Fund Balance $ Final 1,848 1,848 $ 1,848 1,848 Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ 377 377 - 377 377 (1,471) (1,471) 1,848 1,848 1,848 1,848 1 1 - 1 1 1,847 1,847 - - 376 - 376 376 - $ - $ 376 $ - $ 376 $ 376 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, 2023 (in thousands) Budgeted Amounts REVENUES Intergovernmental Federal Grants State Grants Miscellaneous Contributions and Donations Reimbursements from Outside Sources Total Revenues Original $ City of Scottsdale, Arizona 158 EXPENDITURES Current General Government Mayor and City Council City Attorney City Manager Public Works Community and Economic Development Public Safety Community Services Total Expenditures Excess (Deficiency) of Revenues over (under) Expenditures Net Change in Fund Balance Final 22,759 262 2,844 25,865 22,759 262 2,844 25,865 Budget to GAAP Differences Actual Amounts GAAP Basis $ $ $ $ 18,594 362 555 1,370 3 20,884 - 18,594 362 555 1,370 3 20,884 (4,165) 100 555 (1,474) 3 (4,981) 5 865 5 20,258 4,732 25,865 5 32 905 1,771 5 17,938 2,502 23,158 32 887 2,582 5 16,445 1,287 21,238 (2) (7) 1 (8) 30 887 2,582 5 16,438 1,288 21,230 5 18 (811) 1,493 1,215 1,920 - 2,707 (354) 8 (346) (3,061) $ - $ (8) 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 $ 2,707 $ (354) $ 8 $ (346) $ (3,061) Table of Contents Housing Choice Voucher Program – Special Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2023 (in thousands) Budgeted Amounts REVENUES Intergovernmental Federal Grants Reimbursements from Outside Sources Total Revenues Original $ 159 City of Scottsdale, Arizona EXPENDITURES Current Community Services Total Expenditures Deficiency of Revenues under Expenditures Net Change in Fund Balance Final 6,429 6,429 6,429 6,429 Budget to GAAP Differences $ $ 6,756 31 6,787 - - Actual Amounts GAAP Basis $ $ 6,756 31 6,787 327 31 358 6,429 6,429 6,513 6,513 6,815 6,815 4 4 6,819 6,819 (302) (302) - (84) (28) (4) (32) 56 $ - $ 4 Explanation of Differences: The City budgets for certain expenditures on the cash basis, rather than on the modified accrual basis: Payroll Accruals $ Actual Amounts Budgetary Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ (84) $ (28) $ (4) $ (32) $ 56 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, 2023 (in thousands) Budgeted Amounts REVENUES Taxes - Local Transaction Privilege Interest Earnings Total Revenues Original $ 160 City of Scottsdale, Arizona EXPENDITURES Total Expenditures Final 53,363 428 53,791 $ 53,363 428 53,791 Actual Amounts Budgetary Basis Budget to GAAP Differences $ $ 62,550 1,740 64,290 - Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ 62,550 1,740 64,290 9,187 1,312 10,499 - - - - - - Excess of Revenues over Expenditures 53,791 53,791 64,290 - 64,290 10,499 OTHER FINANCING USES Transfers Out Total Other Financing Uses (33,889) (33,889) (33,889) (33,889) (34,181) (34,181) - (34,181) (34,181) (292) (292) Net Change in Fund Balance $ 19,902 $ 19,902 $ 30,109 $ - $ 30,109 $ 10,207 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, 2023 (in thousands) Budgeted Amounts REVENUES Streetlight and Services Districts Total Revenues Original $ 161 City of Scottsdale, Arizona EXPENDITURES Current Streetlight and Services Districts Total Expenditures Deficiency of Revenues under Expenditures Net Change in Fund Balance $ Final 552 552 $ 552 552 Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ 525 525 - 525 525 (27) (27) 573 573 573 573 529 529 - 529 529 44 44 (21) (21) (4) - (4) 17 (21) $ (21) $ (4) $ - $ (4) $ 17 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, 2023 (in thousands) Budgeted Amounts REVENUES Taxes - Local Light and Power Franchise Other Taxes Taxes - Intergovernmental State Revenue Sharing Business and Liquor Licenses Charges for Current Services Building and Related Permits Recreation Fees WestWorld Equestrian Facility Fees Fines, Fees, and Forfeitures Court Court Enhancement Library Police Property Rental Interest Earnings Intergovernmental Miscellaneous Developer Contributions Contributions and Donations Reimbursements from Outside Sources Other Total Revenues Original $ Final 262 5,410 $ 262 5,410 Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ 291 5,526 - 291 5,526 29 116 1,516 50 1,516 50 1,802 47 - 1,802 47 286 (3) 71 2,641 200 71 2,641 200 89 3,177 1,133 - 89 3,177 1,133 18 536 933 124 1,691 80 95 338 55 124 1,691 80 95 338 55 129 1,703 98 83 309 135 - 129 1,703 98 83 309 135 5 12 18 (12) (29) 80 2,784 100 480 108 40 16,045 2,784 100 480 108 40 16,045 2,699 393 160 86 17,860 - 2,699 393 160 86 17,860 (85) (100) (87) 52 46 1,815 EXPENDITURES Current General Government Mayor and City Council City Court City Manager Public Works Community and Economic Development Public Safety Community Services Debt Service Principal Interest and Fiscal Charges Total Expenditures 48 1,945 166 2,982 4,345 3,396 48 1,945 166 602 4,367 3,768 21 1,804 2 122 2,794 3,835 (1) 667 17 21 1,803 2 122 3,461 3,852 27 141 (2) 166 480 1,573 (67) 38 23 12,943 38 23 10,957 41 22 8,641 867 50 1,600 908 72 10,241 (3) 1 2,316 Excess of Revenues over Expenditures 3,102 5,088 9,219 (1,600) 7,619 4,131 10 (7,239) (7,229) 10 (7,239) (7,229) 551 (10,982) (10,431) 1,292 265 (47) 1,510 551 (10,982) 1,292 265 (47) (8,921) 541 (3,743) (3,202) OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Financing of Subscription-Based Information Technology Arrangements Financing of Contracts Payable Sale of General Capital Assets Total Other Financing Sources (Uses) Net Change in Fund Balance Explanation of Differences: Items recorded as revenues/other financing sources for GAAP purposes that are not recorded for budget purposes: Financing of Subscription-Based Information Technology Arrangements Financing of Contracts Payable Sale of General Capital Assets Total Revenue/Other Financing Source Adjustments $ (4,127) $ 1,292 265 (47) 1,510 The City budgets for certain expenditures on the cash basis, rather than on the modified accrual basis: Payroll Accruals Non-Cash Operating Expenditures Toal Expenditures Net Decrease in Fund Balance - Budget to GAAP $ (2,141) $ (1,212) $ (90) 43 1,557 1,600 $ (90) Differences in Presentation between Budget and GAAP Basis: The City records principal and interest payments related to the subscription-based information technology arrangements, lease activity, and contracts payable on a GAAP basis; however, for budget purposes they are included in the associated division's expenditures.These differences have no bearing on the fund balance since the overall total expenditures are the same. City of Scottsdale, Arizona 162 $ (1,302) $ 929 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, 2023 (in thousands) Budgeted Amounts REVENUES Taxes - Local Transient Occupancy Tax Property Rental Interest Earnings Reimbursements from Outside Sources Total Revenues Original $ Final 25,000 2,519 59 25 27,603 $ 25,000 2,519 59 25 27,603 Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ 36,492 3,544 311 45 40,392 25 25 36,492 3,569 311 45 40,417 11,492 1,025 252 20 12,789 City of Scottsdale, Arizona 163 EXPENDITURES Current General Government Community and Economic Development Total Expenditures 18,277 18,277 21,977 21,977 22,145 22,145 11 11 22,156 22,156 (168) (168) Excess of Revenues over Expenditures 9,326 5,626 18,247 14 18,261 12,621 (11,900) (11,900) (11,900) (11,900) (13,003) (13,003) - (13,003) (13,003) (1,103) (1,103) OTHER FINANCING USES Transfers Out Total Other Financing Uses Net Change in Fund Balance $ (2,574) $ 25 Explanation of Differences: Items recorded as revenues for GAAP purposes that are not recorded for budget purposes: Amortized Lease Revenue 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 11 $ 14 $ (6,274) $ 5,244 $ 14 $ 5,258 $ 11,518 Table of Contents Stadium Facility – Special Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2023 (in thousands) Budgeted Amounts REVENUES Charges for Current Services Recreation Fees Property Rental Interest Earnings Contributions and Donations Reimbursements from Outside Sources Total Revenues Original $ City of Scottsdale, Arizona 164 EXPENDITURES Current Community Services Debt Service Principal Interest and Fiscal Charges Capital Outlay Total Expenditures Excess of Revenues over Expenditures OTHER FINANCING USES Transfers Out Total Other Financing Uses Net Change in Fund Balance Final 565 19 577 276 1,437 $ 565 19 577 276 1,437 Actual Amounts Budgetary Basis Budget to GAAP Differences $ $ 220 792 86 577 384 2,059 $ $ 220 792 86 577 384 2,059 220 227 67 108 622 671 976 1,280 (233) 1,047 (304) 15 2 688 15 2 993 1,280 15 2 213 (3) 15 2 213 1,277 15 2 (287) 749 444 779 3 782 335 (510) (510) (510) (510) (510) (510) - (510) (510) - $ 239 $ (3) $ (66) $ 269 $ Explanation of Differences: The City budgets for certain expenditures on the cash basis, rather than on the modified accrual basis: Payroll Accrual and Compensated Absences - Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis Differences in Presentation between Budget and GAAP Basis: The City records capitalized expenditures as capital outlay on the GAAP basis; however, for budget purposes they are included in the associated division's expenditures. These differences have no bearing on the fund balance since the overall total expenditures are the same. 3 $ 272 $ 335 Table of Contents Combining Balance Sheet Nonmajor Debt Service Governmental Funds June 30, 2023 (in thousands) ASSETS Cash and Investments Cash with Fiscal Agent Receivables (net of allowance for uncollectibles) Property Tax Total Assets 165 City of Scottsdale, Arizona LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES Liabilities Matured Bond Interest Payable Matured Bonds Payable Total Liabilities Municipal Property Corporation $ $ $ Deferred Inflows of Resources Unavailable Revenues Total Liabilities and Deferred Inflows of Resources Fund Balances Restricted Committed Total Fund Balances Total Liabilities, Deferred Inflows of Resources, and Fund Balances $ McDowell Mountain Ranch CFD Debt Service Stabilization 15,936 15,936 2,681 13,255 15,936 $ $ $ 5,055 5,055 - $ $ $ - - DC Ranch CFD Via Linda Road CFD Waterfront Commercial CFD $ $ $ $ $ 1,303 40 1,343 99 1,085 1,184 $ $ 213 213 3 210 213 $ $ 242 1 243 25 181 206 Total $ $ $ 5,055 17,694 41 22,790 2,808 14,731 17,539 15,936 - - 16 1,200 213 1 207 17 17,556 - 2,372 2,683 5,055 - 143 143 - 36 36 2,551 2,683 5,234 15,936 $ 5,055 $ - $ 1,343 $ 213 $ 243 $ 22,790 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, 2023 (in thousands) Taxes - Local Property Interest Earnings Total Revenues Municipal Property Corporation REVENUES $ McDowell Mountain Ranch CFD Debt Service Stabilization 3 3 $ - $ - DC Ranch CFD Via Linda Road CFD Waterfront Commercial CFD $ $ $ 1,254 1,254 186 186 199 199 Total $ 1,639 3 1,642 City of Scottsdale, Arizona 166 EXPENDITURES Debt Service Principal Interest and Fiscal Charges Total Expenditures 13,255 5,371 18,626 - - 1,085 199 1,284 210 6 216 181 51 232 14,731 5,627 20,358 Deficiency of Revenues under Expenditures (18,623) - - (30) (30) (33) (18,716) OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) 18,623 18,623 - (23) (23) - - - 18,623 (23) 18,600 - - (23) (30) (30) (33) (116) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending $ - $ 5,055 5,055 $ 23 - $ 173 143 $ 30 - $ 69 36 $ 5,350 5,234 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, 2023 (in thousands) Budgeted Amounts REVENUES Taxes - Local Property Total Revenues Original $ City of Scottsdale, Arizona 167 EXPENDITURES Debt Service Principal Interest and Fiscal Charges Bond Issuance Costs Total Expenditures 30,056 30,056 Final $ 30,056 30,056 Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ 30,062 30,062 - 30,062 30,062 6 6 56,365 12,230 68,595 56,365 12,230 68,595 52,975 11,959 845 65,779 - 52,975 11,959 845 65,779 3,390 271 (845) 2,816 Deficiency of Revenues under Expenditures (38,539) (38,539) (35,717) - (35,717) 2,822 OTHER FINANCING SOURCES Transfers In Issuance of Long-Term Capital-Related Debt Premium on Long-Term Debt Issued Total Other Financing Sources 33,439 33,439 33,439 33,439 33,439 115 740 34,294 - 33,439 115 740 34,294 115 740 855 Net Change in Fund Balance $ (5,100) $ (5,100) $ (1,423) $ - $ (1,423) $ 3,677 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, 2023 (in thousands) Budgeted Amounts REVENUES Interest Earnings Total Revenues Original $ 168 City of Scottsdale, Arizona EXPENDITURES Debt Service Principal Interest and Fiscal Charges Total Expenditures Final - $ - Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ 3 3 - 3 3 3 3 13,255 5,372 18,627 13,255 5,372 18,627 13,255 5,371 18,626 - 13,255 5,371 18,626 1 1 Deficiency of Revenues under Expenditures (18,627) (18,627) (18,623) - (18,623) 4 OTHER FINANCING SOURCES Transfers In Total Other Financing Sources 18,627 18,627 18,627 18,627 18,623 18,623 - 18,623 18,623 (4) (4) Net Change in Fund Balance $ - $ - $ - $ - $ - $ - Table of Contents Combining Balance Sheet Nonmajor Capital Projects Governmental Funds June 30, 2023 (in thousands) ASSETS 169 City of Scottsdale, Arizona Cash and Investments Receivables (net of allowance for uncollectibles) Interest Total Assets LIABILITIES AND FUND BALANCES (DEFICITS) Liabilities Accounts Payable Accrued Payroll and Benefits Total Liabilities General Obligation Bonds Preserve Privilege Tax Municipal Property Corporation Bonds $ 38,278 $ 82 $ - $ 38,360 $ 233 38,511 $ 82 $ - $ 233 38,593 $ Fund Balances (Deficits) Restricted Unassigned Total Fund Balances (Deficits) Total Liabilities and Fund Balances (Deficits) 4,783 9 4,792 $ 36,330 (2,611) 33,719 $ 38,511 82 1 83 $ (1) (1) $ 82 Total - $ $ - 4,865 10 4,875 36,330 (2,612) 33,718 $ 38,593 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, 2023 (in thousands) REVENUES Interest Earnings Net Increase in the Fair Value of Investments Total Revenues General Obligation Bonds Preserve Privilege Tax Municipal Property Corporation Bonds $ $ $ City of Scottsdale, Arizona 170 EXPENDITURES Current Community Services Administrative Services Capital Outlay Total Expenditures 892 370 1,262 - 2 2 Total $ 894 370 1,264 330 294 42,806 43,430 78 371 449 - 408 294 43,177 43,879 (42,168) (449) 2 (42,615) OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Issuance of Long-Term Capital-Related Debt Premium on Long-Term Debt Issued Total Other Financing Sources (Uses) 73,590 4,110 77,700 742 742 (178) (178) 742 (178) 73,590 4,110 78,264 Net Change in Fund Balances (Deficits) 35,532 293 (176) 35,649 (1,813) (294) 176 (1,931) Excess (Deficiency) of Revenues over (under) Expenditures Fund Balances (Deficits) - Beginning Fund Balances (Deficits) - Ending $ 33,719 $ (1) $ - $ 33,718 Table of Contents Combining Balance Sheet Nonmajor Permanent Governmental Funds June 30, 2023 (in thousands) Cash and Investments Total Assets ASSETS 171 City of Scottsdale, Arizona LIABILITIES AND FUND BALANCES Total Liabilities Fund Balances Nonspendable Restricted Total Fund Balances Total Liabilities and Fund Balances Rassner Memorial Scottsdale Library Endowment Scottsdale Community Endowment Herbert R. Drinkwater Youth Services Endowment Scottsdale Employee Endowment Total $ $ 427 427 $ $ 135 135 $ $ 41 41 $ $ 33 33 $ $ 636 636 $ - $ - $ - $ - $ - $ 409 18 427 427 $ 129 6 135 135 $ 39 2 41 41 $ 32 1 33 33 $ 609 27 636 636 Table of Contents Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Permanent Governmental Funds For the Fiscal Year Ended June 30, 2023 (in thousands) REVENUES Net Increase in the Fair Value of Investments Total Revenues Rassner Memorial Scottsdale Library Endowment $ 31 31 Scottsdale Community Endowment $ Herbert R. Drinkwater Youth Services Endowment Scottsdale Employee Endowment 10 10 $ 3 3 $ Total 2 2 $ 46 46 City of Scottsdale, Arizona 172 EXPENDITURES Current Community Services Total Expenditures 24 24 8 8 2 2 2 2 36 36 Excess of Revenues over Expenditures 7 2 1 - 10 7 2 1 - 10 420 133 40 33 626 Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending $ 427 $ 135 $ 41 $ 33 $ 636 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 173 Table of Contents Combining Statement of Fund Net Position Internal Service Funds June 30, 2023 (in thousands) Fleet Management ASSETS AND DEFERRED OUTFLOWS OF RESOURCES Assets Current Assets Cash and Investments Receivables (net of allowance for uncollectibles) Miscellaneous Supplies Inventory Prepaid Items Total Current Assets $ 23,094 $ 208 1,465 1 24,768 Noncurrent Assets Equity in Joint Venture Capital Assets Buildings and Improvements Motor Vehicles Machinery and Equipment Construction in Progress Leases Subscription-Based Information Technology Arrangements Less Accumulated Depreciation/Amortization Total Capital Assets (net of accumulated depreciation/amortization) Total Noncurrent Assets Computer Replacement Self-Insurance 47,281 450 47,731 $ - Total 1,778 1,778 $ 72,153 - 658 1,465 1 74,277 5 - - 5 18,891 103,093 1,376 52 8 - - (65,386) 58,034 58,039 8 526 (320) 259 259 (2,805) 2,450 2,450 18,891 103,093 6,676 52 16 526 (68,511) 60,743 60,748 Total Assets 82,807 47,990 4,228 135,025 Deferred Outflows of Resources Pension-Related Amounts 729 210 1,428 183 213 1 1,786 65 91 1 110 9,581 14 4 11,652 LIABILITIES AND DEFERRED INFLOWS OF RESOURCES Liabilities Current Liabilities Accounts Payable Accrued Payroll and Benefits Accrued Compensated Absences - Due within one year Leases - Due within one year Subscription - Due within one year Other Payables - Due within one year Unearned Revenue Other Liabilities Total Current Liabilities 1,825 Noncurrent Liabilities Accrued Compensated Absences - Due in more than one year Leases- Due in more than one year Subscription - Due in more than one year Net Pension Liabilities Other Payables - Due in more than one year Total Noncurrent Liabilities 128 5 4,280 4,413 Total Liabilities Deferred Inflows of Resources Pension-Related Amounts Net Investment in Capital Assets Unrestricted NET POSITION Total Net Position $ 45 - - 6,238 24,644 162 47 57,286 19,850 27 23,482 City of Scottsdale, Arizona 174 92 92 79 6 115 1,228 11,564 12,992 - 77,136 5,255 - $ 23,509 - 939 - 3,306 248 304 2 110 9,581 14 4 13,569 - 207 11 115 5,508 11,564 17,405 92 30,974 - 209 2,358 1,778 $ 4,136 59,671 45,110 $ 104,781 Table of Contents Combining Statement of Revenues, Expenses, and Changes in Fund Net Position Internal Service Funds For the Fiscal Year Ended June 30, 2023 (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 $ 29,372 515 29,887 Operating Expenses Costs of Sales and Services Fleet Management Operations Self-Insurance Administration Self-Insurance Claims Self-Insurance Benefits Insurance and Bond Premiums Computer Replacement Depreciation/Amortization Total Operating Expenses 15,296 10,262 25,558 Operating Income (Loss) 4,329 Non-Operating Revenues (Expenses) Property Tax Gain (Loss) on Sale of Capital Assets Net Non-Operating Revenues (Expenses) 166 166 Income (Loss) Before Contributions and Transfers 2,379 Change in Net Position Total Net Position - Beginning Total Net Position - Ending - $ 70,262 77,136 $ $ 72,537 8,571 271 103 1,962 83,444 (183) 10,720 (37) (37) 536 129 665 7,110 (220) 11,385 55 (7) - 2,379 55 (7) 7,158 (220) 13,812 536 - - 15,296 4,319 2,284 34,000 5,500 20 11,305 72,724 536 - 750 750 - 20 913 933 - 6,574 City of Scottsdale, Arizona 175 $ Total - 130 46,233 6,874 $ 42,415 8,571 271 103 1,447 52,807 4,319 2,284 34,000 5,500 - 4,495 Capital Contributions Transfers In Transfers Out Computer Replacement Self-Insurance 16,351 23,509 - $ 4,356 4,136 $ 90,969 104,781 Table of Contents Combining Statement of Cash Flows Internal Service Funds For the Fiscal Year Ended June 30, 2023 (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 (Used for) Operating Activities $ 29,371 (9,035) (4,800) 515 16,051 Cash Flows from NonCapital Financing Activities Property Tax Transfers In Transfers Out Net Cash Provided by (Used for) NonCapital Financing Activities Computer Replacement Self-Insurance $ 51,143 (48,137) (1,780) 1,447 2,673 $ Total 750 (20) 730 $ 81,264 (57,172) (6,600) 1,962 19,454 - 536 55 (7) 584 - 536 55 (7) 584 (11,815) 712 (11,103) (130) (130) (616) (616) (12,561) 712 (11,849) Net Increase in Cash and Cash Equivalents 4,948 3,127 114 8,189 Cash and Cash Equivalents at Beginning of Year 18,146 44,154 1,664 63,964 Cash Flows from Capital and Related Financing Activities Acquisition of Capital Assets Sale of Capital Assets Net Cash Provided by (Used for) Capital and Related Financing Activities Cash and Cash Equivalents at End of Year $ 23,094 $ 47,281 $ 1,778 $ 72,153 $ 4,329 $ 6,574 $ (183) $ 10,720 Reconciliation of Operating Income (Loss) to Net Cash Provided by (Used for) Operating Activities Operating Income (Loss) Income Provided by (Used for) Operating Activities Depreciation/Amortization Current Year Pension Contributions Change in Equity in Joint Venture Change in Accounts Receivable Change in Prepaid Expense Change in Inventories Change in Accounts Payable Change in Unearned Revenue Change in Accrued Payroll Change in Compensated Absences Payable Change in Claims Payable Change in Net Pension Liability Change in Deferred Outflows of Resources Related to Pensions Change in Deferred Inflows of Resources Related to Pensions Total Adjustments Net Cash Provided by (Used for) Operating Activities 10,262 (402) 1 1,921 (78) (137) 33 (61) 697 571 (1,085) 11,722 $ Supplemental Disclosure of Non-Cash Investing, Capital, and Financing Activities Changes to Property, Plant, and Equipment Contributions of Capital Assets from Other Funds $ Retirement of Assets Total Non-Cash Investing, Capital, and Financing Activities $ 130 (116) (204) 713 (12) 13 29 (4,885) 515 118 (202) (3,901) 11,305 (518) 1 (204) 1,921 (78) 576 (12) 46 (32) (4,885) 1,212 689 (1,287) 8,734 16,051 $ 2,673 $ 730 $ 19,454 2,379 (406) 1,973 $ - $ (37) (37) $ 2,379 (443) 1,936 $ City of Scottsdale, Arizona 176 913 913 $ $ 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 177 Table of Contents Schedule of Changes in Long-Term Debt* For the Fiscal Year Ended June 30, 2023 (in thousands) July 1, 2022 Issued Retired Accretions, Amortizations, Refunding Bonds Bonds and Contract Governmental Business-type Final Issued Defeased Adjustments June 30, 2023 Activities Activities Payment Date GENERAL OBLIGATION BONDS City of Scottsdale, Arizona 178 Governmental Activities 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 2020 GO Taxable Refunding Preservation 2021 GO Various Purpose 2021 GO Taxable Various Purpose 2023 GO Various Purpose 2023 GO Taxable Various Purpose 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 Premium 2021 GO Various Purpose Issuance Premium 2021 GO Taxable Various Purpose Issuance Premium 2023 GO Various Purpose Issuance Premium 2023 GO Taxable Various Purpose Issuance Premium Total General Obligation Bonds REVENUE BONDS Business-type Activities 2008 Utility Revenue Series Refunding 2008 Refunding Series Issuance Premium Total Revenue Bonds $ $ $ $ 8,485 $ 5,000 2,760 10,702 1,528 60,530 27,670 17,410 11,275 24,446 13,159 11,200 157,255 28,855 18,610 564 120 99 1,037 7,553 1,942 970 4,694 1,827 3,357 541 421,589 $ - $ 34,175 39,530 4,130 720 78,555 $ 3,115 $ 2,500 655 10,702 1,528 7,170 11,960 5,485 2,704 901 2,060 2,155 1,180 860 52,975 $ - $ - $ - $ - $ - $ (282) (60) (25) (1,037) (1,259) (162) (485) (391) (365) (186) (30) (89) (15) (4,386) $ 5,370 $ 2,500 2,105 53,360 15,710 17,410 5,790 21,742 12,258 9,140 155,100 27,675 17,750 34,175 39,530 282 60 74 6,294 1,780 485 4,303 1,462 3,171 511 4,041 705 442,783 $ 5,370 $ 2,500 2,105 53,360 15,710 17,410 5,790 21,742 12,258 9,140 155,100 27,675 17,750 34,175 39,530 282 60 74 6,294 1,780 485 4,303 1,462 3,171 511 4,041 705 442,783 $ - 07/01/24 07/01/24 07/01/26 07/01/23 07/01/23 07/01/28 07/01/28 07/01/34 07/01/24 07/01/29 07/01/34 07/01/27 07/01/34 07/01/40 07/01/40 07/01/42 07/01/42 4,375 $ 271 4,646 $ - $ - $ 4,375 $ 4,375 $ - $ - $ - $ - $ - $ (271) (271) $ - $ - $ - $ - $ - 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, 2023 (in thousands) 179 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 2019A MPC 2019B MPC Taxable 2021B MPC Taxable 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 2019A Series Issuance Premium 2019B Taxable Series Issuance Premium Subtotal Governmental Activities Business-type Activities 2006 MPC Refunding 2015A MPC Bonds Water/Sewer 2015 MPC Refunding 2017 MPC Refunding 2017A MPC Bonds Water 2017B MPC Bonds Aviation 2021A MPC Refunding 2021B MPC Taxable Refunding 2006 Refunding Series Issuance Premium 2015A Series Issuance Premium 2015 Refunding Series Issuance Premium 2017 Refunding Series Issuance Premium 2017A Series Issuance Premium 2017B Series Issuance Premium 2021A Refunding Issuance Premium Subtotal Business-type Activities Total Municipal Property Corporation Bonds COMMUNITY FACILITIES DISTRICT BONDS Governmental Activities DC Ranch Refunding Series 2012 Via Linda Road Refunding Series 2012 Waterfront Commercial Refunding Series 2019 DC Ranch 2012 Issuance Premium Total Community Facilities District Bonds Total Bonds July 1, 2022 $ $ $ $ $ 41,805 1,995 70 1,715 11,300 7,955 10,075 8,435 29,540 67,815 2,965 257 8 187 1,016 655 166 1,075 67 187,101 52,850 12,050 19,355 41,620 32,390 19,530 7,920 61,740 4,508 992 2,361 3,939 2,455 1,255 2,507 265,472 452,573 $ Retired - $ $ - 5,825 $ 210 2,024 197 8,256 $ - $ 78,556 887,064 *This exhibit includes both Governmental Activities and Business-type Activities debt (paid out of Enterprise Funds). (continued) Issued $ 3,295 1,995 70 1,715 2,025 565 680 340 1,435 1,135 13,255 Accretions, Amortizations, Bonds and Contract Defeased Adjustments $ $ - $ - - $ $ 1,085 $ 210 181 1,476 $ $ 92,996 - $ 9,715 855 4,490 2,015 1,580 940 1,320 20,915 34,170 Refunding Bonds Issued $ $ - $ $ June 30, 2023 - $ (247) (257) (8) (187) (203) (54) (14) (64) (4) (1,038) 38,510 9,275 7,390 9,395 8,095 28,105 66,680 2,718 813 601 152 1,011 63 172,808 (563) (82) (590) (328) (165) (84) (314) (2,126) (3,164) $ 43,135 11,195 14,865 39,605 30,810 18,590 7,920 60,420 3,945 910 1,771 3,611 2,290 1,171 2,193 242,431 415,239 $ $ - $ - $ (40) (40) $ $ - $ (7,862) $ Governmental Business-type Final Activities Activities Payment Date $ $ 4,740 $ 1,843 157 6,740 $ 864,762 $ 38,510 9,275 7,390 9,395 8,095 28,105 66,680 2,718 813 601 152 1,011 63 172,808 - 07/01/34 07/01/23 07/01/23 07/01/23 07/01/27 07/01/34 07/01/34 07/01/39 07/01/39 07/01/35 07/01/30 07/01/34 07/01/26 07/01/34 07/01/37 07/01/37 07/01/30 07/01/36 $ 43,135 11,195 14,865 39,605 30,810 18,590 7,920 60,420 3,945 910 1,771 3,611 2,290 1,171 2,193 242,431 242,431 4,740 $ 1,843 157 6,740 $ - 07/15/27 07/15/23 07/15/32 172,808 622,331 $ $ 242,431 Table of Contents Schedule of Changes in Long-Term Debt* For the Fiscal Year Ended June 30, 2023 (in thousands) July 1, 2022 CONTRACTS PAYABLE Governmental Activities PNC Bank Investigative Equipment - Public Safety Protective Equipment - Public Safety Field Maintenance Equipment - Community Services I.T. Hardware Equipment - Public Safety Total Contracts 180 City of Scottsdale, Arizona LEASES Governmental Activities Imaging Equipment - City Treasurer Baseball Facility - Community Services Distributed Antenna System - Administrative Services Data Center Space - Administrative Services Street Maintenance Equipment - Public Works Vehicles - Public Safety Imaging Equipment - Various Governmental Funds Imaging Equipment - Fleet Management Imaging Equipment - Risk Management Subtotal Governmental Activities Business-type Activities Imaging Equipment - Water and Sewer Utility Imaging Equipment - Airport Imaging Equipment - Solid Waste Water Quality Monitoring and Treatment Software - Water and Sewer Utility Subtotal Business-type Activities Total Leases $ $ $ 402 550 219 143 1,314 $ 33 1,066 50 1,018 96 305 2,568 $ $ 2,568 SUBSCRIPTIONS Governmental Activities Event Registration and Management System - Public Safety $ Platform for Payroll and HRIS Services - Administrative Services/City Treasurer Performance Measurement/Strategic Planning/Benchmarking - City Manager/City Treasurer Risk Management Information System - Self Insurance Imaging - Administrative Services Geospatial Technology System - Public Works/Administrative Services Enterprise Software - Administrative Services Server Software - Administrative Services Safety Data Sheets Software - Self Insurance Debt Management Software - City Treasurer Enterprise Software (FY 2023) - Administrative Services Imaging - Administrative Services Enterprise Software - Administrative Services Local business Community Information and Resource Service Software - Community and Econ Investigative Software and Storage - Public Safety Core Enterprise User Plan - Administrative Services Digital Signage and Program/Event Communications - Community Services Policy and Accreditation Software - Public Safety E-mail and Communication Management Service - Administrative Services Subtotal Governmental Activities 12 204 29 73 19 2,850 76 7 24 8 67 48 3,417 Business-type Activities Geospatial Technology System - Water and Sewer Utility Geospatial Technology System - Solid Waste Airport Agreement Tracking - Airport Water Quality Monitoring and Treatment Software - Water and Sewer Utility Core and Permit Management Modules - Water and Sewer Utility Subtotal Business-type Activities Total Subscriptions 20 4 24 3,441 $ *This exhibit includes both Governmental Activities and Business-type Activities debt (paid out of Enterprise Funds). (continued) Issued $ $ $ $ $ 382 534 8 8 932 $ 344 220 1,292 276 54 20 28 2,234 58 122 25 205 2,439 Bonds Defeased Accretions, Amortizations, and Contract Adjustments June 30, 2023 Governmental Business-type Final Activities Activities Payment Date 42 265 70 29 90 496 $ - $ - $ - $ $ 33 8 4 204 37 212 53 1 1 553 $ - $ - $ - $ Retired 265 265 50 17 9 41 117 1,049 Refunding Bonds Issued $ $ $ $ 7 2 1 11 21 574 4 204 29 119 73 19 677 18 7 12 93 8 18 48 441 95 19 1,884 20 4 29 32 85 1,969 $ $ $ $ - - $ $ $ $ - - $ $ $ $ - 596 596 596 $ $ $ $ 360 285 149 114 175 1,083 1,058 46 814 59 475 481 7 7 2,947 43 15 8 30 96 3,043 8 596 225 2,173 58 12 127 49 851 181 35 20 28 4,363 29 90 25 144 4,507 $ $ $ $ $ 360 285 149 114 175 1,083 1,058 46 814 59 475 481 7 7 2,947 2,947 8 596 225 2,173 58 12 127 49 851 181 35 20 28 4,363 4,363 $ $ $ $ $ $ - 01/01/33 04/25/24 01/12/25 03/30/27 07/15/24 - 12/31/22 12/01/52 12/01/29 09/01/26 11/24/24 05/01/26 03/01/28 09/01/27 11/01/27 43 15 8 30 96 96 9/1/2027 3/1/2028 8/1/2027 2/16/2026 - 01/14/25 04/01/26 07/01/22 07/01/24 12/02/22 07/01/22 08/01/25 08/01/25 08/12/22 12/01/23 08/01/25 12/03/22 08/01/25 12/01/22 07/15/24 10/18/24 08/29/24 08/16/23 08/01/23 29 90 25 144 144 07/01/22 07/01/22 07/01/23 02/16/26 07/01/23 Table of Contents Schedule of Changes in Long-Term Debt* For the Fiscal Year Ended June 30, 2023 (in thousands) July 1, 2022 PUBLIC-PUBLIC PARTNERSHIPS Governmental Activities Bureau of Reclamation\Westworld Bureau of Reclamation\TPC Total Public-Public Partnerships TOTAL BONDS, CONTRACTS, LEASES, SUBSCRIPTIONS, AND PUBLIC-PUBLIC PARTNERSHIPS $ Issued Retired Accretions, Amortizations, Refunding Bonds Bonds and Contract Governmental Business-type Final Issued Defeased Adjustments June 30, 2023 Activities Activities Payment Date City of Scottsdale, Arizona 181 $ 800 $ 960 1,760 $ 2,171 $ 2,864 5,035 $ 1,007 $ 1,168 2,175 $ - $ - $ - $ - $ - $ - $ 1,964 $ 2,656 4,620 $ 1,964 $ 2,656 4,620 $ - $ 896,147 $ 87,344 $ 98,210 $ - $ - $ (7,266) $ 878,015 $ 635,344 $ 242,671 Compensated Absences Total Other Postemployment Benefit Liability Net Pension Liabilities Risk Management Claims Pollution Remediation Obligation $ 33,145 $ 699 327,796 21,145 - 4,563 34,729 45,599 Total Long-Term Debt $ 1,018,129 $ 327,562 *This exhibit includes both Governmental Activities and Business-type Activities debt (paid out of Enterprise Funds). 2032 2035 Table of Contents City of Scottsdale, Arizona 182 Table of Contents Statistical Section Contents Page Financial Trends 184 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 193 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 200 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 206 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 208 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 183 Table of Contents Table of Contents-Statistical Section City of Scottsdale, Arizona Net Position by Component Last Ten Fiscal Years (accrual basis of accounting) (in thousands) 2014 2015 2016 2017 Table I 2018 2019 2020 2021 City of Scottsdale, Arizona 184 Governmental Activities Net Investment in Capital Assets Restricted Unrestricted Total Governmental Activities Net Position $ 2,685,105 $ 2,663,269 $ 3,406,976 $ 3,530,134 109,615 117,485 122,932 125,366 180,942 (19,464) (3,679) (43,632) $ 2,975,662 (1) $ 2,761,290 (2) $ 3,526,229 (4) $ 3,611,868 $ 3,604,063 $ 3,675,567 123,057 119,657 (27,779) (5,012) $ 3,699,341 (6) $ 3,790,212 $ 3,748,249 $ 146,017 23,905 $ 3,918,171 (7) $ 4,065,844 189,263 63,519 4,318,626 Business-type Activities Net Investment in Capital Assets Restricted Unrestricted Total Business-type Activities Net Position $ 1,046,345 $ 1,036,650 $ 1,059,001 $ 1,069,475 47,101 46,901 47,521 48,911 273,321 253,109 255,503 256,129 $ 1,366,767 (1) $ 1,336,660 (3) $ 1,362,025 (5) $ 1,374,515 $ 1,099,864 48,926 250,500 $ 1,399,290 $ 1,093,556 52,204 282,796 $ 1,428,556 $ 1,102,183 52,728 301,788 $ 1,456,699 1,157,026 51,596 291,368 1,499,990 Primary Government Net Investment in Capital Assets Restricted Unrestricted Total Primary Government Net Position $ 3,731,450 156,716 454,263 $ 4,342,429 $ 4,703,927 171,983 222,721 $ 5,098,631 $ 4,769,123 171,861 277,784 $ 5,218,768 $ 4,850,432 198,745 325,693 $ 5,374,870 $ 3,699,919 164,386 233,645 $ 4,097,950 $ 4,465,977 170,453 251,824 $ 4,888,254 $ 4,599,609 174,277 212,497 $ 4,986,383 (1) In fiscal year 2014, beginning net position was restated due to the implementation of GASB Statement No. 65. (2) In fiscal year 2015, beginning net position was restated due to the implementation of GASB Statement No. 68 and an adjustment to capital assets. (3) 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. (4) 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. (5) In fiscal year 2016, beginning net position was restated due to the recognition of the City's involvement in a joint venture. (6) 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. (7) In fiscal year 2020, beginning net position was restated due to the implementation of GASB Statement No. 87. (8) In fiscal year 2023, beginning net position was restated due to the implementation of GASB Statement No. 94. $ $ $ $ 5,222,870 240,859 354,887 5,818,616 2022 $ $ $ $ $ $ 2023 4,162,863 266,758 132,712 4,562,333 $ 4,247,801 330,043 234,291 $ 4,812,135 (8) 1,195,005 54,717 284,046 1,533,768 $ 1,221,022 54,119 284,450 $ 1,559,591 5,357,868 321,475 416,758 6,096,101 $ 5,468,823 384,162 518,741 $ 6,371,726 Table of Contents Table of Contents-Statistical Section City of Scottsdale, Arizona Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) (in thousands) City of Scottsdale, Arizona 185 Expenses 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 Scottsdale AZ CARES Streetlight and Service Districts (Gain) Loss on In-Substance Defeasance of Debt Interest on Long-Term Debt Bond Issuance Costs Total Governmental Activities Expenses 2014(1) $ 840 1,042 5,810 754 5,705 864 6,069 43,597 134,626 127,026 55,190 17,552 576 35,486 998 436,135 2015 $ 790 927 6,103 792 5,682 1,828 5,088 40,631 138,899 135,647 55,134 17,849 583 34,134 1,643 445,730 2017(2) 2016 $ 813 1,129 6,893 821 4,964 1,974 5,658 38,291 102,892 136,261 53,322 20,264 589 31,665 405,536 Table IIa $ 869 845 6,460 802 5,421 2,288 5,792 40,035 102,813 172,452 54,155 19,326 589 (32) 28,462 672 440,949 2018(3) $ 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 2019 $ 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 2020 $ 770 1,171 6,731 1,045 6,047 4,647 9,825 99,218 41,946 173,352 64,247 19,375 555 34 23,928 452,891 2021 $ 725 1,209 6,860 1,069 6,298 3,766 9,688 100,705 35,999 172,141 64,769 19,189 11,742 545 17,043 451,748 2022 $ 894 1,211 7,389 1,103 6,558 5,083 9,593 109,623 46,396 175,466 72,628 24,705 2,555 535 16,857 480,596 2023 $ 898 1,090 7,679 1,117 6,475 5,639 10,327 110,284 49,554 182,910 80,219 21,486 321 529 15,619 494,147 Business-type Activities Water Utility Sewer Utility Airport Solid Waste Total Business-type Activities Expenses 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 21,790 173,632 105,222 57,847 6,764 23,195 193,028 106,778 54,152 7,024 25,290 193,244 109,606 55,167 9,150 26,850 200,773 117,079 66,634 9,257 28,755 221,725 Total Primary Government Expenses $ 596,674 $ 610,654 $ 573,128 $ 611,561 $ 602,102 $ 606,054 $ 645,919 $ 644,992 $ 681,369 $ 715,872 (1) 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. (2) 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. (3) In fiscal year 2018, the City instituted the practice of allocating bond issuance costs amongst the relevant functions. Table of Contents Table of Contents-Statistical Section City of Scottsdale, Arizona Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) (in thousands) City of Scottsdale, Arizona 186 Program Revenue Governmental Activities Charges for Services: 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 Scottsdale AZ CARES Streetlight and Services Districts Operating Grants and Contributions Capital Grants and Contributions Total Governmental Activities Revenues 2014 $ 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 225 279 756 197 219 2,606 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 22,019 190,455 176 227 737 188 232 2,719 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 11,726 174,014 155 148 656 176 225 2,610 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 22,545 197,370 157 178 688 167 226 2,583 2,041 18,455 11,739 6,268 3,096 602 29,724 107,334 183,258 Table IIb 2018 $ 107,031 40,434 4,390 20,269 17,539 189,663 149 165 1,082 181 411 2,688 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 23,865 206,090 142 171 792 203 349 3,036 1,567 20,562 11,107 7,078 2,617 591 34,233 35,620 118,068 2020 $ 109,947 45,419 5,493 21,344 17,833 200,036 146 227 795 210 373 3,045 1,763 22,102 11,088 9,908 2,815 617 55,604 50,088 158,781 2021 $ 119,345 44,047 5,851 22,650 26,631 218,524 160 175 741 221 562 3,521 113 17,457 10,251 11,338 1,987 529 52,751 305,241 405,047 2022 $ 130,843 45,391 7,695 25,532 34,573 244,034 162 173 597 218 529 3,542 167 41,773 11,891 14,375 2,954 524 53,960 87,927 218,792 2023 $ 124,640 49,823 9,209 27,177 38,822 249,671 175 154 702 222 539 4,612 223 17,655 11,104 35,335 2,971 525 55,318 52,556 182,091 129,022 51,066 10,489 31,080 31,597 253,254 $ 300,297 $ 262,898 $ 358,054 $ 372,921 $ 345,118 $ 318,104 $ 377,305 $ 649,081 $ 468,463 $ 435,345 $ (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) $ (294,110) 25,496 (268,614) $ (46,701) 50,790 4,089 $ (261,804) 48,898 (212,906) $ (312,056) 31,529 (280,527) $ $ $ $ $ $ $ $ $ $ Table of Contents Table of Contents-Statistical Section City of Scottsdale, Arizona Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) (in thousands) Table IIc 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 $ 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 $ 316,478 75,300 14,605 7,248 8,432 422,063 $ 340,559 85,177 2,487 10,387 8,546 447,156 $ 408,581 86,281 (13,201) 16,088 7,762 505,511 $ 424,622 103,128 10,879 14,493 8,660 561,782 Business-type Activities Taxes Interest and Investment Income Transfers Total Business-type Activities 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) 2,862 128 10,951 (8,432) 2,647 177 870 (8,546) (7,499) 232 (7,590) (7,762) (15,120) 261 3,319 (8,660) (5,080) Total Primary Government $ 312,171 $ 330,892 $ 338,664 $ 336,769 $ 368,956 $ 408,087 $ 424,710 $ 439,657 $ 490,391 $ 556,702 $ $ $ $ $ $ $ 127,953 28,143 $ 156,096 $ 400,455 43,291 $ 443,746 $ 243,707 33,778 $ 277,485 $ 249,726 26,449 $ 276,175 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 187 Change in Net Position Governmental Activities Business-type Activities Total Primary Government $ (9,038) 24,832 15,794 $ (20,890) 4,026 (16,864) 98,310 25,280 $ 123,590 $ 85,639 12,490 98,129 87,197 24,775 $ 111,972 90,871 29,266 $ 120,137 Table of Contents Table of Contents-Statistical Section 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 Total General Fund City of Scottsdale, Arizona 188 All Other Governmental Funds Nonspendable Restricted Committed Assigned Unassigned, Reported in: Special Revenue Funds Debt Service Funds Capital Project Funds Total All Other Governmental Funds (1) 2014 $ $ $ 266 52,354 52,620 105,837 20,848 7,362 2015 $ $ $ (1,194) $ 132,853 227 56,017 56,244 113,237 49,554 - 2016 $ $ $ (1,083) (4,770) $ 156,938 249 65,347 65,596 116,847 52,508 - 269 58,518 58,787 $ $ 105,777 58,644 - (1,010) (4,720) $ 163,625 2018(1) 2017 $ $ $ $ (2,175) (11,205) $ 151,041 In fiscal year 2018, beginning fund balance was restated due to the recognition of the City's endowment funds. Table III 264 72,809 73,073 619 115,391 62,867 - 2019 $ $ $ (681) (6,957) $ 171,239 271 97,097 97,368 604 112,267 65,100 - 2020 $ $ $ (708) (589) (13,154) $ 163,520 278 136,390 136,668 555 133,424 67,703 - 2021 $ $ $ (2,807) (7,594) $ 191,281 304 170,994 171,298 681 200,495 81,703 - 2022 $ $ $ (2,111) (4,689) $ 276,079 404 191,490 191,894 599 250,160 98,518 - 2023 $ $ $ (4,153) (24,834) $ 320,290 486 226,509 226,995 609 342,895 155,759 (3,959) (23,171) $ 472,133 Table of Contents Table of Contents-Statistical Section 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 189 Revenues Taxes - Local Taxes - Intergovernmental Business and Liquor Licenses Charges for Current Services Fines, Fees, and Forfeitures 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 2014 2015 2016(1) 2017 2018 2019 2020 2021 2022 2023 $ 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 $ 317,143 87,760 1,869 30,009 8,831 4,031 8,595 6,010 47,850 1,128 617 9,069 2,193 7,614 737 $ 340,782 98,603 1,708 34,702 7,816 7,221 6,790 (4,303) 36,004 2,723 529 4,398 2,121 7,370 488 $ 409,773 99,642 1,915 36,960 8,679 11,366 6,379 (19,580) 40,157 4,012 524 3,841 4,058 7,217 1,037 $ 438,942 114,500 2,862 35,960 8,074 10,045 14,029 (3,150) 59,267 7,679 525 3,640 1,989 7,191 2,264 $ 406,810 $ 412,042 $ 408,363 $ 419,664 $ 458,078 $ 492,118 $ 533,456 $ 546,952 $ 615,980 $ 703,817 In fiscal year 2016, moved "Sale of General Capital Assets" from "Other" within the "Revenues" section to "Sale of General Capital Assets" within the "Other Financing Sources (Uses)" section. Table of Contents Table of Contents-Statistical Section 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 190 Expenditures 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 Scottsdale AZ CARES Streetlight and Services Districts Debt Service Principal Interest and Fiscal Charges Payment to Refunded Bonds Escrow Agent Bond Issuance Costs Capital Outlay 2014 $ 835 1,035 5,702 740 5,515 842 5,061 33,381 41,063 119,159 45,035 14,950 576 2015 $ 784 917 6,012 782 5,584 1,832 4,904 34,518 44,550 123,761 44,998 15,050 583 2016 $ 818 1,138 7,118 824 4,975 1,965 5,785 32,850 42,735 128,527 45,508 15,648 589 2017 $ 887 873 6,576 823 5,381 2,200 5,657 33,636 46,320 137,304 46,224 15,919 589 Table IVb 2018 $ 653 735 6,747 816 5,692 3,094 5,979 35,013 47,696 136,075 47,056 16,309 605 2019 $ 747 1,004 7,471 948 5,797 3,746 8,593 35,154 48,860 146,250 48,786 15,279 584 59,387 37,323 998 99,722 105,930 36,706 1,643 52,164 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 Total Expenditures $ 471,324 $ 480,718 $ 403,131 $ 467,401 $ 461,091 $ 483,419 Excess (Deficiency) of Revenues over (under) Expenditures $ $ $ $ $ $ (64,514) (68,676) 5,232 (47,737) (3,013) 8,699 2020 $ 782 1,163 6,826 1,049 5,970 4,531 9,714 44,382 34,431 157,557 52,924 14,727 555 2021 $ 723 1,246 6,597 1,045 6,194 3,621 9,418 41,410 31,259 153,754 48,034 19,307 12,974 545 2022 $ 878 1,256 7,276 1,099 6,528 4,987 9,544 45,228 41,973 210,701 56,679 17,167 2,259 535 2023 $ 930 1,082 7,565 1,197 6,696 5,877 10,632 48,271 45,541 198,067 67,439 18,392 529 70,076 27,854 6,983 508 80,009 68,955 20,634 1,745 70,417 70,557 19,111 87,417 70,918 17,918 845 148,652 $ 520,041 $ 497,878 $ 583,195 $ 650,551 $ 13,415 $ $ $ 49,074 32,785 53,266 Table of Contents Table of Contents-Statistical Section City of Scottsdale, Arizona Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) (dollars in thousands) 191 City of Scottsdale, Arizona Other Financing Sources (Uses) Transfers In Transfers Out Financing of Leases Financing of Subscription-Based Information Technology Arrangements Financing of Contracts Payable Issuance of Refunding Bonds Issuance of Long-Term Capital-Related Debt Premium on Long-Term Debt Issued Payment to Refunded Bonds Escrow Agent Sale of General Capital Assets 2014 $ Total Other Financing Sources (Uses) Net Change in Fund Balances Debt Service as a Percentage of Non-capital Expenditures (1) $ 89,669 (82,696) 296 2016(1) 2015 $ 89,806 (83,211) - $ Table IVc 2017 2018 2019 2020 2021 2022 2023 85,080 (79,079) - $ 101,427 (94,074) - $ 103,926 (96,272) - $ 108,177 (100,735) 244 $ 119,124 (110,525) 1,025 $ 135,337 (126,874) 122 $ 136,575 (129,030) 1,517 $ 178,154 (169,542) 916 105,885 14,000 12,742 (108,099) - 207,173 26,815 23,871 (168,069) - 4,806 58,480 17,410 12,955 (68,105) 251 25,500 3,496 214 191 2,563 42,550 1,323 (2,563) 149 4,746 239,545 51,160 4,200 (238,102) 220 302 1,009 21,649 2,486 265 73,705 4,850 42,844 31,797 96,385 10,807 28,344 36,864 7,877 53,646 70,354 32,022 133,678 67,061 $ 119,428 64,807 $ 186,944 22.2% 21.0% 18.1% 17.7% (32,717) 26.0% $ 27,709 33.3% $ 16,039 23.4% $ (19,393) 22.7% $ 33,851 24.3% $ 16,576 22.5% $ $ In fiscal year 2016, moved "Sale of General Capital Assets" from "Other" within the "Revenues" section to "Sale of General Capital Assets" within the "Other Financing Sources (Uses)" section. Table of Contents Table of Contents-Statistical Section City of Scottsdale, Arizona Tax Revenues By Source Last Ten Fiscal Years (modified accrual basis of accounting) (in thousands) City of Scottsdale, Arizona 192 Fiscal Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Fiscal Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 (1) $ $ Property 64,914 64,272 61,956 63,320 63,577 68,738 67,911 69,826 72,602 67,634 Privilege and Use General $ 95,604 100,560 104,995 103,081 116,679 122,152 122,923 136,511 165,535 181,553 Franchise Taxes Cable TV Light and Power Franchise Franchise 3,722 $ 8,477 3,748 8,691 3,816 8,826 3,896 8,655 4,391 9,106 3,293 8,832 5,445 8,231 4,204 8,456 3,825 9,490 3,625 10,155 Privilege and Use McDowell Mtn Preserve $ 32,655 34,429 36,029 35,489 40,089 41,909 42,331 46,921 57,013 62,550 Sales and Use Taxes Privilege and Use Privilege and Use Transportation Public Safety $ 18,116 $ 9,330 19,097 9,837 19,938 10,294 19,615 10,140 22,044 11,454 (1) 11,974 27,788 35,022 12,094 39,023 13,406 47,586 16,289 52,373 17,872 Intergovernmental State Revenue State Shared Sales Sharing $ 18,922 $ 24,230 19,867 26,316 20,647 26,173 21,755 28,976 23,719 30,549 25,187 30,269 26,395 33,015 30,615 37,207 34,247 33,718 35,884 47,853 The Privilege and Use-Transportation tax rate increased from 0.2 percent to 0.3 percent, effective February 1, 2019. Table V $ Other 900 906 913 921 931 3,102 4,177 4,209 5,342 6,488 $ Transient Occupancy 15,303 17,047 17,397 18,951 19,837 22,407 18,793 18,013 31,863 36,492 Table of Contents Table of Contents-Statistical Section City of Scottsdale, Arizona Taxable Sales Subject to Privilege (Sales) Tax by Category Last Ten Fiscal Years (dollars in thousands) 193 City of Scottsdale, Arizona Automotive Construction Food Stores Hotel/Motel Major Department Stores Miscellaneous Retail Stores Other Taxable Activity Rentals(3) Restaurants Utilities 2014 $ 1,209,388 1,073,279 655,787 488,117 917,406 1,450,611 666,504 1,210,218 844,186 435,579 2015 $ 1,335,511 1,057,986 690,837 525,421 937,370 1,612,954 695,566 1,315,545 925,948 435,879 2016 $ 1,403,834 969,281 713,187 543,121 927,469 1,708,411 728,596 1,417,607 961,340 497,773 2017 $ 1,489,632 901,684 677,978 641,146 888,674 1,785,097 756,718 1,380,366 957,757 451,318 2018 $ 1,558,428 962,050 763,117 682,078 966,996 2,010,364 926,445 1,644,191 1,065,825 467,609 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 2020 $ 1,725,497 1,044,980 860,447 595,455 944,390 2,438,658 1,119,896 1,747,873 1,008,526 466,345 2021 $ 1,940,656 1,223,155 883,237 551,361 1,037,297 3,054,740 1,368,741 1,746,613 1,170,867 476,372 2022 $ 1,984,944 1,193,366 878,442 965,649 1,147,151 3,683,694 1,697,911 2,132,353 1,518,421 478,033 2023 $ 2,037,030 1,596,705 945,114 1,053,661 1,205,502 3,828,950 1,881,617 2,227,753 1,684,960 524,314 Total $ 8,951,075 $ 9,533,017 $ 9,870,619 $ 9,930,370 $ 11,047,103 $ 11,865,181 $ 11,952,067 $ 13,453,039 $ 15,679,964 $ 16,985,606 1.65% 1.65% 1.65% 1.65% 1.65% 1.75% 1.75% 1.75% 1.75% 1.75% City Sales Tax (1) Table VI (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 privilege tax rate increased to 1.75%. Table of Contents Table of Contents-Statistical Section City of Scottsdale, Arizona Direct and Overlapping Sales Tax Rates Last Ten Fiscal Years Table VII City of Scottsdale, Arizona 194 Fiscal Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 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% 0.70% 1.75% (2) 1.75% 0.70% 1.75% 0.70% 1.75% 0.70% 1.75% 0.70% 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% 1.55% (2) 0.00% 1.55% 0.00% 1.55% 0.00% 1.55% 0.00% 1.55% 0.00% State Rate 5.60% 5.60% 5.60% 5.60% 5.60% 5.60% 5.60% 5.60% 5.60% 5.60% Fiscal Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Fiscal Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Transient Occupancy Tax Rates City Direct County Rate Rate 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% 5.00% 1.77% State Rate 5.50% 5.50% 5.50% 5.50% 5.50% 5.50% 5.50% 5.50% 5.50% 5.50% Jet Fuel Tax Rates (cents per gallon) Fiscal City Direct County State Year Rate Rate Rate 2014 0.0180 0.0031 0.0305 2015 0.0180 0.0031 0.0305 2016 0.0180 0.0031 0.0305 2017 0.0180 0.0031 0.0305 0.0180 0.0031 0.0305 2018 (1) 2019 0.0180 0.0031 0.0305 2020 0.0180 0.0031 0.0305 2021 0.0180 0.0031 0.0305 2022 0.0180 0.0031 0.0305 2023 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) Effective August 9, 2017, the City can only tax the first 10 million gallons by each purchaser in a calendar year. (2) Effective February 1, 2019, the City transaction privilege tax rate increased to 1.75% and the use tax rate increased to 1.55%. State Rate 5.60% 5.60% 5.60% 5.60% 5.60% 5.60% 5.60% 5.60% 5.60% 5.60% Table of Contents Table of Contents-Statistical Section 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 195 Automotive Construction Food Stores Hotel/Motel Major Department Stores Miscellaneous Retail Stores Other Taxable Activity Rentals Restaurants Utilities Total Number of Filers 696 3,080 194 608 32 9,504 12,704 7,763 938 423 35,942 Fiscal Year 2023 Percentage Tax of Total Revenue 1.94% $ 36,569 8.57% 29,379 0.54% 17,381 1.68% 20,074 0.09% 22,188 26.44% 70,236 35.35% 37,563 21.60% 40,721 2.61% 30,925 1.18% 9,573 100.00% $ 314,609 Percentage of Total 11.62% 9.34% 5.52% 6.38% 7.05% 22.32% 11.93% 12.94% 9.83% 3.04% Number of Filers 535 7,465 179 82 27 4,837 3,875 4,139 970 291 100.00% 22,400 Fiscal Year 2014 Percentage Tax of Total Revenue 2.39% $ 20,399 33.32% 18,272 0.80% 10,847 0.37% 8,247 0.12% 15,213 21.59% 26,296 17.30% 14,605 18.48% 20,557 4.33% 14,049 1.30% 7,294 100.00% $ 155,779 Percentage of Total 13.09% 11.73% 6.96% 5.29% 9.77% 16.88% 9.38% 13.20% 9.02% 4.68% 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 Table of Contents-Statistical Section City of Scottsdale, Arizona Property Tax Rates Direct and Overlapping Governments Last Ten Fiscal Years Table IX Overlapping Rates City Direct Rate City of Scottsdale, Arizona 196 Fiscal Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Operating $ 0.5342 0.5580 0.5293 0.5071 0.4956 0.5316 0.5198 0.5273 0.5039 0.4970 Debt Service $ 0.7604 0.6869 0.6244 0.6219 0.5889 0.5705 0.5214 0.5043 0.5042 0.4101 Scottsdale Unified School District Total City $ 1.2946 1.2449 1.1537 1.1290 1.0845 1.1021 1.0412 1.0316 1.0081 0.9071 Operating $ 3.3548 3.1091 2.8332 2.8566 2.7463 2.5675 2.5928 2.6334 2.5261 2.4282 Debt Service and Budget Override $ 1.2239 1.0045 1.0263 1.0033 0.9864 1.1364 1.0538 0.9939 0.9318 0.9165 County Free Library $ 0.0438 0.0556 0.0556 0.0556 0.0556 0.0556 0.0556 0.0556 0.0556 0.0505 County Special Health Care $ 0.1939 0.1856 0.3021 0.3053 0.2851 0.2941 0.3333 0.3046 0.2970 0.2488 EVIT 0.0500 0.0500 0.0500 0.0500 0.0500 0.0500 0.0500 0.0500 0.0500 0.0500 Total School $ 4.6287 4.1636 3.9095 3.9099 3.7827 3.7539 3.6966 3.6773 3.5079 3.3947 Total County $ 3.8560 3.8802 4.0288 4.0583 3.9681 3.9300 3.9036 3.8200 3.6783 3.0434 Total Direct and Overlapping $ 9.7793 9.2887 9.0920 9.0972 8.8353 8.7860 8.6414 8.5289 8.1943 7.3452 $ Overlapping Rates County-Wide Jurisdictions Fiscal Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 County Operating $ 1.2807 1.3209 1.3609 1.4009 1.4009 1.4009 1.4009 1.4009 1.3459 1.2473 Community College $ 1.5340 1.5187 1.4940 1.4651 1.4096 1.3754 1.3285 1.2881 1.2257 1.1894 County Flood $ 0.1392 0.1392 0.1592 0.1792 0.1792 0.1792 0.1792 0.1792 0.1792 0.1592 County Education Equalization $ 0.5123 0.5089 0.5054 0.5010 0.4875 0.4741 0.4566 0.4426 0.4263 0.0000 Fire District Assistance $ 0.0121 0.0113 0.0116 0.0112 0.0102 0.0107 0.0095 0.0090 0.0086 0.0082 Central AZ Project $ 0.1400 0.1400 0.1400 0.1400 0.1400 0.1400 0.1400 0.1400 0.1400 0.1400 Source: Maricopa County Department of Finance Publications On-Line "Tax Rate 2022". 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 2023 the rates were as follows: DC Ranch CFD - $0.3349, Via Linda Road CFD $1.1960, and the Waterfront Commercial CFD - $4.0026. Table of Contents Table of Contents-Statistical Section City of Scottsdale, Arizona Principal Property Taxpayers Current Year and Nine Years Ago (dollars in thousands) Table X 2023 City of Scottsdale, Arizona 197 Taxpayer Arizona Public Service Company Scottsdale Fashion Square LLC ASUF Scottsdale LLC (Lease) SDQ FEE LLC 18700 Hayden Road LLC (Cavasson) (1) Portales Corporate Center LLC Excel Promenade LLC Weingarten Nostat Inc. Southwest Gas Corporation XHR Scottsdale Rnch LLC Gainey Drive Associates Qwest Corporation WJ Small Grandchildrens Trust Scottsdale Fiesta Retail Center Total $ $ Taxable Assessed Value 65,146 46,594 24,523 23,105 21,894 16,927 16,912 16,405 15,157 13,512 260,175 Rank 1 2 3 4 5 6 7 8 9 10 - 2014 Percentage of Total Taxable Assessed Value 0.889% 0.636% 0.335% 0.315% 0.299% 0.231% 0.231% 0.224% 0.207% 3.366% $ $ Taxable Assessed Value 60,718 41,655 12,904 13,137 14,876 10,120 14,098 13,934 11,883 10,180 203,505 Rank 1 2 7 6 3 10 4 5 8 9 Percentage of Total Taxable Assessed Value 1.258% 0.863% 0.267% 0.272% 0.308% 0.210% 0.292% 0.289% 0.246% 0.211% 4.216% 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 2022 assessed valuation of the SRP within the City is $22,018,967 as provided by SRP. (1) Portales Corporate Center LLC/Etal was renamed Portales Corporate Center LLC in 2016. Table of Contents Table of Contents-Statistical Section 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 2014 P 2014 S Real Property Commercial Vacant Land Property Residential Property $ 3,179,924 3,190,808 $ 1,234,395 1,238,888 $ 763,038 793,269 Personal Property Historic and Special Use Assessed Value $ $ 2,810 2,852 Table XI 213,781 214,245 Less Tax Exempt Property $ (591,625) (612,212) Total Taxable Assessed Value $ 4,802,323 4,827,850 Total Direct Tax Rate $ 0.53 0.76 City of Scottsdale, Arizona 198 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 3,842,636 4,510,655 1,209,059 1,451,267 723,452 996,458 1,075 1,488 217,238 217,243 (594,547) (757,790) 5,398,913 6,419,321 0.51 0.62 2018 P 2018 S 4,071,866 4,794,346 1,268,544 1,650,245 747,981 1,135,084 1,155 1,716 223,277 223,276 (614,085) (876,231) 5,698,738 6,928,436 0.50 0.59 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 2020 P 2020 S 2021 P 2021 S 4,555,026 5,356,377 4,813,338 5,719,222 1,397,576 1,848,894 1,465,046 1,988,445 756,975 1,217,117 770,044 1,215,429 1,266 2,032 1,207 1,873 227,231 236,828 241,822 252,043 (614,956) (959,355) (674,280) (1,022,311) 6,323,118 7,701,893 6,617,177 8,154,701 0.52 0.52 0.53 0.50 2022 P 2022 S 5,069,144 6,125,758 1,547,914 2,131,654 799,978 1,263,825 1,280 1,917 232,722 233,873 (694,052) (1,046,330) 6,956,986 8,710,697 0.50 0.50 2023 P 2023 S 5,373,234 6,631,122 1,625,295 2,134,568 785,066 1,217,942 1,364 2,174 241,948 243,283 (698,108) (1,030,404) 7,328,799 9,198,685 0.50 0.41 Source: Arizona Department of Revenue Abstract of the Assessment Roll. Table of Contents Table of Contents-Statistical Section City of Scottsdale, Arizona Property Tax Levies and Collections Last Ten Fiscal Years (dollars in thousands) City of Scottsdale, Arizona 199 Fiscal Year Ended June 30 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Total Tax Levy for Fiscal Year $ 62,265 63,223 59,533 60,982 61,861 65,816 65,521 68,465 70,334 66,494 Collected within the Fiscal Year of the Levy $ Amount 61,227 62,233 58,714 60,056 60,721 64,982 64,273 67,423 69,082 65,395 Percentage of Levy 98.2% 98.2% 98.6% 98.5% 98.2% 98.3% 97.6% 98.8% 98.2% 98.3% Collections in Subsequent Years $ 598 574 540 597 781 665 1,093 714 - Table XII Total Collections to Date $ Amount 61,825 62,807 59,254 60,653 61,502 65,648 65,364 68,130 70,066 65,395 Percentage of Levy 99.1% 99.1% 99.5% 99.5% 99.5% 99.4% 99.3% 98.8% 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 Table of Contents-Statistical Section 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 200 Fiscal Year Ended June 30 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Fiscal Year Ended June 30 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 General Obligation Bonds $ 647,859 624,616 585,931 590,910 568,259 521,632 467,788 475,212 421,589 442,783 Municipal Property Corporation Bonds $ 218,942 243,044 232,970 221,535 208,828 193,165 218,786 202,825 187,101 172,808 Scottsdale Preserve Authority Bonds $ 53,100 48,276 43,489 17,823 13,215 8,432 2,825 1,448 - Revenue Bonds $ 34,747 31,518 28,176 24,710 21,069 17,258 13,262 9,062 4,646 - Business-type Activities Municipal Property Corporation Bonds Leases $ 296,418 $ 309,150 295,807 353,773 336,407 318,235 299,138 285,707 265,472 242,431 96 Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. See Table XVIII - Schedule of Demographic and Economic Statistics for personal income and population data. Table XIII Governmental Activities Community Facilities District Certificates of Contracts Participation Bonds Payable $ 13,914 $ 30,090 $ 11,762 27,437 9,546 24,694 7,264 21,860 4,914 19,244 2,493 16,707 13,808 11,084 451 8,256 1,314 6,740 1,083 Leases $ 329 229 156 95 32 219 2,373 1,799 2,568 2,947 Percentage of Personal Income 11.43% 11.26% 10.26% 9.98% 8.96% 7.45% 6.59% 6.57% 5.68% 5.16% Per Capita $ 5,776 5,689 5,292 5,212 4,843 4,232 3,952 4,118 3,691 3,612 Subscriptions $ 70 24 144 Total Primary Government $ 1,298,389 1,298,869 1,223,452 1,240,499 1,174,343 1,080,362 1,020,048 993,959 896,147 878,015 Public-Public Partnerships $ 2,990 2,837 2,683 2,529 2,375 2,221 2,068 1,914 1,760 4,620 Subscriptions $ 4,387 3,417 4,363 Table of Contents Table of Contents-Statistical Section 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 201 Fiscal Year Ended June 30 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Governmental Activities General Obligation Bonds $ 647,859 624,616 585,931 590,910 568,259 521,632 467,788 475,212 421,589 442,783 Less: Amounts Available in Debt Service Fund $ 9,369 12,172 11,529 11,516 2,471 1,394 1,042 3,469 8,714 7,291 Net General Bonded Debt $ 638,490 612,444 574,402 579,394 565,788 520,238 466,746 471,743 412,875 435,492 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. Percentage of Total Taxable Assessed Value of Property 13.2% 11.8% 9.6% 9.0% 8.2% 7.2% 6.1% 5.8% 4.7% 4.7% Table XIV Per Capita $ 2,840 2,683 2,484 2,434 2,333 2,038 1,808 1,955 1,700 1,791 Table of Contents Table of Contents-Statistical Section City of Scottsdale, Arizona Direct and Overlapping Governmental Activities Debt As of June 30, 2023 (dollars in thousands) City of Scottsdale, Arizona 202 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 $ 135,585 600,335 158,935 34,925 284,683 409,124 24,595 5,655 335,365 71,410 130,195 Table XV Estimated Percentage Applicable 14.2100% 14.1121% 0.0001% 6.0154% 69.8349% 30.6539% 61.7963% 3.4236% 0.3697% 0.0001% 6.7521% Estimated Share of Overlapping Debt $ Subtotal, overlapping debt City direct debt Total direct and overlapping debt 19,267 84,720 2,101 198,808 125,413 15,199 194 1,240 8,791 455,733 635,344 100.0000% 635,344 $ 1,091,077 Sources: The various entities, State and County 2022 Abstract of the Assessment Roll , Arizona Department of Revenue, Property Tax Rates and Assessed Values , Arizona Tax Research Association and Maricopa County 2022 Tax Levy , and the Maricopa County Office of Budget and Finance. 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 proportion of overlapping debt applicable to the City is computed on the ratio of 2022-23 net assessed limited property value for the overlapping jurisdiction within the City to the total net assessed limited property valuation of the overlapping jurisdiction. Table of Contents Table of Contents-Statistical Section 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 2014 $ Total Net Debt Applicable to 20% Limit 965,570 2016 (1) 2017 (2) 2018 2019 2020 1,035,356 $ 1,191,278 $ 1,283,864 $ 1,385,687 $ 1,444,654 $ 1,540,379 532,888 513,768 521,179 511,046 479,265 8,180 10,637 2015 $ 553,121 Excess Premium Legal 20% Debt Margin (Available Borrowing Capacity) $ 203 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 412,449 $ 57.28% $ Total Net Debt Applicable to 6% Limit 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) $ 223,727 22.77% $ 256,584 $ 37,747 17.39% $ 319,637 10.56% $ 41.23% Excess Premium Legal 6% Debt Margin (Available Borrowing Capacity) 754,505 $ 385,159 864,004 $ 37.65% $ 415,706 $ 2022 2023 1,630,940 $ 1,742,139 $ 1,839,737 433,865 444,366 395,172 411,487 10,415 10,181 12,713 11,549 13,996 954,974 $ 1,096,333 1,173,861 $ 1,335,418 $ 1,414,254 33.90% 28.83% 28.03% 23.35% 23.13% 433,396 462,114 $ $ $ 489,282 $ 522,642 $ 551,921 26,116 14,419 3,950 - 3,859 3,713 8,128 - - - - 426 410 929 359,043 6.78% $ 401,287 $ 429,446 3.47% 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) $ 2021 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. 0.91% $ 462,114 0.00% $ 484,997 0.88% $ 518,519 0.79% $ 542,864 1.64% Table of Contents Table of Contents-Statistical Section City of Scottsdale, Arizona Legal Debt Margin Information As of June 30, 2023 (in thousands) Table XVIb Legal Debt Margin Calculation for Fiscal Year 2023 Assessed Valuation as of June 30, 2023 $ 9,198,685 20% Limitation Debt Limit Equal to 20% of Assessed Valuation $ 1,839,737 204 City of Scottsdale, Arizona Debt applicable to limit: General Obligation Bonds 411,487 Excess Premium 13,996 Legal 20% Debt Margin (Available Borrowing Capacity) $ 1,414,254 6% Limitation Debt Limit Equal to 6% of Assessed Valuation $ 551,921 Debt applicable to limit: General Obligation Bonds 8,128 Excess Premium Legal 6% Debt Margin (Available Borrowing Capacity) 929 $ 542,864 Source: City of Scottsdale, City Treasurer Notes: Under Arizona law, cities can issue general obligation bonds for purposes of water, sewers, 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 Table of Contents-Statistical Section City of Scottsdale, Arizona Pledged-Revenue Coverage Last Ten Fiscal Years (dollars in thousands) Table XVII Water and Sewer Revenue Bonds City of Scottsdale, Arizona 205 Fiscal Year Ended June 30 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Operating Revenue(1) $ 142,066 139,242 152,612 148,310 160,161 164,487 173,739 177,073 167,200 183,228 Less: Operating Expenses $ 77,891 79,154 81,586 85,909 87,130 82,748 98,549 94,052 97,184 116,266 Net Operating Revenue $ 64,175 60,088 71,026 62,401 73,031 81,739 75,190 83,021 70,016 66,962 Development Fee Revenue $ 15,139 5,326 5,156 6,072 6,525 4,256 7,777 5,257 5,902 3,278 Net Revenue $ 79,314 65,414 76,182 68,473 79,556 85,995 82,967 88,278 75,918 70,240 Municipal Property Corporation Bonds Debt Service Principal $ 3,240 2,940 3,055 3,195 3,370 3,540 3,725 3,930 4,145 4,375 Debt Service Interest $ 1,738 1,599 1,487 1,354 1,195 1,026 849 654 447 230 Coverage 15.93 14.41 16.77 15.05 17.43 18.83 18.14 19.26 16.53 15.25 Excise Tax(2) $ 183,376 195,037 194,560 196,729 216,643 223,668 230,539 251,375 284,031 314,347 Debt Service Principal(3) $ 18,200 16,950 20,215 22,550 26,290 30,210 33,675 31,625 32,795 34,170 Debt Service Interest(3) $ 22,994 22,299 23,220 21,599 23,908 22,474 21,906 18,742 15,929 14,562 Scottsdale Preserve Authority Bonds Fiscal Year Ended June 30 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 $ Sales Tax 32,655 34,429 36,029 35,489 40,089 41,909 42,331 46,921 57,013 - Debt Service Principal $ 3,960 4,140 4,340 4,175 4,365 4,540 4,780 1,280 1,350 - Debt Service Interest $ 2,508 2,330 2,143 1,423 734 577 350 132 68 - Coverage 5.05 5.32 5.56 6.34 7.86 8.19 8.25 33.24 40.21 N/A Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. (1) Includes investment income. (2) 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. (3) Includes debt service payments paid out of revenue from the water and sewer fund, the special programs fund, the tourism development fund, and the stadium facility fund. Coverage 4.45 4.97 4.48 4.46 4.32 4.25 4.15 4.99 5.83 6.45 Table of Contents Table of Contents-Statistical Section City of Scottsdale, Arizona Demographic and Economic Statistics Last Ten Fiscal Years City of Scottsdale, Arizona 206 Fiscal Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 (1) Population 224,800 228,300 231,200 238,000 242,500 255,300 258,100 241,361 242,800 243,100 Personal Income(2) (in thousands) $ 11,358,020 11,536,227 11,921,597 12,428,360 13,109,550 14,499,508 15,473,869 15,128,990 15,780,058 17,026,724 Per Capita Personal Income(3) $ 50,525 50,531 51,564 52,220 54,060 56,794 59,953 62,682 64,992 70,040 Median Age(4) 45.1 45.4 46.1 46.3 46.3 46.9 47.0 47.7 47.7 47.9 Table XVIII Charter and Public School Enrollment(5) 27,191 26,233 25,979 25,847 25,598 25,281 25,606 25,800 24,906 24,283 Fiscal Year End Average Unemployment Rate(6) 5.4% 4.7% 4.2% 3.8% 3.5% 3.5% 3.4% 6.6% 3.0% 2.8% Data Sources and Notes: U.S. Census; fiscal years 2014-2020 and 2022-2023 based on U.S. Census July 1 population estimates rounded to the nearest hundred. Fiscal year 2021 based on U.S. Census 2020 population for April 1, 2020. (1) (2) Calculated by multiplying Per Capita Personal Income by Total Population divided by 1,000. (3) U.S. Census, American Community Survey, 5-Year Estimates. (4) U.S. Census, American Community Survey, 5-Year Estimates. (5) Arizona Department of Education based on Oct 1 enrollment of fiscal year for all charter and district schools located within Scottsdale city boundaries; fiscal year 2019 updated to correct prior reporting error. (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 2022 calendar year that ended within the 2023 fiscal year. Table of Contents Table of Contents-Statistical Section City of Scottsdale, Arizona Principal Employers Current Year and Nine Years Ago 2023 City of Scottsdale, Arizona 207 Employer HonorHealth(2) Vanguard(3) City of Scottsdale (4) General Dynamics Mission Systems Scottsdale Unified School District(5) Axon Mayo Clinic (6) Nationwide Specialty (7) CVS Health Fairmont Scottsdale Princess International Cruise and Excursion McKesson Corporation Total Employees 7,347 2,984 2,697 2,505 2,253 1,752 1,559 1,407 1,345 1,300 Rank 1 2 3 4 5 6 7 8 9 10 25,149 Percentage of Total City (1) Employment 3.39% 1.38% 1.24% 1.16% 1.04% 0.81% 0.72% 0.65% 0.62% 0.60% 11.60% Table XIX 2014 Employees 6,134 2,186 2,446 2,929 2,583 Rank 1 5 4 2 3 Percentage of Total City (1) Employment 5.31% 1.89% 2.12% 2.54% 2.24% 1,851 1,501 1,088 6 7 9 1.60% 1.30% 0.94% 1,350 1,000 23,068 8 10 1.17% 0.87% 19.98% Source: City of Scottsdale, Economic Development Department communications with employers, July 2023. (1) Annual Employment in 2023 according to ESRI was 216,779; the fiscal year 2014 Annual Financial Report reported annual employment as 115,456. (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) General Dynamics C4 Systems was renamed General Dynamics Mission Systems in 2016. (5) Scottsdale Unified School District has administrative offices and some schools outside of Scottsdale city limits. 2023 numbers only report Scottsdale-based employees. (6) Scottsdale Insurance Company was renamed Nationwide Specialty in 2015. (7) CVS Caremark was renamed CVS Health in 2014. Table of Contents Table of Contents-Statistical Section City of Scottsdale, Arizona Full-time Equivalent City Government Employees by Function Last Ten Fiscal Years City of Scottsdale, Arizona 208 Function 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 Water/Sewer Utilities Airport Solid Waste Total Table XX 2014 2015 2016 2017 2018(1) 2019(2) 2020(3) 2021 2022 2023 10.0 8.0 53.5 7.0 56.5 5.0 93.0 204.0 176.5 934.6 454.2 127.4 204.0 14.0 90.0 2,437.7 10.0 8.0 53.5 6.0 55.9 7.0 89.7 205.0 173.0 930.6 448.3 120.9 205.0 14.5 90.0 2,417.4 10.0 7.0 53.5 6.0 58.5 7.2 89.8 205.8 185.1 942.7 469.6 123.6 211.3 14.5 90.8 2,475.4 10.0 7.0 53.5 6.0 58.5 7.2 86.7 206.8 186.6 936.7 474.6 125.1 213.3 14.5 92.8 2,479.3 10.0 7.0 53.5 6.0 58.5 16.2 86.7 210.8 179.6 937.7 476.7 124.1 214.5 15.5 92.8 2,489.6 10.0 7.0 63.5 6.5 58.5 17.2 101.7 210.8 182.2 952.7 476.9 102.1 215.9 15.5 96.8 2,517.3 10.0 7.0 63.5 6.5 61.0 25.3 102.7 237.0 126.3 963.1 511.2 95.5 217.9 15.5 96.4 2,538.9 10.0 7.0 63.5 6.5 60.0 24.2 102.5 238.2 127.3 971.7 502.5 97.5 215.9 15.5 96.4 2,538.7 10.0 7.0 63.5 6.8 60.0 26.2 102.5 241.5 128.3 971.9 505.0 100.0 217.9 15.5 99.4 2,555.5 10.0 7.0 63.5 6.8 60.6 26.7 102.5 243.7 130.7 993.4 502.3 104.0 220.9 15.5 101.4 2,588.9 Source: The City of Scottsdale's Budget Department. (1) Effective fiscal year 2018, Citizen Services was moved from Community and Economic Development to City Manager. (2) Effective fiscal year 2019, Purchasing was moved from Administrative Services to City Treasurer, and Risk Management was moved from City Treasurer to City Attorney. (3) Effective fiscal year 2020, Communications was moved from Administrative Services to City Manager, Emergency Management was moved from City Manager to Public Safety, Transportation was moved from Community and Economic Development to Public Works, and WestWorld was moved from Community and Economic Development to Community Services. Table of Contents Table of Contents-Statistical Section City of Scottsdale, Arizona Operating Indicators by Division(1) Last Ten Fiscal Years City of Scottsdale, Arizona 209 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 payments issued(2) # of customer contacts (utilities and licensing) # of Purchasing purchase orders(3) City Manager % of survey respondents rating the "Overall Quality of Life in Scottsdale" as good to excellent(4) % of survey respondents rating "Your Neighborhood as a Place to Live" as good to excellent(4)(5) Total ad value equivalency generated(6) Acres of land acquired for inclusion in the McDowell Sonoran Preserve % increase of Neighborhood Watch groups annually Administrative Services Human Resources Citywide turnover(7) 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) (continued) Table XXI 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 34% 39% 39% 35% 35% 35% 28% 20% 27% 27% 14 16 13 13 15 14 11 14 13 10 1,080 65 1,005 57 1,000 61 1,067 56 1,033 70 946 63 950 59 912 63 882 67 1,017 70 99,063/ 83,441 96,741/ 91,200 100,920/ 92,993 100,092/ 85,295 95,301/ 84,602 83,471/ 78,390 88,444/ 77,118 74,419/ 65,915 96,471/ 83,783 96,157/ 88,418 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 29,206 96,201 4,725 28,051 101,694 4,356 29,205 104,226 4,205 29,399 125,589 4,217 98% No Survey No Survey 96% No Survey 96% No Survey 97% No Survey 95% 93% $64,931 No Survey $34,863 No Survey N/A 93% N/A No Survey N/A 97% N/A No Survey N/A 94% N/A No Survey N/A 92% N/A 2,365 2% 0 0% 0 5% 420 5% 0 2% 0 7% 0 1% 0 2% 0 4% 0 10% 6.0% 1.4% 7.8% 1.4% 9.6% 1.1% 8.1% 1.2% 9.8% 1.3% 9.3% 1.2% 10.7% 1.2% 9.5% 1.2% 20.4% 1.0% 16.1% 1.1% 1,335,869 45.8 1,395,338 51.4 2,686,000 58.6 2,117,633 67.2 1,512,355 82.8 1,026,016 86.9 2,032,000 98.3 820,000 103.5 1,562,340 114.0 1,670,481 159.0 Table of Contents Table of Contents-Statistical Section City of Scottsdale, Arizona Operating Indicators by Division(1) Last Ten Fiscal Years City of Scottsdale, Arizona 210 Division Community Services Preserve McDowell Sonoran Preserve Annual Visitors – All trailheads Parks and Recreation # of square feet of medians and rights of way maintained WestWorld # of special events at WestWorld(8) Community and Economic Development Planning and Development Services 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 Economic Development Targeted job creation - # of companies/# of jobs(9) Tourism Hotel/Motel average occupancy rate # of Downtown special events coordinated Aviation Scottsdale Airport - takeoffs and landings Public Safety Police # of calls for service(10) Achieve the standard of six minutes or less for response to emergency calls for service (includes medical and accident-related calls) Percent of Emergency Calls Answered within 10 seconds (Target 91% of the time) Fire Total incidents Responses per capita Travel time (enroute to onscene) (continued) Table XXI 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 325,023 659,882 706,682 698,090 732,510 747,000 936,000 992,000 882,669 870,000 22,502,626 22,832,327 22,913,730 22,827,842 22,968,631 22,897,463 22,897,463 23,261,040 23,283,195 23,283,195 24 52 51 55 49 46 30 48 35 42 15 12 12 15 13 14 13 7 5 4 100% 100% 14,222 100% 100% 15,514 95% 98% 13,781 100% 98% 13,797 99% 98% 12,594 99% 98% 13,676 100% 99% 12,358 100% 99% 12,076 100% 99% 11,226 100% 100% 12,251 16 / 1,069 13 / 1,180 9 / 1,183 14 / 1,019 12 / 1,852 14 / 1,531 9 / 603 7 / 1,005 9 / 769 12 / 797 65.6% 275 67.8% 325 67.9% 277 75.1% 174 69.1% 173 70.2% 155 55.6% 129 47.1% 43 61.9% 188 66.1% 182 148,971 153,285 162,535 164,622 166,425 176,677 191,284 192,185 155,092 167,641 223,534 221,069 233,531 268,767 271,438 267,923 272,696 238,349 255,691 229,060 5:04 5:25 5:12 4:48 4:57 5:05 5:36 5:24 5:36 6:04 90% 95% 91% 93% 98% 94% 88% 91% 92% 85% 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 37,456 0.15 5:16 37,317 0.14 5:29 41,353 0.17 5:21 40,675 0.17 5:51 Table of Contents Table of Contents-Statistical Section City of Scottsdale, Arizona Operating Indicators by Division(1) Last Ten Fiscal Years 211 City of Scottsdale, Arizona Division Public Works Public Works Facility inventory maintained (square feet)(11) # of active Capital Projects managed by CPM Solid Waste # of homes serviced by Residential Refuse Collection # of citizens serviced annually by Household Hazardous Waste collection program Transportation and Street Operations Actions to improve safety and efficiency of traffic flow (signal timing changes and traffic control and speed limit studies)(12) Total citywide transit ridership(13) Water Resources Water Service Connections Drinking Water Supplied (million gallons per day) Reclaimed Water Supplied (million gallons per day) Sewer Service Connections Sewage Treated (million gallons per day) # of water meters read annually Table XXI 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 3,313,468 150 3,348,774 120 2,925,697 155 2,925,697 150 2,925,697 161 2,961,661 180 2,978,196 185 2,978,196 190 3,012,519 196 3,044,769 171 80,354 80,785 81,187 81,665 82,236 82,711 83,189 83,680 83,993 84,905 2,905 2,362 3,345 2,770 2,509 2,629 2,426 2,393 2,581 2,449 3,687 2,589,218 4,252 2,635,739 6,638 2,297,323 9,737 2,186,424 8,697 2,178,152 4,748 1,933,249 2,176 1,501,663 2,657 646,306 2,780 644,306 3,783 828,029 88,348 88,905 89,596 90,172 90,817 91,279 91,802 92,590 93,027 93,402 70.2 63.9 67.5 67.0 70.9 66.3 67.6 74.0 67.7 65.8 9.7 79,014 9.2 79,588 9.1 80,202 11.6 80,704 12.2 81,306 11.9 81,841 11.6 82,320 12.0 82,834 11.1 83,268 12.7 83,792 20.9 1,059,738 21.2 1,066,385 20.5 1,078,500 21.4 1,085,590 22.1 1,072,498 22.1 1,099,164 21.6 1,099,085 22.2 1,110,050 22.8 1,112,651 22.0 1,121,844 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 2023 Budget. (2) Effective fiscal year 2022 the # of Accounts Payable payments issued figure presented includes all electronic payments. (3) 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. (4) The complete results for the most recent survey, as well as archived copies of prior year surveys can be found at https://www.scottsdaleaz.gov, search "Survey". (5) Effective fiscal year 2020 the percentage of survey respondents rating "Your Neighborhood as a Place to Live" as good to excellent was moved from Administrative Services to City Manager to align with an organizational changes. (6) 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. (7) Effective fiscal year 2022 the increase in the citywide turnover rate is due to a methodology change. (8) Effective fiscal year 2020 the # of special events at WestWorld was moved from Community and Economic Development to Community Services to align with an organizational change made by the City Manager. (9) 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. (10) (11) Measure is for the prior calendar year end, rather than fiscal year end. 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. (12) 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. (13) Effective fiscal year 2020 Total citywide transit ridership was moved from Community and Economic Development to Public Works to align with an organizational change made by the City Manager. Table of Contents Table of Contents-Statistical Section City of Scottsdale, Arizona Capital Asset Statistics by Function Last Ten Fiscal Years Function Public Safety Police Stations Police Vehicles Fire Stations 2014 2015 2016 2017 2018 Table XXII 2019 2020 2021 2022 2023 4 359 15 4 347 15 4 344 15 4 344 15 4 343 15 4 343 15 4 341 15 4 344 15 4 352 15 4 355 15 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 19,933,597 2,831 308 20,080,026 2,852 311 20,080,026 2,852 315 20,080,026 2,801 314 42 975 4 55 6 42 975 4 61 6 42 975 4 64 6 42 975 4 64 6 42 975 4 64 6 42 975 4 70 6 42 975 4 70 6 43 975 4 70 6 44 982 4 72 6 44 982 4 72 6 Water Water Mains (miles) Fire Hydrants 2,079 10,874 2,079 10,941 2,094 11,052 2,102 11,135 2,117 11,213 2,124 11,301 2,133 11,375 2,143 11,480 2,148 11,582 2,152 11,622 Sewer Sanitary Sewers (miles) Storm Sewers (miles) 1,429 188 1,441 275 1,452 285 1,456 309 1,468 316 1,483 325 1,505 330 1,513 337 1,520 342 1,524 347 Highways and Streets Square Yards of Pavement (1) Equivalent 12' Wide Lane Miles Traffic Signals City of Scottsdale, Arizona 212 Culture and Recreation Parks Parks Acreage Swimming Pools Tennis/Pickleball Courts Community Centers Source: City of Scottsdale's divisions. (1) Pavement sq yards that does not include Alleys (230,935) and Parking Lots (819,875) Table of Contents City of Scottsdale, Arizona City Treasurer’s Office (480) 312-2437 Visit our website www.ScottsdaleAZ.gov/Finance