City of Tempe, Arizona Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2018 City Council: Mark Mitchell, Mayor Robin Arredondo-Savage, Vice Mayor Kolby Granville Randy Keating Lauren Kuby Joel Navarro David Schapira Administrative Staff: Andrew Ching, City Manager Presented by: Kenneth Jones, Deputy City Manager - Chief Financial Officer Renie Broderick, Internal Services Director Jerry Hart, CPA, Deputy Internal Services Director - Finance Karen Huffman, CPA, Controller 1 City of Tempe, Arizona 2 Comprehensive Annual Financial Report For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona TABLE OF CONTENTS INTRODUCTORY SECTION Letter of Transmittal Certificate of Achievement for Excellence in Financial Reporting List of Principal Officials City Organizational Chart 7 12 13 14 FINANCIAL SECTION Independent Auditor’s Report Management’s Discussion and Analysis (required supplementary information) 15 17 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Position Statement of Activities 37 38 Fund Financial Statements: Balance Sheet - Governmental Funds Reconciliation of the Balance Sheet to the Statement of Net Position Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance to the Statement of Activities Statement of Revenues, Expenditures and Changes in Fund Balance - Budget to Actual - General Fund Statement of Revenues, Expenditures and Changes in Fund Balance - Budget to Actual - Transit Special Revenue Fund Statement of Net Position - Proprietary Funds Statement of Revenues, Expenses and Changes in Net Position - Proprietary Funds Statement of Cash Flows - Proprietary Funds Statement of Net Position - Fiduciary Fund Statement of Changes in Net Position - Fiduciary Fund Notes to the Financial Statements 40 42 44 46 47 48 50 52 53 54 54 55 Required Supplementary Information: Schedules of Required Supplementary Information Schedule of Contributions- All Pension Plans - Last Four Fiscal Years Schedule of the Proportionate Share of the Net Pension Liability- ASRS - Last Four Fiscal Years Schedule of Changes in the Net Pension Liability and Related Ratios- PSPRS: Police - Last Four Fiscal Years Schedule of Changes in the Net Pension Liability and Related Ratios- PSPRS: Fire - Last Four Fiscal Years Schedule of Contributions- OPEB Plan - Last Two Fiscal Years Schedule of Changes in the Net OPEB Liability and Related Ratios - Last Two Fiscal Years Schedule of Investment Returns- OPEB Plan- Last Two Fiscal Years 123 124 125 126 Notes to Required Supplementary Information 127 3 120 121 122 Comprehensive Annual Financial Report For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona FINANCIAL SECTION (Continued) Combining Fund Financial Statements: Non-major Governmental Funds: Combining Balance Sheet Combining Statement of Revenues, Expenditures and Changes in Fund Balances 130 134 Internal Service Funds: Combining Statement of Net Position Combining Statement of Revenues, Expenses and Changes in Net Position Combining Statement of Cash Flows 139 140 141 Other Supplementary Information: Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget to Actual: General, Debt Service, Special Revenue, Capital Projects and Enterprise Fund Types General Obligation Debt Service Fund Special Assessment Debt Service Fund Performing Arts Fund Highway User Revenue Fund Community Development Fund Housing Assistance Fund Housing Affordability Fund Donations and Court Awards Fund Grants Fund Community Facilities District Fund Transit Capital Projects Fund Streets Capital Projects Fund Police Capital Projects Fund Fire Capital Projects Fund Storm Sewers Capital Projects Fund Parks Capital Projects Fund Rio Salado Capital Projects Fund Community Development Capital Projects Fund Signals Capital Projects Fund Community Facilities District Capital Projects Fund Water and Wastewater Fund Solid Waste Fund Emergency Medical Transportation Fund Golf Fund 143 144 145 146 147 148 149 150 151 152 153 154 155 156 157 158 159 160 161 162 163 164 165 166 167 STATISTICAL SECTION Financial Trends Net Position by Component - Last Ten Fiscal Years (accrual basis of accounting) Changes in Net Position - Last Ten Fiscal Years (accrual basis of accounting) Fund Balances, Governmental Funds - Last Ten Fiscal Years (modified accrual basis of accounting) S-1 S-2 169 170 S-3 173 S-4 174 Changes in Fund Balance, Governmental Funds - Last Ten Fiscal Years (modified accrual basis of accounting) 4 Comprehensive Annual Financial Report For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona STATISTICAL SECTION (Continued) Revenue Capacity Taxable Sales and Percentage of Taxable Sales by Category - Last Ten Fiscal Years (cash basis) Direct and Overlapping Sales Tax Rates - Last Ten Fiscal Years General Property Tax Information Primary and Secondary Assessed Value and Estimated Actual Value of Taxable Property - Last Ten Fiscal Years Property Tax Rates - All Direct and Overlapping Governments - Last Ten Fiscal Years S-5 S-6 S-7 176 177 178 S-8 179 S-9 180 S-10 S-11 S-12 S-13 181 182 183 184 S-14 S-15 S-16 S-17 S-18 S-19 S-20 S-21 S-22 185 186 187 188 189 190 191 192 193 S-23 194 S-24 S-25 195 196 S-26 S-27 S-28 197 198 199 Property Tax Levies - All Direct and Overlapping Governments - Last Ten Fiscal Years Property Tax Levies and Collections - Last Ten Fiscal Years Principal Tax Payers, Property Tax - Current Year and Nine Years Prior Principal Tax Payers, Sales and Use Tax - Current Year and Nine Years Prior Debt Capacity Excise Tax Collections - Last Ten Fiscal Years Ratios of Net General Bonded Debt Outstanding - Last Ten Fiscal Years Ratios of Outstanding Debt by Type - Last Ten Fiscal Years Direct and Overlapping Governmental Activities Debt- Property Tax Supported Total Direct and Overlapping Governmental Activities Debt Legal Debt Margin Information - Last Ten Fiscal Years Remaining General Obligation Bond Authorizations Pledged-Revenue Coverage - Last Ten Fiscal Years Pledged Revenue, Projected Debt Service and Estimated Coverage - Excise Tax Obligation (Excluding Transit Excise Tax Obligations) Pledged Revenue, Projected Debt Service and Estimated Coverage - Transit Excise Tax Obligations Demographic and Economic Information Demographic and Economic Statistics - Last Ten Fiscal Years Principal Employers - Current Fiscal Year and Nine Years Prior Operating Information Full-Time Equivalent City Government Employees by Function - Last Ten Fiscal Years Operating Indicators by Function/Program - Last Ten Fiscal Years Capital Asset Statistics by Function/Program - Last Ten Fiscal Years 5 City of Tempe, Arizona 6 This section provides general information on the government’s structure and information useful in assessing the City’s financial condition. Intr oductor y Section CITY OF TEMPE P.O. BOX 5002 20 EAST SIXTH STREET TEMPE, AZ 85281 480.350.8350 CITY MANAGER’S OFFICE December 19, 2018 To the Honorable Mayor, Members of the City Council and Residents of the City of Tempe, Arizona: The Comprehensive Annual Financial Report, including the Independent Auditor’s Report, for the fiscal year ended June 30, 2018 is submitted in accordance with Article V of the City Charter for your review. Responsibility for the accuracy and completeness of the presented data, including all disclosures, rests with management. To the best of our knowledge and belief, this report is accurate in all material respects and is presented in a manner designed to fairly set forth the financial position and results of operations of the City. All disclosures necessary to enable the reader to gain an understanding of the City's financial activities have been included. This Comprehensive Annual Financial Report represents management's report to its governing body, constituents, legislative and oversight bodies, investors and creditors. Copies of this report will be sent to elected officials, City management personnel, bond rating agencies, nationally recognized municipal securities information repositories and other agencies that have expressed an interest in Tempe's financial condition. Copies of this financial report will also be placed in the City library and on the City’s web site at https://www.tempe.gov/government/internal-services/finance/open-book for use by the general public. Management is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the City are protected from loss, theft, or misuse and that adequate accounting data are compiled to allow for the preparation of the basic financial statements in conformity with generally accepted accounting principles (GAAP). The internal control structure is designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that the cost of a control should not exceed the benefits likely to be derived and the valuation of costs and benefits requires estimates and judgments by management. The accounting firm of Heinfeld, Meech & Co., P.C., an independent certified public accounting firm, performed the City’s annual financial statement audit. The auditor’s unmodified “clean” Independent Auditor’s Report on the financial statements is included in the financial section of this report. The City’s independent auditors also perform the Single Audit of the City's federal grant programs. The Single Audit Reporting Package is issued separately from this financial report and is available upon request. Generally Accepted Accounting Principles (GAAP) require that management provide a narrative introduction, overview and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The MD&A can be found immediately following the Independent Auditors’ Report. 7 CITY OF TEMPE PROFILE History - Tempe’s history dates back to 1867 when Mr. Charles T. Hayden, father of former U.S. Senator Carl Hayden, constructed a cable ferry on the then uncontrollable waters of the Salt River. In 1871, Mr. Hayden and four others organized the Hayden Milling operations and related agricultural enterprises. Soon after, the Town of Hayden’s Ferry was founded. The name of the town was changed from Hayden’s Ferry to Tempe in 1880 and was incorporated in 1894. Current Profile - The boundaries of Tempe encompass an area approximately 40.1 square miles with an estimated population of 185,000 residents. Tempe offers more than 330 days of sunshine each year with rainfall amounts of approximately 7 inches a year. The City is located in Maricopa County, Arizona and is bordered by the cities of Phoenix, Scottsdale, Mesa, Chandler and the Town of Guadalupe. Tempe is surrounded by five major freeways and is only minutes away from Phoenix Sky Harbor International Airport, making it the most accessible City in the metropolitan Phoenix area. Government and Organization - On October 19, 1964, the electors in accordance with Arizona State Law ratified a Home Rule City Charter. The City operates under a Council-Manager form of government. The Mayor is elected for four years and six Councilmembers are elected at large on a non-partisan ballot for staggered four-year terms. The City Council appoints the City Manager who has full responsibility for carrying out Council policies and administering City operations. The City provides services as authorized by its charter including: public safety (police, fire, building inspection), highways and streets, public transit, sanitation, water and wastewater, cultural-recreational, human services, community development and general administration. The Rio Salado Community Facilities District is a separate component unit of the City and facilitates the development around Tempe Town Lake. Budgetary Controls - The City maintains budgetary controls that are designed to ensure compliance with budgetary and legal provisions embodied in the annually appropriated operating and capital project budgets approved by the City Council. Activities of the General Fund, Special Revenue Funds, General Obligation Debt Service Fund, Special Assessments Debt Service Fund, and Proprietary Funds are included in the annually appropriated operating budget. Project-length budgets are developed for capital projects and appropriated annually in the Capital Projects Funds. The level of budgetary control (that is, the level at which expenditures cannot legally exceed the appropriated amount) is at the city-wide level consisting of the total operating budget and the total capital projects budget, as adopted by the City Council. However, for budget administrative purposes, the City maintains budgeting controls at department appropriation levels. In addition to maintaining budgetary control via a formal appropriation, the City maintains an encumbrance accounting system. Encumbrances are made against appropriations upon the issuance of a purchase order. As part of the annual budgeting process, encumbrances outstanding at each fiscal year end are re-appropriated through City Council action in order to be included in the adopted budget of the following year. LOCAL ECONOMY The City's overall financial condition continues to be strong and stable. The City has experienced steady revenue growth over the past few years and our five-year forecast for revenues remains positive, anticipating moderate growth, although slowing, in taxable sales and other revenue sources. Commercial and residential development activity has provided a big boost to construction sales tax revenues in recent years and is projected to decline slightly. Moderate increases in other local taxes should provide for a stable local tax revenue stream for the remainder of the current fiscal year and into fiscal year 2019-20, with slowing growth projected in the subsequent years of the forecast. During fiscal year ended June 30, 2018, the City continued to experience improvement in the three key categories of revenue including sales taxes, state shared revenue and property taxes as indicated below. For the current year, these three revenue sources comprised 81% of total General Fund revenue. Sales Tax Growth continued in the local sales tax base across many categories including retail, rentals, restaurants and hotel/motels. On a cash basis, total taxable sales increased by 5.2% and retail taxable sales (comprising 50.5% of total taxable sales) grew by 4.4%. General Fund sales tax revenues increased by $6 million (or 5.9%) to $107.3 million. Sales tax revenue represented 49% of total General Fund revenues for the year. 8 State-Shared Revenue State-shared sales tax revenue increased by $2.1 million (or 13%) to $18.3 million compared to the prior year, reflecting increased taxable sales throughout the state and minimal impact of the U.S. Census. The 2010 Census counts are used in the distribution formula for state-shared revenues. As the City’s proportionate share of total state population continues to decline over time due to its landlocked status, the percentage of stateshared revenues allocated to the City also declines. The City experienced an increase in state-shared income tax of $1.1 million (or 5%), reflective of the strengthening state economy. State shared income tax received during the fiscal year ($22.6 million) is from actual collections by the State for fiscal year 2015-16. Auto lieu tax ($7.5 million) increased by $0.5 million (or 7.4%) compared to the prior year, reflective of continuing strong auto sales. These state-shared revenues combined represented about 24.0% of General Fund revenue for the year. Property Tax Property tax revenues grew by $0.9 million (or 4.9%) to $19.8 million and by $1.3 million (or 5.0%) to $27.7 million over the prior year in the General Fund and General Obligation Debt Service Fund, respectively. The city continues to experience significant improvement in valuation across all taxable property categories. Property tax comprised approximately 9.0% of General Fund revenues for the year. Though the changing economy has provided the City with financial challenges, we expect conditions to continue improving over the long-term. Through sound management of resources and continued focus on long-range financial planning, the City will continue to adapt to changing conditions and set a strong foundation for the future. LONG-TERM FINANCIAL PLANNING The City prepares a five-year, comprehensive long-range financial forecast for each of its major operating funds in the fall and spring of each fiscal year. In addition, the city annually updates the debt management plan. These forecasts are critical to identifying and establishing the budgetary parameters that guide management and policy makers in the budget allocation process. The forecast provides a long-term view of how current-year decisions will impact the City of Tempe’s future finances, and is consistent with the City Council’s stated strategic priority of achieving long-term financial stability and vitality. The latest forecast projects growth in the sales tax, state shared, and property tax revenues. This is due to continued recovery in both the local and state economies. However, Tempe’s economy continues to outperform the forecasts for state and regional growth. We are projecting that Tempe’s retail and development activity will continue to outperform our surrounding cities for the near term. Revenue related to building permits, plan reviews and other development-related activities continues at a rate well above normal. An economic downturn is inevitable at some point in our cyclical economy. We have not assumed an economic downturn in the latest forecast, but we do project healthy fund balances throughout the five-year forecast period in the General Fund which would help overcome moderate recessionary trends. CITY COUNCIL STRATEGIC PRIORITIES Realization of the City Council’s strategic priorities for Tempe is ongoing. During the year, city departments, led by the Office of Strategic Management and Diversity, worked collaboratively to refine performance measures that, over time, will allow the city to measure actual progress towards achieving the identified strategic priorities which are as follows: The associated performance measures, which continue to evolve, reflect the various strategies by which achievement of the strategic priorities will be made possible. The strategic priorities and associated performance measures are now widely being incorporated into the decision-making processes within the City. To the extent 9 possible, public meeting agenda items requiring explicit council direction and/or action must now identify the related strategic priority (s) to be achieved. This was particularly the case during the development of both the fiscal year 2018/2019 Annual Operating Budget as well as the Five-Year Capital Improvement Program Budget. Additionally, many non-budgetary decisions of the City Council during the year were made within the context of the identified strategic priorities. Strategic planning in the city continues to evolve and is not something meant to be fully documented “at a point in time” and simply placed on a bookshelf, but to be a “living guide” that provides parameters and direction for future decision-making. It is subject to continual review, fine tuning and updating as the needs of the city change or are more clearly identified. Important tools utilized in the continual evolution of strategic planning are three separate biennial surveys of the community, businesses and employees. The survey results provide valuable strategic planning input. To ensure transparency, the progress towards the achievement of the identified strategic priorities and performance measures are openly displayed through dashboards on the city’s public-facing website. These dashboards also assist in fostering improved accountability to the residents of Tempe. MAJOR INITIATIVES Pre-kindergarten Pilot Program (Tempe PRE) Tempe PRE is a two-year pilot program launched in July 2017 by the Tempe City Council to increase access to high-quality preschool at no cost for qualifying families. Families that are eligible for the program must live in Tempe and be living at or below 200 percent of the Federal Poverty Level. The program is designed to be a 5 day a week, full day program. For children to learn classroom routines and develop healthy friendships and social skills, it is essential that they are here for the entire day. Currently, part-time attendance is not an option. The classrooms have  Certified lead teachers (1:9 ratio)  Well trained instructional assistants  HighScope Curriculum o Play Based o Child Centered  Healthy meals and snacks The pilot program has been successful in its goal of improving kindergarten readiness. Fiscal year 2018/19 marks the final year of the pilot program; the city is actively searching for a permanent, recurring funding source for the program. Emergency Medical Transportation During the year, the Fire Medical Rescue Department began providing emergency medical transportation services with the acquisition of three ambulances. These services had previously been contracted out, but due to concerns regarding the long-term viability of the service providers within the past few years, the city began taking the necessary steps towards direct provision of this critical service. Within five years, the fire department will have a fleet of ambulances along with non-sworn paramedics and emergency medical technicians that will respond to the 9-1-1 calls for medical aid. Private ambulance companies will continue to provide the city with backup when needed and will continue to provide convalescent or inter-facility transport such as rides to doctor appointments or hospital. Those transportation needs are arranged through health care providers. Service fees for Tempe 9-1-1 Ambulance are set by the Arizona Department of Health Services. The fees are the same as those for the private ambulance companies. Tempe Fire Medical Rescue uses the service fees to support its ambulance service with a long-term goal of becoming self-sustaining through those revenues. Fire Station No. 7 Construction began in May 2018 on the city’s newest fire station (illustrated below) that is expected to be placed in service in summer 2019. The 10,699-sq. ft. building, residing in Estrada Park in the southeast Tempe, will hold three bays and living quarters for 12 staff. In 2014, the Tempe Fire Medical Rescue Department commissioned ORH Inc. to conduct a Station Location Study to evaluate deployment locations for fire stations in Tempe. One of 10 11 12 City of Tempe, Arizona List of Principal Officials City Council Mark Mitchell, Mayor Robin Arredondo-Savage, Vice Mayor Kolby Granville Randy Keating Lauren Kuby Joel Navarro David Schapira Administrative Staff For the Fiscal Year Ended June 30, 2018 Andrew Ching, City Manager Ken Jones, Deputy City Manager-Chief Financial Officer Steven Methvin, Deputy City Manager-Chief Operating Officer Sylvia Moir, Police Gregory Ruiz, Fire Shelley Hearn, Community Services Don Bessler, Public Works Chad Weaver, Community Development Naomi Farrell, Human Services Kevin Kane, Municipal Court Judith R. Baumann, City Attorney Lori Cox, Internal Audit Office Cecilia Velasco-Robles, Municipal Budget Office Rosa Inchausti, Office of Strategic Management and Diversity Brigitta Kuiper, City Clerk and Elections Renie Broderick, Internal Services 13 City Organizational Chart Residents of Tempe Mayor and City Council City Attorney City Manager City Clerk City Court Community Relations Economic Development Government Relations Mayor/Council Staff/311 Deputy City Manager, Chief Operating Officer Deputy City Manager, Chief Financial Officer Municipal Budget Office Internal Audit Office Office of Strategic Management and Diversity Community Development Development Services Planning Community Services Human Services Public Works Fire Medical Rescue Police Arts & Cultural Svcs Community Partnerships and Resources Construction Management/ Engineering Emergency/ Medical Services Investigations/ Organizational Services Housing Field Operations Social Services Transit/ Transportation Library Services Recreation Water Utilities Emergency Medical Transport Fire Prevention Homeland Security/ Special Operations Support Services/ Personnel Safety Training/ Professional Development 14 Operations Support Services Internal Services Finance Human Resources Information Technology This section contains the independent auditor’s report, management’s discussion and analysis, and basic financial statements. Also included are financial statements for individual funds and a component unit for which data is not provided separately in the basic financial statements, and other useful supplementary information. Financial Section INDEPENDENT AUDITOR’S REPORT The Honorable Mayor and Members of the City Council City of Tempe, Arizona Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of City of Tempe, Arizona (the City), as of and for the year ended June 30, 2018, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Tempe, Arizona, as of June 30, 2018, and the respective changes in financial position and, where applicable, cash flows thereof and the respective budgetary comparisons for the General Fund and the Transit Special Revenue Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. 15 Change in Accounting Principle As described in Note 1, the City implemented the provisions of the Governmental Accounting Standards Board (GASB) Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, for the year ended June 30, 2018, which represents a change in accounting principle. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis, net pension liability information, and schedules of funding progress for other postemployment benefits as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The Introductory Section, Combining Fund Financial Statements, Other Supplementary Information, and Statistical Section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The Combining Fund Financial Statements and Other Supplementary Information are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Combining Fund Financial Statements and Other Supplementary Information is fairly stated in all material respects in relation to the basic financial statements as a whole. The Introductory Section and Statistical Section have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 19, 2018, on our consideration of City of Tempe, Arizona’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering City of Tempe, Arizona’s internal control over financial reporting and compliance. Heinfeld, Meech & Co., P.C. Phoenix, Arizona December 19, 2018 16 Internal Services Department MANAGEMENT’S DISCUSSION AND ANALYSIS This section of the City of Tempe’s (the City) Comprehensive Annual Financial Report presents a narrative overview and analysis of the financial activities of the City for the fiscal year ended June 30, 2018. Readers are encouraged to consider the information presented here in conjunction with additional information that has been furnished in the letter of transmittal. FINANCIAL HIGHLIGHTS  The assets and deferred outflows of resources of the City exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $864.1 million (net position). Of this amount, $166.5 million (unrestricted net position) may be used to meet the government’s ongoing obligations to citizens and creditors.  The City’s total net position increased by $13.6 million during the fiscal year compared to a decrease of $28.8 million in the prior year. The governmental activities experienced an increase in net position of $2.1 million compared to a decrease of $43.1 million in the prior year and the business-type activities experienced an increase of $11.6 million compared to an increase of $14.4 million in the prior year.  For the fiscal year ended June 30, 2018, the City’s governmental revenues overall increased by $24.6 million. This was predominately due to an increase of $8.4 million in sales taxes followed by an increase in intergovernmental revenue, unrestricted by $18.7 million, property taxes of $2.2 million, operating grants and contributions of $2.6 million and $0.9 million in other areas. These increases were offset by a decrease in capital grants and contributions of $2.3 million and gain on the sale of capital assets of $5.9 million. Expenses overall decreased by $3.5 million. Human Services increased by $4.7 million and interest on long-term debt increased by $2.0 million while Police and Fire Medical Rescue decreased by $4.2 million and $6.2 million respectively.  At June 30, 2018, the City’s governmental funds reported combined ending fund balances of $242.4 million. Approximately 65.8% of this total amount ($159.5 million) is for spending at the government’s discretion (committed, assigned, or unassigned).  At June 30, 2018, total fund balance for the General Fund was $110.2 million, which represents an increase of $14.1 million over the prior year’s fund balance as revenues continued to exceed expenditures. Revenues increased by $18.0 million, while related expenditures increased by $11.7 million. Net transfers increased by $4.1 million while the proceeds from the sale of capital assets decreased by $2.6 million.  At June 30, 2018, the City’s enterprise funds reported combined total net position of $265.8 million, and total unrestricted net position of $154.5 million. $159.5 million of the unrestricted net position was in the Water and Wastewater Fund. 17 OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the City’s basic financial statements. The City’s basic financial statements are comprised of three components: (1) Government-wide financial statements, (2) Fund financial statements, and (3) Notes to the financial statements. This report also contains required supplementary information and other supplementary information in addition to the basic financial statements themselves. 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. The statement of net position presents information on all of the City’s assets, liabilities and deferred inflows/outflows of resources, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether or not 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 current 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 will only result in cash flows in future periods, such as revenues pertaining to uncollected taxes and expenses pertaining to earned but unused vacation and sick leave. Both of the government-wide 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 police, fire medical rescue, community services, public works, community development, human services, municipal court, mayor and council, city manager, city attorney, internal audit office, municipal budget office, office of strategic management and diversity, city clerk and elections, and internal services. The business-type activities of the City include water and wastewater, solid waste, emergency medical transportation, and golf operations. Included within the government-wide financial statements are the operations of the Rio Salado Community Facilities District. Although legally separate from the City, this component unit is blended with the primary government (the City) because of its governance or financial relationships with the City. FUND FINANCIAL STATEMENTS The fund financial statements are designed to report information about groupings of related accounts that are 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 financerelated legal requirements. All of the funds of the City can be divided into the following three categories: governmental, proprietary, and fiduciary. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. Most of the City’s basic services are reported in governmental funds. These statements, however, focus on near-term inflows and outflows of spendable resources and spendable resources available at the end of the fiscal year. Such information may be useful in determining what financial resources are available in the near future to finance the City’s programs. 18 Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of 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. Other than the General Fund, the City maintains several individual governmental funds organized according to their type (special revenue, debt service, and capital projects). Information is presented separately in the governmental funds balance sheet and in the governmental funds statement of revenues, expenditures and changes in fund balances for the General Fund, Transit Special Revenue Fund, General Obligation Debt Service Fund, Special Assessment Debt Service Fund and the Transit Capital Projects Fund which are all considered to be major funds. Data from the remaining governmental funds are combined into a single, aggregated presentation. Individual fund data for each of the non-major governmental funds is provided in the form of combining statements elsewhere in this report. The City adopts an annual appropriated budget for the General, Special Revenue, Debt Service, and Proprietary Funds along with a Capital Improvement Program Budget for the Capital Projects Funds. The legal level of budgetary control is at the citywide level (incorporating both the operating and capital budgets). Budgetary comparison statements have been provided in the basic financial statements for the General Fund and the Transit Special Revenue Fund to demonstrate compliance with the budget. Budgetary comparison schedules for other non-major Special Revenue, Debt Service, Capital Projects, and Enterprise Funds are included in Other Supplementary Information. Proprietary funds. Proprietary funds are generally used to account for services provided to customers to whom the City charges user fees that are designed to fully recover the cost of providing the service. Proprietary fund statements provide the same type of information 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 and wastewater, solid waste, emergency medical transportation and golf course operations. All enterprise funds are considered to be major funds of the City.  Internal Service funds are used to report activities that provide supplies and services for certain City programs and activities. The City uses internal service funds to account for its employee and retiree health insurance programs, its workers’ compensation claims, and its risk management services including general liability and property liability claims. Because these services predominantly benefit governmental 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 elsewhere in this report. Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the City. The City uses a fiduciary fund to account for other post-employment benefits provided to retirees. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City's own programs. NOTES TO THE FINANCIAL STATEMENTS The notes to the financial statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. COMBINING STATEMENTS The combining statements referred to earlier in connection with non-major governmental funds and internal service funds are presented immediately following the Notes to the Financial Statements. 19 GOVERNMENT-WIDE STATEMENTS FINANCIAL ANALYSIS Net position- June 30, 2018 Assets Current and other assets Capital assets, net Total assets Governmental Activities Business-type Activities $ $ 618,808,086 813,193,183 1,432,001,269 263,227,412 364,360,921 627,588,333 Total $ 882,035,498 1,177,554,104 2,059,589,602 Deferred outflows of resources Deferred charge on refunding Deferred outflow from pensions Deferred outflow from OPEB Total deferred outflows of resources 8,910,973 64,999,119 3,139,299 77,049,391 12,364,932 2,775,335 382,408 15,522,675 21,275,905 67,774,454 3,521,707 92,572,066 Liabilities Long-term liabilities Other liabilities Total liabilities 828,417,204 67,900,346 896,317,550 329,398,208 46,048,156 375,446,364 1,157,815,412 113,948,502 1,271,763,914 Deferred inflows of resources Deferred inflow from pensions Deferred inflow from OPEB Total deferred inflows of resources 12,938,668 1,479,284 14,417,952 1,688,894 162,565 1,851,459 14,627,562 1,641,849 16,269,411 Net position Net investment in capital assets Restricted Unrestricted Total net position 483,438,668 102,808,694 12,067,796 598,315,158 111,354,858 154,458,327 265,813,185 594,793,526 102,808,694 166,526,123 864,128,343 $ $ $ ANALYSIS OF NET POSITION As noted earlier, net position may serve as a useful indicator of a government’s financial position. For the City, assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $864.1 million and $850.5 million as of June 30, 2018 and 2017, respectively. The City implemented GASB Statement No. 75, “Accounting and Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans” in the current year. The change in accounting principal resulted in a prior period adjustment. The net position as of June 30, 2017 has been restated along with the deferred outflows and deferred inflows for OPEB. The largest portion of the City’s net position reflects its investment in capital assets (e.g. land, buildings, infrastructure, improvements, machinery and equipment and construction in progress) less any related debt used to acquire those assets. The net position invested in capital assets, net of related debt were $594.8 million and $623.9 million at June 30, 2018 and 2017, respectively. These totals represent 68.9% and 73.4% of total net position at June 30, 2018 and 2017, respectively. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be liquidated for these liabilities. 20 Net position- June 30, 2017 restated Assets Current and other assets Capital assets, net Total assets Governmental Activities Business-type Activities $ $ Deferred outflows of resources Deferred charge on refunding Deferred outflow from pensions Deferred outflow from OPEB, restated Total deferred outflows of resources, restated Liabilities Long-term liabilities, restated Other liabilities Total liabilities Deferred inflows of resources Deferred inflow from pensions Deferred inflow from OPEB, restated Total deferred inflows of resources, restated Net position Net investment in capital assets Restricted Unrestricted, restated Total net position, restated $ 589,608,104 827,029,041 1,416,637,145 262,012,392 358,565,056 620,577,448 Total $ 851,620,496 1,185,594,097 2,037,214,593 10,355,896 80,419,146 6,887,364 13,734,782 4,460,139 829,583 24,090,678 84,879,285 7,716,947 97,662,406 19,024,504 116,686,910 829,632,035 66,312,775 895,944,810 337,552,269 44,809,709 382,361,978 1,167,184,304 111,122,484 1,278,306,788 21,600,560 503,849 2,927,034 62,656 24,527,594 566,505 22,104,409 2,989,690 25,094,099 519,530,983 117,866,229 (41,146,880) 596,250,332 104,387,674 149,862,610 254,250,284 623,918,657 117,866,229 108,715,730 850,500,616 $ $ An additional portion of the City’s net position represents resources that are subject to external restriction on their usage. The net position subject to external restrictions was $102.8 million (11.9% of total net position) at June 30, 2018. At June 30, 2017 restricted net position was $117.9 million (13.9% of total net position). With the implementation of GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, new categories of net position were established and existing ones redefined. One new category represents nonspendable items which are inventories, prepaid items, and notes receivable. This category is considered unrestricted. The remaining balance of net position is also unrestricted (committed, assigned, and unassigned), and may be used to meet the government’s ongoing obligations to citizens and creditors. The total balance of unrestricted net position was $166.5 million (19.3% of total net position) and $108.7 million (12.8% of total net position) at June 30, 2018 and 2017, respectively. At the end of the current fiscal year, the City is able to report positive balances in all three categories of net position for the governmental as well as for the business-type activities as a whole. In the prior year, there was positive net position in all categories except for the governmental activities unrestricted restated net position. ANALYSIS OF CHANGE IN NET POSITION The City’s net position increased by $13.6 million during the current fiscal year. These changes in net position are explained in the governmental and business-type activities discussion below. 21 Changes in Net Position- June 30, 2018 Governmental Activities Business-type Activities $ $ Total Revenues Program revenues: Charges for services Operating grants and contributions Capital grants and contributions General revenues: Sales taxes Intergovernmental revenue, unrestricted Property taxes Franchise taxes Unrestricted investment earnings Miscellaneous Gain on sale of capital assets Total revenues 48,449,068 30,237,598 4,094,624 109,182,268 - $ 157,631,336 30,237,598 4,094,624 168,650,143 63,353,523 47,495,555 3,290,220 1,489,603 5,506,328 1,667,264 374,233,926 697,388 651,500 33,015 110,564,171 168,650,143 63,353,523 47,495,555 3,290,220 2,186,991 6,157,828 1,700,279 484,798,097 107,357,688 42,150,580 29,739,525 102,940,790 17,270,124 22,505,753 5,007,487 405,716 7,045,025 3,283,818 476,584 288,182 981,169 979,356 16,749,283 1,716,725 11,817,213 370,715,018 76,903,243 17,494,354 1,776,367 2,802,184 98,976,148 107,357,688 42,150,580 29,739,525 102,940,790 17,270,124 22,505,753 5,007,487 405,716 7,045,025 3,283,818 476,584 288,182 981,169 979,356 16,749,283 1,716,725 11,817,213 76,903,243 17,494,354 1,776,367 2,802,184 469,691,166 3,518,908 (1,454,082) 2,064,826 596,250,332 598,315,158 11,588,023 (25,122) 11,562,901 254,250,284 265,813,185 15,106,931 (1,479,204) 13,627,727 850,500,616 864,128,343 Expenses Police Fire medical rescue Community services Public works Community development Human services Municipal court Mayor and council City manager City attorney Internal audit office Municipal budget office Office of strategic management and diversity City clerk and elections Internal services Unallocated depreciation Interest on long-term debt Water and wastewater Solid waste Emergency Medical Transportation Golf Total expenses Increase in net position before transfers Transfers Change in net position Net position- beginning, restated Net position- ending $ 22 $ $ Changes in Net Position- June 30, 2017 Governmental Activities Business-type Activities $ $ Total Revenues Program revenues: Charges for services Operating grants and contributions Capital grants and contributions General revenues: Sales taxes Intergovernmental revenue, unrestricted Property taxes Franchise taxes Unrestricted investment earnings Miscellaneous Gain on sale of capital assets Total revenues 48,694,535 27,582,362 6,355,742 104,870,388 - $ 153,564,923 27,582,362 6,355,742 160,218,570 44,671,765 45,308,519 3,182,193 662,115 5,435,113 7,538,846 349,649,760 351,831 299,116 128,394 105,649,729 160,218,570 44,671,765 45,308,519 3,182,193 1,013,946 5,734,229 7,667,240 455,299,489 111,570,351 48,345,996 27,956,647 103,728,249 16,521,932 17,777,825 4,909,370 473,324 6,815,022 3,160,056 376,249 261,313 1,055,075 815,016 18,821,669 1,777,887 9,847,278 374,213,259 70,364,126 15,918,430 2,520,474 88,803,030 111,570,351 48,345,996 27,956,647 103,728,249 16,521,932 17,777,825 4,909,370 473,324 6,815,022 3,160,056 376,249 261,313 1,055,075 815,016 18,821,669 1,777,887 9,847,278 70,364,126 15,918,430 2,520,474 463,016,289 (24,563,499) 427,858 (24,135,641) 639,396,166 615,260,525 16,846,699 (427,858) 16,418,841 239,873,012 256,291,853 (7,716,800) (7,716,800) 879,269,178 871,552,378 Expenses Police Fire medical rescue Community services Public works Community development Human services Municipal court Mayor and council City manager City attorney Internal audit office Municipal budget office Office of strategic management and diversity City clerk and elections Internal services Unallocated depreciation Interest on long-term debt Water and wastewater Solid waste Golf Total expenses Increase(decrease) in net position before transfers Transfers Change in net position Net position- beginning Net position- ending $ 23 $ $ Governmental activities. The governmental net position increased by $2.0 million for the fiscal year ended June 30, 2018. The fiscal year ended June 30, 2017 had a $24.1 million decrease in net position. Overall revenues increased by $24.6 million while expenses decreased by $3.5 million. The key factors contributing to the change in net position compared to the prior year are as follows:  Sales taxes increased in the amount of $8.4 million (5.3%) due to the increase in development in the City and continued improvement in the overall economy.  Intergovernmental revenue, unrestricted increased by $18.7 million (41.8%). The majority of the increase ($14.9 million) is due to the net local funding for the streetcar project which is a part of the Valley Metro Rail, Incorporated joint venture. There were also increases in State shared sales tax, State shared income tax and auto lieu tax.  Property taxes increased by $2.2 million (4.8%) due to the continuation of the property tax stabilization policy implemented by the City in Fiscal Year 2012.  Gain on sale of capital assets decreased by $5.9 million (77.9%) due to prior year containing the sale of certain City owned land for the purposes of redevelopment.  The positive change in net position was not only due to the increase in revenues, but expenses decreased by $3.5 million (0.9%). Police decreased by 4.2 million (3.8%) and Fire Medical Rescue decreased by 6.2 million (12.8%). The decrease is due to prior year containing an expense due to the Arizona Supreme Court ruling that a 2011 law that increased employee contribution rates for active Public Safety Personnel Retirement System members hired prior to the law’s effective date was unconstitutional. As a result, the City accrued a claims and judgement expense of $4.0 million for Police and $1.9 million for Fire Medical Rescue in the prior year. The remaining decrease in Police and Fire Medical Rescue is due to the change in deferred outflows in the pension liability. The decrease in expenses in these areas were offset with a $4.7 million increase in Human Services due to the implementation of a pre-kindergarten pilot program and the increase of $2.0 million in interest on long-term debt. The remaining increase in expenses was due primarily to a moderate increase in employee compensation. The following charts, over the next few pages, illustrate the City’s governmental expenses and program revenues by function and its revenues by source for the current fiscal year: 24 A comparison of expenses by function and the percentage of total expenses for the largest functions are presented in the chart. As stated earlier, total expenses for the City’s governmental activities decreased from prior year by $3.5 million (0.9%). The main functions which experienced the decreases were Police and Fire Medical Rescue. Fiscal Year Ended June 30, 2018 June 30, 2017 Police Fire medical rescue Community services Public works Community development Human services Internal services 25 $107,357,688 42,150,580 29,739,525 102,940,790 17,270,124 22,505,753 16,749,283 29.0% 11.4 8.0 27.8 4.7 6.1 4.5 $111,570,351 48,345,996 27,956,647 103,728,249 16,521,932 17,777,825 18,821,669 29.8% 12.9 7.5 27.7 4.4 4.8 5.1 General revenues such as sales taxes, property taxes, intergovernmental revenueunrestricted, miscellaneous and other and franchise taxes are not shown by program, but are effectively used to support program activities citywide. Fiscal Year Ended June 30, 2018 June 30, 2017 Sales taxes Intergovernmental revenueunrestricted Property taxes Unrestricted investment earnings Miscellaneous and other Franchise taxes $168,650,143 45.1% $160,218,570 45.2% 63,353,523 47,495,555 16.9 12.7 44,671,765 45,308,519 12.8 13.0 1,489,603 7,173,592 3,290,220 0.4 1.9 0.9 662,115 12,973,959 3,182,193 0.2 3.7 0.9 For governmental activities overall, without regard to program, a comparison of the largest general revenues and their percentage of total revenues (excluding transfers) is presented. As stated previously, sales taxes, intergovernmental revenue- unrestricted, property taxes and unrestricted investment earnings each displayed growth. The category of miscellaneous and other decreased due to the prior year containing the sale of land. 26 Business-type activities. Business-type activities increased the City’s net position by $10.4 million for the year ended June 30, 2018 compared to an increase of $14.2 million for the year ended June 30, 2017. Rate increases were implemented in January 2018 for the Water and Wastewater Fund and Solid Waste Fund. For the business-type activities a comparison of revenues by source is provided for each activity. For the Year Ended June 30, 2017 For the Year Ended June 30, 2018 Water and Wastewater Charges for services Unrestricted investment earnings/other Total Solid Waste Emergency Medical Transport $ 87,807,953 $16,706,706 $ 2,280,247 $ 806,560 88,614,513 17,159 $16,723,865 541,246 $ 2,821,493 27 Golf Total $ 2,387,362 $ 109,182,268 $ 16,938 2,404,300 1,381,903 $ 110,564,171 For the Year Ended June 30, 2017 Water and Wastewater Charges for services Unrestricted investment earnings/other Total Solid Waste Emergency Medical Transport Golf Total $86,273,324 $16,274,287 $XXX-XXXX $2,322,777 $104,870,388 689,723 83,188 $XXX-XXXX 6,430 779,341 $86,963,047 $16,357,475 $XXX-XXXX $2,329,207 $105,649,729 As shown in the Analysis of Change in Net Position schedules presented previously, the largest of the City’s business-type activities, Water and Wastewater, had expenses of $76.9 million for the fiscal year, followed by Solid Waste with $17.5 million, Emergency Medical Transportation with $1.8 million, and Golf with $2.8 million. Expenses for the Water and Wastewater Fund increased by $6.5 million (9.3%) due to recognition of higher depreciation expense and net loss from joint venture. Charges for services increased by $1.5 million (1.8%) due to a rate increase implemented in January 2018. The change in net position was $10.8 million in fiscal year 2018 which is down from $14.3 million in fiscal year 2017. The Solid Waste Fund had increased expenses of $1.6 million (9.8%) primarily due to the accrual of a large liability claim. Charges for services increased by $0.4 million (2.7%) due to a rate increase implemented in January 2018. The change in net position decreased by $0.6 million in fiscal year 2018 while prior year had an increase of $0.1 million. In Fiscal Year 2018, the City created the Emergency Medical Transportation Fund to provide ambulance services. The City put into service two advanced life support ambulances and one in reserve along with thirteen new positions to staff operations with anticipation to grow the service to six ambulances. Before transfers, the fund recorded operating income of $1.0 million. Two of the ambulances were purchased prior to the fund’s creation and therefore were transferred into this fund in the current year. This resulted in a gain on the transfer of asset of $0.4 million. This transfer along with an operating transfer of $0.2 million provided for the fund to have an ending net position of $1.6 million. In the Golf Fund, charges for services increased by $0.1 million (2.8%) while operating expenses increased by $0.3 million (10.1%). In the prior year, the Rolling Hills Golf Course was closed during the replacement of the irrigation system. In the current year, the golf course reopened thereby increasing charges for services and corresponding expenses. As total expenses increased in the current year by $0.3 million, there was a decrease in net position of $0.3 million compared to last year’s net position change that was fairly flat. FUND STATEMENTS FINANCIAL ANALYSIS As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. GOVERNMENTAL FUNDS The focus of the City’s governmental funds is to provide information on near-term inflows, outflows, and balances of resources that are available for spending. Such information is useful in assessing the City’s financing requirements. Types of governmental funds reported by the City include the General Fund, Special Revenue Funds, Debt Service Funds and Capital Project Funds. 28 Fund balance is reported in classifications that comprise a hierarchy based on the extent to which the City is bound to honor constraints on the specific purposes for which amounts in those funds can be spent. The classifications of fund balance are Non-spendable, Restricted, Committed, Assigned, and Unassigned. The amount that represents available resources for spending is the total of committed, assigned, and unassigned. This unrestricted fund balance may serve as a useful measure of a government’s net resources available for spending at each fiscal year end. As of the end of the current fiscal year, the City’s governmental funds reported combined ending fund balances of $242.4 million, an increase of $13.6 million from the prior year. Approximately $159.5 million of this total amount pertained to the categories of committed, assigned or unassigned, all of which is available for spending at the City’s discretion. The combined categories reflect an increase of $21.7 million over the prior year’s combined balance of $137.9 million. The increase is due primarily to a combination of increases in sales taxes, property tax, intergovernmental revenues- unrestricted and licenses and permits. The remainder of fund balance contains two components: non-spendable and restricted. Non-spendable fund balance includes amounts that cannot be spent as they are not in a spendable form. At June 30, 2018, the nonspendable fund balance included amounts for inventories ($1.3 million), prepaid items ($0.7 million) and a capital improvement note receivable reserve ($0.3 million). Restricted fund balances are amounts that have externally (outside the City) enforceable limitations or enabling legislation (City Charter) that govern their use. The restricted portion of fund balance consists primarily of amounts for debt service ($13.3 million), Public Works ($57.4 million), Fire Medical Rescue ($2.4 million) and Community Development ($2.1 million). Revenues for governmental functions overall totaled $362.6 million in the fiscal year ended June 30, 2018, which represents a net increase of $17.8 million (5.2%) from the fiscal year ended June 30, 2017. This change is primarily due to the increase in the following areas: $7.9 million (5.3%) in sales taxes, $2.3 million (5.0%) in property taxes, $2.7 million in state sales tax (9.7%), $1.1 million in state income tax (5.1%) and $2.9 million (52.9%) in licenses and permits. On the other hand, there was a decrease in federal grants of $3.8 million (18.7%) and in fines and forfeitures of $1.3 million (14.6%). The General Fund is the chief operating fund of the City. At the end of the current fiscal year, the total fund balance was $110.2 million; the fund only had $0.2 million in restricted fund balance. As a measure of the General Fund’s liquidity, it may be useful to compare fund balances to total fund revenues. The total fund balance in the City’s General Fund experienced an increase in the current year of $14.1 million. In the prior year the net increase was $6.2 million. Total revenues increased by $18.0 million (8.9%) from the prior year. Sales taxes increased by $6.0 million (5.9%), property taxes increased by $0.9 million (4.9%), state sales taxes by $2.1 million (13.1%) and state income tax by $1.1 million (5.1%), all of which Fiscal Year Ended was due to the growth in the June 30, 2018 June 30, 2017 economy. In addition, $ 220,762,808 $ 202,726,086 Intergovernmentalother Revenues increased by $3.3 million 110,198,374 49.9 % 96,076,703 47.4 % (544.0%) due to the revenue Total fund balance 93,995,709 42.6 80,099,820 39.5 from the Tempe Sports Unassigned fund balance Authority being moved from the General Obligation Debt Service Fund to the General Fund. Charges for services increased by $1.5 million (12.4%) in the area of buildings and trade fees. License and permits increased by $2.9 million (52.9%) in the area of building permit fees and sales tax applications/renewals. On the other hand, fines and forfeitures decreased by $1.3 million (15.5%) mainly for ambulance services revenue as they were moved into the newly established Emergency Medical Transportation Fund. Expenditures increased by $11.7 million (6.1%) due primarily to an increase in employee compensation and the implementation of the pre-kindergarten pilot program in Human Services costing $3.0 million. Transfers in increased by $3.2 million due to moving the Tempe Sports Authority (TSA) fund balance assignment from the General Obligation Debt Service Fund to the General Fund while proceeds from the sale of capital assets decreased by $2.6 million due to prior year containing the sale of land for development. The combination of the increase in the excess of revenues over expenditures of $6.3 million along with the decrease in total other financing uses of $1.6 million resulted in net change in fund balances increasing from $6.2 million to $14.1 million. 29 The Transit Special Revenue Fund is used to account for revenues and expenditures utilized to provide related transit services. Revenues stayed fairly consistent increasing in the current year only by $0.2 million due to an increase in sales tax revenue while expenditures increased by $7.3 million. Only $2.0 million was due to an increase in service expenditures; the remaining increase was predominately due to an $8.0 million defeasance of Transit debt in the current year. Of that amount, $5.2 million was a current defeasance and therefore included as an increase in expenditures. The remaining $2.8 million was an advanced defeasance and therefore was recorded as a payment to defeased bonds escrow agent (see Debt Administration section). The fund balance totaled $47.5 million at June 30, 2018, compared to a $46.9 million fund balance at June 30, 2017. The fund balance increased by $0.6 million the current year as compared to a $4.9 million increase in prior year. A transfer in from the Transit Capital Projects Fund covered the debt defeasance thereby reducing the impact on the Transit Special Revenue Fund. The General Obligation Debt Service Fund accounts for the accumulation of resources for and payments of general obligation debt. Total fund balance decreased by $11.3 million from $24.4 million at June 30, 2017 to $13.1 million at June 30, 2018. The decrease in fund balance was due predominately to a defeasance of General Obligation debt resulting in a payment to defeased bonds escrow agent of $9.5 million (see Debt Administration section). There was an increase in property tax revenues ($1.3 million) that was offset by a decrease in intergovernmental- other revenues ($2.5 million) due to the Tempe Sports Authority revenue being recorded into the General Fund in the current year instead of this fund. This revenue source is unrestricted and not required to be used for general obligation debt service. In addition, there was a decrease in expenditures of $0.5 million. The total debt service fund balance will be used for future debt service payments consistent with the City’s Debt Management Plan. The Special Assessment Debt Service Fund accounts for the accumulation of resources for and payments of special assessment debt to which the City acts as a trustee for the established improvement districts. Total fund balance (restricted for special assessment debt service payments) decreased slightly by $0.2 million for fiscal year ended June 30, 2018. There are only two remaining improvement districts with debt outstanding (refer to Note 9 of the Notes to the Financial Statements). The Transit Capital Projects Fund accounts for the acquisition of buses, streetscapes, the East Valley Bus Maintenance Facility upgrades and other transit improvements. Total fund balance had a $4.3 million decrease from $21.3 million at June 30, 2017 to $17.0 million at June 30, 2018. The decrease was due to $2.1 more expenditures than revenues. The projects in this fund are mainly funded with grants and cash transfers from the Transit Special Revenue Fund. Expenditures will be more than revenues when cash is used to fund the projects. 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 year indicated, the total net positions for the proprietary funds were as follows: Fiscal Year Ended June 30, 2018 June 30, 2017 Water and wastewater fund Solid waste fund Emergency Medical Transportation Golf fund Internal service funds 30 $ 262,017,940 2,309,224 $ 251,190,490 2,884,569 1,634,680 (148,659) 3,164,682 175,225 3,951,613 The Water and Wastewater Fund accounts for the provision of water and sewer services to the City and the adjoining Town of Guadalupe. The fund experienced an increase in total net position of $10.8 million (4.3%) for the fiscal year ended June 30, 2018 versus an increase in net position of $14.3 million (6.0%) for the fiscal year ended June 30, 2017. A rate increase was implemented in January 2018 resulting in Charges for services increasing by $1.5 million (1.8%). Total expenses increased by $6.5 million (9.3%) mainly due to the recognition of higher depreciation expense and net loss from joint venture. The Solid Waste Fund accounts for the provision of solid waste collection and disposal services for both residential and commercial customers. A rate increase was implemented in January 2018 resulting in Charges for services increasing by $0.4 million (2.7%). Total expenses increased by $1.6 million (9.9%) primarily due to the accrual of a large liability claim. Net position decreased by $0.6 million (19.9%) compared to prior year’s increase of $0.1 million (6.0%). The Emergency Medical Transportation Fund accounts for the operation of the City’s ambulance services. As mentioned earlier, this fund was created in the current year. Charges for Services were $2.3 million while total expenses were $1.8 million. Net position ended at $1.6 million due to a gain on the transfer of two ambulances and a transfer from the governmental funds. The Golf Fund accounts for the operation of the Rolling Hills and Ken McDonald golf courses. The Golf Fund net position decreased by $0.3 million (184.8%) compared to prior year’s net position remaining fairly flat. Charges for Services increased by $0.1 million (2.8%) and there was a corresponding increase in total expenses of $0.3 million (11.2%). In the prior year, the Rolling Hills Golf Course was closed during the replacement of the irrigation system. In the current year, the golf course reopened thereby increasing charges for services and corresponding expenses. The Internal Service Funds account for the risk management, worker’s compensation and health insurance activities of the City. The $0.8 million decrease in net position is due primarily to operating expenses exceeding contributions in the Health Fund. FIDUCIARY FUND The Other Post-Employment Benefits Trust Fund accounts for activities of the Other Post-Employment Benefits Plan and accumulates resources for health care benefit payments to qualified retirees. The change in net position stayed fairly consistent decreasing by $0.1 million from $1.2 million in prior year to a $1.1 million increase in the current year. BUDGET HIGHLIGHTS The City’s General Fund expenditure final budget of $210.2 million differs from the original budget of $212.3 million due to budget transfers to other funds. During the year, actual revenues were greater than budgetary estimates by $17.8 million (8.7% of total budgeted revenue) in the General Fund. This is due primarily to the positive variance in taxes, charges for services and licenses and permits. Actual expenditures were under budget by $3.2 million. 31 CAPITAL ASSETS AND DEBT ADMINISTRATION CAPITAL ASSETS The City’s capital assets for its governmental and business-type activities as of June 30, 2018 were $1.2 billion (net of accumulated depreciation). Capital assets include land, buildings, infrastructure, improvements, machinery and equipment, and construction in progress. The total decrease in the City’s capital assets for the current fiscal year was $8.0 million. The tables below reflect the capital assets at the end of the fiscal year June 30, 2018 and 2017, respectively. Capital Assets, Net of Depreciation- June 30, 2018 Governmental Activities Land Buildings Infrastructure Improvements Machinery and equipment Construction in progress Total $ 89,605,173 162,987,428 386,452,235 120,891,695 31,268,241 21,988,411 $ 813,193,183 Business-type Activities $ 6,693,377 22,819,217 170,201,027 122,763,036 12,132,619 29,751,645 $ 364,360,921 Total $ 96,298,550 185,806,645 556,653,262 243,654,731 43,400,860 51,740,056 $ 1,177,554,104 Capital Assets, Net of Depreciation- June 30, 2017 Governmental Activities Land Buildings Infrastructure Improvements Machinery and equipment Construction in progress Total $ 89,605,173 173,998,770 396,996,885 124,850,118 35,158,962 6,419,133 $ 827,029,041 Business-type Activities $ 6,693,377 24,081,400 180,295,319 121,665,222 13,191,158 12,638,580 $ 358,565,056 Total $ 96,298,550 198,080,170 577,292,204 246,515,340 48,350,120 19,057,713 $ 1,185,594,097 Major capital asset events during the current fiscal year included the following: Governmental Activities  The City completed several improvement projects including $3.4 million in street resurfacing, $0.6 million on the Rio Salado multi-path underpass, $1.1 million on the Town Lake dam replacement and $1.4 million on existing building upgrades. There were also various other infrastructure and improvement projects for parks and buildings. 32 Business-type Activities  The enterprise funds (predominately the Water and Wastewater Fund) incurred $27.8 million in construction in progress (CIP) costs in the current year. The major CIP projects completed and capitalized in the Water and Wastewater Fund included $3.7 million in the filter rehabilitation at the water treatment plant. $3.0 million in improvements for the main power building, $1.5 million in site improvements at the water treatment plant, and $0.5 million in water operation projects.  The Emergency Medical Transportation Fund acquired an ambulance for $0.2 million and received two additional ambulances valued at $0.4 million that were transferred from other governmental funds.  The Golf Fund capitalized $0.2 million for the Rolling Hills golf course irrigation system and $0.1 million for other improvements to the golf facilities. For government-wide financial statement presentation, all depreciable capital assets are depreciated from acquisition date to the end of the current fiscal year. Fund financial statements record capital asset purchases as expenditures. Please refer to Note 8 of the Notes to the Financial Statements for further information regarding capital assets. DEBT ADMINISTRATION At the end of the current fiscal year, the City had total long-term obligations outstanding of $1,157.8 million, which is a decrease of $9.4 million over the prior fiscal year. In the current year, the City issued general obligation bonds. In addition, the City defeased general obligations and Transit excise tax obligations to reduce debt service. The largest change in long-term liabilities was a $28.6 million decrease in excise tax obligations due to the Transit defeasance and regularly scheduled debt service payments. This decrease was offset with a $9.2 million increase in the pension liability, $2.5 million net increase in OPEB liability, $5.7 million net increase in general obligation bonds and a $2.4 million increase in the bond premiums. There were additional decreases in the HUD 108 loan and WIFA loans. Outstanding Long-term Obligations - June 30, 2018 Governmental Activities Business-type Activities Total General obligation bonds Special assessment bonds Excise tax obligations Premium on debt payable HUD Section 108 loan WIFA loan Capital Leases Total debt payable $ 180,435,000 17,415,000 97,994,000 21,847,912 3,389,000 65,610 321,146,522 $ 191,635,000 69,876,000 27,703,607 9,581,644 213,267 299,009,518 $ 372,070,000 17,415,000 167,870,000 49,551,519 3,389,000 9,581,644 278,877 620,156,040 Compensated absences Claims and judgments OPEB Pensions Total long-term obligations 31,362,690 8,576,085 75,083,055 392,248,852 $ 828,417,204 9,017,390 21,371,300 $ 329,398,208 31,362,690 8,576,085 84,100,445 413,620,152 $1,157,815,412 33 Outstanding Long-term Obligations - June 30, 2017 Governmental Activities Business-type Activities Total General obligation bonds Special assessment bonds Excise tax obligations Premium on debt payable HUD Section 108 loan WIFA loan Capital leases Total debt payable $ 178,555,000 18,730,000 116,009,000 20,515,300 3,794,000 34,743 337,638,043 $ 187,835,000 80,466,000 26,648,171 10,347,660 318,834 305,615,665 $ 366,390,000 18,730,000 196,475,000 47,163,471 3,794,000 10,347,660 353,577 643,253,708 Compensated absences Claims and judgments OPEB, restated Pensions Total long-term obligations 31,187,868 6,704,534 72,921,914 381,179,677 $ 829,632,036 8,723,528 23,213,075 $ 337,552,268 31,187,868 6,704,534 81,645,442 404,392,752 $1,167,184,304 The City issued $47.6 million in general obligation debt with $7.3 million premium allocated to the projects during the current fiscal year. The funding was for public safety, parks, municipal infrastructure preservation, street improvements and water and wastewater projects in the amounts of $4.7 million, $9.7 million, $5.6 million, $8.9 million and $26 million, respectively. The City defeased $8.3 million of general obligation bonds. The primary purpose of the defeasance was to lower the fund balance and reduce debt service expenses in the debt service fund which resulted in an economic gain (the difference between the present values of the debt service payment on the old and new debt) of $5.1 million. Likewise, the City defeased $8.0 million of Transit excise tax revenue obligations. The primary purpose of the defeasance was to lower debt service in the Transit fund which resulted in an economic gain of $7.1 million. The City’s total net general obligation bonded debt (total bonded debt, including the enterprise funds and Water Infrastructure Finance Authority loans, general obligation premiums less debt service reserves) outstanding increased by $18.0 million from the fiscal year ended June 30, 2017 to the fiscal year ended June 30, 2018. The ratio of net general obligation bonded debt for governmental purposes to taxable valuation and the amount of bonded debt per capita are useful indicators of the City’s debt position to management, citizens, oversight bodies and investors. Additional information can be located in the Statistical Section (Exhibit S-15). A comparison of these indicators follows: Fiscal Year Ended June 30, 2018 June 30, 2017 Net general bonded debt Net general bonded debt per capita Ratio of net general bonded debt to total assessed value Debt service secondary tax rate per $100 of taxable valuation $ 400,760,799 2,166 22.6% $ 1.57 $ 382,798,272 2,098 22.9% $ 1.59 The State constitution imposes certain debt limitations on the City of 6% and 20% of the assessed valuation of the City. The City’s available debt margin at June 30, 2018 is $103.3 million under the 20% capacity and $59.9 million under the 6% limitation. Additional information on the statutory debt limitations may be found in Note 9 of the Notes to the Financial Statements and the Statistical Section (Exhibit S-19) of this report. 34 During the year, the City maintained ratings on its outstanding general obligation bonds of AAA from Standard & Poors Corporation and AAA from Fitch Ratings. Additional information on the City’s long-term debt can be found in Note 9 of the Notes to the Financial Statements. REQUESTS FOR INFORMATION This financial report is designed to provide our citizens, taxpayers, city council, customers, investors and creditors with a general overview of the City’s finances. If you have questions about this report or need additional information, contact: City of Tempe Internal Services Department Accounting Division 20 E. Sixth Street Tempe, AZ 85281 480.350.8256 35 City of Tempe, Arizona 36 Statement of Net Position June 30, 2018 City of Tempe, Arizona Governmental Activities Pooled cash and investments Receivables: Taxes Accounts, net Accrued interest Due from other governments Inventories Prepaid items Restricted cash and investments Special assessment receivables Capital improvement notes receivable Equity in joint venture Capital assets not being depreciated: Land Construction in progress Capital assets (net of accumulated depreciation): Buildings Infrastructure Improvements Machinery and equipment Total assets $ 239,183,338 Business-type Activities $ 97,408,113 Total $ 336,591,451 25,441,066 6,680,978 804,129 7,854,392 1,346,784 698,908 36,286,016 17,956,470 6,703,214 275,852,791 15,252,009 478,247 769,252 34,952,642 697,387 113,669,762 25,441,066 21,932,987 1,282,376 7,854,392 2,116,036 698,908 71,238,658 17,956,470 7,400,601 389,522,553 89,605,173 21,988,411 6,693,377 29,751,645 96,298,550 51,740,056 162,987,428 386,452,235 120,891,695 31,268,241 1,432,001,269 22,819,217 170,201,027 122,763,036 12,132,619 627,588,333 185,806,645 556,653,262 243,654,731 43,400,860 2,059,589,602 8,910,973 64,999,119 3,139,299 77,049,391 12,364,932 2,775,335 382,408 15,522,675 21,275,905 67,774,454 3,521,707 92,572,066 13,701,656 5,640,367 16,333,666 1,740,539 30,484,118 6,588,090 865,073 3,468,090 173,223 34,953,680 20,289,746 6,505,440 19,801,756 1,913,762 65,437,798 Deferred Outflows of Resources Deferred charge on refundings Deferred outflows from pensions Deferred outflows from OPEB Total outflow of resources Liabilities Accounts payable Deposits Accrued expenses Unearned revenue Liabilities payable from restricted assets Long-term liabilities: Special assessment debt with a governmental commitment: Due within one year Due in more than one year Other long-term liabilities: Due within one year Due in more than one year Total liabilities 1,380,000 16,035,000 - 1,380,000 16,035,000 40,384,441 770,617,763 896,317,550 30,822,869 298,575,339 375,446,364 71,207,310 1,069,193,102 1,271,763,914 12,938,668 1,479,284 14,417,952 1,688,894 162,565 1,851,459 14,627,562 1,641,849 16,269,411 483,438,668 111,354,858 594,793,526 1,802,271 2,443,036 1,997,853 56,158,449 1,908,465 1,098,397 406,998 127,702 2,000 36,863,523 12,067,796 598,315,158 154,458,327 265,813,185 1,802,271 2,443,036 1,997,853 56,158,449 1,908,465 1,098,397 406,998 127,702 2,000 36,863,523 166,526,123 864,128,343 Deferred Inflows of Resources Deferred inflows from pensions Deferred inflows from OPEB Total inflow of resources Net Position Net investment in capital assets Restricted for: Police Fire Community services Public works Community development Human services Municpal court City manager Office of strategic management and diversity Debt service Unrestricted Total net position $ The notes to the financial statements are an integral part of this statement. 37 $ $ Statement of Activities For the fiscal year ended June 30, 2018 Charges for Services Expenses Program Revenues Operating Grants and Capital Grants Contributions and Contributions Functions/Programs Governmental activities: Police Fire medical rescue Community services Public works Community development Human services Municipal court Mayor and council City manager City attorney Internal audit office Municipal budget office Office of strategic management and diversity City clerk and elections Internal services Unallocated depreciation Interest on long-term debt Total governmental activities Business-type activities: Water and wastewater Solid waste Emergency medical transportation Golf course Total business-type activities Total government $ $ 107,357,688 42,150,580 29,739,525 102,940,790 17,270,124 22,505,753 5,007,487 405,716 7,045,025 3,283,818 476,584 288,182 981,169 979,356 16,749,283 1,716,725 11,817,213 370,715,018 76,903,243 17,494,354 1,776,367 2,802,184 98,976,148 469,691,166 $ $ 977,914 858,577 8,323,732 16,011,590 15,684,471 9,501 3,559,861 19,361 3,140 3,000,921 48,449,068 87,807,953 16,706,706 2,280,247 2,387,362 109,182,268 157,631,336 $ $ 3,755,909 163,920 5,128,766 7,623,675 69,957 13,049,375 393,960 46,583 3,000 2,453 30,237,598 30,237,598 $ $ 1,439,827 906,395 1,289,361 459,041 4,094,624 4,094,624 General revenues: Sales taxes Intergovenmental revenue, unrestricted Property taxes Franchise taxes Unrestricted investment earnings Miscellaneous Gain on sale of capital assets Transfers Total general revenues and transfers Change in net position Net position - beginning, restated Net position - ending The notes to the financial statements are an integral part of this statement. 38 City of Tempe, Arizona Net (Expense) Revenue and Changes in Net Position Governmental Activities $ $ (101,184,038) (40,221,688) (16,287,027) (78,016,164) (1,056,655) (9,446,877) (1,447,626) (405,716) (6,651,065) (3,217,874) (476,584) (288,182) (978,169) (976,216) (13,745,909) (1,716,725) (11,817,213) (287,933,728) Business-type Activities $ - Total $ (101,184,038) (40,221,688) (16,287,027) (78,016,164) (1,056,655) (9,446,877) (1,447,626) (405,716) (6,651,065) (3,217,874) (476,584) (288,182) (978,169) (976,216) (13,745,909) (1,716,725) (11,817,213) (287,933,728) (287,933,728) 10,904,710 (787,648) 503,880 (414,822) 10,206,120 10,206,120 10,904,710 (787,648) 503,880 (414,822) 10,206,120 (277,727,608) 168,650,143 63,353,523 47,495,555 3,290,220 1,489,603 5,506,328 1,667,264 (1,454,082) 289,998,554 2,064,826 596,250,332 598,315,158 697,388 651,500 33,015 (25,122) 1,356,781 11,562,901 254,250,284 265,813,185 168,650,143 63,353,523 47,495,555 3,290,220 2,186,991 6,157,828 1,700,279 (1,479,204) 291,355,335 13,627,727 850,500,616 864,128,343 $ $ 39 Balance Sheet Governmental Funds June 30, 2018 General Obligation Debt Service Transit Special Revenue General Assets Pooled cash and investments Receivables: Taxes Accounts Accrued interest Due from other funds Due from other governments Inventories Prepaid items Restricted cash and investments Special assessments Capital improvement notes receivable Total assets Liabilities Accounts payable Deposits Accrued expenditures Due to other funds Unearned revenue Matured bonds payable Matured interest payable Total liabilities $ 103,581,520 $ 16,513,441 6,111,454 433,543 1,102,219 461,093 2,930 2,738,658 5,176,954 136,121,812 $ Deferred Inflows of Resources Unavailable revenue- courts Unavailable revenue- federal grants Unavailable revenue- grants Unavailable revenue- notes receivable Unavailable revenue- other Unavailable revenue- property tax Unavailable revenue- special assessments Total deferred inflows of resources Fund Balances Fund balances: Non-spendable Restricted Committed Assigned Unassigned Total fund balances Total liabilities, deferred inflows of resources, and fund balances $ The notes to the financial statements are an integral part of this statement. 40 6,456,557 5,448,143 3,779,143 390,894 16,074,737 $ 40,141,299 $ 6,153,664 76,474 4,542,616 3,094,467 1,526,260 55,534,780 $ 3,249,561 46,762 2,050,000 1,033,424 6,379,747 $ 9,529,127 $ 741,955 285,861 24,042,060 34,599,003 $ 52,245 17,230,000 3,759,745 21,041,990 3,764,177 4,926,954 892,451 265,119 9,848,701 155,193 1,526,260 1,681,453 442,034 442,034 711,092 154,667 15,336,906 93,995,709 110,198,374 28,238,205 11,201,499 8,033,876 47,473,580 13,114,979 13,114,979 136,121,812 $ 55,534,780 $ 34,599,003 City of Tempe, Arizona Special Assessment Debt Service $ 231,998 $ 284,588 432,585 17,956,470 18,905,641 $ 93,500 432,585 526,085 $ 17,194,973 $ 157,037 17,352,010 $ 18,241,058 18,241,058 18,905,641 386,909 386,909 $ 54,613,541 $ 2,032,006 220,497 5,024 3,154,739 885,691 695,978 5,978,246 67,585,722 $ - 138,498 138,498 $ Other Governmental Funds Transit Capital Projects 16,965,101 16,965,101 $ 17,352,010 $ 3,406,642 192,224 444,028 1,102,219 1,256,145 5,545,000 433,364 12,379,622 Total Governmental Funds $ 225,292,458 $ 25,441,066 6,617,812 799,629 1,102,219 7,854,392 1,346,784 698,908 36,286,016 17,956,470 6,703,214 330,098,968 $ 13,551,914 5,640,367 4,269,933 1,102,219 1,740,539 24,825,000 5,659,118 56,789,090 526,483 135,917 50,586 712,986 3,764,177 526,483 291,110 6,453,214 943,037 707,153 18,241,058 30,926,232 1,553,045 21,977,639 28,031,381 3,227,804 (296,755) 54,493,114 2,264,137 80,589,089 39,232,880 26,598,586 93,698,954 242,383,646 67,585,722 41 $ 330,098,968 Reconciliation of the Balance Sheet to the Statement of Net Position June 30, 2018 City of Tempe, Arizona Fund balances- total governmental funds $ 242,383,646 Amounts reported for the governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. Governmental capital assets Accumulated depreciation 1,600,419,970 (787,226,787) 813,193,183 The equity in joint venture is not a financial resource and, therefore, is not reported in the funds. 275,852,791 Other assets are not available to pay current-period expenditures and, therefore, are offset by unavailable revenue. Unavailable special assessment revenue Unavailable tax and other revenue Unavailable notes receivable revenue Unavailable court revenue Grant and contribution monies not received within 60 days 18,241,058 1,650,190 6,453,214 3,764,177 817,593 30,926,232 Bond premiums and the deferred charge on refundings are not financial resources and, therefore, are not reported in the funds. (1,786,939) CDBG settlement (see Note 22) (2,213,846) Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in the governmental funds. Compensated absences Claims and judgments Net pension liability (excluding internal service) Other post employment benefits (excluding internal service) Bonds, capital improvement notes and capital leases (31,362,690) (8,576,085) (339,481,488) (73,335,718) (310,448,610) (763,204,591) Internal service funds are used by management to charge the costs of self insurance to individual funds. The assets and liabilities of the internal service funds are reported with governmental activities. Net position of governmental activities 3,164,682 $ The notes to the financial statements are an integral part of this statement. 42 598,315,158 City of Tempe, Arizona 43 Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Fiscal Year Ended June 30, 2018 General General Obligation Debt Service Transit Special Revenue Revenues: Taxes: Sales taxes Property taxes Franchise taxes Intergovernmental: Federal grants State grants State sales tax State income tax Auto lieu tax Other Investment income Charges for services Fines and forfeitures Other entities' participation Special assessments Licenses and permits Miscellaneous Total revenues $ 107,251,413 19,827,431 3,290,220 $ 41,074,434 - 18,266,956 22,604,114 7,532,801 3,869,434 994,242 13,655,401 6,839,148 359,315 8,330,276 7,942,057 220,762,808 2,006,136 5,635,976 386,052 12,448,593 33,328 61,584,519 $ 27,700,581 30,898 27,731,479 Expenditures: Current: Police Fire medical rescue Community services Public works Community development Human services Municipal court Mayor and council City manager City attorney Internal audit office Municipal budget office Office of strategic management and diversity City clerk and elections Internal services Debt service: Principal Interest Fiscal fees Capital outlay Total expenditures 83,343,898 32,993,517 20,149,424 13,599,389 13,822,031 7,415,773 4,639,330 403,658 6,697,999 3,215,260 490,396 294,404 984,828 995,339 16,263,613 49,706,853 - 205,308,859 7,235,000 2,384,635 35,536 59,362,024 17,230,000 7,164,358 290,713 24,685,071 Excess (deficiency) of revenues over expenditures before other financing sources (uses) 15,453,949 2,222,495 3,046,408 3,211,129 (6,274,028) 87,798 1,642,823 (1,332,278) 8,495,338 (6,987,432) 8,690 (3,152,694) (1,636,098) 6,818,822 (11,896,382) 228,395 (9,462,302) (14,311,467) (11,265,059) - Other financing sources (uses): Transfers in Transfers out Issuance of debt Premium on issuance of debt Capital lease proceeds Proceeds from sale of capital assets Payment to defeased bonds escrow agent Total other financing sources (uses) Net change in fund balance 14,121,671 586,397 Fund balance at beginning of year Fund balance (deficit) at end of year 96,076,703 110,198,374 46,887,183 47,473,580 $ The notes to the financial statements are an integral part of this statement. 44 $ $ 24,380,038 13,114,979 City of Tempe, Arizona Special Assessment Debt Service $ - $ 1,075 2,027,722 10,163 2,038,960 213 $ Other Governmental Funds Transit Capital Projects - $ 8,436,503 - Total Governmental Funds $ 156,762,350 47,528,012 3,290,220 304,887 4,981 605,059 914,927 14,192,302 488,230 11,887,793 3,788,739 73,430 4,340,514 831,482 4,975,266 550,779 49,565,038 16,503,325 488,230 30,154,749 22,604,114 7,532,801 13,294,149 1,489,603 30,445,583 7,670,630 5,972,968 2,027,722 8,330,276 8,502,999 362,597,731 - 3,997,749 166,185 5,357,953 9,210,901 2,586,614 13,012,689 519,012 484,165 46,583 3,000 - 87,341,647 33,159,702 25,507,377 72,517,143 16,408,645 20,428,462 5,158,342 403,658 7,182,164 3,261,843 490,396 294,404 987,828 995,339 16,263,826 1,315,000 897,190 750 2,213,153 3,064,701 3,064,701 5,950,000 880,301 4,594 29,353,973 71,573,719 31,730,000 11,326,484 331,593 32,418,674 366,207,527 (174,193) (2,149,774) (22,008,681) (3,609,796) - 7,468,696 (9,649,588) (2,180,892) 16,303,475 (8,564,973) 25,025,000 3,855,000 34,343 36,652,845 42,297,460 (43,372,403) 25,025,000 4,083,395 87,798 1,685,856 (12,614,996) 17,192,110 (174,193) (4,330,666) 14,644,164 13,582,314 312,691 138,498 21,295,767 16,965,101 39,848,950 54,493,114 228,801,332 242,383,646 $ $ $ 45 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance to the Statement of Activities For the Fiscal Year Ended June 30, 2018 City of Tempe, Arizona Net change in fund balances- total governmental funds $ 13,582,314 Amounts reported for the governmental activities in the statement of activities are different because: Certain expenditures reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Compensated absences and long-term claims and judgements Other post employment benefits (excluding internal service) (4,260,219) (6,876,453) (11,136,672) Certain revenues in the statement of activities do not provide current financial resources and, therefore, are not reported as revenues in the governmental funds. Property tax and charges for services revenue Court revenue Grants and contributions Special assessments received/recognized 120,642 (1,191,994) (2,728,385) (1,180,985) (4,980,722) 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. Capital outlay Miscellaneous net capital expenditures Depreciation expense 32,418,674 16,538,384 (46,765,073) 2,191,985 Government funds report pension contributions as expenditures. However, they are reported as deferred outflows of resources in the Statement of Net Position. The change in the net pension liability, adjusted for deferred pension items, is reported as pension expense in the Statement of Activities. Current year pension contributions Pension expense 30,534,210 (42,385,956) (11,851,746) Lease payments are reported as expenditures in the governmental funds when paid. For the City as a whole, however, the principal portion of the payments serve to reduce the liability in the statement of net position while the acquisition of new leases increase the liability. Principal payments made Capital lease proceeds 56,931 (87,798) (30,867) Governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. Amortization of deferred outflow- refunding Amortization of bond premium (1,444,923) 2,750,783 1,305,860 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 the governmental funds. Neither transaction, however, has any effect on net position. Issuance of debt Premium on issuance of debt Principal payments made (13,875,000) (4,083,395) 31,730,000 13,771,605 Internal service funds are used by management to charge the costs of self-insurance to individual funds. The adjustments for internal service funds close those funds by charging additional amounts to participating governmental activities to completely cover the internal service funds' costs. Change in net position of governmental activities (786,931) $ The notes to the financial statements are an integral part of this statement. 46 2,064,826 Statement of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual General Fund For the Fiscal Year Ended June 30, 2018 City of Tempe, Arizona Budgeted Amounts Revenues Taxes Intergovernmental Investment income Charges for services Fines and forfeitures Licenses and permits Other entities' participation Miscellaneous Total revenues Variance with Final Budget Positive (Negative) Original Final (Budgetary Basis) $ 125,126,695 50,300,349 1,060,000 9,426,570 6,320,251 4,440,500 359,315 6,934,501 203,968,181 $ 125,126,695 50,300,349 1,060,000 9,426,570 6,320,251 4,440,500 359,315 6,934,501 203,968,181 $ 130,369,064 52,273,305 2,008,383 13,655,401 6,839,148 8,330,276 359,315 7,942,057 221,776,949 85,315,634 34,177,796 19,481,214 14,405,624 15,184,489 8,373,773 410,062 4,771,375 6,885,196 3,190,684 512,117 291,311 996,004 1,279,518 30,877,774 1,500,000 (15,941,468) 211,711,103 85,911,489 33,943,778 19,574,112 14,446,641 15,184,489 8,541,046 410,062 4,771,375 6,713,124 3,199,249 512,117 291,311 996,004 1,277,407 28,799,697 941,435 (15,941,468) 209,571,868 83,497,252 33,034,416 19,715,801 14,470,382 14,120,373 8,292,533 403,778 4,635,421 6,467,204 3,213,360 490,181 294,569 984,463 994,381 31,859,021 (15,510,408) 206,962,727 2,414,237 909,362 (141,689) (23,741) 1,064,116 248,513 6,284 135,954 245,920 (14,111) 21,936 (3,258) 11,541 283,026 (3,059,324) 941,435 (431,060) 2,609,141 3,613,452 (3,498,482) 338,975 453,945 (7,288,977) 3,613,452 (3,498,482) 338,975 453,945 (5,149,742) 3,211,129 (6,274,028) 1,642,823 (1,420,076) 13,394,146 (402,323) (2,775,546) 1,303,848 (1,874,021) 18,543,888 Expenditures Police Fire medical rescue Community services Public works Community development Human services Mayor and council Municipal court City manager City attorney Internal audit office Municipal budget office Office of strategic management and diversity City clerk and elections Internal services Contingency Interdepartmental charges Total expenditures Other financing sources (uses) Transfers from other funds Transfers to other funds Proceeds from sale of capital assets Total other financing sources (uses) Net change in fund balance Actual Amounts $ $ Explanation of differences between budgetary revenues and expenditures, and GAAP revenues and expenditures: The City does not budget for the change in the fair value of investment, but recognizes the change for GAAP purposes The City budgets for claims and other accrued expenses on a cash basis, rather than on a modified accrual basis The City recognizes encumbrances as expenditures for budgetary purposes but not for GAAP purposes The City recognizes certain other expenditures on a cash basis, rather than on a modified accrual basis Net change in fund balance as reported on the statement of revenues, expenditures and changes in fund balances- governmental funds The notes to the financial statements are an integral part of this statement. 47 (1,014,141) 166,538 1,369,449 205,679 $ 14,121,671 $ $ 5,242,369 1,972,956 948,383 4,228,831 518,897 3,889,776 1,007,556 17,808,768 Statement of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Transit Special Revenue Fund For the Fiscal Year Ended June 30, 2018 City of Tempe, Arizona Budgeted Amounts Original Final Revenues Sales taxes Intergovernmental revenue Investment income Charges for services Other entities' participation Miscellaneous Total revenues Expenditures Current: Public works Contingency Debt service: Principal retirement Interest and fiscal fees Total expenditures Other financing sources (uses) Transfers from other funds Transfers to other funds Proceeds from sale of capital assets Payment to refunded bond escrow agent Total other financing sources (uses) Net change in fund balance Actual Amounts (Budgetary Basis) Variance with Final Budget Positive (Negative) $ $ $ 37,198,207 8,417,253 512,000 12,966,580 130,000 570,875 59,794,915 $ 37,198,207 8,417,253 512,000 12,966,580 130,000 570,875 59,794,915 54,527,146 178,000 54,527,146 178,000 49,989,265 - 4,537,881 178,000 10,400,000 2,763,813 67,868,959 10,400,000 2,763,813 67,868,959 7,235,000 2,420,171 59,644,436 3,165,000 343,642 8,224,523 (7,642,813) (7,642,813) (7,642,813) (7,642,813) 8,495,338 (6,987,432) 8,690 (3,152,694) (1,636,098) 8,495,338 655,381 8,690 (3,152,694) 6,006,715 $ (15,716,857) $ (15,716,857) 658,265 $ 16,375,122 Explanation of differences between budgetary revenues and expenditures, and GAAP revenues and expenditures: The City does not budget for the change in the fair value of investment, but recognizes the change for GAAP purposes The City budgets for claims and other accrued expenses on a cash basis, rather than on a modified accrual basis The City recognizes certain other expenditures on a cash basis, rather than on a modified accrual basis Net change in fund balance as reported on the statement of revenues, expenditures, and changes in fund balances- governmental funds The notes to the financial statements are an integral part of this statement. 48 41,074,434 7,675,440 740,332 12,448,593 61,938,799 (354,280) 284,642 (2,230) $ 586,397 3,876,227 (741,813) 228,332 (517,987) (130,000) (570,875) 2,143,884 City of Tempe, Arizona 49 Statement of Net Position Proprietary Funds June 30, 2018 City of Tempe, Arizona Business-type Activities - Enterprise Funds Water and Wastewater Solid Waste Emergency Medical Transportation Golf Course $ $ Total Governmental ActivitiesInternal Service Funds Assets Current assets: Pooled cash and investments Restricted cash and investments Accounts receivable Accrued interest receivable Due from other funds Inventories Total current assets Noncurrent assets: Advance to other funds Notes receivable Equity in joint venture Capital assets: Land Buildings Infrastructure Improvements Machinery and equipment Construction in progress Less accumulated depreciation Total capital assets (net of accumulated depreciation) Total noncurrent assets Total assets $ 93,440,324 34,952,642 12,882,847 433,747 992,969 769,252 143,471,781 3,011,085 697,387 113,669,762 $ 3,967,789 1,246,434 32,235 5,246,458 - 1,122,728 1,122,728 - 12,265 12,265 - $ 97,408,113 34,952,642 15,252,009 478,247 992,969 769,252 149,853,232 $ 13,890,880 63,166 4,500 13,958,546 3,011,085 697,387 113,669,762 - 6,330,829 46,714,221 334,283,600 206,579,758 15,084,793 29,676,926 (286,359,628) 1,265,783 14,386,038 74,719 (9,190,949) 681,228 (69,494) 362,548 1,822,663 3,210,587 1,368,293 1,837,096 (3,698,090) 6,693,377 49,802,667 337,494,187 207,948,051 31,989,155 29,751,645 (299,318,161) - 352,310,499 469,688,733 6,535,591 6,535,591 611,734 611,734 4,903,097 4,903,097 364,360,921 481,739,155 - 613,160,514 11,782,049 1,734,462 4,915,362 631,592,387 13,958,546 12,364,932 1,932,394 274,952 14,572,278 719,862 90,272 810,134 60,143 3,275 63,418 62,936 13,909 76,845 12,364,932 2,775,335 382,408 15,522,675 91,810 5,613 97,423 Deferred Outflows of Resources Deferred charge on refunding Deferred outflows related to pensions Deferred outflows related to OPEB Total deferred outflows of resources 50 Business-type Activities - Enterprise Funds Water and Wastewater Solid Waste Emergency Medical Transportation Golf Course $ $ Total Governmental ActivitiesInternal Service Funds Liabilities Current liabilities: Accounts payable Deposits Accrued expenses Due to other funds Unearned revenue Accrued interest payable General obligation bonds- current Excise tax revenue obligations- current WIFA loan payable- current Capital leases payable- current Total current liabilities $ Noncurrent liabilities: Advance from other funds General obligation bonds payable Excise tax revenue obligations WIFA loan payable Capital leases payable OPEB obligation Pensions Total noncurrent liabilities Total liabilities 5,400,974 810,796 2,491,619 173,223 5,628,680 18,735,000 10,590,000 782,281 44,612,573 $ 1,100,486 54,277 827,950 1,982,713 9,566 34,016 119,618 163,200 77,064 114,505 873,351 105,588 1,170,508 $ 6,588,090 865,073 3,468,090 992,969 173,223 5,628,680 18,735,000 10,590,000 782,281 105,588 47,928,994 $ 149,742 9,849,887 9,999,629 209,439,034 79,775,573 8,799,363 6,571,897 15,198,498 319,784,365 2,086,276 5,720,875 7,807,151 - 3,011,085 107,679 359,217 451,927 3,929,908 3,011,085 209,439,034 79,775,573 8,799,363 107,679 9,017,390 21,371,300 331,521,424 89,059 740,226 829,285 364,396,938 9,789,864 163,200 5,100,416 379,450,418 10,828,914 1,201,082 116,832 1,317,914 452,099 40,996 493,095 - 35,713 4,737 40,450 1,688,894 162,565 1,851,459 58,497 3,876 62,373 102,528,788 159,489,152 262,017,940 6,535,591 (4,226,367) 2,309,224 1,678,745 (1,827,404) (148,659) 111,354,858 154,458,327 265,813,185 3,164,682 3,164,682 Deferred Inflows of Resources Deferred inflows related to pensions Deferred inflows related to OPEB Total deferred inflows of resources Net Position Net investment in capital assets Unrestricted Total net position $ $ The notes to the financial statements are an integral part of this statement. 51 $ 611,734 1,022,946 1,634,680 $ $ $ Statement of Revenues, Expenses and Changes in Net Position Proprietary Funds For the Year Ended June 30, 2018 City of Tempe, Arizona Business-type Activities - Enterprise Funds Water and Wastewater Operating revenues: Charges for services Miscellaneous Total operating revenues Operating expenses: Personnel services Supplies and materials Fees and services Depreciation Total operating expenses Operating income (loss) Nonoperating revenues (expenses): Investment income (loss) Interest and fiscal fees Gain (loss) on sale of capital assets Gain on transfer of capital assets Net loss from joint venture Income (loss) before contributions and operating transfers Transfers in Transfers out Change in net position Total net position- beginning, restated Total net position- ending $ Solid Waste Total Governmental ActivitiesInternal Service Funds 2,387,362 577 2,387,939 $ 109,182,268 651,500 109,833,768 $ 35,294,459 35,294,459 Emergency Medical Transportation Golf Course $ $ 87,807,953 106,932 87,914,885 $ 16,706,706 2,745 16,709,451 13,826,928 5,240,202 20,823,001 20,627,696 60,517,827 27,397,058 5,224,691 873,089 10,046,020 1,329,019 17,472,819 (763,368) 792,855 229,028 727,117 27,367 1,776,367 1,045,126 487,457 423,933 1,453,806 399,023 2,764,219 (376,280) 20,331,931 6,766,252 33,049,944 22,383,105 82,531,232 27,302,536 37,583,820 37,583,820 (2,289,361) 682,974 (10,192,707) 16,654 (6,192,709) 14,414 (21,535) - 379,140 - (37,965) 16,361 - 697,388 (10,230,672) 11,480 379,140 (6,192,709) 23,225 - 11,711,270 (770,489) 1,424,266 (397,884) 11,967,163 (2,266,136) 6,209,842 (7,093,662) 10,827,450 239,917 (44,773) (575,345) 210,414 1,634,680 74,000 (323,884) 6,734,173 (7,138,435) 11,562,901 1,479,205 (786,931) 251,190,490 $ 262,017,940 2,884,569 $ 2,309,224 The notes to the financial statements are an integral part of this statement. 52 2,280,247 541,246 2,821,493 $ 1,634,680 $ 175,225 254,250,284 (148,659) $ 265,813,185 3,951,613 $ 3,164,682 Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2018 City of Tempe, Arizona Business-type Activities- Enterprise Funds Water and Wastewater Cash flows from operating activities: Receipts from customers Receipts from other funds Payments to employees for services Payments to suppliers for goods and services Payment for premiums and settlement of claims Net cash provided (used) by operating activities $ 88,904,826 (14,374,105) (25,232,682) 49,298,039 Solid Waste Emergency Medical Transportation Golf Course $ $ $ 16,644,210 (5,417,194) (10,465,144) 761,872 1,698,765 (822,257) (946,579) (70,071) 2,387,939 (552,061) (1,892,320) (56,442) Total $ 109,635,740 (21,165,617) (38,536,725) 49,933,398 Governmental ActivitiesInternal Service Funds $ 35,802,744 (35,209,220) 593,524 Cash flows from noncapital financing activities: Advances from/(to) other funds Transfers in Transfers out Net cash provided (used) by noncapital financing activities (684,583) 6,209,842 (7,093,662) (1,568,403) 239,917 (44,773) 195,144 119,618 210,414 330,032 564,965 74,000 638,965 6,734,173 (7,138,435) (404,262) Cash flows from capital and related financing activities: Proceeds from issuance of bonds Principal paid on advances Principal paid on long-term debt Principal paid on capital leases Interest and fiscal fees Change in capital assets Investment in joint venture Deferred revenue Proceeds from the sale of assets Net cash provided (used) by capital and related financing activities 22,535,000 (28,830,580) (8,832,147) (26,802,978) (3,283,719) 30,760 18,837 (45,164,827) (516,855) 57,810 (459,045) (259,961) (259,961) (153,965) (105,567) (37,965) (301,564) 16,361 (582,700) 22,535,000 (153,965) (28,830,580) (105,567) (8,870,112) (27,881,358) (3,283,719) 30,760 93,008 (46,466,533) - 647,355 341,644 988,999 13,166 13,166 - 177 177 660,698 341,644 1,002,342 22,459 22,459 3,553,808 124,839,158 511,137 3,456,652 - - 4,064,945 128,295,810 2,095,188 11,795,692 Cash flows from investing activities: Interest received Issuance of notes receivable Net cash provided (used) by investing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Reconciliation of operating income (loss) to net cash provided (used) by operating activities: $ 128,392,966 $ 3,967,789 $ Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation Change in assets and liabilities: (Increase) decrease in receivables (Increase) decrease in inventories Increase (decrease) in deposits Increase (decrease) in payables Increase (decrease) in accrued expenses (Increase) decrease in deferred outflows Increase (decrease) in deferred inflows Increase (decrease) in pension Increase (decrease) in net OPEB liability Net cash provided (used) by operating activities $ 27,397,058 $ (763,368) $ 1,045,126 $ - 1,479,205 1,479,205 $ - $ 132,360,755 $ 13,890,880 $ (376,280) $ 27,302,536 $ (2,289,361) $ 508,285 6,074 2,397,562 64,421 (38,774) (56,980) 2,297 593,524 20,627,696 1,329,019 27,367 399,023 22,383,105 989,941 (12,027) 100,581 741,967 (207,724) 1,569,632 (809,855) (1,313,836) 214,606 49,298,039 $ (65,241) 54,277 399,688 (100,606) 567,513 (296,942) (429,555) 67,087 761,872 $ (1,122,728) 9,566 34,016 (63,418) (70,071) $ (14,581) (5,207) 58,252 (31,434) (208,406) 122,191 (56,442) $ (198,028) (12,027) 154,858 1,136,640 (279,521) 2,131,979 (1,138,231) (1,951,797) 403,884 49,933,398 - Noncash investing, capital, and financing activities: Net loss from joint venture $ (6,192,709) $ - $ - $ - $ (6,192,709) $ - Total noncash investing, capital, and financing activities: $ (6,192,709) $ - $ - $ - $ (6,192,709) $ - The notes to the financial statements are an integral part of this statement. 53 Statement of Net Position Fiduciary Fund For the Fiscal Year Ended June 30, 2018 City of Tempe, Arizona Other Post Employment Benefits Trust Assets Cash and investments Total assets $ Net Position Restricted for other post employment benefits Total net position $ 13,391,250 13,391,250 13,391,250 13,391,250 Statement of Changes In Net Position Fiduciary Fund For the Fiscal Year Ended June 30, 2018 City of Tempe, Arizona Other Post Employment Benefits Trust Additions: Employer contributions $ Investment earnings: Net increase in fair value of investments Investment income Investment expenses Net investment earnings 6,983,551 424,609 698,569 (60,508) 1,062,670 Total additions 8,046,221 Deductions: Benefit payments Total deductions 6,983,551 6,983,551 Change in net position 1,062,670 Net position- beginning Net position- ending $ The notes to the financial statements are an integral part of these statements. 54 12,328,580 13,391,250 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona The City of Tempe, Arizona (the "City") was incorporated on November 26, 1894. On October 19, 1964, the electors in accordance with Arizona State Law ratified a Home Rule City Charter. The City operates under a Council-Manager form of government and provides services as authorized by its charter including: public safety (police, fire, building inspection), highways and streets, public transit, sanitation, water and wastewater, cultural-recreational, community development, and administrative. NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying summary of the City's significant accounting policies is presented to assist the reader in interpreting the basic financial statements. The basic financial statements of the City have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP") as applied to governmental units. During the year ended June 30, 2018, the City implemented the provisions of GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefit Plans other than Pension Plans. The primary objective of this Statement is to improve accounting and financial reporting by state and local governments for postemployment benefits other than pensions (other postemployment benefits or OPEB). It also improves information provided by state and local governmental employers about financial support for OPEB that is provided by other entities. A. Reporting Entity The accompanying basic financial statements include the City and its component unit, collectively referred to as "the financial reporting entity". In accordance with the Governmental Accounting Standards Board's ("GASB") Statement 14, as amended, the component unit discussed below has been included in the City's financial reporting entity because of the significance of its financial relationships with the City. Rio Salado Community Facilities District: The Rio Salado Community Facilities District (CFD) was organized on February 20, 1997, under the laws of the State of Arizona to facilitate development of the Rio Salado Town Lake project. The board of the district is comprised of the same members as the City’s council. Data for this component unit has been included in the City's basic financial statements utilizing the "blending" method because its sole purpose is to finance public facilities and facilitate development for the City. Blending involves aggregating the component unit’s data and data from the City at the government-wide and fund financial statement level. Separately issued financial statements are not available for the City's component unit. B. Basic Financial Statements The basic financial statements include both government-wide (based on the City as a whole and its component unit) and fund financial statements. Both the government-wide and fund financial statements categorize activities as either governmental activities or business-type activities. Governmental activities are normally supported by taxes and intergovernmental revenues. Business-type activities rely to a significant extent, on fees and charges for support. All activities, both governmental and business-type, are reported in the government-wide financial statements using the economic resources measurement focus and the accrual basis of accounting, which includes long-term assets as well as long-term obligations. The government-wide financial statements focus more on the sustainability of the City as an entity and the change in aggregate financial position resulting from the activities of the fiscal period. The government-wide financial statements exclude the fiduciary fund. 55 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) B. Basic Financial Statements (Continued) The government-wide Statement of Activities demonstrates the degree to which the direct expenses, including depreciation, of the various departments of the City are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific department. Interest on long-term debt and depreciation expense on assets shared by multiple departments, are not allocated to the various departments. Program revenues include revenues from fines and forfeitures, licenses and permit fees, special assessment taxes, certain intergovernmental grants, other entities participation and charges for services. Taxes and other items not properly included among program revenues are reported as general revenues. Generally, the effect of interfund activity has been removed from the government-wide financial statements. Net interfund activity and balances between governmental activities and business-type activities are shown in the government-wide financial statements. The City does not currently utilize an indirect cost allocation system. The General Fund charges certain administrative fees to departments within other operating funds to support general services used by those funds. The expenditures/expenses are recorded as a reduction of expense in the allocating fund. Therefore, no elimination is required from either the government-wide or fund level financial statements. The fund financial statements are, in substance, very similar to the financial statements presented prior to the adoption of GASB Statement 34. Emphasis here is on the major funds in either the governmental, business-type or fiduciary categories. Non-major funds are summarized into a single column. Unless an internal service fund is combined with the business-type activities (deemed to be an infrequent event), totals on the proprietary fund statement should directly reconcile to the business-type activity column presented in the government-wide statements. Internal service funds of a government (which traditionally provide services primarily to other funds of the City) are presented as part of the proprietary fund financial statements. Since the principal users of the internal services are the City’s governmental activities, financial statements of internal service funds are consolidated into the governmental activities column when presented at the government-wide level. To the extent possible, the costs of these services are reflected in the appropriate department. C. Basis of Presentation The City uses funds to report on its financial position and the results of its operations. A fund is a separate accounting entity with a self-balancing set of accounts. Fund accounting is designed to demonstrate legal compliance and to aid in the City's financial management by segregating transactions related to certain functions or activities. The following fund categories are used by the City: Governmental Funds Governmental Funds are those through which most of the governmental functions of the City are financed. The focus of Governmental Fund measurement, in the fund financial statements, is upon determination of financial position and changes in financial position rather than upon net income. 56 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Basis of Presentation (Continued) Governmental Funds (Continued) Governmental Funds include the following fund types: General - The General Fund is the general operating fund of the City. It is used to account for all activities of the City not accounted for in some other fund. Special Revenue - Special Revenue Funds are used to account for the proceeds of specific revenue sources (other than for major capital projects) that are legally or otherwise restricted to expenditures for specified purposes. There is one special revenue fund presented as a major fund in the basic financial statements, it is as follows: Transit Special Revenue Fund - accounts for the receipt and expenditures of the Transit Tax monies. These monies are restricted to financing transit operations and improvements. Debt Service - Debt Service Funds are used to account for the accumulation of resources for, and the payment of, long term debt not being accounted for in the Special Revenue Funds and Enterprise Funds. Both debt service funds are presented as major funds in the basic financial statements: General Obligation Debt Service Fund - accounts for the accumulation of resources and payments of general obligation and other debt. Special Assessment Debt Service Fund - accounts for the accumulation of resources and payments of special assessment debt. Capital Projects - Capital Projects Funds are used to account for financial resources to be used for the acquisition or construction of major capital facilities and improvements (other than those financed by Enterprise Funds). The following capital project fund is presented as a major fund in the basic financial statements: Transit Capital Projects Fund - used for the acquisition of buses, the light rail system, and other traffic flow improvements. Proprietary Funds Proprietary funds are used to account for the City's ongoing operations and activities, which are similar to those often found in the private sector. The focus of Proprietary Fund measurement is upon the determination of operating income, changes in net position, financial position and cash flows. Each proprietary fund is reported as a major fund in the basic financial statements. 57 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Basis of Presentation (Continued) Proprietary Funds (Continued) Proprietary funds include the following fund types: Enterprise - Enterprise Funds are used to account for operations, including debt service, (a) that are financed and operated in a manner similar to private businesses - where the intent of the government body is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis is financed or recovered primarily through user charges; or (b) where the governing body has determined that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. Equity in Joint Venture - The equity method is used to account for the City's equity interest in a joint venture (See Note 7). Under this method, the equity interest is recorded in the balance sheet as a single amount. In addition, the City's share of the net income or loss is reported in the Statement of Revenues, Expenses and Changes in Fund Net Position - Proprietary Funds, as a nonoperating revenue or expense. The following enterprise funds are used by the City: Water and Wastewater Fund – accounts for the provision of water and sewer services to the residents of the City and some residents in the adjoining Town of Guadalupe. All activities necessary to provide such services are accounted for in this fund, including but not limited to administration, operation, maintenance, financing and related debt service, billing and collection. Solid Waste Fund – accounts for the provision of refuse collection and disposal services for both residential and commercial customers. All activities necessary to provide such services are accounted for in this fund, including but not limited to administration, operation, maintenance, financing, billing and collection. Golf Course Fund - accounts for the operation of the Rolling Hills and Ken McDonald golf courses. All activities necessary to provide such services are accounted for in this fund, including but not limited to administration, operation, maintenance and financing. Emergency Medical Transportation Fund – accounts for the operation of emergency medical transportation services. Revenues are derived from the user fees collected for ambulance services. All activities necessary to provide such services are accounted for in this fund, including but not limited to administration, operation and maintenance. Internal Service - Internal Service Funds account for operations that provide services to other departments or agencies of the government, or to other governments, on a cost-reimbursement basis. The following internal service funds are used by the City: Risk Management Fund – accounts for expenses incurred for automobile liability, general liability, and property claims under the City’s self-insurance program. Worker’s Compensation Fund – accounts for expenses incurred for worker’s compensation claims under the City’s self-insurance program. Health Fund – accounts for the expenses incurred for employee health related costs under the City’s self-insurance program. 58 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Basis of Presentation (Continued) Fiduciary Funds Fiduciary funds are used to account for resources held for the benefit of parties outside of the City. The fiduciary fund is reported by fund type. The following fiduciary fund is used by the City. Other Post Employment Benefits Trust Fund – accounts for activities of the Other Post Employment Benefits Plan, which accumulates resources for health care benefit payments to qualified retirees. D. Measurement Focus and Basis of Accounting The government-wide, proprietary and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Under this method, revenues are recorded when earned and expenses are recorded at the time liabilities are incurred. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. This is the manner in which these funds are normally budgeted. This presentation is deemed most appropriate to 1) demonstrate legal and covenant compliance, 2) demonstrate the source and use of liquid resources, and 3) demonstrate how the City’s actual experience conforms to the annual budget. Under the modified accrual basis of accounting, revenues are recorded when susceptible to accrual, i.e., both measurable and available. "Measurable" means the amount of the transaction can be determined and "available" is defined as collectible within the current period or within 60 days of the end of the current fiscal period. Expenditures, other than interest on long-term debt, are recorded when the related fund liability is incurred, if measurable. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgements, are recorded only when payment is due. As permitted by generally accepted accounting principles the City applies the “early recognition” option for debt service payments. Resources are provided during the current year for the payment of debt service principal and interest due early in the following year (less than one month). Therefore, the expenditures and related liabilities have been recognized in the current period. Revenues susceptible to accrual include property tax, local sales tax, state-shared sales tax, highway user tax, vehicle license tax, franchise fees, special assessments and interest earned on pooled investments. Licenses and permits, charges for services, fines and forfeitures and miscellaneous revenues are generally recorded as revenues when received in cash because they are not measurable until actually received. In applying the susceptible to accrual concept to intergovernmental revenues, the legal and contractual requirements of the numerous individual programs are used as guidance. There are, however, essentially two types of these revenues. In one, monies must be expended for a specific purpose or project before any amounts will be paid to the City; therefore, revenues are recognized based upon the expenditures recorded. In the other, monies are virtually unrestricted as to the purpose of expenditure and are usually revocable only for failure to comply with prescribed compliance requirements. These resources are reflected as revenues at the time of receipt or earlier if the susceptible to accrual criteria are met. The City reports unearned revenues in the governmental funds if the potential revenue does not meet both the "measurable" and "available" criteria for recognition in the current period. Unearned revenues arise when resources are received by the City before it has a legal claim to them, as when grant monies are received prior to the incurrence of qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the City has a legal claim to the resources, the liability for the unearned revenue is removed and revenue is recognized. 59 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Measurement Focus and Basis of Accounting (Continued) Since the governmental fund financial statements are presented on a basis different than the governmental activities column of the government-wide financial statements, a reconciliation is provided immediately following each fund statement. These reconciliations briefly explain the adjustments necessary to transform the governmental fund financial statements into the governmental activities column of the government-wide financial statements. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. An exception to this rule is charges between the government’s water and sewer function and various functions of the City. Elimination of these charges would distort the direct costs and program revenues reported for the applicable functions. Amounts reported as program revenue include 1) charges to customers or users who purchase, use or directly benefit from goods or services provided by a particular department 2) operating grants and contributions that are restricted to meeting the operational requirements of a particular department and 3) capital grants and contributions that are restricted. Taxes, investment income and other revenues not identifiable with a particular department are included as general revenues. The general revenues support the net costs of the departments not covered by program revenues. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing goods and services of the fund’s principal ongoing operations. Operating expenses include the cost of providing the goods and services, administrative expenses, and depreciation on capital assets. Non-operating revenues and expenses are items such as investment income and interest expense, which are not a result of the direct operations of the activity. E. Budgetary Data State law mandates that cities and towns adopt a budget annually. As a result, an operating budget is legally adopted each fiscal year for the General, Special Revenue, Debt Service, and Proprietary Funds on a modified accrual basis plus encumbrances. The separately issued annual budget may be obtained from the City's Municipal Budget Office, 31 East 5th Street, Tempe, Arizona, 85281. Certain differences as described in Note 2 exist between the basis of accounting used for budgetary purposes and that used for reporting purposes in accordance with GAAP. The legal level of budgetary control is at the city-wide level consisting of the total operating budget and the total capital projects budget, as adopted. Management may amend the budget at any level below the total budget as adopted. The total budget can only be amended by the City Council subject to limitations in the State law (see Note 1F). At the end of each fiscal year, all amounts encumbered are reappropriated as part of the following year’s operating or capital projects budget. Any appropriations that are either unexpended or unencumbered, lapse at fiscal year-end. No supplemental appropriations were necessary during the year. The City adheres to the following procedures in establishing the budgetary data reflected in the basic financial statements: 1) Prior to May 1, the City Manager submits to the City Council a proposed operating budget for the fiscal year commencing the following July 1. The operating budget includes proposed revenues and expenditures. 2) Public hearings are conducted to obtain taxpayer comments. 3) Prior to July 1, the budget is legally enacted through passage of a resolution. 60 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) F. Expenditure Limitation On June 3, 1980, the voters of Arizona approved an expenditure limitation for all local governments, which restricts the annual growth of expenditures to a percentage determined by population and inflation. Certain types of expenditures are excluded from the limitation. Article 9, Sections 20 and 21 of the Arizona Constitution require the Economic Estimates Commission to determine each year the expenditure limitation for the following fiscal year for each city. The limitation is calculated based upon the amount of FY 1979-80 actual payments of local revenues, referred to as the “base limit”. Each year, the base limits for local jurisdictions are adjusted for population and inflation to reach the expenditure limitations. The City of Tempe’s 2018 Expenditure Limitation is $335,790,320. Local governments may carry forward to future years’ revenues, which are not subject to the expenditure limitation and were not expended in the year of receipt. G. Pooled Cash and Investments Cash resources of the City are combined to form a pool of cash and investments managed by the Accounting Division. Excluded from this pool are certain legally restricted cash resources. In accordance with the City’s legally adopted budget, the interest earned on pooled investments is recorded in the General Fund, except for the earnings of Enterprise Funds and other funds whose interest earnings are specifically mandated by law or an outside regulating agency to remain in those funds. Investments are stated at fair value. The City's investment policy permits investment in the following instruments: 1) Obligations of the United States Government, its agencies and instrumentalities; 2) Fully insured or collateralized certificates of deposit and other evidences of deposit at banks and savings and loan associations; 3) Bankers' acceptances issued by the 10 largest domestic banks and the 20 largest international banks, provided collateral meets the standards set by the Investment Advisory Committee; 4) A-1/P-1 rated commercial paper secured by an irrevocable line of credit or collateralized by U.S. government securities; 5) Repurchase agreements whose underlying collateral consist of the foregoing; 6) Money market funds whose portfolios consist of the foregoing; and 7) The State of Arizona's Local Government Investment Pools 5 and 7. H. Receivables For accounts receivable, all amounts outstanding in excess of 120 days are included in the allowance. I. Inventories and Prepaid Items All inventories are valued using the average cost method. They consist of expendable supplies held for consumption and are accounted for using the consumption method. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. 61 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) J. Restricted Assets Certain proceeds of the City’s bonds, as well as certain resources set aside for their repayment, are classified as restricted on the Balance Sheet, or Statement of Net Position, because they are maintained in trust accounts and their use is limited by applicable debt covenants. In addition, the Industrial Commission of Arizona requires a restricted security for self-insured entities. As the City is self-insured, a security of $2.7 million is included in restricted assets in the General Fund. K. Capital Assets Capital assets, including public domain infrastructure (e.g., roads, bridges, curbs and gutters, streets and sidewalks, drainage systems, and lighting systems) are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the government as assets with an initial, individual cost of more than $10,000 ($25,000 for infrastructure assets) and an estimated useful life greater than three years. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets, donated works of arts and capital assets received in a service concession arrangement are recorded at acquisition value at the date of donation. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend its life, are not capitalized. Major improvements are capitalized and depreciated over the remaining useful lives of the related capital assets. Property, plant and equipment are depreciated using the straight-line method over the following estimated useful lives (land and construction-in-progress are not depreciated): Assets Useful Life (years) Buildings Infrastructure Improvements Machinery and equipment 10-70 7-70 10-50 3-15 L. Deferred Outflows/Inflows of Resources In addition to assets, the statement of financial position may report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period and so will not be recognized as an outflow of resources (expense/expenditure) until then. In addition to liabilities, the statement of financial position may report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period and so will not be recognized as an inflow of resources (revenue) until that time. M. Compensated Absences Accumulated unpaid vacation, vested sick pay and earned compensatory time are accrued in the Government-wide and all Proprietary Fund statements. Compensated absences are only reported in the governmental funds if they have matured (i.e. unused reimbursable leave still outstanding following an employee’s resignation or retirement). These long-term liabilities of the governmental funds are not shown on the fund financial statements, as the benefits 62 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) M. Compensated Absences (Continued) are not expected to be liquidated with expendable available financial resources. Vacation leave will be absorbed by time off from work or, within certain limitations, may be payable to the employees. Sick leave is accumulated at the rate of 96 hours (or a proportionate equivalent for employees with workweeks other than 40 hours) per year up to a maximum of 480 hours. Each year, hours accumulated in excess of 480 hours are either converted to cash at a 4-for-1 rate or accumulated in a “sick bank”. Generally upon retirement or resignation, employees with at least 10 or 20 years of service are eligible for compensation of up to 50 percent, or 60 percent respectively, of accumulated sick leave. Each employee receives a $500 "Mediflex" allowance each year as reimbursement for all otherwise non-reimbursed health maintenance costs. Unused balances are accumulated. Upon termination, for employees with at least 10 years of service, the balance is transferred to a “Retiree Funded Health Savings Account”. N. 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 plan’s fiduciary net position and additions to/deductions from the plan’s fiduciary net position have been determined on the same basis as they are reported by the plan. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. O. Other Post-Employment Benefits (OPEB) For purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position and additions to/deductions from the plan’s fiduciary net position have been determined on the same basis as they are reported by the plan. For this purpose, benefit payments are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value, except for money market investments and participating interest-earning investment contracts that have a maturity at the time of purchase of one year or less, which are reported at cost. P. Long-term Obligations In the government-wide financial statements, and proprietary fund types in the fund financial statements, longterm debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type. Bond premiums and discounts are deferred and amortized over the life of the bonds. Bonds payable are reported net of the applicable bond premium or discount. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, in the period in which the bonds are issued. 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. Q. Interfund Transactions Interfund transactions consist of identified services performed for other funds or costs billed to other funds and are recorded as expenditures in the fund receiving the services and as a reimbursement, reducing expenditures, in the fund performing the services except for sales of water, sewer and refuse services to other City departments and the internal service risk management, worker’s compensation or health charges which are recorded as revenue and expenditures in the appropriate funds. All other interfund transactions are reported as transfers. 63 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) R. Fund Equity In the fund financial statements, the classifications of fund balance are Nonspendable, Restricted, Committed, Assigned, and Unassigned. Nonspendable and Restricted fund balances represent the “restricted” classifications and Committed, Assigned, and Unassigned represent the “unrestricted” classifications (see Note 11). S. Statements of Cash Flows The City considers all highly liquid investments (including restricted assets) with an original maturity of three months or less to be cash equivalents. For the purposes of the statement of cash flows, all pooled cash and investments are also considered to be cash equivalents, although there are investments with maturities in excess of three months when purchased in the portfolio. This is due to the fact that the Proprietary funds may deposit or withdraw cash at any time without prior notice or penalty, having the characteristics of demand deposits. In a statement of cash flows, cash receipts and payments are classified according to whether they stem from operating, noncapital financing, capital and related financing, or investing activities. T. 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, liabilities, 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. NOTE 2 - BUDGET BASIS OF ACCOUNTING Arizona state statutes require accounting for certain transactions to be on a basis other than GAAP. The actual results of operations, in accordance with state statutes ("budget basis") are presented in the Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual for the General Fund and Transit Special Revenue Fund (major funds) to provide a meaningful comparison of actual results with the budget. Budgetary statements include a reconciliation of the adjustments required to convert the budgetary basis to GAAP basis. The major differences between the budget and GAAP bases are: 1) Encumbrances are recorded as the equivalent of expenditures (budget) as opposed to a reservation of fund balance (GAAP). 2) Certain revenues and expenditures not recognized in the budgetary year are accrued (GAAP). 3) Changes in the fair value of investments (GAAP) are not budgeted. NOTE 3 - PROPERTY TAXES Under Arizona law a two-tiered tax system exists: (1) a primary system for taxes levied to pay for current operation and maintenance expenses, and (2) a secondary system for taxes levied to pay principal and interest on bonded indebtedness as well as for the determination of the maximum permissible bonded indebtedness. In Fiscal Year 2016, with the passage of Proposition 117, the limited property tax value was required to be used in determining and levying primary and secondary taxes on all property. In May 2016, legislation was passed by the Arizona State Legislature, effective August 2016, which clarifies that the valuation for the calculation of the debt limit is the full cash (secondary) property value rather than the limited property value. Primary levies are limited to a 2% increase annually plus levies attributable to assessed valuation added as a result of growth and annexation. Secondary tax levies do not have a limitation. 64 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 3 - PROPERTY TAXES (Continued) The City's property tax is levied each year on or before the third Monday in August based on the previous January 1 Limited Property Tax 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 on November 1 and May 1, respectively. Delinquent amounts bear interest at the rate of 16%. Maricopa County, at no charge to the taxing entities, bills and collects all property taxes. Public auctions of properties which have delinquent real estate taxes are held in February following the May 1 date upon which the second installment becomes delinquent. The purchaser is given a Certificate of Purchase issued by the County Treasurer. Five years from the date of sale, the holder of a Certificate of Purchase, which has not been redeemed, may demand of the County Treasurer a County Treasurer's Deed. Additionally, a lien against property assessed attaches on the first day of January preceding the assessment and levy thereof. NOTE 4 - CASH AND INVESTMENTS The City maintains a cash and investment pool that is available for use by all funds. Each fund type's portion of this pool is displayed on the Statement of Net Position and on the Balance Sheet as "Pooled cash and investments." Pooled cash and investments are stated at fair value, with accrued interest shown under “Accrued interest receivable”. The change in fair value of the investments is recorded in investment income. Restricted cash and investments are amounts held separately by trustees and segregated due to their source and future intent. Amounts held by trustees are invested in money market securities, maturing within one year from the time of purchase, or US treasury obligations and are reported at amortized cost. Deposits At year-end, the carrying amount of the City's deposits with financial institutions was $6,477,233 and the bank balance was $5,104,672; $4,604,672 of that amount was exposed to custodial risk because it was uninsured and is collateralized with securities held by the pledging financial institution. Investments City Charter, Ordinance, and Trust Agreements authorize the City to invest in US treasury obligations, US agency obligations, certificates of deposit that are fully insured or collateralized, banker’s acceptances issued by the 10 largest domestic banks and the 20 largest international banks, A-1/P-1 rated commercial paper secured by an irrevocable line of credit or collateralized by US government securities, repurchase agreements whose underlying collateral consist of the foregoing, money market funds whose portfolios consist of the foregoing and the Arizona Local Government Investment Pools 5 and 7. Cash and investments as of June 30, 2018 are classified in the accompanying financial statements as follows: Carrying amount of investments Carrying amount of cash deposits Total cash and investments $414,744,126 6,477,233 $421,221,359 Pooled cash and investments – unrestricted Restricted cash and investments Investments in OPEB trust Total cash and investments $336,591,451 71,238,658 13,391,250 $421,221,359 65 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 4 - CASH AND INVESTMENTS (Continued) Investments (Continued) The City had a net decrease in the fair value of investments during Fiscal Year 2018 of $2,842,006. This amount takes into account all changes in fair value (including purchases and sales) that occurred during the year. At June 30, 2018, the City maintained the following investments and maturities: Remaining Maturity in Months Investment Type US government treasuries US government agencies Money market Principal cash held with trustee State investment pool Mutual funds Category Fair Value 12 Months or Less 13 - 24 Months 25 - 36 Months Level 2 $ 140,488,143 $ 30,444,811 $ 63,522,534 $46,520,798 Level 2 Level 1 147,504,207 83,330,521 74,028,747 83,330,521 47,206,964 - 26,268,496 - Level 1 27,479 27,479 - - N/A Level 1 30,036,814 13,356,962 $ 414,744,126 30,036,814 13,356,962 $231,225,334 $110,729,498 $72,789,294 Fair Value Measurements. The City categorizes its fair value measurements 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.    Level 1 inputs are quoted prices in active markets for identical assets Level 2 inputs are significant other observable inputs Level 3 inputs are significant unobservable inputs For level 2 investments, one method used to establish fair market value is the evaluators gather information from market sources and integrate relative credit information, observed market movements, and sector news into the evaluated pricing applications and models. Another method is a volatility-driven, multi-dimensional single cash flow stream model or option-adjusted spread (OAS) model is used. The State Treasurer’s pool is an external investment pool, the Local Government Investment Pool (Pool 5), with no regulatory oversight. The pool is not required to register (and is not registered) with the Securities and Exchange Commission. The activity and performance of the pool is reviewed monthly by the State Board of Investment. The fair value of each participant’s position in the State Treasurer investment pool approximates the value of the participant’s shares in the pool and the participants’ shares are not identified with specific investments. Participants in the pool are not required to categorize the value of shares in accordance with the fair value hierarchy. 66 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 4 - CASH AND INVESTMENTS (Continued) Investments (Continued) Interest rate risk. One of the ways the City limits its exposure to fair value losses arising from rising interest rates is by purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations. Although the City’s formal investment policy allows for investment maturities up to 5 years from the date of purchase, in general, the City limits all securities to a final maturity of no more than three years and assumes that its callable investments will not be called. In general, it is the City’s intent to hold investments to maturity. Credit risk. The City addresses credit risk through the investment policy by restricting the allowable investment instruments. The investments in the US agency obligations and US government treasuries were rated AA+ and money market funds were rated AAAm by Standard & Poor’s. The Arizona Local Government Investment Pool 5 is currently rated AAAf/S1+ by Standard & Poor’s. The mutual funds in the OPEB Trust ranged from A to BB. Concentration of Credit Risk. The City policy places no limit on the amount that the City may invest in any one issuer of the US treasury obligations and the US agency obligations. The investment policy does establish a maximum percentage of 10% in banker’s acceptances, 20% in commercial paper and 25% in repurchase agreements. The maximum investment in any one issuer for certificates of deposits is 33% and for repurchase agreements is 10%. The City is required to disclose if 5% or more of its investments are in securities of a single issuer. As of June 30, 2018, 33.87% of the City’s investments are in US Treasuries, 16.39% of the City’s investments are in Fannie Mae, 8.23% of the City’s investments are in Federal Home Loan Bank, 8.21% of the City’s investments are in Federal Home Loan Mortgage Corporation securities, 20.09% in money market funds and 7.24% of the City’s investments are in the State of Arizona Local Government Investment Pool 5. Custodial Credit Risk. The City’s investment in the State of Arizona Local Government Investment Pool (LGIP) is stated at fair value, which approximates the value of the City’s pool shares. The LGIP is operated by the Arizona State Treasurer’s Office, as authorized by Arizona Revised Statutes, §35-326. Arizona Revised Statutes, §35-312 and §35-313, regulate authorized investments. The Arizona State Legislature has created the Arizona Board of Investments which reviews the investment of state monies, serves as trustees of the Permanent Land Trust Funds, and approves the State Treasurer’s Office Investment Policy. NOTE 5 - DUE TO/FROM OTHER FUNDS, INTERFUND TRANSFERS AND ADVANCES Due to/from other funds consisted of the following at June 30, 2018: Due to 1,102,219 $ 1,102,219 General fund Non-major governmental fund Total governmental funds $ Water and wastewater fund Emergency medical transportation fund Golf fund Total enterprise funds $ Due to 119,618 873,351 $ 992,969 Due from $ 1,102,219 $ 1,102,219 $ Due from 992,969 $ 992,969 The interfund balances at June 30, 2018 are short-term transfers to cover temporary cash deficits in various funds. All interfund balances outstanding at June 30, 2018 are expected to be repaid within one year. 67 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 5 - DUE TO/FROM OTHER FUNDS, INTERFUND TRANSFERS AND ADVANCES (Continued) Transfers Out Transit Special Revenue General Transfers In General $ - $ - General Obligation Debt Service Transit Capital Projects Non-major Governmental Water and Wastewater $ $ $ $ 2,923,129 267,250 - - - 8,495,338 4,856 6,818,822 - 7,468,696 39,917 16,303,475 - 6,209,842 - - - General Obligation Debt Service 648,058 - - - 17,199 6,148,709 Transit Capital Projects 267,250 6,701,446 - - 500,000 - Non-major Governmental 4,036,160 235,367 2,918,578 7,536,250 650,203 - 887,000 Total - Transit Special Revenue 8,495,338 Solid Waste 20,750 $ 3,211,129 Water and Wastewater - - 6,054,675 - 155,167 Solid Waste - - - - 39,917 200,000 - 239,917 Golf - - - - - 74,000 - 74,000 Emergency Medical Transportation - Health 1,322,560 Total $ 6,274,028 50,619 $ - - - 210,414 - 6,987,432 $ 11,896,382 $ 9,649,588 $ - $ - 106,026 - 8,564,973 $ 7,093,662 $ - 210,414 44,773 1,479,205 $ 50,510,838 The interfund transfers generally fall within one of the following categories: 1) pay-as-you-go financing transfers into capital project funds; 2) transfers to cover debt service payments; or 3) transfers to cover operating expenditures in accordance with City policy. Interfund Advance. In two installment payments in Fiscal Year 2016, the Water and Wastewater Enterprise Fund advanced the Golf Enterprise Fund a total of $2.5 million for an irrigation system at Rolling Hills Golf Course. In Fiscal Year 2017, an additional $825,000 was advanced. Currently the interest rate is .90% and can fluctuate based on the City’s average earnings on its investments. The advance is repaid in an annual installment of $182,450 commencing June 30, 2017 through June 30, 2038. The advance balance in the Water and Wastewater Enterprise Fund at June 30, 2018 was $3,011,085. NOTE 6 – CAPITAL IMPROVEMENT NOTES RECEIVABLE On November 10, 2004, the City entered into an intergovernmental agreement with the Arizona Tourism and Sports Authority (“TSA”) for the renovation of the Tempe Diablo Stadium Complex. On September 1, 2005, the City funded the project through the issuance of municipal bonds (see Note 9). The TSA agreed to reimburse the City $12,000,000 for their contribution, plus interest at the bond rate (3.50% to 5.00%). A note receivable was recorded in the General Fund for the TSA’s portion. Payments are received semi-annually and any unpaid interest is capitalized. Due to capitalizing interest, at June 30, 2018 the note receivable balance is $4,926,954. In August 2008, the City advanced to the Downtown Tempe Community (DTC) $250,000 to begin operations. The DTC is to repay the advance at zero percent interest rate when the district is terminated. During the construction of the light rail, the City entered into two development agreements to add a light rail station at Washington and Center Parkway. Each agreement has a total contribution to the City of $1.3 million, payable at $130,000 annually over a five and six year period with the remaining balance due the following year. In addition, there is an option for a prepayment equal to the net present value of the unpaid balance calculated using a 4.50% discount rate. At June 30, 2018 the note receivable balance in the Transit Special Revenue fund is $1,526,260 and the corresponding revenue has been reported as a deferred inflow of resources. 68 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 6 – CAPITAL IMPROVEMENT NOTES RECEIVABLE (Continued) In accordance with a development agreement, the City has deferred certain water and sewer development fees. Commencing in August 2011, the City receives $12,324 monthly over a 10 year period with an interest rate of 4.00%. The notes receivable balance in the Water and Wastewater Enterprise Fund at June 30, 2018 was $428,310. In August 2011, in accordance with a development agreement, the City has deferred certain water and sewer development fees. The City will use the sales tax rebate due to the developer to pay for the deferred development fees. The outstanding fees accrue at an interest rate of 2.00%. The notes receivable balance in the Water and Wastewater Enterprise Fund at June 30, 2018 was $269,077. NOTE 7 - JOINT VENTURE The City currently participates in three joint ventures, the Subregional Operating Group, Valley Metro Rail, Inc and Regional Wireless Cooperative. Subregional Operating Group (SROG) The City participates with the cities of Phoenix, Mesa, Scottsdale, and Glendale in an intergovernmental agreement for the construction, operation and maintenance of jointly used facilities including the 91st Avenue Wastewater Treatment Plant, the Salt River Project Outfall Sewer, the Southern Avenue Interceptor and related transportation facilities. The City of Phoenix is the management agency who has agreed to be responsible for the planning, designing, constructing, operating and maintaining of the jointly used sewage facilities and to perform the required accounting, administrative and other support functions. The agreement provides for the formation of a Multicity Subregional Operating Group Committee ("Multicity SROG"), whose members are composed of a representative officially appointed upon motion and order of each city, for the specific purpose of making recommendations concerning specific decisions or courses of action for the jointly used facilities. The Multicity SROG annually reviews and approves the capital improvements and replacements budget and also the operating budget for the jointly used facilities. As of June 30, 2017 (the latest information available), the City has a 15.54% equity interest or purchased capacity in the 91st Avenue Wastewater Treatment Plant and other varied, yet less significant percentages of equity interest in the other jointly used facilities. Purchased capacity is a measure of the right of use owned by the City in the total capacity of the wastewater treatment plant. The City contributes to capital improvements based upon equity interest and contributes to operating and maintenance expenses based upon proportional flow and sewage strength. The City has financed its share of capital improvement costs through the issuance of general obligation bonds, excise tax bonds, development fees and grants. The joint venture has not issued any debt. Summary financial information on the joint venture (GAAP basis) as of and for the fiscal year ended June 30, 2017 (the latest information available) is as follows (in thousands): Total assets Total liabilities Total net position $ 729,343 (33,872) $ 695,471 Total revenues Total expenses Total non-operating revenues (expenses) Net decrease in net position $ 57,529 (83,760) (202) ($ 26,433) 69 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 7 - JOINT VENTURE (Continued) Subregional Operating Group (SROG) (Continued) The City's net investment and its share of operating and maintenance expenses are recorded in the Water and Wastewater Enterprise Fund. The City's equity in joint venture at June 30, 2018, was $ 113,669,762. The City’s net loss from joint venture was $ 6,192,709 for the fiscal year ended June 30, 2018. Separately audited financial statements for the jointly used wastewater treatment and transportation facilities may be obtained from the Arizona Municipal Water Users Associations, 3003 North Central, Suite 1550, Phoenix, Arizona, 85012. Valley Metro Rail, Inc. (VMRI) The City currently participates with the cities of Phoenix, Mesa and Glendale in a joint powers agreement for the design, construction and operation of a light rail transit system. Valley Metro Rail, Inc. (VMRI) is the management agency that was incorporated to administer the joint powers agreement between the cities. In addition, VMRI has oversight responsibility for the planning, designing, construction and operation of a regional mass transit light rail system. The agreement provides voting rights for members of the representative cities related to strategic initiatives including passage of an annual capital program and annual operating budget. As of June 30, 2018, the City has a 18.88% (unaudited) equity interest in the joint venture. The light rail project was completed and began operations in December 2008. Member contributions to the joint venture were offset by a Federal funding agreement from the U.S. Department of Transportation. These contributions were recognized as intergovernmental revenue in the Transit Capital Projects fund. Summary financial information on the joint venture (GAAP basis) as of and for the fiscal year ended June 30, 2017 (the latest information available) is as follows: Total assets Total liabilities Total net position $ 1,423,466,229 (104,880,784) $ 1,318,585,445 Operating revenues Operating expenses Non-operating revenues Non-operating expenses Capital Contributions Net increase in net position $ 14,507,213 (89,976,554) 39,371,400 (18,118,210) 127,938,184 $ 73,722,033 The City has an ongoing financial responsibility as a result of the joint powers agreement to participate in the cost to construct and operate the light rail project and related improvements less any federal reimbursements and operating fares. The equity interests will be determined, and periodically adjusted, based on the number of rail mileage located within each city. The City’s equity in joint venture at June 30, 2018 was $ 264,671,875. Separate financial statements may be obtained from Valley Metro Rail, Inc., 411 North Central Avenue, Suite 200, Phoenix, Arizona 85004. 70 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 7 - JOINT VENTURE (Continued) Regional Wireless Cooperative (RWC) The City participates in the Regional Wireless Cooperative (RWC), an association of municipalities formed in 2008 to oversee the administration, operation, management, and maintenance of an expanding regional communications network. The RWC was formed through a governance structure founded on the principles of cooperation for the mutual benefit of all members and has expanded to serve a still-growing list of cities, towns, and fire districts, along with many other area entities who serve public safety needs. A regional radio communications network was built to seamlessly serve the interoperable communication needs of first responders and other municipal radio users in and around the Phoenix Metropolitan Region. Financial responsibilities are shared by all members based on their relative size and is measured by the number of subscriber units (radios) on the network. Currently, 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. The City records its share of contributions to the RWC and the equity in the joint venture in the government-wide financial statements. The City made current year contributions $1,006,480. As of June 30, 2018, the City’s net investment in RWC was $11,180,916 (unaudited), or 12.74% of the RWC’s total net position. Summary financial information on the joint venture (GAAP basis) as of and for the fiscal year ended June 30, 2017 (the latest information available) is as follows (in thousands): Total assets Total liabilities Total net position $ 87,096 (5,418) $ 81,678 Total revenues Total expenses Net decrease in net position $ 9,333 (16,307) ($ 6,974) The Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2017, for the RWC may be obtained from the Regional Wireless Cooperative, 200 West Washington Street, 12th Floor, Phoenix, Arizona, 85003-1611. 71 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 8 - CAPITAL ASSETS A summary of capital asset activity, for the government-wide financial statements, for the fiscal year ended June 30, 2018 is as follows: Additions Retirements Transfers in (out) 31,412,189 31,412,189 $ (2,634,930) (2,634,930) $ $ 89,605,173 (13,207,981) 21,988,411 (13,207,981) 111,593,584 Balances June 30, 2017 Balances June 30, 2018 Governmental activities: Non-depreciable assets: Land Construction-in-progress Total non-depreciable assets $ 89,605,173 6,419,133 96,024,306 Depreciable assets: Buildings Infrastructure Improvements Machinery and equipment Total depreciable assets 310,644,847 803,130,276 200,136,402 158,943,165 1,472,854,690 670,000 3,879,686 4,549,686 (1,406,833) (1,406,833) 7,857,914 4,387,857 540,944 12,786,715 310,644,847 810,988,190 205,194,259 161,956,962 1,488,784,258 (136,646,077) (406,133,391) (75,286,284) (123,784,203) (741,849,955) (11,011,342) (18,402,564) (9,016,280) (8,334,886) (46,765,072) 1,388,241 1,388,241 42,127 42,127 (147,657,419) (424,535,955) (84,302,564) (130,688,721) (787,184,659) $ 827,029,041 $(10,803,197) $ (2,653,522) $ (379,139) $ 813,193,183 Accumulated depreciation: Buildings Infrastructure Improvements Machinery and equipment Total accumulated depreciation Governmental activities capital assets, net $ Depreciation expense was charged to the governmental functions in the government-wide financial statements as follows: Police Fire medical rescue Community services Public works Community development Human services Municipal court City manager City attorney Internal services Unallocated depreciation Total depreciation expense 72 $ $ 4,725,447 2,082,682 3,893,018 32,090,597 1,406,192 82,926 91,568 5,296 659 669,962 1,716,725 46,765,072 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 8 - CAPITAL ASSETS (Continued) Balances June 30, 2017 Business-type activities: Non-depreciable assets: Land Construction-in-progress Total non-depreciable assets Depreciable assets: Buildings Infrastructure Improvements Machinery and equipment Total depreciable assets $ 6,693,377 12,638,580 19,331,957 Additions $ $ (1,117,644) 27,839,904 (1,117,644) 27,839,904 $ 1,159,100 1,159,100 (580,697) (580,697) (1,262,183) (10,677,565) (7,717,694) (2,725,664) (22,383,106) 499,169 499,169 $ 6,615,898 $ (1,199,172) $ 49,802,667 336,910,914 199,132,543 30,779,072 616,625,196 Accumulated depreciation: Buildings (25,721,267) Infrastructure (156,615,595) Improvements (77,467,321) Machinery and equipment (17,587,914) Total accumulated depreciation (277,392,097) Business-type activities capital $ 358,565,056 assets, net Transfers in (out) Retirements Balances June 30, 2018 $ 6,693,377 (9,609,195) 29,751,645 (9,609,195) 36,445,022 583,273 8,815,508 631,680 10,030,461 49,802,667 337,494,187 207,948,051 31,989,155 627,234,060 (26,983,450) (167,293,160) (85,185,015) (42,127) (19,856,536) (42,127) (299,318,161) 379,139 $364,360,921 Depreciation expense was charged to the proprietary funds in the government-wide and fund financial statements as follows: Water and wastewater Solid waste Emergency medical transportation Golf course Total depreciation expense 73 $ $ 20,627,697 1,329,019 27,367 399,023 22,383,106 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT General Obligation Bonds. The City issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. General obligation bonds have been issued for both general government and proprietary activities. Bonds issued for proprietary activities are reported in the Proprietary Funds as they are to be repaid from proprietary revenues. In the current year, $47,560,000 was issued to finance improvements for Street Improvements and Infrastructure Preservation, Community Services, Parks, Public Safety and Water and Wastewater improvements. General obligation bonds are direct obligations and pledge the full faith and credit of the City. These bonds are generally issued as 10-20 year serial bonds with varying amounts of principal maturing each year. General obligation bonds outstanding at June 30, 2018, were as follows (the 7/1/2018 principal payment was deducted as the Fiscal Year 2018 resources were dedicated): $66,365,000 2008A Capital Improvement Serial Bonds due in annual installments of $1,870,000 to $5,080,000 beginning July 1, 2009 through July 1, 2028; interest at 3.375% to 4.375% $ 3,270,000 $56,055,000 2009A Capital Improvement Serial Bonds due in annual installments of $1,760,000 to $4,200,000 beginning July 1, 2011 through July 1, 2029; interest at 3.00% to 4.375% 5,340,000 $16,755,000 2010A Capital Improvement Serial Bonds due in annual installments of $500,000 to $2,160,000 beginning July 1, 2011 through July 1, 2030; interest at 2.50% to 5.00% 2,160,000 $28,410,000 2010B Capital Improvement Serial Bonds due in annual installments of $2,250,000 to $2,295,000 beginning July 1, 2020 through July 1, 2030; interest at 4.21% to 5.719%, net of 35% federal credit 28,410,000 $60,280,000 2010C Capital Improvement Refunding Issue Serial Bonds due in annual installments of $1,225,000 to $7,735,000 through July 1, 2022; interest at 1.25% to 5.00% 21,240,000 $5,375,000 2011A Capital Improvement Serial Bonds due in annual installments of $475,000 to $605,000 beginning July 1, 2013 through July 1, 2021; interest at 2.00% to 4.00% 1,765,000 $7,005,000 2012A Capital Improvement Serial Bonds due in annual installments of $635,000 to $765,000 beginning July 1, 2013 through July 1, 2022; interest at 2.00% to 2.25% 2,970,000 $12,765,000 2012B Capital Improvement Refunding Serial Bonds due in annual installments of $1,055,000 to $3,320,000 beginning July 1, 2013 through July 1, 2023; interest at 2.00% to 3.50% 9,530,000 $13,675,000 2013A Capital Improvement Serial Bonds due in annual installments of $515,000 to $940,000 beginning July 1, 2014 through July 1, 2033; interest at 1.00% to 4.00% 10,970,000 $41,070,000 2013B Capital Improvement Refunding Serial Bonds due in annual installments of $90,000 to $8,205,000 beginning July 1, 2014 through July 1, 2024; interest at 1.00% to 5.00% 31,490,000 $15,550,000 2014B Capital Improvement Refunding Serial Bonds due in annual installments of $1,025,000 to $5,320,000 beginning July 1, 2015 through July 1, 2023; interest at 2.00% to 4.00% 5,320,000 $45,675,000 2014C Capital Improvement Refunding Serial Bonds due in annual installments of $1,095,000 to $14,190,000 beginning July 1, 2015 through July 1, 2024; interest at 1.00% to 4.00% 44,580,000 $43,965,000 2015A Capital Improvement Serial Bonds due in annual installments of $1,740,000 to $2,925,000 beginning July 1, 2016 through July 1, 2035; interest at 1.00% to 3.75% 34,440,000 $13,630,000 2016A Capital Improvement Serial Bonds due in annual installments of $540,000 to $880,000 beginning July 1, 2017 through July 1, 2036; interest at 2.00% to 3.00% 12,540,000 $86,440,000 2016B Capital Improvement Refunding Serial Bonds due in annual installments of $3,550,000 to $17,935,000 beginning July 1, 2017 through July 1, 2029; interest at 2.00% to 4.00% 82,715,000 $32,810,000 2017 Capital Improvement Serial Bonds due in annual installments of $970,000 to $2,390,000 beginning July 1, 2018 through July 1, 2037; interest at 2.00% to 5.00% 27,770,000 $47,560,000 2018 Capital Improvement Serial Bonds due in annual installments of $1,365,000 to $3,640,000 beginning July 1, 2019 through July 1, 2038; interest at 2.00% to 5.00% 47,560,000 Total general obligation bonds outstanding (excluding current portion of general obligation bonds $ 372,070,000 outstanding) 74 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) General Obligation Bonds (Continued) The following is a summary of total debt service cash requirements to maturity (net of 35% federal credit): Fiscal Year Ending June 30, 2019 2020 2021 2022 2023 2024-2028 2029-2033 2034-2038 Principal Total Interest $ 33,470,000 34,860,000 36,395,000 35,210,000 34,305,000 119,755,000 51,875,000 26,200,000 $ 14,291,868 13,031,703 11,713,580 10,487,917 9,265,275 29,300,936 11,896,594 3,488,188 $ 47,761,868 47,891,703 48,108,580 45,697,917 43,570,275 149,055,936 63,771,594 29,688,188 $ 372,070,000 $ 103,476,061 $ 475,546,061 The following is a summary of governmental debt service cash requirements to maturity (net of 35% federal credit): Fiscal Year Ending June 30, 2019 2020 2021 2022 2023 2024-2028 2029-2033 2034-2038 Principal Interest Total $ 14,545,000 15,130,000 15,735,000 14,880,000 14,110,000 57,075,000 36,170,000 12,790,000 $ 6,671,031 6,145,285 5,627,977 5,122,399 4,652,197 16,197,040 6,720,328 1,561,188 $ 21,216,031 21,275,285 21,362,977 20,002,399 18,762,197 73,272,040 42,890,328 14,351,188 $ 180,435,000 $ 52,697,445 $ 233,132,445 The following is a summary of enterprise debt service cash requirements to maturity: Fiscal Year Ending June 30, 2019 2020 2021 2022 2023 2024-2028 2029-2033 2034-2038 Principal Total Interest $ 18,925,000 19,730,000 20,660,000 20,330,000 20,195,000 62,680,000 15,705,000 13,410,000 $ 7,620,837 6,886,418 6,085,603 5,365,519 4,613,078 13,103,895 5,176,266 1,927,000 $ 26,545,837 26,616,418 26,745,603 25,695,519 24,808,078 75,783,895 20,881,266 15,337,000 $ 191,635,000 $ 50,778,616 $ 242,413,616 75 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Special Assessment Bonds Payable with Governmental Commitment. As trustee for improvement districts, the City is responsible for collection of assessments levied against the owners of property within the improvement districts and for disbursement of these amounts for retirement of the respective bonds issued to finance the improvements. At June 30, 2018, the special assessments receivable of $17,406,959, together with amounts paid in advance and interest to be received over the life of the assessment period, are adequate for the scheduled maturities of the bonds payable and the related interest. Improvement bonds are collateralized by properties within the districts. In the event of default by the property owner, the City may enforce an auction sale to satisfy the debt service requirements of the improvement bonds. As of June 30, 2018, there is $144,475 in delinquent receivables. The City is contingently liable on special assessment bonds to the extent that proceeds from auction sales are insufficient to retire outstanding bonds. In addition, there are $405,035 in special assessments that are due to be received upon meeting the conditions in the development agreement. Special assessment bonds payable with governmental commitment outstanding at June 30, 2018, were as follows (the 7/1/2018 principal payment was deducted as the Fiscal Year 2018 resources were dedicated): $4,405,000 ID 179 Special Assessment Bonds Payable with Governmental Commitment issued June 1, 2005; maturing January 1, 2021; due in annual installments of $220,000 to $385,000; interest at 4.10% $25,190,000 ID 180 Special Assessment Bonds Payable with Governmental Commitment issued February 27, 2008; maturing January 1, 2029; due in annual installments of $760,000 to $1,925,000; interest at 5.00% $ 620,000 16,795,000 $ 17,415,000 Total special assessment bonds outstanding The following is a summary of debt service cash requirements to maturity: Fiscal Year Ending June 30, Principal 2019 2020 2021 2022 2023 2024-2028 2029 $ 1,380,000 1,445,000 1,520,000 1,370,000 1,435,000 8,340,000 1,925,000 $ $ 17,415,000 76 Interest Total 831,570 762,768 690,533 619,250 549,125 1,564,250 48,125 $ 2,211,570 2,207,768 2,210,533 1,989,250 1,984,125 9,904,250 1,973,125 $ 5,065,621 $ 22,480,621 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue and Refunding Obligations Excise Tax Revenue Obligations. On June 17, 2008 the City issued $30,170,000 of Excise Tax Revenue Obligations. The proceeds were used to fund the costs associated with a portion of the City’s light rail project and to pay costs incurred to issue the obligations. The City has collateralized the obligations by a pledge of 0.50% transit excise tax revenues, approved by voters on September 10, 1996, which are restricted to public transit use. The City covenants and agrees that, so long as any of the Parity Obligations remain outstanding and the principal and interest shall be unpaid, it will not further encumber the Transit Excise Taxes on a parity basis unless the Transit Excise Taxes collected in the immediately preceding fiscal year shall have amounted to at least two times the highest combined principal and interest debt service payments, or any required deposits, for any succeeding fiscal year for with respect to the transit excise tax revenue Parity Obligations. In the following outstanding balance, the 7/1/2018 principal payment was deducted as the fiscal year 2018 resources were dedicated. On May 9, 2018, the City defeased $5,185,000 of these obligations (see Note 10). $30,170,000 2008 Excise Tax Revenue Obligations due in annual installments of $480,000 to $1,120,000 through July 1, 2019; interest at 3.50% to 5.00% $ 760,000 The following is a summary of debt service cash requirements to maturity: Fiscal Year Ending June 30, 2019 Principal $ $ Interest 760,000 760,000 $ $ 30,400 30,400 Total $ 790,400 $ 790,400 Excise Tax Revenue Obligations. On June 24, 2009, the City issued $23,615,000 of Excise Tax Revenue Obligations: $14,300,000 of tax-exempt obligations (Series 2009A) and $9,315,000 of taxable obligations (Series 2009B) referred to as Build America Bonds. As an issuer of Build America Bonds, the City qualifies, and intends to apply, for the interest subsidy payment directly from the US Treasury. The amount of the interest subsidy payment is 35.00% of the corresponding interest payable on the Series 2009B taxable obligations on any interest payment date. The proceeds were used to finance the construction of a public parking garage and various projects for the Tempe Water/Wastewater Department and to pay costs incurred to issue the obligations. The City has collateralized the obligations by a pledge of all unrestricted excise taxes (transaction, franchise, privilege, business taxes, state-shared sales and income taxes, fees for licenses and permits, and state revenue sharing), including all fines and forfeitures, which the City presently or in the future validly imposes or receives from other entities and which are not earmarked by the contributor for a contrary or inconsistent purpose. The Excise Taxes do not include the 0.10% Performing Arts Center Excise Taxes, the excise taxes collected and paid to the City under the 0.50% transportation excise tax approved by the voters of the City on September 10, 1996 which are restricted to public transit use, or the excise taxes collected under the 1.00% increase in the transient lodging tax on hotels approved by the voters on September 10, 2002, which are restricted to fund programs of the Tempe Convention and Visitor’s Bureau. 77 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue and Refunding Obligations (Continued) The City covenants and agrees that the Excise Taxes which it presently imposes will continue to be imposed so that the amount of Excise Taxes for any fiscal year of the City shall be equal to at least three times the total of the Debt Service on all Parity Obligations in such Fiscal Year. The City further covenants and agrees that if receipts for any current Fiscal Year shall not equal three times such Debt Service or will not be sufficient to meet such Fiscal Year’s actual Debt Service with respect to Parity Obligations, the City will either impose new Excise Taxes or will increase the rates of such taxes currently imposed in order that (i) such revenues for the current Fiscal Year will be sufficient to meet such Fiscal Year's Debt Service with respect to Parity Obligations, and (ii) such revenues for the next succeeding Fiscal Year will be equal to at least three times the next succeeding Fiscal Year's Debt Service with respect to Parity Obligations. In the following outstanding balance, the 7/1/2018 principal payment was deducted as the fiscal year 2018 resources were dedicated. $14,300,000 2009A Excise Tax Revenue Obligations due in annual installments of $770,000 to $1,340,000 through July 1, 2023; interest at 3.00% to 5.00% $9,315,000 2009B Excise Tax Revenue Obligations due in annual installments of $1,400,000 to $1,715,000 through July 1, 2029; interest at 4.23%, net of 35.00% federal credit Total $ 2,285,000 9,315,000 $ 11,600,000 The following is a summary of total debt service cash requirements to maturity (net of 35.00% federal credit): Fiscal Year Ending June 30, 2019 2020 2021 2022 2023 2023-2028 2029 Principal $ 1,115,000 1,170,000 7,600,000 1,715,000 $ 11,600,000 78 Interest Total 507,808 452,059 393,559 393,559 393,559 1,351,577 72,459 $ 1,622,808 1,622,059 393,559 393,559 393,559 8,951,577 1,787,459 $ 3,564,580 $ 15,164,580 $ Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue and Refunding Obligations (Continued) The following is a summary of governmental debt service cash requirements to maturity (net of 35.00% federal credit): Fiscal Year Ending June 30, 2019 2020 2021 2022 2023 2024-2028 2029 Principal $ Interest 325,000 340,000 2,220,000 500,000 $ 3,385,000 $ 148,215 131,961 114,941 114,956 114,937 394,404 21,125 $ 1,040,539 Total $ 473,215 471,961 114,941 114,956 114,937 2,614,404 521,125 $ 4,425,539 The following is a summary of enterprise debt service cash requirements to maturity (net of 35.00% federal credit): Fiscal Year Ending June 30, 2019 2020 2021 2022 2023 2024-2028 2029 Principal $ Interest 790,000 830,000 5,380,000 1,215,000 $ 8,215,000 $ Total 359,593 320,098 278,617 278,603 278,622 957,174 51,334 $ 1,149,593 1,150,098 278,617 278,603 278,622 6,337,174 1,266,334 $ 2,524,041 $ 10,739,041 Excise Tax Revenue Obligations. On June 23, 2011, the City issued $39,125,000 of Excise Tax Revenue Obligations: $31,825,000 of tax-exempt obligations (Series 2011A) and $7,300,000 of taxable obligations (Series 2011B) referred to as Qualified Energy Conservation Bonds. As an issuer of these bonds, the City qualifies, and intends to apply, for the interest subsidy payment directly from the US Treasury. The amount of the interest subsidy payment is 72.38% of the corresponding interest payable on the Series 2011B taxable obligations on any interest payment date. The proceeds were used to finance the construction of energy retrofit improvements and various projects for the Tempe Water/Wastewater Department and to pay costs incurred to issue the obligations. The City has collateralized the obligations by a pledge of all unrestricted excise taxes (transaction, franchise, privilege, business taxes, state-shared sales and income taxes, fees for licenses and permits, and state revenue sharing), including all fines and forfeitures, which the City presently or in the future validly imposes or receives from other entities and which are not earmarked by the contributor for a contrary or inconsistent purpose. The Excise Taxes do not include 79 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue and Refunding Obligations (Continued) the 0.10% Performing Arts Center Excise Taxes, the excise taxes collected and paid to the City under the 0.50% transportation excise tax approved by the voters of the City on September 10, 1996 which are restricted to public transit use, or the excise taxes collected under the 1.00% increase in the transient lodging tax on hotels approved by the voters on September 10, 2002, which are restricted to fund programs of the Tempe Convention and Visitor’s Bureau. The City covenants and agrees that the Excise Taxes which it presently imposes will continue to be imposed so that the amount of Excise Taxes for any fiscal year of the City shall be equal to at least three times the total of the Debt Service on all Parity Obligations in such Fiscal Year. The City further covenants and agrees that if receipts for any current Fiscal Year shall not equal three times such Debt Service or will not be sufficient to meet such Fiscal Year’s actual Debt Service with respect to Parity Obligations, the City will either impose new Excise Taxes or will increase the rates of such taxes currently imposed in order that (i) such revenues for the current Fiscal Year will be sufficient to meet such Fiscal Year's Debt Service with respect to Parity Obligations, and (ii) such revenues for the next succeeding Fiscal Year will be equal to at least three times the next succeeding Fiscal Year's Debt Service with respect to Parity Obligations. In the following outstanding balance, the 7/1/2018 principal payment was deducted as the fiscal year 2018 resources were dedicated. $31,825,000 2011A Excise Tax Revenue Obligations due in annual installments of $1,030,000 to $2,375,000 through July 1, 2022; interest at 2.00% to 5.00% $7,300,000 2011B Excise Tax Revenue Obligations due in one installment of $7,300,000 on July 1, 2025; interest due semi-annually at 4.87%, net of 72.38% federal credit Total $ 5,850,000 7,300,000 $ 13,150,000 The following is a summary of total debt service cash requirements to maturity (net of 72.38% federal credit): Fiscal Year Ending June 30, Principal 2019 2020 2021 2022 2023 2024-2025 $ 1,355,000 1,425,000 1,500,000 1,570,000 7,300,000 $ 390,758 323,008 251,758 176,758 98,258 196,516 $ 1,745,758 1,748,008 1,751,758 1,746,758 98,258 7,496,516 $ 13,150,000 $ 1,437,056 $ 14,587,056 Interest 80 Total Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue and Refunding Obligations (Continued) The following is a summary of governmental debt service cash requirements to maturity (net of 72.38% federal credit): Fiscal Year Ending June 30, 2019 2020 2021 2022 2023 2024-2025 Principal $ Interest Total 35,000 35,000 35,000 40,000 7,300,000 $ 105,758 104,008 102,258 100,258 98,258 196,516 $ 140,758 139,008 137,258 140,258 98,258 7,496,516 $ 7,445,000 $ 707,056 $ 8,152,056 The following is a summary of enterprise debt service cash requirements to maturity: Fiscal Year Ending June 30, Principal 2019 2020 2021 2022 $ 1,320,000 1,390,000 1,465,000 1,530,000 $ 285,000 219,000 149,500 76,500 $ 1,605,000 1,609,000 1,614,500 1,606,500 $ 5,705,000 $ 730,000 $ 6,435,000 Interest Total Excise Tax Revenue Refunding Obligations. On August 31, 2011, the City issued $18,300,000 of Excise Tax Revenue Refunding Obligations. The Obligations were issued for the purpose of providing funds (i) to refund in advance of maturity portions of certain outstanding Performing Arts Center Excise Tax Revenue Obligations (the “Obligations Being Refunded”) and (ii) to pay the costs and expenses relating to the issuance of the Obligations. The City has collateralized the obligations by a pledge of 0.10% performing arts center tax, approved by voters on May 16, 2000, which are restricted to the Tempe Center for the Performing Arts Project. Additionally, the payments to be made by the City are secured by a subordinate lien pledge by the City of all unrestricted excise, transaction, franchise, privilege and business taxes, state-shared sales and income taxes, fees for licenses and permits, and state revenue sharing, including all fines and forfeitures, which the City presently or in the future validly imposes or receives from other entities and which are not earmarked by the contributor for a contrary or inconsistent purpose. The general Excise Taxes do not include the Performing Arts Center Excise Taxes, the excise taxes collected and paid to the City under the 0.50% transportation excise tax approved by the voters of the City on September 10, 1996 which are restricted to public transit use, or the excise taxes collected under the 1.00% increase in the transient lodging tax on hotels approved by the voters on September 10, 2002, which are restricted to fund programs of the Tempe Convention and Visitor’s Bureau. 81 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue and Refunding Obligations (Continued) The City covenants and agrees that the Performing Arts Center Excise Taxes and the Excise Taxes which it presently imposes will continue to be imposed in each Fiscal Year so that the sum of (A) the Performing Arts Center Excise Taxes for such Fiscal Year plus (B) the excess of the Excise Taxes for such Fiscal Year over the Debt Service requirements on the Outstanding Senior Excise Tax Obligations for such Fiscal Year, shall be equal to at least three times the total of the Debt Service with respect to Parity Obligations in such Fiscal Year. The City further covenants and agrees that if such revenues for any such Fiscal Year shall not equal three times such Debt Service or will not be sufficient to meet such Fiscal Year’s actual Debt Service with respect to Parity Obligations, the City will either impose new Excise Taxes or will increase the rates of such taxes currently imposed in order that (i) such revenues for the current Fiscal Year will be sufficient to meet such Fiscal Year's Debt Service with respect to Parity Obligations, and (ii) such revenues for the next succeeding Fiscal Year will be equal to at least three times the next succeeding Fiscal Year's Debt Service with respect to Parity Obligations. The City further covenants and agrees that so long as any Special Parity Obligations are outstanding, the Performing Arts Center Excise Taxes, the Excise Taxes and the Special Excise Taxes will be imposed in each Fiscal Year so that the sum of (A) Performing Arts Center Excise Taxes for such Fiscal Year, plus (B) Special Excise Taxes for such Fiscal Year plus (C) the excess of the Excise Taxes for such Fiscal Year over the Debt Service on the Outstanding Senior Excise Tax Obligations for such Fiscal Year shall be equal to at least three times the total of the Debt Service with respect to the Parity Obligations and the Special Parity Obligations in such Fiscal Year. The City further covenants and agrees that if such revenues for any such Fiscal Year shall not equal three times such Debt Service or will not be sufficient to meet such Fiscal Year's actual Debt Service with respect to Parity Obligations and Special Parity Obligations, the City will either impose new Excise Taxes or Special Excise Taxes or will increase the rates of such taxes currently imposed in order that (i) such revenues for the current Fiscal Year will be sufficient to meet such Fiscal Year's Debt Service with respect to Parity Obligations and Special Parity Obligations and (ii) such revenues for the next succeeding Fiscal Year will be equal to at least three times the next succeeding Fiscal Year’s Debt Service with respect to Parity Obligations and Special Parity Obligations. In the following outstanding balance, the 7/1/2018 principal payment was deducted as the fiscal year 2018 resources were dedicated. $18,300,000 2011 Excise Tax Revenue Refunding Obligations due in annual installments of $100,000 to $3,295,000 through July 1, 2020; interest at 2.00% to 5.00% The following is a summary of debt service cash requirements to maturity: Fiscal Year Ending June 30, 2019 2020 Principal Interest Total $ 3,145,000 3,295,000 $ 283,100 138,850 $ 3,428,100 3,433,850 $ 6,440,000 $ 421,950 $ 6,861,950 82 $ 6,440,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue and Refunding Obligations (Continued) Excise Tax Revenue and Refunding Obligations. On June 11, 2012, the City issued $30,500,000 of Excise Tax Revenue and Revenue Refunding Obligations: $8,390,000 of revenue obligations and $22,110,000 of revenue refunding obligations. The proceeds were used (i) to refund in advance of maturity certain outstanding Excise Tax Revenue Obligations of the City, (ii) finance the construction and acquisition of certain water and wastewater improvements, and (iii) to pay the costs of execution and delivery of the obligations. The City has collateralized the obligations by a pledge of all unrestricted excise taxes (transaction, franchise, privilege, business taxes, state-shared sales and income taxes, fees for licenses and permits, and state revenue sharing), including all fines and forfeitures, which the City presently or in the future validly imposes or receives from other entities and which are not earmarked by the contributor for a contrary or inconsistent purpose. The Excise Taxes do not include the taxes collected and paid to the City under the 0.50% transportation privilege (sales) and use tax approved by the voters of the City on September 10, 1996 which are restricted to public transit use, the 0.10% Performing Arts Center Excise Taxes approved by voters of the City on May 16, 2000, which are restricted to the Tempe Center for the Arts Project, or the excise taxes collected under the 1.00% increase in the transient lodging tax on hotels approved by the voters on September 10, 2002, which are restricted to fund programs of the Tempe Convention and Visitor’s Bureau. The City covenants and agrees that the Excise Taxes which it presently imposes will continue to be imposed so that the amount of Excise Taxes for any fiscal year of the City shall be equal to at least three times the total of the Debt Service on all Parity Obligations in such Fiscal Year. The City further covenants and agrees that if receipts for any current Fiscal Year shall not equal three times such Debt Service or will not be sufficient to meet such Fiscal Year’s actual Debt Service with respect to Parity Obligations, the City will either impose new Excise Taxes or will increase the rates of such taxes currently imposed in order that (i) such revenues for the current Fiscal Year will be sufficient to meet such Fiscal Year's Debt Service with respect to Parity Obligations, and (ii) such revenues for the next succeeding Fiscal Year will be equal to at least three times the next succeeding Fiscal Year's Debt Service with respect to Parity Obligations. In the following outstanding balance, the 7/1/2018 principal payment was deducted as the fiscal year 2018 resources were dedicated. $30,500,000 2012 Excise Tax Revenue and Refunding Obligations due in annual installments of $280,000 to $5,125,000 through July 1, 2032; interest at 1.50% to 5.00% The following is a summary of total debt service cash requirements to maturity: Fiscal Year Ending June 30, Principal Interest Total 2019 2020 2021 2022 2023 2024-2028 2029-2032 $ 1,895,000 1,995,000 2,090,000 2,195,000 5,125,000 6,475,000 2,245,000 $ 1,037,125 942,375 842,625 738,125 628,375 949,150 196,963 $ 2,932,125 2,937,375 2,932,625 2,933,125 5,753,375 7,424,150 2,441,963 $ 22,020,000 $ 5,334,738 $ 27,354,738 83 $ 22,020,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue and Refunding Obligations (Continued) The following is a summary of governmental debt service cash requirements to maturity: Fiscal Year Ending June 30, 2019 2020 2021 2022 2023 2024-2025 Principal $ Interest 1,550,000 1,630,000 1,710,000 1,795,000 4,705,000 4,065,000 $ 15,455,000 $ 772,750 695,250 613,750 528,250 438,500 307,250 $ 3,355,750 Total $ 2,322,750 2,325,250 2,323,750 2,323,250 5,143,500 4,372,250 $ 18,810,750 The following is a summary of enterprise debt service cash requirements to maturity: Fiscal Year Ending June 30, 2019 2020 2021 2022 2023 2024-2028 2029-2032 Principal Interest $ 345,000 365,000 380,000 400,000 420,000 2,410,000 2,245,000 $ 264,375 247,125 228,875 209,875 189,875 641,900 196,963 $ 6,565,000 $ 1,978,988 Total $ 609,375 612,125 608,875 609,875 609,875 3,051,900 2,441,963 $ 8,543,988 Excise Tax Revenue Refunding Obligations. On September 12, 2012, the City issued $41,390,000 of Excise Tax Revenue Obligations. The proceeds (including the premium) were used to refund $45,295,000 of the 2007 Variable Rate Demand Excise Tax Revenue Obligations and pay costs incurred to issue the obligations. The payments required to be made by the City to the Trustee under the Purchase Agreement are payable from and secured by a pledge of revenues from an excise tax collected by the City under a 0.50% transportation excise tax approved by the voters of the City on September 10, 1996 which is restricted to public transit use (the “Transit Excise Taxes”). Such tax is levied by the City upon persons on account of their business activities within the City. The amount of taxes due are calculated by applying the 0.50% tax rate against the gross proceeds of sales or gross income derived from the business activities. Such taxes are collected by the City on a monthly basis. 84 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue and Refunding Obligations (Continued) Such lien on and pledge of the Transit Excise Taxes is on parity with that for the City’s Transit Excise Tax Revenue Obligations, Series 2008, currently outstanding in the aggregate principal amount of $760,000. In the following outstanding balance, the 7/1/2018 principal payment was deducted as the fiscal year 2018 resources were dedicated. On May 9, 2018, the City advanced defeased $2,860,000 of these obligations (see Note 10). $41,390,000 2012 Excise Tax Revenue Refunding Obligations due in annual installments of $430,000 to $2,645,000 through July 1, 2037; interest at 1.50% to 5.00% $ 32,485,000 The following is a summary of total debt service cash requirements to maturity: Fiscal Year Ending June 30, Principal Interest Total 2019 2020 2021 2022 2023 2024-2028 2029-2033 2034-2037 $ 1,215,000 1,265,000 1,310,000 1,375,000 1,445,000 8,405,000 10,415,000 7,055,000 $ 1,406,394 1,357,794 1,307,194 1,241,694 1,172,944 4,704,219 2,697,044 625,719 $ 2,621,394 2,622,794 2,617,194 2,616,694 2,617,944 13,109,219 13,112,044 7,680,719 $ 32,485,000 $ 14,513,002 $ 46,998,002 Excise Tax Revenue Obligations. On June 26, 2013, the City issued $27,240,000 of Excise Tax Revenue Obligations to finance the construction and acquisition of various water and wastewater improvements for the City and to pay the costs of execution and delivery of the Obligations. The payments to be made by the City will be secured by a pledge by the City of all unrestricted excise, transaction, franchise, privilege and business taxes, State-shared sales and income taxes, fees for licenses and permits, and State revenue-sharing now or hereafter validly imposed by the City or contributed, allocated and paid over to the City and not earmarked by the contributor for a contrary or inconsistent purpose, including, without limitation, all fines and forfeitures (all such taxes and receipts herein referred to as “Excise Taxes”), but not (i) excise taxes collected and paid to the City under the 0.50% transaction privilege (sales) and use tax approved by the voters of the City on September 10, 1996, which are restricted to improvement and operation of the public transit system (such taxes and receipts herein referred to as “Transit Excise Taxes”), (ii) excise taxes collected and paid to the City under the 0.10% transaction privilege (sales) and use tax approved by the voters of the City on May 16, 2000, the use of which is restricted to the construction and operation of a performing arts center (such taxes and receipts herein referred to as the “Performing Arts Center Excise Taxes”), (iii) excise taxes collected and paid to the City under the 1.00% increase in the transient lodging tax on hotels approved by the voters of the City on September 10, 2002, which are restricted to funding programs of the Tempe Convention and Visitor’s Bureau (such taxes and receipts herein referred to as “Convention and Visitor’s Bureau Taxes”) or (iv) any other similar tax restricted as to its use. The pledge of the Excise Taxes is on a parity pledge with the Existing Obligations. 85 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue and Refunding Obligations (Continued) In the following outstanding balance, the 7/1/2018 principal payment was deducted as the fiscal year 2018 resources were dedicated. $27,240,000 2013 Excise Tax Revenue Obligations due in annual installments of $905,000 to $2,025,000 through July 1, 2033; interest at 1.75% to 5.00% $ 22,325,000 The following is a summary of total debt service cash requirements to maturity: Fiscal Year Ending June 30, Principal Interest Total 2019 2020 2021 2022 2023 2024-2028 2029-2033 $ 1,045,000 1,090,000 1,140,000 1,200,000 1,260,000 7,315,000 9,275,000 $ 1,067,875 1,026,075 971,575 914,575 854,575 3,261,875 1,297,925 $ 2,112,875 2,116,075 2,111,575 2,114,575 2,114,575 10,576,875 10,572,925 $ 22,325,000 $ 9,394,475 $ 31,719,475 Excise Tax Revenue and Refunding Obligations. On June 22, 2016, the City issued $42,485,000 of Excise Tax Revenue and Revenue Refunding Obligations: $21,770,000 of revenue obligations and $20,715,000 of revenue refunding obligations. The proceeds were used (i) to refund in advance of maturity certain outstanding Excise Tax Revenue Obligations of the City, (ii) finance the construction and acquisition of certain water and wastewater improvements, and (iii) to pay the costs of execution and delivery of the obligations. The City has collateralized the obligations by a pledge of all unrestricted excise taxes (transaction, franchise, privilege, business taxes, state-shared sales and income taxes, fees for licenses and permits, and state revenue sharing), including all fines and forfeitures, which the City presently or in the future validly imposes or receives from other entities and which are not earmarked by the contributor for a contrary or inconsistent purpose. The Excise Taxes do not include the taxes collected and paid to the City under the 0.50% transportation privilege (sales) and use tax approved by the voters of the City on September 10, 1996 which are restricted to public transit use, the 0.10% Performing Arts Center Excise Taxes approved by voters of the City on May 16, 2000, which are restricted to the Tempe Center for the Arts Project, or the excise taxes collected under the 1.00% increase in the transient lodging tax on hotels approved by the voters on September 10, 2002, which are restricted to fund programs of the Tempe Convention and Visitor’s Bureau. The City covenants and agrees that the Excise Taxes which it presently imposes will continue to be imposed so that the amount of Excise Taxes for any fiscal year of the City shall be equal to at least three times the total of the Debt Service on all Parity Obligations in such Fiscal Year. The City further covenants and agrees that if receipts for any current Fiscal Year shall not equal three times such Debt Service or will not be sufficient to meet such Fiscal Year’s actual Debt Service with respect to Parity Obligations, the City will either impose new Excise Taxes or will increase the rates of such taxes currently imposed in order that (i) such revenues for the current Fiscal Year will be sufficient to meet such Fiscal Year's Debt Service with respect to Parity Obligations, and (ii) such revenues for the next 86 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue and Refunding Obligations (Continued) succeeding Fiscal Year will be equal to at least three times the next succeeding Fiscal Year's Debt Service with respect to Parity Obligations. In the following outstanding balance, the 7/1/2018 principal payment was deducted as the fiscal year 2018 resources were dedicated. $42,485,000 2016 Excise Tax Revenue and Refunding Obligations due in annual installments of $1,135,000 to $7,510,000 through July 1, 2031; interest at 2.00% to 5.00% The following is a summary of total debt service cash requirements to maturity: Fiscal Year Ending June 30, Principal Interest Total 2019 2020 2021 2022 2023 2024-2028 2029-2031 $ 7,510,000 1,135,000 1,190,000 2,830,000 9,040,000 6,520,000 $ 1,411,250 1,035,750 1,035,750 979,000 919,500 3,023,000 662,500 $ 8,921,250 1,035,750 2,170,750 2,169,000 3,749,500 12,063,000 7,182,500 $ 28,225,000 $ 9,066,750 $ 37,291,750 The following is a summary of governmental debt service cash requirements to maturity: Fiscal Year Ending June 30, 2019 2020 2021 2022 2023 2024-2025 Principal Interest Total $ 332,000 345,000 400,000 82,000 $ 57,950 57,950 57,950 41,350 24,100 6,250 $ 57,950 57,950 389,950 386,350 424,100 88,250 $ 1,159,000 $ 245,550 $ 1,404,550 87 $ 28,225,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue and Refunding Obligations (Continued) The following is a summary of enterprise debt service cash requirements to maturity: Fiscal Year Ending June 30, 2019 2020 2021 2022 2023 2024-2028 2029-2031 Principal Interest Total 7,510,000 803,000 845,000 2,430,000 8,958,000 6,520,000 $ 1,353,300 977,800 977,800 937,650 895,400 3,016,750 662,500 $ 8,863,300 977,800 1,780,800 1,782,650 3,325,400 11,974,750 7,182,500 $ 27,066,000 $ 8,821,200 $ 35,887,200 $ Transit Excise Tax Revenue Refunding Obligations. On March 29, 2017, the City issued $19,305,000 of Excise Tax Revenue Refunding Obligations. The proceeds were used to refund $18,050,000 of the 2008 Excise Tax Revenue Obligations and pay costs incurred to issue the obligations. The City covenants and agrees that, so long as any of the Parity Obligations remain outstanding and the principal and interest shall be unpaid, it will not further encumber the Transit Excise Taxes on a parity basis unless the Transit Excise Taxes collected in the immediately preceding fiscal year shall have amounted to at least two times the highest combined principal and interest debt service payments, or any required deposits, for any succeeding fiscal year for with respect to the transit excise tax revenue Parity Obligations. In the following outstanding balance, the 7/1/2018 principal payment was deducted as the fiscal year 2018 resources were dedicated. $19,305,000 2017 Transit Excise Tax Revenue Refunding Obligations due in annual installments of $150,000 to $1,460,000 through July 1, 2035; interest at 2.87% The following is a summary of debt service cash requirements to maturity: Fiscal Year Ending June 30, 2019 2020 2021 2022 2023 2024-2028 2029-2033 2034-2035 Principal Interest $ 155,000 $ 549,749 950,000 545,300 980,000 518,035 1,010,000 489,909 1,035,000 460,922 5,650,000 1,840,675 6,500,000 982,832 2,875,000 124,415 $ 19,155,000 $ 5,511,837 88 Total $ 704,749 1,495,300 1,498,035 1,499,909 1,495,922 7,490,675 7,482,832 2,999,415 $ 24,666,837 $ 19,155,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue and Refunding Obligations (Continued) Excise Tax Revenue Refunding Obligations. On April 5, 2017, the City issued $14,790,000 of Excise Tax Revenue Refunding Obligations. The proceeds were used to refund $14,275,000 of the 2007R Excise Tax Refunding Revenue Obligations and pay costs incurred to issue the obligations. The primary purpose of the refunding was to take advantage of lower interest rates, thereby reducing future debt service in the City’s Debt Service and Community Facilities District funds. As a result of the refunding, the City reduced its total debt service requirements by $908,114, which resulted in an economic gain of $873,351. The City has collateralized the obligations by a pledge of all unrestricted excise taxes (transaction, franchise, privilege, business taxes, State-shared sales and income taxes, fees for licenses and permits, and state revenue sharing), including all fines and forfeitures, which the City presently or in the future validly imposes or receives from other entities and which are not earmarked by the contributor for a contrary or inconsistent purpose. The Excise Taxes do not include the 0.10% Performing Arts Center Excise Taxes, the excise taxes collected and paid to the City under the 0.50% transportation excise tax approved by the voters of the City on September 10, 1996 which are restricted to public transit use, or the excise taxes collected under the 1.00% increase in the transient lodging tax on hotels approved by the voters on September 10, 2002, which are restricted to fund programs of the Tempe Convention and Visitor’s Bureau. The City covenants and agrees that, so long as any of the obligations remain outstanding and the principal and interest thereon shall be unpaid or unprovided for, it will not further encumber the excise taxes on a parity basis unless the excise taxes collected in the next preceding fiscal year of the City shall have amounted to at least three times the highest combined debt service requirements for any succeeding fiscal year for all obligations and outstanding parity obligations, including the additional parity obligations proposed to be secured by a pledge or the excise taxes. In the following outstanding balance, the 7/1/2018 principal payment was deducted as the fiscal year 2018 resources were dedicated. $14,790,000 2017 Excise Tax Revenue Refunding Obligations due in annual installments of $2,655,000 to $3,200,000 through July 1, 2022; interest at 1.97% The following is a summary of debt service cash requirements to maturity: Fiscal Year Ending June 30, 2019 2020 2021 2022 Principal Interest Total 3,145,000 3,200,000 2,655,000 2,710,000 $ 11,710,000 $ 230,687 168,731 105,691 53,387 $ 558,496 $ 3,375,687 3,368,731 2,760,691 2,763,387 $ 12,268,496 $ 89 $ 11,710,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Section 108 Guaranteed Loan. In July 2004, the City entered into a Section 108 guaranteed loan agreement with the U.S. Department of Housing and Urban Development (HUD) for funding of $7,000,000 for on-site environmental remediation of the University/Hayden Butte Redevelopment Area 5 (Rio Salado Marketplace Redevelopment). The note required interest only payments until August 2007. At that time the note was due in annual installments of $261,000 to $549,000 through August 1, 2024; interest at 5.37% to 6.01%. On May 28, 2015, HUD refinanced the loan lowering the interest rate to 1.25% to 2.35%. The City has pledged its Community Development Block Grants as security for HUD’s guaranteed loan. The City was awarded a $1,000,000 HUD Brownfield Economic Development Initiative grant to be used to pay interest on the HUD Section 108 loan until such time the development generates sufficient tax revenue to cover the debt service of the development. $7,000,000 HUD Section 108 Guaranteed Loan due in annual installments of $261,000 to $549,000 through August 1, 2024; interest at 1.25% to 2.35% $ 3,389,000 The following discloses debt service requirements as of June 30, 2018 segregating principal and interest, for the next five years and five-year increments thereafter: Fiscal Year Ending June 30, 2019 2020 2021 2022 2023 2024-2025 Principal $ 423,000 442,000 462,000 482,000 504,000 1,076,000 $ 3,389,000 Interest $ 74,348 67,380 58,651 48,414 36,576 30,847 $ 316,216 Total $ 497,348 509,380 520,651 530,414 540,576 1,106,847 $ 3,705,216 Water Infrastructure Finance Authority Loans. In September 2009, the City signed two capitalization grant agreements with the Water Infrastructure Finance Authority (WIFA). The funding from these agreements was derived from the United States Environmental Protection Agency pursuant to the federal American Recovery and Reinvestment Act (ARRA) of 2009, Public Law 111-5. The loan agreement for Loan #92A174-10 is in the principal amount of $4,084,503 of which $2,200,000 will be forgivable principal and the remaining balance bears interest and administrative fees at a combined rate of 3.06%. $1,884,503 Water Infrastructure Finance Authority Loan #92A174-10 due in annual installments of $69,678 to $123,631 through July 1, 2029; interest at 1.56% and administrative fee at 1.50% 90 $ 1,174,791 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Water Infrastructure Finance Authority Loans (Continued) The following discloses debt service requirements on WIFA Loan #92A174-10 as of June 30, 2018 segregating principal and interest, for the next five years and five-year increments thereafter: Fiscal Year Ending June 30, 2019 2020 2021 2022 2023 2024-2028 2029 Principal $ 91,423 94,225 97,112 100,087 103,154 565,160 123,630 $ 1,174,791 Interest and Administrative Fee $ 35,996 33,194 30,307 27,332 24,265 71,935 3,788 $ 226,817 Total $ 127,419 127,419 127,419 127,419 127,419 637,095 127,418 $ 1,401,608 The loan agreement for Loan #92A175-10 is in the principal amount of $14,045,799 and bears interest and administrative fees at a reduced ARRA rate of 2.00%. $14,045,799 Water Infrastructure Finance Authority Loan #92A175-10 due in annual installments of $578,079 to $842,152 through July 1, 2029; interest at .50% and administrative fee at 1.50% $ 8,406,853 The following discloses debt service requirements on WIFA Loan #92A175-10 as of June 30, 2018 segregating principal and interest, for the next five years and five-year increments thereafter: Fiscal Year Ending June 30, 2019 2020 2021 2022 2023 2024-2028 2029 Principal $ 690,858 704,675 718,769 733,144 747,807 3,969,449 842,151 $ 8,406,853 Interest and Administrative Fee $ 168,137 154,320 140,226 125,851 111,188 325,526 16,843 $ 1,042,091 91 Total $ 858,995 858,995 858,995 858,995 858,995 4,294,975 858,994 $ 9,448,944 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Capital Leases. The City has entered into capital lease agreements for equipment. These lease agreements generally require annual payments and the lease term varies from 4 to 5 years. The lease agreements qualify as capital leases for accounting purposes and, therefore, have been recorded at the present value of their future minimum lease payments as of the date of inception. The governmental assets acquired through capital leases are for equipment with an original cost of $217,590. Accumulated depreciation as of June 30, 2018 totaled $89,462. The following is a schedule of future minimum lease payments, together with the net present value of the minimum lease payments as of June 30, 2018. These amounts will be paid for by the General Fund. Fiscal Year Ending June 30, 2019 2020 2021 2022 Less: remaining interest at 0% to 6.33% Present value of future minimum lease payments $ $ Total 24,682 17,560 17,560 5,853 65,655 (44) 65,611 The proprietary assets acquired through capital leases are for equipment with an original cost of $395,432. Accumulated depreciation as of June 30, 2018 totaled $83,243. The following is a schedule of future minimum lease payments, together with the net present value of the minimum lease payments as of June 30, 2018. These amounts will be paid for by the Golf Fund. Fiscal Year Ending June 30, 2019 2020 Total minimum lease payments Less: remaining interest at 1.24% to 2.90% Present value of future minimum lease payments Total $ 109,811 109,811 219,622 (6,355) $ 213,267 Statutory Debt Limitation. In the absence of more restrictive bond authorization ballot limitations, the City is subject to state statutory limitations on the amount of net bonded debt (exclusive of revenue and special assessment bonds and purchase contracts) it may have outstanding. The statutory debt limitation is 20 percent of the secondary assessed valuation for purposes of water, wastewater, open space preserves, artificial lighting, parks, playgrounds and recreational facilities, public safety, law enforcement, fire and emergency services facilities and streets and transportation facilities and 6 percent of the secondary assessed valuation for all other purposes. At June 30, 2018, the 20 percent debt limitation was $457,098,588 with $353,760,024 of outstanding debt. This provided a 20 percent debt margin of $103,338,564. The 6 percent debt limitation was $137,129,577 with $77,206,874 of outstanding debt. This provided a 6 percent debt margin of $59,922,703. The authorized, unissued debt subject to the statutory limitations of 20 percent and 6 percent at June 30, 2018, was $263,829,698. 92 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Bond Covenants. The various bond indentures contain certain limitations and restrictions on annual debt service requirements, maintenance and flow of monies through various restricted accounts, minimum amounts to be maintained in various sinking funds, and minimum revenue bond coverages. Arbitrage. Under U.S. Treasury Department regulations, all government tax-exempt debt issued after August 31, 1986 is subject to arbitrage rebate requirements. The requirements stipulate, in general, the earnings from the investment of tax exempt bond proceeds that exceed related interest expenditures on the bonds must be remitted to the Federal government on every fifth anniversary of each bond issue. The City has evaluated each general obligation bond and revenue bond issue subject to the arbitrage rebate requirements and has determined that no liability exists at June 30, 2018. Debt Service Coverage for Governmental General Obligation Bonds. The governmental general obligations are payable from ad valorem tax revenues to be levied on all taxable property within the City. A total of $180,435,000 is outstanding in governmental general obligation bonds. Proceeds of the bonds were used for general governmental purposes. The bonds are payable through July 1, 2038. Annual principal and interest payments on the bonds are expected to require less than 76.54% of total 2018 ad valorem taxes. The total principal and interest remaining to be paid on the bonds is $233,132,445. Principal and interest paid for the current year and total ad valorem tax revenues were $21,202,298 and $27,700,581 respectively. Debt Service Coverage for Business-type Activities General Obligation Bonds. The business-type general obligations are paid from the water and wastewater utility system revenues of the City. A total of $191,635,000 is outstanding in business-type general obligation bonds. Proceeds of the bonds were used for improvements and expansions to the City’s water and wastewater system. The bonds are payable through July 1, 2038. Annual principal and interest payments on the bonds are expected to require less than 29.77% of 2018 water and wastewater utility system revenue. The total principal and interest remaining to be paid on the bonds is $242,413,616. Principal and interest paid for the current year and water and wastewater system revenues were $26,139,098 and $87,807,953, respectively Debt Service Coverage for Governmental Excise Tax Obligations. The City has pledged all future unrestricted excise taxes to repay a total of $39,154,000 in outstanding governmental excise tax obligations. Proceeds of the bonds were used for general governmental purposes. The bonds are payable through July 1, 2029. Annual principal and interest payments on the bonds are expected to require less than 3.57% of total 2018 pledged excise taxes. The total principal and interest remaining to be paid on the bonds is $45,061,390. Principal and interest (net of Federal subsidy) paid for the current year and total pledged excise taxes were $6,382,873 and $178,992,195, respectively. Debt Service Coverage for Business-type Activities Excise Tax Obligations. The City has pledged all future unrestricted excise taxes to repay a total of $69,876,000 in outstanding business-type activities excise tax obligations. Proceeds of the bonds were used for improvements and expansions to the City’s water and wastewater system. The bonds are payable through July 1, 2033. Annual principal and interest payments on the bonds are expected to require less than 8.02% of total 2018 excise taxes. The total principal and interest remaining to be paid on the bonds is $93,324,703. Principal and interest paid for the current year and total excise taxes were $14,360,816 and $178,992,195, respectively. 93 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Debt Service Coverage for Transit Excise Tax Obligations. For the repayment of transit excise tax obligation bonds, the City has pledged all future excise taxes collected and paid under the 0.50% transportation excise tax. Proceeds of the bonds were used for the construction of the City’s portion of the light rail system. The current balance outstanding is $52,400,000. The bonds are payable through July 1, 2037. Annual principal and interest payments on the bonds are expected to require less than 10.50% of total 2018 transit excise taxes. The total principal and interest remaining to be paid on the bonds is $72,455,235. Principal and interest paid for the current year and transit excise taxes were $4,311,491 and $41,074,434 respectively. Debt Service Coverage for Performing Arts Center Excise Taxes. For repayment of performing arts excise tax obligations, the City has pledged all future excise taxes collected and paid under a 0.10% performing arts center tax. Proceeds of the bonds were used for the construction of the Tempe Performing Arts Center. The bonds are payable primarily from performing arts excise taxes and are secured by a subordinate lien pledge of all future unrestricted excise taxes. The current balance outstanding is $6,440,000 and the bonds are payable through July 1, 2020. Annual principal and interest payments on the bonds are expected to be less than 40.64% of total 2018 performing arts excise taxes. The total principal and interest remaining to be paid on the bonds is $6,861,950. Principal and interest paid for the current year and total available excise taxes were $3,428,850 and $166,685,009, respectively. 94 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Changes in Long-term Liabilities. The following is a summary of changes in long-term liabilities for the fiscal year ended June 30, 2018 (the ending balance does not include 7/1/2018 “matured” payment for general or excise tax obligations): Amounts Ending Due Within Beginning Additions Reductions Balance One Year Balance Governmental activities: Debt payable: $178,555,000 $ 25,025,000 $ (23,145,000) $180,435,000 $14,545,000 General obligation bonds payable (1,315,000) 17,415,000 1,380,000 Special assessments 18,730,000 6,675,000 (5,915,000) 760,000 760,000 2008 Excise tax obligations 3,695,000 (310,000) 3,385,000 325,000 2009 Excise tax obligations 7,475,000 (30,000) 7,445,000 35,000 2011 Excise tax obligations 9,465,000 (3,025,000) 6,440,000 3,145,000 2011 Excise tax refunding obligations 16,930,000 (1,475,000) 15,455,000 1,550,000 2012 Excise tax obligations 36,515,000 (4,030,000) 32,485,000 1,215,000 2012 Excise tax refunding obligations 1,159,000 1,159,000 2016 Excise tax refunding obligations 19,305,000 (150,000) 19,155,000 155,000 2017 Excise tax refunding obligations 14,790,000 (3,080,000) 11,710,000 3,145,000 2017 Excise tax refunding obligations 20,515,300 4,083,395 (2,750,783) 21,847,912 Premium on debt payable (405,000) 3,389,000 423,000 2004 HUD Section 108 loan 3,794,000 (56,931) 65,610 24,639 Capital leases 34,743 87,798 (45,687,714) 321,146,522 26,702,639 337,638,043 29,196,193 Compensated absences Claims and judgments OPEB, restated Net pension liability Governmental activities long-term 31,187,868 6,704,534 72,921,914 381,179,677 $829,632,036 (11,912,610) 12,087,432 4,753,551 (2,882,000) 2,161,141 11,069,175 $ 59,267,492 $ (60,482,324) 31,362,690 8,576,085 75,083,055 392,248,852 $828,417,204 Business-type activities: General obligation bonds payable General obligation premium 2009 Excise tax obligations 2011 Excise tax obligations 2012 Excise tax obligations 2013 Excise tax obligations 2016 Excise tax obligations Excise premium 2010 WIFA Loan 2010 WIFA Loan Capital leases OPEB, restated Net pension liability Business-type activities long-term $187,835,000 15,884,742 8,965,000 6,975,000 6,895,000 23,355,000 34,276,000 10,763,429 1,263,495 9,084,165 318,834 8,723,528 23,213,075 $337,552,268 $ 22,535,000 3,670,412 293,862 $ 26,499,274 $191,635,000 $18,925,000 17,804,034 8,215,000 790,000 5,705,000 1,320,000 6,565,000 345,000 22,325,000 1,045,000 27,066,000 7,510,000 9,899,573 1,174,791 91,423 8,406,853 690,858 213,267 105,588 9,017,390 21,371,300 $329,398,208 $30,822,869 $ (18,735,000) (1,751,120) (750,000) (1,270,000) (330,000) (1,030,000) (7,210,000) (863,856) (88,704) (677,312) (105,567) (1,841,775) $ (34,653,334) 12,133,780 2,928,022 $41,764,441 The long-term liabilities at June 30, 2018 have been reduced by deposits made with the City’s fiscal agent for July 1, 2018 maturities. For the governmental activities, claims and judgments and compensated absences are generally liquidated by the General Fund. 95 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 10 - BONDS TO BE PAID FROM ASSETS HELD IN TRUST Advance Bond Refundings Future debt service on refunded bonds has been provided through advance refunding bond issues. Under an advance refunding arrangement, refunding bonds are issued and the net proceeds, plus any additional resources that may be required, are used to purchase securities issued or guaranteed by the United States government. These securities are then deposited in an irrevocable trust under an escrow agreement which provides that all proceeds from the trust will be used to fund the principal and interest payments of the previously issued bonded debt being refunded. The trust deposits have been computed so that the securities in the trust, along with future cash flow generated by the securities, will be sufficient to service the previously issued bonds. On June 22, 2016, the City issued $20,715,000 of excise tax revenue refunding obligation with a premium of $5,179,065 to partially advance refund $3,860,000 of Series 2009 and $17,850,000 of Series 2011A outstanding excise tax revenue obligations. The bonds were issued with an average interest rate of 4.93%. The net proceeds of $25,894,065 after the payment of $77,916 in issuance costs and an underwriter’s discount of $134,648 were used to purchase State and local government securities. The primary purpose of the refunding was to take advantage of lower interest rates, thereby reducing future debt service in the City’s Debt Service and Water and Wastewater funds. As a result of the advance refunding, the City reduced its total debt service requirements by $1,818,444, which resulted in an economic gain (the difference between the present values of the debt service payment on the old and new debt) of $1,631,429. On June 23, 2016, the City issued $86,440,000 of general obligation refunding bonds with a premium of $12,092,091 to partially advance refund $11,445,000 of Series 2007A, $37,920,000 of Series 2008A and $31,190,000 of Series 2009A outstanding general obligation bonds. In addition, the proceeds were utilized for a current refunding of $9,890,000 of Series 2006 general obligation bonds. The bonds were issued with an average interest rate of 4.10%. The net proceeds of $98,532,091 after the payment of $255,831 in issuance costs, an underwriter’s discount of $497,030 and $2,665 deposited into the debt service fund were used to purchase State and local government securities. The primary purpose of the refunding was to take advantage of lower interest rates, thereby reducing future debt service in the City’s General Obligation Debt Service and Water and Wastewater funds. As a result of the advance refunding, the City reduced its total debt service requirements by $9,822,425, which resulted in an economic gain of $8,858,944. On March 29, 2017, the City issued $19,305,000 of Transit excise tax revenue refunding obligation to partially advance refund $18,050,000 of Series 2008 outstanding excise tax revenue obligations. The bonds were issued with an average interest rate of 2.87%. The net proceeds of $19,082,453 after the payment of $217,047 in issuance costs and a bank counsel fee of $5,500 were used to purchase State and local government securities. The primary purpose of the refunding was to take advantage of lower interest rates, thereby reducing future debt service in the City’s Transit Special Revenue fund. As a result of the advance refunding, the City reduced its total debt service requirements by $2,985,742, which resulted in an economic gain of $2,375,840. On May 9, 2018, the City defeased $8,045,000 of Transit excise tax revenue obligations. This transaction partially advanced defeased $2,860,000 of Series 2012 outstanding obligations and contained a current defeasance of $5,185,000 of Series 2008 obligations. The primary purpose of the defeasance was to lower debt service in the Transit fund. As a result of the defeasance, the City reduced its total debt service requirements in the Transit fund by $15,584,956, which resulted in an economic gain of $7,089,619. 96 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 10 - BONDS TO BE PAID FROM ASSETS HELD IN TRUST (Continued) Advance Bond Refundings (Continued) On May 8, 2018, the City defeased $8,290,000 of general obligation bonds. This transaction partially advanced defeased $4,220,000 of Series 2015 outstanding obligations and $4,070,000 of Series 2017 obligations. The primary purpose of the defeasance was to lower the balance in the debt service fund. As a result of the defeasance, the City reduced its total debt service requirements in the debt service fund by $14,591,813, which resulted in an economic gain of $5,092,510. Bonds which have been advance refunded (and thus not included in the debt of the City) and are still outstanding as of June 30, 2018 are as follows: $23,615,000 excise tax revenue obligations issued in 2009 and partially refunded in 2016 (final redemption date is 7/1/2019) $ 3,860,000 $31,825,000 excise tax revenue obligations issued in 2011 and partially refunded in 2016 (final redemption date is 7/1/2021) 17,850,000 $66,365,000 general obligation bonds issued in 2008 and partially refunded in 2016 (final redemption date is 7/1/2018) 37,920,000 $56,055,000 general obligation bonds issued in 2009 and partially refunded in 2016 (final redemption date is 7/1/2019) 31,190,000 $30,170,000 Transit excise tax revenue obligations issued in 2008 and partially refunded in 18,050,000 2017 (final redemption date is 7/1/2018) $41,390,000 Transit excise tax revenue obligations issued in 2012 and partially defeased in 2018 (final redemption date is 7/1/2022) 2,860,000 $43,965,000 general obligation bonds issued in 2015 and partially defeased in 2018 (final 4,220,000 redemption date is 7/1/2025) $32,810,000 general obligation bonds issued in 2017 and partially defeased in 2018 (final 4,070,000 redemption date is 7/1/2027) Total bonds advance refunded $120,020,000 NOTE 11 – FUND BALANCE CLASSIFICATIONS During the year ended June 30, 2011, the City implemented the provisions of GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. GASB Statement No. 54 establishes standards for financial reporting, including note disclosure requirements, for fund balance classifications of the governmental funds, and clarifies existing governmental fund type definitions. In the fund financial statements, fund balance is reported in classifications that comprise a hierarchy based on the extent to which the City is bound to honor constraints on the specific purposes for which amounts in those funds can be spent. The classifications of fund balance are Non-spendable, Restricted, Committed, Assigned, and Unassigned. Committed, Assigned, and Unassigned represent the amount that is available for discretionary spending. Non-spendable fund balance includes amounts that cannot be spent because either 1) it is not in a spendable form, such as inventory or prepaid items or 2) legally or contractually required to be maintained intact. Restricted fund balance is externally (outside the City) enforceable limitations imposed by creditors, grantors, contributors, laws and regulations of other governments, or laws through constitutional provisions or enabling legislation (changes in City Charter). 97 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 11 – FUND BALANCE CLASSIFICATIONS (Continued) Committed fund balance is self-imposed limitations imposed at the highest level of decision making authority, namely, Mayor and Council. Mayor and Council approval (through ordinance or resolution, both of which are considered the highest level of decision making authority of the City) is required to commit resources or to rescind the commitment. Assigned fund balance represents limitations imposed by management. In June 2011, through resolution 2011.56, the Mayor and Council authorized the Chief Financial Officer to assign fund balance amounts for specific purposes. Unassigned fund balance represents the residual net resources in excess of the other classifications. The General Fund is the only fund that can report a positive unassigned fund balance and any governmental fund can report a negative unassigned fund balance. When both restricted and unrestricted resources are available for specific expenditures, restricted resources are considered spent before unrestricted resources. Within unrestricted resources, committed and assigned are considered spent (if available) before unassigned amounts. As of June 30, 2018, the fund balance details by classification are listed as follows: The Mayor and Council have established a minimum unassigned fund balance policy for the General Fund of 20% to 30% of current year operating revenues. As of June 30, 2018, the aggregate balance is 42.58% of General Fund revenues. 98 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 11 – FUND BALANCE CLASSIFICATIONS (Continued) Transit Special Revenue General Fund balances: Non-spendable: Inventories Prepaid items Capital improvements notes receivable Restricted: Debt Service reserve Police Fire Community services Public works Community development Human services Municipal court City manager Strategic Mgmnt + Diversity Committed to: Police Fire Public works Community development Municpal court Assigned to: Self-insurance purposes Capital projects ROW revenue Other Transit TSA Unassigned: Total fund balances $ 461,092 250,000 711,092 $ - Total Other General Total Special Obligation Assessment Transit Capital Governmental Governmental Funds Debt Service Debt Service Funds Projects $ - $ - $ - $ 885,691 667,354 1,553,045 $ 1,346,783 667,354 250,000 2,264,137 154,667 - 28,238,205 - 13,114,979 - 138,498 - 16,965,101 - 1,802,271 2,443,036 1,997,853 12,190,917 1,908,465 1,098,397 406,998 127,702 2,000 13,253,477 1,802,271 2,443,036 1,997,853 57,394,223 2,063,132 1,098,397 406,998 127,702 2,000 154,667 28,238,205 13,114,979 138,498 16,965,101 21,977,639 80,589,089 - 11,201,499 11,201,499 - - - 323,501 800,969 19,422,062 6,958,936 525,913 28,031,381 323,501 800,969 30,623,561 6,958,936 525,913 39,232,880 8,033,876 8,033,876 - - - 3,227,804 3,227,804 6,841,391 2,191,983 54,667 3,327,804 8,033,876 6,148,865 26,598,586 - - - (296,755) 93,698,954 $ 54,493,114 $ 242,383,646 6,841,391 2,191,983 54,667 100,000 6,148,865 15,336,906 93,995,709 $ 110,198,374 $47,473,580 $ 13,114,979 99 $ 138,498 $ 16,965,101 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 12 - COMMITMENTS In the Governmental fund financial statements, construction commitments (encumbrances) are included in either the restricted or committed fund balances. At June 30, 2018 the City’s construction commitments are as follows: Construction in Progress Commitment Governmental funds: Transit Non-major funds Proprietary funds: Water/wastewater Solid waste $ 5,997,255 21,916,118 $ 27,913,373 $ 2,342,154 19,646,257 $ 21,988,411 Commitment Construction in Progress $ 9,872,528 58,476 $ 9,931,004 $ 29,676,926 74,719 $ 29,751,645 In addition, there were non-construction related commitments as follows: Commitment Governmental funds: General Non-major funds $ 1,369,449 $ 298,219 1,667,668 Commitment Proprietary funds: Water/wastewater Solid waste Golf $ $ 412,766 1,984,382 104,736 2,501,884 NOTE 13 - OPERATING LEASES The City leases copiers under certain non-cancelable leases accounted for as operating leases. Operating leases do not give rise to property rights or lease obligations, and therefore the results of the lease agreements are not reflected in the City’s Statement of Net Position. Current year lease costs for the fiscal year ended June 30, 2018 were $87,959. The following is a schedule by year of future minimum lease payments: Fiscal Year Ending June 30, 2019 2020 2021 2022 Total minimum payments required $ Amount 86,827 25,535 1,408 1,056 $ 114,826 100 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 14 - RETIREMENT AND PENSION PLANS The City contributes to the pension plans described below. The City also contributes to the Elected Officials Retirement Plan; however, the plan is not described below because of its relative insignificance to the financial statements. The plans are component units of the State of Arizona. The City reported $26,079,223 of pension expenditures related to all pension plans to which it contributes. A. Arizona State Retirement System Plan Description. City employees not covered by the other pension plans described after this section participate in the Arizona State Retirement System (ASRS). The ASRS administers a cost-sharing multiple-employer defined benefit pension plan, a cost-sharing multiple-employer defined benefit health insurance premium benefit (OPEB) plan, and a cost-sharing multiple-employer defined benefit long-term disability (OPEB) plan. The Arizona State Retirement System Board governs the ASRS according to the provisions of A.R.S. Title 38, Chapter 5, Articles 2 and 2.1. The ASRS issues a publicly available financial report that includes its financial statements and required supplementary information. The report is available on the ASRS website at www.azasrs.gov. Benefits Provided. The ASRS provides retirement, health insurance premium supplement, long-term disability, and survivor benefits. State statute establishes benefit terms. Retirement benefits are calculated on the basis of age, average monthly compensation, and service credit as follows: Retirement Initial Membership Date: Before July 1, 2011 On or After July 1, 2011 Years of service and age required to Sum of years and age equals 80 30 years age 55 receive benefit 10 years age 62 25 years age 60 5 years age 50* 10 years age 62 Any years age 65 5 years age 50* Any years age 65 Final average salary is based on Highest 36 months of last 120 months Highest 60 months of last 120 months Benefit percent per year of service 2.1% to 2.3% 2.1% to 2.3% *With actuarially reduced benefits Retirement benefits for members who joined the ASRS prior to September 13, 2013, are subject to automatic cost-of-living adjustments based on excess investment earnings. Members with a membership date on or after September 13, 2013, are not eligible for cost-of-living adjustments. Survivor benefits are payable upon a member’s death. For retired members, the survivor benefit is determined by the retirement benefit option chosen. For all other members, the beneficiary is entitled to the member’s account balance that includes the member’s contributions and employer’s contributions, plus interest earned. Retired and disabled members, with at least five years of credited service, are eligible to receive health insurance premium benefits. The benefits are payable only with respect to allowable health insurance premiums for which the member is responsible. For members with 10 or more years of service, benefits range from $150 per month to $260 per month depending on the age of the member and dependents. For members with five to nine years of service, the benefits are the same dollar amounts as above multiplied by a vesting fraction based on completed years of service. Active members are eligible for a long-term disability benefit in the event they become unable to perform their work. The monthly benefit is equal to two-thirds of their monthly earnings. Members receiving benefits continue to earn service credit up to their normal retirement dates. Members with long-term disability commencement dates after June 30, 1999 are limited to 30 years of service or the service on record as of the effective disability date, if their service is greater than 30 years. 101 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 14 - RETIREMENT AND PENSION PLANS (Continued) Contributions. In accordance with state statutes, annual actuarial valuations determine active member and employer contribution requirements. The combined active member and employer contribution rates are expected to finance the costs of benefits employees earn during the year, with an additional amount to finance any unfunded accrued liability. For the current fiscal year, active ASRS members were required by statute to contribute at the actuarially determined rate of 11.50% (11.34% for retirement and 0.16% for long-term disability) of the members’ annual covered payroll, and the City was required by statute to contribute at the actuarially determined rate of 11.50% (10.90% for retirement, 0.44% for health insurance premium benefit, and 0.16% for long-term disability) of the members’ annual covered payroll. The City’s contributions to the pension plan for the year ended June 30, 2018 were $8,163,497. In addition, the City was required by statute to contribute at the actuarially determined rate of 9.49% (9.26% for retirement, 0.10% for health supplement and 0.13% for long-term disability) of annual covered payroll of retired members who worked in positions that would typically be filled by an employee who contributes to ASRS. The City’s contributions for the current and two preceding years for the Arizona State Retirement System OPEB, all of which were equal to the required contributions, were as follows: Fiscal Year Ending June 30, 2018 2017 2016 Health Benefit Supplement Fund $ 324,876 404,502 352,392 Long-Term Disability Fund $ 122,148 106,304 86,816 Pension Liability. At June 30, 2018, the City reported a liability of $ 118,500,674 for its proportionate share of the net pension liability of the ASRS. The net pension liability was measured as of June 30, 2017. The total pension liability used to calculate the net pension liability was determined using update procedures to roll forward the total pension liability from an actuarial valuation as of June 30, 2016, to the measurement date of June 30, 2017. The City’s proportion of the net pension liability was based on a projection of the City’s long-term share of contributions to the pension plan relative to the projected contributions of all participating employers, actuarially determined. At June 30, 2017, the City’s proportion was 0.76%, which was an decrease of 0.02% from its proportion measured as of June 30, 2016. Pension Expense and Deferred Outflows/Inflows of Resources. For the year ended June 30, 2018, the City recognized pension expense for ASRS of $ 3,291,310 and reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Differences between expected and actual experience Changes of assumptions and other inputs Net difference between projected and actual earnings on pension plan investments Changes in proportion and differences between the City contributions and proportionate share of contributions City contributions subsequent to the measurement date Total Deferred Outflow of Resources $ 5,146,756 850,753 - 1,019,563 8,163,497 $ 102 Deferred Inflow of Resources $ 3,553,305 3,543,383 15,180,569 2,267,993 $ 9,364,681 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 14 - RETIREMENT AND PENSION PLANS (Continued) The $ 8,163,497 reported as deferred outflows of resources related to ASRS pensions resulting from contributions subsequent to the measurement date as reported in the table above will be recognized as a reduction of the net pension liability in the year ended June 30, 2019. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to ASRS pensions will be recognized in pension expense as follows: Deferred Outflow (Inflows) of Resources $ (4,929,626) 4,062,009 1,245,877 (2,725,869) Fiscal Year Ending June 30, 2019 2020 2021 2022 Actuarial Assumptions. The significant actuarial assumptions used to measure the total ASRS pension liability are as follows: Actuarial valuation date Actuarial roll forward date Actuarial cost method Asset valuation Discount rate Projected salary increases Inflation Permanent base increases Mortality rates June 30, 2016 June 30, 2017 Entry age normal Fair value 8.00% 3.00-6.75% 3.00% Included 1994 GAM Scale BB The actuarial assumptions used in the June 30, 2016 valuation were based on the results of an actuarial experience study for the five-year period ended June 30, 2012. The purpose of the experience study was to review actual experience in relation to the actuarial assumptions in effect. The ASRS Board adopted the experience study recommended changes which were applied to the June 30, 2013, actuarial valuation. The study did not include an analysis of the assumed investment rate of return. The long-term expected rate of return on ASRS pension plan investments was determined to be 8.70% using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class of ASRS are summarized in the following table: Target Allocation 58% 25% 10% 5 2% 100% Asset Class Equity Fixed income Real estate Multi-asset Commodities Total 103 Long-Term Expected Real Rate of Return 6.73% 3.70 4.25 3.41 3.84 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 14 - RETIREMENT AND PENSION PLANS (Continued) Discount Rate. The discount rate used to measure the ASRS total pension liability was 8.00%, which is less than the long-term expected rate of return of 8.70%. The projection of cash flows used to determine the discount rate assumed that contributions from participating employers will be made based on the actuarially determined rates based on the ASRS Board’s funding policy, which establishes the contractually required rate under Arizona statute. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of the Proportionate Share 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 8.00%, as well as what the proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower or 1-percentage-point higher than the current rate: The City’s Proportionate share of the net pension liability 1% Decrease (7.00%) Current Discount Rate (8.00%) 1% Increase (9.00%) $ 152,097,675 $ 118,500,674 $ 90,427,503 Pension Plan Fiduciary Net Position. Detailed information about the pension plan’s fiduciary net position is available in the separately issued ASRS financial report. The report is available on the ASRS website at www.azasrs.gov. B. Public Safety Personnel Retirement System Plan Descriptions. City public safety employees who are regularly assigned hazardous duty participate in the Public Safety Personnel Retirement System (PSPRS). The PSPRS administers an agent multiple-employer defined benefit pension plan and an agent multiple-employer defined benefit health insurance premium benefit (OPEB) plan. A nine-member board known as the Board of Trustees and the participating local boards govern the PSPRS according to the provisions of A.R.S. Title 38, Chapter 5, Article 4. The PSPRS issues publicly available financial reports that include their financial statements and required supplementary information. This report is available on the PSPRS website at www.psprs.com. Benefits Provided. The PSPRS provide retirement, health insurance premium supplement, disability, and survivor benefits. State statute establishes benefits terms. Certain retirement and disability benefits are calculated on the basis of age, average monthly compensation, and service credit as follows. See the publicly available PSPRS financial reports for additional benefits information. 104 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 14 - RETIREMENT AND PENSION PLANS (Continued) Retirement Initial Membership Date: Before January 1, 2012 On or After January 1, 2012 Retirement and Disability: Years of service and age required to 20 years any age 25 years or 15 years of credited receive benefit 15 years age 62 service and age 52.5 Final average salary is based on Highest 36 months of last 20 years Highest 60 months of last 20 years Normal retirement 50% less 2.0% for each year of credited 2.5% per year of credited service, service less than 20 years or plus 2.0% not to exceed 80% to 2.5% for each year of credited service over 20 years, not to exceed 80% Accidental disability retirement 50% or normal retirement, whichever is greater Survivor benefit: Retired members 80%-100% of retired member’s pension benefit Active members 80% of accidental disability retirement benefit or 100% of average monthly compensation if death was the result of injuries received on the job Retirement and survivor benefits are subject to automatic cost-of-living adjustments based on excess investment earning. PSPRS also provides temporary disability benefits of 50% of the member's compensation for up to 12 months. Employees Covered by Benefit Terms. At June 30, 2018, the following employees were covered by the agent pension plans’ benefit terms: PSPRS Police 245 57 336 638 Retirees and beneficiaries Inactive, non-retired members Active members Total PSPRS Fire 130 29 132 291 Contributions and Annual OPEB Cost. State statutes establish the pension contribution requirements for active PSPRS employees. In accordance with state statutes, annual actuarial valuations determine employer contribution requirements for PSPRS pension and health insurance premium benefits. The combined active member and employer contribution rates are expected to finance the costs of benefits employees earn during the year, with an additional amount to finance any unfunded accrued liability. Contributions rates for the year ended June 30, 2018 are indicated below. Rates are a percentage of active members’ annual covered payroll. Active members – pension City: Pension Health insurance PSPRS Police 7.65% 55.67 0.90 105 PSPRS Fire 7.65% 64.60 .25 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 14 - RETIREMENT AND PENSION PLANS (Continued) In addition, the City was required by statute to contribute at the actuarially determined rate of 41.16% for police and 47.98% for fire of annual covered payroll of retired members who worked in positions that would typically be filled by an employee who contributes to the PSPRS. For the agent plans, the contributions to the pension plan and annual OPEB cost and contributions for the health insurance premium benefit for the year ended were: Pension: Contributions made Health insurance premium benefit: Annual OPEB cost Contributions made PSPRS Police PSPRS Fire $ 11,464,549 $ 6,451,177 185,344 185,344 24,966 24,966 Pension Liability. At June 30, 2018, the City reported $187,448,327 for police and $107,671,151 for fire in net pension liability. The net pension liabilities were measured as of June 30, 2017, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The total pension liability as of June 30, 2017, reflects changes of benefit terms and actuarial assumptions for a court ruling for funding permanent benefit increases and a decrease in the wage growth assumption. In May 2016 voters approved Proposition 124 that authorized certain statutory adjustments to PSPRS’ automatic cost-of-living adjustments. The statutory adjustments change the basis for future cost-of-living adjustments from excess investment earnings to the change in the consumer price index, limited to a maximum annual increase of two percent. In addition, Laws 2016, Chapter 2, changed the benefit formula and contribution requirements for members hired on or after July 1, 2017. The final change that impacted the actuarial assumptions was a decrease from 7.85% to 7.50% on the investment rate of return. The net pension liability measured as of June 30, 2017 will reflect changes of actuarial assumptions based on the results of an actuarial experience study for the 5-year period ended June 30, 2016. The change in the City's net pension liability as a result of these changes is not known. Actuarial Assumptions. The significant actuarial assumptions used to measure the total pension liability are as follows: PSPRS Actuarial valuation date June 30, 2017 Actuarial cost method Entry age normal Asset valuation Market Value of Assets Discount rate 7.40% 3.50 – 7.50% Projected salary increases Inflation 2.50% Permanent benefit increase Included RP-2014 mortality table, 110% of Mortality rates female healthy annuitant mortality table Actuarial assumptions used in the June 30, 2017 valuation were based on the results of an actuarial experience study for the 5-year period ended June 30, 2016. The long-term expected rate of return on PSPRS pension plan investments was determined to be 7.40% using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expenses and inflation) are developed for each major asset class. The target allocation and best estimates of geometric real rates of return for each major asset class for all agent pension plans are summarized in the following table: 106 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 14 - RETIREMENT AND PENSION PLANS (Continued) Asset Class U.S. equity Non-U.S. equity Private equity Fixed income Credit opportunities Absolute return GTAA Real assets Real estate Risk parity Short-term investments Total Target Allocation 16%% 14% 12% 5% 16% 2 10% 9% 10% 4% 2 100% Long-Term Expected Real Rate of Return 7.60%% 8.70% 6.75% %1 1.25 5.83% 3.75% 3.96% 4.52% 3.75% 5.00% 0.25 Pension Discount Rates. The discount rate of 7.40% was used to measure the total pension liability. The projection of cash flows used to determine the PSPRS 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 the actuarially determined contribution rates and the member rate. Based on those assumptions, the pension plans’ fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Changes in the Agent Plans Net Pension Liability Police: Balances at June 30, 2017 Changes for the year: Service cost Interest on the total pension liability Changes of benefit terms Differences between expected and actual experience in the measurement of the pension liability Changes of assumptions or other inputs Contributions – employer Contributions – employee Net investment income Benefit payments, including refunds of employee contributions Administrative expense Other changes Net changes Balances at June 30, 2018 Total Pension Liability $ 285,510,601 6,639,904 21,145,695 2,664,893 (215,490) 7,860,019 - $ 107 (13,775,904) 24,319,117 309,829,718 Increase(Decrease) Plan Fiduciary Net Position $ 106,649,093 - Net Pension Liability $ 178,861,508 6,639,904 21,145,695 2,664,893 12,486,872 3,579,664 13,507,120 (215,490) 7,860,019 (12,486,872) (3,579,664) (13,507,120) (13,775,904) (119,915) 54,461 15,732,298 $ 122,381,391 119,915 (54,461) 8,586,819 $ 187,448,327 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 14 - RETIREMENT AND PENSION PLANS (Continued) Changes in the Agent Plans Net Pension Liability Fire: Balances at June 30, 2017 Changes for the year: Service cost Interest on the total pension liability Changes of benefit terms Differences between expected and actual experience in the measurement of the pension liability Changes of assumptions or other inputs Contributions – employer Contributions – employee Net investment income Benefit payments, including refunds of employee contributions Administrative expense Other changes Net changes Balances at June 30, 2018 Increase(Decrease) Plan Fiduciary Net Position $ 69,151,674 Net Pension Liability $ 99,486,139 3,288,107 12,435,795 1,132,919 - 3,288,107 12,435,795 1,132,919 2,381,447 6,731,555 - 7,629,875 1,711,846 8,517,929 2,381,447 6,731,555 (7,629,875) (1,711,846) (8,517,929) (8,942,533) 17,027,290 $ 185,665,103 (8,942,533) (75,769) 930 8,842,278 $ 77,993,952 Total Pension Liability $ 168,637,813 75,769 (930) 8,185,012 $ 107,671,151 Sensitivity of the Net Pension Liability to Changes in the Discount Rate. The following presents the City’s net pension liabilities calculated using the discount rates noted above, as well as what the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower or 1-percentage-point higher than the current rate: 1% Decrease Current Discount Rate 1% Increase Police: Rate Net pension liability 6.40% $ 231,017,941 7.40% $ 187,448,327 8.40% $ 152,097,309 Fire: Rate Net pension liability 6.40% $ 131,831,304 7.40% $ 107,671,151 8.40% $ 87,861,338 Pension Plan Fiduciary Net Position. Detailed information about the pension plans’ fiduciary net position is available in the separately issued PSPRS financial report. The report is available on the PSPRS website at www.psprs.com. 108 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 14 - RETIREMENT AND PENSION PLANS (Continued) Pension Expense. For the year ended June 30, 2018, the City’s recognized $ 25,959,839 as pension expense for police and $ 13,260,271 as pension expense for fire. Pension Deferred Outflows/Inflows of Resources. At June 30, 2018, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Police: Differences between expected and actual experience Changes of assumptions or other inputs Net difference between projected and actual earnings on pension plan investments Contributions subsequent to the measurement date Total Fire: Differences between expected and actual experience Changes of assumptions or other inputs Net difference between projected and actual earnings on pension plan investments Contributions subsequent to the measurement date Total Deferred Outflows of Resources $ 18,256,674 Deferred Inflows of Resources $ 5,262,881 - 931,888 11,464,549 $ 30,653,111 $ 5,262,881 Deferred Outflows of Resources $ 967,122 13,693,374 Deferred Inflows of Resources $ - 829,104 6,451,177 $ 21,940,777 - $ The amounts reported as deferred outflows of resources related to pension resulting from contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability (or an increase in the net pension asset) in the year ended June 30, 2019. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: PSPRS Police $ 6,739,696 3,868,521 2,930,335 387,129 $ 13,925,681 Fiscal Year Ending June 30, 2019 2020 2021 2022 2023 Total 109 PSPRS Fire $ 4,247,143 4,985,771 2,984,182 1,782,638 1,489,867 $ 15,489,601 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 14 - RETIREMENT AND PENSION PLANS (Continued) Agent Plan OPEB Trend Information. The table below presents the annual OPEB cost information for the health insurance premium benefit for the current and two preceding years: Police: Fiscal Year Ended June 30, 2018 2017 2016 Annual OPEB Cost $ 185,344 214,548 191,805 Percentage of Annual Cost Contributed 100% 100 100 Net OPEB Obligation $ - Annual OPEB Cost $ 24,966 - Percentage of Annual Cost Contributed 100% 100 100 Net OPEB Obligation $ - Fire: Fiscal Year Ended June 30, 2018 2017 2016 Agent Plan OPEB Actuarial Assumptions. Actuarial valuations involve estimates of the reported amounts’ value and assumptions about the probability of events in the future. Amounts determined regarding the funded status of the plans and the annual required contributions are subject to continual revision as actual results are compared to past expectations and new estimates are made. The required schedule of funding progress for the health insurance premium benefit presented as required supplementary information provides multiyear trend information that shows whether the actuarial value of the plans’ assets are increasing or decreasing over time relative to the actuarial accrued liability for benefits. Projections of benefits are based on (1) the plans as understood by the City and plans’ members and include the types of benefits in force at the valuation date, and (2) the pattern of sharing benefit costs between the City and plans’ members to that point. Actuarial calculations reflect a long-term perspective and employ methods and assumptions that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets. The significant actuarial methods and assumptions used are the same for both PSPRS plans and related benefits (unless noted), and the actuarial methods and assumptions used to establish the fiscal year 2018 contribution requirements, are as follows: PSPRS Actuarial valuation date June 30, 2016 Actuarial cost method Entry age normal Amortization method Level percent closed for unfunded actuarial accrued liability Remaining amortization period 20 years for unfunded actuarial accrued liability, 20 years for overfunded Asset valuation method 7-year smoothed market value (80%/120% market) Actuarial assumptions: Investment rate of return 7.5% Projected salary increases includes 4.0%-8.0% inflation at 4.0% 110 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 14 - RETIREMENT AND PENSION PLANS (Continued) The funded status of both the PSPRS health insurance premium benefit plans in the June 30, 2017, actuarial valuation was determined using the following actuarial methods and assumptions, applied to all periods included in the measurement. Actuarial valuation date Actuarial cost method Amortization method Remaining amortization period Asset valuation method PSPRS June 30, 2017 Entry age normal Level percent closed for unfunded actuarial accrued liability 19 years for unfunded actuarial accrued liability, 20 years for overfunded 7-year smoothed market value (80%/120% market) Actuarial assumptions: Investment rate of return 7.4% Projected salary increases includes 3.5%-7.5% inflation at 3.5% Agent Plan OPEB Funded Status. The following table presents the funded status of the health insurance premium benefit plans as of the most recent valuation date, June 30, 2017. Actuarial value of assets Actuarial accrued liability Unfunded actuarial accrued liability (funding excess) Funded ratio Annual covered payroll funded actuarial accrued liability (funding excess) as a percentage of covered payroll PSPRS Police $ 4,221,444 6,779,619 2,558,175 PSPRS Fire $ 3,791,670 3,432,367 (359,303) 62.3% $ 29,173,568 8.77% 110.5% $ 13,548,032 - % Aggregate Amounts. At June 30,2018, the City reported the following aggregate amounts related to pensions and OPEB for all plans to which it contributes: Pension $ 413,620,152 41,695,233 14,627,562 42,511,419 26,079,221 Net Asset Net Liability Deferred outflows Deferred inflows Expense Contributions 111 $ OPEB (141,993) 84,242,438 2,864,036 1,641,849 657,615 657,691 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 15 - OTHER POST-EMPLOYMENT BENEFITS Other post-employment healthcare benefits, like the cost of pension benefits, constitute an exchange of compensation for employee services rendered. Like pension benefits, the cost of other post-employment benefits (OPEB) generally should be associated with the periods in which the exchange occurs rather than in future periods in which the benefits are provided. GASB Statement No. 74, “Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans”, effective with fiscal years beginning after June 15, 2016, requires certain financial reporting disclosures by plans that administer OPEB benefits; those disclosures have been incorporated throughout this report. GASB Statement No. 75, “Accounting and Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans”, effective with fiscal years beginning after June 15, 2017, requires certain financial reporting disclosures for employers which also have been incorporated throughout this report. A. Plan Description The City offers (through a single-employer defined contribution plan, the “City of Tempe Post-Employment Health Plan”) the continuation of group health insurance benefits administered by the City’s Human Resources Division, in accordance with Resolution 2009.86 of the City Council, to all retired, benefitted employees who meet the following eligibility requirements: (a) have at least 10 years of service, (b) be enrolled in one of the City's group health insurance plans, and (c) at the time of retirement, be or have been eligible to receive benefits from one of the City sponsored state retirement plans. Due to changes effective July 1, 2009, benefitted employees hired after June 30, 1999 are not eligible to participate in the post-employment benefit plan. As of June 30, 2018, 937 retirees met those eligibility requirements to receive post-employment healthcare benefits. Total membership in the program is as follows: Retirees receiving benefits Active employees eligible Total 937 414 1,351 Benefits provided. The plan provides benefits to eligible retirees, their spouses and dependents through monthly City contributions to a health reimbursement account established for each retiree. The plan benefits and contribution amounts are annually determined by the City’s Human Resources Division, in accordance with the approved OPEB Health Plan, based on the costs of coverage that is available through the health plans offered by the ASRS. Coverage for Medicare-eligible retirees is provided through fully-insured, City-sponsored Medicare Supplemental plans. Medicare-eligible retirees who formally waive the coverage of the Medicare Supplemental plans are eligible to receive a $100 monthly contribution to a health reimbursement account established for the retiree. The provision of these benefits is discretionary and the City is not legally or contractually obligated to continue them. B. Basis of Accounting and Valuation of Investments An irrevocable trust fund (Other Post Employment Benefit Trust) has been established for the purpose of advance funding the OPEB liability; the trust has an $13.4 million balance as of June 30, 2018. The investments of the trust are overseen by the OPEB Retirement Investment Committee, consisting of three city employees appointed by the City’s Deputy City Manager/Chief Financial Officer. Separate financial statements are not available for the trust. The Other Post Employment Benefit Trust financial statements are prepared on the accrual basis of accounting. The City’s contributions are recognized when due and a formal commitment to provide the contribution has been made. Benefits are recognized when due and payable in accordance with the terms of the plan. All trust investments are reported at fair value. Fair value is determined based on quoted market prices. 112 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 15 - OTHER POST EMPLOYMENT BENEFITS (Continued) C. Net OPEB Liability The City’s net OPEB liability was measured as of June 30, 2018, and the total OPEB liability used to calculate the net OPEB liability was determined by an actuarial valuation as of July 1, 2017. The components of the net OPEB liability at June 30, 2018 were as follows: Total OPEB liability Plan fiduciary net position Net OPEB liability Plan fiduciary net position as a percentage of total OPEB liability $95,154,294 13,391,250 $81,763,044 14.10% Actuarial Assumptions. The total OPEB liability in the July 1, 2017 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement, unless otherwise specified: Measurement date Actuarial valuation date Actuarial cost method Asset valuation method Actuarial assumptions: Salary increases Investment rate of return Discount rate Healthcare cost trend Mortality rates June 30, 2018 July 1, 2017 Entry age normal Market value 3.00% per annum 6.50% 6.50% ASRS/PSPRS Pre-Medicare, 5.00% to 16.00%; ASRS/ PSPRS Medicare Supplement, 2.50% to 19.90%; City Medicare Supplement, 2.50% to 7.80%; City High/Low PPO, 5.00% to 14.05% For active employees, based on the RPH-2014 Employee Mortality Table, Generational with Projection Scale MP-2017 for males/females. For retired employees, based on the RPH-2014 Healthy Annuitant Mortality Table, Generational with Projection Scale MP2017 for males/females. The Total OPEB Liability was adjusted from the actuarial valuation date to the measurement date using standard actuarial roll-forward techniques. Investment policy. The City’s policy in regard to the allocation of invested assets is established and may be amended by the OPEB Retirement Investment Committee by a majority of vote of its members. It is the policy of the committee to pursue an investment strategy that reduces risk through the prudent diversification of the portfolio. Rate of return. For the year ended June 30,2018, the annual money-weighted rate of return on investments, net of investment expense, was 9.13%. The money-weighted return expresses investment performance, net of investment expense, adjusted for the changing amounts actually invested. 113 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 15 - OTHER POST EMPLOYMENT BENEFITS (Continued) C. Net OPEB Liability (Continued) The long-term rate of return on OPEB plan investments was determined using the building-block method in which best-estimate ranges of expected future real rates of return (expected returns net of OPEB 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. The target allocation and best estimates of the geometric real rates of return for each major asset class are summarized in the following table: Asset Class Cash & Equivalents Equity Fixed Income Real Estate Other Total Target Allocation 0% 65% 35% 0% 0% 100% Long-Term Expected Real Rates of Return Not applicable 7.50% 5.00% 6.00% Not applicable 6.63% Discount rate. The discount rate used to measure the Total OPEB Liability is 6.5%. The projection of cash flows used to determine the discount rate assumed that City contributions will be made at rates equal to the actuarially determined contribution rates. Based on those assumptions, the OPEB plan's Fiduciary Net Position was projected to be available to make all projected OPEB payments for current active and inactive employees. Therefore, the long-term expected rate of return on OPEB plan investments was applied to all periods of projected benefit payments to determine the Total OPEB Liability. D. Changes in the Net OPEB Liability The change in the net OPEB liability during the year was as follows: Balance at 6/30/2017 Changes for the year: Service cost Interest Differences between expected and actual experience Changes in Assumptions/ Inputs Contributions- employer Net Investment income Benefit payments Net changes Balance at 6/30/2018 Changes in Net OPEB Liability Total OPEB Plan Fiduciary Net Net OPEB Liability Position Liability $ 90,707,176 $ 12,328,580 $ 78,378,596 321,229 5,689,881 - 321,229 5,689,881 4,915,943 - 4,915,943 503,616 (6,983,551) 4,447,118 $ 95,154,294 114 6,983,551 1,062,670 (6,983,551) 1,062,670 $ 13,391,250 503,616 (6,983,551) (1,062,670) 3,384,448 $ 81,763,044 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 15 - OTHER POST EMPLOYMENT BENEFITS (Continued) D. Changes in the Net OPEB Liability (Continued) Sensitivity of the net OPEB liability. The following presents the net OPEB liability, as well as what the net OPEB liability would be if it were calculated using a discount or healthcare cost trend rates that are 1-percentage point lower or 1-percentage point higher than the current discount or healthcare cost trend rates: Discount Rate: Healthcare Cost Trend Rates: 1% Decrease No Change 1% Increase $90,450,342 73,292,973 $81,763,044 81,763,044 $74,260,954 99,058,467 E. OPEB Expense and Deferred Outflows/Inflows of Resources related to OPEB. For the year ended June 30, 2018, the City recognized OPEB expense of $7,725,643. At June 30, 2018, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: OPEB Expense Service Cost Interest (on Liabilities) Interest (on Assets) Difference between Actual and Expected Experience Changes in Assumptions/Inputs Difference between Actual and Expected Investment Earnings Differences between expected and actual experience Changes of assumptions or other inputs Difference between actual and expected investment earnings Total Deferred Outflows of Resources $ 2,457,971 251,808 $ 2,709,779 $ 321,229 5,689,882 (801,358) 2,457,971 251,808 _ (193,889) $ 7,725,643 Deferred Inflows of Resources $ 633,928 $ 633,928 Amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows: Fiscal Year Ended June 30, 2019 2020 2021 2022 2023 Deferred Outflow (Inflows) of Resources $ 2,515,891 2,515,891 (193,889) (193,889) (52,262) 115 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 16 - DEFERRED COMPENSATION PLANS The City offers its employees three compensation plans created in accordance with Internal Revenue Code, Section 457 and 401(K). The plans, available to all City employees, permit them to defer a portion of their salary until future years. The deferred compensation is not available to employees until termination, retirement, death or unforeseeable emergency. The City’s fiduciary responsibility is that of exercising “due care” in selecting a third-party administrator. Federal legislation requires that Section 457 plan assets be held in trust for employees. As a result, the employee assets held in Section 457 plans are neither the property of the City nor subject to claims of the City’s general creditors. Therefore, the plan assets are not included in the City’s basic financial statements. NOTE 17 - RISK FINANCING ACTIVITIES The City is exposed to risks arising from general liability, automobile liability (physical damage and bodily injury), property liability, workers compensation, and employee health claims. The City has established a Risk Management Fund, Worker’s Compensation Fund and Health Fund (all internal service funds) to account for and finance its uninsured risks of loss. Amounts are paid into the internal service funds by all other funds and are available to pay claims and to fund claim reserves. As with any risk retention program, the City is contingently liable in respect to claims beyond those actuarially projected. These interfund premiums are used to cover the amount of claim expenditures reported in the internal service funds. The City is a self-insured entity with excess commercial insurance coverage purchased for general and automobile liability, property, workers' compensation/employers’ liability, crime and group health coverage. The coverage is as follows: for general and automobile liability the first $2.0 million per occurrence is self-insured and excess coverage of $40.0 million is provided; for property the self-insurance retention is the first $100,000 per occurrence of all perils with a policy limit of $850 million; for workers' compensation the first $750,000 for police, firefighters, and EMTs’ and $500,000 for all others of each claim is self-insured, with excess coverage per the Arizona statutory workers' compensation requirements and $2.0 million per occurrence in employer’s liability; and for group health the self-insurance retention is $275,000 per individual, with no aggregate stop loss deductible limit. During the year there were no significant reductions in the amounts of excess coverage purchased. At fiscal year end, the estimated, unpaid insurance claims liability was based on a case-by-case review of actual pending claims and an estimated amount for incurred but not reported claims. A liability for a known claim was established if information indicated that it was probable that a loss had been incurred as of June 30, 2018, and that the amount was reasonably estimable. A liability for incurred but not reported claims was based on historical experience. The following is a summary of changes in insurance claims liabilities, accounted for in the governmental and proprietary funds, for the last two fiscal years: General liability Automobile liability Property liability Workers' compensation Health insurance June 30, 2017 $ 2,200,882 801,335 403,000 2,681,980 1,353,729 $ 7,440,926 Claims Incurred Net of Change in Estimates $ 667,513 1,368,829 (221,141) 1,691,782 19,180,615 $ 22,687,598 116 Payments $ (613,993) (350,964) (47,659) (1,869,385) (19,151,201) $(22,033,202) June 30, 2018 $ 2,254,402 1,819,200 134,200 2,504,377 1,383,143 $ 8,095,322 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 17 - RISK FINANCING ACTIVITIES (Continued) General liability Automobile liability Property liability Workers' compensation Health insurance June 30, 2016 $ 2,471,692 95,729 3,476,263 1,167,879 $ 7,211,563 Claims Incurred Net of Change in Estimates $ 479,927 941,848 430,892 1,238,758 18,702,903 $ 21,794,328 Payments $ (750,737) (140,513) (123,621) (2,033,041) (18,517,053) $(21,564,965) June 30, 2017 $ 2,200,882 801,335 403,000 2,681,980 1,353,729 $ 7,440,926 At June 30, 2018, the Risk Management Fund accrued expenses totaled $4,216,805. This balance includes the general liability, automobile liability and property liability of $4,207,802 and other accrued expenses of $9,003. The Worker’s Compensation Fund had accrued expenses totaling $2,504,377. The Health Fund had accrued expenses totaling $3,128,705. Additionally, at June 30, 2018, the City had $6,841,391 of General Fund assigned fund balance for self-insurance purposes. NOTE 18 - CONTINGENT LIABILITIES The City is subject to a number of lawsuits, investigations, and other claims that are incidental to the ordinary course of its operations. Although the City Attorney does not currently possess sufficient information to reasonably estimate the amounts of the liabilities to be recorded upon the settlement of such claims and lawsuits, some claims could be significant to the City’s operations. While the ultimate resolution of such lawsuits, investigations, and claims cannot be determined at this time, in the opinion of City management, based on the advice of the City Attorney, the resolution of these matters will not have a materially adverse effect on the City’s financial position. The City participates in federally-funded and state-funded programs administered by various government agencies. The programs included in these financial statements may be subject to program compliance and/or financial monitoring by the granting agency or its representatives. The amount, if any, of expenditures which may be disallowed by the granting agencies cannot be determined at this time. NOTE 19 - RELATED ORGANIZATION The Industrial Development Authority (IDA) is a non-profit corporation established by the City in 1981 to promote industry and develop trade by inducing manufacturing, industrial and commercial enterprises to locate and remain in Tempe. The Board of Directors of the IDA is appointed by the City Council; however, the City does not have a financial benefit/burden relationship nor is the City able to impose its will on the IDA as defined in GASB Statement No. 14; therefore, data for the IDA is not included in the City’s basic financial statements. Separately issued financial statements are not available for the IDA. NOTE 20 – TAX ABATEMENTS The City has made commitments as part of our economic development programs to reimburse certain public improvement costs through transaction privilege taxes generated out of the respective development area. The total amount rebated in FY 2018 is $3,948,602. Detailed information on such commitments is prohibited from disclosure under Arizona Revised Statute 42-2002 Disclosure of Confidential Information Prohibited. 117 Notes to the Financial Statements For Fiscal Year Ended June 30, 2018 City of Tempe, Arizona NOTE 20 – TAX ABATEMENTS (Continued) In addition, the City enters into property tax abatement agreements with local businesses under Arizona Revised Statutes 42-6201 through 42-6210- Government Property Lease Excise Tax (GPLET). State law imposes an excise tax on buildings that are owned by the City, leased by a private party and occupied/used for commercial, residential rental or industrial purposes. The City is allowed to abate the tax for a period of eight years for both existing and new projects within redevelopment areas that are part of a single central business district. For the fiscal year ended June 30, 2018, the difference between property taxes assessed and the GPLET collected totaled $1,619,506 under this program, including the following tax abatement agreements that each exceed 10% of the total amount:  A 30.5% property tax GPLET to a retail development for constructing a retail complex in the City. The GPLET amounted to $494,435.  A 10.6% property tax GPLET to a retail development in the downtown area. The difference between property taxes assessed and the GPLET collected amounted to $171,988.  An 11.2% property tax abatement to a retail development in the downtown area. The property tax abated was $181,945. NOTE 21 - DEFICIT IN NET POSITION AND FUND BALANCE The Golf Course Fund had a deficit net position of $148,659. The deficit will be covered by future financing sources. The Grants Fund had a deficit fund balance of $294,932. The deficit will be covered by future grant revenues. NOTE 22 – CLAIMS AND JUDGEMENTS On October 18, 2017 HUD issued Notice CPD-17-09 providing further clarification and guidance on the Management of Community Development Block Grant Assisted Real Property. This notice defines the expectations for the acquisition, management and disposition of Real Property. The City must be in compliance and have all currently held properties fulfilling a National Objective within the specified timeframes or the expenditures would be deemed invalid and the City would be required to reimburse HUD. This resulted in a disallowed expenditure for the purchase of land in the amount of $2,213,846 which was recorded as a claims and judgement expense in the Government-wide statements. NOTE 23 – PRIOR PERIOD ADJUSTMENTS Beginning Net Position Restatement. The implementation of GASB Statement No. 75, Accounting and Financial Reporting for Other Post-Employment Benefits other than Pensions, represents a change in accounting principle. Net position as of July 1, 2017 has been restated as follows for this change in accounting principle: Net position, June 30, 2017, as previously reported Net OPEB liability Deferred outflows – contributions during fiscal year 2017 Deferred Inflows Net position, July 1, 2017, as restated 118 Statement of ActivitiesGovernmental $ 615,260,525 (25,393,708) 6,887,364 (503,849) $ 596,250,332 Statement of ActivitiesBusiness-type $ 256,291,853 (2,808,496) 829,583 (62,656) $ 254,250,284 Statement of ActivitiesTotal $ 871,552,378 (28,202,204) 7,716,947 (566,505) $ 850,500,616 City of Tempe, Arizona Required Supplementary Information 119 Schedule of Contributions All Pension Plans Last Four Fiscal Years City of Tempe, Arizona 2018 Arizona State Retirement System: Actuarially determined contribution Contributions in relation to the actuarially determined contribution Contribution deficiency (excess) City's covered payroll Contributions as a percentage of covered-employee payroll Public Safety Personnel Retirement System- Police: Actuarially determined contribution Contributions in relation to the actuarially determined contribution Contribution deficiency (excess) City's covered payroll Contributions as a percentage of covered-employee payroll Public Safety Personnel Retirement System- Fire: Actuarially determined contribution Contributions in relation to the actuarially determined contribution Contribution deficiency (excess) City's covered payroll Contributions as a percentage of covered-employee payroll $ 8,163,494 2017 $ 7,887,785 $ 8,163,494 - $ 74,894,440 $ 7,731,482 $ 7,887,785 - $ 73,170,548 10.90% $ 11,464,549 12,852,861 $ 11,464,549 - $ 20,593,765 6,451,177 7,738,771 $ 7,731,482 - $ 7,738,771 - $ 71,257,899 $ 71,063,096 10.85% $ 12,604,739 $ 12,852,861 - $ 28,606,412 55.67% 6,621,730 $ 6,451,177 - $ 9,986,342 64.60% 9,727,183 $ 12,604,739 - $ 9,727,183 - $ 28,627,615 $ 28,889,762 44.03% $ 6,067,633 $ 6,621,730 - $ 12,337,861 53.67% 33.67% $ 4,066,636 $ 6,067,633 - $ 4,066,636 - $ 12,215,891 $ 10,958,329 49.67% This schedule is intended to show information for ten years. Additional years' information will be displayed as it becomes available. 120 10.89% $ 44.93% $ 2015 $ 10.78% $ $ 2016 37.11% Schedule of the Proportionate Share of the Net Pension Liability Arizona State Retirement System Last Four Fiscal Years City of Tempe, Arizona 2018 City's proportion of the net pension liability 2017 0.76% 2016 0.78% 2015 0.77% 0.76% City's proportion share of the net pension liability $ 118,500,674 $ 126,045,105 $ 119,185,001 $ 112,524,308 City's covered-employee payroll $ 73,170,548 $ 71,257,899 $ 71,063,096 $ 69,182,112 City's proportionate share of the net pension liability as a percentage of its covered-employee payroll 161.95% 176.89% 167.72% 162.65% Plan fiduciary net position as a percentage of the total pension liability 69.92% 67.06% 68.35% 69.49% This schedule is intended to show information for ten years. Additional years' information will be displayed as it becomes available. 121 Schedule of Changes in the Net Pension Liability and Related Ratios Public Safety Personnel Retirement System- Police Last Four Fiscal Years City of Tempe, Arizona 2018 Total pension liability Service cost Interest Changes of benefit terms Differences between expected and actual Changes of assumptions Benefit payments, including refunds Net change in total pension liability Total pension liability- beginning Total pension liability- ending Plan fiduciary net position Contributions- employer Contributions- employee Net investment income Benefit payments, including refunds Administrative expense Other Net change in plan fiduciary net position Plan fiduciary net position- beginning Plan fiduciary net position- ending Net pension liability- ending $ $ $ Net pension liability as a percentage of covered-employee payroll 6,639,904 21,145,695 2,664,893 (215,490) 7,860,019 (13,775,904) 24,319,117 285,510,601 309,829,718 $ 12,486,872 3,579,664 13,507,120 (13,775,904) (119,915) 54,461 15,732,298 106,649,093 122,381,391 $ 187,448,327 $ Plan fiduciary net position as a percentage of the total pension liability Covered-employee payroll 2017 $ $ $ 29,173,568 642.53% $ $ $ $ 12,552,708 3,597,316 653,674 (15,820,570) (94,459) (173,159) 715,510 105,933,583 106,649,093 $ 178,861,508 $ 39.50% $ 5,378,159 19,846,810 13,183,597 (5,746,957) 10,622,755 (15,820,570) 27,463,794 258,046,807 285,510,601 2016 28,069,721 637.20% $ 5,447,093 16,537,700 4,426,439 (2,351,309) 25,455,442 (13,685,124) 35,830,241 214,790,355 250,620,596 $ $ $ 9,132,346 3,253,980 12,456,186 (13,685,124) (3,260,002) 7,897,386 95,552,878 103,450,264 $ 152,113,224 $ 147,170,332 $ $ 41.05% $ 29,044,518 523.72% This schedule is intended to show information for ten years. Additional years' information will be displayed as it becomes available. 122 $ 9,804,542 3,641,788 3,769,779 (14,604,348) (92,360) (36,082) 2,483,319 103,450,264 105,933,583 37.35% $ 5,468,695 19,315,142 (2,753,278) (14,604,348) 7,426,211 250,620,596 258,046,807 2015 41.28% $ 28,717,534 512.48% Schedule of Changes in the Net Pension Liability and Related Ratios Public Safety Personnel Retirement System- Fire Last Four Fiscal Years City of Tempe, Arizona 2018 Total pension liability Service cost Interest Changes of benefit terms Differences between expected and actual Changes of assumptions Benefit payments, including refunds Net change in total pension liability Total pension liability- beginning Total pension liability- ending Plan fiduciary net position Contributions- employer Contributions- employee Net investment income Benefit payments, including refunds Administrative expense Other Net change in plan fiduciary net position Plan fiduciary net position- beginning Plan fiduciary net position- ending Net pension liability- ending $ 3,288,107 12,435,795 1,132,919 2,381,447 6,731,555 (8,942,533) 17,027,290 168,637,813 185,665,103 $ $ $ 7,629,875 1,711,846 8,517,929 (8,942,533) (75,769) 930 8,842,278 69,151,674 77,993,952 $ 107,671,151 $ $ $ Plan fiduciary net position as a percentage of the total pension liability Covered-employee payroll Net pension liability as a percentage of covered-employee payroll 2017 2,601,714 11,454,692 9,445,952 177,366 5,723,255 (10,767,917) 18,635,062 150,002,751 168,637,813 $ $ $ 6,665,926 1,620,334 420,827 (10,767,917) (60,954) 64,490 (2,057,294) 71,208,968 69,151,674 $ 99,486,139 $ $ 42.01% $ 13,548,032 2016 2,527,186 11,256,214 (1,631,037) (8,554,561) 3,597,802 146,404,949 150,002,751 $ $ $ 4,553,293 1,627,959 2,537,356 (8,554,561) (62,287) (36,284) 65,476 71,143,492 71,208,968 $ 4,587,619 1,461,331 8,786,886 (9,805,679) (3,124,665) 1,905,492 69,238,000 71,143,492 $ 78,793,783 $ 75,261,457 $ $ 41.01% $ 794.74% 12,995,575 765.54% 2015 $ $ 47.47% $ 12,133,956 48.59% $ 649.37% This schedule is intended to show information for ten years. Additional years' information will be displayed as it becomes available. 123 2,541,502 9,938,885 2,317,758 (861,599) 12,031,993 (9,805,679) 16,162,860 130,242,089 146,404,949 12,719,039 591.72% Schedule of Contributions OPEB Plan Last Two Fiscal Years City of Tempe, Arizona 2018 2017 Actuarially determined contribution Contributions in relation to the actuarially determined contribution $ Contribution deficiency (excess) $ 449 $ 412,633 City's covered payroll $ 34,716,792 $ 41,444,730 $ 6,983,551 Contributions as a percentage of covered-employee payroll Note: 6,984,000 20.12% 7,171,851 6,759,218 16.31% This schedule is intended to show information for ten years. Additional years' information will be displayed as it becomes available. 124 Schedule of Changes in the Net OPEB Liability and Related Ratios Last Two Fiscal Years City of Tempe, Arizona 2018 Total OPEB liability Service cost Interest Changes of benefit terms Differences between expected and actual Changes of assumptions Benefit payments, including refunds Net change in total OPEB liability Total OPEB liability- beginning Total OPEB liability- ending Plan fiduciary net position Contributions- employer Net investment income Benefit payments, including refunds Administrative expense Other Net change in plan fiduciary net position Plan fiduciary net position- beginning Plan fiduciary net position- ending Net OPEB liability- ending $ $ $ $ $ 300,495 5,742,386 (6,759,218) (716,337) 91,423,513 90,707,176 $ $ 6,759,218 1,211,093 (6,759,218) 1,211,093 11,117,487 12,328,580 $ 81,763,044 $ 78,378,596 14.07% $ Net OPEB liability as a percentage of covered-employee payroll Note: $ 6,983,551 1,062,670 (6,983,551) 1,062,670 12,328,580 13,391,250 Plan fiduciary net position as a percentage of the total OPEB liability Covered-employee payroll 321,229 5,689,881 4,915,943 503,616 (6,983,551) 4,447,118 90,707,176 95,154,294 2017 34,716,792 235.51% 13.59% $ 41,444,730 189.12% This schedule is intended to show information for ten years. Additional years' information will be displayed as it becomes available. 125 Schedule of Investment Returns OPEB Plan Last Two Fiscal Years City of Tempe, Arizona 2018 Annual money-weighted rate of return, net of investment expense Note: 2017 9.13% 11.41% This schedule is intended to show information for ten years. Additional years' information will be displayed as it becomes available. 126 Notes to Required Supplementary Information June 30, 2018 City of Tempe, Arizona Factors that Affect Trends - Pensions. The actuarial assumptions used in the June 30, 2016 valuation for ASRS were based on the results of an actuarial experience study for the five-year period ended June 30, 2012. The purpose of the experience study was to review actual experience in relation to the actuarial assumptions in effect. The ASRS Board adopted the experience study recommended changes which were applied to the June 30, 2013, actuarial valuation. The study did not include an analysis of the assumed investment rate of return. The actuarial assumptions used in the June 30, 2017 valuation for PSPRS were based on the results of an actuarial experience study for the 5-year period ended June 30, 2016. The total pension liability used to calculate the net pension liability for PSPRS was determined by an actuarial valuation as of that date. The total pension liability as of June 30, 2017, reflects changes of benefit terms and actuarial assumptions for a court ruling for funding permanent benefit increases and a decrease in the wage growth assumption. Schedule of Changes in Net OPEB Liability. Mortality Rates. Mortality tables were updated from the RP-2000 Employee and Healthy Annuitant mortality tables projected to 2017 using scale AA to the RPH-2014 Employee and Healthy Annuitant mortality tables, with generational mortality improvement using Scale MP-2017. This resulted in an increase in the Total OPEB Liability of approximately $1.03 million. Retirement Rates. The retirement rates were updated to those used in the June 30, 2017 pension valuations. This change resulted in a decrease in the Total OPEB Liability of approximately $2.25 million. Turnover Rates. The turnover rates were updated to those used in the June 30, 2017 pension valuations. This change resulted in an increase in the Total OPEB Liability of approximately $0.40 million. Medical Trend. Increases in the medical plan premiums impact the City’s HRA contributions. The medical trend for the underlying plans has been higher than expected. Therefore, we adjusted the assumed future increases in the premiums. This change resulted in an increase in the Total OPEB Liability of approximately $1.31 million. Schedule of Contributions – OPEB. Methods and assumptions used to determine actuarial contribution amounts were as follows: Measurement date Actuarial valuation date Actuarial cost method Asset valuation method Actuarial assumptions: Salary increases Investment rate of return Discount rate Healthcare cost trend Mortality rates June 30, 2018 July 1, 2017 Entry age normal Market value 3.00% per annum 6.50% 6.50% ASRS/PSPRS Pre-Medicare, 5.00% to 16.00%; ASRS/ PSPRS Medicare Supplement, 2.50% to 19.90%; City Medicare Supplement, 2.50% to 7.80%; City High/Low PPO, 5.00% to 14.05% For active employees, based on the RPH-2014 Employee Mortality Table, Generational with Projection Scale MP2017 for males/females. For retired employees, based on the RPH-2014 Healthy Annuitant Mortality Table, Generational with Projection Scale MP-2017 for males/females. 127 City of Tempe, Arizona NON-MAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS Special Revenue Funds are used to account for specific revenues used to finance certain projects or activities as required by law or contractual agreement.  Performing Arts Fund. To account for the receipt and expenditure of the Performing Arts Tax monies. These monies are restricted to financing the performing and visual arts center.  Highway User Revenue Fund. To account for the receipt and expenditure of the City's share of the highway user taxes. State law restricts the use of these monies to maintenance, construction and reconstruction of streets, and repayment of transportation-related general obligation debt.  Community Development Fund. To account for the receipt and expenditure of U.S. Department of Housing and Urban Development Community Development Block Grant and Home Program monies.  Housing Assistance Fund. To account for the receipt and expenditure of U.S. Department of Housing and Urban Development Lower Income Housing Assistance Program grant monies.  Housing Affordability Fund. To account for the receipt and expenditure from contributions to assist in the development of long-term housing affordability solutions.  Donations and Court Awards. To account for the receipt and expenditure of miscellaneous donations and revenue received from court awarded confiscated property under both the Federal and State Organized Crime Acts.  Grants. To account for the receipt and expenditure of miscellaneous grant monies.  Community Facilities District. To account for the receipt and expenditure of monies for the Rio Salado Community Facilities District. 128 City of Tempe, Arizona NON-MAJOR GOVERNMENTAL FUNDS (Continued) CAPITAL PROJECTS FUNDS Capital Projects Funds account for all current financial resources used for the acquisition of capital facilities except those financed by Enterprise Funds. Disbursements from these funds are primarily for property acquisition and the construction of permanent public improvements. The major sources of financing are derived from bond proceeds and special revenues.  Streets Fund. Used for improving, constructing and reconstructing major streets, highways, collector and local streets within the City, and to acquire rights-of-way.  Police Fund. Used for purchasing, constructing and equipping police functions.  Fire Fund. Used for purchasing, constructing and equipping fire functions.  Storm Sewers Fund. Used for planning, constructing, extending and improving storm drain trunk lines and detention basins.  Parks Fund. Used for acquiring, developing and equipping parks, playgrounds and recreation facilities.  Rio Salado Fund. Used for consulting and engineering studies necessary for the design of the Rio Salado projects and for constructing a wildlife habitat.  Community Development Fund. Used for acquiring, reconstructing, remodeling, renovating and equipping existing buildings that house municipal departments, and for acquiring and constructing housing for the elderly and the redevelopment of the downtown area.  Signals Fund. Used for purchasing, constructing and equipping street light and traffic signal upgrades and for the planning of an overall transportation plan.  Community Facilities District. Used for the improving and constructing in the Rio Salado Community Facilities District. 129 Combining Balance Sheet Non-major Governmental Funds June 30, 2018 Special Revenue Performing Arts Assets Pooled cash and investments Receivables: Taxes Accounts Accrued interest Due from other governments Inventories Prepaid items Restricted cash and investments Total assets Liabilities Accounts payable Deposits Accrued expenditures Due to other funds Unearned revenue Matured bonds payable Matured interest payable Total liabilities $ 772,838 $ 959,141 3,226,925 4,958,904 $ Deferred Inflows of Resources Unavailable revenue- federal grants Unavailable revenue- grants Unavailable revenue- other Total deferred inflows of resources Fund Balances Fund balance: Non-spendable Restricted Committed Assigned Unassigned Total fund balances Total liabilities, deferred inflows of resources, and fund balances 37,364 175,694 3,025,000 201,925 3,439,983 Highway User Revenue $ 8,166,390 $ 1,072,865 885,691 10,124,946 $ 235,227 73,919 309,146 - 4,958,904 $ 498,728 $ 111,946 15,908 16,037 642,619 $ - 1,518,921 1,518,921 $ Community Development 10,124,946 130 $ 499,144 $ 56,703 667,354 1,223,201 $ - 885,691 8,930,109 9,815,800 $ 48,476 12,163 32,150 92,789 Housing Assistance - 549,830 549,830 $ 642,619 2,870 181,128 183,998 667,354 371,849 1,039,203 $ 1,223,201 City of Tempe, Arizona Special Revenue Housing Affordability $ 51,072 Donations and Court Awards $ 2,378,589 $ 4,950 11,057 15,995 2,410,591 - $ $ 74 51,146 - $ - 41,314 315 41,629 - - 51,146 51,146 $ 51,146 $ $ $ 2,410,591 2,912,364 12,716 2,925,080 125,643 192,224 809 1,102,219 1,256,089 2,676,984 $ 1,975,931 $ 2,719,289 4,695,220 $ 70,966 2,520,000 199,289 2,790,255 407,111 135,917 543,028 1,235,528 1,036,825 96,609 2,368,962 $ Community Facilities District Grants 2,925,080 $ 14,342,692 $ 2,032,006 56,703 5,024 3,035,367 885,691 695,978 5,978,246 27,031,707 $ - 1,823 (296,755) (294,932) $ Total 407,111 135,917 543,028 1,904,965 1,904,965 $ 4,695,220 (continued) 131 561,860 192,224 444,028 1,102,219 1,256,089 5,545,000 433,364 9,534,784 1,553,045 14,564,171 1,036,825 96,609 (296,755) 16,953,895 $ 27,031,707 Combining Balance Sheet Non-major Governmental Funds June 30, 2018 Capital Projects Streets Assets Pooled cash and investments Receivables: Taxes Accounts Accrued interest Due from other governments Inventories Prepaid items Restricted cash and investments Total assets Liabilities Accounts payable Deposits Accrued expenditures Due to other funds Unearned revenue Matured bonds payable Matured interest payable Total liabilities $ 10,988,144 $ 119,372 11,107,516 $ Deferred Inflows of Resources Unavailable revenue- federal grants Unavailable revenue- grants Unavailable revenue- other Total deferred inflows of resources Fund Balances Fund balance: Non-spendable Restricted Committed Assigned Unassigned Total fund balances Total liabilities, deferred inflows of resources, and fund balances 927,351 927,351 Police $ 2,492,524 $ 113,208 2,605,732 $ 178,748 178,748 119,372 119,372 11,107,516 Storm Sewers $ 3,164,945 $ 24,621 $ 3,164,945 $ 24,621 $ - 224,181 9,818,970 17,642 10,060,793 $ Fire 2,605,732 132 $ - 1,800,448 323,501 303,035 2,426,984 $ 4,732 4,732 3,164,945 $ 13,780,000 $ 50,586 13,830,586 $ - 2,354,052 800,969 5,192 3,160,213 $ 16,645 16,645 Parks 50,586 50,586 7,976 7,976 $ 24,621 491,653 56 491,709 2,808,167 9,603,092 877,032 13,288,291 $ 13,830,586 City of Tempe, Arizona Capital Projects Rio Salado $ 195,391 $ 195,391 $ 2,028 2,028 Community Development $ 6,369,205 $ 6,369,205 $ - 195,391 Signals $ 1,264,353 $ 1,264,353 $ - 85,821 107,542 193,363 $ 915,933 915,933 6,369,205 304,485 304,485 1,991,666 $ 1,991,666 $ $ 1,264,353 3,207 3,207 $ 40,270,849 $ 163,794 119,372 40,554,015 $ - 226,620 733,248 959,868 1,077,878 910,581 1,988,459 $ Total Non-major Governmental Funds Total $ - 5,284,325 168,947 5,453,272 $ Community Facilities District 1,991,666 133 $ 2,844,782 56 2,844,838 $ 54,613,541 $ 2,032,006 220,497 5,024 3,154,739 885,691 695,978 5,978,246 67,585,722 $ $ 3,406,642 192,224 444,028 1,102,219 1,256,145 5,545,000 433,364 12,379,622 119,372 50,586 169,958 526,483 135,917 50,586 712,986 7,413,468 26,994,556 3,131,195 37,539,219 1,553,045 21,977,639 28,031,381 3,227,804 (296,755) 54,493,114 40,554,015 $ 67,585,722 Combining Statement of Revenues, Expenditures and Changes in Fund Balances Non-major Governmental Funds For the Fiscal Year Ended June 30, 2018 Special Revenue Highway User Revenue Performing Arts Community Development Housing Assistance Revenues: Sales taxes Intergovernmental: Federal grants State grants State sales tax Other Investment income Charges for services Fines and forfeitures Other entities' participation Miscellaneous Total revenues $ 8,436,503 $ - $ - $ - 952,961 204,389 9,060 9,602,913 11,887,793 193,127 7,097 12,088,017 2,809,331 46 482,429 3,291,806 9,863,006 14,851 1,015 9,878,872 4,503,797 - 9,166,644 - 2,376,120 - 9,542,260 - 3,025,000 409,123 2,376 7,940,296 9,166,644 405,000 77,474 2,858,594 9,542,260 1,662,617 2,921,373 433,212 336,612 - 1,500,000 - - - (694,783) (34,564) (729,347) (4,856) (5,917,008) (71,461) 34,343 (4,458,982) - - 933,270 (1,537,609) 433,212 336,612 Expenditures: Current: Police Fire medical rescue Community services Public works Community development Human services Municipal court City manager City attorney Office of strategic management and diversity Debt service: Principal retirement Interest Fiscal fees Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures before other financing sources (uses) Other financing sources (uses): Transfers in: General fund Special revenue funds Debt service funds Capital projects funds Enterprise funds Transfers out: Special revenue funds Debt service funds Capital projects funds Enterprise funds Internal service funds Issuance of debt Premium on issuance of debt Proceeds from sale of capital assets Total other financing sources (uses) Net change in fund balances Fund balance at beginning of year Fund balance at end of year 585,651 $ 1,518,921 11,353,409 $ 9,815,800 134 116,618 $ 549,830 702,591 $ 1,039,203 City of Tempe, Arizona Special Revenue Housing Affordability $ - Donations and Court Awards $ $ - $ - Total $ 8,436,503 338 338 41,658 9,709 271,785 459,936 377,235 24,755 1,185,078 1,304,271 488,230 3,732,230 306 8,360 371,546 36,075 11,904 5,952,922 2,365,981 2,365,981 13,976,608 488,230 11,887,793 3,788,739 11,414 3,792,214 831,482 617,699 535,245 44,365,927 - 15,349 189,979 76,944 203,866 449,915 114,165 - 3,997,749 150,836 664,177 44,257 860 890,443 69,097 370,000 46,583 3,000 2,508,810 - 3,997,749 166,185 5,357,953 9,210,901 2,586,614 13,012,689 519,012 484,165 46,583 3,000 - 1,050,218 6,237,002 2,520,000 393,704 2,218 5,424,732 5,950,000 880,301 4,594 42,219,746 338 134,860 (284,080) (3,058,751) 2,146,181 - - - 2,918,578 - 1,500,000 2,918,578 - - - (465,999) (465,999) (6,690) 2,911,888 (465,999) (11,546) (6,611,791) (106,025) 34,343 (2,742,440) 338 134,860 (750,079) (146,863) (596,259) 50,808 $ - Community Facilities District Grants 51,146 2,234,102 $ 2,368,962 455,147 $ (294,932) 2,051,828 $ 1,904,965 (continued) 135 17,550,154 $ 16,953,895 Combining Statement of Revenues, Expenditures and Changes in Fund Balance Non-major Governmental Funds For the Fiscal Year Ended June 30, 2018 Capital Projects Streets Police Fire Storm Sewers Revenues: Sales taxes Intergovernmental: Federal grants State grants State sales tax Other Investment income Charges for services Fines and forfeitures Other entities' participation Miscellaneous Total revenues $ - $ 3,702 44,755 724,424 772,881 - $ 14,856 1,439,827 1,454,683 - $ - 12,549 906,395 918,944 - - - Expenditures: Current: Police Fire medical rescue Community services Public works Community development Human services Municipal court City manager City attorney Office of strategic management and diversity Debt service: Principal retirement Interest Fiscal fees Capital outlay Total expenditures 7,110,878 7,110,878 2,156,909 2,156,909 1,823,952 1,823,952 147,110 147,110 Excess (deficiency) of revenues over expenditures before other financing sources (uses) (6,337,997) (702,226) (905,008) (147,110) 5,012,684 887,000 - 466,000 195,084 20,720 - - (2,230) 6,320,030 1,185,000 13,402,484 (197) (195,084) 1,625,000 250,000 2,340,803 (5,530) (1,109) (210,414) 2,435,000 380,000 2,618,667 126,518 126,518 7,064,487 1,638,577 1,713,659 (20,592) - - Other financing sources (uses): Transfers in: General fund Special revenue funds Debt service funds Capital projects funds Enterprise funds Transfers out: Special revenue funds Debt service funds Capital projects funds Enterprise funds Internal service funds Issuance of debt Premium on issuance of debt Proceeds from sale of capital assets Total other financing sources (uses) Net change in fund balances Fund balance at beginning of year Fund balance at end of year 2,996,306 $ 10,060,793 788,407 $ 2,426,984 136 1,446,554 $ 3,160,213 28,568 $ 7,976 City of Tempe, Arizona Capital Projects Parks $ Rio Salado - $ 28,012 1,132,483 2,266 1,162,761 - - $ - Community Facilities District Signals $ - $ - 1,161 1,161 748 83,900 13,268 97,916 215,694 988 44,504 70,538 331,724 459,041 459,041 - - - - Total Non-major Governmental Funds Total $ - $ 215,694 62,016 548,300 4,357,567 15,534 5,199,111 8,436,503 14,192,302 488,230 11,887,793 3,788,739 73,430 4,340,514 831,482 4,975,266 550,779 49,565,038 - 3,997,749 166,185 5,357,953 9,210,901 2,586,614 13,012,689 519,012 484,165 46,583 3,000 8,134,008 8,134,008 583,772 583,772 7,498,717 7,498,717 1,863,336 1,863,336 35,291 35,291 29,353,973 29,353,973 5,950,000 880,301 4,594 29,353,973 71,573,719 (6,971,247) (582,611) (7,400,801) (1,531,612) 423,750 (24,154,862) (22,008,681) 1,020,104 887,122 40,000 550,000 48,000 - 966,056 934,474 2,562 455,035 400,000 56 - - 3,002,160 6,347,158 1,845,460 690,119 4,502,160 6,347,158 2,918,578 1,845,460 690,119 (390) (71,338) 8,365,000 1,285,000 11,525,498 (860,815) (262,815) (1,439) (20,777) 4,895,000 755,000 7,985,911 (289) 1,258,452 1,658,219 - (9,786) (954,328) (405,498) 25,025,000 3,855,000 39,395,285 (465,999) (21,332) (7,566,119) (405,498) (106,025) 25,025,000 3,855,000 34,343 36,652,845 4,554,251 (845,426) 585,110 126,607 423,750 15,240,423 14,644,164 8,734,040 $ Community Development 13,288,291 1,038,789 $ 193,363 4,868,162 $ 5,453,272 833,261 $ 959,868 137 1,564,709 $ 1,988,459 22,298,796 $ 37,539,219 39,848,950 $ 54,493,114 City of Tempe, Arizona INTERNAL SERVICE FUNDS Internal Service Funds are used to account for the financing of goods or services provided by one department to other departments of the government and to other government units, on a cost reimbursement basis.  Risk Management Fund. Used to account for the costs of general liability, automobile liability, and property liability claims by the City under a self-insurance program.  Worker’s Compensation Fund. Used to account for the costs incurred for worker’s compensation claims by the City under a self-insurance program.  Health Fund. Used to account for the expenses incurred for employee health related costs under the City’s self-insurance program. 138 Combining Statement of Net Position Internal Service Funds June 30, 2018 City of Tempe, Arizona Assets Current assets: Pooled cash and investments Accounts receivable Accrued interest receivable Total assets Risk Management Worker's Compensation $ 6,547,408 6,547,408 $ 2,529,078 4,500 2,533,578 Deferred Outflows of Resources Deferred outflows related to pensions Deferred outflows related to OPEB Total deferred outflows of resources 91,810 5,613 97,423 Liabilities Current liabilities: Accounts payable Accrued expenses and claims payable Total current liabilities 5,702 4,216,805 4,222,507 Noncurrent liabilities: Net OPEB liability Net pension liability Total noncurrent liabilities Total liabilities Deferred Inflows of Resources Deferred inflows related to pensions Deferred inflows related to OPEB Total deferred inflows of resources Net Position Unrestricted Total net position 1,530,666 14,030 $ 14,030 $ 149,742 9,849,887 9,999,629 89,059 740,226 829,285 3,257,574 10,828,914 - 58,497 3,876 62,373 1,619,986 $ 1,619,986 13,890,880 63,166 4,500 13,958,546 91,810 5,613 97,423 - 2,519,548 - 4,814,394 63,166 4,877,560 128,869 3,128,705 3,257,574 - 58,497 3,876 62,373 Total - 15,171 2,504,377 2,519,548 5,051,792 139 $ - 89,059 740,226 829,285 $ 1,530,666 Health 3,164,682 $ 3,164,682 Combining Statement of Revenues, Expenses and Changes in Net Position Internal Service Funds For the Fiscal Year Ended June 30, 2018 City of Tempe, Arizona Risk Management Worker's Compensation Health Total Operating revenues: Contributions Total operating revenues $ 3,233,977 3,233,977 $ 1,691,574 1,691,574 $ 30,368,908 30,368,908 $ 35,294,459 35,294,459 Operating expenses: Fees and services Total operating expenses 3,233,977 3,233,977 1,691,574 1,691,574 32,658,269 32,658,269 37,583,820 37,583,820 (2,289,361) (2,289,361) Operating income (loss) - - Nonoperating revenues Investment income Total nonoperating revenues - 23,225 23,225 Transfers in - - 1,479,205 1,479,205 - 23,225 (810,156) (786,931) (9,195) 14,030 2,430,142 $ 1,619,986 3,951,613 $ 3,164,682 Changes in net position Total net position - beginning as restated Total net position - ending 1,530,666 $ 1,530,666 140 $ - 23,225 23,225 Combining Statement of Cash Flows Internal Service Funds For the Fiscal Year Ended June 30, 2018 City of Tempe, Arizona Cash flows from operating activities: Receipts from other funds Reduction in (payments for) settlement of claims Net cash provided by (used) in operating activities Risk Management Worker's Compensation $ $ 3,233,977 (2,542,595) 691,382 1,691,574 (1,874,873) (183,299) Health Total $ 30,877,193 (30,791,752) 85,441 $ 35,802,744 (35,209,220) 593,524 Cash flows from non-capital financing activities: Transfers in Net cash provided (used) by non-capital financing activities - - 1,479,205 1,479,205 1,479,205 1,479,205 Cash flows from investing activities: Interest received Net cash provided (used) by investing activities - 22,459 22,459 - 22,459 22,459 691,382 (160,840) 1,564,646 2,095,188 5,856,026 2,689,918 3,249,748 11,795,692 4,814,394 $ 13,890,880 - $ (2,289,361) $ (2,289,361) - - (79,771) 800,189 64,421 (38,774) (56,980) 2,297 (5,696) (177,603) 508,285 91,541 1,774,976 - - 508,285 6,074 2,397,562 64,421 (38,774) (56,980) 2,297 Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, beginning of year $ Cash and cash equivalents, end of year 6,547,408 $ 2,529,078 $ Reconciliation of operating income (loss) to net cash provided (used) by operating activities: Operating income (loss) Adjustments to reconcile operating income to net cash provided (used) by operating activities: Change in assets and liabilities: (Increase) decrease in receivables Increase (decrease) in accounts payable Increase (decrease) in accrued expenses (Increase) decrease in deferred outflows Increase (decrease) in deferred inflows Increase (decrease) in net pension liability Increase (decrease) in net OPEB liability $ Net cash provided (used) by operating activities $ 141 - 691,382 $ $ (183,299) $ 85,441 $ 593,524 City of Tempe, Arizona Other Supplementary Information BUDGETARY COMPARISON SCHEDULES 142 Combined Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual General, Debt Service, Special Revenue, Capital Projects and Enterprise Fund Types For the Fiscal Year Ended June 30, 2018 City of Tempe, Arizona Revenues Taxes Intergovernmental Investment income Charges for services Fines and forfeitures Licenses and permits Other entities' participation Miscellaneous Contingency Total revenues Expenditures Current: Police Fire medical rescue Community services Public works Community development Human services Mayor and council Municipal court City manager City attorney Internal audit office Municipal budget office Office of strategic management and diversity City clerk and elections Internal services Contingency Interdepartmental charges Debt Service: Principal Interest and fiscal fees Total expenditures Other financing sources (uses) Transfers from other funds Transfers to other funds Issuance of debt Premium on issuance of debt Payment to refunded bond escrow agent Gain (loss) from transfer of capital assets Proceeds (loss) from sale of capital assets Total other financing sources (uses) Net change in fund balance Variance with Final Budget Positive (Negative) Final Budget Amounts Actual Amounts (Budgetary Basis) $ 208,914,553 98,662,025 2,342,000 129,738,335 8,422,683 4,440,500 2,821,758 11,218,995 7,741,231 474,302,080 $ 219,468,375 79,344,245 4,161,736 137,490,779 9,950,877 8,330,276 4,835,331 12,293,484 475,875,103 93,505,497 43,671,140 53,213,807 268,358,707 31,150,395 17,824,107 410,062 6,240,185 10,836,773 3,377,724 512,117 291,311 1,017,166 1,277,407 28,799,697 10,700,503 (15,941,468) 90,196,687 43,122,215 39,812,299 209,175,997 17,634,545 21,532,948 403,778 5,154,433 6,951,369 3,259,943 490,181 294,569 987,463 994,381 31,859,021 (15,510,408) 3,308,810 548,925 13,401,508 59,182,710 13,515,850 (3,708,841) 6,284 1,085,752 3,885,404 117,781 21,936 (3,258) 29,703 283,026 (3,059,324) 10,700,503 (431,060) 75,150,727 23,928,861 654,324,718 61,821,017 24,465,760 542,646,198 13,329,710 (536,899) 111,678,520 39,236,708 (39,908,708) 97,495,002 368,975 97,191,977 $ (82,830,661) 49,202,633 (50,647,274) 47,560,000 6,698,371 (12,614,996) 379,140 1,778,864 42,356,738 (24,414,357) 9,965,925 (10,738,566) (49,935,002) 6,698,371 (12,614,996) 379,140 1,409,889 (54,835,239) 58,416,304 143 $ $ $ 10,553,822 (19,317,780) 1,819,736 7,752,444 1,528,194 3,889,776 2,013,573 1,074,489 (7,741,231) 1,573,023 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual General Obligation Debt Service Fund For the Fiscal Year Ended June 30, 2018 City of Tempe, Arizona Revenues: Property taxes Investment income Total revenues $ Expenditures: Debt service: Principal Interest and fiscal fees Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Premium on issuance of debt Payment to refunded bond escrow agent Total other financing sources (uses) Net change in fund balance $ Final Budget Amounts Actual Amounts (Budgetary Basis) 27,834,225 27,834,225 $ 27,700,581 30,898 27,731,479 27,680,183 7,576,832 35,257,015 17,230,000 7,455,071 24,685,071 10,450,183 121,761 10,571,944 (7,422,790) 3,046,408 10,469,198 6,925,070 (12,810,117) (5,885,047) 6,818,822 (11,896,382) 228,395 (9,462,302) (14,311,467) (106,248) 913,735 228,395 (9,462,302) (8,426,420) (13,307,837) $ (11,265,059) $ 2,042,778 144 Variance with Final BudgetPositive (Negative) $ (133,644) 30,898 (102,746) Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Special Assessment Debt Service For the Fiscal Year Ended June 30, 2018 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Charges for services Special assessments Miscellaneous Total revenues $ Expenditures: Current: Public works Debt service: Principal Interest and fiscal fees Total expenditures Net change in fund balance 1,992,875 1,992,875 $ 1,125,000 867,875 1,992,875 $ - $ 145 1,075 2,027,722 10,163 2,038,960 Variance with Final BudgetPositive (Negative) $ 1,075 34,847 10,163 46,085 213 (213) 1,315,000 897,940 2,213,153 (190,000) (30,065) (220,278) (174,193) $ (174,193) Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Performing Arts Fund For the Fiscal Year Ended June 30, 2018 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Sales taxes Investment income Charges for services Miscellaneous Total revenues $ Expenditures: Current: Community services Debt service: Principal Interest and fiscal fees Total expenditures Excess (deficiency) of revenues over expenditures Other financing uses: Transfers out Proceeds on sale of assets Total other financing uses Net change in fund balance $ 7,776,305 1,233,275 240,000 9,249,580 $ 8,436,503 8,941 952,961 213,449 9,611,854 Variance with Final BudgetPositive (Negative) $ 660,198 8,941 (280,314) (26,551) 362,274 4,763,763 4,492,181 271,582 3,025,000 407,250 8,196,013 3,025,000 411,499 7,928,680 (4,249) 267,333 1,053,567 1,683,174 629,607 (694,783) (694,783) (694,783) (694,783) - 358,784 146 $ 988,391 $ 629,607 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Highway User Revenue Fund For the Fiscal Year Ended June 30, 2018 City of Tempe, Arizona Final Budget Amounts Revenues: Intergovernmental revenue State sales tax Charges for services Miscellaneous Total revenues Expenditures: Current: Public works Total expenditures $ 450,000 10,979,121 72,500 1,750 11,503,371 $ Actual Amounts (Budgetary Basis) Variance with Final BudgetPositive (Negative) 11,887,793 193,127 7,097 12,088,017 $ (450,000) 908,672 120,627 5,347 584,646 10,063,925 10,063,925 8,989,263 8,989,263 1,074,662 1,074,662 Excess (deficiency) of revenues over expenditures 1,439,446 3,098,754 1,659,308 Other financing sources (uses): Transfers in Transfers out Proceeds from sale of capital assets Total other financing sources (uses) 1,500,000 (7,375,931) (5,875,931) 1,500,000 (5,993,325) 34,343 (4,458,982) 1,382,606 34,343 1,416,949 Net change in fund balance $ (4,436,485) $ (1,360,228) 147 $ 3,076,257 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Community Development Fund For the Fiscal Year Ended June 30, 2018 City of Tempe, Arizona Revenues: Federal grants Investment income Miscellaneous Total revenues Final Budget Amounts Actual Amounts (Budgetary Basis) Variance with Final BudgetPositive (Negative) $ 6,842,363 934,044 7,776,407 $ 2,809,331 46 482,429 3,291,806 $ 6,898,961 2,573,687 4,325,274 405,000 79,044 7,383,005 405,000 77,474 3,056,161 1,570 4,326,844 Expenditures: Current: Community development Debt service: Principal Interest and fiscal fees Total expenditures Net change in fund balance $ 393,402 148 $ 235,645 $ (4,033,032) 46 (451,615) (4,484,601) (157,757) Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Housing Assistance Fund For the Fiscal Year Ended June 30, 2018 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Federal grants Intergovernmental other Investment income Miscellaneous Total revenues $ 10,607,423 60,000 10,667,423 Expenditures: Current: Human services Total expenditures 10,667,423 10,667,423 Net change in fund balance $ - 149 $ 9,863,006 14,851 1,015 9,878,872 Variance with Final BudgetPositive (Negative) $ 9,543,622 9,543,622 $ 335,250 (744,417) 14,851 1,015 (60,000) (788,551) 1,123,801 1,123,801 $ 335,250 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Housing Affordability Fund For the Fiscal Year Ended June 30, 2018 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Federal grants Investment income Total revenues $ Expenditures: Current: Human services Total expenditures Net change in fund balance - $ 51,000 51,000 $ (51,000) 150 Variance with Final BudgetPositive (Negative) 634 634 $ $ 634 634 634 51,000 51,000 $ 51,634 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Donations and Court Awards Fund For the Fiscal Year Ended June 30, 2018 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Intergovernmental other Investment income Charges for services Fines and forfeitures Other entities' participation Miscellaneous Contigency Total revenues $ Expenditures: Current: Fire medical rescue Community services Public works Community development Human services Municipal court City manager Office of strategic management and diversity Contingency Total expenditures Net change in fund balance 30,858 153,000 481,435 533,000 500 598,758 1,797,551 $ 91,248 820,704 1,860 503,823 391,208 1,378,810 369,307 2,000 598,758 4,157,718 $ (2,360,167) 151 41,658 13,384 271,785 459,936 377,235 24,755 1,188,753 Variance with Final BudgetPositive (Negative) $ 15,349 189,979 76,944 203,866 449,915 114,165 1,050,218 $ 138,535 10,800 13,384 118,785 (21,499) (155,765) 24,255 (598,758) (608,798) 75,899 630,725 1,860 426,879 187,342 928,895 255,142 2,000 598,758 3,107,500 $ 2,498,702 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Grants Fund For the Fiscal Year Ended June 30, 2018 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Variance with Final BudgetPositive (Negative) Revenues: Federal grants State grants Intergovernmental other Investment income Charges for services Fines and forfeitures Other entities' participation Miscellaneous Contingency Total revenues $ 2,160,643 633,941 7,778,766 3,000 663,795 5,000 7,000 7,142,473 18,394,618 Expenditures: Current: Police Fire medical rescue Community services Public works Community development Human services Municipal court City manager City attorney Office of strategic management and diversity Contingency Total expenditures 4,324,114 674,168 825,519 237,885 40,712 1,941,892 90,000 3,754,342 178,475 19,162 7,142,473 19,228,742 3,999,572 150,836 664,177 44,257 860 919,240 69,097 370,000 46,583 3,000 6,267,622 324,542 523,332 161,342 193,628 39,852 1,022,652 20,903 3,384,342 131,892 16,162 7,142,473 12,961,120 Excess (deficiency) of revenues over expenditures (834,124) 101,493 935,617 (466,000) (466,000) (465,999) (465,999) 1 1 Other financing uses: Transfers out Total other financing uses Net change in fund balance $ (1,300,124) 152 $ $ 1,730,940 488,975 3,721,009 306 8,360 371,546 36,075 11,904 6,369,115 (364,506) $ $ (429,703) (144,966) (4,057,757) 306 5,360 (292,249) 31,075 4,904 (7,142,473) (12,025,503) 935,618 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Community Facilities District Fund For the Fiscal Year Ended June 30, 2018 City of Tempe, Arizona Final Budget Amounts Actual Amounts (Budgetary Basis) Variance with Final BudgetPositive (Negative) $ 2,524,467 200,000 2,724,467 $ 2,365,981 2,365,981 $ 2,934,750 200,000 2,508,810 - 425,940 200,000 2,295,000 751,250 6,181,000 2,520,000 395,922 5,424,732 (225,000) 355,328 756,268 Deficiency of revenues over expenditures (3,456,533) (3,058,751) 397,782 Other financing sources (uses): Transfers in Transfers out Total other financing sources (uses) 3,041,450 3,041,450 2,918,578 (6,690) 2,911,888 (122,872) (6,690) (129,562) (415,083) $ (146,863) Revenues: Charges for services Miscellaneous Total revenues Expenditures: Current: Community development Contigency Debt service: Principal Interest and fiscal fees Total expenditures Net change in fund balance $ 153 $ (158,486) (200,000) (358,486) 268,220 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Transit Capital Projects Fund For the Fiscal Year Ended June 30, 2018 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Federal grants Intergovermental other Investment income Other entities' participation Total revenues $ Expenditures: Current: Public works Total expenditures Deficiency of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Total other financing sources (uses) Net change in fund balance $ 6,830,941 908,061 48,720 7,787,722 $ 304,887 4,981 605,059 914,927 Variance with Final BudgetPositive (Negative) $ (6,526,054) (908,061) 4,981 556,339 (6,872,795) 23,957,252 23,957,252 9,061,956 9,061,956 14,895,296 14,895,296 (16,169,530) (8,147,029) 8,022,501 7,701,446 7,701,446 7,468,696 (9,649,588) (2,180,892) (232,750) (9,649,588) (9,882,338) (8,468,084) $ (10,327,921) 154 $ (1,859,837) Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Streets Capital Projects Fund For the Fiscal Year Ended June 30, 2018 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Federal grants Investment income Charges for services Other entities' participation Miscellaneous Total revenues $ Expenditures: Current: Public works Total expenditures 922,869 1,225,234 2,148,103 $ 3,702 44,755 724,424 772,881 Variance with Final BudgetPositive (Negative) $ (922,869) 3,702 44,755 (1,225,234) 724,424 (1,375,222) 20,252,772 20,252,772 11,248,798 11,248,798 9,003,974 9,003,974 (18,104,669) (10,475,917) 7,628,752 6,466,676 9,500,548 15,967,224 5,899,684 (2,230) 6,320,030 1,185,000 13,402,484 (566,992) (2,230) (3,180,518) 1,185,000 (2,564,740) Deficiency of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Issuance of debt Premium on issuance of debt Total other financing sources (uses) Net change in fund balance $ (2,137,445) 155 $ 2,926,567 $ 5,064,012 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Police Capital Projects Fund For the Fiscal Year Ended June 30, 2018 City of Tempe, Arizona Revenues: Intergovernmental other Investment income Other entities' participation Total revenues Final Budget Amounts Actual Amounts (Budgetary Basis) Variance with Final BudgetPositive (Negative) $ $ $ Expenditures: Current: Police Total expenditures Deficiency of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Issuance of debt Premium on isuance of debt Total other financing sources (uses) Net change in fund balance $ 220,000 220,000 220,000 14,856 1,219,827 1,454,683 14,856 1,219,827 1,234,683 3,269,894 3,269,894 2,699,863 2,699,863 570,031 570,031 (3,049,894) (1,245,180) 1,804,714 195,084 2,272,408 2,467,492 661,084 (195,281) 1,625,000 250,000 2,340,803 466,000 (195,281) (647,408) 250,000 (126,689) (582,402) $ 1,095,623 $ 1,678,025 156 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Fire Capital Projects Fund For the Fiscal Year Ended June 30, 2018 City of Tempe, Arizona Revenues: Investment income Other entities' participation Total revenues Final Budget Amounts Actual Amounts (Budgetary Basis) Variance with Final BudgetPositive (Negative) $ $ $ Expenditures: Current: Fire medical rescue Total expenditures 215,637 215,637 12,549 906,395 918,944 12,549 690,758 703,307 8,961,946 8,961,946 7,873,848 7,873,848 1,088,098 1,088,098 Deficiency of revenues over expenditures (8,746,309) (6,954,904) 1,791,405 Other financing sources: Transfers in Transfers out Issuance of debt Premium on issuance of debt Total other financing sources 7,782,288 7,782,288 20,720 (217,053) 2,435,000 380,000 2,618,667 20,720 (217,053) (5,347,288) 380,000 (5,163,621) (964,021) $ (4,336,237) $ (3,372,216) Net change in fund balance $ 157 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Storm Sewers Capital Projects Fund For the Fiscal Year Ended June 30, 2018 City of Tempe, Arizona Revenues: Investment income Total revenues Expenditures: Current: Public works Total expenditures Final Budget Amounts Actual Amounts (Budgetary Basis) Variance with Final BudgetPositive (Negative) $ $ $ Defiiency of revenues over expenditures Other financing sources (uses): Issuance of debt Total other financing sources (uses) Net change in fund balance $ - - - 747,110 747,110 327,258 327,258 419,852 419,852 (747,110) (327,258) 419,852 740,381 740,381 126,518 126,518 (613,863) (613,863) (6,729) 158 $ (200,740) $ (194,011) Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Parks Capital Projects Fund For the Fiscal Year Ended June 30, 2018 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Intergovernmental other Investment income Other entities' participation Miscellaneous Total revenues Expenditures: Current: Community services Total expenditures $ 304,852 304,852 $ 28,012 1,132,483 2,266 1,162,761 Variance with Final BudgetPositive (Negative) $ 28,012 827,631 2,266 857,909 27,229,709 27,229,709 14,750,161 14,750,161 12,479,548 12,479,548 (26,924,857) (13,587,400) 13,337,457 Other financing sources (uses): Transfers in Transfers out Issuance of debt Premium on issuance of debt Total other financing sources (uses) 417,000 16,533,048 16,950,048 1,947,226 (71,728) 8,365,000 1,285,000 11,525,498 1,530,226 (71,728) (8,168,048) 1,285,000 (5,424,550) Net change in fund balance $ (9,974,809) $ (2,061,902) $ 7,912,907 Deficiency of revenues over expenditures 159 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Rio Salado Capital Projects Fund For the Fiscal Year Ended June 30, 2018 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Investment income Total revenues $ - $ 1,161 1,161 Variance with Final BudgetPositive (Negative) $ 1,161 1,161 Expenditures: Current: Community development Total expenditures 585,047 585,047 585,047 585,047 Deficiency of revenues over expenditures (585,047) (583,886) 1,161 - 598,000 (860,815) (262,815) 598,000 (860,815) (262,815) Other financing sources (uses): Transfers in Transfers out Total other financing sources (uses) Net change in fund balance $ (585,047) 160 $ (846,701) - $ (261,654) Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Community Development Capital Projects Fund For the Fiscal Year Ended June 30, 2018 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Investment income Other entities' participation Miscellaneous Total revenues Expenditures: Current: Public works Total expenditures $ - $ 748 83,900 13,268 97,916 Variance with Final BudgetPositive (Negative) $ 748 83,900 13,268 97,916 15,656,174 15,656,174 8,770,033 8,770,033 6,886,141 6,886,141 (15,656,174) (8,672,117) 6,984,057 Other financing sources (uses): Transfers in Transfers out Issuance of debt Premium on issuance of debt Total other financing sources (uses) 2,355,565 10,209,248 12,564,813 2,358,127 (22,216) 4,895,000 755,000 7,985,911 2,562 (22,216) (5,314,248) 755,000 (4,578,902) Net change in fund balance $ (3,091,361) Deficiency of revenues over expenditures 161 $ (686,206) $ 2,405,155 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Signals Capital Projects Fund For the Fiscal Year Ended June 30, 2018 City of Tempe, Arizona Revenues: Federal grants Investment income Other entities' participation Total revenues Final Budget Amounts Actual Amounts (Budgetary Basis) Variance with Final BudgetPositive (Negative) $ $ 215,694 988 115,042 331,724 $ (2,342,864) 988 115,042 (2,226,834) 5,725,927 5,725,927 4,672,572 4,672,572 1,053,355 1,053,355 (3,167,369) (4,340,848) (1,173,479) 400,000 2,577,402 2,977,402 400,056 (289) 1,258,452 1,658,219 56 (289) (1,318,950) (1,319,183) (189,967) $ (2,682,629) $ (2,492,662) Expenditures: Current: Public works Total expenditures Deficiency of revenues over expenditures Other financing sources (uses) : Transfers in Transfers out Issuance of debt Total other financing sources (uses) Net change in fund balance $ 2,558,558 2,558,558 162 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Community Facilities District Capital Projects Fund For the Fiscal Year Ended June 30, 2018 City of Tempe, Arizona Revenues: Charges for services Total revenues Final Budget Amounts Actual Amounts (Budgetary Basis) $ $ Expenditures: Current: Community development Total expenditures Net change in fund balance 459,041 459,041 1,234,151 1,234,151 $ (775,110) 163 459,041 459,041 Variance with Final BudgetPositive (Negative) $ 342,511 342,511 $ 116,530 - 891,640 891,640 $ 891,640 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Water and Wastewater Fund For the Fiscal Year Ended June 30, 2018 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Charges for services Investment income Fines and forfeitures Miscellaneous Total revenues $ Expenditures: Current: Public works Contingency Debt service: Principal Interest and fiscal fees Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Issuance of debt Premium on issuance of debt Proceeds from sale of capital assets Total other financing sources (uses) Net change in fund balance $ 83,928,584 735,000 68,500 277,450 85,009,534 $ 87,995,632 1,242,540 289,382 89,527,554 Variance with Final BudgetPositive (Negative) $ 4,067,048 507,540 (68,500) 11,932 4,518,020 99,285,234 1,000,000 80,744,709 - 18,540,525 1,000,000 30,220,544 11,482,797 141,988,575 30,091,017 12,807,683 123,643,409 129,527 (1,324,886) 18,345,166 (56,979,041) (34,115,855) 22,863,186 6,175,965 (7,204,734) 47,879,679 46,850,910 6,209,842 (7,093,662) 22,535,000 2,614,976 18,837 24,284,993 33,877 111,072 (25,344,679) 2,614,976 18,837 (22,565,917) (10,128,131) 164 $ (9,830,862) $ 297,269 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Solid Waste Fund For the Fiscal Year Ended June 30, 2018 City of Tempe, Arizona Final Budget Amounts Actual Amounts (Budgetary Basis) $ 16,035,730 35,000 16,070,730 $ 16,706,706 48,260 2,745 16,757,711 18,059,366 500,000 18,559,366 17,745,675 17,745,675 313,691 500,000 813,691 Deficiency of revenues over expenditures (2,488,636) (987,964) 1,500,672 Other financing sources (uses): Transfers in Transfers out Proceeds from sale of capital assets Total other financing sources (uses) 371,000 (215,848) 30,000 185,152 410,917 (215,773) 57,810 252,954 39,917 75 27,810 67,802 Revenues: Charges for services Investment income Miscellaneous Total revenues Expenditures: Current: Public works Contingency Total expenditures Net change in fund balance $ (2,303,484) 165 $ (735,010) Variance with Final BudgetPositive (Negative) $ $ 670,976 13,260 2,745 686,981 1,568,474 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Emergency Medical Transportation Fund For the Fiscal Year Ended June 30, 2018 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Investment income Fines and forfeitures Miscellaneous Total revenues $ Expenditures: Current: Fire medical rescue Contingency Total expenditures Deficiency of revenues over expenditures Other financing sources: Transfers in Gain (loss) on transfer of assets Total other financing sources Net change in fund balance $ 957,202 957,202 $ 809,685 541,246 1,350,931 Variance with Final BudgetPositive (Negative) $ (147,517) 541,246 393,729 2,042,350 139,837 2,182,187 1,699,932 1,699,932 342,418 139,837 482,255 (1,224,985) (349,001) 875,984 - 210,414 379,140 589,554 210,414 379,140 589,554 (1,224,985) 166 $ 240,553 $ 1,465,538 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Golf Fund For the Fiscal Year Ended June 30, 2018 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Investment income Charges for services Miscellaneous Total revenues $ Expenditures: Current: Public works Total expenditures Deficiency of revenues over expenditures Other financing sources: Transfers in Proceeds from sale of capital assets Total other financing sources Net change in fund balance $ 2,935,588 2,935,588 $ 2,387,362 577 2,387,939 Variance with Final BudgetPositive (Negative) $ (548,226) 577 (547,649) 3,260,761 3,260,761 3,111,616 3,111,616 149,145 149,145 (325,173) (723,677) (398,504) 74,000 74,000 74,000 16,361 90,361 16,361 16,361 (251,173) 167 $ (633,316) $ (382,143) This section provides a broad range of trend data covering key financial indicators including general governmental revenues and expenditures, property taxes, debt burden, demographics and miscellaneous data useful in assessing the City’s financial condition. Statis tical Section City of Tempe, Arizona STATISTICAL SECTION The Statistical Section presents detailed information as a context for understanding the information in the financial statements, note disclosures and required supplementary information in regards to the City’s overall financial health.  Financial Trends. 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. These schedules contain information to help the reader assess the City’s most significant local revenue sources, property tax and sale and use taxes.  Debt Capacity. 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.  Economic and Demographic Information. These schedules offer economic and demographic indicators to help the reader understand the environment within which the City’s financial activities take place.  Operating Information. These schedules contain service and infrastructure data to help the reader understand how the information in the City’s financial report relates to the services the City provides and the activities it performs. Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. 168 Net Position by Component (Exhibit S-1) Last Ten Fiscal Years Accrual Basis of Accounting City of Tempe, Arizona Fiscal Year 2018 Governmental activities Net investment in capital assets Restricted (a) Unrestricted Fiscal Year 2017 Fiscal Year 2016 Fiscal Year 2015 Fiscal Year 2014 Fiscal Year 2013 Fiscal Year 2012 Fiscal Year 2011 Fiscal Year 2010 Fiscal Year 2009 $ 483,438,668 102,808,694 12,067,796 $ 519,530,983 117,866,229 (22,136,687) $ 564,120,959 102,095,778 (26,820,571) $ 519,040,090 141,565,366 (18,763,531) $ 537,940,057 148,338,902 236,990,748 $ 548,739,169 119,845,935 253,302,947 $ 560,427,507 124,800,334 248,936,397 $ 571,925,061 114,643,888 259,250,692 $ 562,958,494 142,947,736 241,371,774 $ 574,872,877 181,241,102 237,470,312 Total governmental activities net position $ 598,315,158 $ 615,260,525 $ 639,396,166 $ 641,841,925 $ 923,269,707 $ 921,888,051 $ 934,164,237 $ 945,819,641 $ 947,278,004 $ 993,584,291 Business-type activities Net investment in capital assets Unrestricted $ 111,354,858 154,458,327 $ 104,387,674 151,904,179 $ 69,467,178 170,405,834 $ 142,208,059 90,577,933 $ 137,971,614 118,726,035 $ 149,782,240 105,207,407 $ 162,774,388 92,951,764 $ 175,625,967 73,018,010 $ 144,245,429 102,511,794 $ 151,096,394 100,251,937 Total business-type activities net position $ 265,813,185 $ 256,291,853 $ 239,873,012 $ 232,785,992 $ 256,697,649 $ 254,989,647 $ 255,726,152 $ 248,643,977 $ 246,757,223 $ 251,348,331 $ 594,793,526 102,808,694 166,526,123 $ 623,918,657 117,866,229 129,767,492 $ 633,588,137 102,095,778 143,585,263 $ 661,248,149 141,565,367 71,814,402 $ 675,911,671 148,338,902 355,716,783 $ 698,521,409 119,845,935 358,510,354 $ 723,201,895 124,800,334 341,888,161 $ 747,551,028 114,643,888 332,268,702 $ 707,203,923 142,947,736 343,883,568 $ 725,969,271 181,241,102 337,722,249 $ 864,128,343 $ 871,552,378 $ 879,269,178 $ 874,627,918 $ 1,179,967,356 Primary government Net investment in capital assets Restricted (a) Unrestricted Total primary government net position $ 1,176,877,698 $ 1,189,890,389 (a) With the implementation of GASB No. 54 in Fiscal Year 2011, Restricted fund balance has been redefined to include only amounts that have externally enforceable limitations or enabling legislation. 169 $ 1,194,463,618 $ 1,194,035,227 $ 1,244,932,622 Changes in Net Position (Exhibit S-2a) Last Ten Fiscal Years Accrual Basis of Accounting City of Tempe, Arizona Fiscal Year 2018 Fiscal Year 2017 Fiscal Year 2016 Fiscal Year 2015 Fiscal Year 2014 Fiscal Year 2013 Fiscal Year 2012 Fiscal Year 2011 Fiscal Year 2010 Fiscal Year 2009 $ 107,357,688 42,150,580 29,739,525 102,940,790 17,270,124 22,505,753 5,007,487 405,716 7,045,025 3,283,818 476,584 288,182 981,169 979,356 16,749,283 1,716,725 11,817,213 $ 111,570,351 48,345,996 27,956,647 103,728,249 16,521,932 17,777,825 4,909,370 473,324 6,815,022 3,160,056 376,249 261,313 1,055,075 815,016 18,821,669 1,777,887 9,847,278 $ 93,057,663 34,319,479 27,402,656 112,589,913 18,372,515 17,430,250 4,354,299 337,046 7,371,101 2,961,497 425,674 259,133 868,596 8,252,013 1,785,487 12,924,841 $ 92,214,451 32,914,994 29,239,583 107,411,254 18,832,177 13,374,117 4,028,068 330,042 7,045,783 3,712,245 433,339 415,774 751,331 6,403,407 1,955,520 12,882,924 $ 78,658,426 31,103,237 29,363,339 102,892,245 30,234,017 4,288,787 408,196 477,964 2,844,965 392,629 844,934 6,416,085 463,969 326,433 4,128,800 3,214,557 1,331,649 17,153,207 $ 76,585,163 32,594,512 28,592,571 103,586,986 26,757,509 3,900,928 223,472 615,451 2,963,058 393,471 481,374 7,039,462 449,428 354,866 4,063,048 2,036,621 3,662,321 14,347,644 $ 76,799,591 28,156,863 31,069,618 98,915,390 25,113,273 3,934,716 356,468 78,458 2,854,168 338,059 910,616 7,456,756 476,011 462,817 5,325,401 2,102,617 2,301,194 14,894,293 $ 72,492,475 27,499,884 27,031,973 94,687,386 30,778,689 4,179,694 316,531 556,354 2,659,312 477,080 403,792 4,463,790 447,287 467,763 8,321,853 2,037,261 5,733,128 18,453,487 $ 78,283,021 30,542,829 21,891,886 115,283,119 23,494,471 5,245,105 387,723 369,153 3,101,845 427,828 739,884 21,238,479 4,210,261 531,651 7,107,213 3,923,486 3,443,660 2,149,363 2,383,904 16,185,139 $ 86,126,079 30,850,700 30,402,447 101,674,714 20,445,243 5,496,374 418,851 265,531 2,933,734 484,460 684,875 20,431,433 3,137,349 583,563 6,338,984 4,458,557 3,157,288 1,817,517 1,297,669 16,247,598 Total governmental activities expenses 370,715,018 374,213,259 342,712,163 331,945,009 314,543,439 308,647,885 301,546,309 301,007,739 340,940,020 337,252,966 Business-type activities: Water and wastewater Solid waste Emergency medical transportation Golf course Cemetery (e) 76,903,243 17,494,354 1,776,367 2,802,184 - 70,364,126 15,918,430 2,520,474 - 75,515,527 14,881,636 2,734,351 - 73,548,319 15,868,498 2,685,634 - 73,208,373 15,379,174 2,799,922 - 72,352,330 14,758,133 2,724,422 - 72,156,412 14,626,578 2,658,416 129,849 67,505,481 13,784,106 2,011,316 176,553 73,045,936 13,730,227 2,269,182 312,525 64,720,725 14,499,308 2,324,208 218,447 Total business-type activities expenses 98,976,148 88,803,030 93,131,514 92,102,451 91,387,469 89,834,885 89,571,255 83,477,456 89,357,870 81,762,688 $ 469,691,166 $ 463,016,289 $ 435,843,677 $ 424,047,460 $ 405,930,908 $ 398,482,770 $ 391,117,564 $ 384,485,195 $ 430,297,890 $ 419,015,654 Expenses Governmental activities: Police Fire medical rescue Community services Public works Community development Human services(h) Municipal court Mayor and council City manager City attorney Internal audit office Municipal budget office (h) Office of strategic management and diversity (i) City clerk and elections Internal services Parks and recreation (a) Community relations Diversity program (h) Tempe learning center (d)(f) Economic development (g) Development services (b) Finance and technology (c)(h) Financial services (c) Human resources (h) Information technology(c) Non-departmental Unallocated depreciation Interest on long-term debt Total primary government expenses (a) In Fiscal Year 2011, the Parks and Recreation department was split; the Parks component was merged into Public Works and the Recreation component was merged into Community Services. (b) In Fiscal Year 2011, the Development Services department was merged into Community Development. (c) In Fiscal Year 2011, the Financial Services department and the Information Technology department were merged into one department, Finance and Technology. (d) In Fiscal Year 2011, Tempe Learning Center was disaggregated from Human Resources. (e) In Fiscal Year 2013, the Cemetery Fund was closed into the General Fund. (f) In Fiscal Year 2014, Tempe Learning Center was reincorporated into Human Resources. (g) In Fiscal Year 2014, Economic Development was established as its own reporting unit. (h) In Fiscal Year 2015, Finance and Technology and Human Resources were combined to form the Internal Services Department. A component of the Community Services Department along with Diversity formed a new department called Human Services. The budget office became a stand alone office now known as Municipal Budget Office. Economic Development and Community Relations became a part of the City Manager Office. (i) In Fiscal Year 2017, the Office of Strategic Management and Diversity was created. The Diversity office which was under the City Manager's office was moved into the new office. (j) In Fiscal Year 2018, the Emergency Medical Transportation Fund was established. 170 Changes in Net Position (Exhibit S-2b) Last Ten Fiscal Years Accrual Basis of Accounting City of Tempe, Arizona Fiscal Year 2018 Fiscal Year 2017 Fiscal Year 2016 Fiscal Year 2015 Fiscal Year 2014 Fiscal Year 2013 Fiscal Year 2012 Fiscal Year 2011 Fiscal Year 2010 Fiscal Year 2009 Program Revenues Governmental activities: Charges for services: Police Fire medical rescue Community services Public works Community development Human services (d) Municipal court City manager City attorney City clerk and elections Internal services Parks and recreation (a) Community relations Development services Finance and technology (b) Financial services (b) Non-departmental Operating grants and contributions Captital grants and contributions Total governmental activities program revenues Business-type activities: Charges for services: Water and wastewater Solid waste Emergency medical transportation (e) Golf course Cemetery (c) Capital grants and contributions Total business-type activities program revenues $ 977,914 858,577 8,323,732 16,011,590 15,684,471 9,501 3,559,861 19,361 3,140 3,000,921 30,237,598 4,094,624 82,781,290 $ 1,021,670 1,869,840 8,283,698 16,585,374 13,250,819 7,820 5,852,849 7,597 16,940 1,797,928 27,582,362 6,355,742 82,632,639 $ 1,444,986 1,536,642 7,812,755 17,740,856 12,665,828 13,926 6,372,719 14,174 2,186,635 26,831,238 8,091,341 84,711,100 $ 1,712,306 334,158 7,589,603 19,786,216 13,065,445 80,237 8,302,032 2,212,402 19,784,859 7,258,243 80,125,501 $ 1,320,177 268,938 7,445,319 19,681,176 12,035,033 6,747,891 2,224,489 24,668,792 5,933,017 80,324,832 $ 1,506,807 153,903 6,988,375 18,536,983 6,815,190 6,426,389 13,310 2,140,898 27,287,325 6,551,849 76,421,029 $ 1,649,775 1,642,702 7,101,043 18,136,860 7,088,168 7,826,823 2,623,338 22,450,002 15,961,785 84,480,496 $ 1,657,335 2,107,133 6,453,226 19,582,397 4,484,572 8,413,798 8,682 2,624,190 22,131,520 24,708,317 92,171,170 $ 1,052,723 912,000 6,173,870 19,596,611 1,938,184 5,868,369 126,455 3,710,512 1,997,614 18,222,849 38,709,299 98,308,486 $ 1,201,962 314,969 7,122,650 20,461,847 592,236 8,912,739 9,348 24,070 5,090,280 1,781,809 130,492 16,052,299 35,955,254 97,649,955 87,807,953 16,706,706 2,280,247 2,387,362 109,182,268 86,273,324 16,274,287 2,322,777 104,870,388 81,265,973 15,319,833 2,575,908 99,161,714 78,043,384 14,216,743 2,755,966 95,016,093 80,989,551 14,400,476 2,661,519 98,051,546 74,979,069 14,341,827 2,480,815 91,801,711 73,392,328 14,866,281 2,344,355 144,242 1,988,550 92,735,756 70,094,034 15,326,780 1,562,489 110,196 1,691,429 88,784,928 62,511,102 15,242,801 1,574,081 116,643 4,765,839 84,210,466 55,504,216 15,130,988 1,813,578 98,356 59,867 72,607,005 Total primary government program revenues $ 191,963,558 $ 187,503,027 $ 183,872,814 $ 175,141,594 $ 178,376,378 $ 168,222,740 $ 177,216,252 $ 180,956,098 $ 182,518,952 $ 170,256,960 Net (expense)/revenue Governmental activities Business-type activities Total primary government net expense $ (287,933,728) 10,206,120 $ (277,727,608) $ (291,580,620) 16,067,358 $ (275,513,262) $ (258,001,063) 6,030,200 $ (251,970,863) $ (251,819,508) 2,913,642 $ (248,905,866) $ (234,218,607) 6,664,077 $ (227,554,530) $ (232,226,856) 1,966,826 $ (230,260,030) $ (217,065,813) 3,164,501 $ (213,901,312) $ (208,836,569) 5,307,472 $ (203,529,097) $ (242,631,534) (5,147,404) $ (247,778,938) $ (239,603,011) (9,155,683) $ (248,758,694) (a) (b) (c) (d) (e) In Fiscal Year 2011, the Parks and Recreation department was split; the Parks component was merged into Public Works and the Recreation component was merged into Community Services. In Fiscal Year 2011, the Financial Services department and the Information Technology department were merged into one department, Finance and Technology. In Fiscal Year 2013, the Cemetery Fund was closed into the General Fund. A component of the Community Services department along with Diversity formed a new department called Human Services. In Fiscal Year 2018, the Emergency Medical Transportation Fund was established. 171 Changes in Net Position (Exhibit S-2c) Last Ten Fiscal Years Accrual Basis of Accounting City of Tempe, Arizona Fiscal Year 2018 Fiscal Year 2017 Fiscal Year 2016 Fiscal Year 2015 Fiscal Year 2014 $ 168,650,143 63,353,523 47,495,555 3,290,220 1,489,603 5,506,328 1,667,264 (1,454,082) 289,998,554 $ 160,218,570 44,671,765 45,308,519 3,182,193 662,115 5,435,113 7,538,846 427,858 267,444,979 $ 152,492,065 41,472,528 43,316,151 3,363,615 1,683,445 7,419,129 5,298,681 509,690 255,555,304 697,388 651,500 33,015 (25,122) 1,356,781 351,831 299,116 128,394 (427,858) 351,483 841,726 152,428 572,356 (509,690) 1,056,820 $ 291,355,335 $ 267,796,462 $ 256,612,124 $ 241,732,206 $ 236,986,699 $ $ (24,135,641) 16,418,841 $ (7,716,800) $ (2,445,759) 7,087,020 $ 4,641,261 $ (10,486,918) 3,313,258 (7,173,660) $ 1,381,656 8,050,513 9,432,169 Fiscal Year 2013 Fiscal Year 2012 Fiscal Year 2011 Fiscal Year 2010 (a) Fiscal Year 2009 General revenues and other changes in net position Governmental activities: General revenues: Sales taxes State shared income taxes, unrestricted (b) Intergovernmental revenue, unrestricted (b) Property taxes Franchise taxes Auto-lieu taxes (b) Unrestricted investment earnings Miscellaneous Gain on sale of capital assets Transfers Total governmental activities Business-type activites: Unrestricted investment earnings Miscellaneous Gain (loss) on sale of capital assets Transfers Total business-type activities Total primary government $ 147,787,315 40,571,933 41,457,646 2,933,239 889,594 5,042,875 2,170,917 479,071 241,332,590 $ 488,477 142,914 247,296 (479,071) 399,616 147,815,825 32,102,103 40,074,441 3,310,940 6,053,172 725,099 4,114,557 657,224 746,902 235,600,263 $ 149,078,044 16,519,248 38,644,241 3,253,175 5,165,072 278,102 2,987,769 261,764 3,763,255 219,950,670 $ 142,985,910 13,649,203 35,899,010 3,428,125 5,437,201 822,900 3,199,954 496,911 (508,805) 205,410,409 115,362 923,413 21,149 (3,763,255) (2,703,331) 335,297 3,032,990 40,582 508,805 3,917,674 $ 217,247,339 $ 209,328,083 $ 203,957,488 $ 196,881,543 $ 220,793,006 $ (12,276,186) (736,505) (13,012,691) $ (11,655,404) 7,082,175 $ (4,573,229) $ (1,458,363) 1,886,754 428,391 $ (46,306,287) (4,591,108) (50,897,395) $ (20,630,037) (7,335,651) (27,965,688) 436,821 1,643,570 52,947 (746,902) 1,386,436 $ 141,844,739 16,137,383 35,501,233 3,821,436 5,424,902 1,229,447 2,991,971 133,677 293,418 207,378,206 $ 459,759 1,976,132 (5,563,191) (293,418) (3,420,718) 125,186,698 21,406,004 37,183,541 3,559,615 5,560,791 97,660 3,429,435 17,160 (115,657) 196,325,247 $ 10,698 332,955 96,986 115,657 556,296 134,382,181 24,832,128 35,891,803 3,976,956 6,024,595 7,410,643 4,348,126 1,491,079 615,463 218,972,974 1,940,956 262,728 231,811 (615,463) 1,820,032 Changes in net position Governmental activities Business-type activities Total primary government 2,064,826 11,562,901 $ 13,627,727 $ $ $ (a) Due to the prolonged economic downturn, in Fiscal Year 2010 the City had planned drawdown of fund balance. (b) In Fiscal Year 2015, State shared income taxes, unrestricted and Auto-lieu taxes were combined under the category Intergovernmental revenue, unrestricted. 172 $ $ $ Fund Balances, Governmental Funds (Exhibit S-3) Last Ten Fiscal Years Modified Accrual Basis of Accounting City of Tempe, Arizona Fiscal Year 2018 General fund Reserved Unreserved Nonspendable Restricted Committed Assigned Unassigned Total general fund All other governmental funds Reserved Unreserved, reported in: Debt service funds (a) Special revenues funds Capital projects funds Nonspendable Restricted Committed Assigned Unassigned (b) Total all other governmental funds $ - Fiscal Year 2017 $ 711,092 154,667 $ $ $ 15,336,906 93,995,709 110,198,374 1,553,045 80,434,422 39,232,880 11,261,680 (296,755) 132,185,272 $ $ $ 638,685 100,000 475,531 14,762,667 80,099,820 96,076,703 1,623,799 88,581,119 26,744,884 15,774,827 132,724,629 Fiscal Year 2016 $ $ $ $ 782,276 100,000 147,036 10,291,768 78,629,198 89,950,278 1,594,761 82,863,821 20,404,290 15,186,266 (2,856,351) 117,192,787 Fiscal Year 2015 $ Fiscal Year 2014 - $ 346,364 - $ $ $ 520,770 8,800,833 73,879,480 83,547,447 $ - $ 1,952,950 80,049,732 21,925,153 15,935,817 (2,922,001) 116,941,651 $ 653,365 338,193 9,884,517 63,878,841 74,754,916 1,947,082 77,724,151 14,295,999 15,326,386 (673,217) 108,620,401 Fiscal Year 2013 $ - $ 643,980 8,127,268 52,658,705 61,429,953 $ - $ 1,733,749 75,566,724 19,054,131 14,817,549 (571,299) 110,600,854 Fiscal Year 2012 $ $ $ 634,526 9,967,268 50,954,570 61,556,364 $ $ - $ $ (a) In Fiscal Year 2009, the special assessment debt service fund is reported in "unreserved" fund balance due to the current year deficit balance. (b) In Fiscal Year 2011, GASB No. 54 was implemented requiring additional classifications of fund balance. A deficit fund balance is reported in "unassigned". 173 - Fiscal Year 2011 (b) 1,765,739 76,139,830 67,195,597 11,707,666 (1,733,419) 155,075,412 $ 650,506 13,783,790 39,604,103 54,038,399 1,826,335 75,275,738 75,446,158 10,614,331 (1,097,095) 162,065,467 Fiscal Year 2010 $ Fiscal Year 2009 $ $ 981,529 42,832,205 43,813,734 $ 1,322,728 75,647,216 76,969,944 $ 69,324,494 $ 59,067,648 $ 32,742,748 63,078,330 165,145,572 $ (45,374) 23,220,030 71,685,317 153,927,621 Changes in Fund Balance, Governmental Funds (Exhibit S-4a) Last Ten Fiscal Years Modified Accrual Basis of Accounting City of Tempe, Arizona Revenues: Taxes Intergovernmental Investment earnings Charges for services Fines and forfeitures Other entities' participation Special assessments Licenses and permits Miscellaneous Total revenues Expenditures: Police Fire medical rescue Community services Public works Community development Human services (f) Municipal court Mayor and council City manager City attorney Internal audit office Municipal budget office (f) Office of strategic management and diversity (g) City clerk and elections Internal services Parks and recreation (a) Community relations (f) Diversity program (f) Economic development (e)(f) Tempe learning center (d) Development services (b) Finance and technology (f) Financial services (c) Human resources (f) Non-departmental Debt service: Principal Interest Fiscal fees Capital outlay Total expenditures Deficiency of revenues over expenditures before other financing sources (uses) Fiscal Year 2018 Fiscal Year 2017 Fiscal Year 2016 Fiscal Year 2015 Fiscal Year 2014 Fiscal Year 2013 Fiscal Year 2012 Fiscal Year 2011 $ 207,580,582 90,577,368 1,489,603 30,445,583 7,670,630 5,972,968 2,027,722 8,330,276 8,502,999 362,597,731 $ 197,341,071 89,383,867 662,115 30,134,108 8,982,209 1,916,336 2,173,798 5,446,638 8,761,291 344,801,433 $ 188,672,865 85,856,572 1,683,445 31,752,038 9,357,450 1,751,971 2,439,086 6,308,241 9,867,156 337,688,824 $ 182,323,977 78,988,805 889,594 33,520,741 9,986,226 1,093,272 3,862,306 6,828,905 8,197,929 325,691,755 $ 182,032,821 74,692,323 725,099 33,268,236 8,909,849 174,954 3,605,932 6,638,496 6,707,484 316,755,194 $ 168,974,511 76,651,736 278,102 30,183,216 8,537,078 196,106 4,442,862 3,856,216 4,908,914 298,028,741 $ 162,157,488 72,701,235 822,900 29,451,269 8,198,638 3,542,185 2,526,283 3,814,753 7,021,832 290,236,583 $ 158,749,333 87,180,913 1,229,966 28,981,943 8,235,437 622,543 3,867,979 2,969,580 7,209,565 299,047,259 87,341,647 33,159,702 25,507,377 72,517,143 16,408,645 20,428,462 5,158,342 403,658 7,182,164 3,261,843 490,396 294,404 987,828 995,339 16,263,826 - 82,429,673 31,383,875 23,770,512 70,604,468 15,336,696 17,589,585 4,886,110 417,734 6,800,149 3,098,124 408,867 262,696 932,200 752,876 16,334,235 - 81,154,550 30,724,706 22,516,873 73,771,025 16,321,778 17,388,871 4,262,778 342,645 7,292,703 2,920,857 403,108 236,768 850,235 7,433,821 - 78,102,044 26,802,154 22,240,413 72,414,122 17,432,661 13,471,552 4,058,927 345,501 6,583,633 3,790,479 432,384 323,676 751,978 7,232,975 - 75,135,489 28,887,609 25,579,134 72,739,804 29,460,993 4,325,838 368,846 590,201 2,912,507 426,006 885,350 6,562,909 451,293 396,577 4,558,042 3,066,799 - 72,709,534 28,056,149 24,551,075 70,784,480 25,253,707 3,830,508 244,837 617,384 3,037,216 388,263 511,960 7,088,482 441,212 418,396 3,760,937 2,045,707 - 67,325,484 25,871,390 23,473,722 66,845,601 23,572,565 3,874,634 440,161 101,885 2,648,388 393,958 899,917 7,180,324 457,292 415,447 3,572,392 2,087,079 - 31,730,000 11,326,484 331,593 32,418,674 366,207,527 39,547,000 11,688,331 569,367 30,298,582 357,111,080 29,686,000 13,356,740 437,027 45,373,210 354,473,695 41,065,000 13,619,726 544,868 49,626,981 358,839,074 26,105,000 13,853,239 231,060 24,192,621 320,729,317 122,595,000 14,442,661 872,574 20,874,698 402,524,780 (3,609,796) (12,309,647) (16,784,871) (33,147,319) (3,974,123) (104,496,039) (a) (b) (c) (d) (e) (f) $ Fiscal Year 2009 145,038,639 111,505,248 97,660 26,142,181 11,082,812 328,147 2,783,916 3,395,257 5,968,065 306,341,925 $ 150,848,798 143,357,538 6,393,595 28,655,422 11,516,359 1,600,100 2,860,571 3,987,355 6,168,789 355,388,527 65,289,995 25,639,288 22,010,148 67,998,367 22,946,249 4,051,517 318,282 521,642 2,564,283 379,752 395,778 4,332,418 427,103 445,556 6,620,247 1,945,518 - 74,747,734 27,134,920 18,254,109 72,253,980 19,343,140 5,267,930 388,486 330,992 3,117,084 514,069 799,975 16,880,739 4,217,031 520,731 7,056,690 3,842,927 3,405,582 - 77,046,317 28,330,453 26,158,843 73,659,648 19,515,673 5,525,601 386,483 347,556 2,914,014 506,621 633,640 17,583,861 3,095,259 555,034 6,376,874 4,211,080 3,127,479 395,648 25,756,000 13,853,998 1,640,155 29,512,675 299,923,067 26,062,231 17,728,802 1,260,876 35,348,520 306,286,572 22,212,157 15,489,383 1,166,712 58,406,594 355,350,965 19,656,531 15,839,389 1,314,011 106,066,458 413,246,473 (9,686,484) (7,239,313) (49,009,040) (57,857,946) In Fiscal Year 2011, the Parks and Recreation department was split; the Parks component was merged into Public Works and the Recreation component was merged into Community Services. In Fiscal Year 2011, the Development Services department was merged into Community Development. In Fiscal Year 2011, the Financial Services department and the Information Technology department were merged into one department, Finance and Technology. In Fiscal Year 2011, Tempe Learning Center was disaggregated from Human Resources. In Fiscal Year 2014, Economic Development was established as its own reporting area. In Fiscal Year 2015, Finance & Technology and Human Resources were combined to form the Internal Services Department. A component of the Community Services Department along with Diversity formed a new department called Human Services. The budget office became a stand alone department now known as Municipal Office. Economic Development and Community Relations became a part of the City Manager Office. (g) In Fiscal Year 2017, the Office of Strategic Management and Diversity was created. The Diversity office which was under the City Manager's office was moved into the new office. 174 Fiscal Year 2010 Changes in Fund Balance, Governmental Funds (Exhibit S-4b) Last Ten Fiscal Years Modified Accrual Basis of Accounting City of Tempe, Arizona Other financing sources (uses): Transfers in Transfers out Issuance of debt Premium on issuance of debt Capital lease proceeds Proceeds from sale of capital assets Issuance of refunding bonds Payment to refunded/defeased bond escrow agent Total other financing sources Net change in fund balances Debt service as a percentage of noncapital expenditures Fiscal Year 2018 Fiscal Year 2017 Fiscal Year 2016 42,297,460 (43,372,403) 25,025,000 4,083,395 87,798 1,685,856 - 27,870,785 (27,442,927) 12,290,000 1,754,028 4,483,481 34,095,000 30,410,514 (29,900,824) 13,630,000 5,413,632 5,350,923 34,422,798 26,437,046 (25,957,975) 43,965,000 1,269,813 111,827 2,189,572 6,780,000 22,217,580 (21,470,678) 11,650,000 880,967 663,658 5,645,000 67,438,620 (68,806,307) 13,675,000 6,392,968 270,346 53,910,000 (12,614,996) 17,192,110 (19,082,453) 33,967,914 (35,888,204) 23,438,839 (4,534,184) 50,261,099 (4,267,894) 15,318,633 (12,985,558) 59,895,069 $ 13,582,314 $ 21,658,267 6,653,968 $ 17,113,780 $ 11,344,510 $ (44,600,970) 12.8% 15.5% 13.8% 17.6% 13.4% $ Fiscal Year 2015 Fiscal Year 2014 Fiscal Year 2013 35.7% (a) Fiscal Year 2012 $ Fiscal Year 2011 Fiscal Year 2010 18,104,564 (18,613,369) 7,005,000 6,668,536 534,963 45,181,900 16,912,259 (16,618,841) 13,146,000 2,401,827 110,617 328,593 26,040,000 59,305,503 (59,421,161) 26,040,000 755,553 27,986 362,900 - 64,230,445 (63,614,982) 45,980,000 807,728 9,577,814 - (48,667,199) 10,214,395 (27,936,582) 14,383,873 27,070,781 56,981,005 14,383,873 $ (21,938,259) 16.0% 12.5% 527,911 14.5% $ (a) In Fiscal Year 2013 the substantial increase in the Debt Service as a Percentage of Non-capital Expenditures was due to debt service expenditures containing the Transit Fund defeasance of the 2006 Variable Rate Demand Excise Tax Revenue Obligations ($53,670,000) and a current refunding of the 2007 Variable Rate Demand Excise Tax Revenue Obligations ($45,295,000). 175 Fiscal Year 2009 $ (876,941) 11.4% Taxable Sales and Percentage of Taxable Sales by Category (Exhibit S-5) Last Ten Fiscal Years Cash Basis City of Tempe, Arizona Taxable Sales Fiscal Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Retail $ Utilities and Telecommunications Rental 3,050,222,000 2,976,389,000 3,117,950,000 3,248,736,000 3,387,223,000 3,566,605,000 3,898,027,000 4,057,021,000 4,323,045,000 4,527,666,000 $ 1,203,889,000 1,136,889,000 1,133,200,000 1,175,200,000 1,200,932,000 1,197,308,000 1,277,164,000 1,342,058,000 1,391,183,000 1,526,503,000 $ 590,556,000 536,611,000 515,000,000 522,095,000 533,915,000 557,844,000 583,788,000 548,882,000 539,476,000 552,373,000 Restaurant Contracting Hotel and Motel $ 504,611,000 472,667,000 479,150,000 514,519,000 524,813,000 574,888,000 628,169,000 656,237,000 679,897,000 705,920,000 $ 631,556,000 400,000,000 298,450,000 341,542,000 340,870,000 404,398,000 701,314,000 653,818,000 654,944,000 662,203,000 $ 123,611,000 110,944,000 112,600,000 123,981,000 123,629,000 135,525,000 159,255,000 166,167,000 184,412,000 209,961,000 Restaurant Contracting Hotel and Motel All Other Amusements $ 87,778,000 96,167,000 89,850,000 87,663,000 78,580,000 82,928,000 82,680,000 89,261,000 96,055,000 89,259,000 $ City Direct Sales Tax Rate Total 88,167,000 66,056,000 68,550,000 66,141,000 80,020,000 71,660,000 74,754,000 75,989,000 75,694,000 59,140,000 $ 6,280,390,000 5,795,723,000 5,814,750,000 6,079,877,000 6,269,982,000 6,591,156,000 7,405,151,000 7,589,433,000 7,944,706,000 8,333,025,000 Percentage of Taxable Sales Fiscal Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Retail Utilities and Telecommunications Rental 48.57 % 51.35 53.62 53.43 54.04 54.11 52.64 53.46 54.42 54.33 19.17 % 19.62 19.49 19.33 19.15 18.17 17.25 17.68 17.51 18.32 9.40 % 9.26 8.86 8.59 8.52 8.46 7.88 7.23 6.79 6.63 8.03 % 8.16 8.24 8.46 8.37 8.72 8.48 8.65 8.56 8.47 10.06 % 6.90 5.13 5.60 5.40 6.14 9.47 8.61 8.24 7.95 1.97 % 1.91 1.94 2.04 1.97 2.06 2.15 2.19 2.32 2.52 Amusements 1.40 % 1.66 1.55 1.44 1.25 1.26 1.12 1.18 1.21 1.07 Source: City of Tempe, Arizona Tax and License Division Note: In Fiscal Year 2011, City of Tempe, Arizona voters approved a 0.2% temporary (4 years) increase in the City sales tax. The tax expired on June 30, 2014. 2018: Data was restated for 2015, 2016 & 2017 due to a calculatation error. The sales tax rate was not reduced on the worksheet, from 2.0 to 1.8, once the temporary tax expired. 176 All Other Total 1.40 % 1.14 1.17 1.11 1.30 1.08 1.01 1.00 0.95 0.71 100 % 100 100 100 100 100 100 100 100 100 1.80 % 1.80 2.00 2.00 2.00 2.00 1.80 1.80 1.80 1.80 Direct and Overlapping Sales Tax Rates (Exhibit S-6) Last Ten Fiscal Years City of Tempe, Arizona Fiscal Year 2009 2010 (a) 2011 (b) 2012 2013 (c) 2014 2015 (d) 2016 2017 2018 City Direct Sales Tax Rate Maricopa County Sales Tax Rate 1.80 % 1.80 2.00 2.00 2.00 2.00 1.80 1.80 1.80 1.80 0.70 % 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 State Sales Tax Rate 5.60 % 6.60 6.60 6.60 5.60 5.60 5.60 5.60 5.60 5.60 Total Sales Tax Rate 8.10 9.10 9.30 9.30 8.30 8.30 8.10 8.10 8.10 8.10 % Source: City of Tempe, Arizona Tax and License Division (a) (b) (c) (d) In Fiscal Year 2010, State of Arizona voters approved a 1.0% increase in the State sales tax. In Fiscal Year 2011, City of Tempe, Arizona voters approved a 0.2% temporary (4 years) increase in the City sales tax. In Fiscal Year 2013, State of Arizona decreased the State sales tax rate by 1.0%, effective June 1, 2013. In Fiscal Year 2015, the City of Tempe, Arizona voters approved 0.2% temporary sales tax expired, effective June 30, 2014. 177 General Property Tax Information (Exhibit S-7) City of Tempe, Arizona Tax Levy Limitations Beginning in 1980-81, the total tax levy is comprised of two elements: a primary levy for operating costs and a secondary levy for general obligation bond debt service requirements. The primary levy was limited to a 7% increase for 1980-81 and a 2% annual increase thereafter. In addition, the primary levy on residential property only is limited to an amount not more than 1% of market value. The secondary levy is unlimited. Assessments and Collections Since 1950-51, Maricopa County, at no charge to the cities, has assessed and collected all municipal property taxes. Remittances are made to the respective cities periodically as collections accrue. Taxes Due First installment is due October 1st; second installment is due March 1st. Taxes Payable City property taxes are payable at the office of the County Treasurer. Taxes for the first half of the year can be paid on the first of September through the first of November. Second half taxes can be paid on the first of March through the first of May. Taxes Delinquent The first half becomes delinquent on the first day of November at 5 p.m. The second half becomes delinquent on the first day of May at 5 p.m. Interest at the rate of 16% per annum attaches on the first and second installments following the delinquent dates. Tax Sale The sale of delinquent tax bills is begun on a date not earlier than February 1 nor later than March 1 following the May 1 date upon which the second half taxes become delinquent. The sale is made at public auction in the office of the County Treasurer. Tax bills are sold to the highest bidder who offers to pay the accumulated amount of tax and to charge thereon the lowest rate of interest. The maximum amount of interest allowed by law is 12% per annum. The purchaser is given a Certificate of Purchase for each parcel. Tax Deed Five years subsequent to the tax sale, the holder of a Certificate of Purchase which has not been redeemed by the delinquent property owner may demand a County Treasurer's Deed. However, at the end of three full years, a holder of a Certificate of Purchase may institute quiet title action and the court will instruct the County Treasurer to issue a County Treasurer's Deed if the suit is successful. Redemption Redemption may be made by the delinquent property owner or any interested party by payment in full of all accumulated charges at any time before issuance of the tax deed. Payment may be made to the County Treasurer. 178 Primary and Secondary Assessed Value and Estimated Actual Value of Taxable Property (Exhibit S-8) Last Ten Fiscal Years Rate per $100 of Assessed Value City of Tempe, Arizona Fiscal Year Commercial, Manufacturing, Telecommunications Property Vacant, Agricultural & Governmental Property Owner Occupied Residential Property Rental Residential Property Railroad & Airlines Property Non-commercial Historic Property Less: Tax-Exempt Property 2009 Primary Secondary $ 1,416,640,407 1,605,563,621 $ 326,359,399 439,585,924 $ 674,491,736 901,618,735 $ 218,810,180 291,324,398 $ 3,043,548 3,447,472 $ 5,628,185 7,346,018 $ 480,062,120 591,937,974 2010 Primary Secondary 1,518,486,978 1,746,634,264 443,398,023 610,147,603 747,601,586 840,563,032 265,780,915 326,620,717 2,656,174 3,162,023 5,489,270 7,160,219 601,138,220 766,798,994 2011 Primary Secondary 1,516,407,070 1,634,522,147 491,365,479 598,845,876 714,116,748 718,136,239 297,885,542 321,946,932 2,487,354 2,984,727 6,031,888 8,869,602 2012 Primary Secondary 1,215,073,855 1,225,527,325 507,897,174 558,393,732 601,231,081 601,912,854 260,011,506 261,295,232 2,447,610 2,740,384 2013 Primary Secondary 1,134,332,461 1,140,686,523 474,229,052 492,511,871 499,166,936 499,439,182 222,440,746 222,488,879 2014 Primary Secondary 1,013,888,495 1,019,499,265 590,348,150 627,596,276 422,097,495 422,373,499 2015 Primary Secondary 1,018,312,716 1,030,441,480 582,528,256 605,931,213 2016 Primary Secondary 1,040,045,065 1,119,535,292 2017 Primary Secondary 2018 Primary Secondary Total Direct Tax Rate Net Taxable Assessed Value $ 2,164,911,335 2,656,948,194 $ Estimated Total Actual Value (a) Assessed Value as a Percentage of Actual Value 0.51 0.89 $ 14,590,284,375 19,106,939,110 14.84 % 13.91 2,382,274,726 2,767,488,864 0.49 0.91 16,460,996,774 19,043,217,077 14.47 14.53 664,036,520 772,654,291 2,364,257,561 2,512,651,232 0.52 0.88 16,647,684,537 17,474,298,161 14.20 14.38 5,848,137 7,897,668 652,320,790 700,438,585 1,940,188,573 1,957,328,610 0.66 1.13 14,108,227,934 14,184,312,548 13.75 13.80 2,784,852 2,839,643 5,609,483 7,054,535 650,548,735 667,783,593 1,688,014,795 1,697,237,040 0.79 1.35 12,115,273,950 12,149,064,435 13.93 13.97 237,011,004 245,942,542 2,470,685 2,494,792 5,503,454 7,172,229 769,883,275 811,779,331 1,501,436,008 1,513,299,272 0.92 1.57 10,969,708,459 11,047,136,814 13.69 13.70 445,788,470 472,413,709 279,658,188 317,364,940 2,626,349 2,652,015 5,660,031 7,102,655 786,460,357 812,188,311 1,548,113,653 1,623,717,701 0.92 1.51 11,632,254,953 12,317,499,077 13.31 13.18 604,094,072 681,597,591 458,995,411 569,311,744 303,832,779 395,569,487 2,453,154 2,501,825 5,495,047 6,440,828 820,971,174 901,610,148 1,593,944,354 1,873,346,619 0.93 1.59 12,152,815,646 14,573,138,077 13.12 12.85 1,066,869,523 1,066,869,523 604,354,126 604,354,126 480,671,687 480,671,687 340,922,305 340,922,305 2,213,159 2,213,159 5,507,068 5,507,068 831,185,771 831,185,771 1,669,352,097 1,669,352,097 0.94 1.59 12,936,980,827 16,688,127,422 12.90 10.00 1,121,945,426 1,121,945,426 655,920,933 655,920,933 502,268,412 502,268,412 378,171,085 378,171,085 2,238,277 2,238,277 5,400,480 5,400,480 891,707,903 891,707,903 1,774,236,710 1,774,236,710 0.92 1.57 13,773,672,226 17,858,194,237 12.88 9.94 Source: Arizona Departmart of Revenue - State and County Abstract of the Assessment Roll Maricopa County Tax Levy. Maricopa County Tax Levy - Schedule B & C: Cities and Towns Tax Levies, Primary & Secondary Note: The total tax levy was comprised of two elements: a primary levy for operating costs and a secondary levy for general obligation bond debt service requirements. The primary levy is limited to a 2% increase plus new construction. The secondary levy is unlimited. In Fiscal Year 2016, with the passage of Proposition 117, the limited property tax value is required to be used in determining and levying primary and secondary taxes on all property. Prior to Fiscal Year 2016, the primary levy was based on the limted property tax value and the secondary levy was based on the secondary property tax value. (a) Estimated Total Actual Value is the calculated value of the actual full cash value net of estimated value of property exempt from taxation. 179 Property Tax Rates - All Direct and Overlapping Governments (Exhibit S-9) Last Ten Fiscal Years Rate per $100 of Assessed Value City of Tempe, Arizona Fiscal Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 City of Tempe (a) Primary Secondary Total $ 0.51 0.89 1.40 Tempe Union $ 1.76 0.52 2.28 Schools Tempe Elementary (b) East Valley Institute of Technology Maricopa County $ $ $ 2.43 1.08 3.51 0.05 0.05 1.03 1.03 Community College County Ed Equalization Rate County-Wide Jurisdiction Central Fire Arizona District Flood Project District Assistance $ $ $ 0.78 0.16 0.94 - 0.14 0.14 $ 0.10 0.10 $ 0.01 0.01 County Library District $ 0.04 0.04 Special Health Care District $ - Primary Secondary Total 0.49 0.91 1.40 1.48 0.74 2.22 2.14 1.14 3.28 0.05 0.05 0.99 0.99 0.72 0.16 0.88 0.33 - 0.14 0.14 0.10 0.10 0.01 0.01 0.04 0.04 - Primary Secondary Total 0.52 0.88 1.40 1.47 0.83 2.30 2.31 1.29 3.60 0.05 0.05 1.05 1.05 0.79 0.18 0.97 0.36 0.36 0.15 0.15 0.10 0.10 0.01 0.01 0.04 0.04 - Primary Secondary Total 0.66 1.13 1.79 1.61 0.96 2.57 2.65 1.34 3.99 0.05 0.05 1.24 1.24 1.01 0.20 1.21 0.43 0.43 0.18 0.18 0.10 0.10 0.01 0.01 0.05 0.05 - Primary Secondary Total 0.79 1.35 2.14 1.81 0.61 2.42 3.18 2.39 5.57 0.05 0.05 1.24 1.24 1.16 0.22 1.38 0.47 0.47 0.18 0.18 0.10 0.10 0.01 0.01 0.05 0.05 - Primary Secondary Total 0.92 1.57 2.49 2.01 0.64 2.65 3.22 2.94 6.16 0.05 0.05 1.28 1.28 1.29 0.24 1.53 0.51 0.51 0.14 0.14 0.14 0.14 0.01 0.01 0.04 0.04 - Primary Secondary Total 0.92 1.51 2.43 2.43 0.63 3.06 3.30 2.45 5.75 0.05 0.05 1.32 1.32 1.28 0.24 1.52 0.51 0.51 0.14 0.14 0.14 0.14 0.01 0.01 0.06 0.06 - Primary Secondary Total 0.93 1.59 2.52 2.22 0.66 2.88 3.22 2.25 5.47 0.05 0.05 1.36 1.36 1.26 0.23 1.49 0.51 0.51 0.16 0.16 0.14 0.14 0.01 0.01 0.06 0.06 - Primary Secondary Total 0.94 1.59 2.53 2.24 0.66 2.90 3.09 2.20 5.29 0.05 0.05 1.40 1.40 1.24 0.23 1.47 0.50 0.50 0.18 0.18 0.14 0.14 0.01 0.01 0.06 0.06 - Primary Secondary Total 0.92 1.57 2.49 2.06 0.60 2.66 2.96 2.09 5.05 0.05 0.05 1.40 1.40 1.20 0.21 1.41 0.49 0.49 0.18 0.18 0.14 0.14 0.01 0.01 0.06 0.06 - Source: Maricopa County Assessor's Office Maricopa County Tax Levy Publication (a) Primary levies are limited to a 2% increase annually plus levies attributable to assessed valuation added as a result of growth and annexation. Secondary tax levies do not have a limitation. (b) Tempe property owners residing within the Kyrene Elementary School District No. 28, Scottsdale Unified School District No. 48 or Mesa Unified School District No. 4 have combined rates of $13.05, $12.82 or $16.41, respectively. Also, see the Direct and Overlapping Governmental Activities Debt- Property Tax Supported Schedule (Exhibit S-17). 180 Total 0.09 0.09 $ 6.51 3.08 9.59 0.09 0.09 6.15 3.38 9.53 0.11 0.11 6.50 3.64 10.14 0.15 0.15 7.60 4.17 11.77 0.17 0.17 8.65 5.13 13.78 0.19 0.19 9.23 5.96 15.19 0.19 0.19 9.76 5.42 15.18 0.19 0.19 9.50 5.34 14.84 0.20 0.20 9.41 5.32 14.73 0.29 0.29 9.03 5.20 14.23 Property Tax Levies - All Direct and Overlapping Governments (Exhibit S-10) Last Ten Fiscal Years City of Tempe, Arizona Fiscal Year City of Tempe Tempe Union Schools Tempe Elementary (a) East Valley Institute of Technology $ Maricopa County Community College 12,032,028 12,032,028 $ 463,492,311 463,492,311 $ 347,905,170 95,293,956 443,199,126 County-Wide Jurisdictions County Ed Central Equalization Arizona Rate Project Flood District $ 74,674,333 74,674,333 $ - $ 58,315,605 58,315,605 Fire District Assistance $ 3,105,495 3,105,495 Special Health Care District 20,581,183 20,581,183 $ Primary Secondary Total $ 10,976,100 23,726,547 34,702,647 $ 71,503,299 26,355,087 97,858,386 $ 42,985,150 23,151,705 66,136,855 2010 Primary Secondary Total 11,665,890 25,192,451 36,858,341 65,733,950 39,195,990 104,929,940 41,787,151 25,976,662 67,763,813 12,586,167 12,586,167 492,230,736 492,230,736 359,942,153 92,685,846 452,627,999 74,996,804 74,996,804 164,225,937 - 58,113,465 58,113,465 3,324,489 3,324,489 20,468,370 20,468,370 2011 Primary Secondary Total 12,238,972 22,174,672 34,413,644 64,028,512 38,435,006 102,463,518 44,984,350 26,867,644 71,851,994 10,970,238 10,970,238 492,224,342 492,224,342 371,276,183 89,482,591 460,758,774 68,019,592 68,019,592 166,947,807 166,947,807 49,581,306 49,581,306 3,265,310 3,265,310 20,479,676 20,479,676 2012 Primary Secondary Total 12,751,029 22,100,197 34,851,226 58,076,820 34,886,097 92,962,917 41,459,414 21,157,373 62,616,787 8,672,478 8,672,478 477,571,468 477,571,468 389,655,514 75,935,239 465,590,753 62,401,172 62,401,172 163,937,848 163,937,848 38,781,832 38,781,832 3,251,752 3,251,752 19,070,066 19,070,066 57,895,470 57,895,470 1,143,452,093 344,151,676 1,487,603,769 2013 Primary Secondary Total 13,271,172 23,000,956 36,272,128 56,711,827 19,078,254 75,790,081 42,911,003 32,431,353 75,342,356 7,428,442 7,428,442 425,111,491 425,111,491 396,192,808 76,200,590 472,393,398 54,584,578 54,584,578 161,622,544 161,622,544 34,465,535 34,465,535 3,782,401 3,782,401 16,925,024 16,925,024 57,895,470 57,895,470 1,095,820,845 325,792,603 1,421,613,448 2014 Primary Secondary Total 13,778,678 23,766,365 37,545,043 56,857,111 18,307,254 75,164,365 38,477,473 35,425,302 73,902,775 7,214,753 7,214,753 409,775,397 409,775,397 412,623,059 78,752,950 491,376,009 39,842,985 39,842,985 163,916,558 163,916,558 45,136,223 45,136,223 3,913,249 3,913,249 14,116,305 14,116,305 62,499,144 62,499,144 1,095,428,276 328,974,530 1,424,402,806 2015 Primary Secondary Total 14,324,634 24,609,512 38,934,146 71,480,977 19,247,913 90,728,890 40,508,811 31,649,661 72,158,472 7,676,815 7,676,815 442,762,977 442,762,977 429,857,856 82,901,341 512,759,197 43,660,332 43,660,332 170,582,239 170,582,239 49,076,612 49,076,612 3,946,541 3,946,541 19,504,284 19,504,284 65,124,108 65,124,108 1,169,517,494 347,397,119 1,516,914,613 2016 Primary Secondary Total 14,877,877 25,281,551 40,159,428 67,301,586 19,895,071 87,196,657 40,281,153 28,161,726 68,442,879 7,614,014 7,614,014 471,193,529 471,193,529 437,227,709 80,036,848 517,264,557 49,512,136 49,512,136 174,988,030 174,988,030 48,660,147 48,660,147 4,013,398 4,013,398 19,250,761 19,250,761 67,273,204 67,273,204 1,205,869,884 349,698,856 1,555,568,740 2017 Primary Secondary Total 15,690,240 26,577,755 42,267,995 70,920,943 20,881,916 91,802,859 40,273,959 28,658,765 68,932,724 8,034,256 8,034,256 506,222,142 506,222,142 447,212,880 82,211,035 529,423,915 58,463,580 58,463,580 181,352,524 181,352,524 50,677,352 50,677,352 4,030,569 4,030,569 20,091,335 20,091,335 70,777,141 70,777,141 1,261,672,688 370,403,704 1,632,076,392 2018 Primary Secondary Total 16,404,593 27,834,226 44,238,819 68,659,932 19,909,974 88,569,906 40,876,811 28,971,774 69,848,585 8,489,725 8,489,725 535,870,745 535,870,745 457,339,611 81,872,034 539,211,645 62,198,813 62,198,813 186,400,980 186,400,980 53,530,745 53,530,745 3,893,879 3,893,879 21,268,052 21,268,052 73,820,558 73,820,558 1,305,552,672 381,789,780 1,687,342,452 (a) For levies for Tempe property owners residing within Kyrene, Scottsdale or Mesa School Districts, see the Direct and Overlapping Governmental Activities Debt- Property Tax Supported Schedule (Exhibit S-17). 181 49,923,129 49,923,129 Total 2009 Source: Maricopa County Assessor's Office Maricopa County Tax Levy Publication $ County Library District 53,018,363 53,018,363 55,722,300 55,722,300 $ 936,862,030 387,159,068 1,324,021,098 1,135,585,817 405,558,607 1,541,144,424 1,151,700,166 384,998,335 1,536,698,501 Property Tax Levies and Collections (Exhibit S-11) Last Ten Fiscal Years City of Tempe, Arizona Fiscal Year Total Tax Levy for Fiscal Year (a) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 $ 35,130,400 37,081,738 34,455,730 34,856,232 36,402,794 37,675,450 38,916,826 40,471,289 42,580,125 44,161,889 Adjustments $ (358,256) (686,613) (604,321) (318,630) (170,121) (175,020) (164,001) (138,077) (338,449) (164,135) Collected within the Fiscal Year of the Levy % of Amount Original Levy Adjusted Tax Levy for Fiscal Year $ 34,772,144 36,395,125 33,851,409 34,537,602 36,232,673 37,500,430 38,752,825 40,333,212 42,241,676 43,997,754 $ 33,987,393 35,581,096 33,299,312 33,860,185 35,627,136 36,924,892 38,310,425 39,886,362 41,757,608 43,501,882 96.7 % 96.0 96.6 97.1 97.9 98.0 98.4 98.6 98.1 98.5 Total Collections to Date % of Amount Adjusted Levy Collections in Subsequent Years (b) $ 739,454 772,083 526,937 646,893 463,431 488,899 370,628 206,764 438,151 - $ 34,726,847 36,353,179 33,826,249 34,507,078 36,090,567 37,413,791 38,681,053 40,093,126 42,195,759 43,501,882 Source: Maricopa County Treasurer (a) The amounts listed in this column do not tie directly to the amount listed for City of Tempe in Exhibit S-10 for total of Primary and Secondary Property Tax Levy. Due to a timing difference, the amount listed on the Maricopa County Secured Tax Levy Report , from the Maricopa County Treasurer's office, is at the time the levy is placed on the Tax Levy report (in May/June when the property tax rate is set). The amount listed on the Secured Tax Levy Report , from the Maricopa County Treasuer's office, is at the time the levy is placed on the actual tax rolls in August. 182 99.9 % 99.9 99.9 99.9 99.6 99.8 99.8 99.4 99.9 98.9 Principal Tax Payers (Exhibit S-12) Property Tax Current Year and Nine Years Prior City of Tempe, Arizona Fiscal Year 2018 Taxable Secondary Assessed Value Taxpayer: Verizon Wireless Arizona Public Service Company Arizona Mills Mall LLC JP Morgan Chase Bank NA KBSII Fountainhead LLC Century Link Honeywell International Inc JDM II Tempe OC LLC Tempe Rio West Business Park LLC PKW W Rio Salado LLC Tempe Fountainhead Corporate LLC Alllied Signal State Farm Mutual Auto Insurance Freescale Semiconductor Inc Breof BNK 2 Southwest LLC St. Paul Properties Inc Fly (CD) LLC / AWHQ LLC $ Total $ 30,599,748 27,334,259 19,340,107 15,661,748 11,466,843 10,611,863 9,258,581 8,188,702 7,195,035 6,992,064 - Rank 1 2 3 4 5 6 7 8 9 10 146,648,950 Source 2018: RBC Capital Markets Source 2009: RBC Capital Markets 183 Fiscal Year 2009 Taxable Secondary Assessed Value Percentage of Total City Secondary Taxable Assessed Value 1.72 % 1.54 1.09 0.88 0.65 0.60 0.52 0.46 0.41 0.39 - $ 8.26 % $ 21,694,174 41,359,277 26,433,482 17,401,173 14,649,443 14,556,474 13,813,044 13,115,990 11,250,833 11,042,331 185,316,221 Rank 3 1 2 4 5 6 7 8 9 10 Percentage of Total City Secondary Taxable Assessed Value % 0.82 1.56 0.99 0.65 0.55 0.55 0.52 0.49 0.42 0.42 6.97 % Principal Tax Payers (Exhibit S-13) Sales and Use Tax Current Fiscal Year and Nine Years Prior City of Tempe, Arizona Fiscal Year 2018 Taxpayer Business Type Taxpayer A Taxpayer B Taxpayer C Taxpayer D Taxpayer E Taxpayer F Taxpayer G Taxpayer H Taxpayer I Taxpayer J Taxpayer K Taxpayer L Taxpayer M Service Grocery Stores Electronics/Software Mixed Retail Mixed Retail Auto Sales Mixed Retail Auto Sales Auto Sales Service Electronics/Software Construction Electronics/Software Total Sales and Use Tax Payments $ $ 4,929,513 3,778,311 2,960,708 2,913,091 2,323,424 1,928,493 1,502,297 1,497,997 1,402,384 1,334,049 ‐ ‐ ‐ Rank Fiscal Year 2009 Percentage of Total Sales and Use Tax Payments 2.92 % 2.24 1.76 1.73 1.38 1.14 0.89 0.89 0.83 0.79 1 2 3 4 5 6 7 8 9 10 Sales and Use Tax Payments $ ‐ ‐ ‐ 24,570,267 14.57 % $ 4,340,462 2,798,620 1,858,309 1,689,840 1,655,858 1,407,514 ‐ ‐ ‐ 982,267 1,424,983 1,067,471 957,908 Rank Percentage of Total Sales and Use Tax Payments 1 2 3 4 5 7 9 6 8 10 18,183,232 Source: City of Tempe, Arizona Tax and License Division Note: The identities of the ten largest revenue payers are prohibited from disclosure per State Statute. The business type of the top ten taxpayers has been disclosed along with the appropriate data. 184 3.23 % 2.08 1.38 1.26 1.23 1.05 0.73 1.06 0.79 0.71 13.52 % Excise Tax Collections (Exhibit S-14) Last Ten Fiscal Years City of Tempe, Arizona Fiscal Year 2018 Privilege and use tax (a) $ 105,643,666 Fiscal Year 2017 $ 99,865,430 Fiscal Year 2016 $ 95,804,083 Fiscal Year 2015 $ 92,910,407 Fiscal Year 2014 $ 97,169,520 Fiscal Year 2013 $ 89,714,946 Fiscal Year 2012 $ 84,937,373 Fiscal Year 2011 $ 83,258,888 Fiscal Year 2010 $ 69,043,642 Fiscal Year 2009 $ 74,295,074 State shared sales tax 18,266,956 16,145,681 15,357,220 14,779,296 14,076,468 13,236,998 12,636,771 12,656,738 12,167,009 13,191,255 State shared income tax 22,604,114 21,511,044 19,470,946 19,577,085 18,025,635 16,519,248 13,649,203 16,137,383 21,406,004 24,832,128 Franchise tax 3,290,220 3,182,193 3,363,615 2,933,239 3,310,940 3,253,175 3,428,125 3,821,436 3,559,615 3,980,674 Vehicle license tax 7,532,801 7,015,040 6,644,362 6,215,552 6,053,172 5,165,072 5,437,201 5,424,902 5,560,791 6,024,595 Permits and fees (b) 14,815,290 10,244,664 11,543,817 11,881,915 12,197,631 6,896,214 7,139,843 5,491,077 6,171,045 7,227,027 Fines and forfeitures 6,839,148 8,094,581 8,464,633 8,436,300 8,190,178 8,132,195 7,731,585 7,576,496 7,108,900 9,200,777 $ 178,992,195 $ 166,058,633 $ 160,648,676 $ 156,733,794 $ 159,023,544 $ 142,917,848 $ 134,960,101 $ 134,366,920 $ 125,017,007 $ 138,751,530 Total Source: City of Tempe, Arizona Comprehensive Annual Financial Report City of Tempe, Arizona "Revenue and Expenditure by Account by Fund" report. (a) Amounts exclude the 0.5% Excise Tax approved by voters on September 10, 1996 as a dedicated "transit tax", the 0.1% Performing Arts Center Tax approved by voters in September 2000, and the 1.0% increase in the transient lodging tax on hotels approved by the voters in September 2002, which are restricted to fund programs of the Tempe Convention and Visitor's Bureau. (b) Amounts include all licenses/permits and Community Development and Public Works fees/charges for services. 185 Ratios of Net General Bonded Debt Outstanding (Exhibit S-15) Last Ten Fiscal Years City of Tempe, Arizona Governmental General Obligation Debt Fiscal Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 $ 156,265,000 172,665,000 166,680,000 162,200,000 164,235,000 163,205,000 181,905,000 180,750,000 178,555,000 180,435,000 Enterprise General Obligation Debt and WIFA $ 285,735,000 303,168,706 287,621,092 270,715,646 253,760,904 236,046,554 216,802,282 196,122,761 198,182,660 201,216,644 $ General Obligation Premium Less: Debt Service Reserves 10,094,930 9,793,498 11,561,343 11,610,013 14,741,563 26,115,095 27,517,521 32,224,134 $ 31,844,188 38,126,393 25,526,885 32,062,939 33,262,194 33,699,262 20,960,171 20,693,070 21,456,909 13,114,979 Total $ 410,155,812 437,707,313 438,869,137 410,646,205 396,295,053 377,162,305 392,488,674 382,294,786 382,798,272 400,760,799 Secondary/Limited Assessed Valuation (a) $ 2,656,948,194 2,767,488,864 2,512,995,468 1,957,328,610 1,697,237,040 1,513,299,272 1,627,720,901 1,593,944,354 1,669,352,097 1,774,236,710 Percentage of Percentage of Governmental Total to Debt to Assessed Value Assessed Value (b) of Property 4.7 % 4.9 5.6 6.6 7.7 8.6 9.9 10.0 9.4 9.4 Source: Secondary assessed valuation from Maricopa County Assessor's Office for fiscal years prior to Fiscal Year 2016. In Fiscal Year 2016, the assessed valuation used is the Limited Property Value from Maricopa County Assessor's office Net Assessed Value Detail schedule. (a) In Fiscal Year 2016, with the passage of Proposition 117, the Limited Assessed Value is required to be used for the calculation of the tax levy. (b) General obligation debt for business-type activities is not paid by property taxes and therefore the "Percentage of Governmental Debt to Assessed Value " is disclosed. 186 15.4 % 15.8 17.5 21.0 23.3 24.9 24.1 22.3 22.9 22.6 Net Direct Debt Per Capita 2,376 2,504 2,595 2,424 2,294 2,140 2,213 2,053 2,098 2,166 Ratios of Outstanding Debt by Type (Exhibit S-16) Last Ten Fiscal Years City of Tempe, Arizona Governmental Activities General Obligation Bonds Fiscal Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 $ 156,265,000 172,665,000 166,580,000 162,200,000 164,235,000 163,205,000 181,905,000 180,750,000 178,555,000 180,435,000 Special Assessment Bonds $ 36,095,000 33,025,000 29,875,000 27,815,000 25,675,000 23,930,000 21,175,000 19,980,000 18,730,000 17,415,000 Excise Tax Revenue Bonds HUD Section 108 Loan Premium on Debt Payable $ 239,560,000 230,470,000 228,746,000 218,522,900 154,081,000 144,606,000 134,746,000 123,389,000 116,009,000 97,994,000 $ 9,234,152 15,054,997 20,176,543 19,542,476 18,668,237 22,291,058 20,515,300 21,847,912 $ 6,466,000 6,181,000 5,883,000 5,572,000 5,247,000 4,907,000 4,552,000 4,181,000 3,794,000 3,389,000 Capital Improvement Notes $ 1,023,835 521,955 1,009,612 509,804 - Total GovernmentType Debt Capital Leases $ 1,888,630 1,776,147 96,735 57,921 29,645 87,082 61,399 34,743 65,610 $ 441,298,465 444,639,102 440,414,887 429,222,818 370,453,800 356,700,280 361,133,319 350,652,457 337,638,043 321,146,522 Business-Type Activities General Obligation Bonds Fiscal Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 $ 285,735,000 289,895,000 273,000,000 256,770,000 240,505,000 223,495,000 204,970,000 185,025,000 187,835,000 191,635,000 Excise Tax Revenue Bonds $ 18,685,000 18,050,000 48,827,424 55,505,432 79,034,000 76,109,000 84,839,000 91,876,000 80,466,000 69,876,000 Premium on Debt Payable $ 8,932,839 8,579,661 11,487,656 11,158,485 13,905,912 26,735,479 26,648,171 27,703,607 WIFA Loans $ 13,273,706 14,621,092 13,945,646 13,255,904 12,551,554 11,832,282 11,097,761 10,347,660 9,581,644 Capital Leases $ 187 147,089 97,439 45,352 711,466 499,476 283,594 63,750 318,834 213,267 Total BusinessType Debt Total Primary Government $ 304,420,000 321,365,795 345,478,794 334,846,091 344,994,026 323,813,515 315,830,788 314,797,990 305,615,665 299,009,518 $ 745,718,465 766,004,897 785,893,681 764,068,909 715,447,826 680,513,795 676,964,107 665,450,447 643,253,707 620,156,040 Per Capita 4,319 4,381 4,860 4,515 4,132 3,822 3,816 3,553 3,525 3,352 Percentage of Personal Income 18.05 % 16.43 15.31 16.57 16.27 14.12 14.23 12.63 12.53 11.09 Direct and Overlapping Governmental Activities Debt- Property Tax Supported (Exhibit S-17) City of Tempe, Arizona 2018 Net Limited Assessed Valuation Governmental Unit: Debt Outstanding Portion Applicable To City of Tempe Percent Amount Combined Tax Rate per $100 Assessed Debt repaid with property taxes: Maricopa County Community College Tempe Elementary School District No. 3 Maricopa Special Health Care District Mesa Unified School District No. 4 Kyrene Elementary School District No. 28 Scottsdale Unified School District No. 48 Tempe Union High School District No. 213 State of Arizona Maricopa County East Valley Institute of Technology Subtotal overlapping debt $ 38,251,891,249 1,383,216,384 38,251,891,249 2,835,137,867 1,956,436,925 4,998,095,858 3,339,653,309 59,406,279,473 38,251,891,249 17,530,629,428 $ 445,570,000 131,875,000 112,000,000 270,360,000 183,540,000 259,788,750 91,995,000 None None None 4.64 % 87.88 4.64 0.72 31.34 0.28 54.75 2.99 4.64 10.12 City direct debt (repaid with property tax) $ 1,774,236,710 $ 180,435,000 100.00 % Total direct and overlapping debt $ 20,674,448 115,891,750 5,196,800 1,946,592 57,521,436 727,409 50,367,263 None None None 252,325,698 $ 180,435,000 $ 432,760,698 Source: RBC Capital Markets and Maricopa County Assessor Note: Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the City. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of the City of Tempe. This process recognizes that, when considering the City'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 applicable percentage of each jurisdiction's assessed valuation which lies within the City's boundaries (see "Percent" column above) was derived from information obtained from the County Assessor's Office. 188 1.41 5.05 0.29 7.33 3.98 3.73 2.65 0.49 1.79 0.05 Total Direct and Overlapping Governmental Activities Debt (Exhibit S-18) City of Tempe, Arizona Governmental Unit: Debt Outstanding Portion Applicable To City of Tempe Percent Amount Debt repaid with property taxes: Maricopa County Community College Tempe Elementary School District No. 3 Maricopa Special Health Care District Mesa Unified School District No. 4 Kyrene Elementary School District No. 28 Scottsdale Unified School District No. 48 Tempe Union High School District No. 213 State of Arizona Maricopa County East Valley Institute of Technology Subtotal overlapping debt $ 445,570,000 131,875,000 112,000,000 270,360,000 183,540,000 259,788,750 91,995,000 None None None 4.64 % 87.88 4.64 0.72 31.34 0.28 54.75 N/A N/A N/A City direct debt $ 321,146,522 100.00 % Total direct and overlapping debt $ 20,674,448 115,891,750 5,196,800 1,946,592 57,521,436 727,409 50,367,263 None None None 252,325,698 321,146,522 $ 573,472,220 Source: RBC Capital Markets and Maricopa County Assessor Note: Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the City. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of the City of Tempe. This process recognizes that, when considering the City'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 applicable percentage of each jurisdiction's assessed valuation which lies within the City's boundaries (see "Percent" column above) was derived from information obtained from the County Assessor's Office. 189 Legal Debt Margin Information (Exhibit S-19) Last Ten Fiscal Years City of Tempe, Arizona Fiscal Year 2018 Fiscal Year 2017 Fiscal Year 2016 Fiscal Year 2015 Assessed Valuation $ 2,285,492,942 $ 2,125,705,145 $ 1,593,944,354 $ 1,627,720,901 20% Limitation: Debt limit equal to 20% of assessed valuation $ 457,098,588 $ 425,141,029 $ 318,788,871 $ 325,554,180 $ 103,338,564 Total net debt applicable to 20% limit Legal 20% debt margin (available borrowing capacity) 353,760,024 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 77.39% $ Total net debt applicable to 6% limit Legal 6% debt margin (available borrowing capacity) Total net debt applicable to the 6% limit as a percentage of 6% debt limit 337,734,652 $ 137,129,577 59,922,703 56.30% 330,432,281 $ 79.44% $ 77,206,874 $ 87,406,377 127,542,309 $ 47,299,201 62.91% 95,636,661 13,731,661 85.64% Fiscal Year 2012 $ 1,513,299,272 $ 1,697,237,040 $ 1,957,328,610 $ 2,512,995,468 $ 2,767,488,864 $ $ $ $ 502,599,094 $ 553,497,773 - $ 97,663,254 16,168,254 - $ 90,797,956 83.44% 51,752,956 43.00% - $ 101,834,222 73,469,222 27.85% Source: Maricopa County Assessor's Office City of Tempe, Arizona Accounting Division Note 1: Prior to Fiscal Year 2016, the Assessed Valuation was based on the Net Assessed Secondary Value . Due to a change in the legislation (Proposition 117), in Fiscal Year 2016, the City was required to use the Limited Property Value. In Fiscal Year 2017, the law changed again to allow the Full Cash Value to be used in the legal debt margin calculation. Note 2: Effective with Fiscal Year 2007, general obligation bonded debt for transportation and public safety purposes became subject to the 20% debt limitation. Previously, general obligation debt issued for these purposes was subject to the 6% debt limitation. 190 - $ 117,439,717 102,409,717 12.80% 27,711,549 $ 150,779,728 142,449,728 5.52% 61,344,067 $ 166,049,332 $ 2,401,898,466 $ $ 480,379,693 157,764,332 4.99% 531,389,638 462,255,000 $ 69,134,638 424,675,000 $ 86.99% $ 8,285,000 $ Fiscal Year 2008 $ 2,656,948,194 88.92% 8,330,000 $ Fiscal Year 2009 492,153,706 $ 94.49% 15,030,000 $ Fiscal Year 2010 474,887,545 $ 114.00% 28,365,000 $ 391,465,722 Fiscal Year 2011 446,276,092 $ 123.21% 39,045,000 $ 339,447,408 418,225,647 $ 129.06% 81,495,000 $ 302,659,854 390,600,904 $ 111.11% 81,905,000 $ Fiscal Year 2013 361,721,555 $ 103.65% 80,243,108 $ - Fiscal Year 2014 159,416,891 88.40% $ 144,113,908 $ 142,658,908 1,395,000 $ 158,021,891 0.88% 55,704,693 1,455,000 1.01% Remaining General Obligation Bond Authorizations (Exhibit S-20) City of Tempe, Arizona WIFA Funding (a) Authorization 2008 Program: Water/Wastewater Streets/Transportation/Storm Drains Public Safety - Police/Fire Community Services/Park Improvements $ 113,300,000 44,200,000 32,010,000 51,800,000 $ 18,130,302 - $ Prior Issues Current Year Issue (b) 59,295,000 20,205,000 31,425,000 51,800,000 $ 26,010,000 8,900,000 585,000 - Remaining Authorization $ 9,864,698 15,095,000 - Total 2008 Program 241,310,000 18,130,302 162,725,000 35,495,000 24,959,698 2012 Program: Public Safety - Police/Fire Community Services/Park Improvements Municipal Infrastructure Preservation 6,400,000 10,500,000 12,900,000 - 10,500,000 12,900,000 4,115,000 - 2,285,000 - Total 2012 Program 29,800,000 - 23,400,000 4,115,000 2,285,000 2016 Program: Water/Wastewater Streets/Transportation/Storm Drains Public Safety - Police/Fire Community Services/Park Improvements Municipal Infrastructure Preservation 148,000,000 25,000,000 20,000,000 34,000,000 27,000,000 - 910,000 1,185,000 9,660,000 5,660,000 148,000,000 25,000,000 20,000,000 23,430,000 20,155,000 Total 2016 Program 254,000,000 - 2,095,000 15,320,000 236,585,000 188,220,000 $ 54,930,000 Grand Total $ 525,110,000 $ 18,130,302 $ $ 263,829,698 Source: City of Tempe, Arizona Accounting Division (a) The WIFA funding includes a "forgivable" principal portion of $2.2 million. Per the loan agreement, the forgivable portion could be added back should the City not comply with the terms of the agreement. As some of the terms are not fulfilled until the end of the loan period, the forgivable portion will continue to utilize authorization until the loan is paid off (FY 2028-29). At that time, the authorization will be restored. (b) The current year issuance includes a portion of the premium that was allocated to fund projects. 191 Pledged-Revenue Coverage (Exhibit S-21) Last Ten Fiscal Years City of Tempe, Arizona Special Assessment Bonds Special Assessment Collections Fiscal Year $ 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2,860,571 $ 2,783,916 3,867,979 2,526,283 4,442,862 3,605,932 3,862,306 2,439,086 2,173,798 2,027,722 Excise Tax Revenue Obligations Debt Service (d) Coverage 4,094,274 4,796,008 4,697,441 3,469,611 3,448,085 2,959,851 3,884,758 2,214,178 2,209,650 2,212,190 0.70 0.58 0.82 0.73 1.29 1.22 0.99 1.10 0.98 0.92 Excise Tax Revenue Collections (a) $ Performing Arts Excise Tax Obligations 0.1% Privilege and Use Tax Collections (b) Fiscal Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 $ 6,158,761 $ 5,749,649 5,979,900 6,236,500 6,236,879 6,921,904 7,460,054 7,656,210 8,084,891 8,436,503 132,726,935 $ 119,456,216 128,942,018 129,522,900 142,917,848 165,485,314 156,733,794 160,648,676 166,058,633 178,992,195 Debt Service (d) Coverage 6,177,704 6,760,138 6,761,359 9,399,739 9,931,262 11,977,968 12,055,250 45,696,593 36,355,425 20,743,689 21.48 17.67 19.07 13.78 14.39 13.82 13.00 3.52 4.57 8.63 Transit Excise Tax Obligations Debt Service (d) Coverage 6,012,725 6,005,626 6,016,226 5,377,764 5,922,350 5,918,250 5,919,026 5,921,676 3,427,850 3,428,850 1.02 0.96 0.99 1.16 1.05 1.17 1.26 1.29 2.36 2.46 0.5% Privilege and Use Tax Collections (c) $ 29,850,942 $ 27,891,084 29,012,370 30,172,338 30,087,229 33,539,177 36,147,640 37,288,527 39,512,636 41,074,434 Debt Service (d) Coverage 5,449,867 4,356,904 4,428,049 4,410,547 3,685,428 4,655,713 4,655,688 4,658,463 4,372,288 4,311,491 5.48 6.40 6.55 6.84 8.16 7.20 7.76 8.00 9.04 9.53 Source: City of Tempe, Arizona Accounting Division (a) Excise tax revenue collections include privilege and use tax, state shared privilege and use tax, state shared income tax, franchise tax, permits and fees, and fines and forfeitures. Note that the privilege and use tax exclude the 0.5% excise tax approved by voters on September 10, 1996 as a dedicated "transit tax", the 0.1% Performing Arts Center Tax approved by voters in September 2000, and the 1.0% increase in the transient lodging tax on hotels approved by the voters in September 2002, which is restricted to fund programs of the Tempe Convention and Visitor's Bureau. (b) The 0.1% privilege and use tax is a Performing Arts Center Tax approved by voters in September 2000. (c) The 0.5% privilege and use tax is a Transit Tax approved by voters in September 1996. (d) The debt service amount does not include fiscal agent fees. 192 Pledged Revenue, Projected Debt Service and Estimated Coverage (Exhibit S-22) Excise Tax Obligations (Excluding Transit Excise Tax Obligations) City of Tempe, Arizona Senior Excise Tax Obligations Pledged Excise Tax Revenues (a) Fiscal Year 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 $ 178,992,195 Subordinate Excise Tax Obligations Outstanding Senior Excise Tax Outstanding Obligations Senior Excise Tax Debt Service Obligations Requirements (b) Coverage (c) Revenue Available for Debt Service (d) $ $ 20,743,689 20,710,504 12,827,997 12,120,957 12,120,404 12,109,267 9,248,517 16,538,617 6,909,885 6,903,865 6,911,235 6,910,834 5,117,988 5,116,050 2,723,850 2,116,125 8.63 8.64 13.95 14.77 14.77 14.78 19.35 10.82 25.90 25.93 25.90 25.90 34.97 34.99 65.71 84.58 166,685,009 Outstanding Subordinate Excise Tax Obligations Debt Service Requirements (e) $ Coverage (f) 3,428,850 3,428,100 3,433,850 48.61 48.62 48.54 Source: City of Tempe, Arizona Accounting Division (a) Excise Tax Revenues received by the City in Fiscal Year 2018. See Excise Tax Collection schedule (Exhibit S-14). (b) Consists of the annual debt service requirements (not including fiscal fees) of the following Excise Tax Revenue/Refunding Obligations: Series 2009A+B 2011A+B 2012 2013 2016 2017R Remaining Obligation $ 11,600,000 13,150,000 22,020,000 22,325,000 28,225,000 11,710,000 $ 109,030,000 (c) The estimated coverage figures shown reflect the ratio of actual Fiscal Year 2018 excise tax revenues to total debt service requirements for the City's revenue bonds. (d) Consists of Performing Arts Center Excise Taxes and Excise Taxes (net of current year annual debt service on Outstanding Senior Excise Tax Obligations) received in Fiscal Year 2018. (e) Includes the annual debt service requirements of the City of Tempe, Arizona Excise Tax Refunding Obligations, Series 2011, currently outstanding in the principal amount of $6,440,000. Debt service requirements do not include fiscal fees. (f) Pursuant to the Purchase Agreement, the City agrees that the Performing Arts Center Excise Taxes and the Excise Taxes presently imposed will continue to be imposed so that the amount of Performing Arts Center Excise Taxes and the Excise Taxes (net of maximum annual debt service on the Outstanding Senior Excise Tax Obligations) collected for any fiscal year shall be equal to at least three times the total Debt Service requirements for the Obligations and other Parity Obligations in such fiscal year. 193 Pledged Revenue, Projected Debt Service and Estimated Coverage (Exhibit S-23) Transit Excise Tax Obligations City of Tempe, Arizona Senior Excise Tax Obligations Pledged Excise Tax Revenues (a) Fiscal Year 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 $ 41,074,434 Outstanding Senior Excise Tax Obligations Debt Service Requirements (b) $ Outstanding Senior Excise Tax Obligations Coverage (c) 4,311,491 4,116,542 4,118,094 4,115,229 4,116,603 4,113,866 4,121,911 4,120,202 4,118,882 4,117,595 4,121,303 4,114,506 4,121,749 4,122,318 4,117,246 4,119,056 4,120,075 4,120,427 1,444,831 994,800 9.53 9.98 9.97 9.98 9.98 9.98 9.96 9.97 9.97 9.98 9.97 9.98 9.97 9.96 9.98 9.97 9.97 9.97 28.43 41.29 Source: City of Tempe, Arizona Accounting Division (a) Excise Tax Revenues received by the City in Fiscal Year 2018. (b) Includes annual debt service requirements for the Series 2008 City of Tempe, Arizona Transit Excise Tax Revenue Obligations in the principal amount of $760,000; the Series 2012 City of Tempe, Arizona Transit Excise Tax Revenue Obligations in the principal amount of $32,485,000; the Series 2017R City of Tempe, Arizona Transit Excise Tax Refunding Obligations in the principal amount of $19,155,000. Debt service requirements do not include fiscal fees. (c) The estimated coverage figures shown reflect the ratio of actual Fiscal Year 2018 excise tax revenues to total debt service requirements for the City's Transit excise tax bonds. 194 Demographic and Economic Statistics (Exhibit S-24) Last Ten Fiscal Years City of Tempe, Arizona Total Personal Income (b) Per Capita Personal Income (c) Average Household Income (c) Median Age (c) School Enrollment (d) ASU School Enrollment (e) $ $ 63,866 31.6 25,780 67,082 4.20 % 26,664 67,971 31.8 25,857 68,064 6.70 5,133,769,655 31,745 68,427 35.2 26,670 70,440 8.00 163,989 4,469,848,173 27,257 63,881 31.3 28,136 72,254 8.20 2013 165,499 4,203,343,602 25,398 61,201 31.5 25,510 73,378 6.80 2014 170,027 4,601,100,647 27,061 64,714 28.1 25,264 73,378 7.50 2015 169,533 4,546,705,527 26,819 62,291 28.5 25,480 83,301 6.80 2016 173,510 4,881,183,320 28,132 65,814 28.7 25,656 74,293 5.90 2017 182,498 5,134,033,736 28,531 67,501 29.5 24,891 75,729 4.30 2018 185,038 5,594,253,854 30,233 71,916 30.0 25,527 54,456 3.90 Fiscal Year Population (a) 2009 172,641 2010 174,833 4,661,747,112 2011 161,719 2012 Source: $ 4,131,989,694 23,934 (a) Estimate obtained from Sites USA through Fiscal Year 2015. From Fiscal Year 2016 and forward the estimate is obtained from State Shared Revenue Report published by the League of Arizona Cities & Towns. (b) Amount is calculated using population times per capita personal income. (c) Estimate is provided by Sites USA (June 2018). (d) Arizona Department of Education (Azed.gov) (e) ASU - Office of Institutional Analysis. Fiscal Year 2018 and going forward the amount is for the ASU Tempe campus only. (f) https://oeoapps.az.gov/laus-data-query-tool/laus.aspx (Annual 2017) 195 Unemployment Rate (f) Principal Employers (Exhibit S-25) Current Fiscal Year and Nine Years Prior City of Tempe, Arizona Fiscal Year 2018 Employees (a) Employers: Arizona State University State Farm Insurance SRP Wells Fargo ABM Industries Inc City of Tempe JPMorgan Chase Bank National Association Honeywell Express Scripts Inc Tempe Elementary School District 3 Freescale Semiconductor (Motorola) Kyrene School District US Airways Insight Direct Bank One Telephone Banking Division 8,380 6,120 2,810 2,550 2,000 1,894 1,630 1,610 1,520 1,520 - Total 30,034 Source: Rank 1 2 3 4 5 6 7 8 9 10 - Fiscal Year 2009 Employees (b) Rank Employment 27.90 % 20.38 9.36 8.49 6.66 6.31 5.43 5.36 5.06 5.05 - 10,336 3,331 3,406 1,740 2,000 3,000 2,860 2,800 2,500 2,000 1 3 2 10 8 4 5 6 7 9 30.42 % 9.80 10.03 5.12 5.89 8.83 8.42 8.24 7.36 5.89 100.00 % 33,973 Employment (a) Maricopa Association of Governments; https://geo.azmag.gov/maps/azemployment/ (b) City of Tempe, Arizona Comprehensive Annual Financial Report, Fiscal Year 2009 196 100.00 % Full-Time Equivalent City Government Employees by Function (Exhibit S-26) Last Ten Fiscal Years City of Tempe, Arizona Fiscal year 2018 Police Fire medical rescue Community services Public works Community development Human services Municipal court Mayor and council City manager City attorney Internal audit office Municipal budget office City clerk and elections Internal services Parks and recreation Community relations Diversity program Tempe learning center Development services Economic development Finance and technology Financial services Office of strategic management and diversity Human resources Information technology Water/wastewater Total Fiscal year 2017 508 174 304 431 85 50 43 7 31 25 4 4 5 217 6 1,894 505 155 297 430 83 46 43 7 33 25 4 4 5 206 6 1,849 Fiscal Year 2016 500 156 286 470 88 49 42 7 32 26 4 4 4 156 6 1,824 Fiscal Year 2015 496 156 286 467 90 40 42 7 31 26 4 4 4 155 1,808 Source: City of Tempe, Arizona Fiscal Year 2018 Annual Budget Note: See Exhibit S-2a for changes in functions that have occurred over the years. 197 Fiscal Year 2014 497 156 314 486 90 42 7 11 25 4 5 3 139 20 1,799 Fiscal Year 2013 497 182 288 484 82 42 7 4 25 3 5 24 3 3 132 17 1,798 Fiscal Year 2012 Fiscal Year 2011 Fiscal Year 2010 494 182 287 485 83 42 7 4 25 3 5 25 3 3 132 17 1,797 499 182 289 489 88 42 7 4 25 3 5 25 3 3 132 17 1,813 568 185 308 535 106 42 7 3 25 4 5 27 4 139 20 1,977 Fiscal Year 2009 580 187 232 330 62 46 7 4 29 4 5 210 20 5 62 73 24 76 143 2,097 Operating Indicators by Function/Program (Exhibit S-27) Last Ten Fiscal Years City of Tempe, Arizona Fiscal Fiscal Year 2017 Year 2018 Fiscal Year 2016 Fiscal Year 2015 Fiscal Year 2014 Fiscal Year 2013 Fiscal Year 2012 Fiscal Year 2011 Fiscal Year 2010 Fiscal Year 2009 Function /Program Police Crime rate (per 100,000 population) Traffic accidents Emergency service average response time (minimum) Citizen calls for police service Operating expenditures per citizen calls (a) Fire Firefighters per capita (10,000) No. of fire calls No. of medical calls No. of other assistance calls Emergency service average response time (minimum) Percent of emergency responses taking 6.0 minutes or less (d) Transportation Percent of on-time bus performance Annual bus boardings Number of square yards repaired Library Registered borrowers Circulation Community development Number of permits issued for commercial /industrial Valuation of commercial/industrial permits Number of permits issued for residential Valuation of residential permits Number of permits issued other Valuation of other permits Water/wastewater Number of customer accounts (annual average) Total water gallons treated (million gallons - mg) Operating and maintenance cost per customer account Total wastewater gallons treated (million gallons per day) Solid waste collection Residential container/recycling cost per ton Number of residential accounts Residential recycling diversion rate (c) Number of commercial accounts Commercial collection cost per ton $ $ $ $ 4,478 5,621 5,063 5,638 4,900 5,376 5,110 5,103 5,343 4,755 5,288 4,825 5,800 4,834 5,898 4,693 5,500 4,595 6,100 4,920 6.6 91,012 968 6.36 88,515 917 6.83 86,229 926 5:13 85,502 926 5:02 84,092 874 5:00 86,996 830 6:35 87,730 725 5:30 85,673 749 5:17 86,074 433 5:08 106,317 443 $ $ $ $ $ $ $ $ $ 8.86 2,212 22,093 1,916 11.6 2,565 26,633 2,637 8.82 1,944 20,021 1,963 9.45 2,022 19,630 1,853 9.47 1,958 18,119 1,976 9.44 2,002 17,411 2,033 9.45 2,167 17,156 1,336 8.95 2,208 15,264 1,275 9.13 2,144 15,413 1,253 9.37 2,414 15,199 1,260 4.15 3:36 4:16 4:10 4:08 4:07 4:10 4:20 4:20 4:20 75% 74% 73% 75% 76% 76% 76% 74% 74% 72% 92% 9,553,553 550,252 90% 6,484,875 731,425 90% 6,841,497 402,900 92% 7,178,128 302,000 91% 7,897,964 397,605 93% 8,168,990 412,739 95% 8,430,857 569,600 95% 7,971,817 64,665 94% 8,877,964 74,471 90% 9,157,912 2,090,504 100,155 802,492 97,443 855,055 140,000 800,000 143,000 930,000 143,018 814,199 140,523 933,824 145,948 1,015,578 140,600 937,500 147,914 1,089,174 142,500 1,250,000 503 739,627,514 532 35,888,436 1165 40,037,341 644 $ 270,664,400 122 $ 157,887,839 1 $ 60,000 775 $ 333,250,987 474 $ 274,402,813 1 $ 150,000 678 $ 527,389,841 646 $ 173,004,137 4 $ 8,758,218 30 $ 211,281,465 451 $ 235,037,289 660 $ 156,702,779 18 $ 26,619,100 271 $ 96,518,351 647 $ 54,339,500 18 $ 88,812,800 297 $ 68,954,800 600 $ 99,407,953 8 6,874,200 314 $ 18,260,624 521 $ 77,951,841 18 $ 86,704,700 425 $ 27,741,900 534 $ 68,502,500 21 $ 109,851,600 508 $ 161,914,600 577 $ 105,413,500 43,214 16,090 979 19.1 42,647 15,506 953 19.4 43,061 15,278 941 19.4 42,678 15,130 878 19.4 42,555 15,979 309 19.4 42,351 16,900 278 18.5 0 121 33,405 15% 2,133 81 42,398 16,700 249 18.6 $ $ $ 111 32,869 28% 1,641 100 $ $ $ 139 33,160 19% 1,671 93 $ $ $ 138 33,001 21% 1,709 91 Source: City of Tempe, Arizona Municipal Budget Office and other applicable City departments. (a) For Fiscal Year 2010 and prior, the operating expenditures were based on per capita. (b) The numbers are revised by department to reflect change in methodology in tracking. (c) This calculation consists of the blue container program and green organics. (d) For Fiscal Year 2017 and prior, the percents measured were for 5.0 minutes or less. 198 $ $ $ 140 33,397 19% 1,783 95 $ $ $ 108 33,440 15% 2,130 95 $ $ $ $ $ $ 115 33,759 15% 2,030 78 $ $ $ $ 42,218 15,877 (b) 217 18.6 (b) 112 33,927 29% 1,940 73 $ $ $ 42,453 15,606 (b) 181 18.7 (b) 114 32,886 28% 1,837 77 $ $ $ 42,686 15,774 (b) 256 19.7 (b) 71 32,916 28% 1,875 59 Capital Asset Statistics by Function/Program (Exhibit S-28) Last Ten Fiscal Years City of Tempe, Arizona Fiscal Fiscal Year 2017 Year 2018 Police Stations Patrol units (squads) Fire stations Transportation Streets (miles) Streetlights Traffic signals Buses Parks and recreation Acreage Playgrounds Sports fields Community centers Golf courses Water/wastewater Water mains (miles) Water production capacity (million gallons per day) Water storage capacity (million gallons) Sanitary sewers (miles) Storm sewers (miles) Wastewater treatment capacity (million gallons per day) Solid waste collection Collection trucks Fiscal Year 2016 Fiscal Fiscal Year 2015 Year 2014 Fiscal Year 2013 Fiscal Year 2012 Fiscal Year 2011 Fiscal Year 2010 Fiscal Year 2009 3 21 6 3 21 6 3 24 6 3 24 6 3 24 6 3 21 6 3 20 6 3 20 6 3 22 6 3 22 6 1,241 12,048 230 124 1,241 12,026 229 125 1,241 11,969 228 125 1,241 11,904 223 125 1,241 11,849 222 124 1,241 11,797 221 135 1,241 11,778 221 140 1,241 11,778 221 188 1,241 12,428 219 188 1,241 12,021 219 198 1875 45 200 5 2 1,875 45 200 5 2 1,872 45 200 5 2 1,872 45 200 5 2 1,872 45 200 5 2 1,872 45 200 5 2 1,872 45 200 5 2 1,872 45 200 5 2 1,872 45 200 4 2 1,872 45 200 4 2 850 850 833 833 833 833 839 839 839 825 137 54 495 231 137 54 495 231 125 54 495 231 125 42 549 173 125 42 549 173 125 42 496 173 125 42 498 194 125 42 498 194 129 53 498 195 120 53 497 193 29 29 29 19 19 19 33 33 38 38 43 43 45 47 52 51 58 58 58 58 Source: City of Tempe, Arizona Municipal Budget Office and other applicable City departments. 199