City of Tempe, Arizona Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2019 City Council: Mark Mitchell, Mayor Lauren Kuby, Vice Mayor Jennifer Adams Robin Arredondo-Savage Arlene Chin Randy Keating Joel Navarro Administrative Staff: Andrew Ching, City Manager Presented by: Kenneth Jones, Deputy City Manager - Chief Financial Officer Renie Broderick, Internal Services Director Thomas F. Duensing, 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, 2019 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 13 14 15 FINANCIAL SECTION Independent Auditor’s Report Management’s Discussion and Analysis (required supplementary information) 17 19 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 Five Fiscal Years Schedule of the Proportionate Share of the Net Pension Liability- ASRS - Last Five Fiscal Years Schedule of the Proportionate Share of the Net OPEB Health Insurance Premium Liability (Asset) - ASRS - Last Two Fiscal Years Schedule of the Proportionate Share of the Net OPEB Long-Term Disability Liability-ASRS - Last Two Fiscal Years Schedule of Changes in the Net Pension Liability and Related Ratios- PSPRS: Police - Last Five Fiscal Years Schedule of Changes in the Net Pension Liability and Related Ratios- PSPRS: Fire - Last Five Fiscal Years Schedule of Changes in the Net OPEB Liability and Related Ratios- PSPRS: Police - Last Two Fiscal Years Schedule of Changes in the Net OPEB Liability (Asset) and Related Ratios- PSPRS: Fire - Last Two Fiscal Years 3 118 119 120 121 122 123 124 125 Comprehensive Annual Financial Report For Fiscal Year Ended June 30, 2019 City of Tempe, Arizona FINANCIAL SECTION (Continued) Required Supplementary Information: (Continued) Schedules of Required Supplementary Information (Continued) Schedule of Contributions- OPEB Plan - Last Three Fiscal Years Schedule of Changes in the Net OPEB Liability and Related Ratios - Last Three Fiscal Years Schedule of Investment Returns- OPEB Plan- Last Three Fiscal Years Notes to Required Supplementary Information 126 127 128 129 Combining Fund Financial Statements: Non-major Governmental Funds: Combining Balance Sheet Combining Statement of Revenues, Expenditures and Changes in Fund Balances Internal Service Funds: Combining Statement of Net Position Combining Statement of Revenues, Expenses and Changes in Net Position Combining Statement of Cash Flows 132 136 141 142 143 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 4 145 146 147 148 149 150 151 152 153 154 155 156 157 158 159 160 161 162 163 164 165 166 167 168 169 Comprehensive Annual Financial Report For Fiscal Year Ended June 30, 2019 City of Tempe, Arizona 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) Changes in Fund Balance, Governmental Funds - Last Ten Fiscal Years (modified accrual basis of accounting) S-1 S-2 172 173 S-3 176 S-4 177 S-5 S-6 S-7 179 180 181 S-8 182 S-9 183 S-10 S-11 S-12 S-13 184 185 186 187 S-14 S-15 S-16 S-17 S-18 S-19 S-20 S-21 S-22 188 189 190 191 192 193 194 195 196 S-23 197 S-24 S-25 198 199 S-26 S-27 S-28 200 201 202 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 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 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 CITY OF TEMPE P.O. BOX 5002 20 EAST SIXTH STREET TEMPE, AZ 85281 480.350.8350 CITY MANAGER’S OFFICE December 17, 2019 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, 2019 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 40.22 square miles with an estimated population of 192,000 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 five-year forecast for revenues remains positive, anticipating moderate growth 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 in the latter years of the forecast. Increases in other local taxes should provide for a stable local tax revenue stream into fiscal year 2019/20, with slowing growth projected in the subsequent years of the forecast. During fiscal year ended June 30, 2019, the City continued to experience strong performance 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 79% 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. General Fund sales tax revenues increased by $5.8 million (or 5.4%) to $113.1 million. Sales tax revenue represented 49% of total General Fund revenues for the year. 8 State-Shared Revenue The United States 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 state-shared revenues allocated to the City also declines. State-shared sales tax revenue decreased slightly by $0.3 million (or 1.7%) to $18 million compared to the prior year. The City experienced a slight decrease in state-shared income tax of $0.2 million (or 0.9%). State shared income tax received during the fiscal year ($22.4 million) is from actual collections by the State for fiscal year 2016/17. Auto lieu tax ($7.7 million) increased by $0.1 million (or 1.7%) compared to the prior year, reflective of continuing strong auto sales. These state-shared revenues combined represented about 20.9% of General Fund revenue for the year. Property Tax Property tax revenues grew by $0.7 million (or 3.6%) to $20.5 million and by $0.5 million (or 1.7%) to $28.2 million over the prior year in the General Fund and General Obligation Debt Service Fund, respectively. The city continues to experience continued overall improvement in property valuations. General Fund property tax comprised approximately 8.9% of total General Fund revenues for the year. Though a changing economy can periodically provide the City with financial challenges, we expect continued moderate, although slowing growth 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 maintain 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. Tempe’s retail and development activity are projected to 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 and we continue to watch economic trends for indications of any economic slowdown. Recessionary trends have not been included in any of the individual fund forecasts. Healthy fund balances are projected in the General Fund throughout the forecast period, 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, continued working 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: 9 • • • • • Safe and Secure Communities -- Ensuring a safe and secure community through a commitment to public safety and justice. Strong Community Connections -- Developing and maintaining a strong community connection by emphasizing the importance of open government, customer service and communication with community members. Quality of Life -- Enhancing the quality of life for all Tempe residents and workers through investment in neighborhoods, parks, the arts, human services and city amenities, with an emphasis on equity and diversity. Sustainable Growth & Development -- Implementing sustainable growth and development strategies to improve Tempe’s environment, quality of life and economic outcomes. Tempe strives to make longterm generational investments in technology, infrastructure and public transit that create a safe, clean, equitable and healthy city. Financial Stability and Vitality -- Maintaining long-term financial stability and vitality by focusing on economic development, business retention and generating employment to create a robust and diverse economic base. 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 incorporated into the decision-making processes within the City. To the extent possible, public meeting agenda items requiring explicit council direction and/or action must identify the related strategic priorities. This was particularly the case during the development of both the fiscal year 2018/19 Annual Operating Budget as well as the Five-Year Capital Improvement Program Budget. Additionally, many nonbudgetary decisions of the City Council during the year were made within the context of the identified strategic priorities. Important tools utilized in the continual evolution of strategic planning are three separate biennial surveys of the community, businesses and employees. Another tool used to align the budget with City Council priorities is the Strategic Tool for Aligning Resources for Tempe (START). This tool provides the Mayor and Council an early opportunity to communicate the areas of focus for the upcoming budget year. The data from the performance measures, the Community, Business and Employee Surveys along with 311 calls, are incorporated in the S.T.A.R.T. tool to assist the Mayor and Council in making budget decisions. 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. FINANCIAL POLICY During the 2018 legislative session, the Arizona Legislature approved a statutory change that now requires all Public Safety Personnel Retirement System (PSPRS) employers to adopt formal pension funding policies. Arizona Revised Statute 38-863.01 contains the following requirements of all PSPRS employers: By July 2019, annually approve a PSPRS pension funding policy that is posted on the governing body’s public website and, at least, addresses the following: • • • • • How adequate assets will be maintained to fund benefits payable under PSPRS; How the stability of the governing body’s contributions will be maintained; How and when the governing body’s funding requirements will be met; Define the funded ratio target and timeline for reaching the target; and, Formal acceptance of the annual PSPRS Actuarial Valuation Reports. This new statutory requirement is sound financial policy and is consistent with Tempe’s values related to transparent, stable finances. The legislative change does not impose any requirements that the City of Tempe was not already contemplating. Per Council direction, we will be utilizing actuarial services to determine the funded obligation of Tempe’s Public Safety Retirement System plans and to refine a public safety funding policy, as required by the recent legislation. Additionally, although not required by the legislation, the city included the Arizona State Retirement System (ASRS), PSPRS Tier 3 System, and the Elected Official Retirement System (EORS) in the policy which was formally adopted by the city council in June 2019. 10 MAJOR INITIATIVES Arts and Culture Tax At the special election held on November 6, 2018, Tempe voters approved a permanent one-tenth of one percent transaction privilege (sales) and use tax to fund arts and culture throughout the city. The existing Performing Arts tax is set to expire on December 31, 2020. Effective on January 1, 2021, the new Arts and Culture tax will assist in the implementation of the Tempe Arts and Culture Plan including: • Expanding, presenting and producing programs at the Tempe Center for the Arts to include concerts, plays, etc. • Expanding co-productions at the Tempe Center for the Arts • Creating signature festivals • Developing more after school/summer arts/cultural programs for youth • Expanding Arts in the Park Program • Enhancing Tempe’s Historic properties and utilize spaces • Providing more arts and cultural programming for adults and seniors • Broadening the scope of history and culture • Expanding visual and performing arts opportunities for artists and patrons throughout the community • Providing free programming for arts and culture across multidisciplinary sect Pre-kindergarten Pilot Program (Tempe PRE) - Update The pilot program has been successful in its goal of improving kindergarten readiness. The city council has decided to provide funding to the Tempe PRE program for the next two fiscal years until a permanent, recurring funding source is identified. The initial two-year pilot program was launched in July 2017 to increase access to highquality preschool at no cost for qualifying families. Families that are eligible for the free tuition program must live in Tempe and be living at or below 200 percent of the Federal Poverty Level; half-tuition is available to families residing in Tempe with an income between 200 and 300 percent of our income guidelines. Full tuition is available to all families in Tempe and neighboring cities. It is open to children who are age 3 or 4 by July 31 of the school year they are applying to, and children must be fully potty-trained. Our program is currently designed to be 5 days a week, full day. We also offer free extended care hours at several of our sites, some of which are provided by Kid Zone, as well as camps during school breaks. Our classrooms have early childhood certified lead teachers and well-trained instructional assistants. The classrooms implement the HighScope Preschool Curriculum, which promotes active, play-based and childcentered learning. The City of Tempe partners with the Tempe Elementary and Kyrene school districts to offer programming in 20 classrooms at 12 elementary schools located in the City of Tempe. Emergency Medical Transportation - Update The Fire Medical Rescue Department expanded its emergency medical transportation services during the fiscal year. 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. Emergency service provided by the department during the year totaled 6,093 patient transports. The ambulances are currently housed at stations No. 1, 2, 4 and 6. There are also currently two contractor-provided ambulances serving Tempe. Within five years, the fire department expects to have a fleet of six ambulances in service and two in reserve 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. 11 Streetcar - Update On November 28, 2018, the Federal Transit Administration (FTA) announced that Tempe Streetcar has been allocated the full $75 million through the Federal Transit Administration (FTA) Capital Investment Grants (CIG). The project was allocated $50 million from the FTA in 2017 and with the approval of the final $25 million installment, it allows the project to move toward a fully funded grant. In August 2018, Valley Metro received approval from the Federal Transit Administration (FTA) to begin the initial phase of significant construction on the Tempe Streetcar. With this approval, Valley Metro began work in fall 2018 to build the system's rail trackway, power systems and street improvements. Significant construction progress was made during the year with track installation underway along the entire planned route including the downtown Mill Avenue corridor. Tempe Streetcar is scheduled to open in 2021. AWARDS AND ACKNOWLEDGEMENTS Certificates of Achievement The Government Finance Officers Association of the United States and Canada ("GFOA") awarded a Certificate of Achievement for Excellence in Financial Reporting to the City for its comprehensive annual financial report for the fiscal year ended June 30, 2018. The Certificate of Achievement is a prestigious national award recognizing conformance with the highest standards in the preparation of state and local government financial reports. In order to be awarded a Certificate of Achievement, the City published an easily readable and efficiently organized comprehensive annual financial report, whose contents conform to program standards. This report satisfied both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. The City has received a Certificate of Achievement for the last forty-three consecutive years (fiscal years 1975/76 through 2017/18). We believe our current report continues to conform to the Certificate of Achievement program requirements, and we are submitting it to the GFOA for award consideration. In further demonstration of its' commitment to financial excellence, the City also received the GFOA's Distinguished Budget Presentation Award for the fiscal year 2018/19 annual budget and the National Purchasing lnstitute's Achievement of Excellence in Procurement Award for 2019. Acknowledgment The preparation of this report could not have been accomplished without the dedicated service of the entire staff of the Accounting Division and the competent service of our independent auditors. Credit also must be given to the Mayor and City Councilmembers for their continued support for maintaining the highest standards of professionalism in the management of the City of Tempe's finances. For all those involved, we express our sincerest appreciation. R~ L ctfulll subm.itted, ~~~ Andrew B. Ching City Manager Kenneth Jo Deputy Cit 12 s nager/Chief Financial Officer 13 City of Tempe, Arizona List of Principal Officials City Council Mark Mitchell, Mayor Lauren Kuby, Vice Mayor Jennifer Adams Robin Arredondo-Savage Arlene Chin Randy Keating Joel Navarro Administrative Staff For the Fiscal Year Ended June 30, 2019 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 Keith Burke, Community Services Vacant, Public Works Chad Weaver, Community Development Naomi Farrell, Human Services Kevin Kane, Municipal Court Judith R. Baumann, City Attorney Bill Greene, Internal Audit Office Mark Day, Municipal Budget Office Rosa Inchausti, Office of Strategic Management and Diversity Carla Reece, City Clerk and Elections Renie Broderick, Internal Services 14 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 15 Operations Support Services Internal Services Finance Human Resources Information Technology City of Tempe, Arizona 16 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, the budgetary comparisons for the General Fund and the Transit Special Revenue Fund, and the aggregate remaining fund information of the City of Tempe, Arizona, (the City), as of and for the year ended June 30, 2019, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, the budgetary comparisons for the General Fund and Transit Special Revenue Fund and the aggregate remaining fund information of the City of Tempe, Arizona, as of June 30, 2019, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. 17 Change in Accounting Principle As described in Note 1, the City/Town implemented the provisions of the Governmental Accounting Standards Board (GASB) Statement No. 88, Certain Disclosures Related to Debt, including Direct Borrowings and Direct Placements, for the year ended June 30, 2019, 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, budgetary comparison information, net pension liability information, and other postemployment benefit plan information, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The Introductory Section, Combining and Individual Fund Financial Statements and Schedules, and Statistical Section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The Combining and Individual Fund Financial Statements and Schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Combining and Individual Fund Financial Statements and Schedules 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 17, 2019, on our consideration of the 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 the City of Tempe’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City of Tempe, Arizona’s internal control over financial reporting and compliance. Heinfeld, Meech & Co., P.C. Phoenix, Arizona December 17, 2019 18 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, 2019. 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 $920.0 million (net position). Of this amount, $223.8 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 $55.9 million during the fiscal year compared to an increase of $13.6 million in the prior year. The governmental activities experienced an increase in net position of $42.4 million compared to an increase of $2.1 million in the prior year and the business-type activities experienced an increase of $13.5 million compared to an increase of $11.6 million in the prior year. • For the fiscal year ended June 30, 2019, the City’s governmental revenues overall increased by $40.4 million. This was predominately due to an increase of $20.6 million in capital grants and contributions revenue followed by an increase of $8.9 million in sales taxes, $6.4 million in unrestricted investment earnings, and $4.2 million in operating grants and contributions. Expenses for Public Works and Fire Medical Recue increased by $7.8 million and $3.7, respectively; while, expenses for Police and Community Services decreased by $5.7 million and $1.3 million, respectively. • At June 30, 2019, the City’s governmental funds reported combined ending fund balances of $241.7 million. Approximately 72.2% of this total amount ($174.4 million) is for spending at the government’s discretion (committed, assigned, or unassigned). • At June 30, 2019, total fund balance for the General Fund was $117.8 million, which represents an increase of $7.6 million over the prior year’s fund balance as revenues continued to exceed expenditures. Revenues increased by $9.6 million, while related expenditures increased by $13.4 million. Net other financing uses increased by $2.7 million. • At June 30, 2019, the City’s enterprise funds reported combined total net position of $278.0 million, and total unrestricted net position of $153.2 million. Of this total, $157.9 million of the unrestricted net position was in the Water and Wastewater Fund. 19 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. 20 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. 21 GOVERNMENT-WIDE STATEMENTS FINANCIAL ANALYSIS Net position- June 30, 2019 Assets Current and other assets Capital assets, net Total assets Governmental Activities Business-type Activities $ $ 657,413,508 822,291,754 1,479,705,262 264,300,437 374,025,745 638,326,182 Total $ 921,713,945 1,196,317,499 2,118,031,444 Deferred outflows of resources Deferred charge on refunding Deferred outflow from pensions Deferred outflow from OPEB Total deferred outflows of resources 7,820,971 64,623,464 2,121,951 74,566,386 11,014,756 3,058,485 303,060 14,376,301 18,835,727 67,681,949 2,425,011 88,942,687 Liabilities Long-term liabilities Other liabilities Total liabilities 819,612,790 73,653,632 893,266,422 325,087,551 46,515,661 371,603,212 1,144,700,341 120,169,293 1,264,869,634 Deferred inflows of resources Deferred inflow from pensions Deferred inflow from OPEB Total deferred inflows of resources 15,671,091 3,372,159 19,043,250 2,593,456 462,621 3,056,077 18,264,547 3,834,780 22,099,327 Net position Net investment in capital assets Restricted Unrestricted Total net position 491,949,237 79,370,511 70,642,228 641,961,976 124,836,951 153,206,243 278,043,194 616,786,188 79,370,511 223,848,471 920,005,170 $ $ $ 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 $920.0 million and $864.1 million as of June 30, 2019 and 2018, respectively. The City reclassified certain employees during the fiscal year which resulted in a prior period adjustment resulting in a change in estimate. The net position as of June 30, 2018 has been restated for Governmental Activities and Business-Type Activities along with the long-term liabilities, deferred outflows and deferred inflows for both OPEB and pensions. Total, Government-Wide long-term liabilities, deferred outflows and deferred inflows did not change. 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 was $616.8 million and $594.8 million at June 30, 2019 and 2018, respectively. These totals represent 67.0% and 68.9% of total net position at June 30, 2019 and 2018, 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. 22 Net position- June 30, 2018 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, restated 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, restated 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 $ 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 8,910,973 65,127,065 3,162,724 12,364,932 2,647,389 358,983 21,275,905 67,774,454 3,521,707 77,200,762 15,371,304 92,572,066 827,059,211 67,900,346 894,959,557 330,756,201 46,048,156 376,804,357 1,157,815,412 113,948,502 1,271,763,914 12,905,892 1,468,363 1,721,670 173,486 14,627,562 1,641,849 14,374,255 1,895,156 16,269,411 483,438,668 102,808,694 13,318,115 599,565,477 111,354,858 153,208,008 264,562,866 594,793,526 102,808,694 166,526,123 864,128,343 $ $ 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 $79.4 million (8.6% of total net position) at June 30, 2019. At June 30, 2018 restricted net position was $102.8 million (11.9% 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 $223.8 million (24.3% of total net position) and $166.5 million (19.3% of total net position) at June 30, 2019 and 2018, 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. The same situation held true for the previous fiscal year. ANALYSIS OF CHANGE IN NET POSITION The City’s total net position increased by $55.9 million during the current fiscal year. These changes in net position are explained in the governmental and business-type activities discussion below. 23 Changes in Net Position- June 30, 2019 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 Capital contributions Total revenues 48,615,402 34,467,594 39,638,190 108,714,216 - $ 157,329,618 34,467,594 39,638,190 177,596,413 48,024,343 48,706,817 3,036,531 7,936,949 5,924,186 674,569 414,620,994 3,614,531 1,124,986 199,388 32,552 113,685,673 177,596,413 48,024,343 48,706,817 3,036,531 11,551,480 7,049,172 873,957 32,552 528,306,667 101,620,981 44,646,087 28,463,648 110,725,592 17,550,896 21,669,347 4,985,853 491,026 7,150,485 3,137,658 434,770 172,182 1,079,461 829,499 15,650,001 1,716,431 12,503,655 372,827,572 77,906,953 15,791,378 2,966,379 2,937,558 99,602,268 101,620,981 44,646,087 28,463,648 110,725,592 17,550,896 21,669,347 4,985,853 491,026 7,150,485 3,137,658 434,770 172,182 1,079,461 829,499 15,650,001 1,716,431 12,503,655 77,906,953 15,791,378 2,966,379 2,937,558 472,429,840 41,793,422 603,077 42,396,499 599,565,477 641,961,976 14,083,405 (603,077) 13,480,328 264,562,866 278,043,194 55,876,827 55,876,827 864,128,343 920,005,170 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 $ 24 $ $ 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 19,044,276 109,182,268 - $ 157,631,336 30,237,598 19,044,276 168,650,143 48,403,871 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 48,403,871 47,495,555 3,290,220 2,186,991 6,157,828 1,700,279 484,798,097 107,357,688 40,900,261 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 11,817,213 369,464,699 76,903,243 17,494,354 3,026,686 2,802,184 100,226,467 107,357,688 40,900,261 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 3,026,686 2,802,184 466,664,480 4,769,227 (1,454,082) 3,315,145 596,250,332 599,565,477 10,337,704 (25,122) 10,312,582 254,250,284 264,562,866 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 $ 25 $ $ Governmental activities. The governmental net position increased by $42.4 million for the fiscal year ended June 30, 2019 compared to a $3.3 million increase in net position for the fiscal year ended June 30, 2018. Overall, revenues increased by $40.4 million while expenses increased by $3.4 million. The key factors contributing to the change in net position compared to the prior year are as follows: • Sales taxes, the largest revenue source, increased in the amount of $8.9 million (5.3%) due to the increase in development coupled with the continued strong overall economy. • Capital grants and contributions increased by $20.6 million (108.1%). The majority of the increase ($19.4 million) is due to the increase in net funding from the prior year for the transit streetcar project which is a part of the Valley Metro Rail, Incorporated joint venture. The revenues from this project grew from $14.9 million to $34.3 million from the fiscal years ended June 30, 2018 and June 30, 2019, respectively. • Unrestricted investment earnings increased from $1.5 million for the fiscal year ended June 30, 2018 to $7.9 million for the fiscal year ended June 30, 2019 due primarily to realized gains on investments at June 30, 2019 totaling $4.6 million. • The positive change in net position was not only due to the increase in revenues, but expenses remained relatively flat at an increase of $3.4 million, or 0.9%. For the public safety services, Police expenses decreased by $5.7 million (5.4%) and Fire Medical Rescue expenses increased by $3.7 million (9.2%). The decrease in police expenses is due to a reduction in both pension and OPEB expense for the year ended June 30, 2019. The increase in Fire expenses is due to the addition of 23 authorized positions. For non-public safety services, increases in Public Works expenses of $7.8 million were offset by overall decreases in governmental activity expenses by $2.4 million as a result of reduced pension and OPEB expenses. The increase in Public Works expense is primarily due to increased costs of bus service of $2.1 million plus the net loss related to the Regional Wireless Consortium of $3.2 million. 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: 26 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 increased from prior year by $3.4 million (0.9%). The main functions which experienced the increases were Fire Medical Rescue and Public Works. 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, 2019 June 30, 2018 Public works Police Fire medical rescue Community services Human services Community development Internal services $110,725,592 101,620,981 44,646,087 28,463,648 21,669,347 17,550,896 15,650,001 29.7% 27.3 12.0 7.6 5.8 4.7 4.2 $102,940,790 107,357,688 42,150,580 29,739,525 22,505,753 17,270,124 16,749,283 27.9% 29.1 11.1 8.0 6.1 4.7 4.5 Fiscal Year Ended June 30, 2019 June 30, 2018 Sales taxes Intergovernmental revenueunrestricted Property taxes Unrestricted investment earnings Miscellaneous and other Franchise taxes $177,596,413 42.8% $168,650,143 45.1% 48,024,343 48,706,817 11.6 11.7 48,403,871 47,495,555 12.9 12.7 7,936,949 6,598,755 3,036,531 1.9 1.6 0.7 1,489,603 7,173,592 3,290,220 0.4 1.9 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, 27 sales taxes, intergovernmental revenue- unrestricted, property taxes and unrestricted investment earnings each displayed growth. The categories of miscellaneous and other and franchise taxes decreased slightly. Business-type activities. Business-type activities increased the City’s net position by $13.5 million for the year ended June 30, 2019 compared to an increase of $10.3 million for the year ended June 30, 2018. Rate increases were implemented in January 2018 for the Water and Wastewater Fund and Solid Waste Fund and the fiscal year ended June 30, 2019 was the first full fiscal year under the current rates. For the business-type activities a comparison of revenues by source is provided for each activity. For the Year Ended June 30, 2019 Charges for services Unrestricted investment earnings/ other Total Emergency Medical Transport Water and Wastewater Solid Waste $ 85,339,513 $ 17,306,244 $ 3,442,151 $ 2,626,308 $ 108,714,216 4,285,469 $ 89,624,982 185,199 $ 17,491,443 296,858 $ 3,739,009 171,379 $ 2,797,687 4,938,905 $ 113,653,121 Golf Total For the Year End30, 2017 For the Year Ended June 30, 2018 Charges for services Unrestricted investment earnings/ other Total Emergency Medical Transport Water and Wastewater Solid Waste $ 87,807,953 $ 16,706,706 $ 2,280,247 $ 2,387,362 $ 109,182,268 806,560 $ 88,614,513 17,159 $ 16,723,865 541,246 $ 2,821,493 16,938 $ 2,404,300 1,381,903 $ 110,564,171 28 Golf Total 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 $77.9 million for the fiscal year, followed by Solid Waste with $15.8 million, Emergency Medical Transportation with $3.0 million, and Golf with $2.9 million. Expenses, both operating and nonoperating, for the Water and Wastewater Fund increased by a total of $1.0 million (1.3%) due to normal operating and nonoperating expense growth across all categories coupled with decreased pension and OPEB expenses. Charges for services decreased by $2.5 million (2.8%) due to a decrease in water consumption coupled with no rate increases for the fiscal year ended June 30, 2019. The change in net position was a $10.6 million increase in fiscal year 2018 which is down slightly from $10.8 million increase in fiscal year 2018. The Solid Waste Fund had decreased expenses of $1.7 million (9.7%) primarily due decreased pension and OPEB expenses and a reduction in risk management charges from the prior year of $1.7 million. Charges for services increased by $0.6 million (3.6%) due to a full year of a January 2018 rate increase. The change in net position increased by $2.2 million in fiscal year 2019 while the prior year had a decrease of $0.6 million. In Fiscal Year 2018, the City created the Emergency Medical Transportation Fund to provide ambulance services. During Fiscal Year 2019, service was expanded, and the number of authorized, full-time equivalent positions grew from 13 to 25 as a result of the transfer of 12 full-time equivalent positions from Governmental Activities. The service expansion resulted in an increase in the charges for services from $2.3 million during Fiscal Year 2018 to $3.4 million in the Fiscal Year Ended June 30, 2019. The fund realized operating income of $0.8 million. The reclassification of those position resulted in a change in estimate of the pension and OPEB liabilities, thus, a restatement of the July 1, 2018 beginning net position. The ending net position grew to $1.2 million at June 30, 2019. In the Golf Fund, charges for services increased by $0.2 million (10.0%) while operating expenses increased by $0.1 million (4.5%). In the prior year, the Rolling Hills Golf Course was closed during the replacement of the irrigation system. The total net position of the fund decreased by $29,295, resulting in a deficit ending net position of $0.2 million. 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. 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 $241.7 million, a decrease of $0.7 million from the prior year. Approximately $174.4 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 $14.9 million over the prior year’s combined balance of $159.5 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, 2019, the non29 spendable fund balance included amounts for inventories ($1.1 million), prepaid items ($0.6 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 ($3.5 million), Public Works ($51.5 million), Police ($4.2 million). Revenues for governmental functions overall totaled $382.2 million in the fiscal year ended June 30, 2019, which represents a net increase of $19.6 million (5.4%) from the fiscal year ended June 30, 2018. This change is primarily due to the increase in the following areas: $8.2 million (5.2%) in sales taxes, $1.2 million (2.5%) in property taxes, $6.5 million in Federal grants (39.3%), $6.4 million in investment income. On the other hand, there was a decrease in other entities participation of $2.2 million, and in licenses and permits of $1.4 million (16.6%). The General Fund is the chief operating fund of the City. At the end of the current fiscal year, the total fund balance was $117.8 million. The fund only had $0.5 million in non-spendable fund balance and $0.1 million in restricted fund balance. The remaining $117.2 million is available for spending at the City’s discretion. 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 $7.6 million. In the prior year the net increase was $14.1 million. Total revenues increased by $9.6 million (4.3%) from the prior year. Sales taxes increased by $5.8 million (5.4%), property taxes increased by $0.7 million (3.6%), state sales taxes decreased by $0.3 million (1.7%) and state income tax decreased by $0.2 Fiscal Year Ended million (0.9%). Overall, these June 30, 2019 June 30, 2018 revenues remained relatively Revenues $ 230,323,385 $ 220,762,808 stable due to economic stability. In addition, Total fund balance 117,786,874 51.0 % 110,198,374 49.9 % Intergovernmentalother Unassigned fund balance 97,995,211 42.5 93,995,709 42.6 increased by $0.9 million (24.20%) due primarily to the increased revenue from the Tempe Sports Authority. Investment income increased by $4.5 million (452.6%) due primarily to realized gains on investments at June 30, 2019. Charges for services decreased by $0.5 million (3.3%). This is due to slight decreases in fees, fines & forfeitures of $0.4 million. Licenses and permits decreased by $1.4 million (16.6%) due primarily to a reduction in building permit fees which can fluctuate depending on issuance of building permits throughout any fiscal year. Expenditures increased by $13.4 million (6.5%) due primarily to an increase in employee compensation and the net increase in 15 full-time equivalent positions. Net transfers out decreased by $1.4 million due to a transfer out in the prior year to the Internal Service Health Fund of $1.3 million. Proceeds from the sale of capital assets decreased by $1.2 million due to the sale of real estate in the prior fiscal year. The combination of the increase in the excess of revenues over expenditures of $11.6 million along with the decrease in total other financing uses of $4.1 million resulted in net change in fund balances decreasing from $14.1 to $7.6 million. The Transit Special Revenue Fund is used to account for revenues and expenditures utilized to provide related transit services. Revenues increased by $2.9 million due primarily to increases in sales tax revenue of $2.0 million (4.8%), increases in investment income of $1.7 million (448%) due to realized gains on investments. Expenditures increased slightly by $0.4 million (0.7%). Although program expenditures increased by $6.0 million, due to increased costs of the fixed route and local circulator bus services, this increase was offset by a reduction in debt service of $5.5 million due to the $5.3 million reduction in debt service cost related to the 2008 excise tax obligations. Net transfers out of $6.3 million were primarily to the Transit Capital Projects Fund. The fund balance totaled $45.9 million at June 30, 2019, compared to a $47.5 million fund balance at June 30, 2018. The fund balance decreased by $1.6 million in the current year as compared to an increase of $0.6 million in prior year. 30 The General Obligation Debt Service Fund accounts for the accumulation of resources for and payments of general obligation debt. Total fund balance decreased by $9.6 million from $13.1 million at June 30, 2018 to $3.5 million at June 30, 2019. Of this fund balance, $3.6 represents accumulation of non-secondary property taxes set aside for future payment of Qualified Energy Conservation Bonds (QEBC’s). Therefore, the amount of unspent secondary property taxes, used for interest, principal redemption and related fees for General Obligation debt service is a $0.1 million deficit. This deficit will be covered by future secondary property tax levies. The planned decrease in fund balance was due predominately to a June 2019 defeasance of General Obligation debt of $9.0 million (see Debt Administration section). There was an increase in property tax revenues ($0.5 million). 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, 2019. 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 $0.1 million increase in fund balance from $17.0 million at June 30, 2018 to $17.1 million at June 30, 2019. Increases in expenditures of $6.9 million were due primarily to the increased project expenditures for the Tempe Street Car project ($2.7 million increase) and the Highline Canal Multi-Use Path project ($2.6 million increase). 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 transfers are 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, 2019 June 30, 2018 Water and wastewater fund Solid waste fund Emergency Medical Transportation Golf fund Internal service funds $ 272,579,833 4,484,324 $ 262,017,940 2,309,224 1,156,991 (177,954) 3,925,191 384,361 (148,659) 3,164,682 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 $10.6 million for the fiscal year ended June 30, 2019 versus an increase in net position of $10.8 million for the fiscal year ended June 30, 2018. Charges for services decreased by $2.5 million (2.8%) due to a decrease in water consumption coupled with no rate increases for the fiscal year. Total expenses increased by $1.0 million (1.3%) mainly due to the recognition of higher operating expenses. 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 a full fiscal year’s increase in Charges for services of $0.6 million (3.6%). Total expenses decreased by $1.7 million (9.7%) primarily due to the reduction in risk management charges for a large liability claim recognized in the fiscal year ended June 30, 2018. Net position increased by $2.2 million compared to prior year’s decrease of $0.6 million. 31 The Emergency Medical Transportation Fund accounts for the operation of the City’s ambulance services. As mentioned earlier, service was expanded during the current fiscal year, and the number of authorized, full-time equivalent positions grew from 13 to 25 as a result of the transfer of 12 full-time equivalent positions from the General Fund. The service expansion resulted in an increase in the charges for services from $2.3 million during Fiscal Year 2018 to $3.4 million in the Fiscal Year Ended June 30, 2019. The fund realized operating income of $0.8 million. The reclassification of those position resulted in a change in estimate of the pension and OPEB liabilities, thus, a restatement of the July 1, 2018 beginning net position. The ending net position grew to $1.2 million at June 30, 2019. The Golf Fund accounts for the operation of the Rolling Hills and Ken McDonald golf courses. The Golf Fund net position decreased by $29,295 compared to prior year’s decrease in net position of $0.3 million. Charges for Services increased by $0.2 million (10.0%) and there was a corresponding increase in total expenses of $0.1 million. The Internal Service Funds account for the risk management, worker’s compensation and health insurance activities of the City. The current ending net position increased by $0.8 million from $3.2 million to $4.0 million. The $0.8 million increase in net position is due primarily to contributions exceeding operating expenses 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 increase in net position of $0.8 million is due to investment earnings within the fund. All other benefit payments were made funded with City contributions. At June 30, 2019, the ending net position was $14.2 million. BUDGET HIGHLIGHTS The City’s final General Fund expenditure budget of $221.7 million differs from the original budget of $220.7 million due to budget appropriation transfers from other funds. During the year, actual revenues were greater than budgetary estimates by $11.1 million (5.1% of total budgeted revenue) in the General Fund. This is due primarily to the positive variance in charges for services and licenses and permits. Actual expenditures were under budget by $4.9 million. CAPITAL ASSETS AND DEBT ADMINISTRATION CAPITAL ASSETS The City’s capital assets for its governmental and business-type activities as of June 30, 2019 were $1.2 billion (net of accumulated depreciation). Capital assets include land, buildings, infrastructure, improvements, machinery and equipment, and construction in progress. The total increase in the City’s capital assets for the current fiscal year was $18.8 million. The tables below reflect the capital assets at the end of the fiscal year June 30, 2019 and 2018, respectively. 32 Capital Assets, Net of Depreciation- June 30, 2019 Governmental Activities Land Buildings Infrastructure Improvements Machinery and equipment Construction in progress Total $ 91,314,323 152,970,611 376,087,235 116,012,468 28,202,694 57,704,423 $ 822,291,754 Business-type Activities $ 6,693,377 21,557,177 165,620,014 114,452,149 13,493,144 52,209,884 $ 374,025,745 Total $ 98,007,700 174,527,788 541,707,249 230,464,617 41,695,838 109,914,307 $ 1,196,317,499 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 Major capital asset events during the current fiscal year included the following: Governmental Activities • The City completed several improvement projects including $7.2 million in street resurfacing, $0.4 million in police security improvements, $0.9 million in fire station renovations, $2.5 million in park improvements, and $0.9 million in other City facility improvements. Business-type Activities • The enterprise funds (predominately the Water and Wastewater Fund) incurred $28.2 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 $4.8 million in the sewer collection system assessments and rehabilitation projects. $0.9 million in flood irrigation improvements, $0.4 million in various sewer system repairs. Additionally, the Water and Wastewater Fund acquired $0.7 million in operation support vehicles. • The Emergency Medical Transportation Fund acquired three ambulances for $0.6 million for service expansion. • During the fiscal year, the Golf Fund acquired $0.8 million in golf carts through a capital lease and various other course maintenance equipment for $0.2 million. • The Solid Waste Fund acquired four refuse trucks for $1.3 million and four additional support vehicles for $0.2 million. 33 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 $1,144.7 million, which is a decrease of $13.1 million over the prior fiscal year. In the current year, the City issued general obligation bonds, refunded excise tax obligations, and defeased general obligation bonds. The largest change in long-term liabilities was the issuance of general obligation bonds for $52.1 million in principal and $10.5 million in premium. This was offset by $33.5 million in general obligation principal payments, $3.4 million in general obligation premium amortization and $9.0 million in defeased general obligation bonds. Notably, the OPEB liability for both Governmental and Business-type Activities decreased by $5.1 million due to the OPEB liability associated with the OPEB trust. There were additional decreases in the HUD 108 loan and WIFA loans. Outstanding Long-term Obligations - June 30, 2019 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 $ 183,990,000 16,035,000 87,269,000 25,046,197 2,966,000 40,972 315,347,169 $ 197,700,000 57,886,000 30,951,583 8,799,363 736,327 296,073,273 $ 381,690,000 16,035,000 145,155,000 55,997,780 2,966,000 8,799,363 777,299 611,420,442 Compensated absences Claims and judgments OPEB Pensions Total long-term obligations 32,030,165 8,677,577 70,478,941 393,078,938 $ 819,612,790 9,012,781 20,001,497 $ 325,087,551 32,030,165 8,677,577 79,491,722 413,080,435 $1,144,700,341 34 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 The City issued $52.1 million in general obligation debt with $10.5 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 $7.1 million, $12.0 million, $6.7 million, $6.2 million and $29.6 million, respectively. The City issued $9.1 million in excise tax revenue refunding obligations. The refunding obligations refunded portions of the Excise Tax Revenue Refunding Obligations series 2009A and 2009B. The primary purpose of refunding the existing debt was to take advantage of lower interest rates thereby reducing future debt service payments which resulted in an economic gain (the difference between the present values of the debt service payment on the old and new debt) of $1.5 million in the City’s Governmental and Proprietary funds. The City defeased $9.0 million of general obligation bonds. The primary purpose of the defeasance was to lower the fund balance in the General Obligation Debt Service Fund and reduce future debt service expenses. 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 $25.1 million from the fiscal year ended June 30, 2018 to the fiscal year ended June 30, 2019. 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, 2019 June 30, 2018 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 $ 425,827,274 2,214 22.9% $ 1.50 $ 400,760,799 2,166 22.6% $ 1.57 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, 2019 is $121.6 million under the 20% capacity and $69.5 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. 35 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 36 Statement of Net Position June 30, 2019 City of Tempe, Arizona Governmental Activities Business-type Activities Total Assets 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 Net OPEB assets 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 $ 236,797,131 $ 99,968,129 $ 336,765,260 25,052,959 7,510,490 1,130,458 9,052,076 1,075,847 692,751 47,672,024 16,833,630 3,663,861 482,327 307,449,954 14,351,180 621,344 1,174,101 283,569 35,352,765 495,983 52,254 112,001,112 25,052,959 21,861,670 1,751,802 9,052,076 2,249,948 976,320 83,024,789 16,833,630 4,159,844 534,581 419,451,066 91,314,323 57,704,423 6,693,377 52,209,884 98,007,700 109,914,307 152,970,611 376,087,235 116,012,468 28,202,694 1,479,705,262 21,557,177 165,620,014 114,452,149 13,493,144 638,326,182 174,527,788 541,707,249 230,464,617 41,695,838 2,118,031,444 7,820,971 64,623,464 2,121,951 74,566,386 11,014,756 3,058,485 303,060 14,376,301 18,835,727 67,681,949 2,425,011 88,942,687 20,269,553 4,110,069 16,227,618 2,661,929 30,384,463 6,691,156 800,538 3,486,631 205,117 35,332,219 26,960,709 4,910,607 19,714,249 2,867,046 65,716,682 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 1,445,000 14,590,000 - 1,445,000 14,590,000 43,929,326 759,648,464 893,266,422 25,039,311 300,048,240 371,603,212 68,968,637 1,059,696,704 1,264,869,634 15,671,091 3,372,159 19,043,250 2,593,456 462,621 3,056,077 18,264,547 3,834,780 22,099,327 491,949,237 124,836,951 616,786,188 4,202,692 1,406,820 540,012 52,249,367 1,657,563 1,836,008 423,126 122,352 2,000 16,930,571 70,642,228 641,961,976 153,206,243 278,043,194 4,202,692 1,406,820 540,012 52,249,367 1,657,563 1,836,008 423,126 122,352 2,000 16,930,571 223,848,471 920,005,170 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 medical rescue 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, 2019 Program Revenues Charges for Services Expenses Operating Grants and Contributions Capital Grants and Contributions $ $ Functions/Programs Governmental activities: Police $ 101,620,981 Fire medical rescue 44,646,087 Community services 28,463,648 Public works 110,725,592 Community development 17,550,896 Human services 21,669,347 Municipal court 4,985,853 Mayor and council 491,026 City manager 7,150,485 City attorney 3,137,658 Internal audit office 434,770 Municipal budget office 172,182 Office of strategic management and diversity 1,079,461 City clerk and elections 829,499 Internal services 15,650,001 Unallocated depreciation 1,716,431 Interest on long-term debt 12,503,655 Total governmental activities 372,827,572 Business-type activities: Water and wastewater Solid waste Emergency medical transportation Golf course Total business-type activities Total government 77,906,953 15,791,378 2,966,379 2,937,558 99,602,268 $ 472,429,840 $ 1,298,812 200,378 7,714,161 17,797,231 14,283,336 10,031 4,457,922 23,487 2,056 2,827,988 48,615,402 85,339,513 17,306,244 3,442,151 2,626,308 108,714,216 $ 157,329,618 $ 2,959,992 321,207 6,525,612 8,636,236 20,226 15,242,642 650,370 18,432 90,573 2,304 34,467,594 34,467,594 $ 856,886 661,873 37,326,330 793,101 39,638,190 39,638,190 General revenues: Sales taxes Intergovenmental revenue, unrestricted Property taxes Franchise taxes Unrestricted investment earnings Miscellaneous Gain on sale of capital assets Capital contributions 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 $ $ (96,505,291) (43,462,629) (14,223,875) (46,965,795) (2,454,233) (6,416,674) (527,931) (491,026) (6,500,115) (3,095,739) (434,770) (172,182) (988,888) (827,443) (12,819,709) (1,716,431) (12,503,655) (250,106,386) Business-type Activities $ - Total $ (96,505,291) (43,462,629) (14,223,875) (46,965,795) (2,454,233) (6,416,674) (527,931) (491,026) (6,500,115) (3,095,739) (434,770) (172,182) (988,888) (827,443) (12,819,709) (1,716,431) (12,503,655) (250,106,386) (250,106,386) 7,432,560 1,514,866 475,772 (311,250) 9,111,948 9,111,948 7,432,560 1,514,866 475,772 (311,250) 9,111,948 (240,994,438) 177,596,413 48,024,343 48,706,817 3,036,531 7,936,949 5,924,186 674,569 603,077 292,502,885 42,396,499 599,565,477 641,961,976 3,614,531 1,124,986 199,388 32,552 (603,077) 4,368,380 13,480,328 264,562,866 278,043,194 177,596,413 48,024,343 48,706,817 3,036,531 11,551,480 7,049,172 873,957 32,552 296,871,265 55,876,827 864,128,343 920,005,170 $ $ 39 Balance Sheet Governmental Funds June 30, 2019 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 $ 97,119,920 $ 15,323,541 6,968,565 657,915 13,189,459 241,024 2,582,167 2,137,601 138,220,192 $ 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 6,504,722 3,639,484 4,084,325 572,139 14,800,670 $ 45,407,735 $ 6,748,045 164,872 4,389,291 3,134,314 1,526,260 61,370,517 $ 7,060,631 50,711 2,130,000 993,271 10,234,613 $ $ $ 748,649 29,022 35,192,903 35,970,574 29,693 11,239,153 17,025,000 3,771,384 32,065,230 3,712,980 902,416 751,934 265,318 5,632,648 299,936 1,526,260 3,388,064 5,214,260 441,843 441,843 491,024 106,684 480,675 18,713,280 97,995,211 117,786,874 26,686,269 11,201,499 8,033,876 45,921,644 3,463,501 3,463,501 138,220,192 $ 61,370,517 $ 35,970,574 City of Tempe, Arizona Special Assessment Debt Service $ 7,681 $ 293,454 398,985 16,833,630 17,533,750 $ 85,000 398,985 483,985 $ 16,197,523 $ 1,623,104 17,820,627 $ 17,127,084 17,127,084 17,533,750 748,194 748,194 $ 61,835,340 $ 2,232,724 58,286 6,229 3,039,681 834,823 692,751 6,363,655 75,063,489 $ - (77,319) (77,319) $ Other Governmental Funds Transit Capital Projects 17,072,433 17,072,433 $ 17,820,627 $ 5,492,584 470,585 473,914 1,950,306 2,004,790 5,720,000 345,823 16,458,002 Total Governmental Funds $ 220,568,199 $ 25,052,959 7,055,873 1,122,470 13,189,459 9,052,076 1,075,847 692,751 47,672,024 16,833,630 3,663,861 345,979,149 $ 19,835,824 4,110,069 4,608,950 13,189,459 2,661,929 24,875,000 5,509,463 74,790,694 898,833 178,508 39,636 1,116,977 3,712,980 1,198,769 178,508 2,428,676 4,179,634 707,161 17,127,084 29,532,812 1,527,574 17,899,466 35,151,647 4,274,740 (1,364,917) 57,488,510 2,018,598 65,228,353 46,833,821 31,021,896 96,552,975 241,655,643 75,063,489 41 $ 345,979,149 Reconciliation of the Balance Sheet to the Statement of Net Position June 30, 2019 City of Tempe, Arizona Fund balances- total governmental funds $ 241,655,643 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 1,654,476,693 (832,184,939) 822,291,754 The equity in joint venture is not a financial resource and, therefore, is not reported in the funds. 307,449,954 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 17,127,084 1,498,731 2,428,676 3,712,980 4,765,341 29,532,812 Bond premiums and the deferred charge on refundings are not financial resources and, therefore, are not reported in the funds. (8,195,226) 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 (32,030,165) (8,677,577) (343,497,930) (71,161,508) (299,330,972) (754,698,152) 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 3,925,191 $ The notes to the financial statements are an integral part of this statement. 42 641,961,976 City of Tempe, Arizona 43 Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Fiscal Year Ended June 30, 2019 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 $ 113,051,026 20,533,256 3,036,531 $ 43,063,185 - 17,958,644 22,408,078 7,657,621 4,807,042 5,494,397 13,197,912 6,434,188 359,315 6,951,095 8,434,280 230,323,385 1,568,492 6,226,000 2,114,818 11,522,473 1,351 64,496,319 $ 28,173,553 123,009 28,296,562 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 89,906,114 38,468,308 19,445,469 13,583,975 13,762,094 9,980,798 4,599,924 495,829 6,594,336 3,497,353 459,746 261,798 998,200 910,335 15,715,866 55,668,805 - 218,680,145 2,130,000 1,986,542 4,536 59,789,883 29,115,000 9,969,510 333,601 39,418,111 Excess (deficiency) of revenues over expenditures before other financing sources (uses) 11,643,240 4,706,436 (11,121,549) 20,750 (4,492,142) 416,652 (4,054,740) 3,133,840 (9,416,394) 24,182 (6,258,372) 6,993,346 (8,983,336) 795,061 2,665,000 1,470,071 - Other financing sources (uses): Transfers in Transfers out Issuance of debt Premium on issuance of debt Proceeds from sale of capital assets Issuance of refunding bonds Total other financing sources (uses) Net change in fund balance Fund balance at beginning of year Fund balance (deficit) at end of year $ 7,588,500 (1,551,936) (9,651,478) 110,198,374 117,786,874 47,473,580 45,921,644 13,114,979 3,463,501 The notes to the financial statements are an integral part of this statement. 44 $ $ City of Tempe, Arizona Special Assessment Debt Service $ - $ 514 1,990,732 6,151 1,997,397 - $ 2,556,339 53,169 15,736 439,638 3,064,882 144 $ Other Governmental Funds Transit Capital Projects - 8,823,434 - Total Governmental Funds $ 164,937,645 48,706,809 3,036,531 18,859,529 619,642 12,658,768 3,738,405 188,989 4,831,630 757,716 2,979,705 563,882 54,021,700 22,984,360 619,642 30,617,412 22,408,078 7,657,621 14,824,616 7,936,949 29,552,529 7,191,904 3,778,658 1,990,732 6,951,095 9,005,664 382,200,245 3,171,974 328,731 5,783,125 9,839,442 2,862,868 16,263,926 533,433 803,312 18,432 90,573 - 93,078,088 38,797,039 25,228,594 79,092,222 16,624,962 26,244,724 5,133,357 495,829 7,397,648 3,515,785 459,746 261,798 1,088,773 910,335 15,716,010 1,380,000 831,570 1,500 2,213,214 9,972,189 9,972,189 6,143,000 738,576 4,594 43,546,032 90,128,018 38,768,000 13,526,198 344,231 53,518,221 420,201,560 (215,817) (6,907,307) (36,106,318) (38,001,315) - 9,316,576 (3,061,927) 759,990 7,014,639 19,265,362 (12,172,998) 27,130,000 4,860,000 19,350 39,101,714 38,729,874 (38,126,797) 27,130,000 5,655,061 1,220,174 2,665,000 37,273,312 (215,817) 107,332 2,995,396 (728,003) 138,498 (77,319) 16,965,101 17,072,433 54,493,114 57,488,510 242,383,646 241,655,643 $ $ $ 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, 2019 City of Tempe, Arizona Net change in fund balances- total governmental funds $ (728,003) 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) 1,444,879 1,626,716 3,071,595 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 (151,459) (51,197) (76,790) (1,113,974) (1,393,420) 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 53,518,221 33,474,787 (46,297,274) 40,695,734 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 33,402,544 (38,121,811) (4,719,267) 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 24,638 24,638 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 (1,090,002) 2,456,776 1,366,774 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 (29,795,000) (5,655,061) 38,768,000 3,317,939 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 760,509 $ The notes to the financial statements are an integral part of this statement. 46 42,396,499 Statement of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual General Fund For the Fiscal Year Ended June 30, 2019 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) $ 135,781,062 52,856,182 1,700,000 9,547,441 5,612,329 3,991,000 359,315 7,099,831 216,947,160 $ 135,781,062 52,856,182 1,700,000 9,547,441 5,612,329 3,991,000 359,315 7,099,831 216,947,160 $ 136,620,813 52,831,385 3,228,452 13,197,912 6,434,188 6,951,095 359,315 8,434,280 228,057,440 90,432,797 37,640,519 20,565,750 14,412,283 14,625,093 9,142,314 471,784 4,724,723 7,340,548 3,388,518 530,752 284,898 1,009,214 1,011,140 29,181,379 1,916,657 (15,974,695) 220,703,674 90,801,040 37,935,866 20,643,249 14,249,827 14,810,573 10,654,623 471,784 4,724,723 7,340,548 3,493,218 530,752 284,898 1,009,214 1,011,140 28,696,397 1,052,685 (15,974,695) 221,735,842 87,442,651 38,119,023 19,935,505 13,494,580 13,739,316 10,359,627 495,542 4,591,520 6,853,177 3,494,887 459,794 262,097 997,760 919,387 32,170,576 (16,510,377) 216,825,065 3,358,389 (183,157) 707,744 755,247 1,071,257 294,996 (23,758) 133,203 487,371 (1,669) 70,958 22,801 11,454 91,753 (3,474,179) 1,052,685 535,682 4,910,777 20,750 (3,152,823) 332,585 (2,799,488) (6,556,002) 20,750 (3,152,823) 332,585 (2,799,488) $ (7,588,170) 20,750 (4,492,142) 416,652 (4,054,740) 7,177,635 (1,339,319) 84,067 (1,255,252) 14,765,805 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 2,265,945 (2,330,406) 934,126 (458,800) $ 7,588,500 $ $ 839,751 (24,797) 1,528,452 3,650,471 821,859 2,960,095 1,334,449 11,110,280 Statement of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Transit Special Revenue Fund For the Fiscal Year Ended June 30, 2019 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 Total other financing sources (uses) Net change in fund balance Actual Amounts (Budgetary Basis) Variance with Final Budget Positive (Negative) $ $ $ 42,859,114 8,542,689 640,000 12,430,050 130,000 564,875 65,166,728 $ 42,859,114 8,542,689 640,000 12,430,050 130,000 564,875 65,166,728 43,063,185 8,094,428 1,296,180 13,643,834 42,515 66,140,142 57,938,199 188,000 58,010,112 188,000 54,473,051 - 3,537,061 188,000 2,130,000 2,381,330 62,637,529 2,130,000 2,381,330 62,709,442 2,130,000 1,991,078 58,594,129 390,252 4,115,313 (10,081,654) (10,081,654) (10,081,654) (10,081,654) 3,133,840 (9,416,394) 24,182 (6,258,372) 3,133,840 665,260 24,182 3,823,282 $ (7,552,455) $ (7,624,368) 1,287,641 $ 8,912,009 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 revenues on a budget basis, rather than on a modified accrual basis The City recognizes certain other expenditures on a budget 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. 48 860,877 (10,708) (2,504,700) (1,185,046) $ (1,551,936) 204,071 (448,261) 656,180 1,213,784 (130,000) (522,360) 973,414 City of Tempe, Arizona 49 Statement of Net Position Proprietary Funds June 30, 2019 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, net Accrued interest receivable Due from other funds Prepaid expense Inventories Total current assets Noncurrent assets: Advance to other funds Notes receivable Net OPEB assets 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 95,653,115 35,352,765 11,540,920 574,026 1,306,417 1,174,101 145,601,344 4,315,014 1,247,157 37,016 5,599,187 1,560,345 1,560,345 2,758 10,302 283,569 296,629 $ 99,968,129 35,352,765 14,351,180 621,344 1,306,417 283,569 1,174,101 153,057,505 $ 16,228,932 454,617 7,988 16,691,537 2,873,802 495,983 35,724 112,001,112 13,206 - 2,069 - 1,255 - 2,873,802 495,983 52,254 112,001,112 1,663 - 6,330,829 46,714,221 340,429,268 206,579,758 15,531,275 51,935,091 (307,243,250) 1,265,783 15,709,131 238,217 (10,152,195) 1,444,675 (198,159) 362,548 1,822,663 3,210,587 1,368,293 2,336,239 36,576 (3,695,805) 6,693,377 49,802,667 343,639,855 207,948,051 35,021,320 52,209,884 (321,289,409) - 360,277,192 475,683,813 7,060,936 7,074,142 1,246,516 1,248,585 5,441,101 5,442,356 374,025,745 489,448,896 1,663 621,285,157 12,673,329 2,808,930 5,738,985 642,506,401 16,693,200 11,014,756 2,049,354 205,316 13,269,426 771,626 73,083 844,709 164,300 16,046 180,346 73,205 8,615 81,820 11,014,756 3,058,485 303,060 14,376,301 89,355 7,008 96,363 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 5,857,129 800,538 2,493,325 205,117 5,397,219 18,925,000 11,010,000 798,900 - 453,643 804,218 - 22,928 68,321 289,045 - 357,456 120,767 1,017,372 255,411 $ 6,691,156 800,538 3,486,631 1,306,417 205,117 5,397,219 18,925,000 11,010,000 798,900 255,411 $ 433,729 11,618,668 - 45,487,228 1,257,861 380,294 1,751,006 48,876,389 12,052,397 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 218,512,042 68,025,541 8,000,463 6,182,212 13,676,901 314,397,159 1,966,252 5,048,615 7,014,867 527,825 796,750 1,324,575 2,873,802 480,916 336,492 479,231 4,170,441 2,873,802 218,512,042 68,025,541 8,000,463 480,916 9,012,781 20,001,497 326,907,042 86,061 635,579 721,640 Total liabilities 359,884,387 8,272,728 1,704,869 5,921,447 375,783,431 12,774,037 1,773,390 316,973 2,090,363 654,619 106,367 760,986 103,309 24,107 127,416 62,138 15,174 77,312 2,593,456 462,621 3,056,077 82,411 7,924 90,335 114,698,527 157,881,306 $ 272,579,833 7,060,936 (2,576,612) 4,484,324 1,246,516 (89,525) 1,156,991 1,830,972 (2,008,926) (177,954) 124,836,951 153,206,243 $ 278,043,194 3,925,191 3,925,191 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 $ $ $ Statement of Revenues, Expenses and Changes in Net Position Proprietary Funds For the Year Ended June 30, 2019 City of Tempe, Arizona Business-type Activities - Enterprise Funds Golf Course Total Governmental ActivitiesInternal Service Funds 3,442,151 296,858 3,739,009 $ 2,626,308 10,064 2,636,372 $ 108,714,216 1,124,986 109,839,202 $ 40,367,259 40,367,259 1,535,206 317,156 985,350 128,667 2,966,379 772,630 605,680 371,526 1,404,429 506,534 2,888,169 (251,797) 20,928,040 6,810,734 32,517,380 22,935,420 83,191,574 26,647,628 39,697,380 39,697,380 669,879 - (49,389) 161,315 - 3,614,531 (10,124,229) 199,388 (6,286,465) 90,630 - 1,700,065 772,630 (139,871) 14,050,853 760,509 (47,360) 6,059,402 (7,168,178) 10,561,893 79,912 400,000 (4,877) 2,175,100 772,630 110,576 (29,295) 32,552 6,569,978 (7,173,055) 13,480,328 760,509 262,017,940 $ 272,579,833 2,309,224 $ 4,484,324 (148,659) (177,954) 264,562,866 $ 278,043,194 3,164,682 $ 3,925,191 Water and Wastewater Solid Waste Operating revenues: Charges for services Miscellaneous Total operating revenues $ 85,339,513 772,109 86,111,622 $ 17,306,244 45,955 17,352,199 Operating expenses: Personnel services Supplies and materials Fees and services Depreciation Total operating expenses Operating income (loss) 13,697,077 5,398,179 21,379,309 21,071,083 61,545,648 24,565,974 5,090,077 723,873 8,748,292 1,229,136 15,791,378 1,560,821 3,477,970 (10,074,840) 35,390 (6,286,465) 136,561 2,683 - 11,718,029 Nonoperating revenues (expenses): Investment income (loss) Interest and fiscal fees Gain (loss) on sale of capital assets Net loss from joint venture Income (loss) before contributions and operating transfers Capital contributions Transfers in Transfers out Change in net position Total net position- beginning, restated Total net position- ending The notes to the financial statements are an integral part of this statement. 52 Emergency Medical Transportation $ $ 384,361 1,156,991 $ Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2019 City of Tempe, Arizona Business-type Activities- Enterprise Funds 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 Water and Wastewater Solid Waste Emergency Medical Transportation $ $ $ Cash flows from noncapital financing activities: Advances from/(to) other funds Transfers in Transfers out Net cash provided (used) by noncapital financing activities 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 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 87,453,549 (14,917,252) (26,736,440) 45,799,857 17,351,476 (5,685,983) (10,173,285) 1,492,208 3,301,392 (1,418,226) (1,289,144) 594,022 Golf Course $ 2,633,614 (564,207) (1,779,132) 290,275 Total $ 110,740,031 (22,585,668) (39,978,001) 48,176,362 Governmental ActivitiesInternal Service Funds $ 39,975,808 (37,724,898) 2,250,910 (313,448) 6,059,402 (7,168,178) (1,422,224) 400,000 (4,877) 395,123 169,427 169,427 144,021 110,576 254,597 6,569,978 (7,173,055) (603,077) - 37,670,463 (40,519,768) (8,956,125) (29,085,136) (4,617,815) 31,894 35,390 (45,441,097) (1,693,116) 21,230 (1,671,886) (763,449) (763,449) (137,283) (279,346) (49,389) (242,132) 161,315 (546,835) 37,670,463 (137,283) (40,519,768) (279,346) (9,005,514) (31,783,833) (4,617,815) 31,894 217,935 (48,423,267) - 3,337,691 338,687 3,676,378 131,780 131,780 - 1,963 1,963 3,471,434 338,687 3,810,121 87,142 87,142 2,612,914 128,392,966 347,225 3,967,789 - - 2,960,139 132,360,755 2,338,052 13,890,880 $ 131,005,880 $ 4,315,014 $ - $ - $ 135,320,894 $ 16,228,932 $ 24,565,974 $ 1,560,821 $ 772,630 $ (251,797) $ 26,647,628 $ 669,879 (391,451) (1,663) 283,987 1,768,781 1,060 27,962 (104,647) (2,998) 2,250,910 Reconciliation of operating income (loss) to net cash provided (used) by operating activities: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation Change in assets and liabilities: (Increase) decrease in receivables (Increase) decrease in prepaid expenses (Increase) decrease in inventories (Increase) decrease in net OPEB asset 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 Noncash investing, capital, and financing activities: Net loss from joint venture Capital contributions Total noncash investing, capital, and financing activities: 21,071,083 1,229,136 128,667 506,534 22,935,420 $ 1,341,927 (404,849) (35,724) (10,258) 456,155 1,706 (47,324) 772,449 (1,521,597) (389,685) 45,799,857 $ (723) (13,206) (54,277) (646,843) (23,732) (34,575) 267,891 (672,260) (120,024) 1,492,208 $ (437,617) (2,069) 13,362 34,305 34,443 83,719 (1,245) (32,173) 594,022 $ (2,758) (283,569) (1,255) 280,392 6,262 (4,975) 36,862 27,304 (22,725) 290,275 $ 900,829 (283,569) (404,849) (52,254) (64,535) 103,066 18,541 (52,431) 1,160,921 (2,167,798) (564,607) 48,176,362 $ $ (6,286,465) $ - $ - $ - $ (6,286,465) $ - $ (47,360) (6,333,825) $ 79,912 79,912 $ - $ - $ 32,552 (6,253,913) $ - 53 The notes to the financial statements are an integral part of this statement. - Statement of Net Position Fiduciary Fund For the Fiscal Year Ended June 30, 2019 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 $ 14,187,536 14,187,536 14,187,536 14,187,536 Statement of Changes In Net Position Fiduciary Fund For the Fiscal Year Ended June 30, 2019 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 8,461,506 236,922 621,671 (62,307) 796,286 Total additions 9,257,792 Deductions: Benefit payments Total deductions 8,461,506 8,461,506 Change in net position 796,286 Net position- beginning Net position- ending 13,391,250 14,187,536 $ The notes to the financial statements are an integral part of these statements. 54 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 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, 2019, the City implemented the provisions of GASB Statement No. 88, Certain Disclosures Related to Debt, including Direct Borrowings and Direct Placements. For the City, the primary objective of this Statement is to improve the information that is disclosed in the notes to the financial statements related significant events of default on direct placement debt. During the Fiscal Year, additional information is provided for two outstanding direct placement debt issuances; the 2017 Transit Excise Tax Revenue Refunding Obligations and the 2017 Excise Tax Revenue Refunding Obligations (see note 9). 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, 2019 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, 2019 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, 2019 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. 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. 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. 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, 2019 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, 2019 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, 2019 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 2019 Expenditure Limitation is $507,146,336. 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. Investment income is composed of interest, dividends, and net changes in the fair value of applicable investments. Investment income is included in other local revenue in the governmental fund financial statements and in nonoperating revenues in the proprietary fund financial statements. H. Receivables For accounts receivable, all amounts are net of allowance for doubtful accounts. 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 the government-wide and fund financial statements. Prepaid items are recorded as expenses when consumed in the government-wide financial statements. Prepaid items are recorded as expenditures when consumed in the fund financial statements. In fund financial statements, inventory and prepaid items represent amounts that are not in spendable form, even though they are a component of assets. Such amounts are presented as a component of non-spendable fund balance. 61 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 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 $2.6 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, 2019 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. Net Position Flow Assumption In the government-wide and proprietary fund financial statements the City applies restricted resources first when outlays are incurred for purposes for which either restricted or unrestricted amounts are available. 63 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 City of Tempe, Arizona NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) R. 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. S. 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). T. 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. U. 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. 64 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 City of Tempe, Arizona 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. 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 $7,222,232 and the bank balance was $5,827,241; $5,327,241 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. 65 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 City of Tempe, Arizona NOTE 4 - CASH AND INVESTMENTS (Continued) Cash and investments as of June 30, 2019 are classified in the accompanying financial statements as follows: Carrying amount of investments Carrying amount of cash deposits Total cash and investments $426,755,353 7,222,232 $433,977,585 Pooled cash and investments – unrestricted Restricted cash and investments Investments in OPEB trust Total cash and investments $336,765,260 83,024,789 14,187,536 $433,977,585 The City had a net increase in the fair value of investments during Fiscal Year 2019 of $1,765,412. This amount takes into account all changes in fair value (including purchases and sales) that occurred during the year. At June 30, 2019, the City maintained the following investments and maturities: US government treasuries US government treasuries Money market Principal cash held with trustee State investment pool Mutual funds Remaining Maturity in Months 13 – 24 25 – 36 Months Months $ 73,133,017 $ 39,445,946 Category Level 2 Fair Value $ 186,307,334 12 Months or Less $ 64,838,617 Level 2 125,983,118 36,628,328 36,913,779 52,441,011 - Level 1 Level 1 69,614,919 10,865,971 69,614,919 10,865,971 - - - N/A 19,843,945 19,843,945 - - - 14,140,066 $426,755,353 14,140,066 $215,931,846 Level 1 $110,046,796 $ 91,886,957 37 - 48 Months $ 8,889,754 $ 8,889,754 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, 2019 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 AAA by Moody’s. The mutual funds in the OPEB Trust ranged from AA 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, 2019, 43.66% of the City’s investments are in US Treasuries, 9.88% of the City’s investments are in Fannie Mae, 8.10% of the City’s investments are in Federal Home Loan Bank, 11.55% of the City’s investments are in Federal Home Loan Mortgage Corporation securities, and 16.31% in money market funds. 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, 2019: General fund Debt service fund Non-major governmental fund Total governmental funds Due to 11,239,153 1,950,306 $ 13,189,459 Due from $ 13,189,459 $ 13,189,459 Due to 289,045 1,017,372 $ 1,306,417 Due from $ 1,306,417 $ Water and wastewater fund Emergency medical transportation fund Golf fund Total enterprise funds $ $ 1,306,417 The interfund balances at June 30, 2019 are short-term transfers to cover temporary cash deficits in various funds. All interfund balances outstanding at June 30, 2019 are expected to be repaid within one year. 67 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 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 $ - $ - Transit Special Revenue 71,913 - General Obligation Debt Service 648,270 - General Obligation Debt Service $ - Transit Capital Projects $ - - 3,061,927 - - $ 195,979 Water and Wastewater Solid Waste $ Total 20,750 $ - - - 3,133,840 4,877 6,993,346 6,144,220 - $ 20,750 - 9,316,576 - 19,265,362 Transit Capital Projects - 9,316,576 - - Non-major Governmental 3,735,383 99,818 2,923,934 - 11,977,019 Water and Wastewater - - 6,059,402 - - - 6,059,402 Solid Waste - - - - - 400,000 - 400,000 Golf 36,576 - - - - 74,000 - Emergency Medical Transportation - - - - - Health - - - - - Total $ 4,492,142 $ 9,416,394 - Non-major Governmental - $ 8,983,336 $ 3,061,927 $ 12,172,998 529,208 - $ 7,168,178 110,576 - - $ 4,877 $ 45,299,852 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, 2019 was $2,873,802. NOTE 6 – CAPITAL IMPROVEMENT NOTES RECEIVABLE On November 10, 2004, the City entered into an intergovernmental agreement with the Arizona Sports and Tourism Authority (“AZSTA”) 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 AZSTA 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 AZSTA’s portion. Payments are received semi-annually, and any unpaid interest is capitalized. Due to capitalizing interest, at June 30, 2019 the General Fund capital improvement note receivable balance for this agreement is $1,887,601. In August 2008, the City advanced to the Downtown Tempe Authority (DTA) $250,000 to begin operations. The DTA is to repay the advance at zero percent interest rate when the district is terminated. At June 30, 2019 the General Fund capital improvement note receivable balance for this agreement is $250,000. 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, 2019, 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, 2019 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, 2019 was $295,134 for this agreement. 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, 2019 was $200,849 for this agreement. 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, 2018 (the latest information available), the City has a 15.48% 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, 2018 (the latest information available) is as follows (in thousands): Total assets Total liabilities Total net position $ 714,798 (30,972) $ 683,826 Total revenues Total expenses Total non-operating revenues (expenses) Net decrease in net position $ 73,244 (84,703) (186) ($ 11,645) 69 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 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, 2019, was $ 112,001,112. The City’s net loss from joint venture was $ 6,286,465 for the fiscal year ended June 30, 2019. 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, 2019, the City has a 19.82% (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, 2018 (the latest information available) is as follows: Total assets Total liabilities Total net position $ 1,507,283,952 (107,646,761) $ 1,399,637,191 Operating revenues Operating expenses Non-operating revenues Non-operating expenses Capital Contributions Net increase in net position $ 13,361,446 (95,180,383) 44,072,802 (23,219,997) 142,017,878 $ 81,051,746 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, 2019 was $298,553,612. During the fiscal year ended June 30, 2019, the equity in joint venture increased by $33,881,737. This is primarily due to the funding of the transit streetcar project through capital grants and contributions toward the project. 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, 2019 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 $953,430. As of June 30, 2019, the City’s net investment in RWC was $8,896,342 (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, 2018 (the latest information available) is as follows (in thousands): Total assets Total liabilities Total net position $ 79,501 (4,289) $ 75,212 Total revenues Total expenses Net decrease in net position $ 10,828 (17,294) ($ 6,466) The Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2018, for the RWC may be obtained from the Regional Wireless Cooperative, 200 West Washington Street, 7th Floor, Phoenix, Arizona, 85003-1611. 71 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 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, 2019 is as follows: Balances June 30, 2018 Additions Governmental activities: Non-depreciable assets: Land Construction-in-progress Total non-depreciable assets $ 89,605,173 21,988,411 111,593,584 $ 2,213,846 52,564,790 54,778,636 Depreciable assets: Buildings Infrastructure Improvements Machinery and equipment Total depreciable assets 310,644,847 810,988,190 205,194,259 161,956,962 1,488,784,258 Accumulated depreciation: Buildings Infrastructure Improvements Machinery and equipment Total accumulated depreciation (147,657,419) (424,535,955) (84,302,564) (130,688,721) (787,184,659) Governmental activities capital assets, net $ 813,193,183 $ 11,405,134 Retirements $ Transfers in (out) Balances June 30, 2019 $ (504,696) (1,760,958) (15,087,820) (1,760,958) (15,592,516) $ 91,314,323 57,704,423 149,018,746 2,923,772 2,923,772 (1,301,924) (1,301,924) 998,121 8,258,005 4,286,827 1,508,888 15,051,841 311,642,968 819,246,195 209,481,086 165,087,698 1,505,457,947 (11,014,938) (18,623,005) (9,166,054) (7,493,277) (46,297,274) 1,293,567 1,293,567 3,427 3,427 (158,672,357) (443,158,960) (93,468,618) (136,885,004) (832,184,939) (537,248) $ 822,291,754 $ (1,769,315) $ 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 $ $ 4,839,568 1,868,034 3,869,849 31,723,782 1,399,868 99,829 88,896 997 659 689,361 1,716,431 46,297,274 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 City of Tempe, Arizona NOTE 8 - CAPITAL ASSETS (Continued) Balances June 30, 2018 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 29,751,645 36,445,022 $ Additions Retirements 29,155,270 29,155,270 $ 3,982,333 3,982,333 49,802,667 337,494,187 207,948,051 31,989,155 627,234,060 Accumulated depreciation: Buildings (26,983,450) (1,262,040) Infrastructure (167,293,160) (10,726,681) Improvements (85,185,015) (8,310,887) Machinery and equipment (19,856,536) (2,635,812) Total accumulated depreciation (299,318,161) (22,935,420) Business-type activities capital assets, net $ 364,360,921 $ 10,202,183 (551,363) (551,363) Transfers in (out) $ (986,147) (986,147) $ (569,911) $ 6,693,377 (6,145,668) 52,209,884 (6,145,668) 58,903,261 6,145,668 35,979 6,181,647 967,599 967,599 Balances June 30, 2019 49,802,667 343,639,855 207,948,051 35,021,320 636,411,893 (28,245,490) (178,019,841) (93,495,902) (3,427) (21,528,176) (3,427) (321,289,409) $ 32,552 $374,025,745 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 $ $ 21,071,083 1,229,136 128,667 506,534 22,935,420 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 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, $52,120,000 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, 2019, were as follows (the 7/1/2019 principal payment was deducted as the Fiscal Year 2019 resources were dedicated): $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% 2,725,000 $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% 14,370,000 $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% 1,195,000 $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% 2,250,000 $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% 10,400,000 $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% 23,935,000 $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% 40,260,000 $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% 32,630,000 $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% 11,980,000 $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% 26,685,000 $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% 37,165,000 $52,120,000 2019 Capital Improvement Serial Bonds due in annual installments of $1,635,000 to $3,785,000 beginning July 1, 2020 through July 1, 2039; interest at 2.00% to 5.00% 52,120,000 Total general obligation bonds outstanding (excluding current portion of general obligation bonds outstanding) $ 381,690,000 74 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 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, 2020 2021 2022 2023 2024 2025-2029 2030-2034 2035-2039 Principal Interest Total $ 37,305,000 38,030,000 36,930,000 36,110,000 33,800,000 113,840,000 55,625,000 30,050,000 $ 15,143,592 13,603,905 12,296,492 10,987,850 9,653,878 31,222,497 13,464,467 3,598,600 $ 52,448,592 51,633,905 49,226,492 47,097,850 43,453,878 145,062,497 69,089,467 33,648,600 $ 381,690,000 $ 109,971,281 $ 491,661,281 The following is a summary of governmental debt service cash requirements to maturity (net of 35% federal credit): Fiscal Year Ending June 30, 2020 2021 2022 2023 2024 2025-2029 2030-2034 2035-2039 Principal Interest Total $ 16,875,000 16,570,000 15,760,000 15,035,000 13,775,000 60,215,000 35,025,000 10,735,000 $ 7,014,414 6,373,252 5,825,924 5,311,722 4,753,019 16,319,633 6,074,479 1,234,900 $ 23,889,414 22,943,252 21,585,924 20,346,722 18,528,019 76,534,633 41,099,479 11,969,900 $ 183,990,000 $ 52,907,343 $ 236,897,343 The following is a summary of enterprise debt service cash requirements to maturity: Fiscal Year Ending June 30, 2020 2021 2022 2023 2024 2025-2029 2030-2034 2035-2039 Principal Interest Total $ 20,430,000 21,460,000 21,170,000 21,075,000 20,025,000 53,625,000 20,600,000 19,315,000 $ 8,129,177 7,230,652 6,470,569 5,676,128 4,900,859 14,902,864 7,389,988 2,363,701 $ 28,559,177 28,690,652 27,640,569 26,751,128 24,925,859 68,527,864 27,989,988 21,678,701 $ 197,700,000 $ 57,063,938 $ 254,763,938 75 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 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, 2019, the special assessments receivable of $16,067,891, 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, 2019, there is $323,465 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 $442,274 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, 2019, were as follows: $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% Total special assessment bonds outstanding $ 420,000 15,615,000 $ 16,035,000 The following is a summary of debt service cash requirements to maturity: Fiscal Year Ending June 30, Principal 2020 2021 2022 2023 2024 2025-2029 $ 1,445,000 1,520,000 1,370,000 1,435,000 1,510,000 8,755,000 $ $ 16,035,000 76 Interest Total 762,768 690,533 619,250 549,125 475,500 1,136,874 $ 2,207,768 2,210,533 1,989,250 1,984,125 1,985,500 9,891,874 $ 4,234,050 $ 20,269,050 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue and Refunding Obligations 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 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 7/1/2019 principal payment was deducted as the fiscal year 2019 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 $ 4,495,000 7,300,000 $ 11,795,000 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 2020 2021 2022 2023 2024 2025 $ 1,425,000 1,500,000 1,570,000 7,300,000 $ 323,008 251,758 176,758 98,258 98,258 98,258 $ 1,748,008 1,751,758 1,746,758 98,258 98,258 7,398,258 $ 11,795,000 $ 1,046,298 $ 12,841,298 Interest 77 Total Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 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, 2020 2021 2022 2023 2024 2025 Principal $ Interest Total 35,000 35,000 40,000 7,300,000 $ 104,008 102,258 100,258 98,258 98,258 98,258 $ 139,008 137,258 140,258 98,258 98,258 7,398,258 $ 7,410,000 $ 601,298 $ 8,011,298 The following is a summary of enterprise debt service cash requirements to maturity: Fiscal Year Ending June 30, Principal 2020 2021 2022 $ 1,390,000 1,465,000 1,530,000 $ 219,000 149,500 76,500 $ 1,609,000 1,614,500 1,606,500 $ 4,385,000 $ 445,000 $ 4,830,000 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. 78 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 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 7/1/2019 principal payment was deducted as the fiscal year 2019 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, 2020 Principal Interest Total $ 3,295,000 $ 138,850 $ 3,433,850 $ 3,295,000 $ 138,850 $ 3,433,850 79 $ 3,295,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 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 7/1/2019 principal payment was deducted as the fiscal year 2019 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 2020 2021 2022 2023 2024 2025-2029 2030-2032 $ 1,995,000 2,090,000 2,195,000 5,125,000 2,425,000 4,585,000 1,710,000 $ 942,375 842,625 738,125 628,375 372,125 653,575 120,413 $ 2,937,375 2,932,625 2,933,125 5,753,375 2,797,125 5,238,575 1,830,413 $ 20,125,000 $ 4,297,613 $ 24,422,613 Interest 80 Total $ 20,125,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 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, 2020 2021 2022 2023 2024 2025 Principal $ Interest 1,630,000 1,710,000 1,795,000 4,705,000 1,985,000 2,080,000 $ 13,905,000 $ 695,250 613,750 528,250 438,500 203,250 104,000 $ 2,583,000 Total $ 2,325,250 2,323,750 2,323,250 5,143,500 2,188,250 2,184,000 $ 16,488,000 The following is a summary of enterprise debt service cash requirements to maturity: Fiscal Year Ending June 30, 2020 2021 2022 2023 2024 2025-2029 2030-2032 Principal Interest $ 365,000 380,000 400,000 420,000 440,000 2,505,000 1,710,000 $ 247,125 228,875 209,875 189,875 168,875 549,575 120,413 $ 6,220,000 $ 1,714,613 Total $ 612,125 608,875 609,875 609,875 608,875 3,054,575 1,830,413 $ 7,934,613 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. 81 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue and Refunding Obligations (Continued) In the following outstanding balance, the 7/1/2019 principal payment was deducted as the fiscal year 2019 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% $ 31,270,000 The following is a summary of total debt service cash requirements to maturity: Fiscal Year Ending June 30, Principal Interest Total 2020 2021 2022 2023 2024 2025-2029 2030-2034 2035-2037 $ 1,265,000 1,310,000 1,375,000 1,445,000 1,520,000 8,825,000 10,795,000 4,735,000 $ 1,357,794 1,307,194 1,241,694 1,172,944 1,100,694 4,283,969 2,319,163 323,156 $ 2,622,794 2,617,194 2,616,694 2,617,944 2,620,694 13,108,969 13,114,163 5,058,156 $ 31,270,000 $ 13,106,608 $ 44,376,608 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. 82 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue and Refunding Obligations (Continued) In the following outstanding balance, the 7/1/2019 principal payment was deducted as the fiscal year 2019 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% $ 21,280,000 The following is a summary of total debt service cash requirements to maturity: Fiscal Year Ending June 30, Principal Interest Total 2020 2021 2022 2023 2024 2025-2029 2030-2033 $ 1,090,000 1,140,000 1,200,000 1,260,000 1,325,000 7,680,000 7,585,000 $ 1,026,075 971,575 914,575 854,575 791,575 2,896,125 872,100 $ 2,116,075 2,111,575 2,114,575 2,114,575 2,116,575 10,576,125 8,457,100 $ 21,280,000 $ 8,326,600 $ 29,606,600 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. 83 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 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 7/1/2019 principal payment was deducted as the fiscal year 2019 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, 2020 2021 2022 2023 2024 2025-2029 2030-2031 Principal Interest Total 1,135,000 1,190,000 2,830,000 1,665,000 9,445,000 4,450,000 $ 1,035,750 1,035,750 979,000 919,500 778,000 2,571,000 336,500 $ 1,035,750 2,170,750 2,169,000 3,749,500 2,443,000 12,016,000 4,786,500 $ 20,715,000 $ 7,655,500 $ 28,370,500 $ The following is a summary of governmental debt service cash requirements to maturity: Fiscal Year Ending June 30, 2020 2021 2022 2023 2024 2025 Principal Interest Total $ 332,000 345,000 400,000 39,000 43,000 $ 57,950 57,950 41,350 24,100 4,100 2,150 $ 57,950 389,950 386,350 424,100 43,100 45,150 $ 1,159,000 $ 187,600 $ 1,346,600 84 $ 20,715,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 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, 2020 2021 2022 2023 2024 2025-2029 2030-2031 Principal $ Interest 803,000 845,000 2,430,000 1,626,000 9,402,000 4,450,000 $ 19,556,000 $ 977,800 977,800 937,650 895,400 773,900 2,568,850 336,500 $ 7,467,900 Total $ 977,800 1,780,800 1,782,650 3,325,400 2,399,900 11,970,850 4,786,500 $ 27,023,900 Transit Excise Tax Revenue Refunding Obligations. On March 29, 2017, the City issued $19,305,000 of direct placement, 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 7/1/2019 principal payment was deducted as the fiscal year 2019 resources were dedicated. The City’s outstanding obligations from the direct placement contain a provision that, in an event of default or covenant violation with this obligation, or default of any parity obligation that has not been cured by the City, the trustee may require performance and observance of any pledge and any outstanding amounts due may immediately become payable. $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, 2020 2021 2022 2023 2024 2025-2029 2030-2034 2035 Principal $ Interest 950,000 980,000 1,010,000 1,035,000 1,070,000 5,805,000 6,690,000 1,460,000 $ 19,000,000 85 $ 545,300 518,035 489,909 460,922 431,218 1,678,520 796,282 41,902 $ 4,962,088 Total $ 1,495,300 1,498,035 1,499,909 1,495,922 1,501,218 7,483,520 7,486,282 1,501,902 $ 23,962,088 $ 19,000,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 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 direct placement, 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 7/1/2019 principal payment was deducted as the fiscal year 2019 resources were dedicated. The City’s outstanding obligations from the direct placement contain a provision that, in an event of default or covenant violation with this obligation, or default of any parity obligation that has not been cured by the City, the trustee may require performance and observance of any pledge and any outstanding amounts due may immediately become payable. $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, 2020 2021 2022 Principal Interest Total $ 3,200,000 2,655,000 2,710,000 $ 168,731 105,691 53,387 $ 3,368,731 2,760,691 2,763,387 $ 8,565,000 $ 327,809 $ 8,892,809 86 $ 8,565,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue and Refunding Obligations (Continued) Excise Tax Revenue Refunding Obligations. On June 26, 2019, the City issued $9,110,000 of Excise Tax Revenue Refunding Obligations. The proceeds (including the premium) were used to (i) refund $1,170,000 of the 2009A tax-exempt Excise Tax Revenue Obligations, (ii) refund $9,315,000 of the 2009B taxable Excise Tax Revenue Obligations referred to as Build America Bonds and (iii)) to pay costs incurred to execute and deliver 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 Enterprise funds. As a result of the refunding, the City reduced its total debt service requirements by $1,645,317, which resulted in an economic gain of $1,498,204. 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 to the extent permitted by law, 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 City covenants and agrees that the Excise Taxes which it presently imposes will continue to be imposed in each fiscal year so that the amount of Excise Taxes, all within and for such fiscal year of the City, shall be equal to at least three times the total Debt Service for all Outstanding Parity Obligations in such fiscal year. The City further covenants and agrees that if such receipts for any such fiscal year shall not equal three times such Debt Service for such fiscal year, or if at any time it appears that the current fiscal year’s receipts will not be sufficient to meet such fiscal year’s actual Debt Service, the City will either impose new Excise Taxes or will increase the rates of such taxes currently imposed in order that (i) the current fiscal year’s receipts will be sufficient to meet all such fiscal year’s Debt Service requirements and (ii) the next succeeding fiscal year’s receipts will be equal to at least three times the next succeeding fiscal year’s Debt Service requirements. In the following outstanding balance, the 7/1/2019 principal payment was deducted as the fiscal year 2019 resources were dedicated. $9,110,000 2019 Excise Tax Revenue Obligations due in annual installments of $1,000,000 to $1,515,000 through July 1, 2029; interest at 5.00% to 6.50% 87 $ 9,110,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue and Refunding Obligations (Continued) The following is a summary of total debt service cash requirements to maturity: Fiscal Year Ending June 30, Principal 2020 2021 2022 2023 2024 2025-2029 $ 1,000,000 1,200,000 6,910,000 $ $ 9,110,000 Interest Total 431,410 405,500 405,500 405,500 405,500 1,068,500 $ 1,431,410 405,500 405,500 405,500 1,605,500 7,978,500 $ 3,121,910 $ 12,231,910 The following is a summary of governmental debt service cash requirements to maturity: Fiscal Year Ending June 30, 2020 2021 2022 2023 2024 2025-2029 Principal $ Interest Total 290,000 350,000 2,025,000 $ 126,280 118,750 118,750 118,750 118,750 313,750 $ 416,280 118,750 118,750 118,750 468,750 2,338,750 $ 2,665,000 $ 915,030 $ 3,580,030 The following is a summary of enterprise debt service cash requirements to maturity: Fiscal Year Ending June 30, 2020 2021 2022 2023 2024 2025-2029 Principal $ Interest 710,000 850,000 4,885,000 $ 6,445,000 88 $ Total 305,130 286,750 286,750 286,750 286,750 754,750 $ 1,015,130 286,750 286,750 286,750 1,136,750 5,639,750 $ 2,206,880 $ 8,651,880 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 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% $ 2,966,000 The following discloses debt service requirements as of June 30, 2019 segregating principal and interest, for the next five years and five-year increments thereafter: Fiscal Year Ending June 30, 2020 2021 2022 2023 2024 2025 Principal $ 442,000 462,000 482,000 504,000 527,000 549,000 $ 2,966,000 Interest $ 67,380 58,651 48,414 36,576 23,024 7,823 $ 241,868 Total $ 509,380 520,651 530,414 540,576 550,024 556,823 $ 3,207,868 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% 89 $ 1,083,368 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 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, 2019 segregating principal and interest, for the next five years and five-year increments thereafter: Fiscal Year Ending June 30, 2020 2021 2022 2023 2024 2025-2029 Principal $ 94,225 97,112 100,087 103,154 106,314 582,476 $ 1,083,368 Interest and Administrative Fee $ $ 33,194 30,307 27,332 24,265 21,105 54,618 190,821 Total $ 127,419 127,419 127,419 127,419 127,419 637,094 $ 1,274,189 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% $ 7,715,995 The following discloses debt service requirements on WIFA Loan #92A175-10 as of June 30, 2019 segregating principal and interest, for the next five years and five-year increments thereafter: Fiscal Year Ending June 30, 2020 2021 2022 2023 2024 2025-2029 Principal $ 704,675 718,769 733,144 747,807 762,763 4,048,837 $ 7,715,995 Interest and Administrative Fee $ $ 154,320 140,226 125,851 111,188 96,232 246,137 873,954 90 Total $ 858,995 858,995 858,995 858,995 858,995 4,294,974 $ 8,589,949 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 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 $87,798. Accumulated depreciation as of June 30, 2019 totaled $46,826. 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, 2019. These amounts will be paid for by the General Fund. Fiscal Year Ending June 30, 2020 2021 2022 $ Total 17,560 17,559 5,853 40,972 - Less: remaining interest at 0% Present value of future minimum lease payments $ 40,972 The proprietary assets acquired through capital leases are for equipment with an original cost of $1,197,838. Accumulated depreciation as of June 30, 2019 totaled $246,055. 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, 2019. These amounts will be paid for by the Golf Fund. Fiscal Year Ending June 30, 2020 2021 2022 2023 Total minimum lease payments Less: remaining interest at 1.24% to 2.90% Total $ 283,569 173,758 173,758 173,758 804,843 (68,516) Present value of future minimum lease payments $ 736,327 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, 2019, the 20 percent debt limitation was $491,419,390 with $369,823,502 of outstanding debt. This provided a 20 percent debt margin of $121,595,888. The 6 percent debt limitation was $147,425,817 with $77,915,351 of outstanding debt. This provided a 6 percent debt margin of $69,510,466. The authorized, unissued debt subject to the statutory limitations of 20 percent and 6 percent at June 30, 2019, was $202,139,698. 91 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 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, 2019. 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 $183,990,000 is outstanding in governmental general obligation bonds. Proceeds of the bonds were used for general governmental purposes. The bonds are payable through July 1, 2039. Annual principal and interest payments on the bonds are were 115.5% of total 2019 General Obligation Debt Service Fund ad valorem taxes and represents a planned spenddown of Debt Service Fund balance for the fiscal year ended June 30, 2019. The total principal and interest remaining to be paid on the bonds is $236,897,343. Principal and interest paid for the current year and total ad valorem tax revenues were $30,312,981 and $28,173,553, 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 $197,700,000 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, 2039. Annual principal and interest payments on the bonds are expected to require less than 31.36% of 2019 water and wastewater utility system revenue. The total principal and interest remaining to be paid on the bonds is $254,763,938. Principal and interest paid for the current year and water and wastewater system revenues were $26,764,772 and $85,339,513, respectively Debt Service Coverage for Governmental Excise Tax Obligations. The City has pledged all future unrestricted excise taxes to repay a total of $33,704,000 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 3.49% of total 2019 pledged excise taxes. The total principal and interest remaining to be paid on the bonds is $38,318,736. Principal and interest (net of Federal subsidy) paid for the current year and total pledged excise taxes were $6,390,138 and $182,518,296, 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 $57,886,000 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 2019 excise taxes. The total principal and interest remaining to be paid on the bonds is $78,046,992. Principal and interest paid for the current year and total excise taxes were $14,349,491 and $182,518,296, respectively. 92 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 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 $50,270,000. The bonds are payable through July 1, 2037. Annual principal and interest payments on the bonds are expected to require less than 9.56% of total 2019 transit excise taxes. The total principal and interest remaining to be paid on the bonds is $68,338,693. Principal and interest paid for the current year and transit excise taxes were $4,116,542 and $43,063,185 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 $3,295,000 and the bonds are payable through July 1, 2020. Annual principal and interest payments on the bonds are expected to be less than 38.90% of total 2019 performing arts excise taxes. The total principal and interest remaining to be paid on the bonds is $3,433,850. Principal and interest paid for the current year and total available excise taxes were $3,428,100 and $170,602,101, respectively. 93 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 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, 2019 (the ending balance does not include 7/1/2019 “matured” payment for general or excise tax obligations): Governmental activities: Debt payable: General obligation bonds payable Special assessments 2008 Excise tax obligations 2009 Excise tax obligations 2011 Excise tax obligations 2011 Excise tax refunding obligations 2012 Excise tax obligations 2012 Excise tax refunding obligations 2016 Excise tax refunding obligations 2017 Excise tax refunding obligations (direct placement) 2017 Excise tax refunding obligations (direct placement) 2019 Excise tax refunding obligations Premium on debt payable 2004 HUD Section 108 loan Capital leases Beginning Balance Additions Reductions Ending Balance Amounts Due Within One Year $180,435,000 17,415,000 760,000 3,385,000 7,445,000 6,440,000 15,455,000 32,485,000 1,159,000 $ 27,130,000 - $ (23,575,000) (1,380,000) (760,000) (3,385,000) (35,000) (3,145,000) (1,550,000) (1,215,000) - $183,990,000 16,035,000 7,410,000 3,295,000 13,905,000 31,270,000 1,159,000 $16,875,000 1,445,000 35,000 3,295,000 1,630,000 1,265,000 - 19,155,000 - (155,000) 19,000,000 950,000 11,710,000 21,847,912 3,389,000 65,610 321,146,522 2,665,000 5,655,061 35,450,061 (3,145,000) (2,456,776) (423,000) (24,638) (41,249,414) 8,565,000 2,665,000 25,046,197 2,966,000 40,972 315,347,169 3,200,000 290,000 442,000 17,560 29,444,560 Compensated absences Claims and judgments OPEB Net pension liability Governmental activities long-term 31,362,690 8,576,085 75,083,055 392,248,852 $828,417,204 13,194,821 3,233,401 9,814,367 $ 61,692,650 (12,527,346) (3,131,909) (4,604,114) (8,984,281) $ (70,497,064) 32,030,165 8,677,577 70,478,941 393,078,938 $819,612,790 12,828,909 3,100,857 $45,374,326 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 2019 Excise tax refunding obligations Excise premium 2010 WIFA Loan 2010 WIFA Loan Capital leases OPEB Net pension liability $191,635,000 17,804,034 8,215,000 5,705,000 6,565,000 22,325,000 27,066,000 9,899,573 1,174,791 8,406,853 213,267 9,017,390 21,371,300 $ 24,990,000 4,879,143 6,445,000 1,356,320 802,406 - $ (18,925,000) (1,871,135) (8,215,000) (1,320,000) (345,000) (1,045,000) (7,510,000) (1,116,352) (91,423) (690,858) (279,346) (4,609) (1,369,803) $197,700,000 20,812,042 4,385,000 6,220,000 21,280,000 19,556,000 6,445,000 10,139,541 1,083,368 7,715,995 736,327 9,012,781 20,001,497 $20,430,000 1,390,000 365,000 1,090,000 710,000 94,225 704,675 255,411 - Business-type activities long-term $329,398,208 $ 38,472,869 $ (42,783,526) $325,087,551 $25,039,311 The long-term liabilities at June 30, 2019 have been reduced by deposits made with the City’s fiscal agent for July 1, 2019 maturities. For the governmental activities, claims and judgments and compensated absences are generally liquidated by the General Fund. 94 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 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 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. 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. On June 18, 2019, the City defeased $9,030,000 of general obligation bonds. This transaction was a cash defeasance and advanced defeased Series 2018 outstanding 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 $16,925,500, which resulted in an economic gain of $1,498,204. 95 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 City of Tempe, Arizona NOTE 10 - BONDS TO BE PAID FROM ASSETS HELD IN TRUST (Continued) Advance Bond Refundings (Continued) Bonds which have been advance refunded (and thus not included in the debt of the City) and are still outstanding as of June 30, 2019 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 $56,055,000 general obligation bonds issued in 2009 and partially refunded in 2016 (final redemption date is 7/1/2019) 31,190,000 $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 redemption date is 7/1/2025) 4,220,000 $32,810,000 general obligation bonds issued in 2017 and partially defeased in 2018 (final redemption date is 7/1/2027) 4,070,000 $47,560,000 general obligation bonds issued in 2018 and partially defeased in 2019 (final redemption date is 7/1/2028) 9,030,000 Total bonds advance refunded $ 73,080,000 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). 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. 96 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 City of Tempe, Arizona NOTE 11 – FUND BALANCE CLASSIFICATIONS (Continued) 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, 2019, 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, 2019, the unassigned fund balance is 42.55% of General Fund revenues. 97 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 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, 2019, the City’s construction commitments are as follows: Governmental funds: Transit Non-major funds Proprietary funds: Water/wastewater Solid waste Golf Commitment Construction in Progress $ 5,465,593 12,894,568 $ 18,360,161 $ 12,253,034 45,451,389 $ 57,704,423 Commitment Construction in Progress $ 23,317,214 $ 23,317,214 $ 51,935,091 238,217 36,576 $ 52,209,884 In addition, there were non-construction related commitments as follows: Commitment Governmental funds: General Non-major funds $ 934,126 348,524 $ 1,282,650 Commitment Proprietary funds: Water/wastewater Solid waste $ 70,193 1,028,096 $ 1,098,289 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, 2019 were $86,827. The following is a schedule by year of future minimum lease payments: Fiscal Year Ending June 30, 2020 2021 2022 Total minimum payments required $ Amount 25,535 1,408 1,056 $ 27,999 98 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 City of Tempe, Arizona NOTE 14 - PENSION AND OTHER POSTEMPLOYMENT BENEFITS The City contributes to the pension and other, multi-employer post employment benefit (OPEB) 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. All amounts reported in this footnote relate to the multi-employer OPEB plans. The City has also established a single-employer, post employment health benefit plan (see Note 15 - OTHER POSTEMPLOYEMENT BENEFITS). Aggregate Amounts. At June 30, 2019, the City reported the following aggregate amounts related to pensions and OPEB for all plans to which it contributes: Net assets Net liabilities Deferred outflows of resources Deferred inflows of resources Expense Contributions $ Pension 413,080,435 67,681,949 18,264,547 39,003,999 35,814,225 OPEB $ 534,581 79,774,364 2,425,011 3,834,780 781,289 739,239 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 receive benefit Sum of years and age equals 80 10 years age 62 5 years age 50* Any years age 65 30 years age 55 25 years age 60 10 years age 62 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. 99 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 City of Tempe, Arizona NOTE 14 - PENSION AND OTHER POSTEMPLOYMENT BENEFITS (Continued) 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 $100 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. 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 11.80 percent (11.64 percent for retirement and 0.16 percent 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 11.80 percent (11.18 percent for retirement, 0.46 percent for health insurance premium benefit, and 0.16 percent for long-term disability) of the active members’ annual covered payroll. The City’s contributions to the pension plan for the year ended June 30, 2019 were as follows: Contributions $ 8,950,287 325,216 122,149 Pension Health Insurance Premium Long-Term Disability Employers are also required to pay an Alternate Contribution Rate (ACR), for retired members who return to work in positions that would typically be filled by an employee who contributes to ASRS. The City was required by statute to contribute at the actuarially determined rate of 10.53 percent (10.41 for retirement, 0.06 percent for health insurance premium benefit, and 0.06 percent for long-term disability). ACR contributions are included in employer contributions presented above. The City’s pension and OPEB contributions are paid by the same funds as the employee’s salary, with the largest component coming from the General Fund. Pension and OPEB Assets/Liability. The net pension and OPEB assets/liability were measured as of June 30, 2018. The total liability used to calculate the net asset or net liability was determined using update procedures to roll forward the total liability from an actuarial valuation as of June 30, 2017, to the measurement date of June 30, 2018. The total liability as of June 30, 2018 reflects changes in actuarial assumptions based on the results of an actuarial experience study for the five-year period ended June 30, 2016, including decreasing the discount rate from 8.0 percent to 7.5 percent, changing the projected salary increases from 3-6.75 percent to 2.7-7.2 percent, decreasing the inflation rate from 3 percent to 2.3 percent, and changing the mortality rates. The City’s proportion of the net assets/liability was based on the City’s actual contributions to the applicable plan relative to the total of all participating employers’ contributions to the plan for the year ended June 30, 2018. 100 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 City of Tempe, Arizona NOTE 14 - PENSION AND OTHER POSTEMPLOYMENT BENEFITS (Continued) At June 30, 2019, the City reported the following amounts for its proportionate share of the ASRS plans net assets/liability. In addition, at June 30, 2019, the City’s percentage proportion for each plan and the related change from its proportion measured as of June 30, 2017 was: Pension Health Insurance Premium Long-Term Disability Net (Assets) Liability $ 108,146,590 (282,642) 406,033 City % Proportion 0.78% 0.78% 0.78% Increase (Decrease) ( $10,354,084) 135,577 129,807 Pension/OPEB Expense and Deferred Outflows/Inflows of Resources. The City has deferred outflows and inflows of resources related to the net pension and OPEB assets/liabilities. Certain changes in the net pension and OPEB assets/liability are recognized as pension and OPEB expense over a period of time rather than the year of occurrence. For the year ended June 30, 2019, the City recognized pension and OPEB expense as follows: Expense $ 1,943,579 269,628 146,365 Pension Health Insurance Premium Long-Term Disability The City reported deferred outflows of resources and deferred inflows of resources related to pensions and OPEB from the following sources: Deferred Outflows of Resources Health Insurance Long-Term Pensions Premium Disability $ 2,979,351 $ $ 10,384 2,861,756 545,078 87,945 Difference between expected and actual experience Changes of assumptions and other inputs Changes in proportion and differences between the City contributions and proportionate share of contributions Contributions subsequent to the measurement date Total 1,699,746 8,950,287 $ 16,491,140 568 325,216 $ 870,862 5,264 122,149 $ 225,742 Deferred Inflows of Resources Health Insurance Long-Term Pensions Premium Disability $ 596,194 $ 260,867 $ 9,588,680 - Difference between expected and actual experience Changes of assumptions and other inputs Net difference between projected and actual earnings on plan investments Changes in proportion and differences between the City contributions and proportionate share of contributions Total 101 2,600,670 564,621 1,237,086 $ 14,022,630 405 $ 825,893 39,328 $ 35 39,363 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 City of Tempe, Arizona NOTE 14 - PENSION AND OTHER POSTEMPLOYMENT BENEFITS (Continued) The amounts of deferred outflows of resources resulting from contributions subsequent to the measurement date as reported in the table above will be recognized as an adjustment of the net pension and OPEB assets/liability in the year ended June 30, 2020. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions and OPEB will be recognized in pension and OPEB expense as follows: 2020 2021 2022 2023 Thereafter Deferred Outflows (Inflows) of Resources Health Insurance Long-Term Pension Premium Disability $ 756,568 $ (109,422) $ 1,918 (2,127,021) (109,422) 1,917 (3,945,024) (109,422) 1,917 (1,166,300) 10,876 12,451 37,143 46,027 Actuarial Assumptions. The significant actuarial assumptions used to measure the total ASRS pension and OPEB liabilities are as follows: Actuarial valuation date Actuarial roll forward date Actuarial cost method Investment rate of return Projected salary increases Inflation Permanent base increases Mortality rates Pension June 30, 2017 June 30, 2018 Entry age normal 7.5% 2.7-7.2% 2.3% Included 2017 SRA Scale U-MP Healthcare cost trend rate Not applicable OPEB June 30, 2017 June 30, 2018 Entry age normal 7.5% Not applicable 2.3% Not applicable Health Ins: 2017 SRA Scale U-MP, LTD: 2012 GLDT Not applicable The actuarial assumptions used in the June 30, 2017 valuation were based on the results of an actuarial experience study for the five-year period ended June 30, 2016. The 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, 2017, actuarial valuation. The long-term expected rate of return on ASRS plan investments was determined to be 7.5 percent using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage, excluding any expected inflation. On June 29, 2018, the ASRS Board approved updated strategic asset allocation targets, to be effective July 2018. The target allocation and best estimates of geometric real rates of return for each major asset class for all ASRS plans are summarized in the following table: Target Allocation 50% 30% 20% 100% Asset Class Equity Fixed income Real estate Total 102 Long-Term Expected Real Rate of Return 5.50% 3.83 5.85 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 City of Tempe, Arizona NOTE 14 - PENSION AND OTHER POSTEMPLOYMENT BENEFITS (Continued) Discount Rate. The discount rate used to measure the ASRS total pension and OPEB liability was 7.5 percent, which was a decrease of 0.5 from the discount rate used as of June 30, 2017. 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 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 investments was applied to all periods of projected benefit payments to determine the total pension and OPEB liability. Sensitivity of the Proportionate Share of the Net Pension and OPEB Asset/Liability to Changes in the Discount Rate. The following presents the City’s proportionate share of the net pension and OPEB assets/liability calculated using the discount rate of 7.5 percent, as well as what the proportionate share of the net pension and OPEB asset/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: Rate Pension Health Insurance Premium Long-Term Disability Proportionate share of net (assets) liabilities Current 1% Decrease Discount Rate 1% Increase 6.5% 7.5% 8.5% $ 154,165,453 $ 108,146,590 $ 69,698,575 1,001,468 (282,642) (1,376,448) 460,148 406,033 353,526 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), or employees who became members on or after July 1, 2017, may participate in the Public Safety Personnel Defined Contribution Retirement Plan (PSDCRP). 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. 103 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 City of Tempe, Arizona NOTE 14 - PENSION AND OTHER POSTEMPLOYMENT BENEFITS (Continued) 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. Before January 1, 2012 (Tier 1) Retirement and Disability: Years of service and age required to receive benefit Retirement Initial Membership Date: On or After January 1, On or After January 1, 2012 (Tier 2) 2017 (Tier 3) 20 years any age 15 years age 62 25 years or 15 years of credited service and age 52.5 15 years and age 55 Final average salary is based on Highest 36 months of last 20 years Highest 60 months of last 20 years Highest 60 months of last 15 years Normal retirement 50% less 2.0% for each year of credited service less than 20 years or plus 2.0% to 2.5% for each year of credited service over 20 years, not to exceed 80% 2.5% per year of credited service, not to exceed 80% 1.5% to 2.5% per year of service, not to exceed 80% Accidental disability retirement Survivor benefit: Retired members Active members 50% or normal retirement, whichever is greater 80%-100% of retired member’s pension benefit 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 inflation. PSPRS also provides temporary disability benefits of 50 percent of the member's compensation for up to 12 months. Health insurance premium benefits are available to retired or disabled members with 5 years of credited service. The benefits are payable only with respect to allowable health insurance premiums for which the member is responsible. Benefits range from $100 per month to $260 per month depending on the age of the member and dependents. 104 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 City of Tempe, Arizona NOTE 14 - PENSION AND OTHER POSTEMPLOYMENT BENEFITS (Continued) Employees Covered by Benefit Terms. At June 30, 2019, the following employees were covered by the agent pension plans’ benefit terms: Retirees and beneficiaries & DROP Inactive, non-retired members Active members Total PSPRS – Fire PSPRS - Police Health Pension Insurance 255 255 67 30 317 317 639 602 Pension 132 33 134 299 Health Insurance 132 23 134 289 Contributions. 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, 2019, are indicated below. Rates are a percentage of active members’ annual covered payroll. PSPRS Police Active members – pension Tier 1 Tier 2 Tier 3 Employer rates – pension Tier 1 Tier 2 Tier 3 PSPRS Fire 7.65% 11.65 9.60 7.65% 11.65 10.67 61.25% 61.25 55.60 71.88% 71.88 66.47 Employers are also required to pay an Alternate Contribution Rate (ACR), for retired members who return to work in positions that would typically be filled by an employee who contributes to PSPRS. The City was required by statute to contribute at the actuarially determined rate of 46.00% for police and 55.80% 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 and OPEB plans for the year ended were: Pension Health insurance PSPRS Police $ 17,208,734 259,528 PSPRS Fire $ 9,655,204 32,346 The City pension and OPEB contributions are paid by the same funds as the employee’s salary, with the largest component coming from the General Fund. Pension and OPEB Assets/Liability. At June 30, 2019, the City reported the following assets and liabilities. Pension Health insurance Net (Assets) Liabilities PSPRS - Police PSPRS - Fire $ 195,113,534 $ 109,820,311 3,020,026 (251,939) The net pension and OPEB assets/liability were measured as of June 30, 2017. The total liability used to calculate the net asset or liability was determined by an actuarial valuation as of that date. 105 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 City of Tempe, Arizona NOTE 14 - PENSION AND OTHER POSTEMPLOYMENT BENEFITS (Continued) Actuarial Assumptions. The significant actuarial assumptions used to measure the total pension liability are as follows: Actuarial valuation date Actuarial cost method Investment rate of return Projected salary increases Inflation Cost-of-living adjustment Mortality rates Healthcare cost trend rate Pension June 30, 2018 Entry age normal 7.40% 3.50% - 7.00% 2.50% Included RP-2014 tables using MP-2016 improvement scale with adjustments to match current experience Not applicable OPEB June 30, 2018 Entry age normal 7.40% Not applicable Not applicable Not applicable RP-2014 tables using MP-2016 improvement scale with adjustments to match current experience Not applicable Actuarial assumptions used in the June 30, 2018 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 plan investments was determined to be 7.40 percent using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of plan investment expenses and inflation) are developed for each major asset class. The target allocation and best estimates of geometric real rates of return for each major asset class are summarized in the following table: Asset Class U.S. equity Non-U.S. equity Private equity Fixed income Private credit GTS Real assets Real estate Risk parity Short-term investments Total Target Allocation 16%% 14% 12% 5% 16% 12% 9% 10% 4% 2 100% Long-Term Expected Real Rate of Return 7.60%% 8.70% 5.83% %1 1.25 6.75% 3.96% 4.52% 3.75% 5.00% 0.25 Discount Rates. At the June 30, 2018 valuation date, the discount rate used to measure the total pension and OPEB liability was 7.4 percent, which was the same as the discount rate used as of June 30, 2016 valuation date. 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 rate and the member rate. Based on those assumptions, the 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 plan investments was applied to all periods of projected benefit payments for these plans to determine the total pension and OPEB liability. 106 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 City of Tempe, Arizona NOTE 14 - PENSION AND OTHER POSTEMPLOYMENT BENEFITS (Continued) Changes in Net (Assets)/Liabilities Pensions Balances at June 30, 2018 Changes for the year: Service cost Interest on the total liability Differences between expected and actual experience in the measurement of the liability Contributions-employer Contributions-employee Net investment income Benefit payments, including refunds of employee contributions Administrative expense Other changes Net changes Balances at June 30, 2019 Health Insurance Balances at June 30, 2018 Changes for the year: Service cost Interest on the total liability Differences between expected and actual experience in the measurement of the liability Contributions-employer Contributions-employee Net investment income Benefit payments, including refunds of employee contributions Administrative expense Net changes Balances at June 30, 2019 Total (Assets) Liability Pension - Police Increase (Decrease) Plan Fiduciary Net Position $309,829,718 $122,381,391 Net (Assets) Liability Total (Assets) Liability Pension - Fire Increase (Decrease) Plan Fiduciary Net Position $187,448,327 $185,665,103 $77,993,952 Net (Assets) Liability $107,671,151 6,266,555 - 6,266,555 3,184,469 - 3,184,469 22,579,727 - 22,579,727 13,505,923 - 13,505,923 1,492,630 - 11,591,750 2,811,219 8,386,647 1,492,630 (11,591,750) (2,811,219) (8,386,647) (549,390) - 7,496,857 1,274,574 5,290,034 (549,390) (7,496,857) (1,274,574) (5,290,034) (15,663,112) 14,675,800 (15,663,112) (128,344) 12,433 7,010,593 128,344 (12,433) 7,665,207 (9,489,726) 6,651,276 (9,489,726) (81,213) 11,590 4,502,116 81,213 (11,590) 2,149,160 $324,505,518 $129,391,984 $195,113,534 $192,316,379 $82,496,068 $109,820,311 Total (Assets) Liability Health Insurance - Fire Increase (Decrease) Plan Fiduciary Net Position $ 2,705,959 $ 3,432,367 $ 3,658,932 Total (Assets) Liability $ 6,779,619 Health Insurance - Police Increase (Decrease) Plan Fiduciary Net Position $ 4,073,660 Net (Assets) Liability Net (Assets) Liability ($ 226,565) 83,184 - 83,184 32,536 - 32,536 489,304 - 489,304 247,192 - 247,192 80,581 - 70,089 182 272,884 80,581 (70,089) (182) (272,884) (50,860) - 8,984 105 248,942 (50,860) (8,984) (105) (248,942) (417,982) 235,087 (417,982) (4,153) (78,980) 4,153 314,067 (216,408) 12,460 (216,408) (3,789) 37,834 3,789 (25,374) $ 7,014,706 $ 3,994,680 $ 3,020,026 $ 3,444,827 $ 3,696,766 ($ 251,939) 107 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 City of Tempe, Arizona NOTE 14 - PENSION AND OTHER POSTEMPLOYMENT BENEFITS (Continued) Sensitivity of the Net Pension and OPEB Assets (Liabilities) to Changes in the Discount Rate. The following presents the City’s net pension and OPEB assets (liabilities) calculated using the discount rates noted above, as well as what the net assets (liability) would be if it were calculated using a discount rate that is 1percentage-point lower or 1-percentage-point higher than the current rate: 1% Decrease Current Discount Rate 1% Increase PSPRS - Police: Rate Net pension (assets) liability Net OPEB (assets) liability 6.40%/6.00% 7.40%/7.00% 8.40%/8.00% $ 239,994,768 $ 195,113,534 $158,661,013 3,806,818 3,020,026 2,362,914 PSPRS - Fire: Rate Net pension liability Net OPEB (assets) liability 6.40%/6.00% 7.40%/7.00% $ 134,281,887 $ 109,820,311 109,502 (251,939) 8.40%/8.00 $ 89,739,977 (556,081) 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. Expense. For the year ended June 30, 2019, the City recognized the following as pension and OPEB expense: Expense PSPRS - Police PSPRS - Fire $ 24,128,910 $ 12,931,510 365,965 (669) Pension Health insurance Deferred Outflows/Inflows of Resources. At June 30, 2019, the City reported deferred outflows of resources and deferred inflows of resources related to pensions and OPEB from the following sources: Pensions 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 PSPRS – Police Pension Deferred Deferred Outflows of Inflows of Resources Resources $ 1,245,645 $ 3,069,111 PSPRS – Fire Pension Deferred Deferred Outflows of Inflows of Resources Resources $ 1,672,578 $ 1,172,806 9,584,164 - 9,669,611 - 1,165,829 - 989,044 - 17,208,734 $ 29,204,372 $ 3,069,111 108 9,655,204 $ 21,986,437 $ 1,172,806 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 City of Tempe, Arizona NOTE 14 - PENSION AND OTHER POSTEMPLOYMENT BENEFITS (Continued) Health Insurance 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 PSPRS – Police Health Insurance Deferred Deferred Outflows of Inflows of Resources Resources $ 169,767 $ - PSPRS – Fire Health Insurance Deferred Deferred Outflows of Inflows of Resources Resources $ 16,770 $ 41,543 - 167,883 - 22,739 - 85,335 - 76,225 259,528 $ 429,295 $ 253,218 $ 32,346 49,116 $ 140,507 The amounts of deferred outflows of resources resulting from contributions subsequent to the measurement date as reported in the table above will be recognized as an adjustment of the net pension and OPEB assets/liability in the year ended June 30, 2020. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions and OPEB will be recognized in pension and OPEB expense as follows:20222 Fiscal Year Ended 2020 2021 2022 2023 2024 Thereafter PSPRS - Police Health Pension Insurance $ 4,239,230 $ (37,318) 3,301,044 (37,318) 757,838 (37,318) 370,710 11,142 246,985 12,644 10,720 4,717 PSPRS - Fire Health Pension Insurance $ 4,972,754 $ (37,114) 2,971,165 (37,114) 1,769,621 (37,114) 1,476,852 (7,968) (31,965) (4,427) - NOTE 15 - OTHER POST-EMPLOYMENT BENEFITS The City offers (through a single-employer defined contribution plan, the “City of Tempe Post-Employment Health Plan”) additional post-employment health insurance benefits through an irrevocable trust. 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. 109 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 City of Tempe, Arizona NOTE 15 - OTHER POST-EMPLOYMENT BENEFITS (Continued) A. Plan Description The City’s single-employer Post-Employment Health Plan is 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, 2019, 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. Contributions. Contributions for benefits due are based on actual benefit payments during the fiscal year and are not based on a measure of pay. Additional contributions to the trust can only be authorized by a majority of the City Council. The total contributions for the year ended June 30, 2019 were $8,461,506. 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 $14.2 million balance as of June 30, 2019. 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. C. Net OPEB Liability The City’s net OPEB liability was measured as of June 30, 2019, 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, 2019 were as follows: Total OPEB liability Plan fiduciary net position Net OPEB liability Plan fiduciary net position as a percentage of total OPEB liability 110 $90,253,199 14,187,536 $76,065,663 15.7% Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 City of Tempe, Arizona NOTE 15 - OTHER POST EMPLOYMENT BENEFITS (Continued) C. Net OPEB Liability (Continued) Actuarial Assumptions. The total OPEB liability as of the July 1, 2017 actuarial valuation date 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, 2019 July 1, 2017 Entry age normal Market value 2.60% 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 PubG.H-2010 & PubS.H-2010 Employee Mortality Tables, Generational with Projection Scale MP-2018 for males/females. For retired employees, based on the PubG.H-2010 & PubS.H-2010 Healthy Annuitant Mortality Tables, Generational with Projection Scale MP-2018 for males/females. The Total OPEB Liability was updated 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 30,2019, the annual money-weighted rate of return on investments, net of investment expense, was 6.43%. The money-weighted return expresses investment performance, net of investment expense, adjusted for the changing amounts actually invested. 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: 111 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 City of Tempe, Arizona NOTE 15 - OTHER POST EMPLOYMENT BENEFITS (Continued) C. Net OPEB Liability (Continued) Asset Class Cash & Equivalents Equity Fixed Income Real Estate Other Total Long-Term Expected Real Rates of Return Not applicable 7.50% 5.00% 6.00% Not applicable 6.63% Target Allocation 0% 65% 35% 0% 0% 100% 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. The separately issued actuarial valuation report for the fiscal year ended June 30, 2019 may be obtained from the City's Internal Services Department, 20 East 6th Street, Tempe, Arizona, 85281 D. Changes in the Net OPEB Liability The change in the net OPEB liability during the year was as follows: Balance at 6/30/2018 Changes for the year: Service cost Interest Differences between expected and actual Experience Changes in Assumptions/ Inputs Contributions for Benefits due Net Investment income Benefit payments Net changes Balance at 6/30/2019 Changes in Net OPEB Liability Total OPEB Plan Fiduciary Net Net OPEB Liability Position Liability $ 95,154,294 $ 13,391,250 $ 81,763,044 319,754 5,930,814 - 319,754 5,930,814 (4,271,517) - (4,271,517) 1,581,360 - 1,581,360 (8,461,506) (4,901,095) $ 90,253,199 8,461,506 796,286 (8,461,506) 796,286 $ 14,187,536 (8,461,506) (796,286) (5,697,381) $ 76,065,663 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: 1% Decrease No Change 1% Increase $84,063,537 $76,065,663 $68,706,519 112 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 City of Tempe, Arizona NOTE 15 - OTHER POST EMPLOYMENT BENEFITS (Continued) E. OPEB Expense and Deferred Outflows/Inflows of Resources related to OPEB. For the year ended June 30, 2019, the City recognized OPEB expense of $6,565,778. At June 30, 2019, 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 Total Differences between expected and actual experience Changes of assumptions or other inputs Difference between actual and expected investment earnings Total $ 319,754 5,930,814 (870,431) 322,213 1,042,488 (179,060) $ 6,565,778 Deferred Outflows of Resources $ 790,680 59,316 $ 849,996 Deferred Inflows of Resources $ 2,135,759 440,040 $ 2,575,799 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, 2020 2021 2022 2023 2024 Thereafter Deferred Outflow (Inflows) of Resources $ 2,515,891 1,185,641 (1,524,138) (179,060) (37,433) 14,829 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. 113 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 City of Tempe, Arizona 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, cyber liability, fiduciary liability and group health coverage. The coverage is as follows: for general and automobile liability the City’s self-insured retention is $2.0 million with layered excess insurance coverage to $40 million; for property coverage the City’s per occurrence deductible is $100,000 with a policy limit of $500 million; for workers’ compensation, the self-insured retention is $750,000 for public safety employees, and $500,000 for all other employees, with the maximum limit of indemnity per occurrence meeting the Arizona Statutory requirements and Employers Liability maximum limit of $2 million per occurrence; 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, 2019, 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 General liability Automobile liability Property liability Workers' compensation Health insurance June 30, 2018 $ 2,254,402 1,819,200 134,200 2,504,377 1,383,143 $ 8,095,322 Claims Incurred Net of Change in Estimates $ 1,603,437 (315,662) 513,607 2,872,394 20,217,631 $ 24,891,407 Payments $ (462,839) (348,388) (419,692) (1,900,991) (20,033,380) $(23,165,290) June 30, 2019 $ 3,395,000 1,155,150 228,115 3,475,780 1,567,394 $ 9,821,439 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 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 $ 8,095,322 114 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 City of Tempe, Arizona NOTE 17 - RISK FINANCING ACTIVITIES (Continued) At June 30, 2019, the Risk Management Fund accrued expenses totaled $4,787,557. This balance includes the general liability, automobile liability and property liability of $4,778,265 and other accrued expenses of $9,292. The Worker’s Compensation Fund had accrued expenses totaling $3,475,780. The Health Fund had accrued expenses totaling $3,355,331. Additionally, at June 30, 2019, 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 for the fiscal year ended June 30, 2019 is $3,645,701. Detailed information on such commitments is prohibited from disclosure under Arizona Revised Statute 42-2002 Disclosure of Confidential Information Prohibited. 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. 115 Notes to the Financial Statements For Fiscal Year Ended June 30, 2019 City of Tempe, Arizona NOTE 20 – TAX ABATEMENTS (Continued) For the fiscal year ended June 30, 2019, the difference between property taxes assessed and the GPLET collected totaled $2,204,527 under this program, including the following tax abatement agreements that each exceed 10% of the total amount: • A 16.8% property tax GPLET to a retail development for constructing a retail complex in the City. The GPLET amounted to $371,373. • A 14.0% property tax GPLET to a retail development in the northern portion of the City. The difference between property taxes assessed and the GPLET collected amounted to $309,112. NOTE 21 - DEFICIT IN NET POSITION AND FUND BALANCE The Special Assessments Fund had a deficit fund balance of $77,319. The deficit will be covered by future assessment payments. The Performing Arts Special Revenue Fund had a deficit fund balance of $1,070,978. The deficit will be covered by the continuing Performing Arts sales tax revenues beyond the final, July 1, 2020 debt service payment of the 2011 Excise Tax Revenue Refunding Obligations. The Grants Special Revenue Fund had a deficit fund balance of $225,461. The deficit will be covered by future grant revenues. NOTE 22 – PRIOR PERIOD ADJUSTMENTS Beginning Net Position Restatement. During the fiscal year ended June 30, 2019, employees were reclassified from the General Fund to the Emergency Medical Transportation Enterprise Fund. This reclassification resulted in a change in estimate to the net position to both Governmental Activities and the Business-type Activities as of July 1, 2018 and represents a change in estimate of the OPEB and pension liabilities, deferred outflows and deferred inflows of the Government-wide, Business-type Activities and Proprietary Funds Financial Statements. Net position as of July 1, 2018 has been restated as follows for this change in accounting principle: Statement of ActivitiesGovernmental Net position, June 30, 2018, as previously reported $ 598,315,158 Net OPEB liability 559,998 Deferred outflows – OPEB (23,425) Deferred Inflows – OPEB 10,921 Net pension liability 797,995 Deferred outflows – Pensions (127,946) Deferred Inflows – Pensions 32,776 Net position, July 1, 2018, as restated $ 599,565,477 Net position, June 30, 2018, as previously reported Net OPEB liability Deferred outflows – OPEB Deferred Inflows – OPEB Net pension liability Deferred outflows – Pensions Deferred Inflows – Pensions Net position, July 1, 2018, as restated 116 Statement of ActivitiesBusiness-type Statement of ActivitiesTotal $ 265,813,185 (559,998) 23,425 (10,921) (797,995) 127,946 (32,776) $ 264,562,866 $ 864,128,343 $ 864,128,343 Proprietary Fund Emergency Medical Transportation $ 1,634,680 (559,998) 23,425 (10,921) (797,995) 127,946 (32,776) $ 384,361 City of Tempe, Arizona Required Supplementary Information 117 Schedule of Contributions All Pension Plans Last Five Fiscal Years City of Tempe, Arizona 2019 Arizona State Retirement System: Actuarially determined contribution Contributions in relation to the actuarially determined contribution Contribution deficiency (excess) Covered payroll Contributions as a percentage of covered payroll Public Safety Personnel Retirement System- Police: Actuarially determined contribution Contributions in relation to the actuarially determined contribution Contribution deficiency (excess) Covered payroll Contributions as a percentage of covered payroll Public Safety Personnel Retirement System- Fire: Actuarially determined contribution Contributions in relation to the actuarially determined contribution Contribution deficiency (excess) Covered payroll Contributions as a percentage of covered payroll 2018 2017 2016 2015 $ 8,950,287 $ 8,163,494 $ 7,887,785 $ 7,731,482 $ 7,738,771 $ 8,950,287 - $ 8,163,494 - $ 7,887,785 - $ 7,731,482 - $ 7,738,771 - $ 80,056,234 $ 74,894,440 $ 73,170,548 $ 71,257,899 $ 71,063,096 11.18% 10.90% 10.78% 10.85% 10.89% $ 17,208,734 $ 11,464,549 $ 12,852,861 $ 12,604,739 $ 9,727,183 $ 17,208,734 - $ 11,464,549 - $ 12,852,861 - $ 12,604,739 - $ 9,727,183 - $ 28,519,612 $ 20,593,765 $ 28,606,412 $ 28,627,615 $ 28,889,762 60.34% 55.67% 44.93% 44.03% 33.67% $ 9,655,204 $ 6,451,177 $ 6,621,730 $ 6,067,633 $ 4,066,636 $ 9,655,204 - $ 6,451,177 - $ 6,621,730 - $ 6,067,633 - $ 4,066,636 - $ 13,477,393 $ 9,986,342 $ 12,337,861 $ 12,215,891 $ 10,958,329 71.64% 64.60% 53.67% This schedule is intended to show information for ten years. Additional years' information will be displayed as it becomes available. 118 49.67% 37.11% Schedule of the Proportionate Share of the Net Pension Liability Arizona State Retirement System Last Five Fiscal Years City of Tempe, Arizona 2019 City's proportion of the net pension liability 2018 0.77% 2017 0.76% 2016 0.78% 2015 0.77% 0.76% City's proportion share of the net pension liability $ 108,146,590 $ 118,500,674 $ 126,045,105 $ 119,185,001 $ 112,524,308 Covered payroll $ 80,056,234 $ 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 payroll 135.09% 161.95% 176.89% 167.72% 162.65% Plan fiduciary net position as a percentage of the total pension liability 73.40% 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. 119 Schedule of the Proportionate Share of the Net OPEB Health Insurance Premium Liability (Asset) Arizona State Retirement System Last Two Fiscal Years City of Tempe, Arizona 2019 City's proportion of the net OPEB health insurance premium liability (asset) 2018 0.78% 0.77% City's proportion share of the net OPEB health insurance premium liability (asset) $ (282,642) $ (418,219) Covered payroll $ 80,056,234 $ 73,170,548 City's proportionate share of the net OPEB health insurance premium liability (asset) as a percentage of its covered payroll -0.35% -0.57% Plan fiduciary net position as a percentage of the total OPEB health insurance premium liability (asset) 102.20% 103.57% This schedule is intended to show information for ten years. Additional years' information will be displayed as it becomes available. 120 Schedule of the Proportionate Share of the Net OPEB Long-Term Disability Liability Arizona State Retirement System Last Two Fiscal Years City of Tempe, Arizona 2019 City's proportion of the net OPEB long-term disability liability 2018 0.78% 0.76% City's proportion share of the net OPEB long-term disability liability $ 406,033 $ 276,226 Covered payroll $ 80,056,234 $ 73,170,548 City's proportionate share of the net OPEB long-term disability liability as a percentage of its covered payroll 0.51% 0.38% Plan fiduciary net position as a percentage of the total OPEB liability long-term disability liability 77.83% 84.44% 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 Five Fiscal Years City of Tempe, Arizona 2019 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 $ 6,266,555 22,579,727 1,492,630 (15,663,112) 14,675,800 309,829,718 324,505,518 $ $ $ 11,591,750 2,811,219 8,386,647 (15,663,112) (128,344) 12,433 7,010,593 122,381,391 129,391,984 $ 195,113,534 $ $ Plan fiduciary net position as a percentage of the total pension liability Covered payroll Net pension liability as a percentage of covered payroll 2018 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 $ 39.87% $ 27,956,306 2017 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 $ $ $ 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% $ 697.92% 29,173,568 642.53% $ 28,069,721 637.20% 2015 5,468,695 19,315,142 (2,753,278) (14,604,348) 7,426,211 250,620,596 258,046,807 $ $ $ 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 $ 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 $ 37.35% This schedule is intended to show information for ten years. Additional years' information will be displayed as it becomes available. 122 2016 $ 41.05% $ 29,044,518 523.72% 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 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 Five Fiscal Years City of Tempe, Arizona 2019 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 $ 3,184,469 13,505,923 (549,390) (9,489,726) 6,651,276 185,665,103 192,316,379 $ $ $ 7,496,857 1,274,574 5,290,034 (9,489,726) (81,213) 11,590 4,502,116 77,993,952 82,496,068 $ 109,820,311 $ $ Plan fiduciary net position as a percentage of the total pension liability Covered payroll Net pension liability as a percentage of covered payroll 2018 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 $ 42.90% $ 13,664,614 803.68% 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% $ 13,548,032 794.74% 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% $ 12,995,575 $ 47.47% $ 765.54% This schedule is intended to show information for ten years. Additional years' information will be displayed as it becomes available. 123 2015 12,133,956 649.37% 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 48.59% $ 12,719,039 591.72% Schedule of Changes in the Net OPEB Liability and Related Ratios Public Safety Personnel Retirement System - Police Last Two Fiscal Years City of Tempe, Arizona 2019 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 $ 83,184 489,304 80,581 (417,982) 235,087 6,779,619 7,014,706 $ $ $ 70,089 182 272,884 (417,982) (4,153) (78,980) 4,073,660 3,994,680 $ 216,193 443,606 (436,179) (3,925) 219,695 3,853,965 4,073,660 $ 3,020,026 $ 2,705,959 $ Plan fiduciary net position Contributions- employer Contributions- employee Net investment income Benefit payments, including refunds Administrative expense Net change in plan fiduciary net position Plan fiduciary net position- beginning Plan fiduciary net position- ending $ Net OPEB liability- ending Plan fiduciary net position as a percentage of the total OPEB liability 87,521 491,831 11,390 164,972 (271,985) (436,179) 47,550 6,732,069 6,779,619 $ 56.95% Covered payroll $ Net OPEB liability as a percentage of covered payroll Note: 2018 27,956,306 60.09% $ 29,173,568 10.80% This schedule is intended to show information for ten years. Additional years' information will be displayed as it becomes available. 124 9.28% Schedule of Changes in the Net OPEB Liability (Asset) and Related Ratios Public Safety Personnel Retirement System - Fire Last Two Fiscal Years City of Tempe, Arizona 2019 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 $ 32,536 247,192 (50,860) (216,408) 12,460 3,432,367 3,444,827 $ $ $ 8,984 105 248,942 (216,408) (3,789) 37,834 3,658,932 3,696,766 $ 398,603 (219,393) (3,526) 175,684 3,483,248 3,658,932 $ (251,939) $ (226,565) $ Plan fiduciary net position Contributions- employer Contributions- employee Net investment income Benefit payments, including refunds Administrative expense Net change in plan fiduciary net position Plan fiduciary net position- beginning Plan fiduciary net position- ending $ Net OPEB asset- ending Plan fiduciary net position as a percentage of the total OPEB liability 33,870 246,243 4,522 24,942 (33,819) (219,393) 56,365 3,376,002 3,432,367 $ 107.31% Covered payroll $ Net OPEB liability (asset) as a percentage of covered payroll Note: 2018 13,664,614 106.60% $ 13,548,032 -1.84% This schedule is intended to show information for ten years. Additional years' information will be displayed as it becomes available. 125 -1.67% Schedule of Contributions OPEB Plan Last Three Fiscal Years City of Tempe, Arizona 2019 7,134,000 2018 Actuarially determined contribution Contributions in relation to the actuarially determined contribution $ Contribution deficiency (excess) $ (1,327,506) $ 449 $ 412,633 Covered-employee payroll $ 35,758,296 $ 34,716,792 $ 41,444,730 8,461,506 Contributions as a percentage of covered-employee payroll Note: $ 2017 23.66% 6,984,000 $ 6,983,551 7,171,851 6,759,218 20.12% This schedule is intended to show information for ten years. Additional years' information will be displayed as it becomes available. 126 16.31% Schedule of Changes in the Net OPEB Liability and Related Ratios OPEB Plan Last Three Fiscal Years City of Tempe, Arizona 2019 Total OPEB liability Service cost Interest 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 Net change in plan fiduciary net position Plan fiduciary net position- beginning Plan fiduciary net position- ending Net OPEB liability- ending $ 319,754 5,930,814 (4,271,517) 1,581,360 (8,461,506) (4,901,095) 95,154,294 90,253,199 $ $ $ 8,461,506 796,286 (8,461,506) 796,286 13,391,250 14,187,536 $ 76,065,663 $ $ Plan fiduciary net position as a percentage of the total OPEB liability Covered-employee payroll $ 35,758,296 212.72% 2017 321,229 5,689,881 4,915,943 503,616 (6,983,551) 4,447,118 90,707,176 95,154,294 $ $ $ 6,983,551 1,062,670 (6,983,551) 1,062,670 12,328,580 13,391,250 $ 6,759,218 1,211,093 (6,759,218) 1,211,093 11,117,487 12,328,580 $ 81,763,044 $ 78,378,596 $ 15.72% Net OPEB liability as a percentage of covered-employee payroll Note: 2018 $ 300,495 5,742,386 (6,759,218) (716,337) 91,423,513 90,707,176 14.07% $ 34,716,792 13.59% $ 41,444,730 235.51% This schedule is intended to show information for ten years. Additional years' information will be displayed as it becomes available. 127 189.12% Schedule of Investment Returns OPEB Plan Last Three Fiscal Years City of Tempe, Arizona 2019 Annual money-weighted rate of return, net of investment expense Note: 2018 6.43% 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. 128 Notes to Required Supplementary Information June 30, 2019 City of Tempe, Arizona Actuarial Assumptions for Valuations Performed. The information presented in the required supplementary schedules was determined as part of the actuarial valuations at the dates indicated, which is the most recent actuarial valuation. The actuarial assumptions used are disclosed in the notes to the financial statements. Factors that Affect Trends - Pensions. The actuarial assumptions used in the June 30, 2017 valuation for ASRS were based on the results of an actuarial experience study for the five-year period ended June 30, 2016. 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, 2017, actuarial valuation. The actuarial assumptions used in the June 30, 2018, valuation for PSPRS were based on the results of an actuarial experience study for the 5-year period ended June 30, 2016. Several actuarial assumptions were adjusted as a result of the study, including decreasing wage inflation from 4.0% to 3.5%. Arizona courts have ruled that provisions of a 2011 law that changed the mechanism for funding permanent pension benefit increases and increased employee pension contribution rates were unconstitutional. As a result, the PSPRS changed benefit terms to reflect the prior mechanism for funding permanent benefit increases for those members and revised actuarial assumptions to explicitly value future permanent benefit increases. These changes increased the PSPRS-required contributions beginning in fiscal year 2019 for members who retired or will retire after the law’s effective date. In addition, the City refunded excess employee contributions to PSPRS members. PSPRS allowed the City to reduce its actual employer contributions for the refund amounts. As a result, the City’s pension contributions were less than the actuarially or statutorily determined contributions for fiscal year 2018 and fiscal year 2019. Schedule of Changes in Net OPEB Liability. Mortality Rates. Mortality tables were previously based on the RPH-2014 Employee and Healthy Annuitant mortality tables, with generational mortality improvement using Scale MP-2017. The Society of Actuaries released the Pub2010 mortality tables which are based on public-sector mortality experience. The valuation assumed the Pub G.H2010 Employee and Healthy Annuitant for general employees and Pub S.H-2010 Employee and Healthy Annuitant for public safety employees, with generational mortality improvement with Scale MP-2018. This resulted in an increase in the total OPEB liability of approximately $1.5 million. Contributions. First-year trends were updated to reflect actual increases in City-HRA contributions for 2019. This resulted in a decrease in the total OPEB liability of approximately $5.3 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, 2019 July 1, 2017 Entry age normal Market value 2.60% 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 PubG.H-2010 & PubS.H-2010 Employee Mortality Tables, Generational with Projection Scale MP-2018 for males/females. For retired employees, based on the PubG.H-2010 & PubS.H-2010 Healthy Annuitant Mortality Tables, Generational with Projection Scale MP-2018 for males/females. 129 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. 130 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 Protection Fund. Used for purchasing, constructing and equipping police functions. ▪ Fire Protection 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. 131 Combining Balance Sheet Non-major Governmental Funds June 30, 2019 Special Revenue Highway User 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 $ $ $ 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 1,076,801 3,286,550 4,363,351 149,421 177,415 1,820,943 3,145,000 141,550 5,434,329 $ 3,895,018 $ 1,155,923 834,823 5,885,764 $ - 4,363,351 $ $ $ 132 5,885,764 $ 1,009,474 $ 647,998 1,657,472 15 379,058 29,545 310,025 1,217,028 73,503 293,175 7,800 29,806 404,284 $ - 834,823 4,567,132 5,401,955 $ 498,385 Housing Assistance - - (1,070,978) (1,070,978) $ 390,195 93,614 483,809 Community Development - 29,545 783,199 812,744 $ 1,217,028 3,178 193,820 196,998 647,998 812,476 1,460,474 $ 1,657,472 City of Tempe, Arizona Special Revenue Housing Affordability $ 27,645 $ 138 27,783 $ - Donations and Court Awards $ 2,725,879 $ 6,076 19,201 17,613 2,768,769 $ - 43,323 386 43,709 - - 27,783 27,783 $ 27,783 Grants $ 1,006,768 $ 1,793,670 15,208 2,815,646 $ 2,768,769 $ 1,680,776 $ 2,749,467 4,430,243 $ 23,213 2,575,000 174,467 2,772,680 354,878 178,508 533,386 1,362,882 1,058,934 303,244 2,725,060 $ 143,050 177,410 879 129,363 2,001,119 2,451,821 Community Facilities District 2,815,646 $ 10,843,945 $ 2,232,724 6,229 2,191,929 834,823 692,751 6,363,655 23,166,056 $ - 15,208 40,692 (225,461) (169,561) $ Total 354,878 178,508 533,386 1,657,563 1,657,563 $ 4,430,243 (continued) 133 825,883 470,585 473,914 1,950,306 2,001,119 5,720,000 345,823 11,787,630 1,527,574 9,251,727 1,058,934 303,244 (1,296,439) 10,845,040 $ 23,166,056 Combining Balance Sheet Non-major Governmental Funds June 30, 2019 rizona Capital Projects Police Protection 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 $ 14,065,629 $ 22,722 14,088,351 $ 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 989,155 989,155 $ 4,548,346 $ 4,548,346 $ 25,211 25,211 - 14,088,351 Storm Sewers $ 2,679,972 $ 137,402 $ 2,679,972 $ 4,279 141,681 $ - 249,745 12,563,313 286,138 13,099,196 $ Fire Protection 4,548,346 134 $ - 4,180,718 342,417 4,523,135 $ 559,635 559,635 2,679,972 $ 13,575,086 $ 58,286 13,633,372 $ - 1,325,360 789,690 5,287 2,120,337 $ 3,330 3,330 Parks 39,636 39,636 206,829 (68,478) 138,351 $ 141,681 1,247,586 3,671 1,251,257 2,532,588 9,746,413 63,478 12,342,479 $ 13,633,372 City of Tempe, Arizona Capital Projects Community Development Rio Salado $ 107,840 $ 276,796 384,636 $ - $ 12,258,808 $ 12,258,808 $ - 384,636 Signals $ 1,414,913 $ 543,955 1,958,868 $ - 384,636 384,636 $ 874,844 874,844 12,258,808 940,717 940,717 $ 2,203,399 $ 2,203,399 $ 543,955 543,955 9,263,303 2,120,661 11,383,964 $ Community Facilities District 1,958,868 Total $ 50,991,395 $ 58,286 847,752 51,897,433 $ - 152,500 321,696 474,196 $ 26,223 26,223 1,387,577 789,599 2,177,176 $ 2,203,399 135 Total Non-major Governmental Funds $ 4,666,701 3,671 4,670,372 $ 61,835,340 $ 2,232,724 58,286 6,229 3,039,681 834,823 692,751 6,363,655 75,063,489 $ 5,492,584 470,585 473,914 1,950,306 2,004,790 5,720,000 345,823 16,458,002 543,955 39,636 583,591 898,833 178,508 39,636 1,116,977 8,647,739 34,092,713 3,971,496 (68,478) 46,643,470 1,527,574 17,899,466 35,151,647 4,274,740 (1,364,917) 57,488,510 51,897,433 $ 75,063,489 Combining Statement of Revenues, Expenditures and Changes in Fund Balances Non-major Governmental Funds For the Fiscal Year Ended June 30, 2019 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 $ 8,823,434 $ - $ - $ - 1,043,251 2,773 13,438 9,882,896 12,658,768 381,242 1,151 13,041,161 4,472,875 914 459,236 4,933,025 10,060,275 19,506 27,607 10,107,388 4,980,907 - 9,619,315 - 4,909,284 - 9,686,117 - 3,145,000 317,638 2,376 8,445,921 9,619,315 423,000 72,004 5,404,288 9,686,117 1,436,975 3,421,846 (471,263) 421,271 734,177 - - 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: Debt service funds Capital projects funds Issuance of debt Premium on issuance of debt Proceeds from sale of capital assets Total other financing sources (uses) - - (4,028,173) 1,299 (4,026,874) (4,877) (7,837,500) 6,686 (7,835,691) 734,177 Net change in fund balances (2,589,899) (4,413,845) 262,914 421,271 Fund balance at beginning of year 1,518,921 9,815,800 549,830 1,039,203 Fund balance at end of year $ (1,070,978) $ 5,401,955 136 $ 812,744 $ 1,460,474 City of Tempe, Arizona Special Revenue Housing Affordability $ $ - Donations and Court Awards $ - Community Facilities District Grants $ - $ - Total $ 8,823,434 1,632 1,632 58,365 31,082 261,805 431,985 418,990 36,930 1,239,157 1,863,204 569,060 3,668,040 441 4,669 325,731 30,888 7,182 6,469,215 2,462,117 2,462,117 16,396,354 569,060 12,658,768 3,726,405 53,575 4,153,084 757,716 452,651 545,544 48,136,591 24,995 - 15,686 279,334 107,296 130,789 186,969 496,834 165,994 - 3,171,974 313,045 522,884 112,831 13,413 1,456,561 36,599 637,318 18,432 90,573 2,718,666 - 3,171,974 328,731 5,783,125 9,839,442 2,862,868 16,263,926 533,433 803,312 18,432 90,573 24,995 1,382,902 6,373,630 2,575,000 348,934 2,218 5,644,818 6,143,000 738,576 4,594 46,581,986 (23,363) (143,745) 95,585 (3,182,701) 1,554,605 - 499,843 - 29,786 - 2,923,934 - 1,263,806 2,923,934 - - 499,843 29,786 11,365 2,935,299 (4,877) (11,865,673) 19,350 (7,663,460) (23,363) 356,098 125,371 (247,402) (6,108,855) 51,146 2,368,962 (294,932) 1,904,965 16,953,895 27,783 $ 2,725,060 $ (169,561) $ 1,657,563 (continued) 137 $ 10,845,040 Combining Statement of Revenues, Expenditures and Changes in Fund Balance Non-major Governmental Funds For the Fiscal Year Ended June 30, 2019 Capital Projects Police Protection Streets Fire Protection 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 $ - $ - $ - $ - 358,072 3,736 5,043 149,424 108,074 624,349 50,191 856,886 907,077 25,630 661,873 687,503 3,566 713 343 4,622 - - - - 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 9,586,741 9,586,741 3,040,165 3,040,165 4,629,726 4,629,726 194,247 194,247 Excess (deficiency) of revenues over expenditures before other financing sources (uses) (8,962,392) (2,133,088) (3,942,223) (189,625) Other financing sources (uses): Transfers in: General fund Special revenue funds Debt service funds Capital projects funds Enterprise funds Transfers out: Debt service funds Capital projects funds Issuance of debt Premium on issuance of debt Proceeds from sale of capital assets Total other financing sources (uses) 100,000 7,337,500 - - - - (46,705) 3,910,000 700,000 12,000,795 (761) 3,587,000 643,000 4,229,239 (7,653) 2,468,000 442,000 2,902,347 271,000 49,000 320,000 Net change in fund balances 3,038,403 2,096,151 (1,039,876) 130,375 Fund balance at beginning of year 10,060,793 2,426,984 3,160,213 7,976 Fund balance at end of year $ 13,099,196 $ 4,523,135 138 $ 2,120,337 $ 138,351 City of Tempe, Arizona Capital Projects Parks $ $ Community Development Rio Salado - $ - $ - 18,650 51,870 849,633 15,188 935,341 230,663 46,133 276,796 12,000 1,700 12,817 3,150 29,667 - - - Community Facilities District Signals $ - $ 1,852,224 637 50,588 1,903,449 - Total $ 516,305 516,305 - Total Non-major Governmental Funds - $ 2,463,175 50,582 12,000 135,414 678,546 2,527,054 18,338 5,885,109 - 8,823,434 18,859,529 619,642 12,658,768 3,738,405 188,989 4,831,630 757,716 2,979,705 563,882 54,021,700 - 3,171,974 328,731 5,783,125 9,839,442 2,862,868 16,263,926 533,433 803,312 18,432 90,573 14,227,163 14,227,163 27,777 27,777 7,532,319 7,532,319 3,980,306 3,980,306 327,588 327,588 43,546,032 43,546,032 6,143,000 738,576 4,594 43,546,032 90,128,018 (13,291,822) 249,019 (7,502,652) (2,076,857) 188,717 (37,660,923) (36,106,318) 315,000 84,546 - 26,800 - 2,056,577 4,127,991 529,208 500,000 - - 2,471,577 11,965,491 111,346 529,208 3,735,383 11,965,491 2,923,934 111,346 529,208 (6,736) (26,800) 10,155,000 1,825,000 12,346,010 (84,546) (57,746) (432) 5,705,000 1,015,000 13,433,344 (128,815) 1,034,000 186,000 1,591,185 - (191,102) (111,346) 27,130,000 4,860,000 46,765,174 (195,979) (11,977,019) 27,130,000 4,860,000 19,350 39,101,714 (945,812) 191,273 5,930,692 (485,672) 188,717 9,104,251 2,995,396 13,288,291 193,363 5,453,272 959,868 1,988,459 37,539,219 54,493,114 12,342,479 $ 384,636 $ 11,383,964 $ 474,196 139 $ 2,177,176 $ 46,643,470 $ 57,488,510 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. 140 Combining Statement of Net Position Internal Service Funds June 30, 2019 City of Tempe, Arizona Assets Current assets: Pooled cash and investments Accounts receivable Accrued interest receivable Net OPEB asset Total assets Deferred Outflows of Resources Deferred outflows related to pensions Deferred outflows related to OPEB Total deferred outflows of resources Liabilities Current liabilities: Accounts payable Due to other funds Accrued expenses and claims payable Total current liabilities 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 Risk Management Worker's Compensation $ 7,075,913 1,663 7,077,576 $ 3,596,714 7,988 3,604,702 89,355 7,008 96,363 $ 104,660 433,729 0 11,618,668 12,052,397 86,061 635,579 721,640 12,774,037 - 104,660 82,411 7,924 90,335 2,289,865 $ 2,289,865 16,228,932 454,617 7,988 1,663 16,693,200 89,355 7,008 96,363 3,721,057 - 1,530,666 $ - 3,500,042 82,411 7,924 90,335 5,556,305 454,617 6,010,922 365,726 0 3,355,331 3,721,057 - 5,552,938 Total - 24,262 3,475,780 3,500,042 86,061 635,579 721,640 141 $ - 43,741 4,787,557 4,831,298 $ 1,530,666 Health 3,925,191 $ 3,925,191 Combining Statement of Revenues, Expenses and Changes in Net Position Internal Service Funds For the Fiscal Year Ended June 30, 2019 City of Tempe, Arizona Risk Management Worker's Compensation Health Total Operating revenues: Contributions Total operating revenues $ 3,170,689 3,170,689 $ 2,872,394 2,872,394 $ 34,324,176 34,324,176 $ 40,367,259 40,367,259 Operating expenses: Fees and services Total operating expenses 3,170,689 3,170,689 2,872,394 2,872,394 33,654,297 33,654,297 39,697,380 39,697,380 Operating income (loss) Nonoperating revenues Investment income Total nonoperating revenues Changes in net position Total net position - beginning Total net position - ending - - 669,879 669,879 - 90,630 90,630 - 90,630 90,630 - 90,630 669,879 760,509 14,030 104,660 1,619,986 $ 2,289,865 3,164,682 $ 3,925,191 1,530,666 $ 1,530,666 142 $ Combining Statement of Cash Flows Internal Service Funds For the Fiscal Year Ended June 30, 2019 City of Tempe, Arizona Cash flows from operating activities: Receipts from other funds Reduction in (payments for) settlement of claims Net cash provided (used) by in operating activities Risk Management Worker's Compensation $ $ Cash flows from investing activities: Interest received Net cash provided (used) by investing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year 3,170,689 (2,642,184) 528,505 2,872,394 (1,891,900) 980,494 Health Total $ 33,932,725 (33,190,814) 741,911 $ 39,975,808 (37,724,898) 2,250,910 - 87,142 87,142 - 87,142 87,142 528,505 1,067,636 741,911 2,338,052 6,547,408 2,529,078 4,814,394 13,890,880 $ 16,228,932 $ 7,075,913 $ 3,596,714 $ 5,556,305 $ - $ - $ 669,879 - 9,091 971,403 (391,451) 236,857 226,626 - - $ (1,663) 38,039 570,752 1,060 27,962 (104,647) (2,998) 528,505 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 net OPEB asset 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 143 $ 980,494 $ 741,911 $ 669,879 $ (391,451) (1,663) 283,987 1,768,781 1,060 27,962 (104,647) (2,998) 2,250,910 City of Tempe, Arizona Other Supplementary Information BUDGETARY COMPARISON SCHEDULES 144 Combined Schedule of Revenues, Expenditures and Changes in Fund Balance- Budget to Actual General, Debt Service, Special Revenue, Capital Projects and Enterprise Fund Types For the Fiscal Year Ended June 30, 2019 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 Proceeds (loss) from sale of capital assets Total other financing sources (uses) Net change in fund balance City of Tempe, Arizona Variance with Final Budget Positive (Negative) Final Budget Amounts Actual Amounts (Budgetary Basis) $ 226,940,952 108,795,758 3,442,000 131,813,141 8,755,076 3,991,000 1,677,016 20,121,214 4,406,586 509,942,743 $ 229,339,753 87,290,952 7,019,500 137,147,359 9,678,547 6,951,095 3,326,007 12,344,197 493,097,410 102,111,380 48,098,739 53,540,826 337,233,470 31,564,102 22,435,197 471,784 6,196,108 11,119,302 3,578,218 530,752 284,898 1,173,523 1,011,140 28,696,397 9,444,811 (15,974,695) 93,751,040 46,968,245 42,691,574 243,450,582 16,955,751 26,565,911 495,542 4,815,088 7,987,329 3,513,319 459,794 262,097 1,254,327 919,387 32,170,576 (16,510,377) 8,360,340 1,130,494 10,849,252 93,782,888 14,608,351 (4,130,714) (23,758) 1,381,020 3,131,973 64,899 70,958 22,801 (80,804) 91,753 (3,474,179) 9,444,811 535,682 68,602,704 23,747,171 733,865,827 69,485,281 25,580,027 600,815,493 (882,577) (1,832,856) 133,050,334 40,299,449 (42,857,858) 125,226,687 547,585 123,215,863 $ (100,707,221) 45,299,852 (45,299,852) 58,565,000 11,890,524 1,499,474 71,954,998 $ (35,763,085) 5,000,403 (2,441,994) (66,661,687) 11,890,524 951,889 (51,260,865) 64,944,136 145 $ $ 2,398,801 (21,504,806) 3,577,500 5,334,218 923,471 2,960,095 1,648,991 (7,777,017) (4,406,586) (16,845,333) Schedule of Revenues, Expenditures and Changes in Fund Balance- Budget to Actual General Obligation Debt Service Fund For the Fiscal Year Ended June 30, 2019 Revenues: Property taxes Investment income Total revenues City of Tempe, Arizona $ 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 Total other financing sources (uses) Net change in fund balance $ Final Budget Amounts Actual Amounts (Budgetary Basis) 28,030,238 28,030,238 $ 28,173,553 123,009 28,296,562 28,096,116 8,324,188 36,420,304 29,115,000 10,303,111 39,418,111 (1,018,884) (1,978,923) (2,997,807) (8,390,066) (11,121,549) (2,731,483) 6,802,366 (8,979,545) (2,177,179) 6,993,346 (8,983,336) 795,061 (1,194,929) 190,980 (3,791) 795,061 982,250 (10,567,245) $ (12,316,478) $ (1,749,233) 146 Variance with Final BudgetPositive (Negative) $ 143,315 123,009 266,324 Schedule of Revenues, Expenditures and Changes in Fund Balance- Budget to Actual Special Assessment Debt Service For the Fiscal Year Ended June 30, 2019 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 2,211,570 2,211,570 $ 1,380,000 831,570 2,211,570 $ - $ 147 514 1,990,732 6,151 1,997,397 Variance with Final BudgetPositive (Negative) $ 514 (220,838) 6,151 (214,173) 144 (144) 1,380,000 833,070 2,213,214 (1,500) (1,644) (215,817) $ (215,817) Schedule of Revenues, Expenditures and Changes in Fund Balance- Budget to Actual Performing Arts Fund For the Fiscal Year Ended June 30, 2019 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Sales taxes 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 sources (uses): Transfers out Proceeds on sale of assets Total other financing sources (uses) Net change in fund balance $ 8,804,923 1,034,000 240,000 10,078,923 $ 8,823,434 1,043,251 16,211 9,882,896 Variance with Final BudgetPositive (Negative) $ 18,511 9,251 (223,789) (196,027) 4,919,709 4,979,040 (59,331) 3,145,000 286,500 8,351,209 3,145,000 323,460 8,447,500 (36,960) (96,291) 1,727,714 1,435,396 (292,318) (4,028,173) (4,028,173) (4,028,173) 1,299 (4,026,874) 1,299 1,299 $ (2,300,459) $ (2,591,478) 148 $ (291,019) Schedule of Revenues, Expenditures and Changes in Fund Balance- Budget to Actual Highway User Revenue Fund For the Fiscal Year Ended June 30, 2019 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 11,465,615 82,500 3,000 12,001,115 $ Actual Amounts (Budgetary Basis) Variance with Final BudgetPositive (Negative) 12,658,768 381,242 1,151 13,041,161 $ (450,000) 1,193,153 298,742 (1,849) 1,040,046 10,781,165 10,781,165 9,738,414 9,738,414 1,042,751 1,042,751 Excess (deficiency) of revenues over expenditures 1,219,950 3,302,747 2,082,797 Other financing sources (uses): Transfers out Proceeds from sale of capital assets Total other financing sources (uses) (7,842,411) (7,842,411) (7,842,377) 6,686 (7,835,691) 34 6,686 6,720 Net change in fund balance $ (6,622,461) $ (4,532,944) 149 $ 2,089,517 Schedule of Revenues, Expenditures and Changes in Fund Balance- Budget to Actual Community Development Fund For the Fiscal Year Ended June 30, 2019 Revenues: Federal grants Investment income Miscellaneous Total revenues Expenditures: Current: Community development Debt service: Principal Interest and fiscal fees Total expenditures Deficiency of revenues and other financing sources over expenditures Other financing sources: Transfers in Total other financing sources Net change in fund balance City of Tempe, Arizona Final Budget Amounts Actual Amounts (Budgetary Basis) Variance with Final BudgetPositive (Negative) $ 7,884,696 647,348 8,532,044 $ 4,472,875 914 459,236 4,933,025 $ 9,026,154 4,910,378 4,115,776 423,000 74,348 9,523,502 423,000 72,004 5,405,382 2,344 4,118,120 (991,458) (472,357) 519,101 - 734,177 734,177 734,177 734,177 $ (991,458) 150 $ 261,820 $ (3,411,821) 914 (188,112) (3,599,019) 1,253,278 Schedule of Revenues, Expenditures and Changes in Fund Balance- Budget to Actual Housing Assistance Fund For the Fiscal Year Ended June 30, 2019 Revenues: Federal grants Investment income Miscellaneous Total revenues City of Tempe, Arizona Final Budget Amounts Actual Amounts (Budgetary Basis) Variance with Final BudgetPositive (Negative) $ 10,556,799 25,000 10,581,799 $ 10,060,275 19,506 27,607 10,107,388 $ 11,178,333 11,178,333 9,683,561 9,683,561 1,494,772 1,494,772 423,827 $ 1,020,361 Expenditures: Current: Human services Total expenditures Net change in fund balance $ (596,534) 151 $ (496,524) 19,506 2,607 (474,411) Schedule of Revenues, Expenditures and Changes in Fund Balance- Budget to Actual Housing Affordability Fund For the Fiscal Year Ended June 30, 2019 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Investment income Total revenues $ Expenditures: Current: Human services Total expenditures Net change in fund balance - $ 51,000 51,000 $ (51,000) 152 974 974 Variance with Final BudgetPositive (Negative) $ 24,995 24,995 $ (24,021) 974 974 26,005 26,005 $ 26,979 Schedule of Revenues, Expenditures and Changes in Fund Balance- Budget to Actual Donations and Court Awards Fund For the Fiscal Year Ended June 30, 2019 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Intergovernmental other Investment income Charges for services Fines and forfeitures Miscellaneous Total revenues $ 34,366 401,239 460,247 628,642 1,524,494 $ 58,365 22,501 261,805 431,985 455,920 1,230,576 Variance with Final BudgetPositive (Negative) $ 23,999 22,501 (139,434) (28,262) (172,722) (293,918) 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 92,870 966,788 113,880 662,641 507,141 1,367,581 371,070 2,000 1,129,075 5,213,046 15,686 279,334 107,296 130,789 186,969 496,834 165,994 1,382,902 92,870 951,102 (165,454) 555,345 376,352 1,180,612 (125,764) (163,994) 1,129,075 3,830,144 Excess (deficiency) of revenues over expenditures (3,688,552) (152,326) 3,536,226 - 499,843 499,843 499,843 499,843 Other financing sources: Transfers in Total other financing sources Net change in fund balance $ (3,688,552) 153 $ 347,517 $ 4,036,069 Schedule of Revenues, Expenditures and Changes in Fund Balance- Budget to Actual Grants Fund For the Fiscal Year Ended June 30, 2019 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 Miscellaneous Total revenues $ 2,286,817 733,642 5,669,844 9,000 350,000 3,393,806 12,443,109 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 4,776,723 955,303 1,344,351 409,088 190,568 2,196,279 103,804 3,407,684 85,000 162,309 5,225,051 18,856,160 3,209,156 313,045 522,884 118,731 26,231 1,456,561 36,599 637,318 18,432 90,573 6,429,530 1,567,567 642,258 821,467 290,357 164,337 739,718 67,205 2,770,366 66,568 71,736 5,225,051 12,426,630 Excess (deficiency) of revenues over expenditures (6,413,051) 33,785 6,446,836 29,786 29,786 29,786 29,786 - Other financing uses: Transfers in Total other financing uses Net change in fund balance $ (6,383,265) 154 $ $ 1,857,304 569,060 3,668,040 441 4,669 325,731 38,070 6,463,315 63,571 $ $ (429,513) (164,582) (2,001,804) 441 (4,331) (24,269) (3,355,736) (5,979,794) 6,446,836 Schedule of Revenues, Expenditures and Changes in Fund Balance- Budget to Actual Community Facilities District Fund For the Fiscal Year Ended June 30, 2019 Revenues: Charges for services Miscellaneous Total revenues City of Tempe, Arizona Final Budget Amounts Actual Amounts (Budgetary Basis) Variance with Final BudgetPositive (Negative) $ 2,350,919 200,000 2,550,919 $ 2,462,117 2,462,117 $ 2,920,350 200,000 2,727,543 - 192,807 200,000 2,575,000 353,734 6,049,084 2,575,000 351,152 5,653,695 2,582 395,389 (3,498,165) (3,191,578) 306,587 2,923,934 2,923,934 2,923,934 11,365 2,935,299 11,365 11,365 (574,231) $ (256,279) Expenditures: Current: Community development Contingency Debt service: Principal Interest and fiscal fees 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 $ 155 $ 111,198 (200,000) (88,802) 317,952 Schedule of Revenues, Expenditures and Changes in Fund Balance- Budget to Actual Transit Capital Projects Fund For the Fiscal Year Ended June 30, 2019 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Federal grants Intergovermental other Investment income Other entities' participation Contingency Total revenues $ 14,585,732 127,014 2,400,000 17,112,746 Expenditures: Current: Public works Total expenditures Deficiency of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Proceeds from sale of capital assets Total other financing sources (uses) Net change in fund balance 2,556,339 53,169 15,736 439,638 3,064,882 $ (12,029,393) 53,169 15,736 312,624 (2,400,000) (14,047,864) 39,940,080 39,940,080 15,437,782 15,437,782 24,502,298 24,502,298 (22,827,334) (12,372,900) 10,454,434 9,316,576 9,316,576 9,316,576 (3,061,927) 759,990 7,014,639 (3,061,927) 759,990 (2,301,937) $ (13,510,758) 156 $ Variance with Final BudgetPositive (Negative) $ (5,358,261) $ 8,152,497 Schedule of Revenues, Expenditures and Changes in Fund Balance- Budget to Actual Streets Capital Projects Fund For the Fiscal Year Ended June 30, 2019 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Variance with Final BudgetPositive (Negative) 358,072 3,736 5,043 149,424 108,074 624,349 $ (2,486,421) 3,736 5,043 149,424 (647,761) (1,000,000) (3,975,979) 27,886,894 27,886,894 13,285,400 13,285,400 14,601,494 14,601,494 (23,286,566) (12,661,051) 10,625,515 7,437,500 7,216,067 14,653,567 7,437,500 (46,705) 3,910,000 700,000 12,000,795 (46,705) (3,306,067) 700,000 (2,652,772) Final Budget Amounts Revenues: Federal grants Intergovernmental other Investment income Charges for services Other entities' participation Contingency Total revenues $ Expenditures: Current: Public works Total expenditures 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 $ 2,844,493 755,835 1,000,000 4,600,328 (8,632,999) 157 $ $ (660,256) $ 7,972,743 Schedule of Revenues, Expenditures and Changes in Fund Balance- Budget to Actual Police Protection Capital Projects Fund For the Fiscal Year Ended June 30, 2019 City of Tempe, Arizona Final Budget Amounts Revenues: Investment income Fines and forfeitures Other entities' participation Total revenues $ Expenditures: Current: Police Total expenditures Deficiency of revenues over expenditures Other financing sources (uses): Transfers out Issuance of debt Premium on isuance of debt Total other financing sources (uses) Net change in fund balance $ 141,500 141,500 Actual Amounts (Budgetary Basis) Variance with Final BudgetPositive (Negative) $ $ 50,191 856,886 907,077 50,191 (141,500) 856,886 765,577 6,533,617 6,533,617 3,099,233 3,099,233 3,434,384 3,434,384 (6,392,117) (2,192,156) 4,199,961 5,667,173 5,667,173 (761) 3,587,000 643,000 4,229,239 (761) (2,080,173) 643,000 (1,437,934) (724,944) $ 2,037,083 $ 2,762,027 158 Schedule of Revenues, Expenditures and Changes in Fund Balance- Budget to Actual Fire Protection Capital Projects Fund For the Fiscal Year Ended June 30, 2019 Revenues: Investment income Other entities' participation Total revenues Expenditures: Current: Fire medical rescue Total expenditures City of Tempe, Arizona Final Budget Amounts Actual Amounts (Budgetary Basis) Variance with Final BudgetPositive (Negative) $ $ $ - 25,630 661,873 687,503 25,630 661,873 687,503 9,114,700 9,114,700 6,768,304 6,768,304 2,346,396 2,346,396 (9,114,700) (6,080,801) 3,033,899 Other financing sources(uses): Transfers out Issuance of debt Premium on issuance of debt Total other financing sources (uses) 7,024,383 7,024,383 (7,653) 2,468,000 442,000 2,902,347 (7,653) (4,556,383) 442,000 (4,122,036) Net change in fund balance $ (2,090,317) $ (3,178,454) $ (1,088,137) Deficiency of revenues over expenditures 159 Schedule of Revenues, Expenditures and Changes in Fund Balance- Budget to Actual Storm Sewers Capital Projects Fund For the Fiscal Year Ended June 30, 2019 Revenues: Intergovernmental Investment income Total revenues Expenditures: Current: Public works Total expenditures City of Tempe, Arizona Final Budget Amounts Actual Amounts (Budgetary Basis) Variance with Final BudgetPositive (Negative) $ $ $ - 4,279 343 4,622 4,279 343 4,622 887,073 887,073 301,042 301,042 586,031 586,031 Defiiency of revenues over expenditures (887,073) (296,420) 590,653 Other financing sources: Issuance of debt Premium on issuance of debt Total other financing sources 915,863 915,863 271,000 49,000 320,000 (644,863) 49,000 (595,863) Net change in fund balance $ 28,790 $ 160 23,580 $ (5,210) Schedule of Revenues, Expenditures and Changes in Fund Balance- Budget to Actual Parks Capital Projects Fund For the Fiscal Year Ended June 30, 2019 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Intergovernmental Investment income Other entities' participation Miscellaneous Contingency Total revenues Expenditures: Current: Community services Total expenditures $ 304,852 606,586 911,438 $ 18,650 51,870 849,633 15,188 935,341 Variance with Final BudgetPositive (Negative) $ 18,650 51,870 544,781 15,188 (606,586) 23,903 25,666,729 25,666,729 17,238,459 17,238,459 8,428,270 8,428,270 (24,755,291) (16,303,118) 8,452,173 Other financing sources (uses): Transfers in Transfers out Issuance of debt Premium on issuance of debt Total other financing sources (uses) 315,000 15,318,149 15,633,149 399,546 (33,536) 10,155,000 1,825,000 12,346,010 84,546 (33,536) (5,163,149) 1,825,000 (3,287,139) Net change in fund balance $ (9,122,142) $ (3,957,108) $ 5,165,034 Deficiency of revenues over expenditures 161 Schedule of Revenues, Expenditures and Changes in Fund Balance- Budget to Actual Rio Salado Capital Projects Fund For the Fiscal Year Ended June 30, 2019 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Intergovernmental other Total revenues $ - $ Variance with Final BudgetPositive (Negative) 276,796 276,796 $276,796 276,796 Expenditures: Current: Community development Total expenditures 27,777 27,777 27,777 27,777 - Deficiency of revenues over expenditures (27,777) 249,019 276,796 - 26,800 (84,546) (57,746) 26,800 (84,546) (57,746) Other financing sources (uses): Transfers in Transfers out Total other financing sources (uses) Net change in fund balance $ (27,777) 162 $ 191,273 $ 219,050 Schedule of Revenues, Expenditures and Changes in Fund Balance- Budget to Actual Community Development Capital Projects Fund For the Fiscal Year Ended June 30, 2019 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Intergovernmental Investment income Charges for services Miscellaneous Total revenues Expenditures: Current: Public works Total expenditures $ - $ 12,000 1,700 12,817 3,150 29,667 Variance with Final BudgetPositive (Negative) $ 12,000 1,700 12,817 3,150 29,667 18,420,773 18,420,773 10,169,285 10,169,285 8,251,488 8,251,488 (18,420,773) (10,139,618) 8,281,155 Other financing sources (uses): Transfers in Transfers out Issuance of debt Premium on issuance of debt Total other financing sources (uses) 4,863,776 8,910,264 13,774,040 6,713,776 (432) 5,705,000 1,015,000 13,433,344 1,850,000 (432) (3,205,264) 1,015,000 (340,696) Net change in fund balance $ (4,646,733) Deficiency of revenues over expenditures 163 $ 3,293,726 $ 7,940,459 Schedule of Revenues, Expenditures and Changes in Fund Balance- Budget to Actual Signals Capital Projects Fund For the Fiscal Year Ended June 30, 2019 Revenues: Federal grants Investment income Other entities' participation Contingency Total revenues City of Tempe, Arizona Final Budget Amounts Actual Amounts (Budgetary Basis) Variance with Final BudgetPositive (Negative) $ 2,350,498 400,000 2,750,498 $ 2,396,179 637 50,588 2,447,404 $ 8,842,377 8,842,377 5,223,514 5,223,514 3,618,863 3,618,863 (6,091,879) (2,776,110) 3,315,769 500,000 5,350,159 5,850,159 500,000 (128,815) 1,034,000 186,000 1,591,185 (128,815) (4,316,159) (4,444,974) (241,720) $ (1,184,925) Expenditures: Current: Public works Total expenditures 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 $ 164 $ 45,681 637 50,588 (400,000) (303,094) (943,205) Schedule of Revenues, Expenditures and Changes in Fund Balance- Budget to Actual Community Facilities District Capital Projects Fund For the Fiscal Year Ended June 30, 2019 Revenues: Charges for services Total revenues Expenditures: Current: Community development Total expenditures Net change in fund balance City of Tempe, Arizona Final Budget Amounts Actual Amounts (Budgetary Basis) $ $ 575,000 575,000 1,773,860 1,773,860 $ (1,198,860) 165 516,305 516,305 Variance with Final BudgetPositive (Negative) $ 327,588 327,588 $ 188,717 (58,695) (58,695) 1,446,272 1,446,272 $ 1,387,577 Schedule of Revenues, Expenditures and Changes in Fund Balance- Budget to Actual Water and Wastewater Fund For the Fiscal Year Ended June 30, 2019 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 $ 85,347,226 1,060,000 68,500 4,852,142 91,327,868 $ 85,540,917 2,095,283 501,109 88,137,309 Variance with Final BudgetPositive (Negative) $ 193,691 1,035,283 (68,500) (4,351,033) (3,190,559) 131,167,273 1,000,000 98,803,547 - 32,363,726 1,000,000 30,853,588 11,495,501 174,516,362 30,717,281 11,706,152 141,226,980 136,307 (210,651) 33,289,382 (83,188,494) (53,089,671) 30,098,823 6,271,585 (8,125,496) 74,824,629 65,000 73,035,718 6,059,402 (7,168,178) 31,435,000 6,235,463 35,390 36,597,077 (212,183) 957,318 (43,389,629) 6,235,463 (29,610) (36,438,641) $ (10,152,776) 166 $ (16,492,594) $ (6,339,818) Schedule of Revenues, Expenditures and Changes in Fund Balance- Budget to Actual Solid Waste Fund For the Fiscal Year Ended June 30, 2019 City of Tempe, Arizona Final Budget Amounts Actual Amounts (Budgetary Basis) $ 17,071,000 42,000 17,113,000 $ 17,306,244 81,090 45,955 17,433,289 19,196,906 500,000 19,696,906 18,325,524 18,325,524 871,382 500,000 1,371,382 Deficiency of revenues over expenditures (2,583,906) (892,235) 1,691,671 Other financing sources (uses): Transfers in Transfers out Proceeds from sale of capital assets Total other financing sources (uses) 999,696 (604,607) 30,000 425,089 400,000 (4,877) 82,595 477,718 (599,696) 599,730 52,595 52,629 Revenues: Charges for services Investment income Miscellaneous Total revenues Expenditures: Current: Public works Contingency Total expenditures Net change in fund balance $ (2,158,817) 167 $ (414,517) Variance with Final BudgetPositive (Negative) $ $ 235,244 39,090 45,955 320,289 1,744,300 Schedule of Revenues, Expenditures and Changes in Fund Balance- Budget to Actual Emergency Medical Transportation Fund For the Fiscal Year Ended June 30, 2019 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Fines and forfeitures Miscellaneous Total revenues Expenditures: Current: Fire medical rescue Contingency Total expenditures Deficiency of revenues over expenditures Other financing uses: Transfers out Total other financing uses Net change in fund balance $ 2,122,500 255,000 2,377,500 $ 2,486,643 296,858 2,783,501 Variance with Final BudgetPositive (Negative) $ 364,143 41,858 406,001 3,469,913 150,000 3,619,913 1,767,873 1,767,873 1,702,040 150,000 1,852,040 (1,242,413) 1,015,628 2,258,041 (43,149) (43,149) - 43,149 43,149 $ (1,285,562) 168 $ 1,015,628 $ 2,301,190 Schedule of Revenues, Expenditures and Changes in Fund Balance- Budget to Actual Golf Fund For the Fiscal Year Ended June 30, 2019 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: 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 $ 2,964,766 2,964,766 $ 2,626,308 10,064 2,636,372 Variance with Final BudgetPositive (Negative) $ (338,458) 10,064 (328,394) 3,858,109 3,858,109 3,800,234 3,800,234 57,875 57,875 (893,343) (1,163,862) (270,519) 818,480 120,000 938,480 110,576 161,315 271,891 41,315 (666,589) 45,137 169 $ (891,971) $ (937,108) City of Tempe, Arizona 170 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. 171 Net Position by Component (Exhibit S-1) Last Ten Fiscal Years Accrual Basis of Accounting City of Tempe, Arizona Fiscal Year 2019 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 Governmental activities Net investment in capital assets Restricted (a) Unrestricted $ 491,949,237 79,370,511 70,642,228 $ 483,438,668 102,808,694 13,318,115 $ 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 Total governmental activities net position $ 641,961,976 $ 599,565,477 $ 615,260,525 $ 639,396,166 $ 641,841,925 $ 923,269,707 $ 921,888,051 $ 934,164,238 $ 945,819,641 $ 947,278,004 Business-type activities Net investment in capital assets Unrestricted $ 124,836,951 153,206,243 $ 111,354,858 153,208,008 $ 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 Total business-type activities net position $ 278,043,194 $ 264,562,866 $ 256,291,853 $ 239,873,012 $ 232,785,992 $ 256,697,649 $ 254,989,647 $ 255,726,152 $ 248,643,977 $ 246,757,223 Primary government Net investment in capital assets Restricted (a) Unrestricted $ 616,786,188 79,370,511 223,848,471 $ 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 Total primary government net position $ 920,005,170 $ 864,128,343 $ 871,552,378 $ 879,269,178 $ 874,627,918 $1,179,967,356 $1,176,877,698 $1,189,890,390 $1,194,463,618 $1,194,035,227 (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. 172 Changes in Net Position (Exhibit S-2a) Last Ten Fiscal Years Accrual Basis of Accounting City of Tempe, Arizona Fiscal Year 2019 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 $ 101,620,981 44,646,087 28,463,648 110,725,592 17,550,896 21,669,347 4,985,853 491,026 7,150,485 3,137,658 434,770 172,182 1,079,461 829,499 15,650,001 1,716,431 12,503,655 $ 107,357,688 40,900,261 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 30,234,017 463,969 4,288,787 408,196 7,220,482 2,844,965 392,629 844,934 7,343,357 1,331,649 17,153,207 $ 76,585,163 32,594,512 28,592,571 103,586,986 26,757,509 449,428 3,900,928 223,472 7,654,913 2,963,058 393,471 481,374 6,454,535 3,662,321 14,347,644 $ 76,799,591 28,156,863 31,069,618 98,915,390 25,113,273 476,011 3,934,716 356,468 7,535,214 2,854,168 338,059 910,616 7,890,835 2,301,194 14,894,293 $ 72,492,475 27,499,884 27,031,973 94,687,386 30,778,689 447,287 4,179,694 316,531 5,020,144 2,659,312 477,080 403,792 10,826,877 5,733,128 18,453,487 $ 78,283,021 30,542,829 26,891,886 131,521,598 30,601,684 531,651 5,245,105 387,723 4,579,414 3,101,845 427,828 739,884 9,516,509 2,383,904 16,185,139 Total governmental activities expenses 372,827,572 369,464,699 374,213,259 342,712,163 331,945,009 314,543,439 308,647,885 301,546,309 301,007,739 340,940,020 Business-type activities: Water and wastewater Solid waste Emergency medical transportation (j) Golf course Cemetery (e) 77,906,953 15,791,378 2,966,379 2,937,558 - 76,903,243 17,494,354 3,026,686 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 Total business-type activities expenses 99,602,268 100,226,467 88,803,030 93,131,514 92,102,451 91,387,469 89,834,885 89,571,255 83,477,456 89,357,870 $ 472,429,840 $ 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 Expenses Governmental activities: Police Fire medical rescue Community services (a) Public works (a) Community development (b) Human services(h) Municipal court Mayor and council City manager (g)(h)(i) City attorney Internal audit office Municipal budget office (h) Office of strategic management and diversity (i) City clerk and elections Internal services (c)(d)(f)(h) Non-departmental Unallocated depreciation Interest on long-term debt Total primary government expenses Note: To assist with comparability, certain prior year expenses have been recategorized as listed below. (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. In Fiscal Year 2015, Finance and Technology was merged into the Internal Services department. (d) In Fiscal Year 2011, Tempe Learning Center was disaggregated from Human Resources. In Fiscal Year 2015, Finance and Technology was merged into the Internal Services department. (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. In Fiscal Year 2015, Human Resources was merged into the Internal Services department. (g) In Fiscal Year 2015, Economic Development and Community Relations became part of the City Manager's Office. (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. 173 Changes in Net Position (Exhibit S-2b) Last Ten Fiscal Years Accrual Basis of Accounting City of Tempe, Arizona Fiscal Year 2019 Program Revenues Governmental activities: Charges for services: Police Fire medical rescue Community services (a)(d) Public works (a) Community development (b) Human services (d) Municipal court City manager City attorney City clerk and elections Internal services (c) Operating grants and contributions Captital grants and contributions Total governmental activities program revenues $ 1,298,812 200,378 7,714,161 17,797,231 14,283,336 10,031 4,457,922 23,487 2,056 2,827,988 34,467,594 39,638,190 122,721,186 Fiscal Year 2018 $ 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 19,044,276 97,730,942 Fiscal Year 2017 $ 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 Fiscal Year 2016 $ 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 Fiscal Year 2015 $ 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 Fiscal Year 2014 $ 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 Fiscal Year 2013 $ 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 Fiscal Year 2012 $ 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 Fiscal Year 2011 $ 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 Fiscal Year 2010 $ 1,052,723 912,000 6,237,098 19,659,838 5,648,696 5,868,369 1,997,614 18,222,849 38,709,299 98,308,486 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 85,339,513 17,306,244 3,442,151 2,626,308 108,714,216 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 Total primary government program revenues $ 231,435,402 $ 206,913,210 $ 187,503,027 $ 183,872,814 $ 175,141,594 $ 178,376,378 $ 168,222,740 $ 177,216,252 $ 180,956,098 $ 182,518,952 Net (expense)/revenue Governmental activities Business-type activities Total primary government net expense $ (250,106,386) 9,111,948 $ (240,994,438) $ (271,733,757) 8,955,801 $ (262,777,956) $ (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) Note: To assist with comparability, certain prior year expenses have been recategorized as listed below. (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. In Fiscal Year 2015, Finance and Technology was merged into the Internal Services department. (c) In Fiscal Year 2013, the Cemetery Fund was closed into the General Fund. (d) In Fiscal Year 2015, a component of the Community Services department along with Diversity formed a new department called Human Services. (e) In Fiscal Year 2018, the Emergency Medical Transportation Fund was established. 174 Changes in Net Position (Exhibit S-2c) Last Ten Fiscal Years Accrual Basis of Accounting General revenues and other changes in net position Governmental activities: General revenues: Sales taxes Intergovernmental revenue, unrestricted (b) Property taxes Franchise taxes 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 Capital contributions Transfers Total business-type activities Total primary government City of Tempe, Arizona Fiscal Year 2019 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 (a) $ 177,596,413 48,024,343 48,706,817 3,036,531 7,936,949 5,924,186 674,569 603,077 292,502,885 $ 168,650,143 48,403,871 47,495,555 3,290,220 1,489,603 5,506,328 1,667,264 (1,454,082) 275,048,902 $ 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 $ 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 $ 147,815,825 38,155,275 40,074,441 3,310,940 725,099 4,114,557 657,224 746,902 235,600,263 $ 149,078,044 21,684,320 38,644,241 3,253,175 278,102 2,987,769 261,764 3,763,255 219,950,670 $ 142,985,910 19,086,404 35,899,010 3,428,125 822,900 3,199,954 496,911 (508,805) 205,410,409 $ 141,844,739 21,562,285 35,501,233 3,821,436 1,229,447 2,991,971 133,677 293,418 207,378,206 $ 125,186,698 26,966,795 37,183,541 3,559,615 97,660 3,429,435 17,160 (115,657) 196,325,247 3,614,531 1,124,986 199,388 32,552 (603,077) 4,368,380 697,388 651,500 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) 1,056,820 488,477 142,914 247,296 (479,071) 399,616 436,821 1,643,570 52,947 (746,902) 1,386,436 115,362 923,413 21,149 (3,763,255) (2,703,331) 335,297 3,032,990 40,582 508,805 3,917,674 459,759 1,976,132 (5,563,191) (293,418) (3,420,718) 10,698 332,955 96,986 115,657 556,296 $ 296,871,265 $ 276,405,683 $ 267,796,462 $ 256,612,124 $ 241,732,206 $ 236,986,699 $ 217,247,339 $ 209,328,083 $ 203,957,488 $ 196,881,543 $ 42,396,499 13,480,328 $ 55,876,827 $ $ (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) $ $ (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) Changes in net position Governmental activities Business-type activities Total primary government 3,315,145 10,312,582 $ 13,627,727 $ 1,381,656 8,050,513 9,432,169 (a) Due to the prolonged economic downturn, in Fiscal Year 2010 the City had planned drawdown of fund balance. (b) To assist with comparability, in Fiscal Year 2015, State shared income taxes, unrestricted and Auto-lieu taxes were combined under the category Intergovernmental revenue, unrestricted . 175 Fund Balances, Governmental Funds (Exhibit S-3) Last Ten Fiscal Years Modified Accrual Basis of Accounting City of Tempe, Arizona Fiscal Year 2019 General fund Reserved Unreserved Nonspendable Restricted Committed Assigned Unassigned Total general fund All other governmental funds Reserved Unreserved, reported in: Special revenues funds Capital projects funds Nonspendable Restricted Committed Assigned Unassigned (b) Total all other governmental funds $ $ $ $ Fiscal Year 2018 491,024 106,684 480,675 18,713,280 97,995,211 117,786,874 1,527,574 65,121,669 46,353,146 12,308,616 (1,442,236) 123,868,769 $ $ $ $ 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 $ $ $ $ Fiscal Year 2016 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 2015 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 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 $ $ $ $ Fiscal Year 2013 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 $ $ 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 (b) In Fiscal Year 2011, GASB No. 54 was implemented requiring additional classifications of fund balance. A deficit fund balance is reported in "unassigned". 176 Fiscal Year 2012 $ $ $ $ Fiscal Year 2011 (b) 634,526 9,967,268 50,954,570 61,556,364 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 $ $ 981,529 42,832,205 43,813,734 $ 69,324,494 $ 32,742,748 63,078,330 165,145,572 Changes in Fund Balance, Governmental Funds (Exhibit S-4a) Last Ten Fiscal Years Modified Accrual Basis of Accounting 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 (a) Public works (a) Community development (b) Human services (g) Municipal court Mayor and council City manager (f)(g) City attorney Internal audit office Municipal budget office (g) Office of strategic management and diversity (h) City clerk and elections Internal services (c)(d)(e)(g) Debt service: Principal Interest Fiscal fees Capital outlay Total expenditures Deficiency of revenues over expenditures before other financing sources (uses) City of Tempe, Arizona Fiscal Year 2019 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 $ 216,680,985 99,111,729 7,936,949 29,552,529 7,191,904 3,778,658 1,990,732 6,951,095 9,005,664 382,200,245 $ 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 $ 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 93,078,088 38,797,039 25,228,594 79,092,222 16,624,962 26,244,724 5,133,357 495,829 7,397,648 3,515,785 459,746 261,798 1,088,773 910,335 15,716,010 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 29,460,993 451,293 4,325,838 368,846 7,549,687 2,912,507 426,006 885,350 7,624,841 72,709,534 28,056,149 24,551,075 70,784,480 25,253,707 441,212 3,830,508 244,837 8,124,262 3,037,216 388,263 511,960 5,806,644 67,325,484 25,871,390 23,473,722 66,845,601 23,572,565 457,292 3,874,634 440,161 7,697,656 2,648,388 393,958 899,917 5,659,471 65,289,995 25,639,288 22,010,148 67,998,367 22,946,249 427,103 4,051,517 318,282 5,299,616 2,564,283 379,752 395,778 8,565,765 74,747,734 27,134,920 22,254,109 85,134,719 26,399,830 520,731 5,267,930 388,486 4,548,022 3,117,084 514,069 799,975 7,248,510 38,768,000 13,526,198 344,231 53,518,221 420,201,560 42,880,000 12,791,480 331,593 32,418,674 378,822,523 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 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 $ (38,001,315) $ (16,224,792) $ (12,309,647) $ (16,784,871) $ (33,147,319) (3,974,123) $(104,496,039) (7,239,313) $ (49,009,040) $ $ (9,686,484) $ Note: To assist with comparability, certain prior year expenses have been recategorized as listed below. (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. In Fiscal Year 2015, Finance and Technology was merged into the Internal Services department. (d) In Fiscal Year 2011, Tempe Learning Center was disaggregated from Human Resources. In Fiscal Year 2015, Finance and Technology was merged into the Internal Services department. (e) In Fiscal Year 2014, Tempe Learning Center was reincorporated into Human Resources. In Fiscal Year 2015, Human Resources was merged into the Internal Services department. (f) In Fiscal Year 2015, Economic Development and Community Relations became part of the City Manger's Office. (g) 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. (h) 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. 177 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 2019 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 38,729,874 (38,126,797) 27,130,000 5,655,061 1,220,174 2,665,000 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 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 - 37,273,312 29,807,106 (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 (48,667,199) 10,214,395 (27,936,582) 14,383,873 27,070,781 (728,003) $ 13,582,314 $ 21,658,267 6,653,968 $ 17,113,780 $ 11,344,510 $ (44,600,970) 527,911 $ 14,383,873 $ (21,938,259) 14.2% 16.5% 15.5% 13.8% 17.6% 13.4% 14.5% 16.0% 12.5% $ 35.7% (a) $ (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). 178 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 Retail 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 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 4,649,114,000 Utilities and Telecommunications Rental Restaurant Contracting Hotel and Motel Amusements All Other Total City Direct Sales Tax Rate 1.80 2.00 2.00 2.00 2.00 1.80 1.80 1.80 1.80 1.80 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 1,755,549,000 536,611,000 515,000,000 522,095,000 533,915,000 557,844,000 583,788,000 548,882,000 539,476,000 552,373,000 554,618,000 472,667,000 479,150,000 514,519,000 524,813,000 574,888,000 628,169,000 656,237,000 679,897,000 705,920,000 736,240,000 400,000,000 298,450,000 341,542,000 340,870,000 404,398,000 701,314,000 653,818,000 654,944,000 662,203,000 675,955,000 110,944,000 112,600,000 123,981,000 123,629,000 135,525,000 159,255,000 166,167,000 184,412,000 209,961,000 228,785,000 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 94,108,000 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 74,142,000 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 8,768,511,000 Rental Utilities and Telecommunications Restaurant Contracting Hotel and Motel Amusements All Other Total 8.16 8.24 8.46 8.37 8.72 8.48 8.65 8.56 8.47 8.40 6.90 5.13 5.60 5.40 6.14 9.47 8.61 8.24 7.95 7.71 Percentage of Taxable Sales Fiscal Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Retail 51.35 53.62 53.43 54.04 54.11 52.64 53.46 54.42 54.33 53.02 19.62 19.49 19.33 19.15 18.17 17.25 17.68 17.51 18.32 20.02 9.26 8.86 8.59 8.52 8.46 7.88 7.23 6.79 6.63 6.33 1.91 1.94 2.04 1.97 2.06 2.15 2.19 2.32 2.52 2.61 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. 179 1.66 1.55 1.44 1.25 1.26 1.12 1.18 1.21 1.07 1.07 1.14 1.17 1.11 1.30 1.08 1.01 1.00 0.95 0.71 0.85 100 100 100 100 100 100 100 100 100 100 Direct and Overlapping Sales Tax Rates (Exhibit S-6) Last Ten Fiscal Years Fiscal Year 2010 (a) City of Tempe, Arizona City Direct Sales Tax Rate Maricopa County Sales Tax Rate State Sales Tax Rate Total Sales Tax Rate 1.80 % 0.70 % 6.60 % 9.10 2011 (b) 2.00 0.70 6.60 9.30 2012 2.00 0.70 6.60 9.30 2013 (c) 2014 2015 (d) 2016 2017 2018 2019 2.00 2.00 1.80 1.80 1.80 1.80 1.80 0.70 0.70 0.70 0.70 0.70 0.70 0.70 5.60 5.60 5.60 5.60 5.60 5.60 5.60 8.30 8.30 8.10 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. 180 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. 181 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 Commercial, Manufacturing, Telecommunications Property Fiscal Year City of Tempe, Arizona Vacant, Agricultural & Governmental Property $ Owner Occupied Residential Property Rental Residential Property Railroad & Airlines Property Non-commercial Historic Property Less: Tax-Exempt Property 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 Total Direct Tax Rate Net Taxable Assessed Value 2,382,274,726 2,767,488,864 $ Assessed Value as a Percentage of Actual Value 2010 Primary Secondary $ 1,518,486,978 1,746,634,264 0.49 0.91 $ 16,460,996,774 19,043,217,077 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 8,869,602 664,036,520 772,654,291 2,364,257,561 2,512,651,232 0.52 0.88 16,647,684,537 17,474,298,161 14.20 14.38 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 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 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 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 2014 Primary Secondary 1,013,888,495 1,019,499,265 590,348,150 627,596,276 422,097,495 422,373,499 237,011,004 245,942,542 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 2015 Primary Secondary 1,018,312,716 1,030,441,480 582,528,256 605,931,213 445,788,470 472,413,709 279,658,188 317,364,940 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 2016 Primary Secondary 1,040,045,065 1,119,535,292 604,094,072 681,597,591 458,995,411 569,311,744 303,832,779 395,569,487 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 2017 Primary Secondary 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 2018 Primary Secondary 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 2019 Primary Secondary 1,130,477,624 1,130,477,624 701,270,049 701,270,049 528,812,064 528,812,064 404,759,028 404,759,028 2,063,797 2,063,797 3,229,286 3,229,286 907,642,388 907,642,388 1,862,969,460 1,862,969,460 0.92 1.50 14,500,815,905 19,292,541,580 12.85 9.66 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. 182 $ Estimated Total Actual Value (a) 14.47 % 14.53 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 2010 2011 City of Tempe (a) Primary Secondary Total $ 0.49 0.91 1.40 Tempe Union $ 1.48 0.74 2.22 Schools Tempe Elementary (b) East Valley Institute of Technology Maricopa County Community College County Ed Equalization Rate $ $ $ $ $ 2.14 1.14 3.28 0.05 0.05 0.99 0.99 0.72 0.16 0.88 0.33 - County-Wide Jurisdiction Central Fire Flood Arizona District District Project Assistance $ 0.14 0.14 $ 0.10 0.10 $ 0.01 0.01 County Library District $ 0.04 0.04 Special Health Care District $ 0.09 0.09 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 - 2016 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 2017 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 2018 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 2019 Primary Secondary Total 0.92 1.50 2.42 1.99 0.66 2.65 2.05 2.85 4.90 0.05 0.05 1.40 1.40 1.17 0.20 1.37 0.47 0.47 0.18 0.18 2012 2013 2014 2015 0.11 0.15 0.15 0.17 0.17 0.19 0.19 6.24 3.29 9.53 6.61 3.53 10.14 7.75 4.02 11.77 8.82 4.96 13.78 9.42 5.77 15.19 0.19 0.06 0.06 0.19 0.11 0.30 9.69 5.26 14.95 0.01 0.01 0.06 0.06 0.20 0.11 0.31 9.61 5.23 14.84 0.14 0.14 0.01 0.01 0.06 0.06 0.20 0.09 0.29 9.23 5.00 14.23 0.14 0.14 0.01 0.01 0.06 0.06 0.19 0.10 0.29 8.19 5.75 13.94 (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 $13.00, $12.75 or $16.26, respectively. Also, see the Direct and Overlapping Governmental Activities Debt- Property Tax Supported Schedule (Exhibit S-17). 0.19 $ 9.95 5.23 15.18 Source: Maricopa County Assessor's Office Maricopa County Tax Levy Publication 183 0.11 Total Property Tax Levies - All Direct and Overlapping Governments (Exhibit S-10) Last Ten Fiscal Years Fiscal Year City of Tempe, Arizona City of Tempe Tempe Union Schools Tempe Elementary (a) East Valley Institute of Technology $ Maricopa County Community College 12,586,167 12,586,167 $ 492,230,736 492,230,736 $ 359,942,153 92,685,846 452,627,999 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 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 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 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 2014 Primary Secondary Total 13,778,678 23,766,365 37,545,043 56,857,111 18,307,254 75,164,365 2015 Primary Secondary Total 14,324,634 24,609,512 38,934,146 2016 Primary Secondary Total 2017 Flood District $ County-Wide Jurisdictions County Ed Central Equalization Arizona Rate Project $ 58,113,465 58,113,465 Fire District Assistance $ 3,324,489 3,324,489 Special Health Care District Total 20,468,370 20,468,370 $ 53,018,363 53,018,363 $ 1,135,585,817 352,540,244 1,488,126,061 74,996,804 74,996,804 $ 164,225,937 164,225,937 371,276,183 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 55,722,300 55,722,300 1,207,422,466 329,276,035 1,536,698,501 477,571,468 477,571,468 389,655,514 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 1,201,347,563 286,256,206 1,487,603,769 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 1,153,716,315 267,897,133 1,421,613,448 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 1,157,927,420 266,475,386 1,424,402,806 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 1,234,641,602 282,273,011 1,516,914,613 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 37,341,000 104,614,204 1,273,143,088 319,766,652 1,592,909,740 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 39,747,000 110,524,141 1,332,449,829 339,373,563 1,671,823,392 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 35,191,536 109,012,094 1,379,373,230 343,160,758 1,722,533,988 2019 Primary Secondary Total 17,118,826 28,030,238 45,149,064 69,668,285 23,042,843 92,711,128 29,725,536 41,355,451 71,080,987 9,005,606 9,005,606 566,289,063 566,289,063 473,275,205 82,713,190 555,988,395 66,310,571 66,310,571 191,959,243 191,959,243 56,684,864 56,684,864 4,319,354 4,319,354 22,475,317 22,475,317 76,921,021 42,153,890 119,074,911 1,424,957,179 376,091,324 1,801,048,503 Source: Maricopa County Assessor's Office Maricopa County Tax Levy Publication (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). 184 $ County Library District Property Tax Levies and Collections (Exhibit S-11) Last Ten Fiscal Years City of Tempe, Arizona Collected within the Fiscal Year of the Levy Fiscal Year Total Tax Levy for Fiscal Year (a) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 $ 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 45,529,984 Adjustments $ (689,600) (656,902) (438,929) (407,726) (301,527) (264,457) (334,210) (368,464) (197,972) (111,957) Adjusted Tax Levy for Fiscal Year $ 36,392,138 33,798,828 34,417,303 35,995,068 37,373,923 38,652,369 40,137,079 42,211,661 43,963,917 45,418,027 Amount $ 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 44,892,921 % of Original Levy 96.0 % 96.6 97.1 97.9 98.0 98.4 98.6 98.1 98.5 98.6 Total Collections to Date Collections in Subsequent Years $ 785,690 485,595 546,653 353,203 436,447 328,433 237,721 433,863 442,635 - Amount $ 36,366,786 33,784,907 34,406,838 35,980,339 37,361,339 38,638,858 40,124,083 42,191,471 43,944,517 44,892,921 % of Adjusted Levy 99.9 % 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 98.8 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. 185 Principal Tax Payers (Exhibit S-12) Property Tax Current Year and Nine Years Prior City of Tempe, Arizona Net Assessed Limited Property Values Taxpayer: Verizon Wireless Arizona Public Service Company Arizona Mills Mall LLC JP Morgan Chase Bank NA Cousins Fund II Phoenix IV LLC Qwest Corporation JDM II Tempe OC LLC Honeywell International Inc San Sonoma Apartments LLC Pky W Rio Salado LLC Tempe Fountainhead Corporate LLC Fly (CD) LLC / AWHQ LLC State Farm Mutual Auto Insurance SRPAI&PD Breof BNK 2 Southwest LLC Target $ Total $ 31,626,714 27,998,289 19,397,626 16,444,834 10,833,116 10,733,492 8,598,137 8,573,232 8,183,300 7,341,667 - Fiscal Year 2019 Rank 1 2 3 4 5 6 7 8 9 10 149,730,407 Percentage of Net Assessed Limited Property Values Taxable Secondary Assessed Value 1.70 % 1.50 1.04 0.88 0.58 0.58 0.46 0.46 0.44 0.39 - $ 8.04 % $ 22,164,880 41,696,241 25,618,715 14,012,511 18,047,439 17,987,113 16,145,044 12,335,440 12,004,262 11,394,622 191,406,267 Fiscal Year 2010 Rank 3 1 2 7 4 5 6 8 9 10 Percentage of Total City Secondary Taxable Assessed Value % 0.83 1.57 0.96 0.53 0.68 0.68 0.61 0.46 0.45 0.43 7.20 % Source 2019: RBC Capital Markets Source 2010: RBC Capital Markets Note: Beginning in Fiscal Year 2016, a voter-approved constitutional amendment and related enabling legislation changed the property valuation for assessing property taxes. Property taxes are now levied based on a revised "Limited Property Value" which is generally (a) the Full Cash Value of a property or (b) an amount of percent greater than the Limited Property Value as determined for the prior year. 186 Principal Tax Payers (Exhibit S-13) Sales and Use Tax Current Fiscal Year and Nine Years Prior City of Tempe, Arizona Fiscal Year 2019 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 Mixed Retail Auto Sales Auto Sales Electronics/Software Rental Petroleum Products Service Electronics/Software Total Sales and Use Tax Payments $ $ 5,379,577 3,765,710 2,627,783 2,449,825 2,429,576 1,908,665 1,863,971 1,739,783 1,392,174 1,316,901 - Rank Fiscal Year 2010 Percentage of Total Sales and Use Tax Payments 3.03 % 2.12 1.48 1.38 1.37 1.07 1.05 0.98 0.78 0.74 1 2 3 4 5 6 7 8 9 10 Sales and Use Tax Payments $ - 24,873,965 14.01 % $ 4,410,442 2,675,505 1,621,537 1,917,101 1,780,858 1,739,863 1,330,225 1,424,093 1,202,017 909,688 - Rank Percentage of Total Sales and Use Tax Payments 1 2 6 3 4 5 8 7 9 10 19,011,329 # 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. 187 0.96 - Source: City of Tempe, Arizona Tax and License Division Note: 3.52 % 2.14 1.30 1.53 1.42 1.39 1.06 0.96 0.73 15.01 % Excise Tax Collections (Exhibit S-14) Last Ten Fiscal Years City of Tempe, Arizona Fiscal Year 2019 Fiscal Year 2018 $ 111,283,725 $ 105,643,666 State shared sales tax 17,958,644 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 State shared income tax 22,408,078 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 Franchise tax 3,036,531 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 Vehicle license tax 7,657,621 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 Permits and fees (b) 13,739,509 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 Fines and forfeitures 6,434,188 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 $ 182,518,296 $ 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 Privilege and use tax (a) Total 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 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. 188 Fiscal Year 2011 $ 83,258,888 Fiscal Year 2010 $ 69,043,642 Ratios of Net General Bonded Debt Outstanding (Exhibit S-15) Last Ten Fiscal Years Fiscal Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 City of Tempe, Arizona Governmental General Obligation Debt Enterprise General Obligation Debt and WIFA $ $ 303,168,706 287,621,092 270,715,646 253,760,904 236,046,554 216,802,282 196,122,761 198,182,660 201,216,644 206,499,363 172,665,000 166,680,000 162,200,000 164,235,000 163,205,000 181,905,000 180,750,000 178,555,000 180,435,000 183,990,000 $ 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 38,801,412 $ 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 3,463,501 Total $ 437,707,313 438,869,137 410,646,205 396,295,053 377,162,305 392,488,674 382,294,786 382,798,272 400,760,799 425,827,274 Percentage of Percentage of Net Direct Secondary/Limited Governmental Total to Assessed Debt to Assessed Value Debt Per Valuation (a) Assessed Value (b) of Property Capita $ 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 1,862,969,450 4.9 % 5.6 6.6 7.7 8.6 9.9 10.0 9.4 9.4 9.7 15.8 % 17.5 21.0 23.3 24.9 24.1 22.3 22.9 22.6 22.9 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. 189 $ 2,504 2,595 2,424 2,294 2,140 2,213 2,053 2,098 2,166 2,214 Ratios of Outstanding Debt by Type (Exhibit S-16) Last Ten Fiscal Years City of Tempe, Arizona Governmental Activities Fiscal Year General Obligation Bonds Special Assessment Bonds Excise Tax Revenue Bonds 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 $ 172,665,000 166,580,000 162,200,000 164,235,000 163,205,000 181,905,000 180,750,000 178,555,000 180,435,000 183,990,000 $ 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 16,035,000 $ 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 87,269,000 Premium on Debt Payable HUD Section 108 Loan Capital Improvement Notes $ $ $ 9,234,152 15,054,997 20,176,543 19,542,476 18,668,237 22,291,058 20,515,300 21,847,912 25,046,197 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 2,966,000 521,955 1,009,612 509,804 - $ Capital Leases Total GovernmentType Debt 1,776,147 96,735 57,921 29,645 87,082 61,399 34,743 65,610 40,972 $ 444,639,102 440,414,887 429,222,818 370,453,800 356,700,280 361,133,319 350,652,457 337,638,043 321,146,522 315,347,169 Business-Type Activities Fiscal Year General Obligation Bonds Excise Tax Revenue Bonds 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 $ 289,895,000 273,000,000 256,770,000 240,505,000 223,495,000 204,970,000 185,025,000 187,835,000 191,635,000 197,700,000 $ 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 57,886,000 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 30,951,583 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 8,799,363 Capital Leases $ 147,089 97,439 45,352 711,466 499,476 283,594 63,750 318,834 213,267 736,327 190 Total BusinessType Debt Total Primary Government $ 321,365,795 345,478,794 334,846,091 344,994,026 323,813,515 315,830,788 314,797,990 305,615,665 299,009,518 296,073,273 $ 766,004,897 785,893,681 764,068,909 715,447,826 680,513,795 676,964,107 665,450,447 643,253,707 620,156,040 611,420,442 Per Capita $ 4,381 4,860 4,515 4,132 3,822 3,816 3,553 3,525 3,352 3,178 Percentage of Personal Income 16.43 % 15.31 16.57 16.27 14.12 14.23 12.63 12.53 11.09 10.23 Direct and Overlapping Governmental Activities Debt (Exhibit S-17) City of Tempe, Arizona 2019 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 $ 40,423,232,423 1,449,460,520 40,423,232,423 3,030,255,065 2,056,567,610 5,306,326,867 3,506,028,130 62,328,357,186 40,423,232,423 18,011,211,783 $ 380,740,000 167,175,000 497,125,000 231,900,000 202,635,000 241,937,500 87,580,000 None None None 4.52 % 84.65 4.52 0.69 29.99 0.26 52.59 2.93 4.52 10.14 City direct debt (governmental activities) $ 1,862,969,450 $ 315,347,169 100.00 % Total direct and overlapping debt $ 17,207,935 141,513,672 22,468,074 1,589,918 60,764,415 636,707 46,054,674 None None None 290,235,395 $ 315,347,169 $ 605,582,564 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. 191 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 $ 380,740,000 167,175,000 497,125,000 231,900,000 202,635,000 241,937,500 87,580,000 None None None 4.52 % 84.65 4.52 0.69 29.99 0.26 52.59 N/A N/A N/A City direct debt $ 315,347,169 100.00 % Total direct and overlapping debt $ 17,207,935 141,513,672 22,468,074 1,589,918 60,764,415 636,707 46,054,674 None None None 290,235,395 315,347,169 $ 605,582,564 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. 192 Legal Debt Margin Information (Exhibit S-19) City of Tempe, Arizona Last Ten Fiscal Years Fiscal Year 2019 Fiscal Year 2018 Fiscal Year 2017 Assessed Valuation $ 2,457,096,949 $ 2,285,492,942 $ 20% Limitation: Debt limit equal to 20% of assessed valuation $ 491,419,390 $ 457,098,588 $ Total net debt applicable to 20% limit Legal 20% debt margin (available borrowing capacity) 369,823,502 $ 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 Total net debt applicable to the 6% limit as a percentage of 6% debt limit $ 75.26% $ Total net debt applicable to 6% limit Legal 6% debt margin (available borrowing capacity) 121,595,888 353,760,024 147,425,817 $ 69,510,466 52.85% 137,129,577 $ 59,922,703 56.30% $ 425,141,029 $ 87,406,377 $ 127,542,309 $ 47,299,201 62.91% 1,593,944,354 $ 318,788,871 $ - $ 95,636,661 $ 13,731,661 85.64% 1,627,720,901 $ 325,554,180 $ - $ 97,663,254 $ $ 16,168,254 83.44% Fiscal Year 2010 1,697,237,040 $ 1,957,328,610 $ 2,512,995,468 $ 2,767,488,864 302,659,854 $ 339,447,408 $ 391,465,722 $ 502,599,094 $ 553,497,773 - 90,797,956 51,752,956 43.00% 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. 193 Fiscal Year 2011 $ 418,225,647 $ - 446,276,092 $ 123.21% $ 39,045,000 $ Fiscal Year 2012 1,513,299,272 129.06% 81,495,000 $ Fiscal Year 2013 390,600,904 111.11% 81,905,000 $ Fiscal Year 2014 361,721,555 103.65% 80,243,108 $ Fiscal Year 2015 330,432,281 79.44% 77,206,874 $ 2,125,705,145 337,734,652 77.39% 77,915,351 $ 103,338,564 Fiscal Year 2016 101,834,222 73,469,222 27.85% $ 114.00% $ 28,365,000 $ - 474,887,545 117,439,717 102,409,717 12.80% $ 94.49% $ 15,030,000 $ 27,711,549 492,153,706 150,779,728 88.92% $ 8,330,000 $ 142,449,728 5.52% 61,344,067 166,049,332 8,285,000 $ 157,764,332 4.99% Remaining General Obligation Bond Authorizations (Exhibit S-20) City of Tempe, Arizona Authorization WIFA Funding (a) Prior Issues 2008 Program: Water/Wastewater $ 113,300,000 Streets/Transportation/Storm Drains 44,200,000 Public Safety - Police/Fire 32,010,000 Community Services/Park Improvement 51,800,000 $ 18,130,302 - $ 85,305,000 29,105,000 32,010,000 51,800,000 Total 2008 Program 241,310,000 18,130,302 198,220,000 16,019,698 8,940,000 2012 Program: Public Safety - Police/Fire Community Services/Park Improvement Municipal Infrastructure Preservation 6,400,000 10,500,000 12,900,000 - 4,115,000 10,500,000 12,900,000 2,285,000 - - Total 2012 Program 29,800,000 - 27,515,000 2,285,000 - 2016 Program: Water/Wastewater Streets/Transportation/Storm Drains Public Safety - Police/Fire Community Services/Park Improvement Municipal Infrastructure Preservation 148,000,000 25,000,000 20,000,000 34,000,000 27,000,000 - 10,570,000 6,845,000 19,810,302 4,860,000 11,990,000 6,725,000 128,189,698 25,000,000 15,140,000 11,440,000 13,430,000 Total 2016 Program 254,000,000 - 17,415,000 43,385,302 193,199,698 $ 243,150,000 $ 61,690,000 $ 202,139,698 Grand Total $ 525,110,000 $ 18,130,302 Current Year Issue (b) Remaining Authorization $ $ 9,864,698 6,155,000 - 8,940,000 - 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 o 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. 194 Pledged-Revenue Coverage (Exhibit S-21) Last Ten Fiscal Years City of Tempe, Arizona Special Assessment Bonds Special Assessment Collections Fiscal Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 $ 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 1,990,732 Excise Tax Revenue Obligations Debt Service (d) Coverage 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 2,211,570 0.58 0.82 0.73 1.29 1.22 0.99 1.10 0.98 0.92 0.90 Excise Tax Revenue Collections (a) $ Performing Arts Excise Tax Obligations 0.1% Privilege and Use Tax Collections (b) Fiscal Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 $ 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 8,823,434 Debt Service (d) Coverage 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 20,739,629 17.67 19.07 13.78 14.39 13.82 13.00 3.52 4.57 8.63 8.80 119,456,216 $ 128,942,018 129,522,900 142,917,848 165,485,314 156,733,794 160,648,676 166,058,633 178,992,195 182,518,296 Transit Excise Tax Obligations Debt Service (d) Coverage 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 3,428,100 0.96 0.99 1.16 1.05 1.17 1.26 1.29 2.36 2.46 2.57 0.5% Privilege and Use Tax Collections (c) $ Debt Service (d) Coverage 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 4,116,542 6.40 6.55 6.84 8.16 7.20 7.76 8.00 9.04 9.53 10.46 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 43,063,185 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. 195 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 Fiscal Year 2019 2020 Pledged Excise Tax Revenues (a) $ 182,518,296 Subordinate Excise Tax Obligations Outstanding Senior Excise Tax Outstanding Obligations Senior Excise Tax Debt Service Obligations Requirements (b) Coverage (c) $ 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 20,739,629 12,637,348 8.80 14.44 12,132,899 12,132,345 12,121,208 9,060,458 16,349,708 6,719,700 6,711,900 6,712,025 6,714,125 5,117,988 5,116,050 2,723,850 2,116,125 15.04 15.04 15.06 20.14 11.16 27.16 27.19 27.19 27.18 35.66 35.68 67.01 86.25 Revenue Available for Debt Service (d) $ 170,602,101 Outstanding Subordinate Excise Tax Obligations Debt Service Requirements (e) $ Coverage (f) 3,428,100 3,433,850 49.77 49.68 Source: City of Tempe, Arizona Accounting Division (a) Excise Tax Revenues received by the City in Fiscal Year 2019. 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 2011A+B 2012 2013 2016 2017R 2019R Remaining Obligation $ 11,795,000 20,125,000 21,280,000 20,715,000 8,565,000 9,110,000 $ 91,590,000 (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 2019. (e) (f) 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 $3,295,000. Debt service requirements do not include fiscal fees. 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. 196 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 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 $ 43,063,185 Outstanding Senior Excise Tax Obligations Debt Service Requirements (b) $ Outstanding Senior Excise Tax Obligations Coverage (c) 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 10.46 10.46 10.46 10.46 10.47 10.45 10.45 10.46 10.46 10.45 10.47 10.45 10.45 10.46 10.45 10.45 10.45 29.80 43.29 Source: City of Tempe, Arizona Accounting Division (a) Excise Tax Revenues received by the City in Fiscal Year 2019. (b) Includes annual remaining debt service requirements for the Series 2012 City of Tempe, Arizona Transit Excise Tax Revenue Obligations in the principal amount outstanding of $31,270,000; the Series 2017R City of Tempe, Arizona Transit Excise Tax Refunding Obligations in the principal amount outstanding of $19,000,000. (c) The estimated coverage figures shown reflect the ratio of actual Fiscal Year 2019 excise tax revenues to total debt service requirements for the City's Transit excise tax bonds. 197 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) 4,661,747,112 $ 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 2019 192,364 5,975,402,932 31,063 72,792 30.4 25,478 55,224 3.80 Fiscal Year Population (a) 2010 174,833 2011 161,719 2012 Source: $ Unemployment Rate (f) (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) 198 Principal Employers (Exhibit S-25) Current Fiscal Year and Nine Years Prior City of Tempe, Arizona Fiscal Year 2019 Employees (a) Employers: Arizona State University State Farm Insurance Freedom Financial Network JPMorgan Chase Bank National Association ABM Industries Inc Wells Fargo City of Tempe SRP Honeywell Insight Direct Inc Freescale Semiconductor (Motorola) Kyrene School District US Airways Bank One Telephone Banking Division 7,150 7,150 3,290 2,220 2,000 1,990 1,932 1,760 1,600 1,220 - Total 30,312 Source: Rank 1 1 2 3 4 5 6 7 8 9 - Fiscal Year 2010 Employment Employees (b) Rank Employment 23.59 % 23.59 10.85 7.32 6.60 6.57 6.37 5.81 5.28 4.02 - 10,089 2,377 3,636 1,565 3,331 3,000 4,779 2,559 1,898 2,000 1 7 3 10 4 5 2 6 9 8 28.63 % 6.75 10.32 4.44 9.45 8.51 13.56 7.26 5.39 5.68 100.00 % 35,234 (a) Maricopa Association of Governments; https://geo.azmag.gov/maps/azemployment/ (b) City of Tempe, Arizona Comprehensive Annual Financial Report, Fiscal Year 2010 199 100.00 % Full-Time Equivalent City Government Employees by Function (Exhibit S-26) Last Ten Fiscal Years City of Tempe, Arizona Fiscal year 2019 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 Community relations Diversity program Tempe learning center Finance and technology Financial services Office of strategic management and diversity Human resources Total 512 214 305 429 79 54 43 7 32 27 4 4 5 210 7 1,932 Fiscal year 2018 508 174 304 431 85 50 43 7 31 25 4 4 5 217 6 1,894 Fiscal year 2017 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 Source: City of Tempe, Arizona Fiscal Year 2019 Annual Budget Note: See Exhibit S-2a for changes in functions that have occurred in prior years. 200 Fiscal Year 2015 496 156 286 467 90 40 42 7 31 26 4 4 4 155 1,808 Fiscal Year 2014 - - Fiscal Year 2013 497 156 314 486 90 42 7 11 25 4 5 3 139 20 1,799 497 182 288 484 82 42 7 4 25 3 5 24 3 3 132 17 1,798 Fiscal Year 2012 494 182 287 485 83 42 7 4 25 3 5 25 3 3 132 17 1,797 Fiscal Year 2011 499 182 289 489 88 42 7 4 25 3 5 25 3 3 132 17 1,813 Fiscal Year 2010 568 185 308 535 106 42 7 3 25 4 5 27 4 139 20 1,977 Operating Indicators by Function/Program (Exhibit S-27) Last Ten Fiscal Years City of Tempe, Arizona Fiscal Fiscal Fiscal Year 2017 Year 2018 Year 2019 Fiscal Year 2016 Fiscal Year 2015 Fiscal Year 2014 Fiscal Year 2013 Fiscal Year 2012 Fiscal Year 2011 Fiscal Year 2010 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) Number of fire calls Number of medical calls Number 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 (e) Number of square yards of asphalt 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 $ 4,752 5,857 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 6.66 90,055 1,015 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 $ 9.33 1,980 22,209 2,324 $ 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 4:31 4:15 3:36 4:16 4:10 4:08 4:07 4:10 4:20 4:20 80% 75% 74% 73% 75% 76% 76% 76% 74% 74% 92% 9,030,182 1,225,309 92% 9,553,553 736,076 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 93,689 743,931 100,155 802,492 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 1,089,174 541 $ 790,508,270 573 $ 32,849,626 1053 $ 35,278,125 503 $ 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 43,284 15,506 995 19.1 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 $ $ $ 235 33,263 23% 1,565 113 $ $ $ 111 32,869 28% 1,641 100 $ $ $ 139 33,160 19% 1,671 93 $ $ $ Source: City of Tempe, Arizona Municipal Budget Office and other applicable City departments. (a) For Fiscal Year 2010, 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. 201 138 33,001 21% 1,709 91 $ $ $ 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) 42,453 15,606 (b) 181 18.7 (b) 112 33,927 29% 1,940 73 114 32,886 28% 1,837 77 $ $ Capital Asset Statistics by Function/Program (Exhibit S-28) Last Ten Fiscal Years City of Tempe, Arizona Fiscal Year 2019 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 2018 Fiscal Year 2017 Fiscal Fiscal Year 2016 Year 2015 Fiscal Year 2014 Fiscal Year 2013 Fiscal Year 2012 Fiscal Year 2011 Fiscal Year 2010 3 21 6 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 1,241 11,414 230 124 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 1875 45 200 5 2 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 2 850 850 850 833 833 833 833 839 839 839 137 54 495 231 137 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 29 29 29 29 19 19 19 33 33 38 43 43 43 45 47 52 51 58 58 58 Source: City of Tempe, Arizona Municipal Budget Office and other applicable City departments. 202