City of Tempe, Arizona Annual Comprehensive Financial Report For the Fiscal Year Ended June 30, 2023 City Council: Corey Woods, Mayor Jennifer Adams, Vice Mayor Arlene Chin Berdetta Hodge Randy Keating Joel Navarro Doreen Garlid Administrative Staff: Rosa Inchausti, City Manager Presented by: Thomas F. Duensing, CPA, Chief Deputy City Manager 1 City of Tempe, Arizona 2 Annual Comprehensive Financial Report City of Tempe, Arizona For Fiscal Year Ended June 30, 2023 TABLE OF CONTENTS INTRODUCTORY SECTION Letter of Transmittal 8 Certificate of Achievement for Excellence in Financial Reporting List of Principal Officials City Organizational Chart 14 15 16 FINANCIAL SECTION Independent Auditor’s Report Management’s Discussion and Analysis (required supplementary information) 18 21 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Position Statement of Activities 34 35 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 Fund Net Position - Proprietary Funds Statement of Revenues, Expenses and Changes in Fund Net Position Proprietary Funds Statement of Cash Flows - Proprietary Funds Statement of Fiduciary Net Position - Fiduciary Trust Fund Statement of Changes in Fiduciary Net Position - Fiduciary Trust Fund Notes to the Financial Statements 36 37 39 40 42 43 44 45 45 46 Required Supplementary Information: Schedules of Required Supplementary Information Schedule of Contributions- All Pension Plans - Last Ten Fiscal Years Schedule of the Proportionate Share of the Net Pension Liability- ASRS - Last Nine Fiscal Years Schedule of Changes in the Net Pension Liability and Related Ratios- PSPRS: Police - Last Nine Fiscal Years Schedule of Changes in the Net Pension Liability and Related Ratios- PSPRS: Fire - Last Nine Fiscal Years 3 89 90 91 92 Annual Comprehensive Financial Report City of Tempe, Arizona For Fiscal Year Ended June 30, 2023 FINANCIAL SECTION (Continued) Required Supplementary Information: (Continued) Schedules of Required Supplementary Information (Continued) Schedule of Contributions- OPEB Plan- Last Seven Fiscal Years 93 Schedule of Changes in the Net OPEB Liability and Related Ratios- OPEB PlanLast Seven Fiscal Years Schedule of Investment Returns- OPEB Plan- Last Seven Fiscal Years Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget to Actual: 94 95 City Wide Operating Budget 98 City Wide Capital Projects Budget 99 Notes to Required Supplementary Information 96 Combining Fund Financial Statements: Non-major Governmental Funds: Combining Balance Sheet Combining Statement of Revenues, Expenditures and Changes in Fund Balances 104 107 Non-Major Enterprise Funds: Combining Statement of Fund Net Position Combining Statement of Revenues, Expenses and Changes in Fund Net Position Combining Statement of Cash Flows 111 112 113 Internal Service Funds: Combining Statement of Fund Net Position Combining Statement of Revenues, Expenses and Changes in Fund Net Position Combining Statement of Cash Flows 115 116 117 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-2 120 122 S-3 127 S-4 128 S-5 S-6 S-7 131 132 133 S-8 S-9 S-10 S-11 S-12 S-13 134 136 138 139 140 141 S-14 S-15 S-16 142 143 144 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 Taxpayers, Property Tax - Current Fiscal Year and Nine Years Prior Principal Taxpayers, Sales and Use Tax - Current Fiscal 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 4 Annual Comprehensive Financial Report City of Tempe, Arizona For Fiscal Year Ended June 30, 2023 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 Pledged Revenue, Projected Debt Service and Estimated Coverage - Water/Sewer Revenue Obligation S-17 S-18 S-19 S-20 145 146 147 148 S-21 150 S-22 150 S-23 152 S-24 S-25 154 155 S-26 S-27 S-28 156 158 160 S-29 S-30 S-31 S-32 S-33 161 162 163 164 165 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 Water Connections by Customer Type, Sewer Connections and Sewage Treated Last Two Fiscal Years Water Deliveries – Last Two Calendar Years Metered Water Usage Charges – Last Two Fiscal Years Water Rates and Sewer Rates Per Meter Size-Last Two Fiscal Years Sewer Service Rates – Last Two Fiscal Years 5 City of Tempe, Arizona 6 This section provides general information on the government’s structure and information useful in assessing the City’s financial condition. Introductory Section 7 CITY OF TEMPE P.O. BOX 5002 20 EAST SIXTH STREET TEMPE, AZ 85281 480.350.8350 CITY MANAGER’S OFFICE December 12, 2023 To the Honorable Mayor, Members of the City Council and Residents of the City of Tempe, Arizona: The Annual Comprehensive Financial Report, including the Independent Auditor’s Report, for the fiscal year ended June 30, 2023 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 Annual Comprehensive Financial Report (ACFR) 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 be placed on the City of Tempe’s web site at https:// www.tempe.gov/government/financial-services/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. 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 square miles with an estimated population of 186,000 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. 8 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 Council Members 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, culturalrecreational, 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 Tempe maintains one of the most thriving economic environments in the country. The local economy is based primarily on commercial and retail trade, higher education, manufacturing, and tourism. Top research firms, Fortune 500 companies, and start-ups make up Tempe’s economic fabric. The City is also the home of Arizona State University, which is one of the largest institution of higher education in the United States and the largest employer in the City. Each of these provides the City with a strong and diversified tax base. Tourism plays an important role in the City’s local economy, offering a wide range of accommodations, restaurants, and attractions. Tempe hosts spring training for the Los Angeles Angels Major League Baseball team, Ironman Arizona Triathlon, Pat’s Run, and the Rock ‘N’ Roll Arizona Marathon and 1/2 Marathon. Also popular are the City’s spring and fall Festival of the Arts, featuring more than 350 artists’ booths, entertainment, food vendors, and free admission. The Festival of the Arts attracts approximately 150,000 visitors over the three-day weekend. Adjacent to Tempe Town Lake, the Tempe Center for the Arts features a 600-seat performance theater, visual arts gallery, and meeting facilities. Commercial and residential development activities continue to provide substantial increases in construction sales tax revenues, and development remains above the long-term historical performance stabilizing Tempe’s revenues. Additionally, current, long-term memoranda of understanding with the City’s four employee groups should stabilize personnel cost increases. Although inflationary pressures have eased over the past twelve months, worker shortages and supply chain issues continue to put pressure on the overall economy. On August 1, 2023, Senate Bill 1131 was signed into law. Effective January 1, 2025, Arizona cities and towns are prohibited from taxing residential rental activities. Early estimates indicate recurring sales tax revenue reductions of approximately 9% in the City’s General Fund, Transit Fund, and Arts and Culture Fund, or approximately $21 million across all funds. To address the residential rental sales tax loss, budget reduction measures will be necessary in both the General Fund and the Transit Fund. The City prepares a long-term forecast in November and February of each year to determine the financial health of the City’s major operating funds. During fiscal year ended June 30, 2023, sales taxes and property taxes experienced moderate growth, and state shared revenue met budget expectations. The latest, November 10, 2023 revenue forecast included the loss of residential sales tax and indicated budgetary measures will be necessary to maintain the stability of the general fund and the transit fund as a result of the loss residential rental sales tax. The forecasted fund balances for all other major funds will be within policy levels. 9 Sales Tax The largest source of revenue for Tempe’s governmental operating funds, sales tax revenue, is driven by taxable sales tax activities and have increased in each of the last five fiscal years.Sales tax revenue represented 49.0% of total General Fund revenues for the fiscal year. Despite the economic impact of the pandemic primarily being felt in the fiscal years 2020 and 2021, taxable sales recovered in fiscal year 2022 to pre-pandemic levels. Taxable sales increased in 2019 (5.2%), 2020 (3.2%), 2021 (3.1%), 2022 (17.3%) and 2023 (4.7%). Overall, General Fund sales tax revenues increased by $10 million (or 7.0%) to $152.6 million in fiscal year 2023. State-Shared Revenue Starting in fiscal year 2017, the population figures used for the distribution of state shared revenues to all incorporated cities and towns in the state are the official U.S. Census Bureau population estimate for each city and town as of July 1 of the prior year, except in the year following a decennial census. The fiscal year 2023 shared revenue allocations were based on the 2020 Decennial Census and Tempe’s relative share of the state’s total population declined and is approximately 3%. State-shared revenues consist of state sales tax, state income tax and auto lieu tax revenues. Total General Fund State-shared revenues from these three revenue sources totaled $71.3 million, which represents a $12.3 million increase, or 20.9%. Property Tax The city continues to experience continued overall improvement in assessed valuations of taxable property which is the basis for property tax revenue assessments. Additionally, Tempe’s largest electric utility, Salt River Project, contributes an in-lieu property tax to the City. Overall, property tax revenues increased by $745 thousand (1.3%) over the prior year. Property taxes comprised approximately 8.5% of total General Fund revenues for the fiscal year. Federal Grants The City has experienced significant Federal grant revenue impacts due to the COVID-19 pandemic. During fiscal year 2020, the City was awarded $22.5 million in Coronavirus Relief Fund (CRF) funding to offset the economic impact of COVID-19. Of this amount, a total of $11.9 million was recognized as revenue in the General Fund and funded public safety costs due to the pandemic for fiscal year 2020 with the remaining $10.6 million in CRF federal grant revenue recognized in fiscal year 2021. During fiscal year 2021, the City was awarded an additional $45.9 million from the American Rescue Plan Act, $22.9 was received in fiscal year 2022 and $22.9 million was received in fiscal year 2023. Of this amount, a total of $22.8 million was recognized as revenue in fiscal year 2023 in the Community Development Capital Projects Fund with $11.6 remaining for future use consistent with requirements set forth by the US Treasury Department. 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. Despite the loss of residential rental tax (effective January 1, 2025), the latest forecast conservatively projects a modest growth in sales taxes, property taxes and State-shared revenues in fiscal year 2024. Fortunately, Tempe’s economy continues to outperform the forecasts for state and regional growth. Tempe’s retail and development activities 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 are projected to remain relatively stable. Additionally, the recent Federal Reserve interest rate increases have resulted in increased interest income from the City’s cash and investments. 10 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 align City operations and measure actual progress towards achieving the identified strategic priorities which are as follows: • 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 long-term 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 continued to be the case during the development of both the fiscal year 2021/22 Annual Operating Budget as well as the Five-Year Capital Improvement Program Budget. Additionally, many non-budgetary decisions of the City Council during the year were made within the context of the identified strategic priorities. 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. In February 2022, using the START Tool, the City Council identified 13 performance measures to accelerate during fiscal year 2023. This was used as a guide in the budget development process and the areas of focus are summarized as follows: • • • • • • • • • • • • • Pavement Quality Index (1.22) Feeling of Safety in Your Neighborhood (1.05) Ending Homelessness (3.28) Tree Coverage (4.11) Carbon Neutrality - City Ops (4.19) Feeling of Safety in Parks (1.23) Transportation System Satisfaction (3.27) Property Code Enforcement (3.01) Housing Inventory Ratio (4.09) Right of Way Landscape Maintenance (3.23) Carbon Neutrality - Community (4.18) Traffic Delay Reduction (3.27) Addressing Opioids (1.31) 11 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 POLICIES The City’s financial policies provide a general framework of goals and objectives for the operating budget, debt management, financial reserves, financial reporting and the capital budget. Strong policies provide a standard for measuring current budgetary performance and evaluating proposals for future programs. Notable policies to ensure financial stability are summarized as follows: • Revenue and expenditures will be projected for the next five years and will be updated biannually. • Long-term debt will not be issued to finance current operations. Capital projects financed through the issuance of bonds will be financed for a period not to exceed the expected useful life of the project. • The City will coordinate development of a five-year capital improvements budget with development of the operating budget. Future operating costs associated with new capital improvements will be projected and included in operating budget forecasts. • Unassigned fund balance coverage for the General Fund will maintain a range of 20% to 30% of General Fund revenue. • The City will maintain an unrestricted fund balance of no less than 25% of current revenue, plus 2% of the gross book value of tangible assets in the Water and Wastewater Fund, and a minimum of 15% of anticipated revenue in the Solid Waste and Golf Funds. • The City will maintain total fund balance in the Transit Special Revenue Fund of at least 25% of current revenue operating revenues, 10% of current year operating revenues for the Highway User Revenue Special Revenue Fund and 10% for the Arts and Culture Fund. • Annual property tax levy increase for existing property shall not exceed the lesser of inflation or 3.3%. MAJOR INITIATIVES Homeless Solutions The City is committed to five strategic priorities that enhance the lives of all in Tempe. Achieving an end to homelessness is one measure of improving community quality of life. The City has invested heavily to serve those in need and is committed to making homelessness a rare, brief and one-time experience in our community. To do that, the city offers a comprehensive system of support that includes: street outreach, case management, connection to social services, crisis response, mental health resources, emergency and transitional shelter, and housing. The City’s Homeless Solutions Task Force includes Human Services, Community Services, Tempe Police, Tempe Fire Medical Rescue, the City Attorney's office, Tempe Municipal Court, and Communication and Media Relations. The task force addresses topics such as: • • • • • • Encampments in desert parks and preserves Annual Point-in-Time Homeless Count Emergency shelter Healthy Giving Heat relief Park safety and community wellness Affordable Housing The Hometown for All initiative was introduced by Mayor Woods and approved by the City Council in 2021. Hometown for All provides a dedicated funding stream to accelerate the growth of affordable and workforce housing to ensure that Tempe has a variety of housing types. For every new development project built in Tempe, an amount equivalent to 50% of certain permitting fees paid to the city’s General Fund goes to support the nonprofit Tempe Coalition for Affordable Housing. Those funds are used to purchase land and properties and reimagine city-owned parcels for future development. 12 American Rescue Plan Act - Update In the spring of 2021, the City was notified of the pending receipt of $46 million in Coronavirus State and Local Fiscal Recovery Funds as part of the recently passed American Rescue Plan Act (ARPA). Based on Council direction, the entire $46 million was allocated in the City’s capital program to fund crucial infrastructure projects in the prior fiscal year 2022 and the current fiscal year 2023. 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 Annual Comprehensive financial report for the fiscal year ended June 30, 2022. 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 Annual Comprehensive 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-seven consecutive years (fiscal years 1975/76 through 2021-2022). 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 FY 2022-23 annual budget and the National Purchasing Institute’s Achievement of Excellence in Procurement Award for FY 2022-23. Acknowledgment The preparation of this report could not have been accomplished without the dedicated service of the entire staff of the Financial Services’ 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. Respectfully submitted, Rosa Inchausti City Manager Thomas F. Duensing, CPA Deputy City Manager 13 Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to City of Tempe Arizona For its Annual Comprehensive Financial Report For the Fiscal Year Ended June 30, 2022 Executive Director/CEO 14 City of Tempe, Arizona List of Principal Officials City Council Corey Woods, Mayor Jennifer Adams, Vice Mayor Arlene Chin Berdetta Hodge Randy Keating Joel Navarro Doreen Garlid Administrative Staff For the Fiscal Year Ended June 30, 2023 Rosa Inchausti, City Manager Tom Duensing, Chief Deputy City Manager Keith Burke, Deputy City Manager Chief Greg Ruiz, Interim Deputy City Manager/Fire Chief Craig Hayton, Community Services Shelly Seyler, Interim Engineering and Transportation Tara Ford, Municipal Utilities Jeffrey Tamulevich, Community Development Tim Burch, Community Health and Human Services Kevin Kane, Municipal Court Sonia Blaine, City Attorney Bill Greene, Internal Audit Office Mark Day, Municipal Budget Office Vacant, Economic Development Office Eric Iwersen, Sustainability Office Vacant, Innovation and Strategic Management Office Vacant, City Clerk and Elections Lisette Camacho, Financial Services Jared Morris, Information Technology Rebecca Strisko, Human Resources 15 16 This section contains the independent auditor’s report, management’s discussion and analysis, and basic financial statements. Also included are financial statements for individual funds and a component unit for which data is not provided separately in the basic financial statements, and other useful supplementary information. Financial Section 17 Independent Auditor’s Report Honorable Mayor and Members of the City Council City of Tempe, Arizona Report on Audit of Financial Statements Opinions We have audited the accompanying financial statements of the governmental activities, the business‐type activities, each major fund, and the aggregate remaining fund information of the City of Tempe, Arizona (City), as of and for the year ended June 30, 2023, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business‐type activities, each major fund, and the aggregate remaining fund information of the City of Tempe, Arizona, as of June 30, 2023, 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. Basis for Opinions We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of City of Tempe, Arizona, and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Change in Accounting Principle As described in Note 1, the City implemented the provisions of GASB Statement No. 96, Subscription‐ Based Information Technology Arrangements, GASB Statement No. 94, Public‐Private and Public‐Public Partnerships and Availability Payment Arrangements, and GASB Statement No. 99, Omnibus 2022, for the year ended June 30, 2023, which represent changes in accounting principle. Our opinion is not modified with respect to these matters. Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for one year beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we:      Exercise professional judgment and maintain professional skepticism throughout the audit. Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, no such opinion is expressed. Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis, 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 is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Supplementary Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The Combining and Individual Fund Financial Statements and Schedules are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Combining and Individual Fund Financial Statements and Schedules information is fairly stated in all material respects in relation to the basic financial statements as a whole. Other Information Management is responsible for the other information included in the annual report. The other information comprises the Introductory Section and Statistical Section but does not include the basic financial statements and our auditor’s report thereon. Our opinions on the basic financial statements do not cover the other information and we do not express an opinion or any form of assurance thereon. In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on other work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 12, 2023, on our consideration of City of Tempe, Arizona’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City of Tempe, Arizona’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering City of Tempe, Arizona’s internal control over financial reporting and compliance. Heinfeld, Meech & Co., P.C. Scottsdale, Arizona December 12, 2023 Financial Services MANAGEMENT’S DISCUSSION AND ANALYSIS This section of the City of Tempe’s (the City) Annual Comprehensive Financial Report presents a narrative overview and analysis of the financial activities of the City for the fiscal year ended June 30, 2023. 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 this fiscal year by $1.0 billion (net position). This is a decrease of $68.5 million over the prior year’s net position primarily due to a $99.9 million special item related to construction in progress capital projects that were determined to be not active and written off in fiscal year 2023. Of the City’s net position, $346.3 million (unrestricted net position) may be used to meet the government’s ongoing obligations to citizens and creditors. • For the fiscal year ended June 30, 2023, the City’s governmental activities revenues increased by $59.7 million to $502.2 million. This was primarily due to increases of $26.0 million in intergovernmental revenues and $9.8 million in operating grants and contribution. Expenses increased by $84.5 million mainly due to an increase in general government of $19.2 million, $24.3 million in community enrichment, and $21.5 million in public safety. • At June 30, 2023, the City’s governmental funds reported combined ending fund balances of $409.3 million. Approximately 57% of this total amount ($233.3 million) was for spending at the government’s discretion (committed, assigned, or unassigned). • At June 30, 2023, total fund balance for the General Fund was $171.7 million, which represents a decrease of $0.3 million over the prior year’s fund balance. Revenues increased by $22.4 million, this is primarily due to a $10.0 million increase in sales taxes. Expenditures decreased by $311.0 million, mainly due to a one-time payment to PSPRS of $341.1 million to fund the City’s unfunded pension liability in FY2022 offset by $11.1 million increase in community enrichment. • At June 30, 2023, the City’s enterprise funds reported combined total net position of $264.0 million, and total unrestricted net position of $140.2 million. Of this total, $136.8 million of the unrestricted net position was in the Water and Wastewater Fund. 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. 21 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 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. 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 public safety, general government, transportation, criminal justice, and community enrichment. 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 finance- related legal requirements. All 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. 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, and the Community Development 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’s annual budget is the legally adopted expenditure control document of the City. The legally adopted budget is at a citywide level that includes all Governmental and Enterprise Funds. A budget schedule at the citywide level is presented in the Required Supplementary Information Section. The 22 schedule compares the original adopted budget, the budget as amended throughout the year, and the actual expenditures prepared on a budgetary basis. 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. Water and wastewater fund was considered a major fund 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. 23 GOVERNMENT-WIDE STATEMENTS FINANCIAL ANALYSIS Governmental Activities 2023 Business-type Activities 2022 2023 Total 2022 2023 2022 Assets Current and other assets $ 1,022,379,528 $ 956,207,816 $ 260,452,937 $ 280,964,162 $ 1,282,832,465 $ 1,237,171,978 Capital assets, net 815,912,432 852,910,401 410,526,682 449,214,932 1,226,439,114 1,302,125,333 Total assets 1,838,291,960 1,809,118,217 670,979,619 730,179,094 2,509,271,579 2,539,297,311 82,674,209 415,984,334 10,121,088 13,644,535 92,795,297 429,628,869 Long-term liabilities 981,679,307 1,204,330,523 367,747,072 381,503,961 1,349,426,379 1,585,834,484 Other liabilities 120,627,911 116,612,907 47,531,170 55,174,979 168,159,081 171,787,886 1,102,307,218 1,320,943,430 415,278,242 436,678,940 1,517,585,460 1,757,622,370 35,953,403 89,274,659 1,807,233 6,839,355 37,760,636 96,114,014 Net investment in capital assets 435,421,987 538,764,896 97,816,016 138,501,996 533,238,003 677,266,892 Restricted 141,175,028 164,690,176 25,963,094 - 167,138,122 164,690,176 Unrestricted 206,108,533 111,429,390 140,236,122 161,803,338 346,344,655 273,232,728 782,705,548 $ 814,884,462 $ 264,015,232 $ 300,305,334 $ 1,046,720,780 $ 1,115,189,796 Total deferred outflows of resources Liabilities Total liabilities Total deferred inflows of resources Net position Total net position $ 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 $1.0 billion and $1.1 billion as of June 30, 2023 and 2022, respectively. The largest portion of the City’s net position reflects its investment in capital assets (i.e. 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 $533.2 million and $677.3 million at June 30, 2023 and 2022, respectively. These totals represent 50.9% and 60.7% of total net position at June 30, 2023 and 2022, 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. 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 $167.1 million (16.0% of total net position) at June 30, 2023. At June 30, 2022 restricted net position was $164.7 million (14.8% of total net position). The remaining balance of net position is unrestricted and may be used to meet the government’s ongoing obligations to citizens and creditors. The total balance of unrestricted net position was $346.3 million (33.1% of total net position) and $273.2 million (24.5% of total net position) at June 30, 2023 and 2022, respectively. At the end of the current fiscal year, the City reported 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. 24 ANALYSIS OF CHANGE IN NET POSITION The City’s total net position increased by $31.4 million during the current fiscal year. These changes in net position are explained in the governmental and business-type activities discussion below. Governmental Activities Business-type Activities Total 2023 2022 2023 2022 2023 2022 123,803,981 $ 122,099,916 $ 181,307,105 $ 174,314,891 Revenues Program revenues: Charges for services 57,503,124 $ 52,214,975 $ Operating grants and contributions $ 36,149,703 26,374,825 - - 36,149,703 26,374,825 Capital grants and contributions 22,911,000 18,931,868 - - 22,911,000 18,931,868 Sales taxes 222,221,888 222,951,580 - - 222,221,888 222,951,580 Intergovernmental revenue, unrestricted 84,994,033 58,954,757 - - 84,994,033 58,954,757 Property taxes 63,596,741 59,488,492 - - 63,596,741 59,488,492 Franchise taxes 2,742,874 3,055,126 - - 2,742,874 3,055,126 Unrestricted investment earnings (loss) 4,594,728 (3,820,904) 1,866,714 (1,777,102) 6,461,442 (5,598,006) Miscellaneous 7,524,676 3,646,464 697,005 788,909 8,221,681 4,435,373 Gain on sale of capital assets - 767,622 294,561 - 1,062,183 Capital contributions - - - 726,800 - 726,800 502,238,767 442,564,805 126,367,700 122,133,084 628,606,467 564,697,889 General revenues: Total revenues Expenses General government 57,489,311 38,315,529 - - 57,489,311 38,315,529 Public safety 177,106,183 155,603,809 - - 177,106,183 155,603,809 Transportation 98,054,788 79,607,326 - - 98,054,788 79,607,326 Criminal justice 5,417,328 5,048,832 - - 5,417,328 5,048,832 Community enrichment 113,071,086 88,729,099 - - 113,071,086 88,729,099 Interest on long-term debt 18,057,610 17,344,833 18,057,610 17,344,833 Water and wastewater - - 96,368,865 89,403,602 96,368,865 89,403,602 Solid waste - - 21,167,692 19,872,919 21,167,692 19,872,919 Emergency medical transportation - - 6,907,615 5,562,895 6,907,615 5,562,895 Golf course - - 3,554,898 3,500,205 3,554,898 3,500,205 469,196,306 384,649,428 127,999,070 118,339,621 597,195,376 502,989,049 Increase in net position before transfers and special item 33,042,461 57,915,377 (1,631,370) 3,793,463 31,411,091 61,708,840 Transfers and special item (65,221,375) 646,079 (34,658,732) (646,079) (99,880,107) - (32,178,914) 58,561,456 (36,290,102) 3,147,384 (68,469,016) 61,708,840 814,884,462 756,323,006 300,305,334 297,157,949 1,115,189,796 1,053,480,955 782,705,548 $ 814,884,462 $ 264,015,232 $ 300,305,333 $ 1,046,720,780 $ 1,115,189,795 Total expenses Change in net position Net position- beginning Net position- ending $ Governmental activities. The governmental net position decreased by $32.2 million for the fiscal year ended June 30, 2023 compared to a $58.6 million increase in net position for the fiscal year ended June 30, 2022. Overall, revenues increased by $59.7 million or 13.5%, and expenses increased by $84.5 million or 22.0% compared to the fiscal year ended June 30, 2022. The key factors contributing to the change in net position compared to the prior year are as follows: • Capital grants and contributions increased by $4.0 million or 21.0% primarily due to an increase of $11.5 million in Federal American Rescue Plan Act capital project funding. This was offset by a decrease of $4.9 million in special assessment contribution. • Intergovernmental revenues increased by $26.0 million or 44.2% due to an increase in sales tax as the economy continued to recover from the pandemic. 25 • Operating grants and contributions increased by $9.8 million mainly due to an increase in federal grants for street and transportation projects of $3.4 million coupled with an increase of $5.4 million in community development grants.. • Total program expenses increased by $84.5 million due primarily to increased maintenance and repair expenditures in public safety of $21.5 million and in community enrichment of $24.3 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: Fiscal Year 2023 Expenses and Program Revenues Governmental Activities $120,000,000 $100,000,000 $80,000,000 $60,000,000 $40,000,000 $20,000,000 Expenses In te re st on lo ng -te rm de bt en ric hm en t C om m un ity C rim in al ju st ic e Tr an sp or ta tio n en er al G Pu bl ic sa fe ty go ve rn m en t $– Program Revenues 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 the prior year by $84.5 million (22.0%). The main function which experienced the increase was public safety totaling $21.5 million and community enrichment totaling $24.3 million. Fiscal Year Ended June 30, 2023 General revenues such as sales taxes, property taxes, unrestricted investment earnings, intergovernmental revenue- unrestricted, miscellaneous and other, and franchise taxes are not shown by program but are effectively used to support program activities citywide. June 30, 2022 Public safety $177,106,183 37.7% $155,603,809 Criminal justice 5,417,328 1.2 5,048,832 40.5% 1.3 General government 57,489,311 12.3 38,315,529 10.0 Transportation 98,054,788 20.9 79,607,326 20.7 Community enrichment 113,071,086 24.1 88,729,099 23.1 Fiscal Year Ended June 30, 2023 Sales taxes 26 June 30, 2022 $222,221,888 50.8% $222,951,580 50.4% Intergovernmental revenue-unrestricted 84,994,033 19.4 58,954,757 13.3 Property taxes 63,596,741 14.5 59,488,492 13.4 Miscellaneous and other 10,704,301 2.4 4,414,086 1.0 Franchise taxes 2,742,874 0.6 3,055,126 0.7 Unrestricted investment Earnings (loss) 4,594,728 1.1 (3,820,904) (0.8) 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, intergovernmental revenues experience growth of 44.2% due to the continued recovery from the pandemic. A summary of the general revenues is below. Fiscal Year 2023 Revenues by Source - Governmental Activities 0.7% 3.1% 16.5% Sales taxes Intergovernmental revenue, unrestricted Property taxes Franchise taxes 57.6% 22.1% Business-type activities. The net position of the City’s business-type activities decreased by $36.3 million for the year ended June 30, 2023 compared to an increase of $3.1 million for the year ended June 30, 2022. The total business-type activities program and general revenues increased by $4.2 million from $126.4 million, which was comparable to prior year. The largest of the City’s business-type activities, Water and Wastewater, had expenses of $130.4 million for the fiscal year, of this amount, the Water and Wastewater fund reported a $34.1 million special item that was related to the write off of a number of construction in progress capital projects. The remaining non-major enterprise funds’ net change in net position remain comparable to prior year. 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 $409.3 million, an increase of $40.8 million from the prior year. Approximately $233.3 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 a increase of $0.9 million over the prior year’s combined balance of $232.4 million. 27 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, 2023, the non-spendable fund balance included amounts for inventories ($1.0 million), prepaid items ($1.3 million) and a lease receivable reserve ($0.8 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, totaling $172.9 million consists primarily of amounts for debt service ($9.7 million), capital projects ($126.7 million), highway user revenue ($14.6 million), grants ($5.6 million), development impact fees ($8.9 million), and other ($7.5 million). The General Fund is the chief operating fund of the City. At the end of the current fiscal year, the total fund balance was $171.7 million, with $1.2 million in non-spendable fund balance. The remaining $170.5 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 decreased in the current year by $0.3 million compared to a prior year net increase of $12.0 million. Arizona state shared revenues are collected by the state for statewide sales taxes, income taxes and auto inlieu taxes (taxes levied on the value of a vehicle). These revenues are distributed to local municipalities based on population. Increased collections by the State of Arizona resulted in increased revenues for Intergovernmental revenues, unrestricted for the City. For fiscal year 2023, state shared income for state sales taxes, state income taxes and auto in-lieu of taxes increased by $10.0 million (7.0%) compared to revenues from fiscal year 2022. Total revenues increased by $22.4 million (8.3%) from the prior year. This increase was due to increases in sales taxes and state and other agency revenues of $10.0 million and $8.8 million, respectively. Fiscal Year Ended June 30, 2023 June 30, 2022 Revenues $291,516,906 Total fund balance 171,692,175 58.9 % $269,102,480 171,997,399 65.6 % Unassigned fund balance 126,393,523 43.4 142,653,834 56.9 Expenditures decreased by $311.0 million (54.1%) primarily due to payment for the unfunded PSPRS pension liabilities from certificates of participation debt proceeds for police and fire liability totaling $218.1 million and $123.0 million, respectively in FY2022. The Transit Special Revenue Fund is used to account for revenues and expenditures utilized to provide related transit services. Revenues increased by $7.7 million (12.2%) from the prior year due primarily to increased sales taxes revenue of $3.1 million (5.6%) and charges for services revenue of $2.7 million (30.3%) from the prior year. Total Transit Special Revenue Fund expenditures increased by $21.6 million (68.8%) due primarily to $22.0 million increase in fixed route expenditures. At June 30, 2023, the Transit Special Revenue Fund special assessment receivable of $10.6 million is related to special assessment debt previously issued to finance the Tempe Streetcar project. The City has assessed and is responsible for the collection of assessments secured by a lien on the benefiting properties from the streetcar project. The fund balance totaled $102.6 million at June 30, 2023, compared to a $90.0 million fund balance at June 30, 2022. The fund balance increased $12.6 million in the current year as compared to an increase of $28.7 million in the prior year. The General Obligation Debt Service Fund accounts for the accumulation of resources and payments of general obligation debt. Total fund balance increased $1.1 million from $8.4 million at June 30, 2022 to $9.5 million at June 30, 2023. Of this fund balance, $4.9 million represents accumulation of non-secondary property taxes set aside for future payment of Qualified Energy Conservation Bonds (QECB’s). Therefore, the amount of unspent secondary property taxes, used for interest, principal redemption and related fees for General Obligation debt service totals $4.6 million. The Community Development Capital Projects Fund accounts for the acquisition, reconstruction, and renovation of City buildings housing municipal departments, human service programs and certain general governmental projects. Total expenditures of $40.7 million represents an increase of $4.7 million from the prior 28 fiscal year due primarily to capital acquisitions. Total revenues increased by $11.4 million due to additional capital expenditures on Tempe Municipal Operating Center using the ARPA grant. Other Non-Major Governmental Funds had a fund balance increase of $3.9 million to $95.4 million at the end of the fiscal year. Two funds that were reported as major funds in fiscal year 2022 were reported as part of the non-major governmental funds (Special Assessment Debt Service Fund and Transit Capital Projects Fund). The change resulted in the increase in non-major governmental funds ending fund balance. 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, 2023 June 30, 2022 Water and Wastewater Fund Non-Major Enterprise Funds $ 248,445,273 $ 287,174,391 15,569,959 13,130,943 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 a decrease in total net position of $38.7 million for the fiscal year ended June 30, 2023 mainly due to the write off of non-active contruction-in-progress capital projects of $34.1 million. Charges for services decreased by $1.3 million (1.5%) primarily due to decrease in utility consumption. Total net operating income was $5.3 million, a decrease of $14.0 million from the prior year. The Non-major enterprise funds include solid waste fund, emergency medical transportation fund, and golf fund. The total fund net position increased by $2.4 million during the fiscal year ended June 30, 2023 compared to $2.7 million during the fiscal year ended June 30, 2022. Total operating revenues and expenses increased by $2.9 million and $2.7 million, respectively, compared to the prior fiscal year. BUDGET HIGHLIGHTS The City’s annual budget is the legally adopted expenditure control document of the City. The legally adopted budget is at a citywide level that includes all Governmental and Enterprise Funds. A budget schedule at the citywide level is presented in the Required Supplementary Information Section. The schedule compares the original adopted budget, the budget as amended throughout the year, and the actual expenditures prepared on a budgetary basis. Operating budget actual revenues were less than budgetary estimates by $54.6 million and actual expenditures were greater than budgetary estimates by $71.1 million . The capital budget reported $341.5 million less than estimated budget. 29 CAPITAL ASSETS AND DEBT ADMINISTRATION CAPITAL ASSETS The City’s capital assets for its governmental and business-type activities as of June 30, 2023 were $1.2 billion (net of accumulated depreciation). Capital assets include land, buildings, infrastructure, improvements, machinery and equipment, and construction in progress. The total decrease in the City’s capital assets for the current fiscal year was $75.7 million. The tables below reflect the capital assets at the end of the fiscal year June 30, 2023 and 2022, respectively. Governmental Activities 2023 Land 2022 2023 Total 2022 2023 95,393,127 $ 94,494,250 $ 6,693,377 $ 102,086,504 $ 101,187,627 63,800,621 132,315,603 29,006,309 112,619,229 92,806,930 244,934,832 Buildings 137,494,955 137,419,695 16,723,869 17,775,779 154,218,824 155,195,474 Infrastructure 324,198,244 335,897,298 209,420,571 190,783,761 533,618,815 526,681,059 Improvements 147,638,805 124,607,646 127,340,651 100,424,965 274,979,456 225,032,611 Machinery and equipment 43,337,101 28,175,909 20,777,671 20,917,821 64,114,772 49,093,730 SBITA Assets 2,994,098 - 564,234 - 3,558,332 - Lease Assets 1,055,481 815,912,432 $ $ 852,910,401 $ 410,526,682 $ 6,693,377 $ 2022 Construction in progress Total $ Business-type Activities 1,055,481 449,214,932 $ 1,226,439,114 $ 1,302,125,333 Major capital asset events during the current fiscal year included the following: Governmental Activities • The decrease in governmental capital assets of $37.0 million is due primarily the write off of construction in progress projects of $65.0 million, the increase in completed construction in progress of $69.7 million transferred into depreciable assets net with current year depreciation expense of $51.1 million. Business-type Activities • As discussed previously, the decrease in in enterprise capital assets is due primarily to increase in completed construction in progress of $63.2 million transferred into depreciable assets, then offset by the write off of non-active contruction-in-progress projects of $34.9 million 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. 30 DEBT ADMINISTRATION At the end of the current fiscal year, the City had total long-term obligations outstanding of $1.0 billion, which is a decrease of $5.2 million over the prior fiscal year. Governmental Activities 2023 General obligation bonds Business-type Activities 2022 2023 Total 2022 $ 243,407,158 $ 212,220,000 $ 177,767,842 $ 189,535,000 $ 2023 2022 421,175,000 $ 401,755,000 Special assessment bonds 21,895,000 23,865,000 - - 21,895,000 23,865,000 Excise tax obligations 60,787,000 69,442,000 42,528,000 46,703,000 103,315,000 116,145,000 Revenue obligations - - 66,895,000 69,570,000 66,895,000 69,570,000 Premium on debt payable 28,097,020 24,718,409 35,672,156 37,695,756 63,769,176 62,414,165 Certificates of participation 336,000,000 343,000,000 - - 336,000,000 343,000,000 1,076,000 1,580,000 - - 1,076,000 1,580,000 - - 5,500,392 6,351,352 5,500,392 6,351,352 4,514 8,710 - 166,851 HUD Section 108 loan WIFA loan Financed purchases Total debt payable $ 691,266,692 $ 674,834,119 $ 328,363,390 $ 350,021,959 $ 4,514 1,019,630,082 $ 175,561 1,024,856,078 On May 23, 2023, the City issued Tax-Exempt $63,325,000 Series 2023 General Obligation Bonds with maturities ranging from $1,745,000 to $8,865,000 to fund various project costs related to streets, public safety, parks, and water/wastewater. The bond matures on 7/1/2043 with interest rate of 5.00%. The Series 2023 General Obligation Bonds were publicly sold and are repaid from the HURF Fund, General Obligation Debt Service Fund and Water and Wastewater Fund. The City has assessed and is responsible for the collection of assessments secured by a lien on the assessed properties related to transit excise tax revenue obligations issued in the amount of $11.6 million, for which the primary source of repayment is the assessments levied against the benefiting properties for the additional streetcar capital improvement project costs. At June 30, 2023, the Transit Fund special assessments receivable, related to the obligations, on the assessed properties totaled $10.6 million. As development occurs, additional benefiting properties will be assessed in an amount not to exceed $13.0 million for all assessed properties. The City’s total net debt payable (total bonded debt, including the enterprise funds and Water Infrastructure Finance Authority loans, general obligation premiums less debt service reserves) outstanding decreased by $5.2 million from the fiscal year ended June 30, 2022 to the fiscal year ended June 30, 2023. 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 is located in the Statistical Section (Exhibit S-15). A comparison of these indicators follows: Fiscal Year Ended June 30, 2023 June 30, 2022 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 $462,681,585 $444,569,812 2,488 2,388 19.4% 19.5% $ 1.48 $ 1.48 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, 2023 is $321.7 million under the 20% capacity and $109.2 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-18) of this report. During the year, the City maintained ratings on its outstanding general obligation bonds of AAA from S&P Global Ratings and AAA from Fitch Ratings. 31 Additional information on the City’s long-term debt can be found in Note 9 of the Notes to the Financial Statements. ECONOMIC FACTORS As we move forward from the uncertain economic environment due to the COVID-19 pandemic, the City has forecasted moderate growth in taxable sales and other revenue sources for FY 2022/23 based on the latest economic data. The City’s overall revenues continue to outperform the prior year and consumer confidence remains stable. The City continues to experience robust development with new residential, hotel and officecomplex developments under construction or planned for the near future. Registration fees for various recreational and cultural programs and event ticket sales continue to lag pre-pandemic levels but are anticipated to continue with moderate growth as residents increase participation in group activities. The adopted fiscal year 2023/24 budget strategically implements a measured spend down of accumulated fund balances and reinforces the City’s commitment to invest in safe communities, economic development, sustainable growth, enhanced quality of life for the City’s residents, and development and maintenance of a strong community connection. 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 Financial Services Accounting 20 E. Sixth Street Tempe, AZ 85281 480.350.8256 32 City of Tempe, Arizona 33 Statement of Net Position June 30, 2023 City of Tempe, Arizona Governmental Activities Business-type Activities Total Assets Pooled cash and investments $ 461,169,342 $ 89,915,549 $ 551,084,891 Receivables: Taxes 28,653,712 - 28,653,712 Accounts, net 14,586,125 18,119,318 32,705,443 Accrued interest 2,148,889 844,599 2,993,488 Special assessment 21,430,487 - 21,430,487 Leases 25,098,080 - 25,098,080 8,205,256 - 8,205,256 Inventories 973,698 1,583,132 2,556,830 Prepaid items 1,271,067 Restricted cash and investments 61,232,089 35,952,244 97,184,333 Capital improvement notes receivable 1,700,147 - 1,700,147 Net OPEB assets 3,857,674 842,772 4,700,446 - 24,729,323 24,729,323 Equity in joint venture 392,052,962 88,466,000 480,518,962 Non-depreciable capital assets 159,193,748 35,699,686 194,893,434 Depreciable assets (net) 656,718,684 374,826,996 1,031,545,680 1,838,291,960 670,979,619 2,509,271,579 Deferred charge on refundings 3,069,817 5,787,234 8,857,051 Deferred outflows from pensions 74,483,836 3,676,082 78,159,918 Due from other governments Restricted joint venture construction deposit Total assets 1,271,067 Deferred Outflows of Resources Deferred outflows from OPEB 5,120,556 657,772 5,778,328 82,674,209 10,121,088 92,795,297 Accounts payable 35,748,186 9,254,221 45,002,407 Deposits 4,735,441 1,075,816 5,811,257 Accrued expenses 12,891,537 1,013,041 13,904,578 Unearned revenue 21,257,566 243,985 21,501,551 Matured bonds payable 37,385,000 29,560,000 66,945,000 Interest payable 8,610,181 6,384,107 14,994,288 Net OPEB liabilities 89,764,995 11,655,328 101,420,323 Net pension liabilities 143,917,382 24,257,208 168,174,590 Long term liabilities due within one year 76,710,697 31,336,377 108,047,074 Long term liabilities due more than one year 671,286,233 300,498,159 971,784,392 1,102,307,218 415,278,242 1,517,585,460 Deferred inflows from leases 24,280,666 - 24,280,666 Deferred inflows from refundings 1,494,606 - 1,494,606 Deferred inflows from pensions 4,078,578 858,064 4,936,642 Deferred inflows from OPEB 6,099,553 949,169 7,048,722 35,953,403 1,807,233 37,760,636 435,421,987 97,816,016 533,238,003 Total deferred outflow of resources Liabilities Total liabilities Deferred Inflows of Resources Total deferred inflow of resources Net Position Net investment in capital assets Restricted for: Grants 5,550,340 - 5,550,340 Capital projects 58,048,858 390,999 58,439,857 Debt service 51,631,452 - 51,631,452 Transportation 14,580,845 - 14,580,845 OPEB 3,857,674 842,772 4,700,446 Other 7,505,859 - 7,505,859 - 24,729,323 24,729,323 Joint venture Unrestricted Total net position 206,108,533 $ 782,705,548 The notes to the financial statements are an integral part of this statement. 34 140,236,122 $ 264,015,232 346,344,655 $ 1,046,720,780 Statement of Activities For the fiscal year ended June 30, 2023 City of Tempe, Arizona Net (Expense) Revenue and Changes in Net Position Program Revenues Expenses Charges for Services Operating Grants and Contributions 57,489,311 $ $ Capital Grants and Contributions Governmental Activities $ Business-type Activities Total Functions Governmental activities: General government - $ (51,050,451) $ - Public safety 177,106,183 2,010,414 7,348,365 - (167,747,404) - (167,747,404) Transportation 98,054,788 20,177,263 5,056,470 21,100,233 (51,720,822) - (51,720,822) Criminal justice 5,417,328 7,935,474 55,790 - 2,573,936 - 2,573,936 113,071,086 21,068,644 23,561,547 1,810,767 (66,630,128) - (66,630,128) Community enrichment $ 6,311,329 127,531 $ (51,050,451) Interest on long-term debt 18,057,610 - - - (18,057,610) - (18,057,610) Total governmental activities 469,196,306 57,503,124 36,149,703 22,911,000 (352,632,479) - (352,632,479) Water and wastewater 96,368,865 90,130,138 - - - (6,238,727) (6,238,727) Solid waste 21,167,692 20,843,436 - - - (324,256) (324,256) Emergency medical transportation Golf course 6,907,615 8,226,766 - - - 1,319,151 1,319,151 Business-type activities: Total business-type activities Total government 3,554,898 4,603,641 - - - 1,048,743 1,048,743 127,999,070 123,803,981 - - - (4,195,089) (4,195,089) 597,195,376 181,307,105 36,149,703 22,911,000 (352,632,479) $ (4,195,089) $ (356,827,568) General revenues: Sales taxes 222,221,888 - 222,221,888 Intergovernmental revenue, unrestricted Property taxes 84,994,033 - 84,994,033 63,596,741 - 63,596,741 Franchise taxes 2,742,874 - 2,742,874 Unrestricted investment earnings (loss) 4,594,728 1,866,714 6,461,442 Miscellaneous 7,524,676 697,005 8,221,681 Transfers (193,514) 193,514 - Special item (65,027,861) (34,852,246) (99,880,107) Total general revenues and transfers Change in net position 320,453,565 (32,095,013) 288,358,552 (32,178,914) (36,290,102) (68,469,016) Net position - beginning 814,884,462 300,305,334 1,115,189,796 Net position - ending $ 782,705,548 $ 264,015,232 $ 1,046,720,780 The notes to the financial statements are an integral part of this statement. 35 Balance Sheet Governmental Funds June 30, 2023 City of Tempe, Arizona General Transit Special Revenue 169,474,775 $ General Obligation Debt Service Community Development Capital Projects Non-Major Governmental Funds Total Governmental Funds Assets Pooled cash and investments $ 111,442,450 $ 3,650,490 $ 47,848,729 $ 100,829,352 $ 433,245,796 Receivables: Taxes 18,607,810 6,402,202 980,800 - 2,662,900 28,653,712 Accounts 10,421,382 3,736,029 - - 322,022 14,479,433 - 10,556,913 - - 10,873,574 21,430,487 Accrued interest 1,360,626 482,898 - - 285,912 2,129,436 Leases 24,779,658 318,422 - - - 25,098,080 197,130 - - - - 197,130 - 5,234,448 - - 2,970,808 8,205,256 Inventories 309,762 - - - 663,936 973,698 Prepaid items 100,000 - - - 1,171,067 1,271,067 10,187,885 4,088,087 33,448,321 - 5,327,146 53,051,439 250,000 1,450,147 - - - Special assessments Due from other funds Due from other governments Restricted cash and investments Capital improvement notes receivable Total assets $ 235,689,028 $ 143,711,596 $ 38,079,611 $ 47,848,729 $ $ 7,262,301 $ 18,806,423 $ 2,077 $ 4,366,228 $ 1,700,147 125,106,717 $ 590,435,681 5,079,104 $ 35,516,133 Liabilities Accounts payable Deposits 3,278,865 - - 9,195 1,447,381 4,735,441 Accrued expenditures 9,710,042 89,206 - - 541,789 10,341,037 Due to other funds - - - - 136,517 136,517 Unearned revenue 149,500 - - 13,307,813 7,800,253 21,257,566 Matured bonds payable 7,000,000 3,485,000 23,690,000 - 3,210,000 37,385,000 Matured interest payable 3,179,060 602,246 4,423,493 - 405,382 8,610,181 30,579,768 22,982,875 28,115,570 17,683,236 18,620,426 117,981,875 Unavailable revenue- courts 8,240,777 - - - - 8,240,777 Unavailable revenue- grants - - - - - - Unavailable revenue- notes receivable - 1,450,147 - - - 1,450,147 Unavailable revenue- other 941,363 5,855,330 - - 18,561 6,815,254 Unavailable revenue- property tax 257,499 - 439,842 - - 697,341 Unavailable revenue- special assessments - 10,556,913 - - 11,115,362 21,672,275 Unavailable revenue- leases 23,977,446 303,220 - - - 24,280,666 33,417,085 18,165,610 439,842 - 11,133,923 63,156,460 Total liabilities Deferred Inflows of Resources Total deferred inflows of resources Fund Balances Fund balances: Non-spendable 1,211,974 15,202 - - 1,835,003 3,062,179 - 70,202,618 9,524,199 9,280,603 83,881,964 172,889,384 Committed 4,586,678 16,760,689 - - 13,705,417 35,052,784 Assigned 39,500,000 15,584,602 - 20,884,890 - 75,969,492 Unassigned 126,393,523 - - - (4,070,016) 122,323,507 Restricted Total fund balances $ 171,692,175 $ 102,563,111 $ 9,524,199 $ 30,165,493 $ 95,352,368 $ 409,297,346 Total liabilities, deferred inflows of resources, and fund balances $ 235,689,028 $ 143,711,596 $ 38,079,611 $ 47,848,729 $ 125,106,717 $ 590,435,681 The notes to the financial statements are an integral part of this statement. 36 Reconciliation of the Balance Sheet to the Statement of Net Position June 30, 2023 City of Tempe, Arizona Fund balances- total governmental funds $ 409,297,346 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 1,833,191,112 (1,017,278,680) 815,912,432 The equity in joint venture is not a financial resource and, therefore, is not reported in the funds. Net OPEB assets (excluding internal service) 392,052,962 3,834,437 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 Bond premiums and the deferred charge on refundings are not financial resources and, therefore, are not reported in the funds. Deferred inflows from refundings Deferred outflows from refundings Deferred inflows related to pension and OPEB Deferred outflows related pension and OPEB 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 (excluding internal service) Net pension liabilities (excluding internal service) Other post employment benefits liabilities (excluding internal service) Lease and SBITA liabilities Bonds and capital improvement notes payable 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 21,672,275 7,512,590 1,450,147 8,240,777 38,875,789 (28,097,020) (1,494,606) 3,069,817 (10,135,925) 79,495,456 42,837,722 (33,399,122) (143,248,560) (89,655,630) (3,723,580) (663,169,672) (933,196,564) 13,091,424 $ 782,705,548 The notes to the financial statements are an integral part of this statement. 37 City of Tempe, Arizona 38 Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Fiscal Year Ended June 30, 2023 City of Tempe, Arizona General Transit Special Revenue General Obligation Debt Service Community Development Capital Projects Non-Major Governmental Funds 152,637,453 $ $ $ $ Total Governmental Funds Revenues: Taxes: Sales taxes $ 57,815,447 - - 11,647,867 $ 222,100,767 Property taxes 24,697,888 - 35,829,213 - - 60,527,101 Franchise taxes 2,863,995 - - - - 2,863,995 Intergovernmental: Federal agency - - - 21,100,233 27,100,395 48,200,628 69,489,135 458,380 - - 20,785,102 90,732,617 3,114,102 58,688 - - - 3,172,790 Interest earnings- leases 517,849 4,101 - - - 521,950 Investment income (loss) 2,652,121 694,842 6,913 39,677 498,795 3,892,348 Charges for services 16,886,464 11,679,887 - - 4,443,712 33,010,063 Fines and forfeitures 4,144,727 - - - 461,041 4,605,768 403,768 501,284 - 96,952 1,629,495 2,631,499 Special assessments - - - - 1,911,731 1,911,731 Licenses and permits 7,393,379 - - - 240,494 7,633,873 Miscellaneous 6,716,025 309,220 - - 2,519,549 9,544,794 291,516,906 71,521,849 35,836,126 21,236,862 71,238,181 491,349,924 General government 38,361,575 - - - 1,535,497 39,897,072 Public safety 133,657,325 - - - 11,278,743 144,936,068 Transportation - 48,278,281 - 12,918,146 19,001,982 80,198,409 Criminal justice 5,159,838 - - - 63,044 5,222,882 Community enrichment 65,589,040 - - 689,680 40,048,211 106,326,931 Principal 8,480,749 3,485,000 23,690,000 - 5,170,991 40,826,740 Interest 6,426,152 1,204,492 8,744,857 - 852,944 17,228,445 Fiscal fees 3,100 4,572 480,946 - 2,427 491,045 Capital outlay 6,137,049 28,400 - 27,098,632 39,978,480 73,242,561 263,814,828 53,000,745 32,915,803 40,706,458 117,932,319 508,370,153 27,702,078 18,521,104 2,920,323 (19,469,596) (46,694,138) (17,020,229) State and other agency Property rental Other entities' participation Total revenues Expenditures: Current: Debt service: Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfers in 20,750 - 4,715,459 22,902,976 14,426,039 42,065,224 Transfers out (33,518,683) (5,946,941) (6,900,296) - (4,073,468) (50,439,388) Issuance of debt - - - 18,280,000 34,102,158 52,382,158 Premium on issuance of debt - - 341,672 1,766,081 3,288,195 5,395,948 374,285 1,178 - 33,415 2,770,747 3,179,625 Proceeds from SBITA 3,822,038 - - - 105,778 3,927,816 Proceeds from leases 1,294,308 - - - - 1,294,308 (28,007,302) (5,945,763) (1,843,165) 42,982,472 50,619,449 57,805,691 (305,224) 12,575,341 1,077,158 23,512,876 3,925,311 40,785,462 171,997,399 89,987,770 8,447,041 6,652,617 91,427,057 368,511,884 Proceeds from sale of capital assets Total other financing sources (uses) Net change in fund balance Fund balance at beginning of year Fund balance at end of year $ 171,692,175 $ 102,563,111 $ 9,524,199 The notes to the financial statements are an integral part of this statement. 39 $ 30,165,493 $ 95,352,368 $ 409,297,346 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance to the Statement of Activities For the Fiscal Year Ended June 30, 2023 City of Tempe, Arizona Net change in fund balances- total governmental funds $ 40,785,462 Amounts reported for the governmental activities in the statement of activities are different because: 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. Expenditures for capitalized assets 79,083,959 Special item (65,027,861) Depreciation and amortization expense (51,054,067) (36,997,969) 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 2,802,251 Court revenue 5,227,840 Notes receivable 421,494 Grants and contributions (1,306,863) Special assessments received/recognized (1,863,890) Joint venture 180,433 5,461,265 Government funds report pension and OPEB 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 and OPEB contributions 17,977,095 Pension and OPEB expense (47,115,130) (29,138,035) Debt proceeds provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the statement of net position. Repayment of debt principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net position. Also, government funds report the effect of premiums and similar items when debt is issued, whereas these amounts are amortized in the statement of activities. Issuance of debt (52,382,158) Leases incurred (1,294,308) Subscription-based information technology arrangements incurred (3,927,816) Premium on issuance of debt (5,395,948) Compensated absences (906,240) Principal payments made 40,826,740 Amortization of deferred inflow- refunding 186,826 Amortization of deferred outflow- deferred charges (524,946) Amortization of bond premium 2,017,337 (21,400,513) 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 9,110,876 $ The notes to the financial statements are an integral part of this statement. 40 (32,178,914) City of Tempe, Arizona 41 Statement of Fund Net Position Proprietary Funds June 30, 2023 City of Tempe, Arizona Business-type Activities - Enterprise Funds Water and Wastewater Assets Current assets: Pooled cash and investments Restricted cash and investments Accounts receivable, net Accrued interest receivable Inventories Total current assets Non-current assets: Advance to other funds Net OPEB assets Restricted joint venture construction deposit Equity in joint venture Capital assets: Non-depreciable assets Depreciable assets, net Total capital assets, net Total non-current assets Total assets $ Deferred Outflows of Resources Deferred charge on refunding Deferred outflows related to pensions Deferred outflows related to OPEB Total deferred outflows of resources Liabilities Current liabilities: Accounts payable Deposits Accrued expenses Due to other funds Unearned revenue Accrued interest payable Matured bonds payable WIFA loan payable Claims liability Compensated absence SBITA liability Bonds and loans payable Total current liabilities Non-current liabilities: Advance from other funds Claims Liability Compensated Absence Bonds and loans payable WIFA loan payable SBITA liability Net OPEB liabilities Net pension liabilities Total non-current liabilities Total liabilities 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 Restricted Unrestricted Total net position $ 74,323,689 35,952,244 12,876,723 754,008 1,583,132 125,489,796 Total Non-Major Enterprise Funds $ 15,591,860 5,242,595 90,591 20,925,046 Governmental ActivitiesInternal Service Funds Total $ 89,915,549 35,952,244 18,119,318 844,599 1,583,132 146,414,842 $ 27,923,547 8,180,650 106,692 20,370 36,231,259 2,364,936 482,407 24,729,323 88,466,000 360,365 - 2,364,936 842,772 24,729,323 88,466,000 23,237 - 35,337,138 362,456,645 397,793,783 513,836,449 639,326,245 362,548 12,370,351 12,732,899 13,093,264 34,018,310 35,699,686 374,826,996 410,526,682 526,929,713 673,344,555 23,237 36,254,496 5,787,234 2,104,208 442,339 8,333,781 1,571,874 215,433 1,787,307 5,787,234 3,676,082 657,772 10,121,088 101,357 7,579 108,936 8,161,690 1,075,647 606,786 243,985 6,384,107 29,560,000 869,077 689,756 30,131 29,296,000 76,917,179 1,092,531 169 406,255 329,634 121,779 1,950,368 9,254,221 9,254,221 232,989 1,075,816 1,013,041 2,550,477 60,613 243,985 6,384,107 29,560,000 869,077 10,432,721 1,019,390 48,037 151,910 29,296,000 78,867,547 13,324,837 1,324,441 293,366,524 4,631,315 14,853 7,993,491 13,884,946 321,215,570 398,132,749 2,364,936 632,950 200,474 327,602 3,661,837 10,372,262 17,560,061 19,510,429 2,364,936 1,957,391 293,566,998 4,631,315 342,455 11,655,328 24,257,208 338,775,631 417,643,178 9,034,542 92,236 109,365 668,822 9,904,965 23,229,802 491,160 590,844 1,082,004 366,904 358,325 725,229 858,064 949,169 1,807,233 23,659 18,547 42,206 86,077,780 25,602,729 136,764,764 248,445,273 11,738,236 360,365 3,471,358 15,569,959 97,816,016 25,963,094 140,236,122 264,015,232 23,237 13,068,187 13,091,424 $ The notes to the financial statements are an integral part of this statement. 42 $ $ Statement of Revenues, Expenses and Changes in Fund Net Position Proprietary Funds For the Fiscal Year Ended June 30, 2023 City of Tempe, Arizona Business-type Activities - Enterprise Funds Total NonMajor Water and Enterprise Wastewater Funds Total Governmental ActivitiesInternal Service Funds Operating revenues: Charges for services Miscellaneous Total operating revenues $ 90,130,138 551,274 90,681,412 $ 33,673,843 5,734 33,679,577 $ 123,803,981 557,008 124,360,989 Operating expenses: Personnel services Supplies and materials Fees and services Depreciation and amortization Total operating expenses Operating income (loss) 16,135,039 2,707,463 41,246,292 25,252,741 85,341,535 5,339,877 13,083,841 1,782,905 14,404,656 2,292,641 31,564,043 2,115,534 29,218,880 4,490,368 55,650,948 27,545,382 116,905,578 7,455,411 47,291,451 47,291,451 853,202 1,831,533 (11,027,330) 64,900 35,181 (66,162) 75,097 1,866,714 (11,093,492) 139,997 77,024 - (3,791,020) 2,159,650 (1,631,370) 930,226 4,021,334 (4,882,145) (34,077,287) (34,938,098) (38,729,118) 1,058,826 (4,501) (774,959) 279,366 2,439,016 5,080,160 (4,886,646) (34,852,246) (34,658,732) (36,290,102) 8,180,650 8,180,650 9,110,876 287,174,391 $ 248,445,273 13,130,943 $ 15,569,959 300,305,334 $ 264,015,232 Non-operating revenues (expenses): Investment income (loss) Interest and fiscal fees Gain (loss) on sale of capital Income (loss) before transfers and special item Transfers in Transfers out Special item Total transfers and special item Change in net position Total net position- beginning, as restated Total net position- ending The notes to the financial statements are an integral part of this statement. 43 $ $ 47,846,604 298,049 48,144,653 3,980,548 13,091,424 Statement of Cash Flows Proprietary Funds For the Fiscal Year Ended June 30, 2023 City of Tempe, Arizona Business-type Activities- Enterprise Funds Total Non-Major Enterprise Funds Water and Wastewater Total Governmental ActivitiesInternal Service Funds 124,435,300 $ Cash flows from operating activities: Receipts from customers $ 91,521,114 $ 32,914,186 $ 47,752,179 Payments to employees for services (16,108,959) (11,699,992) (27,808,951) (978,003) Payments to suppliers for goods and services (54,718,160) (16,734,232) (71,452,392) (45,498,489) Receipts from other Net cash provided (used) by operating activities 551,274 5,734 557,008 298,049 21,245,269 4,485,696 25,730,965 1,573,736 Cash flows from noncapital financing activities: Advances from/(to) other funds 132,949 (132,949) - 60,613 Transfers in 4,021,334 1,058,826 5,080,160 8,180,650 Transfers out (4,882,145) (4,501) (4,886,646) - (727,862) 921,376 193,514 8,241,263 Net cash provided (used) by noncapital financing activities Cash flows from capital and related financing activities: Proceeds from issuance of bonds 12,099,559 200,474 12,300,033 - Principal paid on long-term debt (28,845,960) (166,851) (29,012,811) - Interest and fiscal fees (12,462,750) (126,463) (12,589,213) - Purchase of capital assets (17,693,848) (1,468,393) (19,162,241) - Investment in joint venture (5,809,665) - (5,809,665) - 64,900 75,097 139,997 - (52,647,764) (1,486,136) (54,133,900) - 1,446,887 42,743 1,489,630 57,334 108,331 - 108,331 - 1,555,218 42,743 1,597,961 57,334 Proceeds from the sale of capital assets Net cash provided (used) by capital and related financing activities Cash flows from investing activities: Interest received Payment received on notes receivable Net cash provided (used) by investing activities Net increase (decrease) in cash and cash equivalents (30,575,139) 3,963,679 (26,611,460) 9,872,333 Cash and cash equivalents at beginning of year 140,851,072 11,628,181 152,479,253 26,231,864 Cash and cash equivalents at end of year $ 110,275,933 $ 15,591,860 $ 74,323,689 $ 15,591,860 $ 125,867,793 $ 36,104,197 89,915,549 $ 27,923,547 Reconciliation of cash and cash equivalents at end of year: Pooled cash and investments $ Restricted cash and investments Cash and cash equivalents at end of year 35,952,244 - 35,952,244 8,180,650 $ 110,275,933 $ 15,591,860 $ 125,867,793 $ 36,104,197 $ 5,339,877 $ 2,115,534 $ 7,455,411 $ 853,202 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 25,252,741 2,292,641 27,545,382 - (Increase) decrease in receivables 1,252,666 (Increase) decrease in inventories (327,261) (757,979) 494,687 (94,425) - (327,261) (Increase) decrease in net OPEB asset - (44,594) (84,348) (128,942) (2,317) Increase (decrease) in deposits 150,907 (1,678) 149,229 - Increase (decrease) in unearned revenue (12,597) - (12,597) - Increase (decrease) in payables (10,437,144) (546,671) (10,983,815) (316,540) Increase (decrease) in accrued expenses (2,172,085) (1,010,690) (3,182,775) 2,550,477 - - - (1,555,002) Increase (decrease) in compensated absence 2,014,197 962,584 2,976,781 140,273 (Increase) decrease in deferred outflows related to pension and OPEB 1,679,672 666,781 2,346,453 51,420 Increase (decrease) in deferred inflows related to pension and OPEB Change in assets and liabilities: Increase (decrease) in claims payable (3,112,782) (1,919,340) (5,032,122) (158,233) Increase (decrease) in net pension liabilities (599,890) 3,044,393 2,444,503 113,423 Increase (decrease) in net OPEB liabilities 2,261,562 (275,531) 1,986,031 Net cash provided (used) by operating activities (8,542) $ 21,245,269 $ 4,485,696 $ 25,730,965 $ 1,573,736 $ 3,707,964 $ 344,808 $ 4,052,772 $ - $ 3,707,964 $ 344,808 $ 4,052,772 $ - Noncash investing, capital, and financing activities: Accounts payable related to capital assets Total noncash investing, capital, and financing activities: The notes to the financial statements are an integral part of this statement. 44 Statement of Fiduciary Net Position Fiduciary Trust Fund June 30, 2023 City of Tempe, Arizona Other Employee Benefit Trust Fund Assets Cash and cash equivalents Investments at fair value: Mutual Funds Total investments Total assets $ 120,727 17,714,339 17,714,339 17,835,066 Net Position Restricted for other post employment benefits Total net position 17,835,066 $ 17,835,066 Statement of Changes In Fiduciary Net Position Fiduciary Trust Fund For the Fiscal Year Ended June 30, 2023 City of Tempe, Arizona Other Employee Benefit Trust Fund Additions: Contributions: Employer contributions $ Investment earnings: Net decrease in fair value of investments Interest, dividends and other Investment costs Net investment earnings 9,437,959 1,269,445 256,660 (72,716) 1,453,389 Total additions 10,891,348 Deductions: Benefits paid to participants or beneficiaries Medical insurance for retirees Total deductions 8,174,692 1,263,267 9,437,959 Net increase in fiduciary net position 1,453,389 Net position- beginning Net position- ending $ The notes to the financial statements are an integral part of these statements. 45 16,381,677 17,835,066 Notes to the Financial Statements For Fiscal Year Ended June 30, 2023 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, culturalrecreational, 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. 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. 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. 46 Notes to the Financial Statements For Fiscal Year Ended June 30, 2023 City of Tempe, Arizona NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) B. Basic Financial Statements (Continued) 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. 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. There is one debt service fund presented as a major fund in the basic financial statements: General Obligation Debt Service Fund - accounts for the accumulation of resources and payments of general obligation and other 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: Community Development Capital Projects 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. 47 Notes to the Financial Statements For Fiscal Year Ended June 30, 2023 City of Tempe, Arizona NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Basis of Presentation (Continued) 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. 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. The following enterprise fund is reported as a major fund 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. 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 selfinsurance program. 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. 48 Notes to the Financial Statements For Fiscal Year Ended June 30, 2023 City of Tempe, Arizona NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 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, except for grant revenue which are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. 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 occurrence 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. 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. Generally, 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. 49 Notes to the Financial Statements For Fiscal Year Ended June 30, 2023 City of Tempe, Arizona NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) E. Measurement Focus and Basis of Accounting (continued) 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. 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. F. Budgetary Data State law mandates that cities and towns adopt a budget annually. 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. The separately issued annual budget may be obtained from the City's Municipal Budget Office, 31 East 5th Street, Tempe, Arizona, 85281. The City adheres to the following procedures in establishing the budgetary data: 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. 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 evidence 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. 50 Notes to the Financial Statements For Fiscal Year Ended June 30, 2023 City of Tempe, Arizona NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) G. Receivables For accounts receivable, all amounts are net of allowance for doubtful accounts. H. 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. I. 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, Statement of Fund Net Position, 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 $8.1 million is included in restricted assets in the Worker’s Compensation Fund. J. 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 or in aggregate of similar items 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 Buildings Infrastructure Improvements Machinery and equipment Intangible: Right-to-use subscription assets Right-to-use lease assets Useful Life (years) 10-70 7-70 10-50 3-15 Varies Varies Intangible right-to-use lease assets are amortized over the shorter of the lease term or the useful life of the underlying asset, unless the lease contains a purchase option that the City is reasonably certain of being exercised―then the lease asset is amortized over the useful life of the underlying asset. Intangible right-to-use subscription assets are amortized over the shorter of the subscription term or the useful life of the underlying IT assets. 51 Notes to the Financial Statements For Fiscal Year Ended June 30, 2023 City of Tempe, Arizona NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) K. Leases The city has entered into lease agreements and are accounted for based on the principle that leases are financings of the right to use an underlying asset. A lessee is required to recognize a lease liability and an intangible right-to-use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources. L. Subscription based information technology agreement Subscription based information technology agreement (SBITA) related amounts are recognized at the inception of SBITA in which the City is the lessor. The deferred inflow of resources is recorded in an amount equal to the corresponding lease receivable plus certain additional amounts received from the SBITA at or before the commencement of the subscription term that relate to future periods, less any incentives paid to, or on behalf of the lessee at or before the commencement of the lease term. The inflow of resources is recognized in a systematic and rational manner over the term of the SBITA M. Deferred Outflows/Inflows of Resources In addition to assets, the statement of net position will report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflow of resources represent a consumption of net assets that applies to future periods and so will not be recognized as an outflow of resources (expense/expenditure) until then. The government only has two items that qualify for reporting in this category. It is the deferred charge on refunded debt and deferred outflows related to pensions and OPEB reported in the government-wide statement of net position. In addition to liabilities, the statement of net position will report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources represent an acquisition of net assets that applies to future periods and so will not be recognized as an inflow of resources (revenue) until that time. The government has four items that qualify for reporting in this category. Unavailable revenue, which arises only under a modified accrual basis of accounting, deferred inflow related to leases, the deferred inflow related to pensions and other post-employment benefits, and amounts resulting from refunded debt. Amounts that are reported as deferred outflows are shown as a separate balance sheet section following the assets. Similarly, amounts shown as deferred inflows are shown in a separate balance sheet section following liabilities. N. Compensated Absences Accumulated unpaid vacation, vested sick pay and earned compensatory time are accrued in the Governmentwide 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 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 nonreimbursed 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”. 52 Notes to the Financial Statements For Fiscal Year Ended June 30, 2023 City of Tempe, Arizona NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) O. Post-Employment Benefits For purposes of measuring the net pension and other postemployment benefits (OPEB) assets and liabilities, deferred outflows of resources and deferred inflows of resources related to pensions and OPEB, and pension and OPEB expense, information about the plan’s fiduciary net assets and additions to/deductions from the plan’s fiduciary net assets have been determined on the same basis as they are reported by the plans. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value except for money market investments and interest earnings from inv contracts that have a maturity at the time of purchase of 1 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. 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 13). 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. 53 Notes to the Financial Statements For Fiscal Year Ended June 30, 2023 City of Tempe, Arizona NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) V. Implementation of New GASB Pronouncement For the year ended June 30, 2023, the City implemented the provisions of GASB Statement No. 96, SubscriptionBased Information Technology Arrangements, which (1) defines a subscription-based information technology arrangement (SBITA); (2) establishes that a SBITA results in a right-to-use subscription asset ― an intangible asset ― and a corresponding subscription liability; (3) provides the capitalization criteria for outlays other than subscription payments, including implementation costs of a SBITA; and (4) requires note disclosures regarding a SBITA. As a result, the City’s financial statements have been modified to reflect the implementation of this new standard. The City implemented the provisions of GASB Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements. The primary objective of this Statement is to improve the financial reporting by addressing issues related to public-private and public-public partnership arrangements (PPPs). This Statement also provide guidance for accounting and financial reporting for availability payment arrangements (APAs). This pronouncement did not impact the preparation of these financial statements. The City implemented the provisions of GASB Statement No. 99, Omnibus 2022. This Statement establishes accounting and financial reporting requirements for specific issues related to derivative instruments, leases, public-private and public-public partnerships, subscription-based information technology arrangements (SBITAs), LIBOR usage extension, disclosures for nonmonetary transactions, pledging of revenues, government-wide financial statement focus. This pronouncement did not impact the preparation of these financial statements. NOTE 2 - BUDGET BASIS OF ACCOUNTING Arizona state statutes require accounting for certain transactions to be on a basis other than GAAP. Legal control over the budget derives from State statues that prohibits the City from exceeding it’s adopted budget in total. The legally adopted budget is at the citywide level that includes operating budget and capital budget. The budgetary comparison schedule at the citywide level is presented in the Required Supplementary Information section. There are certain differences between the budgetary basis and the basis used for reporting under GAAP. The major differences between the budget and GAAP bases are: 1) Encumbrances are recorded as the equivalent of expenditures (budget) as opposed to a reservation of fund balance (GAAP). 2) Certain revenues and expenditures not recognized in the budgetary year are accrued (GAAP). 3) Changes in the fair value of investments (GAAP) are not budgeted. NOTE 3 - PROPERTY TAXES Under Arizona law a two-tiered tax system exists: (1) a primary system for taxes levied to pay for current operation and maintenance expenses, and (2) a secondary system for taxes levied to pay principal and interest on bonded indebtedness as well as for the determination of the maximum permissible bonded indebtedness. In Fiscal Year 2016, with the passage of Proposition 117, the limited property tax value was required to be used in determining and levying primary and secondary taxes on all property. In May 2016, legislation was passed by the Arizona State Legislature, effective August 2016, which clarifies that the valuation for the calculation of the debt limit is the full cash (secondary) property value rather than the limited property value. Primary levies are limited to a 2% increase annually plus levies attributable to assessed valuation added as a result of growth and annexation. Secondary tax levies do not have a limitation. 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. 54 Notes to the Financial Statements For Fiscal Year Ended June 30, 2023 City of Tempe, Arizona NOTE 3 - PROPERTY TAXES (Continued) 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 $(2,123,218) and the bank balance was $7,098,771; $6,538,771 of that amount was exposed to custodial risk because it was uninsured and is collateralized with securities held by the pledging financial institution. In addition, the City holds $27,080 in petty cash. 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. Investments (Continued) Cash and investments as of June 30, 2023 are classified in the accompanying financial statements as follows: Carrying amount of investments Carrying amount of cash deposits Total cash and investments $ 668,227,508 (2,123,218) $ 666,104,290 Pooled cash and investments – unrestricted Restricted cash and investments Investments in OPEB trust Total cash and investments $ 551,084,891 97,184,333 17,835,066 $ 666,104,290 55 Notes to the Financial Statements For Fiscal Year Ended June 30, 2023 City of Tempe, Arizona NOTE 4 - CASH AND INVESTMENTS (Continued) At June 30, 2023, the City maintained the following investments and maturities: Remaining Maturity in Months Category 12 Months or Less Fair Value US government agencies Level 2 187,920,571 68,728,166 84,979,540 27,695,559 6,517,306 Money market Level 1 87,426,947 87,426,947 - - - N/A 43,989,272 43,989,272 - - - Level 1 17,714,340 17,714,340 - - $ 668,227,508 $ $ 123,918,746 341,777,471 $ $ 119,169,163 204,148,703 $ 37 - 48 Months Level 2 Mutual funds 331,176,378 25 – 36 Months US government treasuries State investment pool $ 13 – 24 Months $ 88,088,469 115,784,028 $ - $ 6,517,306 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. 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 AAA by S&P Global. The Arizona Local Government Investment Pool 5 is currently rated AAA by Moody’s. The OPEB Trust has investments with an average quality ranging from AAA to B. 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, 2023, 48.34% of the City’s investments are in US Treasuries, 16.93% of the City’s investments are in Federal Home Loan Mortgage Corporation securities, and 9.35% in Federal Home Loan Mortgage Bank. 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 56 Notes to the Financial Statements For Fiscal Year Ended June 30, 2023 City of Tempe, Arizona NOTE 4 - CASH AND INVESTMENTS (Continued) 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, 2023: Due to General fund Non-major governmental funds Internal service funds $ 136,517 60,613 $ Total governmental funds $ 197,130 $ Due from 197,130 197,130 The interfund balances at June 30, 2023 are short-term transfers to cover temporary cash deficits in various funds. All interfund balances outstanding at June 30, 2023 are expected to be repaid within one year. Transfers Out Transit Special Revenue General Transfers In General $ - $ General Obligation Debt Service - $ Non-major Governmental - $ NonMajor Enterprise Water and Wastewater - $ 20,750 $ - Total $ 20,750 General Obligation Debt Service 606,783 Community Development Capital Projects 22,902,976 - - Non-Major Governmental 843,448 5,946,941 2,878,962 Water and Wastewater - - 4,021,334 - - - 4,021,334 Non-major Enterprise 984,826 - - - 74,000 - 1,058,826 Internal Service Funds $ Total $ 33,518,683 - - 4,502 4,099,673 4,501 4,715,459 - - - 22,902,976 4,068,966 687,722 14,426,039 8,180,650 8,180,650 $ 5,946,941 $ 6,900,296 $ 4,073,468 $ 4,882,145 $ 4,501 $ 55,326,034 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/expenses in accordance with City policy. Interfund Advance. In two installment payments in Fiscal Year 2016, the Water and Wastewater Fund advanced the Golf 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 2.25% 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 and Golf Funds on June 30, 2023 was $2,364,936. NOTE 6 – CAPITAL IMPROVEMENT NOTES RECEIVABLE 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, 2023 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 a development agreement to add a light rail station at Washington and Center Parkway. The agreement has total contributions 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. At June 30, 2023, the note receivable balance in the Transit Special Revenue fund is $1,450,147 and the corresponding revenue has been reported as a deferred inflow of resources. 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 on June 30, 2023 was $86,864 for this agreement. 57 Notes to the Financial Statements For Fiscal Year Ended June 30, 2023 City of Tempe, Arizona 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 the operating budget for the jointly used facilities. As of June 30, 2022 (the latest information available), the City has a 14.94% 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, 2022 (the latest information available) is as follows (in thousands): Total assets Total liabilities Total net position $ $ 672,239 (75,515) 596,724 Total revenues $ Total expenses Total non-operating revenues (expenses) Net decrease in net position $ 75,335 (92,632) (308) (17,605) 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 on June 30, 2022, was $88,466,000. 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, 2022, the City has a 16.88% 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. 58 Notes to the Financial Statements For Fiscal Year Ended June 30, 2023 City of Tempe, Arizona NOTE 7 - JOINT VENTURE (Continued) Summary financial information on the joint venture (GAAP basis) as of and for the fiscal year ended June 30, 2022 (the latest information available) is as follows (in thousands): Total assets Total liabilities Total net position $ 2,663,399 (381,788) $ 2,281,611 Operating revenues Operating expenses Non-operating revenues Capital Contributions Net increase in net position $ $ 9,412 (126,697) 41,548 377,782 302,045 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 on June 30, 2022 was $385,257,073. This is primarily due to the funding of the transit streetcar project through capital grants. Separate financial statements may be obtained from Valley Metro Rail, Inc., 411 North Central Avenue, Suite 200, Phoenix, Arizona 85004. 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. As of June 30, 2022, the City’s net investment in RWC was $6,795,889 or 11.67% 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, 2022 (the latest information available) is as follows (in thousands): Total assets Total liabilities Total net position $ Total revenues Total expenses Net decrease in net position $ $ $ 60,864 (2,624) 58,240 10,798 (16,744) (5,946) The Annual Comprehensive Financial Report for the Fiscal Year Ended June 30, 2022, for the RWC may be obtained from the Regional Wireless Cooperative, 200 West Washington Street, 14th Floor, Phoenix, Arizona, 85003-1611. 59 Notes to the Financial Statements For Fiscal Year Ended June 30, 2023 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, 2023 is as follows: Balances June 30, 2022 Additions Transfers in (out) Retirements Balances June 30, 2023 Governmental activities: Non-depreciable assets: Land $ 94,494,250 $ - $ - $ 898,877 $ 95,393,127 Construction-in-progress 132,315,603 67,172,574 (65,027,861) (70,659,695) 63,800,621 Total non-depreciable assets 226,809,853 67,172,574 (65,027,861) (69,760,818) 159,193,748 Depreciable assets: Buildings 329,894,421 11,786,937 341,681,358 Infrastructure 834,577,511 6,567,225 841,144,736 Improvements 247,535,220 34,875,769 282,410,989 Machinery and equipment 181,358,939 6,487,238 (1,027,861) 16,517,818 203,336,134 SBITA assets 4,129,839 4,129,839 Lease assets 1,294,308 1,294,308 Total depreciable assets 1,593,366,091 11,911,385 (1,027,861) 69,747,749 1,673,997,364 Less Accumulated depreciation/amortization for: Buildings (192,474,726) (11,711,677) (204,186,403) Infrastructure (498,680,213) (18,266,279) (516,946,492) Improvements (122,927,574) (11,844,610) (134,772,184) Machinery and equipment (153,183,030) (7,856,933) 1,027,861 13,069 (159,999,033) SBITA assets (1,135,741) (1,135,741) Lease assets (238,827) (238,827) Total accumulated depreciation/amortization (967,265,543) (51,054,067) 1,027,861 13,069 (1,017,278,680) Total Depreciable assets, net Governmental activities capital assets, net 626,100,548 (39,142,682) $ 852,910,401 $ 28,029,892 - 69,760,818 656,718,684 - $ 815,912,432 $ (65,027,861) $ Depreciation expense was charged to the governmental functions in the government-wide financial statements as follows: Public safety General government Transportation Community enrichment Total depreciation/amortization expense 60 $ 6,887,880 13,370,561 25,856,504 4,939,122 $ 51,054,067 Notes to the Financial Statements For Fiscal Year Ended June 30, 2023 City of Tempe, Arizona NOTE 8 - CAPITAL ASSETS (Continued) Balances June 30, 2022 Additions Transfers in (out) Retirements Balances June 30, 2023 Business-type activities: Non-depreciable assets: Land $ 6,693,377 $ - $ - $ - $ 6,693,377 Construction-in-progress 112,619,229 20,760,214 (34,852,247) (69,520,887) 29,006,309 Total non-depreciable assets 119,312,606 20,760,214 (34,852,247) (69,520,887) 35,699,686 Depreciable assets: Buildings 49,802,667 209,429 50,012,096 Infrastructure 405,741,242 31,642,434 437,383,676 Improvements 219,003,303 36,764,542 255,767,845 Machinery and equipment 47,605,854 2,160,858 (330,359) 917,551 50,353,904 SBITA assets 788,307 788,307 Total depreciable assets 722,153,066 2,949,165 (330,359) 69,533,956 794,305,828 Less Accumulated depreciation/amortization for: Buildings (32,026,888) (1,261,339) (33,288,227) Infrastructure (214,957,481) (13,005,624) (227,963,105) Improvements (118,578,338) (9,848,856) (128,427,194) Machinery and equipment (26,688,033) (3,205,490) 330,359 (13,069) (29,576,233) SBITA assets (224,073) (224,073) Total accumulated depreciation/amortization (392,250,740) (27,545,382) 330,359 (13,069) (419,478,832) Total depreciable assets, net Governmental activities capital assets, net 329,902,326 $ 449,214,932 (24,596,217) $ - 69,520,887 374,826,996 - $ 410,526,682 (3,836,003) $ (34,852,247) $ 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/amortization expense 61 $ 25,252,741 1,587,240 258,660 446,741 $ 27,545,382 Notes to the Financial Statements For Fiscal Year Ended June 30, 2023 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT Changes in Long-term Liabilities. The following is a summary of changes in long-term liabilities for the fiscal year ended June 30, 2023: Beginning Balance, as restated Governmental activities: Debt payable: General obligation bonds payable Premium on general obligation bonds Special assessments Special assessment 2020 Excise tax obligations (direct placement) Premium on special assessments Excise tax obligations Excise tax obligations - direct Premium on excise tax obligations 2021 Certificates of Participation 2004 HUD Section 108 loan Financed purchases Debt Principal Compensated absences Claims and judgments Leases SBITAs Governmental activities long-term $ 212,220,000 22,233,929 11,700,000 12,165,000 351,404 53,382,000 16,060,000 2,133,076 343,000,000 1,580,000 8,710 674,834,119 32,633,155 17,830,856 $ 725,298,130 Additions $ $ Reductions Ending Balance 52,382,158 5,395,948 - $ (21,195,000) $ 243,407,158 (1,778,798) 25,851,079 (1,435,000) 10,265,000 57,778,106 906,240 6,794,834 1,294,308 3,927,816 70,701,304 (535,000) 11,630,000 (50,201) 301,203 (7,620,000) 45,762,000 (1,035,000) 15,025,000 (188,338) 1,944,738 (7,000,000) 336,000,000 (504,000) 1,076,000 (4,196) 4,514 (41,345,533) 691,266,692 33,539,395 (5,158,427) 19,467,263 (208,432) 1,085,876 (1,290,112) 2,637,704 $ (48,002,504) $ 747,996,930 Amounts Due Within One Year $ $ 26,910,000 1,510,000 550,000 4,669,000 1,070,000 18,430,000 527,000 317 53,666,317 11,485,487 10,432,721 232,152 894,020 76,710,697 Business-type activities: Debt payable: General obligation bonds payable Premium on general obligation bonds Excise tax obligations Premium on excise tax obligations Revenue obligations - direct placement Premium on revenue obligations 2010 WIFA Loan 2010 WIFA Loan Financed purchases Debt Principal Compensated absences SBITAs $ 189,535,000 20,192,092 46,703,000 7,114,869 69,570,000 10,388,795 791,944 5,559,408 166,851 350,021,959 3,374,618 - $ 10,942,842 1,357,191 12,300,033 783,607 $ (22,710,000) $ 177,767,842 (1,869,969) 19,679,314 (4,175,000) 42,528,000 (964,043) 6,150,826 (2,675,000) 66,895,000 (546,779) 9,842,016 (103,154) 688,790 (747,806) 4,811,602 (166,851) (33,958,602) 328,363,390 (397,837) 2,976,781 (289,242) 494,365 $ 22,220,000 4,301,000 2,775,000 106,314 762,763 30,165,077 1,019,390 151,910 Business-type activities long-term $ 353,396,577 $ 13,083,640 $ (34,645,681) $ 331,834,536 $ 31,336,377 The long-term liabilities at June 30, 2023 have been reduced by deposits made with the City’s fiscal agent for July 1, 2023 maturities. For the governmental activities, claims and judgments and compensated absences are generally liquidated by the General Fund. 62 Notes to the Financial Statements For Fiscal Year Ended June 30, 2023 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Bonds payable on June 30, 2023, are comprised of the following: Purpose Original Amount Interest Rate Maturity Date Outstanding Balance General Obligation Bonds 2013A Capital Improvement Serial Bonds due in annual installments of $515,000 to $940,000 13,675,000 1.0-4.0% 7/1/2023 $ 7,960,000 2013B Capital Improvement Refunding Serial Bonds due in annual installments of $90,000 to $8,205,000 $ 41,070,000 1.0-5.0% 7/1/2024 1,475,000 2014C Capital Improvement Refunding Serial Bonds due in annual installments of $1,095,000 to $14,190,000 45,675,000 1.0-4.0% 7/1/2024 14,190,000 2015A Capital Improvement Serial Bonds due in annual installments of $1,740,000 to $2,925,000 43,965,000 1.0-3.75% 7/1/2035 24,990,000 2016A Capital Improvement Serial Bonds due in annual installments of $540,000 to $880,000 13,630,000 2.0-3.0% 7/1/2036 9,615,000 2016B Capital Improvement Refunding Serial Bonds due in annual installments of $3,550,000 to $17,935,000 86,440,000 2.0-4.0% 7/1/2029 59,160,000 2017 Capital Improvement Serial Bonds due in annual installments of $970,000 to $2,390,000 32,810,000 2.0-5.0% 7/1/2037 21,745,000 2018 Capital Improvement Serial Bonds due in annual installments of $1,365,000 to $3,640,000 47,560,000 2.0-5.0% 7/1/2038 30,650,000 2019 Capital Improvement Serial Bonds due in annual installments of $1,635,000 to $3,785,000 52,120,000 2.0-5.0% 7/1/2039 44,515,000 2020A Capital Improvement Serial Bonds due in annual installments of $750,000 to $1,430,000 24,165,000 2.6 % 7/1/2040 19,930,000 2020B Capital Improvement Refunding Serial Bonds due in annual installments of $2,355,000 34,580,000 1.3 % 7/1/2030 19,130,000 2021 Capital Improvement Serial Bonds due in annual installments of $660,000 to $2,240,000 22,545,000 ‘5.0% 7/1/2041 19,645,000 2022 Capital Improvement Serial Bonds due in annual installments of $2,910,000 to $6,415,000 84,845,000 90,330,000 3.0-5.0% 7/1/2042 2023 Capital Improvement Serial Bonds due in annual installments of $1,745,000 to $8,865,000 Total General Obligation Bonds $ Special Assessment Bonds 63,325,000 627,440,000 ‘5.0% 7/1/2043 ID 180 Special Assessment Bonds Payable with Governmental Commitment due in annual installments of $760,000 to $1,925,000 Total Special Assessment Bonds Excise Tax Revenue Bonds $ $ 25,190,000 25,190,000 $ 2011B Excise Tax Revenue Obligation due in one installment of $7,300,000 annual 2013 Excise Tax Revenue Obligations installments of $905,000 to $2,025,000 annual due in $ 63,325,000 421,175,000 5.0 % 1/1/2029 $ $ 10,265,000 10,265,000 7,300,000 4.9 % 7/1/2025 $ 7,300,000 27,240,000 1.7-5.0% 7/1/2033 16,590,000 2016 Excise Tax Revenue and Refunding Obligations due in annual installments of $1,135,000 to $7,510,000 42,485,000 2.0-5.0% 7/1/2031 15,560,000 2017 Transit Excise Tax Revenue Refunding Obligations due in annual installments of $150,000 to $1,460,000 19,305,000 2.8 % 7/1/2032 15,025,000 2019 Excise Tax Revenue Refunding Obligations due in annual installments of $1,000,000 to $1,515,000 9,110,000 5.0-6.5% 7/1/2029 8,110,000 2020 Excise Tax Revenue Obligation due in annual installments of $475,000 to $840.000 13,160,000 2.7 % 7/1/2040 11,630,000 2021 Excise Tax Revenue Refunding Obligations due in annual installments of $510,000 to $5,460,000 14,695,000 0.2-1.8% 7/1/2032 8,750,000 2021 Excise Tax Revenue Refunding Obligations due in annual installments of $560,000 to $2,240,000 28,890,000 0.2-2.4% 7/1/2037 26,415,000 2021 Excise Tax Revenue Refunding Obligations due in annual installments of $275,000 to $550,000 6,170,000 1.0-5.0% 7/1/2036 5,565,000 Total Excise Tax Revenue Bonds $ 63 168,355,000 $ 114,945,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2023 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Purpose Original Amount Interest Rate Maturity Date Outstanding Balance Water And Sewer Revenue Obligation Bonds 2020 Water and Sewer Revenue Obligations due in annual installments of $1,380,000 to $2,415,000 $ 2021 Water and Sewer Revenue Obligations due in annual installments of $1,025,000 to $2,715,000 Total Water and Sewer Revenue Obligation Bonds $ 38,000,000 2.7 % 7/1/2040 $ 33,570,000 35,480,000 5.0 % 7/1/2041 33,325,000 73,480,000 $ 66,895,000 7/1/2037 $ 336,000,000 $ 336,000,000 8/1/2024 $ 1,076,000 $ 1,076,000 Certificates of Participation Certificate of Participation due in annual installments of $7,000,000 to $27,810,000 $ 343,000,000 Total Certificates of Participation $ 343,000,000 0.4-2.6% Section 108 Guaranteed Loan HUD Section 108 Guaranteed Loan due in annual installments of $261,000 to $549,000 $ 7,000,000 Total Section 108 Guaranteed Loan $ 7,000,000 1.3-2.4% Water Infrastructure Finance Authority Loans WIFA loan #92A174-10 due in annual installments of $69,678 to $123,631 $ 1,884,503 1.5-1.56% 7/1/2029 $ 688,790 WIFA loan #92A175-10 due in annual installments of $578,079 to $842,152 14,045,799 0.5-1.5% 7/1/2029 4,811,602 Total WIFA Loans $ 15,930,302 $ 5,500,392 Total Debt $ 1,273,160,302 $ 955,856,392 Debt Service Requirements The following is a summary of total debt service cash requirements to maturity: General Obligation Fiscal Year 2024 Principal $ Interest Governmental Activities Special Assessment Principal Excise Tax Obligation Interest Principal Interest 26,910,000 $ 10,303,544 $ 1,510,000 $ 513,250 $ 6,289,000 $ 2,023,605 2025 20,860,000 8,995,068 1,585,000 437,750 13,673,000 1,951,952 2026 15,945,000 8,176,465 1,665,000 358,500 4,405,000 1,485,521 2027 16,205,000 7,564,850 1,745,000 275,250 4,495,000 1,404,448 2028 16,825,000 6,941,660 1,835,000 188,000 4,595,000 1,317,342 2029-2033 68,855,000 25,720,223 1,925,000 96,250 22,835,000 5,436,662 2034-2038 45,555,000 13,261,993 - - 14,470,000 2,520,160 2039-2043 32,252,158 3,987,101 - - 1,655,000 67,365 243,407,158 $ 84,950,904 $ $ 10,265,000 $ 64 1,869,000 $ 72,417,000 $ 16,207,055 Notes to the Financial Statements For Fiscal Year Ended June 30, 2023 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Fiscal Year 2024 Certificates of Participation Governmental Activities Section 108 Loan Principal Principal $ Interest Interest Total principal Total interest 18,430,000 $ 6,332,360 $ 527,000 $ 23,025 $ 53,666,000 $ 19,195,785 2025 20,380,000 6,217,542 549,000 7,823 57,047,000 17,610,134 2026 20,335,000 6,031,065 - - 42,350,000 16,051,551 2027 21,380,000 5,790,095 - - 43,825,000 15,034,643 2028 22,225,000 5,491,630 - - 45,480,000 13,938,632 2029-2033 121,745,000 21,329,478 - - 215,360,000 52,582,613 2034-2038 111,505,000 7,029,985 - - 171,530,000 22,812,138 2039-2043 - - - - 33,907,158 4,054,466 663,165,158 $ 161,279,961 $ 58,222,154 $ $ 1,076,000 $ 30,848 $ Business-Type Activities Excise Tax Obligation Principal Interest General Obligation Principal Interest Fiscal Year 2024 336,000,000 $ Revenue Obligation Principal Interest 22,220,000 $ 7,787,252 $ 4,301,000 $ 1,889,368 $ 2,775,000 $ 2,555,855 2025 18,625,000 6,845,430 4,502,000 1,702,730 2,875,000 2,454,470 2026 15,590,000 6,118,730 4,690,000 1,514,637 2,980,000 2,349,025 2027 11,270,000 5,474,385 4,895,000 1,300,945 3,090,000 2,239,388 2028 11,780,000 5,000,645 5,120,000 1,076,280 3,205,000 2,125,308 2029-2033 36,700,000 19,379,513 19,020,000 2,103,293 17,900,000 8,745,541 2034-2038 40,310,000 10,450,100 - - 21,540,000 5,103,413 2039-2043 21,272,842 2,094,372 - - - - $ 177,767,842 $ 63,150,427 $ 42,528,000 $ 9,587,253 $ 66,895,000 $ 26,552,270 Business-Type Activities WIFA Fiscal Year 2024 Principal $ Interest Total principal Total interest 869,077 $ 32,092 $ 30,165,077 $ 12,264,567 2025 887,590 26,552 26,889,590 11,029,182 2026 906,508 20,883 24,166,508 10,003,275 2027 925,839 15,082 20,180,839 9,029,800 2028 1,911,378 12,219 22,016,378 8,214,452 2029-2033 - - 73,620,000 30,228,347 2034-2038 - - 61,850,000 15,553,513 2039-2043 $ 5,500,392 $ 106,828 $ 33,802,842 3,073,642 292,691,234 $ 99,396,778 New bonds On May 23, 2023, the City issued Tax-Exempt $63,325,000 Series 2023 General Obligation Bonds were issued with maturities ranging from 1,745,000 to $8,865,000 to fund various project costs related to streets, public safety, parks, and water/wastewater. The bond matures on 7/1/2043 with interest rate of 5.00%. The Series 2023 General Obligation Bonds were publicly sold and are repaid from the HURF Fund, General Obligation Debt Service Fund and Water and Wastewater Fund. 65 Notes to the Financial Statements For Fiscal Year Ended June 30, 2023 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) 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, 2023, the 20 percent debt limitation was $689,049,692 with $367,391,618 of outstanding debt. This provided a 20 percent debt margin of $321,658,074. The 6 percent debt limitation was $206,714,908 with $97,469,864 of outstanding debt. This provided a 6 percent debt margin of $109,245,044. The voter authorized, unissued debt, which is also subject to the statutory limitations of 20 percent and 6 percent, at June 30, 2023, was $329,802,989. 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. 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. Proceeds of the bonds were used for general governmental purposes. The bonds are payable through July 1, 2043. Annual principal and interest payments on the bonds were 81.46% of total fiscal year ended June 30, 2023 General Obligation Debt Service Fund ad valorem taxes. The total principal and interest remaining to be paid on the bonds is $328,418,062. Principal and interest paid for the current year and total ad valorem tax revenues were $29,638,857 and $35,829,213 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. 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, 2042. Annual principal and interest payments on the bonds are expected to require less than 30.09% of total fiscal year ended June 30, 2023 water and wastewater utility system revenue. The total principal and interest remaining to be paid on the bonds is $240,918,269. Principal and interest paid for the current year and water and wastewater system revenues were $30,973,941 and $89,006,641, respectively. Debt Service Coverage for Governmental Excise Tax Obligations. The City has pledged all future unrestricted excise taxes to repay outstanding governmental excise tax obligations. Proceeds of the bonds were used for general governmental purposes. The bonds are payable through July 1, 2032. Annual principal and interest payments on the bonds are expected to require less than 2.74% of total fiscal year ended June 30, 2023 pledged excise taxes. The total principal and interest remaining to be paid on the bonds is $15,005,774. Principal and interest (net of Federal subsidy) paid for the current year and total pledged excise taxes were $5,940,293 and $233,366,585, respectively. Debt Service Coverage for Business-type Activities Excise Tax Obligations. The City has pledged all future unrestricted excise taxes to repay 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 2.97% of total fiscal year ended June 30, 2023 excise taxes. The total principal and interest remaining to be paid on the bonds is $52,115,253. Principal and interest paid for the current year and total excise taxes were $6,240,581 and $233,366,585, respectively. 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 bonds are payable through July 1, 2040. Annual principal and interest payments on the bonds are expected to require less than 10.78% of total fiscal year ended June 30, 2023 transit excise taxes. The total principal and interest remaining to be paid on the bonds is $44,515,359. Principal and interest paid for the current year and transit excise taxes were $4,689,492 and $57,815,447 respectively. 66 Notes to the Financial Statements For Fiscal Year Ended June 30, 2023 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Debt Service Coverage for Arts and Culture Excise Tax Obligations. For the repayment of arts and culture excise tax obligation bonds, the City has pledged all future excise taxes collected and paid under the 1.0% arts and culture excise tax. Proceeds of the bonds were used for the repair of the roof of the Tempe Center for the Arts. The bonds are payable through July 1, 2036. Annual principal and interest payments on the bonds are expected to require less than 4.50% of total fiscal year ended June 30, 2023 arts and culture excise taxes. The total principal and interest remaining to be paid on the bonds is $7,534,800. Principal and interest paid for the current year and arts and culture excise taxes were 580,750 and $11,647,867, respectively. 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, 2023. 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. Bonds which have been advance refunded (and thus not included in the debt of the City) and are still outstanding as of June 30, 2023 are as follows: $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 67 $ 17,320,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2023 City of Tempe, Arizona NOTE 11 – LEASES City as lessor The City, as a lessor, has entered into lease agreements involving land, baseball facilities and building spaces. The related receivables under the lease agreements have been recorded at the present value of their future minimum lease payments as of the inception date in both the General Fund and the Transit Special Revenue Fund. The leases have interest rates between 0.316% and 3.397%. The General Fund reported lease revenue of $3,114,102 and the related interest revenue of $517,849. Transit Special Revenue Fund reported lease revenue of $58,688 and the associated interest revenue of $4,401. At this time, the City has no variable or other lease matters not previously included in the measurement of the lease receivable. The leasing of asset is not the City’s principal operation. City as lessee The City, as a lessee, has entered into a lease agreement for the use of Hohokam Court. An initial lease liability was recorded in the amount of $1,294,308. As of June 30, 2023, the value of the lease liability is $1,085,876. City of Tempe, AZ is required to make monthly fixed payments of $21,134. The lease has an interest rate of 2.19%. The buildings estimated useful life was 60 months as of the contract commencement. The value of the right to use asset as of June 30, 2023 of $1,294,308 with accumulated amortization of $238,827. Fiscal Year Principal Payments Interest Payments Total Payments 2024 $ 232,152 $ 21,460 $ 253,611 2025 237,287 16,324 253,611 2026 242,536 11,075 253,611 2027 247,901 5,710 253,611 2028 126,000 806 126,806 NOTE 12 – SUBSCRIPTION-BASED INFORMATION TECHNOLOGY ARRANGEMENT (SBITA) The City has obtained the right to use various desktop and server software subscriptions, cloud backup service software, document management software, computer-aided dispatch software, web-based job performance software, debt management software, public safety management software under the provision of various subscription-based information technology arrangements. The total amount of subscription assets and the related accumulated amortization are as follows: Total intangible right-to-use subscription assets $ Less: accumulated amortization 4,918,146 (1,359,814) Carrying value $ 3,558,332 The following schedule details minimum subscription payments to maturity for the City’s subscription liability at June 30, 2023: Governmental Activities Fiscal Year Principal Payments Interest Payments Total Payments 2024 $ 894,020 $ 57,502 $ 951,522 2025 630,051 37,869 667,920 2026 505,823 24,836 530,658 2027 444,797 12,931 457,728 2028 49,197 2,403 51,600 2029 - 2031 113,816 2,285 116,101 Business-Type Activities Fiscal Year Principal Payments Interest Payments Total Payments 2024 $ 151,910 $ 15,763 $ 167,673 2025 110,460 11,318 121,778 2026 114,111 7,667 121,778 2027 117,884 3,896 121,778 68 Notes to the Financial Statements For Fiscal Year Ended June 30, 2023 City of Tempe, Arizona NOTE 13 – FUND BALANCE/NET POSITION 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. 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. 69 Notes to the Financial Statements For Fiscal Year Ended June 30, 2023 City of Tempe, Arizona NOTE 13 – FUND BALANCE CLASSIFICATIONS/NET POSITION (Continued) As of June 30, 2023, 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, 2023, the unassigned fund balance is 73.6% of General Fund revenues. Transit Special Revenue General General Obligation Debt Service Community Development Capital Projects Total Other Governmental Funds Total Governmental Funds Fund balances: Non-spendable: Inventory $ Prepaid Items Leases - net 309,762 $ - $ - $ - 100,000 - - - $ 663,936 $ 1,171,067 973,698 1,271,067 802,212 15,202 - - - 817,414 1,211,974 15,202 - - 1,835,003 3,062,179 Debt Service - - 9,524,199 - 167,049 9,691,248 Federal Grants - - - 1,446,191 1,872,999 3,319,190 State Grants - - - - 2,231,150 2,231,150 Development Impact Fees - - - - 8,863,603 8,863,603 Highway User Revenue - - - - 14,580,845 14,580,845 Other - - - - 7,505,859 7,505,859 Capital projects - 70,202,618 - 7,834,412 48,660,459 126,697,489 - 70,202,618 9,524,199 9,280,603 83,881,964 172,889,384 4,586,678 - - - - 4,586,678 - 16,760,689 - - 13,705,417 30,466,106 4,586,678 16,760,689 - - 13,705,417 35,052,784 Restricted: Committed to: Encumbrance Capital projects Assigned to: Debt Service Reserve 25,000,000 - - - - 25,000,000 Capital Project Reserve 11,500,000 15,584,602 - 20,884,890 - 47,969,492 Other 3,000,000 - - - - 3,000,000 39,500,000 15,584,602 - 20,884,890 - 75,969,492 Unassigned: Total fund balances 126,393,523 $ 171,692,175 $ Water/ Proprietary Funds wastewater Joint venture construction deposit $ 24,729,323 Development impact fees 390,999 OPEB 482,407 Restricted net position $ 25,602,729 - 102,563,111 $ Solid Waste 9,524,199 $ (4,070,016) 30,165,493 $ Emergency Medical Transportation Golf Course $ - $ - - - - 215,945 $ 215,945 $ 129,130 129,130 $ 15,290 15,290 $ - 70 95,352,368 $ $ Total 24,729,323 390,999 842,772 25,963,094 122,323,507 $ 409,297,346 Notes to the Financial Statements For Fiscal Year Ended June 30, 2023 City of Tempe, Arizona NOTE 14 - COMMITMENTS The City has active construction projects as of June 30, 2023. At year end the government’s commitments with contractors are as follows: Construction in Progress Commitment Governmental funds: Transit capital projects Community development capital projects Non-Major governmental funds $ 6,143,879 $ 3,209,484 $ 28,331,764 16,966,915 51,442,558 $ 18,242,407 23,348,527 44,800,418 Construction in Progress Commitment Proprietary funds: Water and wastewater $ $ 29,299,167 $ 29,299,167 $ 14,431,530 14,431,530 NOTE 15 - RETIREMENT PLANS The City contributes to the Arizona State Retirement System (ASRS) and the Public Safety Personnel Retirement System (PSPRS) for police officers and fire fighters. The plans are component units of the State of Arizona. 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 City has also established a single-employer, postemployment health benefit plan (see Note 16 - OTHER POSTEMPLOYEMENT BENEFITS). Amounts reported at June 30, 2023 represent June 30, 2022 measurement dates for both the Arizona State Retirement System and the Public Safety Personnel Retirement System, which is the latest information available. Aggregate Amounts. At June 30, 2023, the City reported the following amounts related to pensions and OPEB for all plans to which it contributes. The ASRS and PSPRS OPEB plans are not included in the notes as the liability and related deferred inflows of resources, deferred outflows of resources, and OPEB expense are not material to the financial statements. Net pension liabilities Deferred outflows of resources Deferred inflows of resources Expense Contributions Net OPEB assets $ ASRS $ 122,131,018 7,102,228 4,320,208 12,761,941 11,406,242 PSPRS - Fire $ 17,628,706 20,807,152 31,966 11,546,788 1,847,318 PSPRS - Police $ 28,414,866 $ 32,559,752 584,468 18,455,470 4,437,226 Total 168,174,590 60,469,132 4,936,642 42,764,199 17,690,786 ASRS City OPEB PSPRS - Fire PSPRS - Police plan (Note 16) 4,243,219 $ 457,227 $ - $ - Total $ 4,700,446 Net OPEB liabilities 69,514 - 2,274,031 99,076,778 101,420,323 Deferred outflows of resources 153,780 170,528 233,976 4,933,735 5,492,019 Deferred inflows of resources 2,671,213 219,408 595,361 3,562,740 7,048,722 Expense (597,778) (44,210) 135,346 15,868,844 15,362,202 Contributions 239,224 - 47,085 - 286,309 71 Notes to the Financial Statements For Fiscal Year Ended June 30, 2023 City of Tempe, Arizona NOTE 15 - RETIREMENT PLANS (Continued) 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. ASRS is a component of the State of Arizona. 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 Years of service and age required to Sum of years and age equals 80 receive benefit 10 years age 62 5 years age 50* Any years age 65 On or After July 1, 2011 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. 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. 72 Notes to the Financial Statements For Fiscal Year Ended June 30, 2023 City of Tempe, Arizona NOTE 15 - RETIREMENT PLANS (Continued) A. Arizona State Retirement System (continued) Contributions. In accordance with state statutes, annual actuarial valuations determine active member and employer contribution requirements. The combined active member and employer contribution rates are expected to finance the costs of benefits employees earn during the year, with an additional amount to finance any unfunded accrued liability. For the year ended June 30, 2023, active ASRS members were required by statute to contribute at the actuarially determined rate of 12.03 percent of the members’ annual covered payroll, and the City was required by statute to contribute at the actuarially determined rate of 11.92 percent of the active members’ annual covered payroll. The City’s contributions to the pension plan for the year ended June 30, 2023 was $11,406,242. 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. ACR contributions are included in employer contributions presented above. The City’s pension contributions are paid by the same funds as the employee’s salary, with the largest component coming from the General Fund. Pension Liability. At June 30, 2023, the City reported $122,131,018 for its proportionate share of the ASRS’ net pension liability. The net asset and net liabilities were measured as of June 30, 2022. 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, 2021, to the measurement date of June 30, 2022. The City’s proportion of the net 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, 2022. The City’s proportions measured as of June 30, 2022, and the change from its proportions measured as of June 30, 2021, were 0.74825% decreased (0.00518%) from last year. Actuarial Assumptions. The significant actuarial assumptions used to measure the total ASRS pension 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 June 30, 2021 June 30, 2022 Entry age normal 7.0% 2.9-8.4% 2.3% Included 2017 SRA Scale U-MP Actuarial assumptions used in the June 30, 2021 valuation were based on the results of an actuarial experience study for the 5-year period ended June 30, 2020. The ASRS Board adopted the experience study, which recommended changes, and those changes were effective as of the June 30, 2020 valuation. The long-term expected rate of return on ASRS plan investments was determined to be 7.0 percent using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage. The target allocation and best estimates of geometric real rates of return for each major asset class are summarized in the following table: Target Allocation 50% 20 10 20 100% Asset Class Equity Fixed income - credit Fixed income - interest rate sensitive Real estate Total 73 Long-Term Expected Real Rate of Return 3.90% 5.30 (0.20) 6.00 Notes to the Financial Statements For Fiscal Year Ended June 30, 2023 City of Tempe, Arizona NOTE 15 - RETIREMENT PLANS (Continued) A. Arizona State Retirement System (Continued) Pension Expense and Deferred Outflows/Inflows of Resources. The City has deferred outflows and inflows of resources related to the net pension liabilities. Certain changes in the net pension liability are recognized as pension expense over a period of time rather than the year of occurrence. For the year ended June 30, 2023, the City recognized $12,791,941 in pension expense. The City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Difference between expected and actual experience Changes of assumptions and other inputs Difference between expected and actual investment earnings Changes in proportion and differences between the City contributions and proportionate share of contributions Contributions subsequent to the measurement date Total Deferred Outflows of Resources $ 1,040,629 6,061,599 Deferred Inflows of Resources $ - - 3,217,049 11,406,242 18,508,470 1,103,159 4,320,208 $ $ 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 assets/liability in the year ended June 30, 2024. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense for the following June 30 roll forward dates: 2024 2025 2026 2027 Deferred Outflows (Inflows) of Resources $ 4,933,681 (1,715,147) (5,585,553) 5,149,039 Discount Rate. At June 30, 2022, the discount rate used to measure the ASRS total pension liability was 7.0 percent. The projection of cash flows used to determine the discount rate assumed that contributions from participating employers will be made 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 plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of the Proportionate Share of the Net Pension Liability to Changes in the Discount Rate. The following presents the City’s proportionate share of the net pension liability calculated using the discount rate of 7.0 percent, as well as what the proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower or 1-percentagepoint higher than the current rate: 1% Decrease 6.0% $ 180,200,687 Current Discount Rate 7.0% $ 122,131,018 1% Increase 8.0% $ 73,709,987 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. 74 Notes to the Financial Statements For Fiscal Year Ended June 30, 2023 City of Tempe, Arizona NOTE 15 - RETIREMENT PLANS (Continued) 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). Public safety employees who became members on or after July 1, 2017, may participate in the Public Safety Personnel Defined Contribution Retirement Plan (PCPDCRP). 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. Employees who were PSPRS members before July 1, 2017, participate in the agent plans, and employees who became PSPRS members on or after July 1, 2017, participate in either agent plans or costsharing plans (PSPRS Tier 3 Risk Pool). The PSPRS issues a publicly available financial report that includes their financial statements and required supplementary information. This report is available on the PSPRS website at www.psprs.com. Benefits Provided. The PSPRS provide retirement, 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. Retirement Initial Membership Date: Before January 1, 2012 On or After January 1, On or After January 1, (Tier 1) 2012 (Tier 2) 2017 (Tier 3) Retirement and Disability: Years of service and age required to receive benefit 20 years any age 15 years age 62 25 years or 15 years of 15 years and age 55 credited service and age 52.5 Final average salary is based on Highest 36 months of last 20 years Highest 60 months of last 20 years Normal retirement 50% less 2.0% for each 1.5% to 2.5% per year of 1.5% to 2.5% per year of year of credited service credited service, not to credited service, not to less than 20 years or plus exceed 80% exceed 80% 2.0% to 2.5% for each year of credited service over 20 years, not to exceed 80% Accidental disability retirement 50% or normal retirement, whichever is greater Catastrophic Disability: Highest 60 months of last 15 years 90% of average monthly benefit compensation. After 60 months, member receives greater of 62.5% average monthly benefit compensation and accrued normal pension. Survivor benefit: Retired members 80%-100% of retired member’s pension benefit Active members 80% to 100% 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. 75 Notes to the Financial Statements For Fiscal Year Ended June 30, 2023 City of Tempe, Arizona NOTE 15 - RETIREMENT PLANS (Continued) B. Public Safety Personnel Retirement System (continued) 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. Employees Covered by Benefit Terms. At the June 30, 2023, the following employees were covered by the agent pension plans’ benefit terms: PSPRS – Police PSPRS – Fire 307 151 93 286 686 36 141 328 Inactive plan members or beneficiaries currently receiving benefits Inactive, entitled plan members not yet receiving benefits Active plan members Total 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, 2023, are indicated below. Rates are a percentage of active members’ annual covered payroll. Active City Portion PSPRS – Police 7.65-11.65% 8.97-13.75% PSPRS – Fire 7.65-11.65% 9.10-14.94% In addition, statue required the City to contribute at the actuarially determined rate of 61.49% for police and 67.88% for fire of annual covered payroll of retired members who worked for the City in positions that an employee who contributes to the PSPRS would typically fill and employees participating in the PSPRS Tier 3 Risk Pool in addition to the City’s required contributions to the PSPRS Tier 3 Risk Pool. The City’s contribution to the plans for the year ended June 30, 2023 were: PSPRS – Police PSPRS – Fire $ 4,437,226 $ 1,847,318 The City pension contributions are paid by the same funds as the employee’s salary, with the largest component coming from the General Fund. Pension Liability. At June 30, 2023, the City reported the following liabilities. PSPRS - Police $ 28,414,866 $ PSPRS - Fire 17,628,706 The net pension liabilities were measured as of June 30, 2022, and the total liability used to calculate the net asset or liability was determined by an actuarial valuation as of that date. The total liabilities as of June 30, 2022 reflect changes of actuarial assumptions, including decreasing the investment rate of return from 7.30% to 7.20%, changing the wage inflation from 3.50% to a range of 2.75-15.00%, and increasing the cost of living adjustment from 1.75% to 1.85%. 76 Notes to the Financial Statements For Fiscal Year Ended June 30, 2023 City of Tempe, Arizona NOTE 15 - RETIREMENT PLANS (Continued) B. Public Safety Personnel Retirement System (continued) Actuarial Assumptions. The significant actuarial assumptions used to measure the total pension liability for both police and fire are as follows: Actuarial valuation date Actuarial cost method Investment rate of return Wage inflation Price inflation Cost-of-living adjustment Mortality rates June 30, 2022 Entry age normal 7.20% 2.75-15.00% 2.5% 1.80% PubS-2010 tables Actuarial assumptions used in the June 30, 2022 valuation were based on the results of an actuarial experience study for the 5-year period ended June 30, 2021. The long-term expected rate of return on PSPRS plan investments was determined to be 7.20 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: Target Allocation Asset Class U.S. Public Equity International Public Equity Global Private Equity Other Assets (Capital Appreciation) Core Bonds Private Credit Diversifying Strategies Cash Total 24% 16 20 7 2 20 10 1 100% Long-Term Expected Real Rate of Return 24% 16 20 7 2 20 10 1 3.49% 4.47 7.18 4.83 0.45 5.10 2.68 (0.35) Discount Rates. At the June 30, 2022 valuation date, the discount rate used to measure the total pension liability was 7.20 percent, which was a decrease of 0.1 from the discount rate used as of June 30, 2021. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate and that employer contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on those assumptions, the 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 investment was applied to all periods of projected benefit payments to determine the total pension liability. 77 Notes to the Financial Statements For Fiscal Year Ended June 30, 2023 City of Tempe, Arizona NOTE 15 - RETIREMENT PLANS (Continued) B. Public Safety Personnel Retirement System (continued) Changes in Net Pension Liabilities PSPRS - Police $ 389,416,749 PSPRS - Fire $223,505,415 Service cost 6,278,066 3,674,351 Interest 28,077,273 16,199,706 Difference between expected and actual experience with regard to economic and 2,888,372 3,274,449 Changes in assumptions 5,350,492 3,060,017 (22,149,263) 20,444,940 (10,531,983) 15,676,540 226,589,257 2,961,098 (15,735,726) (22,149,263) (281,893) 5,411 191,388,884 190,057,939 $ 28,414,866 128,684,062 1,450,567 (9,095,275) (10,531,983) (162,971) 110,344,400 111,208,849 $ 17,628,706 Beginning Balance (Assets) Liability Total Liability Factors: Benefit payments Net change Plan Fiduciary Net Position: Contributions - employer Contributions - employee Projected net investment income Benefit payments Administrative expenses Other Net Change Beginning Fiduciary Net Position Ending Balance (Asset) Liability Sensitivity of the Net Pension (Assets)/Liabilities to Changes in the Discount Rate. The following presents the City’s net pension (asset) liability calculated using the discount rates noted above, as well as what the net (asset) liability would be if it were calculated using a discount rate that is 1-percentage-point lower or 1percentage-point higher than the current rate: PSPRS - Police PSPRS - Fire Current Discount Rate 7.2% $ 28,414,866 $ 17,628,706 1% Decrease 6.2% $ 83,940,257 $ 48,154,338 1% Increase 8.2% $ (16,820,891) $ (7,494,657) 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, 2023, the City recognized the following as pension expense: $ PSPRS Police 18,455,470 78 PSPRS Fire $11,546,788 Notes to the Financial Statements For Fiscal Year Ended June 30, 2023 City of Tempe, Arizona NOTE 15 - RETIREMENT PLANS (Continued) B. Public Safety Personnel Retirement System (continued) Deferred Outflows/Inflows of Resources. At June 30, 2023, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: PSPRS - Police Deferred Outflows of Resources 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 $ $ 10,342,495 PSPRS - Fire Deferred Outflows of Resources Deferred Inflows of Resources $ 584,468 $ 7,780,865 Deferred Inflows of Resources $ 31,965 6,866,691 - 4,166,505 - 15,350,566 - 8,859,784 - 4,437,226 36,996,978 584,468 $ $ 1,847,318 22,654,472 $ 31,965 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 liability in the year ended June 30, 2024. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: 2024 2025 2026 2027 2028 PSPRS - Police PSPRS - Fire $ 8,913,798 $ 4,985,125 8,161,701 4,690,489 4,865,653 3,647,604 8,660,988 6,396,226 1,373,144 1,055,745 79 Notes to the Financial Statements For Fiscal Year Ended June 30, 2023 City of Tempe, Arizona NOTE 16 - OTHER POST-EMPLOYMENT BENEFITS The City offers (through a single employer defined benefit 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. 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 2019.75 of the City Council, to all retired, benefited 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, benefited employees hired after June 30, 1999 are not eligible to participate in the post-employment benefit plan. As of June 30, 2023, 2,046 members met those eligibility requirements to receive post-employment healthcare benefits with 377 eligible retirees waiving coverage, leaving 1,669 members in the program as follows: Active beneficiaries Active employees eligible Total 976 693 1,669 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, 2023 were $9,437,959. 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 a $17.8 million balance as of June 30, 2023. 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. 80 Notes to the Financial Statements For Fiscal Year Ended June 30, 2023 City of Tempe, Arizona NOTE 16 - OTHER POST-EMPLOYMENT BENEFITS (Continued) B. Net OPEB Liability The City’s net OPEB liability was measured as of June 30, 2023, and the total OPEB liability used to calculate the net OPEB liability was determined by an actuarial valuation as of July 1, 2021. The components of the net OPEB liability at June 30, 2023 were as follows: Total OPEB liability Plan fiduciary net position Net OPEB liability Plan fiduciary net position as a percentage of total OPEB liability $ 116,911,843 17,835,065 $ 99,076,778 15.3% Actuarial Assumptions. The total OPEB liability as of the July 1, 2021 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 Amortization method Asset valuation method Actuarial assumptions: Inflation rate Salary increases Investment rate of return Discount rate Healthcare cost trend Mortality rates June 30, 2023 July 1, 2021 Entry age normal Level percentage of payroll, closed Market value 2.6% 3.0% per annum 6.5% 6.5% ASRS/PSPRS Pre-Medicare, 5.0%; ASRS/ PSPRS Medicare Supplement, 2.5% to 2.9%; City Medicare Supplement, (2.0)% to 2.5% General: PubG.H-2010 Employee Public Safety: PubS.H-2010 Employee Male/Female and Generational with Projection Scale MP-2021 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. 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: 81 Notes to the Financial Statements For Fiscal Year Ended June 30, 2023 City of Tempe, Arizona NOTE 16 - OTHER POST-EMPLOYMENT BENEFITS (Continued) Long-Term Expected Target Allocation Real Rates of Return —% —% 65 7.5 35 5.0 6.0 Not applicable 100% Asset Class Cash & Equivalents Equity Fixed Income Real Estate Other Total 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, 2023 may be obtained from the City's Financial Services Department, 20 East 6th Street, Tempe, Arizona, 85281. The change in the net OPEB liability during the year was as follows: Balance at 6/30/2022 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 6/30/2023 Changes in Net OPEB Liability Plan Fiduciary Net Total OPEB Liability Position Net OPEB Liability $ 122,770,950 $ 16,381,676 $ 106,389,274 1,173,319 7,749,644 $ (888,785) (4,455,325) (9,437,959) (5,859,106) 116,911,844 $ 9,437,959 1,453,390 (9,437,959) 1,453,390 17,835,066 $ 1,173,319 7,749,644 (888,785) (4,455,325) (9,437,959) (1,453,390) (7,312,496) 99,076,778 Sensitivity of the Net OPEB liability. The following presents the net OPEB liability, as well as what the net OPEB liability would be if it were calculated using a discount or healthcare cost trend rates that are 1-percentage point lower or 1-percentage point higher than the current discount or healthcare cost trend rates: Discount Rate Healthcare Cost Trend Rate 5.5% 1% Decrease $ 108,677,939 $ 88,490,462 82 6.5% No Change $ 99,076,778 $ 99,076,778 7.5% 1% Increase $ 90,724,873 $ 111,230,963 Notes to the Financial Statements For Fiscal Year Ended June 30, 2023 City of Tempe, Arizona NOTE 16 - OTHER POST-EMPLOYMENT BENEFITS (Continued) C. OPEB Expense and Deferred Outflows/Inflows of Resources related to OPEB For the year ended June 30, 2023, the City recognized OPEB expense of $15,868,844 for the OPEB plan. At June 30, 2023, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: Differences between expected and actual experience Changes of assumptions or other inputs Difference between actual and expected investment earnings Total Deferred Outflows of Resources $ 876,336 3,229,509 827,890 $ 4,933,735 Deferred Inflows of Resources $ 592,523 2,970,217 $ 3,562,740 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, 2024 2025 2026 2027 Deferred Outflow (Inflows) of Resources $ 2,435,140 (1,702,878) 716,449 (77,716) NOTE 17 - 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 thirdparty administrator. Federal legislation requires that Section 457 and 401(k) plan assets be held in trust for employees. As a result, the employee assets held in Section 457 plans are neither the property of the City nor subject to claims of the City’s general creditors. Therefore, the plan assets are not included in the City’s basic financial statements. NOTE 18 - 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. 83 Notes to the Financial Statements For Fiscal Year Ended June 30, 2023 City of Tempe, Arizona NOTE 18 - RISK FINANCING ACTIVITIES (Continued) 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 $40.0 million; for property coverage the City’s per occurrence deductible is $100,000 with a policy limit of $825.0 million; for workers’ compensation, the selfinsured 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 an aggregate stop loss of $183,000. 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, 2023, 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 Workers' compensation Health insurance General liability Workers' compensation Health insurance 6/30/2022 as restated $ 3,929,083 11,903,286 1,998,588 $ 17,830,957 Claims Incurred Net of Change in Estimates $ 4,228,464 2,812,792 22,191,251 $ 29,232,507 June 30, 2021 2,740,860 4,413,992 1,751,204 8,906,056 Claims Incurred Net of Change in Estimates $ 3,070,739 3,275,021 20,236,540 $ 26,582,300 $ $ $ $ $ $ Payments (1,816,411) $ (3,342,116) (22,437,674) (27,596,201) $ June 30, 2023 6,341,136 11,373,962 1,752,165 19,467,263 Payments (4,375,366) $ (2,747,962) (19,989,156) (27,112,484) $ June 30, 2022 1,436,233 4,941,051 1,998,588 8,375,872 NOTE 19 - 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. 84 Notes to the Financial Statements For Fiscal Year Ended June 30, 2023 City of Tempe, Arizona NOTE 20 - 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 21 – 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, 2023 is $2,495,569. 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. For the fiscal year ended June 30, 2023, the difference between property taxes assessed and the GPLET collected totaled $2,420,329 under this program, including the following tax abatement agreements that each exceed 10% of the total amount. 1) A 19.6% property tax GPLET to a retail development for constructing a retail complex in the City. The GPLET amounted to $474,491. 2) A 17.3% property tax GPLET to a hotel development in the the City. The difference between property taxes assessed and the GPLET collected amounted to $417,541. NOTE 22 - DEFICIT IN NET POSITION AND FUND BALANCE The Storm Sewers CIP fund and Signals CIP fund had a deficit fund balance of $26,880 and $392,958, respectively. The deficits will be covered by future grant revenues. Risk Management fund also reported a deficit net position of $2,898,845, the deficit will be covered by future interdepartmental charges for services. NOTE 23 - SPECIAL ITEM Special Items are significant transactions or other events within the control of management that are either unusual in nature or infrequent in occurrence and are reported on the operating statement before extraordinary items. During fiscal year 2023, the City performed evaluation of its current construction-in-proress (CIP) capital projects status and identified $65,027,861 and $34,852,246 in CIP projects that are deemed not active in governmental activities and proprietary activities, respectively. The write off of these CIP capital projects are infrequent in occurrence, therefore they are being reported as special item in the financial statements. 85 Notes to the Financial Statements For Fiscal Year Ended June 30, 2023 City of Tempe, Arizona NOTE 24 - RESTATEMENT The City reported a $6,962,235 and $2,492,850 restatement to the beginning net position in the Workers’ Compensation fund and Risk Management fund, respectively. The restatement was to properly report the incurred but not reported (IBNR) liabilities in the internal service funds as the balance was previously reported solely in the governmental-wide statements. Risk Management Fund Workers’ Compensation Fund June 30. 2022 $ Restatement July 1, 2022 $ — $ 153,149 (2,492,850) (6,962,235) (2,492,850) $ (6,809,086) 86 87 Required Supplementary Information 88 Schedule of Contributions All Pension Plans Last Ten Fiscal Years City of Tempe, Arizona Reporting year Arizona State Retirement System: Actuarially determined contribution Contributions in relation to the actuarially determined contribution Contribution deficiency (excess) 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 $11,406,242 $10,493,005 $9,740,350 $9,474,813 $8,950,287 $8,163,494 $7,887,785 $7,731,482 $7,738,771 $8,003,335 11,406,242 $ - 10,493,005 $ - 9,740,350 $ - 9,474,813 $ - 8,950,287 $ - 8,163,494 $ - 7,887,785 $ - 7,731,482 $ - 7,738,771 $ - 8,003,335 $ - $87,368,901 12.01% $83,608,155 $82,749,459 $80,056,234 $74,894,440 $73,170,548 $71,257,899 $71,063,096 $69,715,464 11.65% 11.45% 11.18% 10.90% 10.78% 10.85% 10.89% 11.48% $20,333,964 218,143,845 $19,873,495 $18,833,432 $17,208,734 $15,962,148 $12,852,861 $12,604,739 $9,727,183 - Covered payroll $96,364,011 Contributions as a percentage of covered payroll 11.84% Public Safety Personnel Retirement SystemPolice: Actuarially determined contribution Additional contribution Contributions in relation to the actuarially determined contribution Contribution deficiency (excess) $ 4,437,226 - $ 4,437,226 - Covered payroll $31,613,970 Contributions as a percentage of covered payroll 14.04% Public Safety Personnel Retirement SystemFire: Actuarially determined contribution Additional contribution Contributions in relation to the actuarially determined contribution Contribution deficiency (excess) $ 1,847,318 - $ 1,847,318 - Covered payroll $17,035,385 Contributions as a percentage of covered payroll 10.84% 7,915,146 19,873,495 $(205,725,027) $ - 18,833,432 $ - 17,208,734 $ - 15,962,148 $ - 12,852,861 $ - 12,604,739 $ - 9,727,183 $ - $10,178,537 10,178,537 $ - $27,412,713 869.95% $28,277,597 $28,907,800 $28,519,612 $28,672,800 $28,606,412 $28,627,615 $28,889,762 $28,982,166 70.28% 65.15% 60.34% 55.67% 44.93% 44.03% 33.67% 35.12% $11,478,887 122,993,405 $11,001,668 $10,137,454 $9,655,204 - 4,652,228 11,001,668 $(116,166,746) $ $15,290,218 879.47% 10,137,454 $ - 9,655,204 $ - $8,639,228 - $6,621,730 - $6,067,633 - $4,066,636 - $4,777,515 - 8,639,228 $ - 6,621,730 $ - 6,067,633 $ - 4,066,636 $ - 4,777,515 $ - $14,489,224 $13,881,219 $13,477,393 $13,373,418 $12,337,861 $12,215,891 $10,958,329 $12,316,358 75.93% 73.03% 71.64% 64.60% 53.67% 49.67% 37.11% 38.79% 89 Schedule of the Proportionate Share of the Net Pension Liability Arizona State Retirement System Last Nine Fiscal Years City of Tempe, Arizona Reporting year 2023 2022 2021 2020 2019 2018 2017 2016 2015 Measurement year 2022 2021 2020 2019 2018 2017 2016 2015 2014 City's proportion of the net pension liability 0.75% 0.77% 0.77% 0.76% 0.77% 0.76% 0.78% 0.77% 0.76% City's proportion share of the net pension liability $ 122,131,018 $ 98,997,357 $ 132,587,729 $ 111,031,198 $ 108,146,590 $ 118,500,674 $ 126,045,105 $ 119,185,001 $ 112,524,308 Covered payroll $ $ 83,608,155 $ $ $ $ $ $ $ 87,368,901 82,749,459 80,056,234 74,894,440 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 139.79% 118.41% 160.23% 138.69% 144.40% 161.95% 176.89% 167.72% 162.65% Plan fiduciary net position as a percentage of the total pension liability 74.26% 78.58% 69.33% 73.24% 73.40% 69.92% 67.06% 68.35% 69.49% This schedule is intended to show information for ten years. Additional years' information will be displayed as it becomes available. 90 Schedule of Changes in the Net Pension Liability and Related Ratios Public Safety Personnel Retirement System- Police Last Nine Fiscal Years City of Tempe, Arizona Reporting year 2023 2022 2021 2020 2019 2018 2017 2016 2015 Measurement year 2022 2021 2020 2019 2018 2017 2016 2015 2014 Total pension liability Service cost $ Interest Changes of benefit terms 6,278,066 $ 6,444,246 $ 6,276,242 $ 6,363,446 $ 6,266,555 $ 6,639,904 $ 5,378,159 $ 5,468,695 $ 5,447,093 28,077,273 27,218,826 25,248,428 23,896,706 22,579,727 21,145,695 19,846,810 19,315,142 16,537,700 2,664,893 13,183,597 - 4,426,439 - - - - - Differences between expected and actual experience 2,888,372 (876,704) 13,853,754 2,252,812 1,492,630 (215,490) (5,746,957) (2,753,278) (2,351,309) Changes of assumptions 5,350,492 - - 7,223,840 - 7,860,019 10,622,755 - 25,455,442 Benefit payments, including refunds (22,149,263) (19,572,007) (17,537,352) (15,881,006) (15,663,112) (13,775,904) (15,820,570) (14,604,348) (13,685,124) Net change in total pension liability 20,444,940 13,214,361 27,841,072 23,855,798 14,675,800 24,319,117 27,463,794 7,426,211 35,830,241 Total pension liability- beginning 389,416,749 376,202,388 348,361,316 324,505,518 309,829,718 285,510,601 258,046,807 250,620,596 214,790,355 $ 409,861,689 $ 389,416,749 $ 376,202,388 $ 348,361,316 $ 324,505,518 $ 309,829,718 $ 285,510,601 $ 258,046,807 $ 250,620,596 $ 226,589,257 $ $ $ $ $ $ $ $ Total pension liability- ending Plan fiduciary net position Contributions- employer 20,333,964 18,813,057 17,153,330 11,403,472 12,486,872 12,552,708 9,804,542 9,132,346 Contributions- employee 2,961,098 2,844,510 2,760,167 2,187,943 2,811,219 3,579,664 3,597,316 3,641,788 3,253,980 Net investment income (15,735,726) 41,258,890 1,807,767 7,119,271 8,386,647 13,507,120 653,674 3,769,779 12,456,186 Benefit payments, including refunds (22,149,263) (19,572,007) (17,537,352) (15,881,006) (15,663,112) (13,775,904) (15,820,570) (14,604,348) (13,685,124) (281,893) (192,755) (147,615) (124,419) (128,344) (119,915) (94,459) (92,360) - 5,411 4,270 23,720 2,498 12,433 54,461 (173,159) (36,082) (3,260,002) Administrative expense Other Net change in plan fiduciary net position net position- beginning Plan fiduciary 191,388,884 44,676,872 5,719,744 10,457,617 6,822,315 15,732,298 715,510 2,483,319 7,897,386 190,057,939 145,381,067 139,661,323 129,203,706 122,381,391 106,649,093 105,933,583 103,450,264 95,552,878 Plan fiduciary net position- ending $ 381,446,823 $ 190,057,939 $ 145,381,067 $ 139,661,323 $ 129,203,706 $ 122,381,391 $ 106,649,093 $ 105,933,583 $ 103,450,264 Net pension liability- ending $ 28,414,866 $ 199,358,810 $ 230,821,321 $ 208,699,993 $ 195,301,812 $ 187,448,327 $ 178,861,508 $ 152,113,224 $ 147,170,332 Plan fiduciary net position as a percentage of the total pension liability Covered payroll 93.07% $ 27,412,713 48.81% $ 28,277,597 38.64% $ 28,907,800 40.09% $ 28,519,612 39.82% $ 28,672,800 39.50% $ 28,606,412 37.35% $ 28,627,615 41.05% $ 28,889,762 41.28% $ 28,982,166 Net pension liability as a percentage of covered payroll 103.66% 705.01% 798.47% 731.78% 681.14% 655.27% This schedule is intended to show information for ten years. Additional years' information will be displayed as it becomes available. 91 624.79% 526.53% 512.48% Schedule of Changes in the Net Pension Liability and Related Ratios Public Safety Personnel Retirement System- Fire Last Nine Fiscal Years City of Tempe, Arizona Reporting year 2023 2022 2021 2020 2019 2018 2017 2016 2015 Measurement year 2022 2021 2020 2019 2018 2017 2016 2015 2014 Total pension liability Service cost $ Interest 3,674,351 $ 3,433,110 $ 3,424,059 $ 3,201,998 $ 3,184,469 $ 3,288,107 $ 2,601,714 $ 2,527,186 $ 2,541,502 16,199,706 15,656,247 14,737,251 14,062,552 13,505,923 12,435,795 11,454,692 11,256,214 9,938,885 - - - - - 1,132,919 9,445,952 - 2,317,758 Differences between expected and actual experience 3,274,449 (3) 7,181,069 2,213,604 (549,390) 2,381,447 177,366 (1,631,037) (861,599) Changes of assumptions 3,060,017 - - 3,771,807 - 6,731,555 5,723,255 - 12,031,993 Benefit payments, including refunds (10,531,983) (13,239,944) (12,284,937) (10,967,777) (9,489,726) (8,942,533) (10,767,917) (8,554,561) (9,805,679) Net change in total pension liability 15,676,540 5,849,410 13,057,442 12,282,184 6,651,276 17,027,290 18,635,062 3,597,802 16,162,860 Changes of benefit terms Total pension liability- beginning 223,505,415 217,656,005 204,598,563 192,316,379 185,665,103 168,637,813 150,002,751 146,404,949 130,242,089 $ 239,181,955 $ 223,505,415 $ 217,656,005 $ 204,598,563 $ 192,316,379 $ 185,665,103 $ 168,637,813 $ 150,002,751 $ 146,404,949 Contributions- employer $ 128,684,062 $ $ $ $ $ $ $ $ Contributions- employee 1,450,567 1,366,781 1,369,664 1,045,992 1,274,574 1,711,846 1,620,334 1,627,959 Net investment income (9,095,275) 24,375,794 1,093,261 4,459,035 5,290,034 8,517,929 420,827 2,537,356 8,786,886 Benefit payments, including refunds (10,531,983) (13,239,944) (12,284,937) (10,967,777) (9,489,726) (8,942,533) (10,767,917) (8,554,561) (9,805,679) (162,971) (114,661) (89,363) (78,221) (81,213) (75,769) (60,954) (62,287) - - - 22,391 - 11,590 930 64,490 (36,284) (3,124,665) Net change in plan fiduciary net position 110,344,400 23,866,857 754,954 4,116,665 4,476,421 8,842,278 (2,057,294) 65,476 1,905,492 Plan fiduciary net position- beginning 111,208,849 87,341,992 86,587,038 82,470,373 77,993,952 69,151,674 71,208,968 71,143,492 69,238,000 Plan fiduciary net position- ending $ 221,553,249 $ 111,208,849 $ Net pension liability- ending $ $ 112,296,566 $ 130,314,013 Total pension liability- ending Plan fiduciary net position Administrative expense Other 17,628,706 11,478,887 10,643,938 87,341,992 $ 9,657,636 86,587,038 $ 118,011,525 $ 7,471,162 82,470,373 $ 109,846,006 $ 7,629,875 6,665,926 4,553,293 4,587,619 1,461,331 77,993,952 $ 69,151,674 $ 71,208,968 $ 71,143,492 $ 107,671,151 $ 99,486,139 $ 78,793,783 $ 75,261,457 Plan fiduciary net position as a percentage of the total pension liability Covered payroll 92.63% $ 15,290,218 49.76% $ 14,489,224 40.13% $ 13,881,219 42.32% $ 13,477,393 42.88% $ 13,373,418 42.01% $ 12,337,861 41.01% $ 12,215,891 47.47% $ 10,958,329 48.59% $ 12,316,358 Net pension liability as a percentage of covered payroll 115.29% 775.04% 938.78% 875.63% 821.38% 872.69% 814.40% This schedule is intended to show information for ten years. Additional years' information will be displayed as it becomes available. 92 719.03% 611.07% Schedule of Contributions Single Employer OPEB Plan Last Seven Fiscal Years City of Tempe, Arizona Reporting/Measurement year 2023 2022 2021 2020 2019 2018 2017 Actuarially determined Contributions in relation to the actuarially determined $ 9,614,000 $ 8,139,000 $ 7,028,000 $ 7,081,000 $ 7,134,000 $ 6,984,000 $ 7,171,851 9,437,959 9,642,039 8,870,605 7,918,331 8,461,506 6,983,551 6,759,218 Contribution deficiency $ 176,041 $ (1,503,039) $ (1,842,605) $ (837,331) $ (1,327,506) $ Covered-employee payroll Contributions as a percentage covered-employee payroll $62,868,923 $61,037,789 $62,477,698 $60,657,959 $35,758,296 $34,716,792 Note: 15.00% 15.80% 14.20% 13.05% 23.66% 449 20.12% $ 412,633 $41,444,730 16.31% This schedule is intended to show information for ten years. Additional years' information will be displayed as it becomes available. 93 Schedule of Changes in the Net OPEB Liability and Related Ratios Single Employer OPEB Plan Last Seven Fiscal Years City of Tempe, Arizona Reporting/Measurement year Total OPEB liability Service cost Interest Changes of benefit terms $ Differences between expected and actual experience Changes of assumptions Benefit payments, including refunds Net change in total OPEB liability Total OPEB liability- beginning Total OPEB liability- ending (888,785) (4,455,325) (9,437,959) (5,859,106) 122,770,950 $ 116,911,844 2,629,006 9,688,529 (9,642,039) 10,882,021 111,888,929 $ 122,770,950 13,492,032 3,190,142 (8,870,605) 14,921,574 96,967,355 $ 111,888,929 267,000 753,880 (7,918,332) 6,714,156 90,253,199 $ 96,967,355 (4,271,517) 1,581,360 (8,461,506) (4,901,095) 95,154,294 $ 90,253,199 4,915,943 503,616 (6,983,551) 4,447,118 90,707,176 $ 95,154,294 (6,759,218) (716,337) 91,423,513 $ 90,707,176 $ $ $ $ $ $ $ Plan fiduciary net position Contributions for benefits due Net investment income Benefit payments, including refunds 2023 Net change in plan fiduciary net position 1,173,319 7,749,644 - 9,437,959 1,453,390 (9,437,959) 2022 $ 1,453,390 1,170,996 7,035,529 - 9,642,039 (2,728,646) (9,642,039) 2021 $ (2,728,646) 1,028,565 6,081,440 - 8,870,605 4,161,448 (8,870,605) 2020 $ 329,347 5,630,520 7,651,741 7,918,331 762,338 (7,919,331) 2019 $ 319,754 5,930,814 - 8,461,506 796,286 (8,461,506) 2018 $ 321,229 5,689,881 - 6,983,551 1,062,670 (6,983,551) 2017 $ 300,495 5,742,386 - 6,759,218 1,211,093 (6,759,218) 4,161,448 761,338 796,286 1,062,670 1,211,093 Plan fiduciary net position- beginning Plan fiduciary net position- ending $ 16,381,676 17,835,066 $ 19,110,322 16,381,676 $ 14,948,874 19,110,322 14,187,536 $ 14,948,874 13,391,250 $ 14,187,536 12,328,580 $ 13,391,250 11,117,487 $ 12,328,580 Net OPEB liability- ending $ 99,076,778 $ 106,389,274 $ 92,778,607 $ 82,018,481 $ 76,065,663 $ 81,763,044 $ 78,378,596 Plan fiduciary net position as a percentage of the total OPEB liability Covered-employee payroll Net OPEB liability as a percentage of coveredemployee payroll 15.26% $ 62,868,923 157.60% 13.34% $ 61,037,789 174.30% 17.08% $ 62,477,698 148.50% 15.42% $ 60,657,959 135.21% 15.72% $ 35,758,296 14.07% $ 34,716,792 212.72% This schedule is intended to show information for ten years. Additional years' information will be displayed as it becomes available. 94 235.51% 13.59% $ 41,444,730 189.12% Schedule of Investment Returns Single Employer OPEB Plan Last Seven Fiscal Years City of Tempe, Arizona 2023 Annual moneyweighted rate of return, net of investment 9.33% 2022 2021 -13.87% 28.40% 2020 5.84% 2019 2018 6.43% 9.13% 2017 11.41% This schedule is intended to show information for ten years. Additional years' information will be displayed as it becomes available. 95 Notes to Required Supplementary Information June 30, 2023 City of Tempe, Arizona Note 1 - Actuarially determined contribution rates Actuarially determined contribution rates. Actuarial determined contribution rates for PSPRS are calculated as of June 30 two years prior to the end of the fiscal year in which contributions are made. The actuarial methods and assumptions used to establish the contribution requirements are as follows: PSPRS Actuarial Methods and Assumptions: Actuarial Cost Method Amortization Level Entry age normal Members with initial membership date before July 1, 2017: Level percent-of-pay, closed Members with initial membership on or after July 1, 2017: Level dollar closed Remaining Amortization Period as of the 2021 Actuarial Valuation Members with initial membership date before July 1, 2017: 18 years for unfunded actuarial accrued liability, 20 years for excess Members with initial membership on or after July 1, 2017: 10 years Asset Valuation Method Members with initial membership date before July 1, 2017: 7-year smoothed market value; 80%/120% market corridor Members with initial membership on or after July 1, 2017: 5-year smoothed market value; 80%120% market corridor Actuarial Assumptions: Investment Rate of Return Members with initial membership date before July 1, 2017: In the 2019 actuarial valuation, the investment rate of return was decreased from 7.40% to 7.30%. In the 2017 actuarial valuation, the investment rate of return was decreased from 7.50% to 7.40%. In the 2016 actuarial valuation, the investment rate of return was decreased from 7.85% to 7.50%. In the 2013 actuarial valuation, the investment rate of return was decreased from 8.00% to 7.85%. Members with initial membership on or after July 1, 2017: 7% Projected Salary Increases In the 2017 actuarial valuation, projected salary increases were decreased from 4.0%-8.0% to 3.5%-7.5%. In the 2014 actuarial valuation, projected salary increases were decreased from 4.5%– 8.5% to 4.0%–8.0%. In the 2013 actuarial valuation, projected salary increases were decreased from 5.0%–9.0% to 4.5%–8.5%. Wage Growth In the 2017 actuarial valuation, wage growth was decreased from 4.0% to 3.5%. Retirement Age Experience-based table of rates that is specific to the type of eligibility condition. Last updated for the 2012 valuation pursuant to an experience study of the period July 1, 2006 - June 30, 2011 Mortality In the 2019 actuarial valuation, changed to PUbS-2010 tables. In the 2017 actuarial valuation, changed to RP-2014 tables, with 75% of MP-2016 fully generational projection scales. RP-2000 mortality table (adjusted by 105% for both males and females) 96 Notes to Required Supplementary Information June 30, 2023 City of Tempe, Arizona Note 2 - Factors that affect trends 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 or a breach of contract because those provisions apply to individuals who were members as of the law’s effective date. As a result, the PSPRS changed benefit terms to reflect the prior mechanism for funding permanent benefit increases for those members and revised actuarial assumptions to explicitly value future permanent benefit increases. PSPRS also reduced those members’ employee contribution rates. These changes are reflected in the plan’s OR plans’ pension liabilities for fiscal year 2015 (measurement date 2014) for members who were retired as of the law’s effective date and fiscal year 2018 (measurement date 2017) for members who retired or will retire after the law’s effective date. These changes also increased the PSPRS-required pension contributions beginning in fiscal year 2016 for members who were retired as of the law’s effective date. These changes increased the PSPRSrequired contributions beginning in fiscal year 2019 for members who retired or will retire after the law’s effective date. PSPRS allowed the City to phase in the increased contributions for members who were retired as of the law’s effective date over three years. As a result, the City’s pension contributions were less than the actuarially determined contributions for 2016 and 2017. 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 2018 and 2019. City Sponsored Plan Schedule of Contributions - OPEB Methods and assumptions used to determine actuarial contribution amounts are as follows: Valuation Date: Actuarially determined contributions are calculated as of June 30, one year prior to the end of the fiscal year in which contributions are reported. Actuarial Cost Method: Entry Age Amortization Method: Level percentage of payroll, closed Amortization Period: 16 years Asset Valuation Method: Market Value Inflation: 2.60% Salary Increases: 3.00% average, including inflation Investment Rate of Return: 6.50%, net of plan investment expenses, including inflation Retirement Rates: From the 2021 ASRS and PSPRS actuarial valuations Mortality Rates: Mortality rates were based on the PubG.H-2010 (general employees) and PubS.H-2010 (public safety) Employee, Retiree and Disabled Mortality Tables, with generational projection using Scale MP-2021. 97 Budgetary Comparison Schedule (Non-GAAP Basis) City Wide Operating Budget For the Fiscal Year Ended June 30, 2023 City of Tempe, Arizona Final Budget Amounts Actual Amounts (Budgetary Basis) City total resources $ 663,462,543 $ 608,891,715 $ Total revenues 663,462,543 608,891,715 City total expenditures Total expenditures Net change in fund balance $ 665,802,337 665,802,337 (2,339,794) $ 594,667,188 594,667,188 Variance with Final BudgetPositive (Negative) 54,570,828 54,570,828 (71,135,149) (71,135,149) 14,224,527 $ (16,564,321) Note: The City’s legally adopted budget is at the Citywide level and includes all governmental and proprietary funds. Legal control over the budget derives from State statutes that prohibit the City from exceeding its adopted budget. Transfers between funds and departmental groups may be made upon City Manager approval and do not require Council action or approval. 98 Budgetary Comparison Schedule (Non-GAAP Basis) City Wide Capital Projects Budget For the Fiscal Year Ended June 30, 2023 City of Tempe, Arizona Final Budget Amounts City total resources Total revenues $ City total expenditures Total expenditures Net change in fund balance $ Variance with Final BudgetPositive (Negative) Actual Amounts (Budgetary Basis) 343,212,235 343,212,235 $ 461,091,183 461,091,183 (117,878,948) 99 119,546,180 119,546,180 $ 119,546,180 119,546,180 $ – (223,666,055) (223,666,055) 341,545,003 341,545,003 $ 117,878,948 100 Combining Fund Financial Statements 101 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. ▪ Arts and Culture Fund. To account for the receipt and expenditure of the Arts and Culture Tax monies. These monies are restricted to supporting arts and cultural activities throughout the City. ▪ 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 Fund. 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 Fund. To account for the receipt and expenditure of miscellaneous grant monies. ▪ Community Facilities District Fund. To account for the receipt and expenditure of monies for the Rio Salado Community Facilities District. DEBT SERVICE FUNDS 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. ▪ Special Assessment Debt Service Fund - accounts for the accumulation of resources and payments of special assessment debt. 102 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. ▪ Arts and Culture Fund. Used for purchasing, developing or improving projects that allow for the support of the arts and cultural activities in the City. ▪ Storm Sewers Fund. Used for planning, constructing, extending and improving storm drain trunk lines and detention basins. ▪ Transit Fund - used for the acquisition of buses, the light rail system, and other traffic flow improvements. ▪ 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. ▪ 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 Fund. Used for the improving and constructing in the Rio Salado Community Facilities District. 103 Combining Balance Sheet Non-major Governmental Funds June 30, 2023 City of Tempe, Arizona Special Revenue Performing Arts Assets Pooled cash and investments Receivables: Taxes Accounts Special assessment Accrued interest Due from other governments Inventories Prepaid items Restricted cash and investments Total assets $ Arts and Culture 16,061 $ - $ 9,485,644 Highway User Revenue Community Development $ $ 13,951,814 1,279,224 - - 1,383,676 32,471 - $ 663,936 16,031,897 $ $ 592,709 $ 16,061 $ 36,802 462,808 11,264,478 - $ 203,488 Housing Assistance 318,329 $ - - 353,360 Housing Affordability Donations and Court Awards $ $ 19,712 4,639,199 Community Facilities District Grants $ 6,800,567 $ Total Special Revenue Funds 2,934,394 $ 38,519,080 61,001 - - 208,029 1,960 2,662,900 303,461 $ 155 19,867 $ 7,167 29,246 4,675,612 $ 2,050,632 9,059,228 $ 2,890,796 5,827,150 $ 44,124 2,469,105 663,936 1,171,067 5,051,342 50,885,015 $ - $ 117,854 $ 310,160 $ 3,478 $ 418,473 17,613 1,668,492 2,422,907 $ 1,153,454 1,567,815 22,609 $ 32,890 Liabilities Accounts payable $ 1,283,188 Deposits - 174,053 - 1,094,180 - - 4,724 174,211 - 1,447,168 Accrued expenditures - 161,501 194,407 22,341 159,585 - - 3,955 - 541,789 Due to other funds - - - - - - - - - - Unearned revenue - - - - 32,004 - - 7,717,249 - 7,749,253 Matured bonds payable - 330,000 - - - - - - 2,880,000 3,210,000 Matured interest payable - 125,375 - 12,668 - - - - 10,714 148,757 Total liabilities - 994,417 787,116 1,151,798 224,479 - 122,578 8,205,575 2,894,192 14,380,155 Unavailable revenue- special assessment - - - - - - - - - - Unavailable revenue- other - - - - - - - - - - - - - - - - - - - - Deferred Inflows of Resources Total deferred inflows of resources Fund Balances Non-spendable - - 663,936 17,613 1,153,454 - - - - 1,835,003 Restricted 16,061 10,270,061 14,580,845 1,253,496 189,882 19,867 4,553,034 853,653 2,932,958 34,669,857 Committed - - - - - - - - - - Assigned - - - - - - - - - - Unassigned - - - - - - - - - - 16,061 10,270,061 15,244,781 1,271,109 1,343,336 4,553,034 853,653 2,932,958 36,504,860 Total fund balances Total liabilities, deferred inflows of resources, and fund balances $ 16,061 $ 11,264,478 $ 16,031,897 $ 2,422,907 $ 104 1,567,815 $ 4,675,612 $ 9,059,228 $ 5,827,150 $ 50,885,015 Combining Balance Sheet Non-major Governmental Funds June 30, 2023 City of Tempe, Arizona Debt Service Special Assessment Debt Service Total Debt Service Fund Assets Pooled cash and investments $ 218,049 $ 218,049 Receivables: Taxes - Accounts - - 10,873,574 10,873,574 Special assessment Accrued interest - 241,788 241,788 Due from other governments - - Inventories - - Prepaid items - - 256,625 256,625 Restricted cash and investments Total assets $ 11,590,036 $ - $ 11,590,036 Liabilities Accounts payable $ - Deposits - - Accrued expenditures - - Due to other funds - - Unearned revenue - - Matured bonds payable 51,000 51,000 Matured interest payable 256,625 256,625 307,625 307,625 11,115,362 11,115,362 Total liabilities Deferred Inflows of Resources Unavailable revenue- special assessment Unavailable revenue- other - - 11,115,362 11,115,362 Non-spendable - - Restricted - - Committed 167,049 167,049 Assigned - - Unassigned - - 167,049 167,049 11,590,036 11,590,036 Total deferred inflows of resources Fund Balances Fund balance: Total fund balances Total liabilities, deferred inflows of resources, and fund balances 105 Combining Balance Sheet Non-major Governmental Funds June 30, 2023 City of Tempe, Arizona Capital Projects Police Protection Streets Fire Protection Arts and Culture Storm Sewers Transit Parks Rio Salado - $ 25,199,382 $ 18,591,511 Community Facilities District Signals Total Capital Projects Funds Total Nonmajor Governmental Funds Assets Pooled cash and investments $ 2,986,350 $ 5,091,155 $ 934,020 $ 5,228,693 $ $ 384,637 $ - $ 3,676,475 $ 62,092,223 $$100,829,352 100,829,352 Receivables: Taxes - - - - - - - - - - - 2,662,900 2,662,900 Accounts - - - - - - 18,561 - - - 18,561 322,022 322,022 Special assessment - - - - - - - - - - - 10,873,574 10,873,574 Accrued interest - - - - - - - - - - 320,697 - - - - 181,006 - - - - Inventories - - - - - - - - - - Prepaid items - - - - - - - - - - - 663,936 1,171,067 Restricted cash and investments Total assets - - - 19,179 - - - - - - 19,179 1,171,067 5,327,146 934,020 $ 5,247,872 $ - $ 25,380,388 $ 18,610,072 $ - $ 3,676,475 $ 62,631,666 5,327,146 $ 125,106,717 $ $ - $ $ $ Due from other governments $ 3,307,047 $ 5,091,155 $ $ $ 384,637 $ - 284,994 285,912 501,703 - 2,970,808 - 2,970,808 663,936 Liabilities Accounts payable 583,712 552,273 Deposits - 212 - - 149,175 $ 1,324,492 - $ 283,321 - $ 3,795,916 - - - 1 - - 213 1,447,381 Accrued expenditures - - - Due to other funds - - - - - - - - - - - 541,789 - 26,880 - - - 109,637 - 136,517 Unearned revenue - - 136,517 - - - - - - - - - 7,800,253 Matured bonds payable - Matured interest payable - - - - - - - - - - - 3,210,000 - - - - - - - - - - 405,382 860,229 583,924 552,273 42,714 26,880 149,175 1,324,492 1 392,958 - 3,932,646 18,620,426 Deferred Inflows of Resources Unavailable revenue- special - - - - - - - - - - - 11,115,362 assessment Unavailable revenue- other - - - - - - 18,561 - - - 18,561 18,561 Total deferred inflows of resources - - - - - - 18,561 - - - 18,561 11,133,923 Total liabilities 860,229 42,714 $ 5,079,104 Fund Balances Non-spendable - - - - - - - - - - - 1,835,003 Restricted 3,040,413 5,225,457 1,178,909 5,205,158 32,885 25,231,213 5,432,671 - 21,877 3,676,475 49,045,058 83,881,964 Committed 507,952 189,193 789,287 - - - 11,834,349 384,636 - - 13,705,417 13,705,417 - - - - - - - - - - - - (1,101,547) (907,419) (1,586,449) - (59,765) - (1) - (414,835) - (4,070,016) (4,070,016) 2,446,818 4,507,231 381,747 5,205,158 (26,880) 25,231,213 17,267,019 384,636 (392,958) 3,676,475 58,680,459 95,352,368 934,020 $ 5,247,872 - $ 25,380,388 $ 18,610,072 - $ 3,676,475 $ 62,631,666 $ 125,106,717 Assigned Unassigned Total fund balances Total liabilities, deferred inflows of resources, and fund balances $ 3,307,047 $ 5,091,155 $ $ 106 $ 384,637 $ Combining Statement of Revenues, Expenditures and Changes in Fund Balances Non-major Governmental Funds For the Fiscal Year Ended June 30, 2023 City of Tempe, Arizona Special Revenue Performing Arts Revenues: Sales taxes Intergovernmental: Federal grants State grants State sales tax Other Investment income (loss) Charges for services Fines and forfeitures Other entities' participation Licenses and permits Miscellaneous Total revenues $ Expenditures: Current: General government Public safety Transportation Criminal justice Community enrichment Debt service: Principal retirement Interest Fiscal fees Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures Net change in fund balances Fund balance at beginning of year Fund balance at end of year Arts and Culture $ $ Community Development - $ - Housing Assistance $ Donations and Court Awards Housing Affordability - $ - $ Community Facilities District Grants 9,399 $ 11,638,468 9,399 (111,998) 650,366 18,415 12,195,251 13,717,215 100,000 240,494 7,220 14,064,929 3,700,981 (663) 535,432 4,235,750 13,591,783 51,130 1,690 13,644,603 776 776 468,029 784,001 24,188 51,849 261,880 207,513 66,107 1,863,567 732 7,679,682 13,659,856 - 2,227,004 13,430,274 - 732 - 330,000 250,750 1,500 69,791 8,331,723 - 734,894 14,394,750 - 504,000 31,432 737,952 3,500,388 - 13,430,274 - 3,863,528 (329,821) - 735,362 - 214,329 - 8,667 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 Payment to refunded bond escrow agent Total other financing sources (uses) Highway User Revenue - $ - $ Total Special Revenue Funds - $ 11,647,867 6,409,006 2,977,708 2,817,149 707 994 196,921 12,601 18,729 12,433,815 82 2,558,468 2,558,550 23,701,770 3,445,737 13,717,215 3,601,150 (35,778) 3,261,677 460,491 320,114 240,494 645,903 61,006,640 46,462 230,054 95,646 63,044 1,621,935 1,489,035 4,341,890 5,231,432 2,563,994 1,535,497 4,571,944 13,755,502 63,044 32,755,053 - - 2,170 2,059,311 - 479,745 11,542,102 - 2,880,000 21,428 305 5,465,727 - 3,714,000 303,610 1,805 2,024,552 58,725,007 776 - (195,744) - 891,713 - (2,907,177) 2,281,633 - - - - - - - 45,000 (1,419,500) 1,500,000 (2,554,501) - - - - - 2,878,962 - - - (1,374,500) - 2,768,787 1,714,286 - - - - - - - - - - - 1,960 2,880,922 - (195,744) 4,748,778 4,553,034 $ 891,713 (38,060) 853,653 $ 8,667 7,394 16,061 2,489,028 7,781,033 $ 10,270,061 1,384,465 13,860,316 $ 15,244,781 $ 735,362 535,747 1,271,109 $ 214,329 1,129,007 1,343,336 107 $ 776 19,091 19,867 $ 4,423,962 (3,974,001) 2,770,747 3,220,708 (26,255) 5,502,341 2,959,213 31,002,519 2,932,958 $ 36,504,860 Combining Statement of Revenues, Expenditures and Changes in Fund Balances Non-major Governmental Funds For the Fiscal Year Ended June 30, 2023 City of Tempe, Arizona Debt Service Special Assessment Debt Service Revenues: Property taxes Investment income (loss) Special assessment Total revenues $ Expenditures: Debt service: Principal retirement Interest 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 Net change in fund balances Fund balance at beginning of year Fund balance at end of year $ 108 1,911,731 1,911,731 Total Debt Service Fund $ 1,911,731 1,911,731 1,435,000 549,125 622 1,984,747 1,435,000 549,125 622 1,984,747 (73,016) (73,016) - - (73,016) (73,016) 240,065 167,049 $ 240,065 167,049 Combining Statement of Revenues, Expenditures and Changes in Fund Balances Non-major Governmental Funds For the Fiscal Year Ended June 30, 2023 City of Tempe, Arizona Capital Projects Police Protection Streets Fire Protection Arts and Culture Storm Sewers Transit Parks Rio Salado Community Facilities District Signals Total Capital Projects Funds Total Non-major Governmental Funds Revenues: Sales taxes Intergovernmental: Federal grants State grants State sales tax Other Investment income (loss) Charges for services Fines and forfeitures Other entities' participation Special assessment License and permits Miscellaneous Total revenues $ - $ 884,539 193 54,738 136,193 - - 1,873,646 2,949,309 - $ 198,157 304,362 - - 502,519 - $ - $ - $ - 42,663 212,910 - - 255,573 52,173 - - 52,173 2,064 - - 2,064 2,514,086 85,270 222,820 - - 2,822,176 $ - $ 153,431 550 412,490 - - 566,471 - $ - - - - 21,000 622 20,606 - - 42,228 $ - $ - $ 11,647,867 1,127,297 - - 1,127,297 3,398,625 21,000 534,573 1,182,035 550 1,309,381 1,873,646 8,319,810 27,100,395 3,466,737 13,717,215 3,601,150 498,795 4,443,712 461,041 1,629,495 1,911,731 240,494 2,519,549 71,238,181 Expenditures: Current: General government Public safety Transportation Criminal justice Community enrichment Debt service: 3,244,544 - 6,240,281 - 466,518 - 489,744 12,157 - 1,158,472 - 6,097,506 - 831,307 - 705,908 6,706,799 5,246,480 7,293,158 1,535,497 11,278,743 19,001,982 63,044 40,048,211 11,833,915 15,078,459 21,991 209 1,663,417 7,925,898 4,275,107 4,741,625 3,135,981 3,625,725 60,859 73,016 3,450,717 4,609,189 12,757,726 18,855,232 - 662,579 1,493,886 113,627 819,535 21,991 209 37,953,928 57,222,565 5,170,991 852,944 2,427 39,978,480 117,932,319 (12,129,150) (7,423,379) (4,486,052) (3,573,552) (70,952) (1,787,013) (18,288,761) - (1,451,658) 307,762 (48,902,755) (46,694,138) Transfers in Transfers out 2,549,467 - - - 1,419,500 - - 5,883,110 - 50,000 - - 100,000 (99,467) - 10,002,077 (99,467) 14,426,039 (4,073,468) Issuance of debt Principal retirement Interest Fiscal fees Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): 7,040,000 7,040,000 2,835,000 - - - 17,187,158 - - - 34,102,158 34,102,158 Premium on issuance of debt 677,037 680,566 273,175 - - - 1,657,417 - - - 3,288,195 3,288,195 Proceeds from sale of capital SBITA proceeds - 105,778 - - - - - - - - 105,778 2,770,747 105,778 Total other financing sources (uses) 10,266,504 7,826,344 3,108,175 - 1,419,500 - - - 533 - - - 47,398,741 - 50,619,449 Net change in fund balances Fund balance at beginning of year (1,862,646) 4,309,464 402,965 4,104,266 (1,377,877) 1,759,624 (2,154,052) 7,359,210 (1,504,014) 60,184,473 3,925,311 91,427,057 Fund balance at end of year $ 2,446,818 $ 4,507,231 $ 381,747 $ 5,205,158 - (70,952) 44,072 $ (26,880) $ 5,883,110 - 18,894,575 - 4,096,097 21,135,116 605,814 16,661,205 25,231,213 109 $ 17,267,019 384,636 $ 384,636 (1,451,125) 1,058,167 $ (392,958) 307,762 3,368,713 $ 3,676,475 $ 58,680,459 $ 95,352,368 NON-MAJOR ENTERPRISE FUNDS Proprietary funds are used to account for City operations that are run like a business. These funds are responsible for providing enough operational revenue to cover all expenses. ▪ 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. 110 Combining Statement of Fund Net Position Non-major Enterprise Funds June 30, 2023 City of Tempe, Arizona Solid Waste Emergency Medical Transportation Golf Course Total Assets Current assets: Pooled cash and investments Accounts receivable, net Accrued interest receivable Total current assets $ 11,702,282 1,510,196 69,833 13,282,311 $ 2,132,380 3,688,487 4,895 5,825,762 $ 1,757,198 43,912 15,863 1,816,973 $ 15,591,860 5,242,595 90,591 20,925,046 Noncurrent assets: Net OPEB assets 215,945 7,048,159 7,048,159 7,264,104 20,546,415 129,130 1,114,451 1,114,451 1,243,581 7,069,343 941,929 146,306 1,088,235 563,251 46,003 609,254 66,694 23,124 89,818 1,571,874 215,433 1,787,307 Current liabilities: Accounts payable Deposits Accrued expenses Compensated absences SBITA Liability Total current liabilities 487,316 85 264,020 287,954 121,779 1,161,154 53,886 84 142,235 41,680 237,885 551,329 551,329 1,092,531 169 406,255 329,634 121,779 1,950,368 Noncurrent liabilities: Advance from other funds Bonds Payable Compensated absences SBITA Liability Total OPEB liability Pensions Total noncurrent liabilities Total liabilities 552,916 327,602 2,539,904 6,215,468 9,635,890 10,797,044 80,034 685,745 3,716,702 4,482,481 4,720,366 2,364,936 200,474 436,188 440,092 3,441,690 3,993,019 2,364,936 200,474 632,950 327,602 3,661,837 10,372,262 17,560,061 19,510,429 219,863 227,149 447,012 131,473 105,874 237,347 15,568 25,302 40,870 366,904 358,325 725,229 6,598,778 215,945 3,575,871 10,390,594 1,114,451 129,130 1,477,303 2,720,884 Non-depreciable assets Depreciable assets,net Total capital assets,net Total noncurrent assets Total assets 15,290 360,365 362,548 362,548 4,207,741 12,370,351 4,570,289 — 12,732,899 4,585,579 — 13,093,264 6,402,552 — 34,018,310 Deferred Outflows of Resources Deferred outflows related to pensions Deferred outflows related to OPEB Total deferred outflows of resources Liabilities 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 Restricted Unrestricted Total net position $ 111 $ $ 4,025,007 11,738,236 15,290 360,365 (1,581,816) 3,471,358 2,458,481 $ 15,569,959 Combining Statement of Revenues, Expenses and Changes in Fund Net Position Non-major Enterprise Funds For the Fiscal Year Ended June 30, 2023 City of Tempe, Arizona Solid Waste Emergency Medical Transportation Golf Course Total Non-Major Proprietary Funds Operating revenues: Charges for services Miscellaneous Total operating revenues $20,843,436 5,734 20,849,170 $8,226,766 8,226,766 $4,603,641 4,603,641 $33,673,843 5,734 33,679,577 Operating expenses: Personnel services Supplies and materials Fees and services Depreciation Total operating expenses Operating income (loss) 7,616,218 761,327 11,193,154 1,587,240 21,157,939 (308,769) 5,056,124 467,420 1,125,411 258,660 6,907,615 1,319,151 411,499 554,158 2,086,091 446,741 3,498,489 1,105,152 13,083,841 1,782,905 14,404,656 2,292,641 31,564,043 2,115,534 Nonoperating revenues (expenses): Investment income (loss) Interest and fiscal fees Gain (loss) on sale of capital assets Income (loss) before operating transfers and special item 87,392 (9,753) 63,966 (10,515) - (41,696) (56,409) 11,131 35,181 (66,162) 75,097 (167,164) 1,308,636 1,018,178 2,159,650 Transfers and special item Transfers in Transfers out Special item Total transfers and special item 939,826 (4,501) (335,611) 599,714 - 119,000 (439,348) (320,348) 1,058,826 (4,501) (774,959) 279,366 Change in net position 432,550 1,308,636 697,830 2,439,016 9,958,044 $10,390,594 1,412,248 $2,720,884 1,760,651 $2,458,481 13,130,943 $15,569,959 Total net position- beginning Total net position- ending 112 Combining Statement of Cash Flows Non-major Enterprise Funds For the Fiscal Year Ended June 30, 2023 City of Tempe, Arizona Emergency Medical Solid Waste Transportation Golf Course Total Cash flows from operating activities: Receipts from customers 4,579,946 $ 32,914,186 Payments to employees for services $ (6,893,484) (4,193,844) (612,664) (11,699,992) Payments to suppliers for goods and services (12,441,977) (1,612,445) (2,679,810) (16,734,232) 5,734 - - 5,734 1,719,445 1,478,779 1,287,472 4,485,696 - (132,949) (132,949) 119,000 1,058,826 - (4,501) 921,376 Receipts from other Net cash provided (used) by operating activities 21,049,172 $ 7,285,068 $ Cash flows from noncapital financing activities: Transfers in 939,826 Transfers out (4,501) - 935,325 - (13,949) - - 200,474 200,474 (166,851) (166,851) (9,753) (15,410) (101,300) (126,463) (1,255,236) (213,157) (1,468,393) 63,966 - 11,131 75,097 (1,201,023) (15,410) (269,703) (1,486,136) 42,743 Advances from/(to) other funds Net cash provided (used) by noncapital financing activities Cash flows from capital and related financing activities: Proceeds from issuance of bonds Principal paid on long-term debt Interest and fiscal fees Acquisition of capital assets Proceeds from the sale of capital assets Net cash provided (used) by capital and related financing activities Cash flows from investing activities: 42,743 - - 42,743 Net cash provided (used) by investing activities Net increase (decrease) in cash and cash equivalents 1,496,490 1,463,369 1,003,820 3,963,679 Investment income Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year 10,205,792 669,011 42,743 753,378 11,628,181 $ 11,702,282 $ 2,132,380 $ 1,757,198 $ 15,591,860 $ (308,769) $ 1,319,151 $ 1,105,152 $ Reconciliation of operating income (loss) to net cash provided (used) by operating activities: Operating income (loss) 2,115,534 Net cash provided (used) by operating activities: Depreciation/amortization 1,587,240 258,660 446,741 2,292,641 (Increase) decrease in receivables 207,477 (941,761) (23,695) (757,979) (Increase) decrease in net OPEB asset (42,615) (42,404) 671 (84,348) Increase (decrease) in deposits (1,741) 63 - (1,678) Increase (decrease) in payables (487,496) (19,614) (39,561) (546,671) Increase (decrease) in accrued expenses (774,224) (76,581) (159,885) (1,010,690) Increase (decrease) in compensated absence 840,870 121,714 - 962,584 (Increase) decrease in deferred outflows related to pension and OPEB 489,553 90,885 86,343 666,781 Increase (decrease) in deferred inflows related to pension and OPEB (1,213,696) (593,591) (112,053) (1,919,340) Increase (decrease) in pension 1,613,794 1,414,244 16,355 3,044,393 Increase (decrease) in net OPEB liability (190,948) (51,987) (32,596) Change in assets and liabilities: Net cash provided (used) by operating activities (275,531) $ 1,719,445 $ 1,478,779 $ 1,287,472 $ 4,485,696 $ $ - $ $ - $ 344,808 $ 344,808 $ 344,808 $ 344,808 Noncash investing, capital, and financing activities: Accounts payable related to capital assets Total noncash investing, capital, and financing activities: 113 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. 114 Combining Statement of Fund Net Position Internal Service Funds June 30, 2023 City of Tempe, Arizona Risk Management Assets Current assets: Pooled cash and investments Restricted 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 3,018,017 23,237 3,041,254 Worker's Compensation $ Health 6,813,396 8,180,650 60,613 20,370 15,075,029 $ Total 18,092,134 $ 46,079 18,138,213 27,923,547 8,180,650 106,692 20,370 23,237 36,254,496 101,357 7,579 - - 101,357 7,579 108,936 - - 108,936 Liabilities Current liabilities: Accounts payable Accrued expense Due to other funds Compensated absences Claims payable Total current liabilities 49,001 28,232 48,037 2,112,292 2,237,562 12,362 60,613 6,568,264 6,641,239 171,626 2,522,245 1,752,165 4,446,036 232,989 2,550,477 60,613 48,037 10,432,721 13,324,837 Noncurrent liabilities: Compensated absences Claims payable Net OPEB liability Net pension liability Total noncurrent liabilities Total liabilities 92,236 2,898,844 109,365 668,822 3,769,267 6,006,829 6,135,698 6,135,698 12,776,937 4,446,036 92,236 9,034,542 109,365 668,822 9,904,965 23,229,802 23,659 18,547 - - 23,659 18,547 42,206 - - 42,206 2,298,092 2,298,092 13,692,177 13,692,177 23,237 13,068,187 13,091,424 Deferred Inflows of Resources Deferred inflows related to pensions Deferred inflows related to OPEB Total deferred inflows of resources Net Position Restricted Unrestricted Total net position $ 23,237 (2,922,082) (2,898,845) $ 115 $ $ Combining Statement of Revenues, Expenses and Changes in Fund Net Position Internal Service Funds For the Fiscal Year Ended June 30, 2023 City of Tempe, Arizona Risk Management Operating revenues: Contributions Miscellaneous Total operating revenues $ Worker's Compensation 5,056,435 5,056,435 $ 4,706,611 298,049 5,004,660 Health $ Total 38,083,558 38,083,558 $ 47,846,604 298,049 48,144,653 Operating expenses: Fees and services Total operating expenses 5,462,430 5,462,430 4,155,156 4,155,156 37,673,865 37,673,865 47,291,451 47,291,451 Operating income (loss) (405,995) 849,504 409,693 853,202 - 77,024 - 77,024 - 77,024 - 77,024 - 8,180,650 - 8,180,650 (405,995) 9,107,178 409,693 9,110,876 (2,492,850) (2,898,845) $ (6,809,086) 2,298,092 $ 13,282,484 13,692,177 3,980,548 13,091,424 Nonoperating revenues Investment income Total nonoperating revenues Transfers in Changes in net position Total net position - beginning, as restated Total net position - ending $ 116 $ Combining Statement of Cash Flows Internal Service Funds For the Fiscal Year Ended June 30, 2023 City of Tempe, Arizona Risk Management Worker's Compensation Health Total Cash flows from operating activities: Receipts from other funds $ 5,056,435 $ 4,645,998 $ 38,049,746 $ 47,752,179 Payments to employees (772,997) (113,397) (91,609) (978,003) Payments made for claims (4,755,929) (3,275,012) (37,467,548) (45,498,489) Miscellaneous cash receipts - 298,049 (472,491) 1,555,638 490,589 1,573,736 - 8,180,650 60,613 - 8,180,650 60,613 - 8,241,263 - 8,241,263 Net cash provided (used) by in operating activities 298,049 Cash flows from noncapital financing activities: Transfer in Due to other funds Net cash provided (used) by noncapital financing activities Cash flows from investing activities: Interest received - 57,334 - 57,334 Net cash provided (used) by investing activities - 57,334 - 57,334 Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, beginning of year (472,491) 3,490,508 9,854,235 5,139,811 490,589 17,601,545 9,872,333 26,231,864 Cash and cash equivalents, end of year $ 3,018,017 $ 14,994,046 $ 18,092,134 $ 36,104,197 $ 3,018,017 $ 6,813,396 $ 18,092,134 $ 27,923,547 Reconciliation of cash and cash equivalents at end of year: Pooled cash and investments Restricted Cash and investments Cash and cash equivalents at end of year - 8,180,650 - 8,180,650 $ 3,018,017 $ 14,994,046 $ 18,092,134 $ 36,104,197 $ (405,995) $ 849,504 $ 409,693 $ 853,202 (2,317) (454,237) 28,232 223,485 140,273 (60,613) (33,929) 800,676 - (33,812) 171,626 2,522,245 (2,579,163) - (94,425) (2,317) (316,540) 2,550,477 (1,555,002) 140,273 51,420 - - 51,420 (158,233) 113,423 (8,542) - - (158,233) 113,423 (8,542) 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: 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 claims payable Increase (decrease) in compensated absence (Increase) decrease in deferred outflows related to pension and OPEB Increase (decrease) in deferred inflows related to pension and OPEB Increase (decrease) in net pension liability Increase (decrease) in net OPEB liability Net cash provided (used) by operating activities $ (472,491) $ 117 1,555,638 $ 490,589 $ 1,573,736 This section provides a broad range of trend data covering key financial indicators including general governmental revenues and expenditures, property taxes, debt burden, demographics and miscellaneous data useful in assessing the City’s financial condition. Statistical Section 118 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. 119 Net Position by Component (Exhibit S-1) Last Ten Fiscal Years Accrual Basis of Accounting City of Tempe, Arizona Fiscal Year 2023 Fiscal Year 2022 Fiscal Year 2021 Fiscal Year 2020 Fiscal Year 2019 Fiscal Year 2018 Fiscal Year 2017 Fiscal Year 2016 Fiscal Year 2015 Fiscal Year 2014 $ 435,421,987 $ 538,278,359 $ 529,205,694 $ 523,422,276 $ 491,949,237 $ 483,438,668 $ 519,530,983 $ 564,120,959 $ 519,040,090 $ 537,940,057 Restricted 141,175,028 164,690,176 135,603,391 99,053,439 79,370,511 102,808,694 117,866,229 102,095,778 141,565,366 148,338,902 Unrestricted 206,108,533 111,429,390 89,964,094 85,960,972 70,642,228 13,318,115 (22,136,687) (26,820,571) (18,763,531) 236,990,748 $ 782,705,548 $ 814,397,925 $ 754,773,179 $ 708,436,687 $ 641,961,976 $ 599,565,477 $ 615,260,525 $ 639,396,166 $ 641,841,925 $ 923,269,707 $ $ 137,380,192 $ 151,450,264 $ 140,978,804 $ 124,836,951 $ 111,354,858 $ 104,387,674 $ $ 142,208,059 $ 137,971,614 Governmental activities Net investment in capital assets Total governmental activities net position Business-type activities Net investment in capital assets 97,816,016 69,467,178 Restricted 25,963,094 - - - - - - - - - Unrestricted 140,236,122 162,925,142 145,707,685 148,328,973 153,206,243 153,208,008 151,904,179 170,405,834 90,577,933 118,726,035 $ 264,015,232 $ 300,305,334 $ 297,157,949 $ 289,307,777 $ 278,043,194 $ 264,562,866 $ 256,291,853 $ 239,873,012 $ 232,785,992 $ 256,697,649 Total business-type activities net position Primary government Net investment in capital assets $ 533,238,003 $ 675,658,551 $ 680,655,958 $ 664,401,080 $ 616,786,188 $ 594,793,526 $ 623,918,657 $ 633,588,137 $ 661,248,149 $ 675,911,671 Restricted 167,138,122 164,690,176 135,603,391 99,053,439 79,370,511 102,808,694 117,866,229 102,095,778 141,565,367 148,338,902 Unrestricted 346,344,655 274,354,532 235,671,779 234,289,945 223,848,471 166,526,123 129,767,492 143,585,263 71,814,402 355,716,783 $1,046,720,780 $1,114,703,259 $1,051,931,128 $ 997,744,464 $ 920,005,170 $ 864,128,343 $ 871,552,378 $ 879,269,178 $ 874,627,918 $1,179,967,356 Total primary government net position 120 City of Tempe, Arizona 121 Changes in Net Position (Exhibit S-2a) Last Ten Fiscal Years Accrual Basis of Accounting City of Tempe, Arizona Fiscal Year 2023 Fiscal Year 2022 Fiscal Year 2021 Fiscal Year 2020 Fiscal Year 2019 Fiscal Year 2018 Fiscal Year 2017 Fiscal Year 2016 Fiscal Year 2015 Fiscal Year 2014 - $ 106,879,997 $ 109,735,808 $ 107,096,572 $ 101,620,981 $ 107,357,688 $ 111,570,351 - 48,723,812 46,151,382 49,941,616 44,646,087 40,900,261 48,345,996 34,319,479 32,914,994 177,106,183 - - - - - - - - - - 39,506,898 35,564,456 36,442,527 28,463,648 29,739,525 27,956,647 27,402,656 29,239,583 29,363,339 Expenses Governmental activities: Police (j) Fire medical rescue (j) Public safety (j) Community services (a) (d) (m) Public works (g) $ $ 93,057,663 $ 92,214,451 $ 78,658,426 31,103,237 - - - - 110,725,592 102,940,790 103,728,249 112,589,913 107,411,254 102,892,245 98,054,788 - - - - - - - - - Engineering and transportation (g) (k) - 79,306,002 88,643,038 102,020,829 - - - - - - Municipal utilities (g) (k) - 301,324 746,213 506,510 - - - - - - Community development (m) - 15,739,179 14,321,605 18,005,337 17,550,896 17,270,124 16,521,932 18,372,515 18,832,177 30,234,017 Transportation (k) Human services (d) (m) - 31,970,182 30,908,394 26,614,653 21,669,347 22,505,753 17,777,825 17,430,250 13,374,117 463,969 113,071,086 - - - - - - - - - Criminal justice (l) 5,417,328 - - - - - - - - - Municipal court (l) - 5,048,832 5,077,211 5,257,225 4,985,853 5,007,487 4,909,370 4,354,299 4,028,068 4,288,787 Community enrichment (m) General government (n) 57,489,311 Mayor and council (n) - 612,841 434,176 461,629 491,026 405,716 473,324 337,046 330,042 408,196 City manager (d)(e)(c) (n) - 9,346,396 10,707,904 7,455,774 7,150,485 7,045,025 6,815,022 7,371,101 7,045,783 7,220,482 City attorney (n) - 3,760,903 3,748,495 3,724,210 3,137,658 3,283,818 3,160,056 2,961,497 3,712,245 2,844,965 Internal audit office (n) - 550,591 619,106 516,840 434,770 476,584 376,249 425,674 433,339 392,629 Municipal budget office (d) (n) - 425,769 106,535 269,344 172,182 288,182 261,313 259,133 415,774 - Economic development office (h) (m) - 1,512,840 787,714 771,575 - - - - - - Sustainability office (h) (n) - 617,053 274,559 174,109 - - - - - - Office of strategic management and diversity (e) (n) - 844,972 899,173 1,186,219 1,079,461 981,169 1,055,075 - - - City clerk and elections (n) - 997,382 957,343 1,036,845 829,499 979,356 815,016 868,596 751,331 844,934 Financial services (i) (n) - 14,399,674 - - - - - - - - Human resources (i) (n) - 4,425,590 - - - - - - - - Information technology (i) (n) - 883,020 - - - - - - - - Internal services (b)(d)(i) (n) - - 18,570,150 19,779,369 15,650,001 16,749,283 18,821,669 8,252,013 6,403,407 7,343,357 122 Unallocated depreciation - 1,451,338 1,502,243 1,716,431 1,716,431 1,716,725 1,777,887 1,785,487 1,955,520 1,331,649 Interest on long-term debt 18,057,610 17,344,833 9,529,375 9,921,992 12,503,655 11,817,213 9,847,278 12,924,841 12,882,924 17,153,207 469,196,306 384,649,428 379,284,880 392,899,606 372,827,572 369,464,699 374,213,259 342,712,163 331,945,009 314,543,439 Water and wastewater 96,368,865 89,403,602 86,542,908 77,716,351 77,906,953 76,903,243 70,364,126 75,515,527 73,548,319 73,208,373 Solid waste 21,167,692 19,872,919 17,319,217 16,909,091 15,791,378 17,494,354 15,918,430 14,881,636 15,868,498 15,379,174 Emergency medical transportation (f) 6,907,615 5,562,895 4,150,475 4,295,939 2,966,379 3,026,686 - - - - Golf course 3,554,898 3,500,205 3,336,616 3,038,086 2,937,558 2,802,184 2,520,474 2,734,351 2,685,634 2,799,922 Total business-type activities expenses 127,999,070 118,339,621 111,349,216 101,959,467 99,602,268 100,226,467 88,803,030 93,131,514 92,102,451 91,387,469 Total primary government expenses $ 597,195,376 $ 502,989,049 $ 490,634,096 $ 494,859,073 $ 472,429,840 $ 469,691,166 $ 463,016,289 $ 435,843,677 $ 424,047,460 $ 405,930,908 Total governmental activities expenses Business-type activities: Note: To assist with comparability, certain prior year expenses have been recategorized as listed below. (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) (m) (n) Tickmark not utilized 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. In Fiscal Year 2015, Economic Development and Community Relations became part of the City Manager's Office. 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. 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. In Fiscal Year 2018, the Emergency Medical Transportation Fund was established. In Fiscal Year 2020, the Public Works department separated into two new departments: Municipal Utilities; Engineering and Transportation. In Fiscal Year 2020, the Sustainability Office and the Economic Development Office were created. Both offices were previously part of the City Manager's office. In Fiscal Year 2022, the Internal Services department separated into three new departments: Financial services, Human resources, and Information technology. In Fiscal Year 2023 the Police and Fire medical rescue departments were reported under the Public safety function for financial reporting purposes only. In Fiscal Year 2023 the Engineering and transportation and municipal utilities departments were reported under the Transportation function for financial reporting purposes only. In Fiscal Year 2023 the Municipal court department was reported under the Criminal Justice function for financial reporting purposes only. In Fiscal Year 2023 the Community development, Community services, Human services and the economic development departments were reported under the Community enrichment function for financial reporting purposes only. In Fiscal Year 2023 Mayor and Council. City Manager, City Attorney, Internal Audit, Municipal Budget, Sustainability, Office of Strategic Management and Diversity, City Clerk and Elections, Financial Services, Human Resources, and Information Technology were reported under the General Government function for financial reporting purposes only. 123 Changes in Net Position (Exhibit S-2b) Last Ten Fiscal Years Accrual Basis of Accounting City of Tempe, Arizona Fiscal Year 2023 Fiscal Year 2022 Fiscal Year 2021 Fiscal Year 2020 Fiscal Year 2019 Fiscal Year 2018 Fiscal Year 2017 Fiscal Year 2016 Fiscal Year 2015 Fiscal Year 2014 Program Revenues Governmental activities: Charges for services: Police (j) Fire medical rescue (j) Public Safety (j) Community services (a) (c) (m) Transportation (k) $ - $ 822,007 $ 738,594 $ 790,792 $ 1,298,812 $ 977,914 $ 1,021,670 $ 1,444,986 $ 1,712,306 $ 1,320,177 - 349,850 297,548 330,441 200,378 858,577 1,869,840 1,536,642 334,158 2,010,414 - - - - - - - - 268,938 - - 3,336,679 1,909,685 3,249,544 7,714,161 8,323,732 8,283,698 7,812,755 7,589,603 7,445,319 20,177,263 - - - - - - - - - Engineering and transportation (e) (k) - 15,076,973 10,492,178 16,315,473 - - - - - - Municipal utilities (e) (k) - - 289 5,897 - - - - - - Public works (e) - - - - 17,797,231 16,011,590 16,585,374 17,740,856 19,786,216 19,681,176 Community development (m) - 22,270,861 16,682,427 21,113,072 14,283,336 15,684,471 13,250,819 12,665,828 13,065,445 12,035,033 Human services (c) (m) - 2,736,199 1,948,647 3,285,787 10,031 9,501 7,820 13,926 80,237 - Community enrichment (m) 21,068,644 - - - - - - - - - Criminal justice (l) 7,935,474 - - - - - - - - - Municipal court (l) - 1,248,063 2,299,815 2,289,026 4,457,922 3,559,861 5,852,849 6,372,719 8,302,032 6,747,891 General government (n) 6,311,329 - - - - - - - - - City manager (f)(h) (n) - - - - - - 7,597 - - - City attorney (n) - - 30,000 27,013 23,487 19,361 16,940 14,174 - - Internal audit office (n) - - - - - - - - - - Municipal budget office (n) - - - - - - - - - - Economic development office (f) (m) - 2,769,468 196,462 - - - - - - - Sustainability office (f) (n) - 6,045 15,544 - - - - - - - Office of strategic management and diversity (h) (n) - 1,000 - - - - - - - - City clerk and elections (n) - - - - 2,056 3,140 - - - - Financial services (g) (n) - 3,597,830 - - - - - - - - Human resources (g) (n) - - - - - - - - - - Information technology (g) (n) - - - - - - - - - - Internal services (b)(g) (n) - - 3,423,684 1,804,246 2,827,988 3,000,921 1,797,928 2,186,635 2,212,402 2,224,489 Operating grants and contributions 36,149,703 26,374,825 36,398,251 32,178,593 34,467,594 30,237,598 27,582,362 26,831,238 19,784,859 24,668,792 Capital grants and contributions 22,911,000 18,931,868 36,754,274 76,680,266 39,638,190 4,094,624 6,355,742 8,091,341 7,258,243 5,933,017 116,563,827 97,521,668 111,187,398 158,070,150 122,721,186 82,781,290 82,632,639 84,711,100 80,125,501 80,324,832 Total governmental activities program revenues 124 Business-type activities: Charges for services: Water and wastewater 90,130,138 91,475,655 90,696,447 85,057,003 85,339,513 87,807,953 86,273,324 81,265,973 78,043,384 80,989,551 Solid waste 20,843,436 20,627,824 19,824,131 18,394,311 17,306,244 16,706,706 16,274,287 15,319,833 14,216,743 14,400,476 Emergency medical transportation (d) 8,226,766 5,990,395 4,135,310 4,375,755 3,442,151 2,280,247 - - - - Golf course 4,603,641 4,006,042 3,907,736 2,780,200 2,626,308 2,387,362 2,322,777 2,575,908 2,755,966 2,661,519 Total business-type activities program revenues 123,803,981 122,099,916 118,563,624 110,607,269 108,714,216 109,182,268 104,870,388 99,161,714 95,016,093 98,051,546 Total primary government program revenues $ 240,367,808 $ 219,621,584 $ 229,751,022 $ 268,677,419 $ 231,435,402 $ 191,963,558 $ 187,503,027 $ 183,872,814 $ 175,141,594 $ 178,376,378 Governmental activities $ (352,632,479) $ (287,127,760) $ (266,547,655) $ (234,829,456) $ (250,106,386) $ (287,933,728) $ (291,580,620) $ (258,001,063) $ (251,819,508) $ (234,218,607) Business-type activities (4,195,089) 4,487,095 7,214,408 8,647,802 9,111,948 10,206,120 16,067,358 6,030,200 2,913,642 6,664,077 $ (356,827,568) $ (282,640,665) $ (259,333,247) $ (226,181,654) $ (240,994,438) $ (277,727,608) $ (275,513,262) $ (251,970,863) $ (248,905,866) $ (227,554,530) Net (expense)/revenue Total primary government net expense Note: To assist with comparability, certain prior year expenses have been recategorized as listed below. (a) Tickmark not utilized (b) In Fiscal Year 2015, Finance and Technology was merged into the Internal Services department. (c) In Fiscal Year 2015, a component of the Community Services department along with Diversity formed a new department called Human Services. (d) In Fiscal Year 2018, the Emergency Medical Transportation Fund was established. (e) In Fiscal Year 2020, the Public Works department separated into two new departments: Municipal Utilities; Engineering and Transportation. (f) In Fiscal Year 2020, the Sustainability Office and the Economic Development Office were created. Both offices were previously part of the City Manager's office. (g) In Fiscal Year 2022, the Internal Services department separated into three new departments: Financial services, Human resources, and Information technology. (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. (i) not used in program revenues. (j) In Fiscal Year 2023 the Police and Fire medical rescue departments were reported under the Public safety function for financial reporting purposes only. (k) In Fiscal Year 2023 the Engineering and transportation and municipal utilities departments were reported under the Transportation function for financial reporting purposes only. (l) In Fiscal Year 2023 the Municipal court department was reported under the Criminal Justice function for financial reporting purposes only. (m) In Fiscal Year 2023 the Community development, Community services, Human services and the economic development departments were reported under the Community enrichment function for financial reporting purposes only. (n) In Fiscal Year 2023 Mayor and Council. City Manager, City Attorney, Internal Audit, Municipal Budget, Sustainability, Office of Strategic Management and Diversity, City Clerk and Elections, Financial Services, Human Resources, and Information Technology were reported under the General Government function for financial reporting purposes only. 125 Changes in Net Position (Exhibit S-2c) Last Ten Fiscal Years Accrual Basis of Accounting City of Tempe, Arizona Fiscal Year 2023 Fiscal Year 2022 Fiscal Year 2021 Fiscal Year 2020 Fiscal Year 2019 Fiscal Year 2018 Fiscal Year 2017 Fiscal Year 2016 Fiscal Year 2015 Fiscal Year 2014 General revenues and other changes in net position Governmental activities: General revenues: Sales taxes $ 222,221,888 $ 222,951,580 $ 190,760,900 $ 180,941,410 $ 177,596,413 $ 168,650,143 $ 160,218,570 $ 152,492,065 $ 147,787,315 $ 147,815,825 Intergovernmental revenue, unrestricted (a) 84,994,033 58,954,757 60,503,495 52,940,012 48,024,343 48,403,871 44,671,765 41,472,528 40,571,933 38,155,275 Property taxes 63,596,741 59,488,492 52,210,522 51,525,619 48,706,817 47,495,555 45,308,519 43,316,151 41,457,646 40,074,441 Franchise taxes 2,742,874 3,055,126 2,846,569 2,772,127 3,036,531 3,290,220 3,182,193 3,363,615 2,933,239 3,310,940 Unrestricted investment earnings 4,594,728 (3,820,904) 829,560 7,950,512 7,936,949 1,489,603 662,115 1,683,445 889,594 725,099 Miscellaneous 7,524,676 3,646,464 4,770,561 3,241,181 5,924,186 5,506,328 5,435,113 7,419,129 5,042,875 4,114,557 - 767,622 1,692,302 638,133 674,569 1,667,264 7,538,846 5,298,681 2,170,917 657,224 Transfers Gain on sale of capital assets (193,514) 646,079 820,065 1,295,173 603,077 (1,454,082) 427,858 509,690 479,071 746,902 Special Item (65,027,861) - - - - - - - - - 320,453,565 345,689,216 314,433,974 301,304,167 292,502,885 275,048,902 267,444,979 255,555,304 241,332,590 235,600,263 1,866,714 (1,777,102) 200,724 3,504,059 3,614,531 697,388 351,831 841,726 488,477 436,821 697,005 788,909 888,141 326,138 1,124,986 651,500 299,116 152,428 142,914 1,643,570 Gain (loss) on sale of capital assets - 294,562 266,964 81,757 231,940 33,015 128,394 572,356 247,296 52,947 Capital contributions - - 100,000 - - - - - - Transfers 193,514 (646,079) (820,065) (1,295,173) (25,122) (427,858) (509,690) (479,071) (746,902) Special Item (34,852,246) - - - - - - - - - (32,095,013) (1,339,710) 635,764 2,616,781 4,368,380 1,356,781 351,483 1,056,820 399,616 1,386,436 $ 288,358,552 $ 344,349,506 $ 315,069,738 $ 303,920,948 $ 296,871,265 $ 276,405,683 $ 267,796,462 $ 256,612,124 $ 241,732,206 $ 236,986,699 Governmental activities $ (32,178,914) $ $ $ $ $ 3,315,145 $ (24,135,641) $ (2,445,759) $ (10,486,918) $ Business-type activities (36,290,102) 10,312,582 16,418,841 7,087,020 3,313,258 Total primary government $ (68,469,016) Total governmental activities Business-type activities: Unrestricted investment earnings Miscellaneous Total business-type activities Total primary government (603,077) Changes in net position (a) 58,561,456 3,147,385 $ 61,708,841 47,886,319 7,850,172 $ 55,736,491 66,474,711 11,264,583 $ 77,739,294 42,396,499 13,480,328 $ 55,876,827 $ 13,627,727 $ (7,716,800) $ 4,641,261 $ (7,173,660) 1,381,656 8,050,513 $ 9,432,169 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. 126 Fund Balances, Governmental Funds (Exhibit S-3) Last Ten Fiscal Years Modified Accrual Basis of Accounting City of Tempe, Arizona Fiscal Year 2023 Fiscal Year 2022 Fiscal Year 2021 Fiscal Year 2020 Fiscal Year 2019 Fiscal Year 2018 Fiscal Year 2017 Fiscal Year 2016 Fiscal Year 2015 Fiscal Year 2014 General fund Fund balances: Non-spendable $ 1,211,974 $ 976,468 $ 391,694 $ 396,885 $ 491,024 $ 711,092 $ 638,685 $ 782,276 $ 346,364 $ 653,365 Restricted - 3,497,723 199,456 154,819 106,684 154,667 100,000 100,000 - - Committed 4,586,678 - - - 480,675 - 475,531 147,036 520,770 338,193 Assigned 39,500,000 24,869,373 20,579,412 17,408,412 18,713,280 15,336,906 14,762,667 10,291,768 8,800,833 9,884,517 Unassigned 126,393,523 142,653,835 138,855,354 116,285,953 97,995,211 93,995,709 80,099,820 78,629,198 73,879,480 63,878,841 Total general fund $ 171,692,175 $ 171,997,399 $ 160,025,916 $ 134,246,069 $ 117,786,874 $ 110,198,374 $ $ $ $ $ $ $ $ 96,076,703 $ 1,623,799 $ 89,950,278 $ 1,594,761 $ 83,547,447 $ 1,952,950 $ 74,754,916 All other governmental funds Fund balances: Non-spendable 1,850,205 1,622,640 1,670,998 1,458,623 1,527,574 1,553,045 1,947,082 Restricted 125,290,937 129,981,114 96,536,269 68,712,850 65,121,669 80,434,422 88,581,119 82,863,821 80,049,732 77,724,151 Committed 13,705,417 50,341,486 28,925,620 39,133,751 46,353,146 39,232,880 26,744,884 20,404,290 21,925,153 14,295,999 - 15,405,309 11,880,755 23,310,919 12,308,616 11,261,680 15,774,827 15,186,266 15,935,817 15,326,386 98,477,894 (836,064) (1,089,017) (1,777,702) (1,442,236) (296,755) - (2,856,351) (2,922,001) (673,217) $ 239,324,453 $ 196,514,485 $ 137,924,625 $ 130,838,441 $ 123,868,769 $ 132,185,272 $ 132,724,629 $ 117,192,787 $ 116,941,651 $ 108,620,401 Assigned Unassigned Total all other governmental funds 127 Changes in Fund Balance, Governmental Funds (Exhibit S-4a) Last Ten Fiscal Years Modified Accrual Basis of Accounting City of Tempe, Arizona Fiscal Year 2023 Fiscal Year 2022 Fiscal Year 2021 Fiscal Year 2020 Fiscal Year 2019 Fiscal Year 2018 Fiscal Year 2017 Fiscal Year 2016 Fiscal Year 2015 Fiscal Year 2014 $ 285,491,863 $ 271,111,952 $ 232,293,514 $ 222,478,903 $ 216,680,985 $ 207,580,582 $ 197,341,071 $ 188,672,865 $ 182,323,977 $ 182,032,821 138,933,245 111,295,511 109,958,549 101,776,973 99,111,729 90,577,368 89,383,867 85,856,572 78,988,805 74,692,323 Property rental 3,172,790 3,349,508 - - - - - - - - Interest earnings 521,950 545,252 - - - - - - - - Investment earnings 3,892,348 (4,366,156) 829,560 7,950,512 7,936,949 1,489,603 662,115 1,683,445 889,594 725,099 Charges for services 33,010,063 24,488,695 17,845,292 27,538,387 29,552,529 30,445,583 30,134,108 31,752,038 33,520,741 33,268,236 Fines and forfeitures 4,605,768 5,373,996 4,909,416 6,154,697 7,191,904 7,670,630 8,982,209 9,357,450 9,986,226 8,909,849 Other entities' participation 2,631,499 3,917,813 4,316,313 4,755,503 3,778,658 5,972,968 1,916,336 1,751,971 1,093,272 174,954 Special assessments 1,911,731 2,126,515 2,541,561 2,442,290 1,990,732 2,027,722 2,173,798 2,439,086 3,862,306 3,605,932 Licenses and permits 7,633,873 7,487,684 6,888,387 7,400,258 6,951,095 8,330,276 5,446,638 6,308,241 6,828,905 6,638,496 Miscellaneous 9,544,794 13,473,798 11,999,740 9,453,724 9,005,664 8,502,999 8,761,291 9,867,156 8,197,929 6,707,484 491,349,924 438,804,568 391,582,332 389,951,247 382,200,245 362,597,731 344,801,433 337,688,824 325,691,755 316,755,194 Police (h) - 310,896,560 96,040,799 96,427,720 93,078,088 87,341,647 82,429,673 81,154,550 78,102,044 75,135,489 Fire medical rescue (h) - 161,837,533 41,303,945 40,622,999 38,797,039 33,159,702 31,383,875 30,724,706 26,802,154 28,887,609 144,936,068 - - - - - - - - - - 33,952,582 30,307,131 30,336,733 25,228,594 25,507,377 23,770,512 22,516,873 22,240,413 25,579,134 Transportation (i) 80,198,409 - - - - - - - - - Public works (e) - - - - 79,092,222 72,517,143 70,604,468 73,771,025 72,414,122 72,739,804 Engineering and transportation (e) (i) - 39,980,688 41,665,283 54,873,909 - - - - - - Municipal utilities (e) (i) - - 78,310 377,524 - - - - - - Community development (k) - 15,540,735 15,701,904 16,438,644 16,624,962 16,408,645 15,336,696 16,321,778 17,432,661 29,460,993 Revenues: Taxes Intergovernmental Total revenues Expenditures: Public safety (h) Community services (c) (k) Human services (c) (k) - 30,942,701 30,565,705 26,679,827 26,244,724 20,428,462 17,589,585 17,388,871 13,471,552 451,293 106,326,931 - - - - - - - - - Criminal justice (j) 5,222,882 - - - - - - - - - Municipal court (j) - 4,993,995 4,825,954 5,105,605 5,133,357 5,158,342 4,886,110 4,262,778 4,058,927 4,325,838 Community enrichment (k) General government (l) 39,897,072 - - - - - - - - - Mayor and council (l) - 600,044 486,599 457,553 495,829 403,658 417,734 342,645 345,501 368,846 City manager (b)(d)(f) (l) - 9,344,242 10,038,861 7,427,628 7,397,648 7,182,164 6,800,149 7,292,703 6,583,633 7,549,687 City attorney (l) - 4,118,555 3,407,246 3,571,789 3,515,785 3,261,843 3,098,124 2,920,857 3,790,479 2,912,507 Internal audit office (l) - 573,579 542,627 506,977 459,746 490,396 408,867 403,108 432,384 426,006 Municipal budget office (c) (l) - 297,671 174,398 255,729 261,798 294,404 262,696 236,768 323,676 - Economic development office (f) (k) - 1,463,481 748,363 738,759 - - - - - - 128 Sustainability office (f) (l) - 531,845 309,803 160,406 - - - - - Office of strategic management and diversity (l) - 1,236,388 1,258,230 1,244,678 1,088,773 987,828 932,200 - - - City clerk and elections (l) - 981,782 869,904 1,006,212 910,335 995,339 752,876 850,235 751,978 885,350 Financial services (g) (l) - 14,533,212 - - - - - - - - Human resources (g) (l) - 4,365,764 - - - - - - - - Information technology (g) (l) - 11,639 - - - - - - - - Internal services (c)(a)(g) - - 19,427,458 18,004,773 15,716,010 16,263,826 16,334,235 7,433,821 7,232,975 7,624,841 Principal 40,826,740 31,022,000 27,019,000 47,107,000 38,768,000 31,730,000 39,547,000 29,686,000 41,065,000 26,105,000 Interest 17,228,445 15,755,521 10,454,626 11,350,230 13,526,198 11,326,484 11,688,331 13,361,380 13,622,096 13,857,641 Fiscal fees 491,045 2,815,114 300,802 472,785 344,231 331,593 569,367 432,387 542,498 226,658 Capital outlay 73,242,561 73,518,401 56,128,602 60,975,054 53,518,221 32,418,674 30,298,582 45,373,210 49,626,981 24,192,621 Total expenditures 508,370,153 759,314,032 391,655,550 424,142,534 420,201,560 366,207,527 357,111,080 354,473,695 358,839,074 320,729,317 $ (17,020,229) $ (320,509,464) (73,218) $ (34,191,287) $ (38,001,315) (3,609,796) $ (12,309,647) $ (16,784,871) $ (33,147,319) Debt service: Deficiency of revenues over expenditures before other financing sources (uses) $ $ $ (3,974,123) Note: To assist with comparability, certain prior year expenses have been recategorized as listed below. (a) 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. (b) In Fiscal Year 2015, Economic Development and Community Relations became part of the City Manager's Office. (c) 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. (d) 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. (e) In Fiscal Year 2020, the Public Works department separated into two new departments: Municipal Utilites; Engineering and Transportation. (f) In Fiscal Year 2020, the Sustainability Office and the Economic Development Office were created. Both offices were previously part of the City Manager's office. (g) In Fiscal Year 2022, the Internal Services department separated into three new departments: Financial services, Human resources, and Information technology. (h) In Fiscal Year 2023 the Police and Fire medical rescue departments were reported under the Public safety function for financial reporting purposes only. (i) In Fiscal Year 2023 the Engineering and transportation and municipal utilities departments were reported under the Transportation function for financial reporting purposes only. (j) In Fiscal Year 2023 the Municipal court department was reported under the Criminal Justice function for financial reporting purposes only. (k) In Fiscal Year 2023 the Community development, Community services, Human services and the economic development departments were reported under the Community enrichment function for financial reporting purposes only. (l) In Fiscal Year 2023 Mayor and council. City manager, city Attorney, Internal Audit, Municipal budget, Sustainability, Office of strategic management and diversity, City Clerk and Elections, Financial services, human resources, Information technology, and Internal services were reported under the General government function for financial reporting purposes only. 129 Changes in Fund Balance, Governmental Funds (Exhibit S-4b) Last Ten Fiscal Years Modified Accrual Basis of Accounting City of Tempe, Arizona Fiscal Year 2023 Fiscal Year 2022 Fiscal Year 2021 Fiscal Year 2020 Fiscal Year 2019 Fiscal Year 2018 Fiscal Year 2017 Fiscal Year 2016 Fiscal Year 2015 Fiscal Year 2014 Transfers in $ 42,065,224 $ 42,875,301 $ 42,696,445 $ 30,942,109 $ 38,729,874 $ 42,297,460 $ 27,870,785 $ 30,410,514 $ 26,437,046 $ 22,217,580 Transfers out (50,439,388) (42,229,222) (41,876,380) (29,646,936) (38,126,797) (43,372,403) (27,442,927) (29,900,824) (25,957,975) (21,470,678) Issuance of debt 52,382,158 384,186,600 23,862,732 37,325,000 27,130,000 25,025,000 12,290,000 13,630,000 43,965,000 11,650,000 Premium on issuance of debt 5,395,948 4,897,404 6,515,503 - 5,655,061 4,083,395 1,754,028 5,413,632 1,269,813 880,967 Lease proceeds 1,294,308 - - 74,604 - 87,798 - - 111,827 - Sbita lease proceeds 3,927,816 - - - - - - - - - Proceeds from sale of capital assets 3,179,625 789,301 1,740,949 665,377 1,220,174 1,685,856 4,483,481 5,350,923 2,189,572 663,658 Other financing sources (uses): Issuance of refunding bonds - 38,195,000 18,260,000 2,665,000 - 34,095,000 34,422,798 6,780,000 5,645,000 Payment to refunding bond escrow agent - (37,643,577) - - - (12,614,996) (19,082,453) (35,888,204) (4,534,184) (4,267,894) Total other financing sources 57,805,691 391,070,807 32,939,249 57,620,154 37,273,312 17,192,110 33,967,914 23,438,839 50,261,099 15,318,633 Net change in fund balances $ 40,785,462 $ 70,561,343 $ 32,866,031 $ 23,428,867 (728,003) $ 13,582,314 $ 21,658,267 $ 6,653,968 $ 17,113,780 $ 11,344,510 Debt service as a percentage of noncapital expenditures 15.5% 6.8% 11.1% 15.8% 130 $ 14.2% 16.5% 15.5% 13.8% 17.6% 13.4% Taxable Sales and Percentage of Taxable Sales by Category (Exhibit S-5) Last Ten Fiscal Years Cash Basis City of Tempe, Arizona Taxable Sales Fiscal Year Retail Rental 2014 $ 3,566,605,000 $ 1,197,308,000 2015 3,898,027,000 1,277,164,000 2016 4,057,021,000 1,342,058,000 2017 4,323,045,000 2018 Utilities and Telecommunications Restaurant Contracting 557,844,000 $ 574,888,000 $ 404,398,000 $ 135,525,000 71,660,000 $ 6,591,156,000 2.00 % 583,788,000 628,169,000 701,314,000 159,255,000 82,680,000 74,754,000 7,405,151,000 1.80 548,882,000 656,237,000 653,818,000 166,167,000 89,261,000 75,989,000 7,589,433,000 1.80 1,391,183,000 539,476,000 679,897,000 654,944,000 184,412,000 96,055,000 75,694,000 7,944,706,000 1.80 4,527,666,000 1,526,503,000 552,373,000 705,920,000 662,203,000 209,961,000 89,259,000 59,140,000 8,333,025,000 1.80 2019 4,649,114,000 1,755,549,000 554,618,000 736,240,000 675,955,000 228,785,000 94,108,000 74,142,000 8,768,511,000 1.80 2020 5,075,059,000 1,734,138,000 427,008,000 678,918,000 853,617,000 156,197,000 68,804,000 52,347,000 9,046,088,000 1.80 2021 5,547,684,000 1,835,514,000 420,360,000 676,710,000 640,451,000 111,374,000 46,901,000 49,253,000 9,328,247,000 1.80 2022 6,504,492,000 2,047,036,000 433,999,000 907,502,000 668,052,000 227,406,000 88,694,000 63,861,000 10,941,042,000 1.80 2023 6,274,459,000 2,366,430,000 460,900,000 983,173,000 685,242,000 281,700,000 118,813,000 70,734,000 11,241,451,000 1.80 Restaurant Contracting Hotel and Motel Amusements $ All Other City Direct Sales Tax Rate Hotel and Motel Amusements $ 82,928,000 $ Total Percentage of Taxable Sales Fiscal Year Retail Rental Utilities and Telecommunications All Other Total 2014 54.11 % 18.17 % 8.46 % 8.72 % 6.14 % 2.06 % 1.26 % 1.08 % 100 % 2015 52.64 17.25 7.88 8.48 9.47 2.15 1.12 1.01 100 2016 53.46 17.68 7.23 8.65 8.61 2.19 1.18 1.00 100 2017 54.42 17.51 6.79 8.56 8.24 2.32 1.21 0.95 100 2018 54.33 18.32 6.63 8.47 7.95 2.52 1.07 0.71 100 2019 53.02 20.02 6.33 8.40 7.71 2.61 1.07 0.85 100 2020 56.10 19.17 4.72 7.51 9.44 1.73 0.76 0.57 100 2021 59.47 19.68 4.51 7.25 6.87 1.19 0.50 0.53 100 2022 59.45 18.71 3.97 8.29 6.11 2.08 0.81 0.58 100 2023 55.82 21.03 4.10 8.75 6.10 2.51 1.06 0.63 100 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. 131 Direct and Overlapping Sales Tax Rates (Exhibit S-6) Last Ten Fiscal Years City of Tempe, Arizona Fiscal Year 2014 2015 (a) 2016 2017 2018 2019 2020 2021 2022 2023 General Fund Sales Tax Rate 1.40 % 1.20 1.20 1.20 1.20 1.20 1.20 1.20 1.20 1.20 City Sales Tax Rates Arts+Culture/ Performing Arts Transit Special Special Revenue Fund Revenue Fund Sales Tax Rate Sales Tax Rate 0.50 % 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 Total City Direct Sales Tax Rate 0.10 % 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 2.00 % 1.80 1.80 1.80 1.80 1.80 1.80 1.80 1.80 1.80 Maricopa County Sales Tax Rate 0.70 % 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 State Sales Tax Rate 5.60 % 5.60 5.60 5.60 5.60 5.60 5.60 5.60 5.60 5.60 Source: City of Tempe, Arizona Tax and License Division (a) In Fiscal Year 2015, the City of Tempe, Arizona voter-approved 0.2% temporary sales tax expired, effective June 30, 2014. 132 Total Sales Tax Rate 8.30 % 8.10 8.10 8.10 8.10 8.10 8.10 8.10 8.10 8.10 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 16% 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. 133 Primary and Secondary Assessed Value and Estimated Actual Value of Taxable Property (Exhibit S-8) Last Ten Fiscal Years Rate per $100 of Assessed Value City of Tempe, Arizona Commercial, Manufacturing, Telecommunications Property Fiscal Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Primary $ 1,013,888,495 Vacant, Agricultural & Governmental Property $ 590,348,150 Owner Occupied Residential Property $ 422,097,495 Rental Residential Property $ 237,011,004 Railroad & Airlines Property $ Non-commercial Historic Property 2,470,685 $ 5,503,454 Less: Tax-Exempt Property $ Net Taxable Assessed Value Total Direct Tax Rate Estimated Total Actual Value (a) Assessed Value as a Percentage of Actual Value 769,883,275 $ 1,501,436,008 0.92 $10,969,708,459 13.69 % Secondary 1,019,499,265 627,596,276 422,373,499 245,942,542 2,494,792 7,172,229 811,779,331 1,513,299,272 1.57 11,047,136,814 13.70 Primary 1,018,312,716 582,528,256 445,788,470 279,658,188 2,626,349 5,660,031 786,460,357 1,548,113,653 0.92 11,632,254,953 13.31 Secondary 1,030,441,480 605,931,213 472,413,709 317,364,940 2,652,015 7,102,655 812,188,311 1,623,717,701 1.51 12,317,499,077 13.18 Primary 1,040,045,065 604,094,072 458,995,411 303,832,779 2,453,154 5,495,047 820,971,174 1,593,944,354 0.93 12,152,815,646 13.12 Secondary 1,119,535,292 681,597,591 569,311,744 395,569,487 2,501,825 6,440,828 901,610,148 1,873,346,619 1.59 14,573,138,077 12.85 Primary 1,066,869,523 604,354,126 480,671,687 340,922,305 2,213,159 5,507,068 831,185,771 1,669,352,097 0.94 12,936,980,827 12.90 Secondary 1,066,869,523 604,354,126 480,671,687 340,922,305 2,213,159 5,507,068 831,185,771 1,669,352,097 1.59 16,688,127,422 10.00 Primary 1,121,945,426 655,920,933 502,268,412 378,171,085 2,238,277 5,400,480 891,707,903 1,774,236,710 0.92 13,773,672,226 12.88 Secondary 1,121,945,426 655,920,933 502,268,412 378,171,085 2,238,277 5,400,480 891,707,903 1,774,236,710 1.57 17,858,194,237 9.94 Primary 1,130,477,624 701,270,049 528,812,064 404,759,028 2,063,797 3,229,286 907,642,388 1,862,969,460 0.92 14,500,815,905 12.85 Secondary 1,130,477,624 701,270,049 528,812,064 404,759,028 2,063,797 3,229,286 907,642,388 1,862,969,460 1.50 19,292,541,580 9.66 Primary 1,226,011,101 724,469,285 549,262,440 452,477,990 2,106,703 5,460,842 949,264,953 2,010,523,408 0.90 15,652,812,327 12.84 Secondary 1,226,011,101 724,469,285 549,262,440 452,477,990 2,106,703 5,460,842 949,264,953 2,010,523,408 1.50 21,407,207,731 9.39 Primary 1,260,003,905 789,897,255 580,182,705 494,195,105 2,082,237 5,536,167 1,003,325,543 2,128,571,831 0.89 16,641,307,485 12.79 Secondary 1,260,003,905 789,897,255 580,182,705 494,195,105 2,082,237 5,536,167 1,003,325,543 2,128,571,831 1.50 23,585,521,332 9.02 Primary 1,374,583,030 848,054,327 608,638,569 525,409,409 2,228,245 5,725,998 1,081,805,791 2,282,833,787 0.89 17,774,367,390 12.84 Secondary 1,374,583,030 848,054,327 608,638,569 525,409,409 2,228,245 5,725,998 1,081,805,791 2,282,833,787 1.48 26,023,287,469 8.77 Primary 1,392,066,474 892,654,128 637,487,403 575,020,890 2,799,655 5,877,028 1,120,498,024 2,385,407,554 0.88 18,860,241,682 12.65 Secondary 1,392,066,474 892,654,128 637,487,403 575,020,890 2,799,655 5,877,028 1,120,498,024 2,385,407,554 1.50 27,897,790,751 8.55 Source: Maricopa County Assessor - State Abstract 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. (b) FY2022 data was obtained from the August abstract because February was unavailable. All other years are based on the February abstract. 134 City of Tempe, Arizona 135 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 Schools Fiscal Year 2014 2015 2016 2017 2018 2019 2020 2021 City of Tempe (a) Primary $ 0.92 Tempe Elementary (b) Tempe Union $ 2.01 $ 3.22 County-Wide Jurisdiction East Valley Institute of Technology Maricopa County $ $ - 1.28 Community College County Ed Equalization Rate $ $ 1.29 0.51 Central Arizona Water Flood District $ - $ Fire District Assistance - $ - County Library District $ Special Health Care District - $ 0.19 Total $ 9.42 Secondary 1.57 0.64 2.94 0.05 - 0.24 - 0.14 0.14 0.01 0.04 - 5.77 Total 2.49 2.65 6.16 0.05 1.28 1.53 0.51 0.14 0.14 0.01 0.04 0.19 15.19 Primary 0.92 2.43 3.30 - 1.32 1.28 0.51 - - - - 0.19 9.95 Secondary 1.51 0.63 2.45 0.05 - 0.24 - 0.14 0.14 0.01 0.06 - 5.23 Total 2.43 3.06 5.75 0.05 1.32 1.52 0.51 0.14 0.14 0.01 0.06 0.19 15.18 Primary 0.93 2.22 3.22 - 1.36 1.26 0.51 - - - - 0.19 9.69 Secondary 1.59 0.66 2.25 0.05 - 0.23 - 0.16 0.14 0.01 0.06 0.11 5.26 Total 2.52 2.88 5.47 0.05 1.36 1.49 0.51 0.16 0.14 0.01 0.06 0.30 14.95 Primary 0.94 2.24 3.09 - 1.40 1.24 0.50 - - - - 0.20 9.61 Secondary 1.59 0.66 2.20 0.05 - 0.23 - 0.18 0.14 0.01 0.06 0.11 5.23 Total 2.53 2.90 5.29 0.05 1.40 1.47 0.50 0.18 0.14 0.01 0.06 0.31 14.84 Primary 0.92 2.06 2.96 - 1.40 1.20 0.49 - - - - 0.20 9.23 Secondary 1.57 0.60 2.09 0.05 - 0.21 - 0.18 0.14 0.01 0.06 0.09 5.00 Total 2.49 2.66 5.05 0.05 1.40 1.41 0.49 0.18 0.14 0.01 0.06 0.29 14.23 Primary 0.92 1.99 2.05 - 1.40 1.17 0.47 - - - - 0.19 8.19 Secondary 1.50 0.66 2.85 0.05 - 0.20 - 0.18 0.14 0.01 0.06 0.10 5.75 Total 2.42 2.65 4.90 0.05 1.40 1.37 0.47 0.18 0.14 0.01 0.06 0.29 13.94 Primary 0.90 1.93 2.70 - 1.40 1.16 0.46 - - - - 0.19 8.74 Secondary 1.50 0.64 2.01 0.05 - 0.17 - 0.18 0.14 0.01 0.06 0.15 4.92 Total 2.40 2.57 4.71 0.05 1.40 1.33 0.46 0.18 0.14 0.01 0.06 0.34 13.65 Primary 0.89 1.87 2.62 - 1.40 1.13 0.44 - - - - 0.18 8.53 Secondary 1.50 0.63 1.85 0.05 - 0.16 - 0.18 0.14 0.01 0.06 0.12 4.71 Total 2.39 2.50 4.47 0.05 1.40 1.29 0.44 0.18 0.14 0.01 0.06 0.30 13.23 136 2022 2023 Primary 0.89 1.84 2.61 - 1.35 1.11 0.43 - - - - 0.18 Secondary 1.48 0.60 1.84 0.05 - 0.11 - 0.18 0.14 0.01 0.06 0.12 8.41 4.59 Total 2.37 2.44 4.45 0.05 1.35 1.22 0.43 0.18 0.14 0.01 0.06 0.30 13.00 Primary 0.88 1.75 2.51 - 1.25 1.09 - - - - - 0.18 7.66 Secondary 1.50 0.60 1.97 0.05 - 0.10 - 0.16 0.14 0.01 0.05 0.07 4.65 Total 2.38 2.35 4.48 0.05 1.25 1.19 - 0.16 0.14 0.01 0.05 0.25 12.31 Source: Maricopa County Assessor's Office Maricopa County Tax Levy Publication (a) Primary levies are limited to a 2% increase annually plus levies attributable to assessed valuation added as a result of growth and annexation. Secondary tax levies do not have a limitation. (b) Tempe property owners residing within the Kyrene Elementary School District No. 28, Scottsdale Unified School District No. 48 or Mesa Unified School District No. 4 have combined rates of $11.40, $11.18 or $15.04, respectively. Also, see the Direct and Overlapping Governmental Activities Debt- Property Tax Supported Schedule (Exhibit S-17). 137 Property Tax Levies - All Direct and Overlapping Governments (Exhibit S-10) Last Ten Fiscal Years City of Tempe, Arizona Schools Fiscal Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 City of Tempe Primary $ 13,778,678 Tempe Elementary (a) Tempe Union $ 56,857,111 $ County-Wide Jurisdiction East Valley Institute of Technology Maricopa County Community College County Ed Equalization Rate Flood District Central Arizona Water Fire District Assistance County Library District Special Health Care District $ Total 38,477,473 - $ 409,775,397 $ 412,623,059 - $ 163,916,558 - - - Secondary 23,766,365 18,307,254 35,425,302 7,214,753 - 78,752,950 39,842,985 - 45,136,223 3,913,249 14,116,305 62,499,144 - $1,157,927,420 266,475,386 Total 37,545,043 75,164,365 73,902,775 7,214,753 409,775,397 491,376,009 39,842,985 163,916,558 45,136,223 3,913,249 14,116,305 62,499,144 1,424,402,806 Primary 14,324,634 71,480,977 40,508,811 - 442,762,977 429,857,856 - 170,582,239 - - - 65,124,108 1,234,641,602 Secondary 24,609,512 19,247,913 31,649,661 7,676,815 - 82,901,341 43,660,332 - 49,076,612 3,946,541 19,504,284 - 282,273,011 Total 38,934,146 90,728,890 72,158,472 7,676,815 442,762,977 512,759,197 43,660,332 170,582,239 49,076,612 3,946,541 19,504,284 65,124,108 1,516,914,613 Primary 14,877,877 67,301,586 40,281,153 - 471,193,529 437,227,709 - 174,988,030 - - - 67,273,204 1,273,143,088 Secondary 25,281,551 19,895,071 28,161,726 7,614,014 - 80,036,848 49,512,136 - 48,660,147 4,013,398 19,250,761 37,341,000 319,766,652 Total 40,159,428 87,196,657 68,442,879 7,614,014 471,193,529 517,264,557 49,512,136 174,988,030 48,660,147 4,013,398 19,250,761 104,614,204 1,592,909,740 Primary 15,690,240 70,920,943 40,273,959 - 506,222,142 447,212,880 - 181,352,524 - - - 70,777,141 1,332,449,829 Secondary 26,577,755 20,881,916 28,658,765 8,034,256 - 82,211,035 58,463,580 - 50,677,352 4,030,569 20,091,335 39,747,000 339,373,563 Total 42,267,995 91,802,859 68,932,724 8,034,256 506,222,142 529,423,915 58,463,580 181,352,524 50,677,352 4,030,569 20,091,335 110,524,141 1,671,823,392 Primary 16,404,593 68,659,932 40,876,811 - 535,870,745 457,339,611 - 186,400,980 - - - 73,820,558 1,379,373,230 Secondary 27,834,226 19,909,974 28,971,774 8,489,725 - 81,872,034 62,198,813 - 53,530,745 3,893,879 21,268,052 35,191,536 343,160,758 Total 44,238,819 88,569,906 69,848,585 8,489,725 535,870,745 539,211,645 62,198,813 186,400,980 53,530,745 3,893,879 21,268,052 109,012,094 1,722,533,988 Primary 17,118,826 69,668,285 29,725,536 - 566,289,063 473,275,205 - 191,959,243 - - - 76,921,021 1,424,957,179 Secondary 28,030,238 23,042,843 41,355,451 9,005,606 - 82,713,190 66,310,571 - 56,684,864 4,319,354 22,475,317 42,153,890 376,091,324 Total 45,149,064 92,711,128 71,080,987 9,005,606 566,289,063 555,988,395 66,310,571 191,959,243 56,684,864 4,319,354 22,475,317 119,074,911 1,801,048,503 Primary 18,114,816 72,156,009 42,303,940 - 605,109,318 499,542,385 - 196,326,940 - - - 80,459,388 1,514,012,796 Secondary 30,177,956 23,880,002 31,468,300 9,617,828 - 74,279,486 70,887,943 - 60,196,609 4,082,918 24,016,045 62,843,632 391,450,719 Total 48,292,772 96,036,011 73,772,240 9,617,828 605,109,318 573,821,871 70,887,943 196,326,940 60,196,609 4,082,918 24,016,045 143,303,020 1,905,463,515 Primary 18,980,475 73,991,571 43,485,838 - 640,280,922 514,159,761 - 202,808,377 - - - 84,240,979 1,577,947,923 Secondary 32,017,977 25,111,276 30,666,905 11,299,160 - 74,558,711 75,415,664 - 64,150,864 4,096,425 25,411,963 55,365,219 398,094,164 Total 50,998,452 99,102,847 74,152,743 11,299,160 640,280,922 588,718,472 75,415,664 202,808,377 64,150,864 4,096,425 25,411,963 139,606,198 1,976,042,087 Primary 20,086,813 77,439,694 46,760,224 - 655,778,021 541,422,496 - 208,194,759 - - - 88,031,823 1,637,713,830 Secondary 33,620,224 25,352,189 32,864,175 11,999,126 - 55,787,637 80,429,826 - 68,372,664 4,186,635 27,090,614 56,990,223 396,693,313 Total 53,707,037 102,791,883 79,624,399 11,999,126 655,778,021 597,210,133 80,429,826 208,194,759 68,372,664 4,186,635 27,090,614 145,022,046 2,034,407,143 Primary 20,948,649 77,052,844 47,230,052 - 643,295,202 560,363,573 - - - - - 92,081,287 1,440,971,607 Secondary 35,773,957 26,264,408 37,005,233 12,684,601 - 53,051,463 75,704,791 - 72,706,057 4,252,620 26,045,384 37,132,768 380,621,282 Total 56,722,606 103,317,252 84,235,285 12,684,601 643,295,202 613,415,036 75,704,791 - 72,706,057 4,252,620 26,045,384 129,214,055 1,821,592,889 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). (b) 2022 Tax Levy Rate for County Ed Equalization (State Equalization Tax) was 0.00. 138 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 2014 Total Tax Levy for Fiscal Year (a) $ 37,675,450 Adjusted Tax Levy for Fiscal Year Adjustments $ (311,588) $ 37,363,862 Amount $ Total Collections to Date % of Original Levy Collections in Subsequent Years $ Amount 436,489 $ % of Adjusted Levy 36,924,892 98.0 % 37,361,381 100.0 % 2015 38,916,826 (280,960) 38,635,866 38,310,425 98.4 323,164 38,633,589 100.0 2016 40,471,289 (362,147) 40,109,142 39,886,362 98.6 221,625 40,107,987 100.0 2017 42,580,125 (411,041) 42,169,084 41,757,608 98.1 404,759 42,162,367 100.0 2018 44,161,889 (242,341) 43,919,548 43,501,882 98.5 414,683 43,916,565 100.0 2019 45,529,984 (266,244) 45,263,740 44,892,921 98.6 366,136 45,259,057 100.0 2020 48,265,218 (204,779) 48,060,439 47,378,445 98.2 675,444 48,053,889 100.0 2021 50,936,177 (315,300) 50,620,877 49,942,161 98.0 653,044 50,595,205 99.9 2022 54,040,262 24,951 54,065,213 53,371,592 98.8 — 54,005,758 99.9 2023 57,217,825 (530,451) 56,687,374 55,973,207 97.8 - 55,973,207 98.7 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. 139 Principal Tax Payers (Exhibit S-12) Property Tax Current Year and Nine Years Prior City of Tempe, Arizona Fiscal Year 2023 Net Assessed Limited Property Values Taxpayer: Arizona Public Service Company $ Rank Fiscal Year 2014 Percentage of Net Assessed Limited Property Values Taxable Secondary Assessed Value Rank Percentage of Total City Secondary Taxable Assessed Value 82,622,532 1 3.64 % $ 22,154,504 2 0.93 % Verizon Wireless 24,966,093 2 1.10 16,681,774 3 0.70 Arizona Mills Mall LLC 22,076,872 3 0.97 24,609,104 1 1.04 JP Morgan Chase Bank NA 21,206,769 4 0.93 Iridium Satellite LLC 16,827,403 5 0.74 Honeywell International Inc 13,876,080 6 0.61 9,966,855 6 0.42 Cousins Fund II Phoenix IV LLC 10,895,850 7 0.48 JDM II Tempe OC LLC 9,953,418 8 0.44 Cousins Fund II Phoenix II LLC 9,881,370 9 0.44 KM Sonoma LLC/MT Sonoma LLC 9,219,673 10 0.41 Qwest Corporation - - 12,794,159 4 0.54 KBSII Fountainhead LLC - - 10,878,779 5 0.46 Tempe Fountainhead Corporate LLC - - 9,243,000 7 0.39 State Farm Mutual Auto Insurance - - 7,285,008 8 0.31 BreofBnk2 Southwest LLC - - 7,005,964 9 0.30 T-Mobile - - 6,606,203 10 0.28 9.76 % $ 127,225,350 Total $ 221,526,060 5.37 % Source 2023: 2023 data was not available at the time of ACFR preparation from Maricopa County Treasurer Office. 2022 data is presented. Source 2014: 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. 140 Principal Tax Payers (Exhibit S-13) Sales and Use Tax Current Fiscal Year and Nine Years Prior City of Tempe, Arizona Fiscal Year 2023 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 Total Service Electronics/Software Mixed Retail Grocery Mixed Retail Mixed Retail Rental Auto Sales Mixed Retail Electronics/Software Auto Sales Hotel Sales and Use Tax Payments $ $ 5,065,574 4,587,089 4,333,760 3,900,828 3,236,280 2,793,943 2,509,160 2,460,079 2,223,987 2,101,261 33,211,961 Fiscal Year 2014 Percentage of Total Sales and Use Tax Payments Rank 1 2 3 4 5 6 7 8 9 10 Sales and Use Tax Payments 2.66 % $ 2.40 2.27 2.04 1.70 1.46 1.32 1.29 1.17 1.10 17.41 % $ 5,318,587 2,821,155 2,694,449 2,994,825 2,501,032 2,131,429 1,775,766 1,090,904 1,142,272 1,123,742 23,594,161 Rank 1 3 4 2 5 6 7 10 8 9 Percentage of Total Sales and Use Tax Payments 3.57 % 1.89 1.81 2.01 1.68 1.43 1.19 0.73 0.77 0.75 15.83 % Source: City of Tempe, Arizona Tax and License Division Note: The identities of the ten largest revenue payers are prohibited from disclosure per State Statute. The business type of the top ten taxpayers has been disclosed along with the appropriate data. 141 Excise Tax Collections (Exhibit S-14) Last Ten Fiscal Years City of Tempe, Arizona Fiscal Year 2023 Privilege and use tax (a) $ 137,347,979 Fiscal Year 2022 $ 140,443,769 Fiscal Year 2021 $ 118,865,174 Fiscal Year 2020 $ 113,398,508 Fiscal Year 2019 $ 111,283,725 Fiscal Year 2018 $ 105,643,666 Fiscal Year 2017 $ 99,865,430 Fiscal Year 2016 $ 95,804,083 Fiscal Year 2015 $ 92,910,407 Fiscal Year 2014 $ 97,169,520 State shared sales tax 34,924,472 25,683,520 23,228,957 19,899,062 17,958,644 18,266,956 16,145,681 15,357,220 14,779,296 14,076,468 State shared income tax 27,216,492 24,105,004 27,983,270 24,875,451 22,408,078 22,604,114 21,511,044 19,470,946 19,577,085 18,025,635 Franchise tax 2,863,995 3,055,126 2,846,569 2,772,127 3,036,531 3,290,220 3,182,193 3,363,615 2,933,239 3,310,940 Vehicle license tax 9,132,854 9,166,233 9,291,268 8,165,499 7,657,621 7,532,801 7,015,040 6,644,362 6,215,552 6,053,172 Permits and fees (b) 17,733,066 8,005,559 12,328,064 15,896,029 13,739,509 14,815,290 10,244,664 11,543,817 11,881,915 12,197,631 Fines and forfeitures (c) Total 4,144,727 $ 233,363,585 4,934,285 $ 215,393,496 4,404,217 $ 198,947,519 5,612,670 $ 190,619,346 6,434,188 $ 182,518,296 6,839,148 $ 178,992,195 8,094,581 $ 166,058,633 8,464,633 $ 160,648,676 8,436,300 $ 156,733,794 8,190,178 $ 159,023,544 Source: City of Tempe, Arizona Annual Comprehensive 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 (expiring December 2020), the 0.1% Arts and Culture Tax approved by voters in November 2018 (effective January 2021) 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 Engineering and Transportation fees/charges for services. (c) Amounts include fines and forfeitures for General Fund only. 142 Ratios of Net General Bonded Debt Outstanding (Exhibit S-15) Last Ten Fiscal Years City of Tempe, Arizona Governmental General Obligation Debt Fiscal Year 2014 $ 163,205,000 Enterprise General Obligation Debt and WIFA $ 236,046,554 General Obligation Premium $ 11,610,013 Less: Debt Service Reserves $ 33,699,262 Secondary/Limited Assessed Valuation (a) Total $ 377,162,305 $ Percentage of Governmental Debt to Assessed Value (b) Percentage of Total to Assessed Value of Property Net Direct Debt Per Capita 1,513,299,272 8.6 % 24.9 % 2015 181,905,000 216,802,282 14,741,563 20,960,171 392,488,674 1,627,720,901 9.9 24.1 $ 2,294 2,140 2016 180,750,000 196,122,761 26,115,095 20,693,070 382,294,786 1,593,944,354 10.0 24.0 2,213 2017 178,555,000 198,182,660 27,517,521 21,456,909 382,798,272 1,669,352,097 10.0 22.3 2,053 2018 180,435,000 201,216,644 32,224,134 13,114,979 400,760,799 1,774,236,710 9.4 22.9 2,098 2019 183,990,000 206,499,363 38,801,412 3,463,501 425,827,274 1,862,969,450 9.7 22.9 2,214 2020 191,860,000 185,795,463 33,458,848 4,158,853 406,955,458 2,010,523,406 9.3 20.2 2,078 2021 196,865,000 163,289,583 36,837,470 6,898,943 390,093,110 2,128,571,831 8.9 18.7 2,198 2022 212,220,000 195,886,352 44,910,501 8,447,041 444,569,812 2,282,833,787 8.9 19.5 2,686 2023 243,407,158 183,268,233 45,530,393 9,524,199 462,681,585 2,385,407,554 9.8 19.4 2,488 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. 143 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 2014 $ 163,205,000 23,930,000 $ 144,606,000 - $ 356,700,280 2015 181,905,000 21,175,000 134,746,000 18,668,237 4,552,000 - 87,082 - 361,133,319 2016 180,750,000 19,980,000 123,389,000 22,291,058 4,181,000 - 61,399 - 350,652,457 2017 178,555,000 18,730,000 116,009,000 20,515,300 3,794,000 - 34,743 - 337,638,043 2018 180,435,000 17,415,000 97,994,000 21,847,912 3,389,000 - 65,610 - 321,146,522 2019 183,990,000 16,035,000 87,269,000 25,046,197 2,966,000 - 40,972 - 315,347,169 2020 191,860,000 27,750,000 76,604,000 21,731,892 2,524,000 - 81,216 - 320,551,108 2021 196,865,000 25,755,000 69,582,000 26,374,477 2,062,000 - 979,231 - 321,617,708 2022 212,220,000 23,865,000 69,442,000 24,718,409 1,580,000 - 8,710 343,000,000 674,834,119 2023 243,407,158 21,895,000 60,787,000 28,097,020 1,076,000 - 4,514 336,000,000 691,266,692 Fiscal Year General Obligation Bonds 2014 $ 223,495,000 2015 204,970,000 84,839,000 - 13,905,912 11,832,282 2016 185,025,000 91,876,000 - 26,735,479 2017 187,835,000 80,466,000 - 2018 191,635,000 69,876,000 2019 197,700,000 2020 $ Excise Tax Revenue Bonds HUD Section 108 Loan Premium on Debt Payable $ 19,542,476 $ 4,907,000 Capital Improvement Notes $ Financed Purchases 509,804 $ Total GovernmentType Debt Certificates of Participation – $ Business-Type Activities Excise Tax Revenue Bonds Total BusinessType Debt Total Primary Government 499,476 $ 323,813,515 $ 680,513,795 4,132 16.27 % 283,594 315,830,788 676,964,107 3,822 14.12 11,097,761 63,750 314,797,990 665,450,447 3,816 14.23 26,648,171 10,347,660 318,834 305,615,665 643,253,707 3,553 12.63 - 27,703,607 9,581,644 213,267 305,615,665 643,253,707 3,525 12.53 57,886,000 - 30,951,583 8,799,363 736,327 296,073,273 611,420,442 3,178 10.23 177,795,000 54,331,000 38,000,000 27,176,457 8,000,463 480,916 305,783,836 626,334,944 3,199 9.62 2021 156,105,000 50,543,000 72,100,000 35,391,535 7,184,583 327,068 321,651,186 643,268,894 3,562 10.44 2022 189,535,000 46,703,000 69,570,000 37,695,756 6,351,352 166,851 350,021,959 1,024,856,078 6,193 24.38 2023 177,767,842 42,528,000 66,895,000 35,672,156 5,500,392 – 328,363,390 1,019,630,082 5,483 13.38 $ 76,109,000 Revenue Obligations $ Premium on Debt Payable - $ 11,158,485 WIFA Loans $ Financed Purchases 12,551,554 144 $ Per Capita Percentage of Personal Income Direct and Overlapping Governmental Activities Debt (Exhibit S-17) City of Tempe, Arizona Governmental Unit: 2023 Net Limited Assessed Valuation Debt Outstanding Portion Applicable To City of Tempe Percent Amount Combined Tax Rate per $100 Assessed Debt repaid with property taxes: State of Arizona Maricopa County Maricopa Special Health Care District Maricopa County Community College Tempe Elementary School District No. 3 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 East Valley Institute of Technology Subtotal overlapping debt $ 78,415,651,028 51,575,018,185 47,553,260,925 51,575,018,185 1,883,100,832 3,705,196,585 2,524,452,281 6,406,817,785 4,407,553,113 25,369,201,769 City direct debt (governmental activities) $ 2,282,833,787 $ Total direct and overlapping debt None None 640,695,000 184,715,000 154,515,000 358,660,000 213,060,000 304,315,000 76,755,000 None 3.06 % 4.66 4.66 4.66 83.59 0.67 30.36 0.29 53.03 9.46 None $ None 29,856,387 8,607,719 129,159,089 2,403,022 64,685,016 882,514 40,703,177 None 276,296,924 0.4263 1.7293 0.1145 1.2881 4.4508 7.0635 3.6784 3.4579 2.4466 0.0500 691,266,692 100.00 % 691,266,692 2.3959 $ 967,563,616 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. 145 Legal Debt Margin Information (Exhibit S-18) Last Ten Fiscal Years City of Tempe, Arizona Fiscal Year 2023 Fiscal Year 2022 Fiscal Year 2021 Fiscal Year 2020 Fiscal Year 2019 Fiscal Year 2018 Fiscal Year 2017 Fiscal Year 2016 Fiscal Year 2015 Fiscal Year 2014 Assessed Valuation $3,445,248,462 $3,270,464,268 $2,985,831,463 $2,723,618,126 $2,457,096,949 $2,285,492,942 $2,125,705,145 $1,593,944,354 $1,627,720,901 $1,513,299,272 20% Limitation: Debt limit equal to 20% of assessed valuation $ 689,049,692 $ 654,092,854 $ 597,166,293 $ 544,723,625 $ 491,419,390 $ 457,098,588 $ 425,141,029 $ 318,788,871 $ 325,554,180 $ 302,659,854 367,391,618 394,798,663 344,099,415 357,900,003 369,823,502 353,760,024 337,734,652 330,432,281 361,721,555 390,600,904 $ 321,658,074 $ 259,294,191 $ 253,066,878 $ 186,823,622 $ 121,595,888 $ 103,338,564 Total net debt applicable to 20% limit Legal 20% debt margin (available borrowing capacity) Total net debt applicable to the 20% limit as a percentage of 20% debt limit 53.32% 60.36% 57.62% 65.70% 75.26% $ 77.39% 87,406,377 $ 79.44% - $ 103.65% - $ 111.11% - 129.06% 6% Limitation: Debt limit equal to 6% of assessed valuation Total net debt applicable to 6% limit Legal 6% debt margin (available borrowing capacity) Total net debt applicable to the 6% limit as a percentage of 6% debt limit $ 206,714,908 $ 196,227,856 $ 179,149,888 $ 163,417,088 $ 147,425,817 $ 137,129,577 $ 127,542,309 97,469,864 91,074,059 84,050,477 76,093,198 77,915,351 77,206,874 80,243,108 $ 109,245,044 $ 105,153,797 47.15% 46.41% $ 95,099,411 46.92% $ 87,323,890 $ 69,510,466 46.56% 52.85% $ 59,922,703 56.30% $ 47,299,201 62.91% $ 95,636,661 $ 81,905,000 $ 13,731,661 85.64% 97,663,254 $ 81,495,000 $ 16,168,254 83.44% 90,797,956 39,045,000 $ 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. 146 Remaining General Obligation Bond Authorizations (Exhibit S-19) City of Tempe, Arizona Authorization 2016 Program: Water/Wastewater Streets/Transportation/Storm Drains Public Safety - Police/Fire Community Services/Park Improvements Municipal Infrastructure Preservation Total 2016 Program 2020 Program: Water/Wastewater Streets/Transportation/Storm Drains Public Safety - Police/Fire Community Services/Park Improvements Municipal Infrastructure Preservation Grand Total Prior Issues Current Year Issue Remaining Authorization 148,000,000 79,855,302 12,009,355 56,135,343 25,000,000 20,000,000 25,000,000 17,489,050 2,510,950 - 34,000,000 34,000,000 - - 27,000,000 254,000,000 27,000,000 183,344,352 14,520,305 56,135,343 134,000,000 - - 134,000,000 74,000,000 34,000,000 748,050 - 7,706,121 8,297,636 65,545,829 25,702,364 45,000,000 5,811,850 19,015,103 20,173,047 62,000,000 13,737,700 20,015,894 28,246,406 349,000,000 20,297,600 55,034,754 273,667,646 $ 603,000,000 $ 203,641,952 $ Source: City of Tempe, Arizona Accounting Division 147 69,555,059 $ 329,802,989 Pledged-Revenue Coverage (Exhibit S-20) Last Ten Fiscal Years City of Tempe, Arizona Special Assessment Bonds Fiscal Year Special Assessment Collections 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 $ 3,605,932 $ 2,959,851 3,862,306 3,884,758 2,439,086 2,214,178 2,173,798 2,209,650 2,027,722 2,212,190 1,990,732 2,211,570 2,442,290 2,207,767 2,143,728 2,210,533 2,126,515 1,989,250 1,911,731 1,984,125 Debt Service (d) Excise Tax Revenue Obligations Excise Tax Revenue Collections Debt (a) Service (d) Coverage Coverage 1.22 $165,485,314 $ 11,977,968 0.99 156,733,794 12,055,250 1.10 160,648,676 45,696,593 0.98 166,058,633 36,355,425 0.92 178,992,195 20,743,689 0.90 182,518,296 20,739,629 1.11 190,619,346 12,637,348 0.97 198,947,519 12,652,543 1.07 206,991,736 12,703,056 0.96 233,366,585 11,938,011 13.82 13.00 3.52 4.57 8.63 8.80 15.08 15.72 16.29 19.55 Performing Arts/Arts + Culture Excise Tax Obligations Transit Excise Tax Obligations 0.1% 0.5% Privilege Privilege and Use Tax and Use Tax Fiscal Collections Debt Collections Debt Year (b) Service (d) Coverage (c) Service (d) Coverage 2014 2015 2016 2017 2018 2019 2020 2021 (f) 2022 2023 $ 6,921,904 $ 5,918,250 7,460,054 5,919,026 7,656,210 5,921,676 8,084,891 3,427,850 8,436,503 3,428,850 8,823,434 3,428,100 9,131,870 3,433,850 4,895,809 — 11,202,441 504,233 11,647,867 580,750 1.17 $ 33,539,177 $ 4,655,713 1.26 36,147,640 4,655,688 1.29 37,288,527 4,658,463 2.36 39,512,636 4,372,288 2.46 41,074,434 4,311,491 2.57 43,063,185 4,116,542 2.66 44,373,904 4,118,094 N/A 47,534,174 4,978,120 22.22 54,736,977 5,901,166 20.06 57,815,447 4,689,492 7.20 7.76 8.00 9.04 9.53 10.46 10.78 9.55 9.28 12.33 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. 148 Pledged-Revenue Coverage (Exhibit S-20) Last Ten Fiscal Years City of Tempe, Arizona (b) The 0.1% privilege and use tax is a Performing Arts Center Tax approved by voters in September 2000 (expiring December 31, 2020) and the 0.1% Arts & Culture Tax approved by voters in November 2018 (effective January 1, 2021). (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. (e) Pledged water/sewer net revenues includes a) operating and non-operating revenues of the system, excluding gain on sale of assets; less b) operating expenses, excluding depreciation. (f) Beginning January 1, 2021, the Performing Arts Excise Tax ended and there was no outstanding Performing Arts Excise Tax Obligation debt service after Fiscal Year 2020. 149 Pledged Revenue, Projected Debt Service and Estimated Coverage (Exhibit S-21) Excise Tax Obligations (Excluding Transit Excise Tax Obligations) City of Tempe, Arizona Senior Excise Tax Obligations Fiscal Year 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 Pledged Excise Tax Revenues (a) Outstanding Senior Excise Tax Obligations Debt Service Requirements (b) $ 233,366,585 $ 11,938,011 8,860,179 16,153,105 6,672,637 6,664,697 6,664,783 6,666,957 5,070,651 5,063,984 2,672,824 2,116,125 Outstanding Senior Excise Tax Obligations Coverage (c) Revenue Available for Debt Service (d) 19.55 $ 26.34 14.45 34.97 35.02 35.01 35.00 46.02 46.08 87.31 110.28 Outstanding Subordinate Excise Tax Obligations Debt Service Requirements (e) 233,076,441 $ 150 580,750 579,250 582,000 578,350 579,700 581,000 582,250 577,500 582,000 580,250 577,500 578,750 578,750 577,500 Coverage (f) 401.34 402.38 400.47 403.00 402.06 401.16 400.30 403.60 400.47 401.68 403.60 402.72 402.72 403.60 Source: City of Tempe, Arizona Accounting Division (a) Excise Tax Revenues received by the City in Fiscal Year 2022. 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 2013 2016 2019R 2021R Remaining Obligation 7,300,000 17,850,000 18,390,000 8,110,000 14,210,000 $ 65,860,000 $ (c) The estimated coverage figures shown reflect the ratio of actual Fiscal Year 2022 excise tax revenues to total debt service requirements for the City's revenue bonds. (d) Consists of Arts and Culture Excise Taxes and Excise Taxes (net of current year annual debt service on Outstanding Senior Excise Tax Obligations) received in Fiscal Year 2022. (e) Includes the annual debt service requirements of the City of Tempe, Arizona Arts and Culture Excise Tax Obligations, Series 2021, currently outstanding in the principal amount of $5,895,000. Debt service requirements do not include fiscal fees. (f) Pursuant to the Purchase Agreement, the City agrees that the Arts and Culture Excise Taxes and the Excise Taxes presently imposed will continue to be imposed so that the amount of Arts and Culture 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. 151 Pledged Revenue, Projected Debt Service and Estimated Coverage (Exhibit S-22) Transit Excise Tax Obligations City of Tempe, Arizona Senior Excise Tax Obligations Pledged Excise Tax Revenues (a) Fiscal Year 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 $ Outstanding Senior Excise Tax Obligations Debt Service Requirements (b) 57,815,447 $ Outstanding Senior Excise Tax Obligations Coverage (c) 4,689,492 4,695,249 4,689,034 4,692,521 4,690,698 4,693,842 4,686,310 4,699,737 4,693,299 4,692,892 4,692,175 4,695,933 4,695,126 2,019,412 1,568,538 861,150 859,685 862,680 12.33 12.31 12.33 12.32 12.33 12.32 12.34 12.30 12.32 12.32 12.32 12.31 12.31 28.63 36.86 67.14 67.25 67.02 Source: City of Tempe, Arizona Accounting Division (a) Excise Tax Revenues recognized by the City in Fiscal Year 2022. (b) Includes annual remaining debt service requirements for the Series 2017R City of Tempe, Arizona Transit Excise Tax Refunding Obligations in the principal amount outstanding of $16,060,000; the Series 2020 City of Tempe, Arizona Transit Excise Tax Obligations in the principal amount outstanding of $12,165,000; and the Series 2021R City of Tempe, Arizona Transit Excise Tax Refunding Obligations in the principal amount outstanding of $28,330,000. (c) The estimated coverage figures shown reflect the ratio of actual Fiscal Year 2022 excise tax revenues to total debt service requirements for the City's Transit excise tax bonds. 152 Pledged Revenue, Projected Debt Service and Estimated Coverage (Exhibit S-23) Water/Sewer Revenue Obligations City of Tempe, Arizona Senior Excise Tax Obligations Pledged Water/Sewer Net Revenues (a) Fiscal Year 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 $ Outstanding Water & Sewer Revenue Obligation Debt Service Requirements (b) 32,039,318 $ 5,328,298 5,330,855 5,329,470 5,329,025 5,329,388 5,330,308 5,326,535 5,333,070 5,324,280 5,330,548 5,331,108 5,330,843 5,329,620 5,327,190 5,328,303 5,327,458 5,329,523 5,328,998 2,850,750 Outstanding Water & Sewer Revenue Obligation Coverage (c) 6.01 6.01 6.01 6.01 6.01 6.01 6.02 6.01 6.02 6.01 6.01 6.01 6.01 6.01 6.01 6.01 6.01 6.01 11.24 Source: City of Tempe, Arizona Accounting Division (a) Net Revenues are defined as that portion of the Revenues remaining after providing sufficient funds for the Current Expenses of the System. (b) Debt Service Requirements include actual principal and intest for the Fiscal Year Ended June 30, 2022 plus remaining principal and interest beginning in the Fiscal Year Ended June 30, 2023, forward for the Series 2020 City of Tempe, Arizona Water & Sewer Revenue Obligations in the principal amount outstanding of $33,570,000 and the Series 2021 City of Tempe, Arizona Water & Sewer Revenue Obligations in the principal amount outstanding of $33,325,000. (c) The estimated coverage figures shown reflect the ratio of actual Fiscal Year 2022 Pledged Water/Sewer Net Revenues the annual total Debt Service Requirements for the Water & Sewer Revenue Obligations. 153 Demographic and Economic Statistics (Exhibit S-24) Last Ten Fiscal Years City of Tempe, Arizona Fiscal Year Population (a) Total Personal Income (b) Per Capita Personal Income (c) Average Household Income (c) Median Age (c) ASU School School Enrollment (d) Enrollment (e) Unemployment Rate (f) 2023 185,950 $ 7,622,648,350 $ 40,993 $ 96,012 30.7 23,806 60,839 3.10 % 2022 186,194 $ 7,181,502,580 $ 38,570 $ 91,012 30.5 23,986 58,088 2.90 % 2021 180,587 6,159,822,570 34,110 82,283 29.8 23,838 56,095 6.20 2020 195,805 6,511,691,080 33,256 79,758 29.6 25,275 57,009 9.80 2019 192,364 5,975,402,932 31,063 72,792 30.4 25,478 55,224 4.10 2018 185,038 5,594,253,854 30,233 71,916 30.0 25,527 54,456 3.90 2017 182,498 5,134,033,736 28,531 67,501 29.5 24,891 75,729 4.30 2016 173,510 4,881,183,320 28,132 65,814 28.7 25,656 74,293 5.90 2015 169,533 4,546,705,527 26,819 62,291 28.5 25,480 83,301 6.80 2014 170,027 4,601,100,647 27,061 64,714 28.1 25,264 73,378 7.50 Source: (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 through FY 18-19 and by ESRI beginning FY 19-20. (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://www.azcommerce.com/oeo/labor-market/unemployment/#content-block-1 154 Principal Employers (Exhibit S-25) Current Fiscal Year and Nine Years Prior City of Tempe, Arizona Fiscal Year 2023 Employees (a) Employers: Rank Fiscal Year 2014 Employment Employees (b) Rank Employment Arizona State University State Farm Insurance 8,330 7,540 1 2 22.8 % 20.6 11,185 - 1 - 27.7 % - Amazon Chase Bank National JPMorgan Association SRP Wells Fargo Kyrene School District City of Tempe ABM Industries Inc Freedom Financial Network Honeywell Maricopa County Community Colleges Motorola Safeway Inc. US Airways Total 3,920 3,320 3,010 2,410 2,330 2,171 2,000 1,580 36,611 3 4 5 6 7 8 9 10 - 10.7 9.1 8.2 6.6 6.4 5.9 5.5 4.3 100.0 % 2,377 4,374 3,576 2,401 3,000 4,611 3,000 3,996 1,898 40,418 9 3 5 8 7 2 6 4 10 5.9 10.8 8.9 5.9 7.4 11.4 7.4 9.9 4.7 100.0 % Source: (a) https://geo.azmag.gov/maps/azemployer/ November 7th, 2023 (b) City of Tempe, Arizona Comprehensive Annual Financial Report, Fiscal Year 2014 155 Full-Time Equivalent City Government Employees by Function (Exhibit S-26) Last Ten Fiscal Years City of Tempe, Arizona Fiscal year 2023 Fiscal year 2022 Fiscal year 2021 Fiscal year 2020 Fiscal year 2019 Fiscal year 2018 Fiscal year 2017 Fiscal Year 2016 Fiscal Year 2015 Fiscal Year 2014 Police Fire medical rescue Community services Engineering and transportation Municipal utilities Community development Human services Municipal court Mayor and council City manager City attorney Internal audit office Municipal budget office 519 241 349 121 277 89 203 44 7 42 30 4 4 520 230 306 118 261 86 190 43 7 32 29 4 4 516 221 283 116 257 82 156 43 7 28 28 4 4 516 220 297 106 267 84 147 43 7 31 28 4 4 512 214 305 79 54 43 7 32 27 4 4 508 174 304 85 50 43 7 31 25 4 4 505 155 297 83 46 43 7 33 25 4 4 500 156 286 88 49 42 7 32 26 4 4 496 156 286 90 40 42 7 31 26 4 4 497 156 314 90 42 7 11 25 4 - Office of strategic management and diversity Economic development office Sustainability office City clerk and elections Financial services Human resources Information technology Internal services Public works Community relations Diversity program Tempe learning center Finance and technology Human resources Total 6 6 6 6 109 23 84 2,170 6 6 2 6 108 20 82 2,060 6 3 1 5 207 1,967 8 3 1 5 212 1,983 7 5 210 429 1,932 6 5 217 431 1,894 6 5 206 430 1,849 6 4 156 470 1,830 4 155 467 1,808 5 486 3 139 20 1,799 Source: City of Tempe, Arizona Fiscal Year 2023 Annual Budget Note: See Exhibit S-2a for changes in functions that have occurred in prior years. 156 City of Tempe, Arizona 157 Operating Indicators by Function/Program (Exhibit S-27) Last Ten Fiscal Years City of Tempe, Arizona Year 2023 Year 2022 Year 2021 Year 2020 Year 2019 Year 2018 Year 2017 Year 2016 Year 2015 Year 2014 Function /Program Police Crime rate (per 100,000 population) 4,237 4,944 4,606 4,247 4,752 4,478 5,063 4,900 5,110 5,343 Traffic accidents 4,818 3,833 3,012 4,945 5,857 5,621 5,638 5,376 5,103 4,755 Emergency service average response time (minimum) 6:23 6:19 6:24 6:27 6.7 6.60 6.36 6.83 5:13 5:02 Citizen calls for police service 83,813 85,516 79,072 83,427 90,055 91,012 88,515 86,229 85,502 84,092 Operating expenditures per citizen calls (a) $ 1,282 $ 1,167 $ 1,212 $ 1,166 $ 1,015 $ 968 $ 917 $ 926 $ 926 $ 874 Fire Firefighters per capita (10,000) 9.33 9.33 9.33 8.9 11.60 8.82 9.45 9.47 Number of fire calls 2,532 2,746 2,369 2,207 1,980 2,212 2,565 1,944 2,022 1,958 Number of medical calls 24,533 24,729 21,582 21,761 22,209 22,093 26,633 20,021 19,630 18,119 Number of other assistance calls 1,991 2,045 2,068 2,117 2,324 1,916 2,637 1,963 1,853 1,976 Emergency service average response time (minimum) 4:40 4:38 4:31 4:31 4:31 4:15 3:36 4:16 4:10 4:08 Percent of emergency responses taking 6.0 minutes or less (d) 79% 80% 82% 80% 80% 75% 74% 73% 75% 76% Transportation Percent of on-time bus performance (f) 83% 85% 87% N/A 92% 92% 90% 90% 92% 91% Annual bus boardings 3,676,750 2,701,540 1,967,142 4,741,442 6,022,149 6,407,657 6,484,875 6,841,497 7,178,128 7,897,964 Annual rail boardings (e) 2,511,247 1,703,120 1,241,440 2,588,121 3,008,033 3,145,896 N/A N/A N/A N/A Number of square yards of asphalt repaired 1,062,443 1,021,983 720,275 918,426 1,225,309 736,076 731,425 402,900 302,000 397,605 Library Registered borrowers 87,848 88,366 110,808 104,791 93,689 100,155 97,443 140,000 143,000 143,018 Circulation 914,753 763,686 497,675 566,745 743,931 802,492 855,055 800,000 930,000 814,199 Community development Number of permits issued for commercial / industrial Valuation of commercial/industrial permits 464 $ 409,458,156 Number of permits issued for residential Valuation of residential permits 1,247 $ 32,319,819 $ 73,063,218 Number of permits issued other Valuation of other permits 369 $570,407,379 447 $435,445,691 1,382 $ 44,418,957 390 965 $ 37,855,549 583 $ 24,408,687 476 $725,909,656 603 $ 40,035,903 981 $ 32,290,151 541 $790,508,270 573 $ 32,849,626 1102 $ 25,876,027 503 $739,627,514 532 $ 35,888,436 1053 $ 35,278,125 644 $270,664,400 122 $157,887,839 1165 $ 40,037,341 775 $333,250,987 474 $274,402,813 1 $ 60,000 678 $527,389,841 646 $173,004,137 1 $ 150,000 30 $211,281,465 451 $235,037,289 4 $ 8,758,218 660 $156,702,779 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) 43,327,000,000 43,319 42,949 43,724 43,284 43,214 42,647 43,061 42,678 42,555 14,190 15,580 16,600 15,154 15,506 16,090 15,506 15,278 15,130 15,979 1,305 $ 19.4 1,167 $ 20 1,070 $ 19 783 $ 19.0 995 $ 19.1 979 $ 19.1 953 $ 19.4 941 $ 19.4 878 $ 19.4 309 19.4 Solid waste collection Residential container/recycling cost per ton $ 177 $ 232 $ 258 $ 159 $ 158 235 $ 111 $ 139 $ 138 $ 140 $ 108 Number of residential accounts 33,326 33,328 34,540 33,245 33,263 32,869 33,160 33,001 33,397 Residential recycling diversion rate (c) 18% 20% 18% 23% 23% 28% 19% 21% 19% 15% Number of commercial accounts 1,454 1,487 1,722 1,491 1,565 1,641 1,671 1,709 1,783 2,130 Commercial collection cost per ton $ 103 $ 97 $ (a) Source: City of Tempe, Arizona Municipal Budget Office and other applicable City departments. (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 Years 2017 and prior, the percents measured were for 5.0 minutes or less. (e) For Fiscal Years 2017 and prior, this data was not requested. (f) Due to a system conversion, data was not available for all of Fiscal Year 2020 and for part of Fiscal Year 2021. 98 $ 342 $ 159 113 $ 100 $ 93 $ 91 $ 95 33,440 $ 95 Capital Asset Statistics by Function/Program (Exhibit S-28) Last Ten Fiscal Years City of Tempe, Arizona Fiscal Year 2023 Police Stations Patrol units (squads) Fire stations Transportation Streets (miles) Streetlights Traffic signals Buses Parks and recreation Acreage (a) Playgrounds Sports fields (b) 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 2022 Fiscal Year 2021 Fiscal Year 2020 Fiscal Year 2019 Fiscal Year 2018 Fiscal Year 2017 Fiscal Year 2016 Fiscal Year 2015 Fiscal Year 2014 3 21 7 3 21 7 3 21 7 3 21 7 3 21 6 3 21 6 3 21 6 3 24 6 3 24 6 3 24 6 1,321 12,301 254 118 1,775 12,274 249 120 1,775 11,559 244 124 1,241 11,483 235 124 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 1,519 44 66 5 2 1,519 44 66 5 2 1,519 44 66 5 2 1,875 45 200 5 2 1,875 45 200 5 2 1,875 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 2 850 850 850 850 850 850 850 833 833 833 137 137 137 137 137 137 137 125 125 125 54 495 231 54 495 231 54 495 231 54 495 231 54 495 231 54 495 231 54 495 231 54 495 231 42 549 173 42 549 173 29 29 29 29 29 29 29 29 19 19 42 42 42 42 43 43 43 45 47 52 Source: City of Tempe, Arizona Municipal Budget Office and other applicable City departments. 160 Water Connections by Customer Type, Sewer Connections and Sewage Treated (Exhibit S-29) Last Two Fiscal Years City of Tempe, Arizona Fiscal Year 2023 Fiscal Year 2022 Fiscal Year 2021 Water Connections Customer Type: Single Family Multifamily Commercial Industrial Landscape Total (a) 35,007 1,933 3,946 73 2,000 42,959 35,135 1,902 3,946 73 2,014 43,070 35,204 1,907 3,950 73 2,005 43,139 Sewer connections No. of Sewer Connections 40,707 40,784 40,596 Sewage treated 91st Avenue Plant (MGD) 19.4 19.2 19 Source: City of Tempe, Municipal Utilities Department. (a) Total number of accounts billed in any month is less than the total number of connections due to vacancies. Note: This schedule is required for the Series 2021 City of Tempe, Arizona Water and Sewer Revenue Obligations and is intended to show information for ten years. Additional years' information will be displayed as it becomes available. 161 Water Deliveries (Exhibit S-30) Last Two Calendar Years City of Tempe, Arizona Calendar Year 2023 (c) Water Deliveries Residential (a) Commercial Other (b) Total Calendar Year 2022 (c) 20,257 10,245 10,475 40,977 20,077 10,447 10,377 40,901 Calendar Year 2021 22,512 11,324 11,617 45,453 Source: City of Tempe, Municipal Utilities Department. (a) (b) (c) Residential includes both single family and multifamily housing. Other includes industrial, landscape and construction. Water Deliveries for calendar year 2022 and 2023 are from January through November 30. Note: This schedule is required for the Series 2021 City of Tempe, Arizona Water and Sewer Revenue Obligations and is intended to show information for ten years. Additional years' information will be displayed as it becomes available. 162 Metered Water Usage Charges (Exhibit S-31) Last Two Fiscal Years City of Tempe, Arizona Fiscal Year 2023 Single Family Residential-Inside City Tier Level (gallons used) 0 - 6,000 6,001 - 8,000 8,001 - 12,000 12,001 - 16,000 16,001 - 20,000 20,001 - 36,000 36,001 - 40,000 Over 40,000 Single Family Residential-Outside City Tier Level (gallons used) 0 - 6,000 6,001 - 8,000 8,001 - 12,000 12,001 - 16,000 16,001 - 20,000 20,001 - 36,000 36,001 - 40,000 Over 40,000 Charges Per Thousand Gallons (a) Customer Class-Inside City Multifamily Commercial Construction Industrial Landscape Customer Class-Outside City Multifamily Commercial Construction Industrial Landscape Fiscal Year 2022 Fiscal Year 2021 $ 2.53 2.53 3.93 3.93 5.00 5.00 5.79 5.79 $ 1.90 2.91 2.91 4.01 4.01 5.08 5.08 5.58 $ 1.84 2.83 2.83 3.89 3.89 4.93 4.93 5.42 $ 3.29 3.29 5.11 5.11 6.50 6.50 7.53 7.53 $ 2.46 3.79 3.79 5.21 5.21 6.60 6.60 7.26 $ 2.39 3.68 3.68 5.06 5.06 6.41 6.41 7.05 $ 2.81 3.16 4.66 3.12 4.26 $ 2.11 2.73 4.42 2.85 4.08 $ 2.11 2.73 4.42 2.85 4.08 $ 3.65 4.11 6.06 4.06 5.54 $ 2.74 3.55 5.74 3.71 5.30 $ 2.74 3.55 5.74 3.71 5.30 Source: City of Tempe, Municipal Utilities Department. (a) Volume charge per one thousand (1,000) gallons usage based on customer class. Note: This schedule is required for the Series 2021 City of Tempe, Arizona Water and Sewer Revenue Obligations and is intended to show information for ten years. Additional years' information will be displayed as it becomes available. 163 Water Rates and Sewer Rates Per Meter Size(Exhibit S-32) Last Two Fiscal Years City of Tempe, Arizona Fiscal Year 2023 Water Monthly Service Charge Inside City 5/8 inch 3/4 inch 1 inch 1 1/2 inch 2 inch 3 inch 4 inch 6 inch 8 inch 10 inch 1.0" installed to accommodate sprinklers Outside City 5/8 inch 3/4 inch 1 inch 1 1/2 inch 2 inch 3 inch 4 inch 6 inch 8 inch 10 inch 1.0" installed to accommodate sprinklers Sewer Monthly Base Charge 5/8 inch 3/4 inch 1 inch 1 1/2 inch 2 inch 3 inch 4 inch 6 inch 8 inch 10 inch Fiscal Year 2022 Fiscal Year 2021 $ 10.25 11.50 16.80 34.65 65.45 97.90 228.10 656.95 1,018.85 1,525.25 10.25 $ 13.55 15.30 22.80 48.40 94.35 213.45 307.65 1,183.00 2,064.50 3,092.90 13.55 $ 13.55 15.30 22.80 48.40 94.35 213.45 307.65 1,183.00 2,064.50 3,092.90 13.55 $ 13.35 14.95 21.85 45.05 85.10 127.25 296.55 854.05 1,324.50 1,982.85 13.35 $ 17.62 19.89 29.64 62.92 122.66 277.49 399.95 1,537.90 2,683.85 4,020.77 17.62 $ 17.62 19.89 29.64 62.92 122.66 277.49 399.95 1,537.90 2,683.85 4,020.77 17.62 9.30 $ 10.30 14.00 25.10 46.70 72.60 176.00 349.00 695.00 1,650.00 2,600.00 $ 10.30 14.00 25.10 46.70 72.60 176.00 349.00 695.00 1,650.00 2,600.00 $ 10.70 16.65 36.70 71.30 107.80 254.05 736.00 1,142.65 1,711.75 Source: City of Tempe, Municipal Utilities department. Note: This schedule is required for the Series 2021 City of Tempe, Arizona Water and Sewer Revenue Obligations and is intended to show information for ten years. Additional years' information will be displayed as it becomes available. 164 Sewer Service Rates(Exhibit S-33) Last Two Fiscal Years City of Tempe, Arizona Fiscal Year 2023 Sewage Return Flow Rate of Metered Water Use Customer Class Multifamily Multifamily w/ sprinkler Commercial: self-service laundry Commercial: laundry/dry cleaners Commercial: restaurants/bakeries Commercial: food sales Commercial: hospitals Commercial: other Volume Charge per 1,000 gallons Customer Class Multifamily Multifamily w/ sprinkler Commercial: self-service laundry Commercial: laundry/dry cleaners Commercial: restaurants/bakeries Commercial: food sales Commercial: hospitals Commercial: other Fiscal Year 2022 95% 95% 95% 95% 95% 95% 95% 95% $ 2.39 2.39 3.03 4.44 4.44 4.44 3.03 3.03 Fiscal Year 2021 95% 95% 95% 95% 75% 75% 85% 90% $ 1.84 3.28 2.82 7.91 7.91 4.58 3.06 3.06 95% 95% 95% 95% 75% 75% 85% 90% $ 1.84 3.28 2.82 7.91 7.91 4.58 3.06 3.06 Source: City of Tempe, Municipal Utilities Department. Note: This schedule is required for the Series 2021 City of Tempe, Arizona Water and Sewer Revenue Obligations and is intended to show information for ten years. Additional years' information will be displayed as it becomes available. 165 City of Tempe, Arizona 166