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Financial Reports-Comprehensive Annual Financial Report (CAFR) - 6/30/2023
Prepared by: Finance Department of Town of Oro Valley David Gephart, CPA Chief Financial Officer Wendy Gomez, MPA Deputy Finance Director Aaron Van Winkle Senior Accountant Nancy Arvizu, CPA Senior Accountant Suzy Molinar Accounting Specialist Chris Hutchison, CPA Senior Budget Analyst Town of Oro Valley, Arizona 11000 N. La Cañada Drive Oro Valley, AZ 85737 (520)229-4700 https://www.orovalleyaz.gov TOWN OF ORO VALLEY, ARIZONA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2023 TABLE OF CONTENTS INTRODUCTORY SECTION Page Letter of Transmittal 1 Organizational Chart 8 List of Town Officials 9 GFOA Certificate of Achievement 10 FINANCIAL SECTION INDEPENDENT AUDITORS’ REPORT 12 MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) 19 BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements: Statement of Net Position 35 Statement of Activities 36 Fund Financial Statements: Balance Sheet – Governmental Funds 40 Reconciliation of the Balance Sheet – Governmental Funds to the Statement of Net Position 43 Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds 44 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds to the Statement of Activities 47 Statement of Net Position – Proprietary Funds 48 Statement of Revenues, Expenses and Changes in Net Position – Proprietary Funds 49 TOWN OF ORO VALLEY, ARIZONA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2023 TABLE OF CONTENTS FINANCIAL SECTION Page BASIC FINANCIAL STATEMENTS Statement of Cash Flows – Proprietary Funds 50 Notes to Financial Statements 51 REQUIRED SUPPLEMENTARY INFORMATION Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual: General Fund 90 Community Center Fund 91 Grants and Contributions Fund 92 Schedule of the Proportionate Share of the Net Pension Liability - ASRS 93 Schedule of Changes in the Net Pension Liability and Related Ratios – PSPRS Police 94 Schedule of Changes in the Net Pension Liability and Related Ratios – PSPRS Dispatchers 96 Schedule of Pension Contributions – All Pension Plans 98 Notes to Required Supplementary Information 100 SUPPLEMENTARY INFORMATION COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES Governmental Funds: Combining Balance Sheet – All Non-Major Governmental Funds – By Fund Type 104 Combining Statement of Revenues, Expenditures and Changes in Fund Balances – All Non-Major Governmental Funds – By Fund Type 105 TOWN OF ORO VALLEY, ARIZONA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2023 TABLE OF CONTENTS FINANCIAL SECTION Page Special Revenue Funds: Combining Balance Sheet 108 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 109 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual 110 Capital Projects Funds: Combining Balance Sheet 114 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 115 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual 116 Debt Service Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 122 STATISTICAL SECTION Financial Trends: Net Position by Component 125 Changes in Net Position 126 Fund Balances of Governmental Funds 128 Changes in Fund Balances of Governmental Funds 129 Revenue Capacity: Principal Sales Taxpayers 130 Taxable Sales by Category 131 TOWN OF ORO VALLEY, ARIZONA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2023 TABLE OF CONTENTS STATISTICAL SECTION Page Direct and Overlapping Sales Tax Rates 132 Net Limited and Full Cash Assessed Value of Taxable Property 133 Historical and Projected Excise Tax Collections 134 Debt Capacity: Ratio of Outstanding Debt by Type 135 Direct and Overlapping Governmental Activities Debt 136 Legal Debt Margin Information 137 Calculation of Legal Debt Margin 138 Pledged-Revenue Coverage 139 Historical and Projected Water System Revenues, Expenses, Debt Service and Coverage 140 Demographic and Economic Information: Demographic and Economic Statistics 141 Principal Employers 142 Operating Information: Full-Time Equivalent Town Employees by Function 143 Water Utility Revenues by User Type 144 Operating Indicators by Function 145 Water Rates 146 Capital Assets Statistics by Function 147 INTRODUCTORY SECTION (This page intentionally left blank) 1 December 14, 2023 Honorable Mayor, Members of Town Council and Citizens of the Town of Oro Valley, Arizona: State law mandates that cities publish a complete set of financial statements presented in conformity with accounting principles generally accepted in the United States of America and audited in accordance with auditing standards generally accepted in the United States of America by a certified public accounting firm licensed in the State of Arizona. Pursuant to that requirement, we hereby issue the annual comprehensive financial report of the Town of Oro Valley, Arizona (Town) for the fiscal year ended June 30, 2023. This report consists of management’s representations concerning finances of the Town. Consequently, management assumes full responsibility for the completeness and reliability of all information presented in this report. To provide a reasonable basis for m aking these representations, management of the Town has established a comprehensive internal control framework designed both to protect the Town’s assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the Town’s financial statements in conformity with accounting principles generally accepted in the United States of America. Because the cost of internal controls should not outweigh their benefits, the Town’s comprehensive framework of internal controls has been designed to provide reasonable, rather than absolute, assurance that the financial statements will be free of material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. The Town’s financial statements have been audited by Baker Tilly, LLP, a certified public accounting firm. The goal of the independent audit was to provide reasonable assurance that the financial statements of the Town for the fiscal year ended June 30, 2023, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditors concluded, based upon the audit, that there was a reasonable basis for rendering an unmodified opinion that the Town’s financial statements for the fiscal year ended June 30, 2023, are fairly presented in conformity with accounting principles generally accepted in the United States of America. The independent auditor’s report is presented as the first component of the financial section of this report. Accounting principles generally accepted in the United States of America 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 Town of Oro Valley’s MD&A can be found immediately following the report of the independent auditors. It’s in our nature… www.orovalleyaz.gov 11000 N. La Cañada Drive • Oro Valley, Arizona 85737 phone: (520) 229-4700 • fax: (520) 229-0428 2 PROFILE OF THE TOWN The Town of Oro Valley was incorporated in 1974. Located in northeastern Pima County, three miles north of Tucson, it sits at an elevation of 2,620 feet. The Town currently occupies a land area of more than 36 square miles and serves an estimated population of 48,906. The population of Oro Valley has increased 65% since the 2000 population of 29,700. Based on 2022 Census estimates, Oro Valley has a median household income of $92,548, compared to the median household income for the state of Arizona of $6 5,913. Oro Valley residents enjoy a comfortable hometown feel with a strong family orientation, excellent education system and abundant opportunities in a safe environment. The Town of Oro Valley operates under the Council-Manager form of government. Policymaking and legislative authority is vested in the Town Council, which consists of a Mayor and six Councilmembers. Councilmembers are elected to four-year staggered terms. The citizens of Oro Valley elect the Mayor. The Council, from among its members, selects the Vice-Mayor. The Town Council is responsible, among other things, for the adoption of local ordinances, budget adoption, the development of citizen advisory committees, the hiring and removal of the Town Manager, the Police Chief, Town Attorney and Town Judge. The Town Manager is responsible for implementation of the policies of the Town Council. The Town Manager appoints all other department directors except those mentioned above under Town Council responsibilities. The Town of Oro Valley provides a full range of services including police protection; the construction and maintenance of streets and related infrastructure; proper planning and economic development; the provision of water and stormwater services; public transportation services; recreational activities and cultural events. As with all cities in the State of Arizona, the Town of Oro Valley is required to comply with Article IX, Section 20 (1) of the Arizona Constitution, which sets limits on the Town’s legal budget capacity. Through the fiscal year ending June 30, 2023, the Town operated under the Alternative Expenditure Limitation – Home Rule Option. This option allowed the Town Council to establish budgetary limits locally, rather than being restricted by the State-imposed expenditure limitation. Voters must authorize this option every four years and it was last authorized in August of 2018. In August 2020, Oro Valley voters approved a Permanent Base Adjustment for the Town. The Permanent Base Adjustment option permanently increases the Town’s base limit so that when the State’s expenditure limitation formula is applied, it results in a limitation more closely matching the Town’s annual budget. This permanent adjustment, which takes effect in the fiscal year ending June 30, 2024, will save the Town the cost of future Home Rule elections and associated staff time every four years, giving the Town permanent control over expenditures instead of using a state-calculated formula. The annual operating budget serves as the foundation for the Town’s financial planning and control. The objective of these controls is to ensure compliance with legal provisions embodied in the annual operating budget approved by the Town Council. The Town’s proposed operating budget is presented to the Town Council for review throughout the budget cycle starting in December and approved in June. The Town Council is required to hold a public hearing on the proposed budget and to adopt the final budget by no later than the second Monday in August. Budget amendments requiring the approval of the Town Council include the following: budget transfers between funds; transfers to fund additional personnel or increased expenditures from personnel reclassifications; transfers that would reduce or eliminate funding for items designated in the adopted Capital Improvement Plan; and transfers that would reduce or eliminate funding for debt service. All other operational budget amendments involving transfers between line items or expenditure categories require approval by the Town Manager. 3 MAJOR INITIATIVES AND ACCOMPLISHMENTS FOR THE YEAR The Council adopted Strategic Leadership Plan for FY 21-22 through 22-23 is the culmination of an extensive four-month process involving Town Council, Town staff, and the Oro Valley community. Rooted deeply in the values and priorities of the Your Voice, Our Future 10-year General Plan, the two-year Strategic Leadership Plan provides organizational direction in seven focus areas: • Economic Vitality • Culture and Recreation • Public Safety • Roads, Water and Town Assets • Land Use and Design • Effective and Efficient Government • Financial Stability and Sustainability While the Strategic Leadership Plan guides short-term decision-making, the General Plan provides a longer term (up to 10 years) direction regarding the growth, development, and redevelopment of the community. Oro Valley is a community defined by the highest standard of environmental integrity, education, infrastructure, services, and public safety. It is a community of people working together to create the Town’s future with a government that is responsive to residents and ensures the long -term financial stability of the Town. Shown below are some of the Town’s accomplishments during FY 2022-23. • Recognized as a “Triple Crown Winner” by the Government Finance Officers Association for receiving the Certificate of Achievement for Excellence in Financial Reporting Award (29th consecutive year), the Distinguished Budget Presentation Award (15th consecutive year) and the Popular Annual Financial Reporting Award (11th consecutive year) • Ended FY 22-23 with a $23.8 million fund balance in the General Fund, exceeding budget expectations by $12.2 million • Revised and updated comprehensive Town Financial and Budgetary Policies • Received an unmodified “clean” audit opinion for the Town’s annual financial statements • Continued work on the $25 million (including premium) bond-funded parks and recreation amenities and improvements, including Naranja Parks improvements, Community Center and golf course irrigation improvements • Approved zoning amendments and a revised master development plan for revitalization of the Oro Valley Marketplace • Approved the updated Strategic Plan for FY 23-24 through 24-25 • Approved the public engagement strategy related to the 2026 General Plan 4 ECONOMIC CONDITIONS AND OUTLOOK The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specific environment in which the Town operates. Revenues exceeded expectations in FY 22-23, with local sales tax and state shared revenues exceeding budget by 7.8% and 6.3%, respectively. The Town continues to provide services and programs without a property tax to fund operations and, therefore, is dependent upon local sales tax and state shared revenues as major sources of revenue for its operating and capital expenditures. These sources accounted for approximately 80% of total General Fund revenue for FY 22-23. Total local sales tax collections totaled $30.2 million for FY 22-23, which represents a $0.4 million, or 1.4% decrease from last fiscal year. This decrease was far less than anticipated and a nice surprise. Major local sales tax categories experiencing year-over-year changes compared to amounts collected in FY 2021-22 are as discussed below: • Utility tax collections totaled $3.7 million for FY 22-23, up 6.8%, or more than $0.2 million over last fiscal year • Retail tax collections totaled $11.4 million for FY 22-23, up 2.3%, or nearly $0.3 million over last fiscal year • Restaurant and bar tax collections totaled $3.4 million for the fiscal year, up 11.8%, or nearly $0.4 million over last fiscal year • Construction sales tax collections totaled $5.5 million for the fiscal year, down 19.5% or $1.3 million from last fiscal year. The chart below is a look at the past five years’ local sales tax activity by category: $- $1 $2 $3 $4 $5 $6 $7 $8 $9 $10 $11 $12 Utility Taxes Retail Taxes Restaurant/Bar Taxes Construction TaxesMillionsSales Tax Activity by Sector -FY 18-19 through FY 22-23 FY 18-19 FY 19-20 FY 20-21 FY 21-22 FY 22-23 5 In FY 22-23, the Town received $19.0 million for state shared revenues in the General Fund, up 23.8%, or $3.7 million over last fiscal year. This was due primarily to an increase in the percentage of state income tax collections distributed to incorporated cities and towns . This increase will be offset with upcoming statutory reductions and a rate cap on state income tax growth . The trend chart below depicts the performance of both of these revenue categories since FY 13-14: Critical to success in this area is the preparation of realistic growth assumptions helping guide Town revenue projections. Despite inflation and interest rate hikes, there continues to be healthy economic growth and activity in Oro Valley, the Tucson metropolitan region and Statewide. Arizona continues to do well in national economic rankings and remains one of the fastest-growing states in both population and personal income. With Oro Valley’s proximity to the Tucson metro region, it is likely that the Town’s local economy will continue to benefit from housing sales, retail and tourism growth, and overall household and personal income growth. Future population and economic growth of the Town depends largely on continued available land for development. Therefore, strategic annexation efforts and discussions are ongoing as a means to address the potential for future buildout within existing Town boundaries. While strong state population and economic growth continues to increase shared revenues, legislative changes made at the state level have a far greater potential for impacts to this significant revenue source for the Town. Statutory income tax rate reductions and a cap of 2.5% are forecast to limit growth in shared income tax revenues to about 2% per year in future years. In the near term, projected commercial and residential development should be steady over the next two to three-year period. Residential activity has returned to a more normal historical pattern, after a 15 -plus year high in FY 20-21. In FY 22-23, the Town estimated that 171 single family residential (SFR) building permits would be issued; a total of 119 were issued by year-end. Despite this variance, revenues exceeded budget due to construction valuations, residential improvement activity and increased commercial activity. The FY 23-24 budget assumes 119 SFR permits will be issued during the year. $- $5 $10 $15 $20 $25 $30 $35 13-14 14-15 15-16 16-17 17-18 18-19 19-20 20-21 21-22 22-23MillionsLocal Sales Tax Collections and State Shared Revenues Sales Taxes State Shared Revenues 6 The below chart depicts the local trends in single family residential (SFR) building permits issued and annual permit revenues from both residential and commercial construction activity from FY 13-14 through FY 23-24 budget projections. Future Focus During FY 2023-24, the Town will continue to identify and quantify both one -time revenues derived from construction activity and recurring revenues derived from such areas as local sales taxes and state- shared sources. The Town continues to dedicate one-time revenues to funding one-time expenditures in the budget, specifically for capital improvement projects, while ensuring sufficient recurring revenues exist to fund recurring expenditures. With the current growth and activity expectations in future years, it will be important to continue to analyze the budget in this manner to avoid future reliance on one-time revenues to fund recurring costs. For FY 23-24, the Town will focus its efforts on supporting elements of the Town Council adopted Strategic Plan all while navigating any potential economic fluctuations that may occur. These strategies will be fulfilled in a number of ways as highlighted below: • The FY 23-24 budget includes the completion of $25 million in improvements at Naranja Park, the Community Center, and multi-use paths throughout the Town. Because these improvements were funded with a bond issuance from a dedicated funding source via the Town’s half-cent sales tax in its Community Center Fund, there is no impact to the Town General Fund. • The FY 23-24 budget includes $2.5 million for the Pavement Preservation Program in the Highway Fund, which maintains the current condition of Town streets. • The FY 23-24 budget includes nearly $14.1 million in capital improvements for the Town’s water system, continuing to ensure a safe, reliable and sustainable water supply to meet community needs. 0 100 200 300 400 500 600 $- $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 13-14 14-15 15-16 16-17 17-18 18-19 19-20 20-21 21-22 22-23 23-24 Budget SFR PermitsPermit RevenueSFR Permits and Building Activity Revenue SFR Permits Residential Permit Revenues Commercial Permit Revenues 7 The Town also continues to maintain strong investment grade ratings on its outstanding excise tax bonds, rated “AA+” by Standard and Poor’s. This is largely achieved by the Council’s goal of continuing to diversify the Town’s revenue base and maintaining strong fund balance reserves in the General Fund, currently at $23.8 million, or 47% of FY 23-24 adopted expenditures of $50.4 million. This is well above the Council-adopted policy threshold of 30% of expenditures. AWARDS AND ACKNOWLEDGMENTS Award. The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the Town of Oro Valley for its annual comprehensive financial report for the year ended June 30, 202 2. This was the twenty- ninth consecutive year that the Town has achieved this prestigious award. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized annual comprehensive financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current annual comprehensive financial report continues to meet the Certificate of Achievement Program’s requirements and are submitting it to the GFOA to determine its eligibility for another certificate. Acknowledgments. The preparation of this Annual Comprehensive Financial Report could not have been accomplished without the efficient and dedicated services of the entire staff of the Finance Department who assisted in and contributed to its preparation. We thank the Mayor and members of the Town Council for their interest and support in planning and conducting the financial affairs of the Town in a responsible and efficient manner. Respectfully submitted, Jeff Wilkins David Gephart Town Manager Chief Financial Officer 8 Organizational Chart 9 TOWN OF ORO VALLEY, ARIZONA LIST OF TOWN OFFICIALS ELECTED OFFICIALS Mayor Mr. Joe Winfield Vice-Mayor Ms. Melanie Barrett Council Member Mr. Timothy Bohen Council Member Dr. Harry “Mo” Greene Council Member Ms. Joyce Jones-Ivey Council Member Mr. Josh Nicolson Council Member Mr. Steve Solomon TOWN MANAGEMENT Town Manager Jeff Wilkins Deputy Town Manager Chris Cornelison Chief Financial Officer David Gephart Human Resources Director Andrew Votava Town Clerk Michael Standish Judge James Hazel Legal Services Director Tobin Sidles Water Utility Director Peter Abraham Chief of Police Kara Riley Public Works Director/Town Engineer Paul Keesler Community and Economic Development Director Paul Melcher Parks and Recreation Director Rosalyn Epting Chief Information Officer Scott Zufelt 10 11 FINANCIAL SECTION 12 INDEPENDENT AUDITORS’ REPORT To the Town Council of Town of Oro Valley, Arizona Report on the Audit of the 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 Town of Oro Valley (the Town), Arizona, as of and for the year ended June 30, 2023, and the related notes to the financial statements, which collectively comprise the Town of Oro Valley’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 Town, 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 (GAAS) 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 Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Town 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. Emphasis of Matter As discussed in Note 1, the Town adopted the provisions of GASB Statement No.96, Subscription -Based Information Technology Arrangements, effective July 1 , 2022. Our opinions are not modified with respect to this matter. Other Matter Compliance Over Use of Highway User Revenue Fund and Other Dedicated State Transportation Revenue Monies In connection with our audit, nothing came to our attention that caused us to believe that the Town failed to use highway user revenue fund monies received by the Town pursuant to Arizona Revised Statutes Title 28, Chapter 18, Article 2, and any other dedicated state transportation revenues received by the Town solely for the authorized transportation purposes, insofar as they relate to accounting matters. However, our audit was not directed primarily toward obtaining knowledge of such noncompliance. Acco rdingly, had we performed additional procedures, other matters may have come to our attention regarding Town noncompliance with the usage of highway user revenue fund monies and other dedicated state transportation revenues, insofar as they relate to accounting matters. Baker Tilly US, LLP, trading as Baker Tilly, is a member of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. © 2020 Baker Tilly US, LLP 13 The communication related to compliance over the use of Highway User Revenue Fund and other dedicated State transportation revenue monies in the preceding paragraph is intended solely for the information and use of the members of the Arizona State Legislature, (the Arizona Auditor General,) the Town’s Council a nd management, and other responsible parties within the Town and is not intended to be and should not be used by anyone other than these specified parties. 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 Town of Oro Valley’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. Auditors’ 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 auditors’ 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 GAAS 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 GAAS 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 Town’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 Town of Oro Valley’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. 14 Required Supplementary Information Accounting principles generally accepted in the United States of America require that the required supplementary information, as listed in the table of contents and Management’s Discussion and Analysis, 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 th e 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 obtaine d 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 Town’s basic financial statements. The supplementary information such as combining and individual fund financial statements, as listed in the table of contents is presented for purposes of additional analysis and is 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 accounti ng and other records used to prepare the basic financial statements. The 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, supplementary 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 comprehensive financial report. The other information comprises the introductory and statistical sections but does not include the basic financial statements and our auditors’ 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 basi c financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report. 15 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 14, 2023 on our consideration of the Town of Oro Valley’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 Town’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Town’s internal control over financial reporting and compliance. Tempe, Arizona December 14, 2023 16 (This page intentionally left blank) 17 MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) (Required Supplementary Information) 18 (This page intentionally left blank) TOWN OF ORO VALLEY, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2023 19 As management of the Town of Oro Valley, Arizona (Town), we offer readers of the Town’s financial statements this narrative overview and analysis of the financial activities of the Town for the fiscal year ended June 30, 2023. The management’s discussion and analysis is presented as required supplementary information to supplement the basic financial statements. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found in the introductory section of this report. FINANCIAL HIGHLIGHTS The financial statements, which follow the Management’s Discussion and Analysis, provide key financial highlights for fiscal year ending June 30, 2023 as follows. • The Town’s total net position of governmental activities increased $8.0 million to $210.1 million and business-type activities increased $6.6 million to $121.7 million, representing 63 percent and 37 percent respectively, of the total net position of $331.8 million. • General revenues from governmental activities accounted for $50.9 million in revenue, or 65 percent of all current fiscal year governmental activities revenues. Program specific revenues in the form of charges for services and grants and contributions accounted for $2 6.9 million or 35 percent of total current fiscal year governmental activities revenues. The Town had $2 3.1 million of program revenues and $447,397 in general revenues related to business-type activities. • The Town had $67.9 million in expenses related to governmental activities, a n increase of 15.1 percent from the prior fiscal year. This increase is largely attributable to public safety expenses. The Town had $18.8 million in expenses related to business-type activities, an increase of 7.8 percent from the prior fiscal year. • Among major funds, the General Fund had $56.9 million in revenues, which primarily consisted of sales taxes and intergovernmental revenues. The total expenditures of the General Fund were $48.5 million. The General Fund’s fund balance decreased from $30.4 million to $23.8 million. • The Community Center Fund had $10.3 million in revenues, which consisted primarily of charges for services and sales taxes. The total expenditures of the Community Center Fund were $8.4 million. • The General Government CIP Fund had $1.4 million in revenues consisting primarily of other revenues and interest income. The total expenditures of the General Government CIP Fund were $19.2 million. • The Grants and Contributions Fund had $3.6 million in revenues consisting primarily of intergovernmental revenue. The total expenditures of the Grants and Contributions Fund were $2.3 million. • The Municipal Debt Service Fund had $248,418 in revenues consisting primarily of interest income and other revenues. The total expenditures of the Municipal Debt Service Fund were $4.3 million. • The Water Fund had operating revenues of $17.7 million, exceeding operating expenses of $16.9 million. TOWN OF ORO VALLEY, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2023 20 OVERVIEW OF FINANCIAL STATEMENTS This discussion and analysis are intended to serve as an introduction to the Town’s basic financial statements. The Town’s basic financial statements comprise three components: 1) government- wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the Town’s finances, in a manner similar to a private- sector business. The accrual basis of accounting is used for the government-wide financial statements. The statement of net position presents information on all Town 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 Town is improving or deteriorating. The statement of activities presents information showing how the Town’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused compensated absences). In the government-wide financial statements the Town’s activities are presented in the following categories: • Governmental activities – Most of the Town’s basic services are included here, such as general government, public safety, highways and streets, transit, and culture and recreation. Sales taxes, intergovernmental, and charges for services finance most of these activities. • Business-type activities – The services provided by the Town included here are water and stormwater utilities. The services are primarily financed through user fees and charges. Fund Financial Statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The Town uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the Town can be divided into two categories: governmental funds and proprietary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements use the modified accrual basis of accounting and focus on near-term inflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating the Town’s near-term financing requirements. TOWN OF ORO VALLEY, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2023 21 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 Town’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures and changes in fund balances for the General, Community Center, Grants and Contributions, General Government CIP, and Municipal Debt Service Funds, all of which are considered to be major funds. Data from the other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements and schedules. Proprietary funds. The Town maintains 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 Town uses enterprise funds to account for its Oro Valley Water Utility and Stormwater Drainage Utility. The Town uses an internal service fund to finance its self- insured employee health benefits. Because these services predominately benefit governmental rather than business-type functions, the internal service fund has been included within governmental activities in the government-wide financial statements. Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found immediately following the basic financial statements. Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the Town’s budget process, and pension plans. The Town adopts an annual expenditure budget for all governmental funds. A schedule of revenues, expenditures and changes in fund balances – budget and actual has been provided for the General Fund and the major Special Revenue Funds as required supplementary information. Schedules for the pension plans have also been provided as required supplementary information. GOVERNMENT-WIDE FINANCIAL ANALYSIS Net position may serve over time as a useful indicator of a government’s financial position. In the case of the Town, assets and deferred outflows exceeded liabilities and deferred inflows by $331.8 million as of the current fiscal year end. The largest portion of the Town’s net position reflects its investment in capital assets (e.g., land, water rights, buildings and improvements, improvements other than buildings, infrastructure, vehicles, machinery and equipment and construction in progress), less any related outstanding debt used to acquire those assets. TOWN OF ORO VALLEY, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2023 22 The Town uses these capital assets to provide services to its citizens; consequently, these assets are not available for future spending. Although the Town’s investment in its capital assets is reported net of related outstanding debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. In addition, a portion of the Town’s net position represents resources that are subject to external restrictions on how they may be used. The remaining balance is unrestricted and may be used to meet the Town's ongoing obligations to its citizens and creditors. The following table presents a summary of the Town’s net position for the fiscal years ended June 30, 2023, and June 30, 2022. 2023 2022 2023 2022 2023 Total 2022 Total Current and other assets 67,802,234$ 79,733,831$ 34,237,373$ 34,584,422$ 102,039,607$ 114,318,253$ Capital assets, net 211,255,182 195,997,562 113,572,975 110,547,409 324,828,157 306,544,971 Total assets 279,057,416 275,731,393 147,810,348 145,131,831 426,867,764 420,863,224 Deferred outflows of resources 11,851,971 35,405,005 834,338 1,141,654 12,686,309 36,546,659 Current and other liabilities 8,861,914 9,992,234 3,994,011 3,450,452 12,855,925 13,442,686 Noncurrent liabilities 69,510,520 87,590,713 22,849,371 26,587,131 92,359,891 114,177,844 Total liabilities 78,372,434 97,582,947 26,843,382 30,037,583 105,215,816 127,620,530 Deferred inflows of resources 2,445,306 11,477,494 133,851 1,156,127 2,579,157 12,633,621 Net position Net investment in capital assets 181,274,918 179,219,389 95,456,678 87,969,917 276,731,596 267,189,306 Restricted 15,579,039 21,752,087 - - 15,579,039 21,752,087 Unrestricted 13,237,690 1,104,482 26,210,775 27,109,858 39,448,465 28,214,340 Total net position 210,091,647$ 202,075,958$ 121,667,453$ 115,079,775$ 331,759,100$ 317,155,733$ Governmental Activities Business-type Activities At the end of the current fiscal year the Town reported positive balances in all categories of net position. The Town’s financial position is the product of several financial transactions including the net results of activities, the acquisition and payment of debt, the acquisition and disposal of capital assets, and the depreciation of capital assets. The following are significant current year transactions impacting the Statement of Net position. • The addition of $27.0 million in capital assets (net of dispositions) for governmental activities, largely attributable to $25.0 million in parks and recreation bonds (including premium) issued in 2022. • The addition of $11.8 million and $3.9 million for governmental activities and business- type activities, respectively, in accumulated depreciation due to depreciation expense. • The $18.1 million reduction in long-term liabilities for governmental activities, resulting from prior fiscal year funding of the Town’s outstanding pension liability in the Public Safety Pension Retirement System. • Deferred outflows and deferred inflows for governmental activities decreased $23.9 million and $10.1 million, respectively, largely attributable to prior fiscal year funding of the Town’s outstanding pension liability in the Public Safety Pension Retirement System. TOWN OF ORO VALLEY, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2023 23 Changes in net position. The Town’s total revenues for the current fiscal year were $101.4 million. The total cost of all programs and services was $86.8 million. The following table presents a summary of the changes in net position for the fiscal years ended June 30, 2023 and June 30, 2022. 2023 2022 2023 2022 2023 Total 2022 Total Revenues Program revenues Charges for services 13,102,775$ 13,273,440$ 19,176,588$ 19,828,827$ 32,279,363$ 33,102,267$ Operating grants and contributions 4,533,920 4,040,118 - - 4,533,920 4,040,118 Capital grants and contributions 9,258,047 8,493,664 3,964,061 1,612,125 13,222,108 10,105,789 General revenues Sales taxes 30,163,507 30,583,921 - - 30,163,507 30,583,921 Franchise taxes 763,311 756,388 - - 763,311 756,388 Unrestricted state shared revenues 18,581,727 15,081,806 - - 18,581,727 15,081,806 Miscellaneous - 150,100 11,000 15,404 11,000 165,504 Investment earnings Interest 1,257,044 287,841 291,272 142,001 1,548,316 429,842 Net increase/(decrease) in fair value 132,918 (1,469,001) 145,125 (1,003,434) 278,043 (2,472,435) Total revenues 77,793,249 71,198,277 23,588,046 20,594,923 101,381,295 91,793,200 Expenses General government 21,233,771 28,083,397 - - 21,233,771 28,083,397 Public safety 20,002,641 8,232,307 - - 20,002,641 8,232,307 Highways and streets 12,041,757 10,234,099 - - 12,041,757 10,234,099 Transit 1,520,300 1,267,596 - - 1,520,300 1,267,596 Culture and recreation 11,839,715 10,059,071 - - 11,839,715 10,059,071 Interest on long-term debt 1,291,181 1,149,019 - - 1,291,181 1,149,019 Water - - 17,438,890 16,202,611 17,438,890 16,202,611 Stormwater - - 1,409,674 1,282,283 1,409,674 1,282,283 Total expenses 67,929,364 59,025,489 18,848,564 17,484,894 86,777,928 76,510,383 Excess/(Deficiency) before transfers 9,863,885 12,172,788 4,739,482 3,110,029 14,603,367 15,282,817 Transfers (1,848,196) (198,665) 1,848,196 198,665 - - Change in net position 8,015,689 11,974,123 6,587,678 3,308,694 14,603,367 15,282,817 Beginning net position 202,075,958 190,101,835 115,079,775 111,771,081 317,155,733 301,872,916 Ending net position 210,091,647$ 202,075,958$ 121,667,453$ 115,079,775$ 331,759,100$ 317,155,733$ Governmental Activities Business-type Activities The following are significant current year transactions that have had an impact on the change in net position. • Total expenses increased $10.3 million, or 13.4 percent. Personnel costs increased as a result of an implemented classification and compensation plan. Other operating costs increased as a result of claim settlement and insurance costs, as well as inflationary impacts on services, supplies and materials. • Total revenues increased $9.6 million, or 10.4 percent, due primarily to investment earnings and state shared revenues, as well as capital grants and contributions. TOWN OF ORO VALLEY, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2023 24 Governmental and Business-type activities. The following table presents the cost of the Town’s major functional activities. The table also shows each function’s net cost (total cost less charges for services generated by the activities and intergovernmental aid provided for specific programs). The net cost shows the financial burden that was placed on the Town’s taxpayers by each of these functions. Total Net (Expense)Total Net (Expense) Expenses Revenue Expenses Revenue General government 21,233,771$ (9,557,895)$ 28,083,397$ (16,548,493)$ Public safety 20,002,641 (18,567,023) 8,232,307 (6,958,363) Highways and streets 12,041,757 (7,054,237) 10,234,099 (5,794,545) Transit 1,520,300 257,949 1,267,596 251,250 Culture and recreation 11,839,715 (4,822,235) 10,059,071 (3,019,096) Interest on long-term debt 1,291,181 (1,291,181) 1,149,019 (1,149,019) Total 67,929,364$ (41,034,622)$ 59,025,489$ (33,218,266)$ Water 17,438,890$ 4,227,629$ 16,202,611$ 3,726,053$ Stormwater drainage 1,409,674 64,456 1,282,283 230,005 Total 18,848,564$ 4,292,085$ 17,484,894$ 3,956,058$ Business-type Activities Governmental Activities June 30, 2023 June 30, 2022 • The cost of all governmental activities this year was $67.9 million. The increase of $8.9 million from the prior year was due to personnel and other operating cost increases as noted previously. • The cost of all business-type activities this year was $18.8 million. The increase of $1.4 million from the prior year was primarily due to increases in operating costs in the water utility. • Federal and State government grants, developer contributions, and charges for services subsidized certain governmental programs and business-type programs with revenues of $50.0 million. • Net cost of governmental activities of $41.0 million was financed by general revenues, which are made up of primarily sales taxes and state shared revenues totaling $48.7 million. TOWN OF ORO VALLEY, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2023 25 FINANCIAL ANALYSIS OF THE TOWN’S FUNDS As noted earlier, the Town uses fund accounting to ensure and demonstrate compliance with finance- related legal requirements. Governmental funds. The focus of the Town’s governmental funds is to provide information on near- term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the Town’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of the Town’s net resources available for spending at the end of the fiscal year. The financial performance of the Town as a whole is reflected in its governmental funds. As the Town completed the year, its governmental funds reported a combined fund balance of $54.7 million, a decrease of $10.8 million. This was primarily due to planned capital spending of bond funds and one-time revenues. The General Fund comprises 43.5 percent of the total governmental fund balance. Approximately $11.3 million, or 47.6 percent of the General’s Fund ending fund balance is unassigned. The General Fund is the principal operating fund of the Town. The decrease in fund balance of $6.6 million to $23.8 million as of fiscal year end was the result of planned transfers for capital spending of one-time revenues. As a whole, General Fund revenues increased approximately $1.4 million. General Fund expenditures decreased $2.8 million, due to prior fiscal year funding of the Town’s outstanding pension liability in the Public Safety Pension Retirement System, offset with planned capital outlay and increased operating costs. The Community Center Fund’s ending fund balance decreased from $5.9 million to $1.0 million, due to planned transfers for capital spending. The General Government CIP Fund’s ending fund balance increased from $24.0 million to $24.6 due to transfers in for future capital spending, as well as investment income and other revenues. The Grants and Contributions Fund’s ending fund balance decreased from $208,250 to $162,207 due to planned capital outlay and transfers of American Rescue Plan Act funds to the Water Utility Fund for water capital projects. The Municipal Debt Service Fund’s ending fund balance increased from $164,136 to $273,718 due to increases in investment income. Proprietary funds. Net position of the Enterprise Funds at the end of the year amounted to $121.7 million. This increased by $6.6 million during the fiscal year due to development fees, capital contributions of water systems, and transfers of American Rescue Plan Act funds for water capital projects. Net position of the Internal Service Fund at the end of the year amounted to $2.9 million. This increased by $25,914 during the fiscal year due to increases in investment income. TOWN OF ORO VALLEY, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2023 26 BUDGETARY HIGHLIGHTS The Town’s annual adopted budget established the legal level of expenditure control. Budgetary comparison statements are required for the General Fund and all major special revenue funds and are reported as Required Supplementary Information. These statements compare the original budget, the budget as amended throughout the year, and the actual revenues and expenditures. Budgetary schedules for the other governmental funds are also presented in this report as Other Supplementary Information. Amendments to the Town of Oro Valley’s fiscal year 2022-23 operating and capital budget may occur throughout the year between departments, and between funds in all other funds in a legally permissible manner. A budget adjustment in the General Fund did occur. The budget amendment moved $526,835 in capacity from General Administration to various departments to adjust for increases in spending due to implementation of the updated Town classification and compensation plan. Significant General Fund budget variances are summarized as follows: • The favorable variance of $6.2 million in revenues was primarily attributable to increased sales taxes and intergovernmental revenue collections from inflation and conservative budgeting. The Town also recognized a one-time donation of land during the fiscal year. • The unfavorable expenditure variance in general administration was attributable to a required settlement payment for the Vistoso Trails Nature Preserve acquisition. • The unfavorable variance in capital outlay was attributable to the one-time land donation referenced above as well as changes in accounting principles for subscription-based information technology arrangements. These unfavorable variances were offset by either increases to revenue or other financing sources. TOWN OF ORO VALLEY, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2023 27 CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets. At year end, the Town had invested $324.8 million in capital assets (net of accumulated depreciation), including buildings, facilities, vehicles, computers, equipment, and infrastructure assets. This amount represents a net increase of $18.3 million from last year. This was primarily due to building improvements and construction in progress. The following schedule presents capital asset balances for the fiscal years ended June 30, 2023 and June 30, 2022. Increase/ 2023 2022 (Decrease) Land and improvements 36,289,821$ 34,674,821$ 1,615,000$ Infrastructure 245,923,586 242,183,497 3,740,089 Buildings 57,711,490 45,920,567 11,790,923 Machinery, equipment, and vehicles 21,529,780 20,139,411 1,390,369 Right of use asset 1,647,382 851,353 796,029 Construction in progress 14,779,568 7,135,093 7,644,475 Accumulated depreciation/amortization (166,626,445) (154,907,180) (11,719,265) Net capital assets 211,255,182$ 195,997,562$ 15,257,620$ Increase/ 2023 2022 (Decrease) Land and improvements 2,410,660$ 2,410,660$ -$ Water rights 8,534,490 8,534,490 - Water system 148,484,849 145,877,922 2,606,927 Stormwater system 4,158,612 3,650,716 507,896 Machinery, equipment, and vehicles 6,722,379 6,215,124 507,255 Construction in progress 11,709,344 8,412,006 3,297,338 Accumulated depreciation (68,447,359) (64,553,509) (3,893,850) Net capital assets 113,572,975$ 110,547,409$ 3,025,566$ Business-type Activities Governmental Activities The estimated cost to complete current construction projects is $50.6 million. Additional information on the Town’s capital assets can be found in Note 6. TOWN OF ORO VALLEY, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2023 28 Debt Administration. At year end, the Town had $63.1 million in long-term debt outstanding with $8.9 million due within one year. Long-term debt decreased by $6.9 million due to $7.5 million in maturities and redemptions, offset with leases, financed purchases and subscription liabilities. The following table presents a summary of the Town’s outstanding long- term debt for the fiscal years ended June 30, 2023 and June 30, 2022. Increase/ 2023 2022 (Decrease) Revenue bonds 43,457,370$ 46,353,030$ (2,895,660)$ Leases 827,109 769,691 57,418 Financed purchases 69,254 - 69,254 Subscription liabilities 466,860 - 466,860 44,820,593$ 47,122,721$ (2,302,128)$ Increase/ 2023 2022 (Decrease) Revenue bonds 16,231,628$ 20,476,968$ (4,245,340)$ Loans payable 2,087,126 2,404,213 (317,087) 18,318,754$ 22,881,181$ (4,562,427)$ Business-type Activities Governmental Activities State statutes currently limit the amount of general obligation debt a Town may issue to 20 percent of its net full cash assessed valuation for water, sewer, lights, open space preserves, parks, playgrounds and recreational facilities. The current debt limitation for the Town is $200.5 million. State statutes also currently limit the amount of general obligation debt a Town may issue to six percent of its net full cash assessed valuation for all other purposes. The current debt limitation for the Town is $60.2 million. The Town does not have any general obligation debt. The Town has a bond rating of “AA+” from Standard & Poor’s and “AA” from Fitch Ratings on outstanding revenue bonds. Additional information on the Town’s long-term debt can be found in Notes 7 through 12. TOWN OF ORO VALLEY, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2023 29 ECONOMIC FACTORS AND NEXT YEAR’S BUDGET AND RATES Many factors were considered by the Town’s administration during the process of developing the fiscal year 2023-24 budget. Among them: • The unemployment rate for the Town of Oro Valley is currently 4.1 percent. Pima County’s and the State of Arizona’s unemployment rates are 4.4 percent and 3.5 percent, respectively. • The Town’s net full cash assessed valuation for the current year is $1,002,518,296. • Single family residential (SFR) building permits issued in this fiscal year totaled 119, as compared to 198 SFR building permits issued last fiscal year. Projections for SFR building permits are 119 for fiscal year 2023-24. The adopted combined operating and capital expenditure budget for fiscal year 2023-24 totals $148.5 million, an increase of $785,000, or .5 percent over last year’s budget of $147.7 million. This increase is primarily due to increases in personnel and operations and maintenance costs. The budget for fiscal year 2023-24 continues to place emphasis on achieving the goals identified in the Town’s adopted Strategic Plan, which was recently updated in fiscal year 22-23 and includes the following focus areas: economic vitality, culture and recreation, public safety, roads water and Town assets, land use and design, effective and efficient government, and financial stability and sustainability. CONTACTING THE TOWN’S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview of the Town’s finances and to demonstrate the Town’s accountability for the resources it receives. If you have questions about this report or need additional information, contact the Finance Department, Town of Oro Valley, Arizona, 11000 North La Cañada Drive, Oro Valley, Arizona 85737. 30 (This page intentionally left blank) 31 BASIC FINANCIAL STATEMENTS 32 (This page intentionally left blank) 33 GOVERNMENT-WIDE FINANCIAL STATEMENTS 34 (This page intentionally left blank) TOWN OF ORO VALLEY, ARIZONA STATEMENT OF NET POSITION JUNE 30, 2023 35 ASSETS Current assets: Cash and investments $47,632,156 $31,636,723 $79,268,879 Cash with fiscal agent 12,013,046 - 12,013,046 Taxes receivable 3,580,931 - 3,580,931 Accounts receivable 752,866 2,043,688 2,796,554 Interest receivable 187,925 140,365 328,290 Intergovernmental receivable 1,317,535 - 1,317,535 Lease receivable 1,430,202 1,430,202 Inventories 127,713 - 127,713 Prepaid items 759,860 416,597 1,176,457 Total current assets 67,802,234 34,237,373 102,039,607 Noncurrent assets: Capital assets, non-depreciable/amortized 51,069,389 22,654,494 73,723,883 Capital assets, depreciable/amortized (net)160,185,793 90,918,481 251,104,274 Total noncurrent assets 211,255,182 113,572,975 324,828,157 Total Assets 279,057,416 147,810,348 426,867,764 DEFERRED OUTFLOWS OF RESOURCES Deferred charge on refunding - 202,459 202,459 Pension plan items 11,851,971 631,879 12,483,850 Total Deferred Outflows of Resources 11,851,971 834,338 12,686,309 LIABILITIES Current liabilities: Accounts payable and accrued expenses 3,522,403 2,062,268 5,584,671 Accrued wages and benefits 1,333,915 183,648 1,517,563 Intergovernmental payable 128,540 861,404 989,944 Interest payable - 208,968 208,968 Unearned revenue 2,524,345 - 2,524,345 Claims payable 361,329 - 361,329 Customer deposits payable 690,817 677,723 1,368,540 Other accrued liabilities 300,565 - 300,565 Total current liabilities 8,861,914 3,994,011 12,855,925 Noncurrent liabilities: Due within one year 5,272,004 3,621,284 8,893,288 Due in more than one year 64,238,516 19,228,087 83,466,603 Total noncurrent liabilities 69,510,520 22,849,371 92,359,891 Total Liabilities 78,372,434 26,843,382 105,215,816 DEFERRED INFLOWS OF RESOURCES Leases 1,392,247 - 1,392,247 Pension plan items 1,053,059 133,851 1,186,910 Total Deferred Inflows of Resources 2,445,306 133,851 2,579,157 NET POSITION Net investment in capital assets 181,274,918 95,456,678 276,731,596 Restricted for: Capital projects 14,035,939 - 14,035,939 Debt service 273,718 - 273,718 Public safety 392,399 - 392,399 Highway and streets 876,983 - 876,983 Unrestricted 13,237,690 26,210,775 39,448,465 Total Net Position $210,091,647 $121,667,453 $331,759,100 Business-type Activities Governmental Activities Total The notes to the basic financial statements are an integral part of this statement. TOWN OF ORO VALLEY, ARIZONA STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2023 36 Functions/Programs Primary Government Governmental activities: General government $21,233,771 $5,567,269 $13,976 $6,094,630 Public safety 20,002,641 245,285 1,190,333 - Highway and streets 12,041,757 287,013 1,537,091 3,163,417 Transit 1,520,300 - 1,778,249 - Culture and recreation 11,839,715 7,003,209 14,272 - Interest on long-term debt 1,291,181 - - - Total governmental activities 67,929,364 13,102,775 4,533,920 9,258,047 Business-type activities: Water 17,438,890 17,702,458 - 3,964,061 Stormwater 1,409,674 1,474,130 - - Total business-type activities 18,848,564 19,176,588 - 3,964,061 Total Primary Government $86,777,928 $32,279,363 $4,533,920 $13,222,108 General revenues: Taxes: Sales taxes Franchise taxes Unrestricted state shared revenues Investment income: Interest Net increase in fair value of investments Miscellaneous Transfers Total general revenues and transfers Changes in net position Net position, beginning of year Net position, end of year Expenses Services Charges for Operating Grants and Contributions Program Revenues Contributions Grants and Capital The notes to the basic financial statements are an integral part of this statement. 37 $(9,557,895) $- $(9,557,895) (18,567,023) - (18,567,023) (7,054,237) - (7,054,237) 257,949 - 257,949 (4,822,235) - (4,822,235) (1,291,181) - (1,291,181) (41,034,622) - (41,034,622) - 4,227,629 4,227,629 - 64,456 64,456 - 4,292,085 4,292,085 $(41,034,622) $4,292,085 $(36,742,537) 30,163,507 - 30,163,507 763,311 - 763,311 18,581,727 - 18,581,727 1,257,044 291,272 1,548,316 132,918 145,125 278,043 - 11,000 11,000 (1,848,196) 1,848,196 - 49,050,311 2,295,593 51,345,904 8,015,689 6,587,678 14,603,367 202,075,958 115,079,775 317,155,733 $210,091,647 $121,667,453 $331,759,100 Totals Net (Expense) Revenue and Changes in Net Position Net (Expense) Revenue and Changes in Net Position Activities Governmental Activities Business-type 38 (This page intentionally left blank) 39 FUND FINANCIAL STATEMENTS TOWN OF ORO VALLEY, ARIZONA BALANCE SHEET – GOVERNMENTAL FUNDS JUNE 30, 2023 40 Community ASSETS Cash and investments $22,398,459 $1,271,785 $13,973,000 Cash with fiscal agent - - 12,013,046 Taxes receivable 3,296,626 284,305 - Accounts receivable 597,746 147,716 7,404 Interest receivable 102,354 13,692 18,635 Intergovernmental receivable 531,500 - - Lease receivable 1,028,805 401,397 - Inventories - 127,713 - Prepaid items 360,848 56,274 326,791 Total Assets $28,316,338 $2,302,882 $26,338,876 LIABILITIES Accounts payable $1,023,156 $212,360 $1,788,588 Accrued payroll and related benefits 1,333,915 - - Intergovernmental payable 128,540 - - Unearned revenue 334,328 396,567 - Customer deposits payable 690,817 - - Other accrued liabilities - 300,565 - Total Liabilities 3,510,756 909,492 1,788,588 DEFERRED INFLOWS OF RESOURCES Lease related 1,007,090 385,157 - FUND BALANCES Nonspendable 360,848 183,987 326,791 Restricted - - 12,013,046 Committed 12,116,181 824,246 - Assigned - - 12,210,451 Unassigned 11,321,463 - - Total Fund Balances 23,798,492 1,008,233 24,550,288 Total Liabilities, Deferred Inflows of Resources and Fund Balances $28,316,338 $2,302,882 $26,338,876 General General Center Government CIP The notes to the basic financial statements are an integral part of this statement. 41 $2,091,844 $273,462 $4,229,293 $44,237,843 - - - 12,013,046 - - - 3,580,931 - - - 752,866 14,769 256 27,864 177,570 71,472 - 714,563 1,317,535 - - - 1,430,202 - - - 127,713 - - 1,950 745,863 $2,178,085 $273,718 $4,973,670 $64,383,569 $238,328 $- $98,500 $3,360,932 - - - 1,333,915 - - - 128,540 1,777,550 - 15,900 2,524,345 - - - 690,817 - - - 300,565 2,015,878 - 114,400 8,339,114 - - - 1,392,247 - - 1,950 873,576 162,207 273,718 4,840,103 17,289,074 - - 17,217 12,957,644 - - - 12,210,451 - - - 11,321,463 162,207 273,718 4,859,270 54,652,208 $2,178,085 $273,718 $4,973,670 $64,383,569 Total Funds Non-Major Municipal Governmental GovernmentalGrants and Debt Service FundsContributions 42 (This page intentionally left blank) TOWN OF ORO VALLEY, ARIZONA RECONCILIATION OF THE BALANCE SHEET – GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION JUNE 30, 2023 43 Governmental Fund Balances $54,652,208 Capital assets are not financial resources in governmental funds, but are reported in the Statement of Net Position at their net depreciable value. Governmental capital assets 377,881,627 Less accumulated depreciation/amortization (166,626,445) 211,255,182 Deferred outflows and inflows of resources related to pensions are applicable to future periods and, therefore, are not reported in the funds. Deferred outflows of resources related to pensions 11,851,971 Deferred inflows of resources related to pensions (1,053,059) 10,798,912 The Internal Service Fund is used by management to charge the cost of insurance to the individual funds. The assets and liabilities of the Internal Service Fund are included in the Statement of Net Position.2,895,865 Long-term liabilities are not due and payable in the current period and, therefore, are not reported in the funds. Compensated absences payable (2,440,842) Revenue bonds payable (47,362,076) Leases payable (827,109) Subscriptions Based Information Technology Arrangements (466,860) Financed purchases (69,254) Net pension liability (18,344,379) (69,510,520) Net Position of Governmental Activities $210,091,647 The notes to the basic financial statements are an integral part of this statement. TOWN OF ORO VALLEY, ARIZONA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES – GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2023 44 REVENUES Sales taxes $26,449,853 $3,713,654 $- Franchise taxes 763,311 - - Development impact fees - - - Intergovernmental 21,480,681 - - Licenses, fees and permits 2,643,013 - - Fines, forfeitures and penalties 84,454 - - Charges for services 2,897,311 6,265,647 - Donations 1,641,102 - - Investment income: Interest 297,228 50,784 467,728 Net increase/(decrease) in fair value of investments 75,150 59,939 62,610 Other 588,650 178,552 822,494 Total Revenues 56,920,753 10,268,576 1,352,832 EXPENDITURES Current: General government 20,309,404 - - Public safety 19,657,927 - 2,671 Highway and streets - - - Transit 1,530,444 - - Culture and recreation 3,772,206 6,772,295 242,158 Capital outlay 2,965,799 1,467,015 18,942,864 Debt service: Principal retirement 193,312 161,740 - Interest and fiscal charges 35,631 16,914 - Total Expenditures 48,464,723 8,417,964 19,187,693 REVENUES OVER/(UNDER) EXPENDITURES 8,456,030 1,850,612 (17,834,861) OTHER FINANCING SOURCES/(USES) Lease agreements 349,652 - - Financed purchase agreements - 81,722 - Subscription-based information technology arrangements 582,440 - - Sale of general capital assets 16,924 11,293 113,204 Insurance recoveries - - 51,229 Transfers in/(out), net (15,996,977) (6,795,852) 18,267,786 Total Other Financing Sources/(Uses)(15,047,961) (6,702,837) 18,432,219 NET CHANGE IN FUND BALANCES (6,591,931) (4,852,225) 597,358 FUND BALANCES, Beginning of year 30,390,423 5,860,458 23,952,930 FUND BALANCES, End of year $23,798,492 $1,008,233 $24,550,288 CenterGeneral Government CIP Community General The notes to the basic financial statements are an integral part of this statement. 45 $- $- $- $30,163,507 - - - 763,311 - - 419,210 419,210 3,714,934 13,976 4,700,508 29,910,099 - - 27,567 2,670,580 - - 46,176 130,630 - - 28,711 9,191,669 - - - 1,641,102 53,863 141,360 215,847 1,226,810 (125,793) - 49,467 121,373 - 93,082 7,805 1,690,583 3,643,004 248,418 5,495,291 77,928,874 306,010 - - 20,615,414 106,153 - 62,510 19,829,261 - - 2,123,019 2,123,019 - - - 1,530,444 - - 1,948 10,788,607 1,874,260 - 3,243,597 28,493,535 - 2,895,660 - 3,250,712 - 1,444,147 - 1,496,692 2,286,423 4,339,807 5,431,074 88,127,684 1,356,581 (4,091,389) 64,217 (10,198,810) - - - 349,652 - - - 81,722 - - - 582,440 - - - 141,421 - - - 51,229 (1,402,624) 4,200,971 (121,500) (1,848,196) (1,402,624) 4,200,971 (121,500) (641,732) (46,043) 109,582 (57,283) (10,840,542) 208,250 164,136 4,916,553 65,492,750 $162,207 $273,718 $4,859,270 $54,652,208 Municipal Debt Service Grants and Contributions Non-Major Funds Governmental Funds Governmental Total 46 (This page intentionally left blank) TOWN OF ORO VALLEY, ARIZONA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES – GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2023 47 Net change in fund balances - total governmental funds $(10,840,542) Amounts reported for governmental activities in the Statement of Activities are different because: Governmental funds report the portion of capital outlay for capitalized assets as expenditures. However, in the Statement of Activities, the costs of those assets are allocated over their estimated useful lives as depreciation expense. Expenditures for capital assets $26,560,522 Contributed capital 1,615,000 Less current year depreciation/amortization (12,832,381) 15,343,141 Deferred items such as premiums related to the net cost of issuance of bonds are amortized over the life of the associated bond issue in the government-wide statements but not reported in the funds.205,511 Governmental funds report pension contributions as expenditures. However, they are reported as deferred outflows of resources in the Statement of Net Position. The change in the net pension liability, adjusted for deferred pension items, is reported as pension expense in the Statement of Activities.1,064,686 Some expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Loss on disposal of assets $(85,521) Compensated absences 372 (85,149) The Internal Service Fund is used by management to charge the cost of insurance to the individual funds. The changes in net position of the Internal Service Fund is reported with governmental activities in the Statement of Activities.25,914 Repayments of long-term debt principal are expenditures in the governmental funds, but the repayment reduces long-term liabilities in the Statement of Net Position. Debt issued or incurred $(1,013,814) Lease principal retirement 292,234 Financed purchases principal retirement 12,468 Subscriptions-based Information Technology Arrangements principal retirement 115,580 Revenue bond principal retirement 2,895,660 2,302,128 Change in net position of governmental activities.$8,015,689 The notes to the basic financial statements are an integral part of this statement. TOWN OF ORO VALLEY, ARIZONA STATEMENT OF NET POSITION – PROPRIETARY FUNDS JUNE 30, 2023 48 ASSETS Current assets: Cash and investments $30,713,611 $923,112 $31,636,723 $3,394,313 Accounts receivable 1,875,241 168,447 2,043,688 - Interest receivable 134,279 6,086 140,365 10,355 Prepaid items 416,597 - 416,597 13,997 Total current assets 33,139,728 1,097,645 34,237,373 3,418,665 Noncurrent assets: Capital assets, non-depreciable 22,654,494 - 22,654,494 - Capital assets, depreciable (net)87,341,677 3,576,804 90,918,481 - Total noncurrent assets 109,996,171 3,576,804 113,572,975 - Total Assets 143,135,899 4,674,449 147,810,348 3,418,665 DEFERRED OUTFLOWS OF RESOURCES Deferred charge on refunding 202,459 - 202,459 - Pension plan items 503,480 128,399 631,879 - Total Deferred Outflows of Resources 705,939 128,399 834,338 - LIABILITIES Current liabilities: Accounts payable and accrued expenses 2,000,827 61,441 2,062,268 161,471 Accrued wages and benefits 147,019 36,629 183,648 - Intergovernmental payable 861,404 - 861,404 - Interest payable 208,968 - 208,968 - Claims payable - - - 361,329 Customer deposits payable 677,723 - 677,723 - Total current liabilities 3,895,941 98,070 3,994,011 522,800 Noncurrent liabilities: Due within one year 3,608,586 12,698 3,621,284 - Due in more than one year 18,758,707 469,380 19,228,087 - Total noncurrent liabilities 22,367,293 482,078 22,849,371 - Total Liabilities 26,263,234 580,148 26,843,382 522,800 DEFERRED INFLOWS OF RESOURCES Pension plan items 106,652 27,199 133,851 - NET POSITION Net investment in capital assets 91,879,874 3,576,804 95,456,678 - Unrestricted 25,592,078 618,697 26,210,775 2,895,865 Total Net Position $117,471,952 $4,195,501 $121,667,453 $2,895,865 Activities: GovernmentalEnterprise Funds Non-Major Water Enterprise Fund Total Service Fund Internal The notes to the basic financial statements are an integral part of this statement. TOWN OF ORO VALLEY, ARIZONA STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION – PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2023 49 OPERATING REVENUES: Charges for services $17,571,426 $1,474,130 $19,045,556 $- Other 131,032 - 131,032 - Self insurance premiums - - - 4,510,710 Total Operating Revenues 17,702,458 1,474,130 19,176,588 4,510,710 OPERATING EXPENSES: Costs of sales and services 12,711,852 1,132,161 13,844,013 28,113 Contractual services 425,014 128,593 553,607 830,896 Depreciation 3,782,858 148,920 3,931,778 - Claims payments - - - 3,667,346 Administrative - - - 220 Total Operating Expenses 16,919,724 1,409,674 18,329,398 4,526,575 OPERATING INCOME/(LOSS)782,734 64,456 847,190 (15,865) NONOPERATING REVENUES (EXPENSES): Sales of assets 11,000 - 11,000 - Investment income: Interest 279,589 11,683 291,272 30,234 Net increase (decrease) in fair value of investments 147,334 (2,209) 145,125 11,545 Interest expense (519,166) - (519,166) - Total Nonoperating Revenues (Expenses)(81,243) 9,474 (71,769) 41,779 INCOME/(LOSS) BEFORE CONTRIBUTIONS AND TRANSFERS 701,491 73,930 775,421 25,914 DEVELOPMENT FEES 1,818,383 - 1,818,383 - CAPITAL CONTRIBUTIONS 2,145,678 - 2,145,678 - TRANSFERS IN/(OUT), NET 1,848,196 - 1,848,196 - CHANGES IN NET POSITION 6,513,748 73,930 6,587,678 25,914 NET POSITION, Beginning of year 110,958,204 4,121,571 115,079,775 2,869,951 NET POSITION, End of year $117,471,952 $4,195,501 $121,667,453 $2,895,865 Enterprise Funds Governmental Water Enterprise Fund Total Service Fund Activities: Non-Major Internal The notes to the basic financial statements are an integral part of this statement. TOWN OF ORO VALLEY, ARIZONA STATEMENT OF CASH FLOWS – PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2023 50 Increase (Decrease) in Cash and Cash Equivalents Cash flows from operating activities: Cash received from customers $18,086,783 $1,504,294 $19,591,077 $- Cash received from premiums - - - 4,510,710 Cash payments to suppliers for goods and services (9,401,171) (338,777) (9,739,948) (861,189) Cash payments to employees for services (3,487,605) (865,601) (4,353,206) - Cash payments for claims - - - (3,608,672) Net cash provided by operating activities 5,198,007 299,916 5,497,923 40,849 Cash flows from noncapital and related financing activities: Interfund transfers 1,848,196 - 1,848,196 - Net cash provided by noncapital financing activities 1,848,196 - 1,848,196 - Cash flows from capital and related financing activities: Development impact fees 1,818,383 - 1,818,383 - Acquisition of capital assets (4,303,769) (507,897) (4,811,666) - Proceeds from sale of capital assets 11,000 - 11,000 - Principal paid on long-term debt (4,562,427) - (4,562,427) - Interest on long-term debt (494,865) - (494,865) - Net cash used for capital financing activities (7,531,678) (507,897) (8,039,575) - Cash flows from investing activities: Investment income 347,028 5,952 352,980 32,109 Net cash provided by investing activities 347,028 5,952 352,980 32,109 Net increase (decrease) in cash and cash equivalents (138,447) (202,029) (340,476) 72,958 Cash and cash equivalents, beginning of year 30,852,058 1,125,141 31,977,199 3,321,355 Cash and cash equivalents, end of year $30,713,611 $923,112 $31,636,723 $3,394,313 Reconciliation of Operating Income (Loss) to Net Cash Provided by (Used for) Operating Activities Operating income (loss)$782,734 $64,456 $847,190 $(15,865) Adjustments to reconcile operating income (loss) to net cash provided by (used for) operating activities: Depreciation 3,782,858 148,920 3,931,778 - Provision for bad debt 20,266 2,966 23,232 - Change in assets and liabilities: Accounts receivable 385,048 27,198 412,246 - Prepaid items (345,488) - (345,488) (13,997) Accounts payable 561,523 56,709 618,232 12,037 Claims payable - - - 58,674 Accrued wages and benefits 32,069 (328) 31,741 - Customer deposits payable (20,989) - (20,989) - Pension plan items (14) (5) (19) - Total adjustments 4,415,273 235,460 4,650,733 56,714 Net cash provided by operating activities $5,198,007 $299,916 $5,497,923 $40,849 Non-cash capital and financing activities Contribution of assets from developers $2,145,678 $- $2,145,678 $- Governmental Activities Internal Service FundWater Non-major Enterprise Fund Total Enterprise Funds The notes to the basic financial statements are an integral part of this statement. TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2023 51 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the Town of Oro Valley, Arizona (Town) have been prepared in conformity with accounting principles generally accepted in the United States of America as applied to government units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The more significant of the Town’s accounting policies are described below. A. Reporting Entity The Town is a municipal entity governed by an elected mayor and council. The financial reporting entity consists of a primary government and its component units. A component unit is a legally separate entity that must be included in the reporting entity in conformity with generally accepted accounting principles. The Town is a primary government that has a separately elected governing body, is legally separate, and is fiscally independent of other state or local governments. Furthermore, there are no component units combined with the Town for financial statement presentation purposes, and the Town is not included in any other governmental reporting entity. Consequently, the Town’s financial statements include the funds of those organizational entities for which its elected governing body is financially accountable. B. Government-Wide and Fund Financial Statements The government-wide financial statements (i.e., the statement of net position and the statement of activities) present financial information about the Town as a whole. The reported information includes all of the nonfiduciary activities of the Town. For the most part, the effect of internal activity has been removed from these statements. These statements are to distinguish between the governmental and business-type activities of the Town. Governmental activities normally are supported by sales taxes and intergovernmental revenues, and are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Sales taxes, franchise taxes, unrestricted state shared revenues, investment income and other items not included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds and proprietary funds. Major individual governmental funds and the major individual enterprise fund are reported as separate columns in the fund financial statements. TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2023 52 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation Government-wide Financial Statements – The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the grantor or provider have been met. As a general rule, the effect of internal activity has been eliminated from the government- wide financial statements; however, the effects of interfund services provided and used between functions are reported as expenses and program revenues at amounts approximating their external exchange value. Fund Financial Statements – Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the Town considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. General capital asset acquisitions are reported as expenditures in governmental funds. Issuances of general long - term debt and acquisitions under lease contracts are reported as other financing sources. Sales taxes, franchise taxes, licenses and permits, charges for services, special assessments and investment income associated with the current fiscal period are all considered to be susceptible to accrual and have been recognized as revenues of the current fiscal period. Miscellaneous revenue is not susceptible to accrual because generally it is not measurable until received in cash. Grants and similar awards are recognized as revenue as soon as all eligibility requirements imposed by the grantor or provider have been met. Unearned revenue arises when resources are received by the Town before it has legal claim to them, as when grant monies are received prior to meeting all eligibility requirements imposed by the provider. The Council adopts the budget at the fund level as a total amount of expenditures. Financial control is administered by fund, with budgetary control for operating performance regulated at the departmental level, e.g., finance, development services, police, and parks and recreation. The legal level of budgetary control (i.e. the level at which expenditures may not legally exceed appropriations) is at the fund level. TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2023 53 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) The focus of governmental fund financial statements is on major funds rather than reporting funds by type. Each major fund is presented in a separate column. Non-major funds are aggregated and presented in a single column. The internal service fund is presented in a single column on the face of the proprietary fund statements. The Town reports the following major governmental funds. General Fund – This fund accounts for all financial resources of the Town, except those required to be accounted for in other funds. Community Center Fund – This fund accounts for the activity of the Oro Valley Community Center, including golf, tennis, food and beverage and fitness revenues and expenditures. This fund also accounts for the half cent sales taxes revenues dedicated to these operations, as well as other Parks and Recreation facilities, amenities or operations as determined by the Town Council. General Government CIP Fund – This fund accounts for governmental capital asset projects. Grants and Contributions Fund – This fund accounts for governmental grants and contributions received and expended by the Town. Municipal Debt Service Fund – This fund accounts for debt service payments on the Series 2010 Excise Tax Revenue Obligations, the Series 2012 Excise Tax Revenue Obligations, the Series 2015 Excise Tax Revenue Refunding Obligations, the Series 2016 Excise Tax Revenue Obligations, the Series 2017 Refunding Excise Tax Revenue Obligations, the Series 2018 Excise Tax Revenue Obligations, the Taxable Series 2021 Excise Tax Revenue Obligations and the Tax- Exempt Series 2021 Excise Tax Revenue Obligations. The Town reports the following major proprietary funds. Water Fund – This fund accounts for the costs to operate, construct and finance the Town water system. The Proprietary Fund financial statements are reported using the economic resources measurement focus and accrual basis of accounting. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the Town’s internal service fund are charges for health benefits. The principal operating revenues of the Town’s enterprise funds are charges to customers for water and stormwater drainage services. Operating expenses for these funds include the cost of sales and services, administrative expenses, depreciation, and amortization. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2023 54 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Cash and Investments For purposes of the Statement of Cash Flows, the Town considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents at year end were cash on hand, cash in bank, and cash and investments held by another governmental entity as the Town's fiscal agent. Arizona statute requires a pooled collateral program for public deposits and a Statewide Collateral Pool Administrator (Administrator) in the State Treasurer’s Office. The purpose of the pooled collateral program is to ensure that governmental entities’ public deposits placed in participating depositories are secured with collateral of 102 percent of the public deposits, less any applicable deposit insurance. An eligible depository may not retain or accept any public deposit unless it has deposited the required collateral with a qualified escrow agent or the Administrator. The Administrator manages the pooled collateral program, including reporting on each depository’s compliance with the program. Nonparticipating interest-earning investment contracts are stated at cost. Money market investments and participating interest investment contracts with a remaining maturity of one year or less at time of purchase are stated at amortized cost. All other investments are stated at fair value. E. Investment Income Investment income is composed of interest, dividends, and net changes in the fair value of applicable investments. F. Receivables and Payables Activity between funds that is representative of lending/borrowing arrangements outstanding at the end of the fiscal year is referred to as either “due to/from other funds” (i.e., the current portion of interfund loans) or “advances to/from other funds” (i.e., the non-current portion of interfund loans). All other outstanding balances between funds are reported as “due to/from other funds.” Interfund balances between governmental funds are eliminated on the Statement of Net Position All receivables are shown net of an allowance for uncollectibles. G. Inventory All inventories are valued at cost using the first-in/first-out (FIFO) method. Inventories consist of expendable supplies held for consumption. Inventories are recorded as expenses when consumed on the government-wide financial statements and the fund financial statements. TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2023 55 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) H. Prepaid Items Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in the government-wide and fund financial statements. Prepaid items are recorded as expenses when consumed in the government-wide financial statements and the fund financial statements. I. Capital Assets Capital assets, which include land, water rights, buildings and improvements, right-to-use lease assets, improvements other than buildings, infrastructure, vehicles, machinery, equipment, and construction in progress, are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the Town as assets with an initial, individual cost of $5,000 or more and an estimated useful life of more than one year. Capital assets are recorded at historical cost if purchased or constructed. Donated capital assets are recorded at acquisition value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend the life of the asset are not capitalized. Certain capital assets of the Town are depreciated/amortized using the straight-line method over the following estimated useful lives: Assets Years Buildings 50 Improvements other than buildings 20-30 Infrastructure 20-50 Vehicles 4-6 Machinery and equipment 7-20 Intangible right-to-use lease assets are amortized over the shorter of the lease term or the useful life of the underlying assets above. J. Deferred Outflows/Inflows of Resources In addition to assets, the statement of financial position may report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net assets that applies to future periods and so will not be recognized as an outflow of resources (expense/expenditure) until then. In addition to liabilities, the statement of financial position may report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net assets that applies to future periods and so will not be recognized as an inflow of resources (revenue) until that time. TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2023 56 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) K. Compensated Absences The Town’s employee annual and sick leave policies generally provide for granting annual and sick leave with pay. Full-time employees accrue annual leave based on the number of years employed. Employees who terminate their employment shall be paid in a lump sum. Full-time employees accumulate sick leave at the rate of one workday per month. Part -time employees whose normal week is twenty hours or more receive sick leave at half the rate of full-time employees. Once an employee has exceeded 480 hours of accrued sick leave, one half of the sick leave balance in excess of the 480 hours shall be paid to the employee upon separation from employment. The current and long-term liabilities, including related benefits, for accumulated vacation and sick leave are reported on the government-wide financial statements. A liability for these amounts, including related benefits, is reported in governmental funds only if they have matured, for example, as a result of employee leave, resignations and retirements. Generally, resources from the General Fund are used to pay for compensated absences. L. Leases and subscription-based information technology arrangements As lessee, the Town recognizes lease liabilities with an initial, individual value of $75,000 or more. The Town uses its estimated incremental borrowing rate to measure lease liabilities unless it can readily determine the interest rate implicit in the lease. The Town's estimated incremental borrowing rate is based on the average interest rate of other financing instruments with similar terms and risks as those currently entered into by the Town. As lessor, the Town recognizes lease receivables with an initial, individual value of $150,000 or more. If there is no stated rate in the lease contract (or if the stated rate is not the rate the Town charges the lessee) and the implicit rate cannot be determined, the Town uses its own estimated incremental borrowing rate as the discount rate to measure lease receivables. The Town’s estimated incremental borrowing rate is calculated as described above. The Town recognizes subscription liabilities with an initial value of $75,000 or more. The Town uses its estimated incremental borrowing rate to measure subscription liabilities unless it can readily determine the interest rate implicit in the arrangement. The Town’s estimated incremental borrowing rate is calculated as described above. M. Pensions For purposes of measuring the net pension liabilities, related deferred outflows of resources and deferred inflows of resources, and related expenses, information about the pension plans’ fiduciary net position and additions to/deductions from the plans’ fiduciary net position have been determined on the same basis as they are reported by the plan. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. Generally, resources from the General Fund are used to pay for pensions. N. Long-term Obligations In the government-wide financial statements and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities on the TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2023 57 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) statement of net position. Bond premiums and discounts are amortized over the life of the bonds using the straight-line method. Deferred amounts on refunding result from the difference between the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. The Town's legal debt limit for water, sewer, lights, open space preserves, parks, playgrounds, and recreational facilities is $200.5 million, and for all other purposes is $60.2 million. The Town does not have any related debt. O. Interfund Activity Flows of cash from one fund to another without a requirement for repayment are reported as interfund transfers. Interfund transfers between governmental funds are eliminated in the Statement of Activities. Interfund transfers in the fund statements are reported as other financing sources/uses in governmental funds and after nonoperating revenues/expenses in proprietary funds. P. Net Position Flow Assumption In the government-wide and proprietary fund financial statements the Town applies restricted resources first when outlays are incurred for purposes for which either restricted or unrestricted amounts are available. Q. Estimates The preparation of the 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 amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. R. New Pronouncements For the year ended June 30, 2023, the Town implemented the provisions of GASB Statement No. 96 – Subscription-based 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 Town’s financial statements have been modified to reflect the implementation of this new standard. TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2023 58 NOTE 2 – FUND BALANCE CLASSIFICATIONS Fund balances of the governmental funds are reported separately within classifications based on a hierarchy of the constraints placed on the use of those resources. The classifications are based on the relative strength of the constraints that control how the specific amounts can be spent. The classifications are nonspendable, restricted, and unrestricted, which includes committed, assigned, and unassigned fund balance classifications. Nonspendable. The nonspendable fund balance classification includes amounts that cannot be spent because they are not in spendable form or are legally or contractually required to be maintained intact. Restricted. Fund balance is reported as restricted when constraints placed on the use of resources are either externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments or is imposed by law through constitutional provisions or enabling legislation. Committed. The committed fund balance classification includes amounts that can be used only for the specific purposes imposed by formal action of the Town Council through the approval of a Town resolution. Those committed amounts cannot be used for any other purpose unless the Town Council removes or changes the specified use by taking the same type of action it employed to previously commit those amounts. The committed fund balance reported in the General Fund is to be used for contingency reserve. The committed fund balance reported in the Townwide Facilities Projects Fund is used for improvements to Town parks. The committed fund balance reported in the Community Center Fund is used for the culture and recreation activity of the Community Center as well as other Parks and Recreation facilities, amenities or operations as determined by the Town Council. Assigned. Amounts in the assigned fund balance classification are intended to be used by the Town for specific purposes but do not meet the criteria to be classified as restricted or committed. In governmental funds other than the General Fund, assigned fund balance represents the remaining amount that is not restricted or committed. In the General Fund, assigned amounts represent intended uses established by the Town Council or a management official delegated that authority by the formal Town Council action. This authorization has been given to the Town Manager through the approval of Resolution No. (R)23-01, which amended the Town Financial and Budgetary Policies. The assigned fund balance in the General Government CIP Fund is to be used for governmental capital asset projects. Unassigned. Unassigned fund balance is the residual classification for the General Fund and includes all spendable amounts not contained in the other classifications. In other governmental funds, the unassigned classification is used only to report a deficit balance resulting from overspending for specific purposes for which amounts had been restricted, committed, or assigned. The Town applies restricted resources first when outlays are incurred for purposes for which either restricted or unrestricted (committed, assigned, and unassigned) amounts are available. Similarly, within unrestricted fund balance, committed amounts are reduced first followed by assigned, and then unassigned amounts when expenditures are incurred for purposes for which amounts in any of the unrestricted fund balance classifications could be used. TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2023 59 NOTE 2 – FUND BALANCE CLASSIFICATIONS (Continued) The table below provides detail of the major components of the Town’s fund balance classifications at year end. Grants and Municipal Fund Balances: Nonspendable: Inventory $- $127,713 $- $- $- $- Prepaid items 360,848 56,274 326,791 - - 1,950 Restricted: Highway and Streets - - - - - 876,983 Debt service - - - - 273,718 - Capital projects - - 12,013,046 - - 3,732,928 Public safety - - - 162,207 - 230,192 Committed: Contingency reserve 12,116,181 - - - - - Culture & recreation - 824,246 - - - 17,217 Assigned: Townwide capital - - 12,210,451 - - - Unassigned:11,321,463 - - - - - Total Fund Balances $23,798,492 $1,008,233 $24,550,288 $162,207 $273,718 $4,859,270 Debt Service Fund Non-Major Governmental Funds General Fund Community Center Fund General Government CIP Fund Contributions Fund NOTE 3 – STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY Excess Expenditures Over Budget – At year end, the Town had expenditures that exceeded the budget, however, this does not constitute a violation of legal provisions. NOTE 4 – CASH AND INVESTMENTS A.R.S. authorize the Town to invest public monies in obligations of the U.S. Government and its agencies, obligations of the State and certain local government subdivisions, interest - bearing savings accounts and certificates of deposit, collateralized repurchase agreements, certain obligations of U.S. corporations, and certain other securities. The statutes do not include any requirements for credit risk, custodial credit risk, concentration of credit risk, interest rate risk, or foreign currency risk for the Town’s investments. Custodial Credit Risk – Deposits. Custodial Credit risk is the risk that in the event of bank failure the Town’s deposits may not be returned to the Town. The Town does not have a deposit policy for custodial credit risk. At year end, the carrying value of the Town’s deposits was $2,199,918 and the bank balance was $4,148,976. Of the bank balance, $750,000 was covered by Federal depository insurance and the remainder was covered by collateral held by the pledging financial institution’s trust department or agent but not in the Town’s name and no amounts were uninsured and uncollateralized. Additionally, the Town had cash on hand of $8,963. TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2023 60 NOTE 4 – CASH AND INVESTMENTS (Continued) Fair Value Measurements. The Town 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 Valuation Techniques. Equity and debt securities classified in Level 1 of the fair value hierarchy are valued using prices quoted in active markets for those securities. Money markets and certificates of deposit securities classified in Level 2 of the of the fair value hierarchy are valued using a matrix pricing technique. Matrix pricing is used to value securities based on the securities’ relationship to benchmark quoted prices. The State Treasurer’s pools are external investment pools, the Local Government Investment Pool (Pool 5) and Local Government Investment Pool – Government (Pool 7), with no regulatory oversight. The pools are as an investment company are not registered with the Securities and Exchange Commission. The activity and performance of the pools are reviewed monthly by the State Board of Investment. The fair value of each participant’s position in the State Treasurer investment pools 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. The Arizona State Treasurer has a publicly available financial report that includes financial statements and required supplementary information. Copies may be obtained by contacting the Arizona State Treasurer, 1700 West Washington, Phoenix, AZ 85007 or at www.aztreasury.gov. The County Treasurer’s pool is an external investment pool with no regulatory oversight. The pool is not required to register (and is not registered) with the Securities and Exchange Commission. The fair value of each participants’ position in the County Treasurer investment pool approximates the value of the participants’ 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. Custodial Credit Risk – Investments. The Town’s investment in the State and County Treasurer’s investment pools represents a proportionate interest in the pool’s portfolio; however, the Town’s portion is not identified with specific investments and is not subject to custodial credit risk. TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2023 61 NOTE 4 – CASH AND INVESTMENTS (Continued) All investments in which the fair value hierarchy is applicable are measured at fair value on a recurring basis. At year end, the Town’s investments consisted of the following: Investment Type Fair Value Category Less than 1 1-5 Moody's S&P's Money Market - Wells Fargo 194,045 Level 2 194,045 N/A N/A Money Market - Zion Bank 161,695 Level 2 161,695 N/A N/A Money Market - US Bank 18,302,746 Level 2 18,302,746 N/A N/A Money Market - BNY Mellon 208,911 Level 2 208,911 N/A N/A U.S. Treasuries 21,674,574 Level 1 1,998,219 19,676,355 Aaa AA+ Supra-National Agency: Asian Development Bank 1,254,107 Level 1 900,729 353,379 Aaa AAA Inter-American Development Bank 527,747 Level 1 527,747 Aaa AAA Collateralized Mortgage Obligation: FHMS 501,392 Level 1 501,392 Aaa AA+ FNA 157,848 Level 1 157,848 Aaa AA+ Federal Home Loan Mortgage Corporation 517,652 Level 1 517,652 Aaa AA+ Asset-Backed Security: Credit Rating - Aaa and AAA 3,815,609 Level 1 726,218 3,089,391 Aaa AAA Credit Rating - N/A and AAA 4,615,425 Level 1 881,914 3,733,511 N/A AAA Credit Rating - Aaa and N/A 2,994,603 Level 1 374,635 2,619,968 Aaa N/A Bank Note: Credit Rating - A2 and A 237,819 Level 1 237,819 A2 A Certificate of Deposit: Credit Rating - Aa3 and A+424,916 Level 1 424,916 Aa3 A+ Credit Rating - Aa3 and AA-545,211 Level 1 545,211 Aa3 AA- Corporate Notes: Credit Rating - A3 and BBB+894,499 Level 1 660,089 234,410 A3 BBB+ Credit Rating - A3 and A+90,249 Level 1 90,249 A3 A+ Credit Rating - A3 and A-2,547,704 Level 1 386,132 2,161,572 A3 A- Credit Rating - A3 and AA-110,709 Level 1 110,709 A3 AA- Credit Rating - A2 and BBB+525,679 Level 1 341,255 184,424 A2 BBB+ Credit Rating - A2 and A+249,431 Level 1 249,431 A2 A+ Credit Rating - A2 and A 1,971,523 Level 1 1,971,523 A2 A Credit Rating - A2 and A-1,504,957 Level 1 1,504,957 A2 A- Credit Rating - A1 and BBB+359,464 Level 1 147,744 211,721 A1 BBB+ Credit Rating - A1 and A-2,801,299 Level 1 1,283,181 1,518,118 A1 A- Credit Rating - A1 and A 2,339,907 Level 1 91,194 2,248,713 A1 A Credit Rating - A1 and A+1,038,375 Level 1 1,038,375 A1 A+ Credit Rating - A1 and AA 272,730 Level 1 272,730 A1 AA Credit Rating - Aaa and AA+266,024 Level 1 266,024 Aaa AA+ Credit Rating - Aa2 and A+245,283 Level 1 245,283 Aa2 A+ Credit Rating - Aa2 and AA 88,385 Level 1 88,385 Aa2 AA Credit Rating - Aa2 and AA-110,439 Level 1 110,439 Aa2 AA- Credit Rating - Aa3 and AA-2,448,215 Level 1 2,448,215 Aa3 AA- 73,999,170 27,176,357 46,822,813 County Treasurer's Investment Pool 305,994 Not applicable 202 days average maturities N/A State Treasurer's Investment Pool 5 14,767,853 Not applicable 47 days average maturities AAA/S1+ Total 89,073,017 Investment Maturities (in Years)Credit Quality Ratings TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2023 62 NOTE 4 – CASH AND INVESTMENTS (Continued) Interest Rate Risk. The Town has implemented an investment policy that will minimize interest rate risk, which is the risk that the market value of securities in the portfolio will fall due to changes in market interest rates by the following. 1. Structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity; and 2. Investing operating funds primarily in shorter-term securities, money market mutual funds, or similar investment pools limiting the average maturity in the portfolio in accordance with this policy. Credit Risk. The Town has implemented an investment policy that will minimize credit risk, which is the risk of loss due to the failure of the security or backer by the following: 1. Limiting investments to the types of securities listed in Section 6 of this investment policy; 2. Pre-qualifying financial institutions, broker/dealers, intermediaries, and advisers with which the Town will do business in accordance with Section 5; and 3. Diversifying the investment portfolio so that the impact of potential losses from any one type of security or from any one individual issuer will be minimized. Concentration of Credit Risk. The Town places no limit on the amount the Town may invest in any one issuer. The investments in Money Markets, Certificates of Deposit, U.S. Treasuries, Supranational Agency Bonds, Collateralized Mortgage Obligations, Asset-Backed Securities, U.S. Agencies, Corporate Securities, County Treasurer’s Investment Pool, and State Treasurer's Investment Pool 5, represent 21%, 1%, 24%, 2%, 2%, 13%, 0%, 20%, 0%, and 17% of the Town's total investments, respectively. TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2023 63 NOTE 5 – RECEIVABLES Receivable balances, net of allowance for uncollectibles, have been disaggregated by type and presented separately in the financial statements with the exception of intergovernmental receivables. Intergovernmental receivables, net of allowance for uncollectibles, as of year-end for the Town’s individual major funds and non-major governmental funds in the aggregate, were as follows: Intergovernmental receivables: Due from federal government $86,569 $71,472 $- Due from state government 407,992 - 391,353 Due from other governments 36,939 - 323,210 Net intergovernmental receivables $531,500 $71,472 $714,563 Non-Major General Fund Grants Fund Funds Governmental Lease Receivables – The Town leases cell tower space and building/facility space to third parties under the provisions of various lease agreements. During the fiscal year ended June 30, 2023, the Town recognized total lease-related revenues of $105,327. TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2023 64 NOTE 6 – CAPITAL AND INTANGIBLE ASSETS A summary of capital and intangible asset activity for the year ended June 30, 2023, was as follows: Governmental Activities: NON-DEPRECIABLE/AMORTIZABLE Land $34,674,821 $1,745,000 $(130,000) $- $36,289,821 Construction in progress 7,135,093 18,364,600 (10,720,125) - 14,779,568 Total non-depreciable/amortizable 41,809,914 20,109,600 (10,850,125) - 51,069,389 DEPRECIABLE/AMORTIZABLE Infrastructure 242,183,497 3,740,089 - - 245,923,586 Buildings & improvements 45,920,567 11,790,923 - - 57,711,490 Machinery, equipment & vehicles 20,139,411 2,452,943 (1,100,502) 37,928 21,529,780 Software - SBITA Subscriptions - 582,440 - - 582,440 Equipment - Leases 851,353 349,652 (136,063) - 1,064,942 Total depreciable/amortizable 309,094,828 18,916,047 (1,236,565) 37,928 326,812,238 ACCUMULATED DEPRECIATION/AMORTIZATION Infrastructure (127,614,346) (9,604,034) - - (137,218,380) Buildings & improvements (12,260,090) (1,234,878) - - (13,494,968) Machinery, equipment & vehicles (14,965,998) (1,635,747) 1,079,011 (37,928) (15,560,662) Software - SBITA Subscriptions - (115,580) - - (115,580) Equipment - Leases (66,746) (242,142) 72,033 - (236,855) Total accumulated depreciation/amortization (154,907,180) (12,832,381) 1,151,044 (37,928) (166,626,445) Total capital assets being depreciated/amortized 154,187,648 6,083,666 (85,521) - 160,185,793 Capital assets, net of depreciation/amortization $195,997,562 $26,193,266 $(10,935,646) $- $211,255,182 Business-type Activities: NON-DEPRECIABLE Land $2,410,660 $- $- $- $2,410,660 Water rights 8,534,490 - - - 8,534,490 Construction in progress 8,412,006 3,647,017 (349,679) - 11,709,344 Total non-depreciable 19,357,156 3,647,017 (349,679) - 22,654,494 DEPRECIABLE Water system 145,877,922 2,606,927 - - 148,484,849 Stormwater system 3,650,716 507,896 - - 4,158,612 Machinery, equipment & vehicles 6,215,124 545,183 - (37,928) 6,722,379 - Total depreciable 155,743,762 3,660,006 - (37,928) 159,365,840 ACCUMULATED DEPRECIATION Water system (58,607,599) (3,552,696) - - (62,160,295) Stormwater system (780,399) (77,875) - - (858,274) Machinery, equipment & vehicles (5,165,511) (301,207) - 37,928 (5,428,790) - Total accumulated depreciation (64,553,509) (3,931,778) - 37,928 (68,447,359) Total capital assets being depreciated 91,190,253 (271,772) - - 90,918,481 Capital assets, net of depreciation $110,547,409 $3,375,245 $(349,679) $- $113,572,975 Transfers Transfers Beginning Ending Balance Increases Decreases Balance Beginning Ending Balance Increases Decreases Balance TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2023 65 NOTE 6 – CAPITAL AND INTANGIBLE ASSETS (Continued) Depreciation and amortization expense was charged to functions/programs as follows: Governmental activities: General government $541,922 $197,866 $739,788 Public safety 1,035,835 - 1,035,835 Highways & streets 9,924,018 - 9,924,018 Culture & recreation 972,884 159,856 1,132,740 Total depreciation/amortization expense - governmental activities $12,474,659 $357,722 $12,832,381 Business-type activities: Water $3,782,858 $- $3,782,858 Stormwater 148,920 - 148,920 Total depreciation - expense business-type activities $3,931,778 $- $3,931,778 Depreciation Amortization TotalDepreciation Amortization Total Construction Commitments – As of year-end, the Town had contractual commitments related to park improvements, facility improvements, and water system improvements. At year end the Town had spent $29.7 million on the projects and had estimated remaining contractual commitments of $50.6 million. NOTE 7 – LOAN PAYABLE The Town has a loan from the Water Infrastructure Finance Authority (WIFA) of Arizona for water system projects. The loan payable at current fiscal year end is presented below. Interest Rate (Including Remaining Business-type activities:Fees)Maturities WIFA Loan, 2014 2.65%7/1/23-29 $2,087,126 $325,496 Total $2,087,126 $325,496 Outstanding Principal June 30, 2023 Due Within One Year TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2023 66 NOTE 7 – LOAN PAYABLE (Continued) Principal and interest payments on the business-type activities loan payable at June 30, 2023 is summarized as follows: Year ending June 30: $325,496 $51,034 334,128 42,288 342,989 33,310 352,085 24,093 361,422 14,632 371,006 4,920 $2,087,126 $170,277 Total 2024 2025 2026 2027 2028 2029 Principal Interest NOTE 8 – REVENUE BONDS PAYABLE Bonds payable at year end, consisted of the following outstanding revenue and refunding bonds. The bonds are both callable and noncallable with interest payable semiannually. Taxes, water revenues, and impact fees are used to pay bonded debt. Purpose Governmental activities: Revenue bonds: Excise Tax Revenue Obligations, 2010 $2,445,000 $790,000 $150,000 Revenue Bonds, 2012 2,580,000 1,030,000 190,000 Pension Obligation Bonds, 2021 17,975,000 17,035,000 960,000 Parks and Recreation, 2021 21,120,000 20,170,000 680,000 Private placement revenue bonds: Refunding Excise Tax Revenue Obligations, 2015 2,529,250 891,770 292,790 Excise Tax Revenue Obligations, 2016 2,000,000 1,408,000 143,000 Refunding Excise Tax Revenue Obligations, 2017 1,115,556 528,600 127,452 Excise Tax Revenue Obligations, 2018 2,035,000 1,604,000 125,000 Total $43,457,370 $2,668,242 5.49-6.59% 3.50-4.00% 2.43% Due Within One Year 7/1/23-28 7/1/23-27 7/1/23-343.02% 7/1/23-42 7/1/23-390.27-2.70% 4.00-5.00% Outstanding Principal June 30, 2023Issued Amount Original Interest Rates 7/1/23-28 Remaining Maturities 1.91% 2.20% 7/1/23-26 7/1/23-32 Purpose Business-type activities: Private placement revenue bonds: Refunding Revenue Bonds, 2015 $1,245,750 $439,230 $144,210 Refunding Revenue Bonds, 2017 13,186,444 6,248,394 1,506,548 Excise Tax Revenue Obligations, 2018 6,105,000 4,812,004 375,000 Refunding Revenue Bonds, 2021 5,582,000 4,732,000 1,021,000 Total $16,231,628 $3,046,758 1.91%7/1/23-25 3.02% 1.16-1.27% 7/1/23-34 7/1/23-30 2.43%7/1/23-27 Due Within One Year Original Amount Issued Interest Remaining Outstanding Principal June 30, 2023RatesMaturities TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2023 67 NOTE 8 – REVENUE BONDS PAYABLE (Continued) Annual debt service requirements to maturity on revenue and refunding bonds for governmental activities at year end are summarized as follows: $1,980,000 $1,258,121 $688,242 $101,489 2,030,000 1,201,676 702,974 85,704 2,085,000 1,140,563 717,942 69,565 2,140,000 1,074,363 426,712 55,995 2,195,000 1,003,105 297,000 46,738 9,975,000 4,033,682 1,431,000 114,448 11,710,000 2,285,949 168,500 2,544 6,910,000 481,321 - - $39,025,000 $12,478,780 $4,432,370 $476,483 Revenue BondsRevenue Bonds Interest Governmental Activities Principal InterestPrincipal Private Placement Year ending June 30: 2024 2025 2026 2027 2028 2029-2033 2034-2038 Total 2039-2042 Annual debt service requirements to maturity on revenue and refunding bonds for business-type activities at year end are summarized as follows: $3,046,758 $311,895 2,836,026 248,084 2,899,058 186,002 2,812,282 125,317 1,210,000 102,847 2,922,000 229,415 505,504 - $16,231,628 $1,203,560 Business-type Activities Total Revenue Bonds Principal Interest 2029-2033 2034 Year ending June 30: 2024 2026 2027 2028 2025 Private Placement TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2023 68 NOTE 8 – REVENUE BONDS PAYABLE (Continued) Pledged revenues – governmental activities. The Town has pledged future sales (excise) tax revenues to repay outstanding revenue bonds and refunding revenue bonds of $47.4 million as of June 30, 2023. Proceeds from the original bond issuances, including those subsequently refunded, provided financing for land acquisition and facility construction. The bonds are paid solely from the Town’s sales taxes and are payable through 2042. Total annual principal and interest payments for all sales tax revenue bonds are expected to require less than seven percent of gross revenues. The total principal and interest to be paid on the bonds is $56.4 million. The current total sales tax revenues were $30.2 million, and the total principal and interest paid on the bonds was $4.3 million or approximately 14.2 percent of gross revenues. Pledged revenues – business-type activities. The Town has pledged future water revenues to repay outstanding revenue bonds and refunding revenue bonds of $16.2 million as of June 30, 2023. Proceeds from the original bond issuances, including those subsequently refunded, provided financing for the construction and improvements to the Town’s water systems and infrastructure. The bonds are paid solely from water utility revenues and are payable through 2034. Total annual principal and interest payments for all water revenue bond issuances are expected to require approximately 25 percent of gross revenues. The total principal and interest to be paid on the bonds is $17.4 million. The current total customer gross revenues were $19.5 million, and the total principal and interest paid on the bonds was $4.6 million or 23 percent of gross revenues. NOTE 9 – OBLIGATIONS UNDER LEASES Leases – Lease agreements are summarized as follows: Description Copiers 07/01/2021 34 months $4,149 2.5%$136,063 $- Copiers 09/30/2022 60 months 6,400 3.5%349,652 295,826 Golf carts 03/01/2022 36-54 months 13,259 2.5%637,971 494,154 Fitness equipment 01/15/2022 48 months 1,278 2.5%58,319 37,129 Total lease agreements $1,182,005 $827,109 Date Liability Lease Beginning Interest Rate Payment Amount June 30, 2023 BalancePayment Terms Annual requirements to amortize long-term obligations and related interest are as follows: Year Ending June 30 2024 $229,867 $21,375 2025 227,098 14,731 2026 206,903 8,432 2027 150,501 2,638 2028 12,740 60 Total $827,109 $47,236 Principal Interest TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2023 69 NOTE 10 – SUBSCRIPTION-BASED INFORMATION TECHNOLOGY ARRANGEMENTS The Town has obtained the right to use software under the provisions of various subscription-based information technology arrangements. The total amount of subscription assets are summarized as follows: Description Sensus/Flexnet 07/01/2022 72 months $3,921 3.75%$245,267 $208,776 Sprypoint 07/01/2022 48 months 7,750 3.75%337,173 258,084 Total SBITA agreements $582,440 $466,860 Date Terms Amount Rate Liability June 30, 2023 Beginning Payment Payment Interest SBITA Balance The following schedule details minimum subscription payments to maturity for the Town’s subscriptions liability at June 30, 2023: June 30 2024 $120,763 $19,284 2025 126,015 14,032 2026 131,276 8,771 2027 43,518 3,529 2028 45,288 1,759 Total $466,860 $47,375 Principal Interest NOTE 11 – FINANCED PURCHASE AGREEMENT The Town acquired Community Center fitness equipment under contract at a total purchase price of $81,722. The following schedule details debt service requirements to maturity for the Town’s financed purchases at June 30, 2023. Year ending June 30: $19,531 $3,146 20,574 2,104 21,671 1,006 7,478 81 $69,254 $6,337 2025 2026 2027 Total Governmental Activities Principal Interest 2024 TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2023 70 NOTE 12 – CHANGES IN LONG-TERM LIABILITIES Long-term liability activity for the current fiscal year was as follows: Due Within One Year Governmental activities Revenue bonds $41,250,000 $- $(2,225,000) $39,025,000 $1,980,000 Private placement revenue bonds 5,103,030 - (670,660) 4,432,370 688,242 Premium 4,110,217 - (205,511) 3,904,706 - Total bonds payable 50,463,247 - (3,101,171) 47,362,076 2,668,242 Leases payable 769,691 349,652 (292,234) 827,109 229,867 Financed purchases - 81,722 (12,468) 69,254 19,531 Subscriptions liability - 582,440 (115,580) 466,860 120,763 Net pension liability 33,916,561 - (15,572,182) 18,344,379 - Compensated absences payable 2,441,214 2,233,418 (2,233,790) 2,440,842 2,233,604 Governmental activities long-term liabilities $87,590,713 $3,247,232 $(21,327,425) $69,510,520 $5,272,007 Business-type activities Revenue bonds $1,815,000 $- $(1,815,000) $- $- Private placement revenue bonds 18,661,968 - (2,430,340) 16,231,628 3,046,758 Total bonds payable 20,476,968 - (4,245,340) 16,231,628 3,046,758 Loan payable 2,404,213 - (317,087) 2,087,126 325,496 Net pension liability 3,352,317 816,173 - 4,168,490 - Compensated absences payable 353,633 253,278 (244,784) 362,127 249,031 Business-type activities long-term liabilities $26,587,131 $1,069,451 $(4,807,211) $22,849,371 $3,621,285 Outstanding Issued Matured/ During Year Outstanding 2023 Due Within One Year July 1,Redeemed June 30, 2022 Outstanding July 1, 2022 Outstanding June 30, 2023 Matured/ Redeemed During YearIssued TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2023 71 NOTE 13 – TRANSFERS At year end, transfer activity in the funds was as follows: Interfund transfers: General Fund $- $15,996,977 Community Center Fund - 6,795,852 General Government CIP 18,267,786 - Grants and Contributions 448,012 1,850,636 Municipal Debt Service Fund 4,200,971 - Non-Major Governmental Funds - 121,500 Water Fund 1,848,196 - $24,764,965 $24,764,965 Transfers In Transfers Out Transfers were made from the General, Community Center, and the General Impact Fee Funds to the Municipal Debt Service Fund for debt service. In addition, transfers were made from the General Fund and Community Center Fund to the General Government CIP Fund, and from the Grants and Contributions Fund to the Water Fund to support capital projects. NOTE 14 – CONTINGENT LIABILITIES Compliance – Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies, principally the federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures/expenses that may be disallowed by the grantor cannot be determined at this time, although the Town expects such amounts, if any, to be immaterial. TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2023 72 NOTE 15 – RISK MANAGEMENT The Town is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The Town’s insurance protection is provided by the Arizona Municipal Risk Retention Pool, of which the Town is a participating member. The limit for basic coverage is $2,000,000 per occurrence on a claims made basis. Excess coverage is for an additional $10,000,000 per occurrence on a follow form, claims made basis. The aggregate limit is also $10,000,000. No significant reduction in insurance coverage occurred during the year and no settlements exceeded insurance coverage during any of the past three fiscal years. The Arizona Municipal Risk Retention Pool is structured such that member premiums are based on an actuarial review that will provide adequate reserves to allow the Pool to meet its expected financial obligations. The Pool has the authority to assess its members’ additional premiums should reserves and annual premiums be insufficient to meet the Pool’s obligations. The Town is insured by Arizona Municipal Workers Compensation Pool for potential worker related accidents. The Town has established a Self-Insurance Fund to account for and finance its uninsured risks of loss related to its employee health benefits program. The activity is reported in an internal service fund in these financial statements. Under this program, the Fund provides coverage for up to a maximum of $150,000 for each claim, not to exceed an annual aggregate of $2,000,000. The Fund purchases commercial insurance for claims in excess of this coverage. Settled claims have not exceeded this coverage for the past three fiscal years. Liabilities of the fund are reported when it is probable that a loss has occurred, and the amount of the loss can be reasonably estimated. Liabilities include an amount for claims that have been incurred but not reported (IBNRs). The result of the process to estimate the claims liability is not an exact amount as it depends on many complex factors, such as inflation, changes in legal doctrines, and damage awards. Accordingly, claims are reevaluated periodically to consider the effects of inflation, recent claim settlement trends (including frequency and amount of pay- outs), and other economic and social factors. The estimate of the claims liability also includes amounts for incremental claim adjustment expenses related to specific claims and other claim adjustment expenses regardless of whether allocated to specific claims. Estimated recoveries, for example from salvage or subrogation, are another component of the claims liability estimate. Changes in the balances of claims liabilities during the past two years are as follows. 2022-23 $302,655 $3,608,672 $3,549,998 $361,329 2021-22 328,352 2,384,594 2,410,291 302,655 Claim Payments Claims Payable at End of Year Claims Payable Beginning of Year Current Year Claims and Changes in Estimates TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2023 73 NOTE 16 – PENSIONS The Town contributes to the plans described below. The plans are component units of the State of Arizona. Aggregate Amounts. On June 30, 2023, the Town reported the following aggregate amounts related to pensions for all plans to which it contributes. Net pension liability $18,344,379 $4,168,490 $22,512,869 Pension deferred outflows of resources 11,851,971 631,879 12,483,850 Pension deferred inflows of resources 1,053,059 133,851 1,186,910 Pension expense 4,182,831 391,630 4,574,461 Total Business-type Activities Governmental Activities The Town reported $4.6 million of pension contributions as expenditures in the governmental funds related to all plans to which it contributes. A. Arizona State Retirement System Plan Description. Town employees not covered by the other pension plans described below participate in the Arizona State Retirement System (ASRS). The ASRS administers a cost - sharing multiple-employer defined benefit pension plan, a cost-sharing multiple-employer defined benefit health insurance premium benefit (OPEB) plan, and a cost-sharing multiple- employer defined benefit long-term disability (OPEB) plan. The Arizona State Retirement System Board governs the ASRS according to the provisions of A.R.S. Title 38, Chapter 5, Articles 2 and 2.1. The ASRS issues a publicly available financial report that includes its financial statements and required supplementary information. The report is available on the ASRS website at www.azasrs.gov. GASB Statement 75 has not been recorded or further disclosed due to its relative insignificance to the Town’s financial statements. TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2023 74 NOTE 16 – PENSIONS (Continued) Benefits Provided. The ASRS provides retirement, health insurance premium supplement, long-term disability, and survivor benefits. State statute establishes benefit terms. Retirement benefits are calculated on the basis of age, average monthly compensation, and service credit as follows: Retirement Initial Membership Date: Before July 1, 2011 On or After July 1, 2011 Years of service and age required to receive benefit Sum of years and age equals 80 10 years, age 62 5 years, age 50* Any years, age 65 30 years, age 55 25 years, age 60 10 years, age 62 5 years, age 50* Any years, age 65 Final average salary is based on Highest 36 months of last 120 months Highest 60 months of last 120 months Benefit percent per year of service 2.1% to 2.3% 2.1% to 2.3% *With actuarially reduced benefits Retirement benefits for members who joined the ASRS prior to September 13, 2013, are subject to automatic cost-of-living adjustments based on excess investment earnings. Members with a membership date on or after September 13, 2013, are not eligible for cost-of-living adjustments. Survivor benefits are payable upon a member’s death. For retired members, the retirement benefit option chosen determines the survivor benefit. 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. 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. 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. TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2023 75 NOTE 16 – PENSIONS (Continued) Active members are eligible for a long-term disability benefit in the event they become unable to perform their work. The monthly benefit is equal to two-thirds of their monthly earnings. Members receiving benefits continue to earn service credit up to their normal retirement dates. Members with long-term disability commencement dates after June 30, 1999, are limited to 30 years of service or the service on record as of the effective disability date if their service is greater than 30 years. Contributions. In accordance with State statutes, annual actuarial valuations determine active member and employer contribution requirements. The combined active member and employer contribution rates are expected to finance the costs of benefits employees earn during the year, with an additional amount to finance any unfunded accrued liability. For the fiscal year ended June 30, 2023, statute required active ASRS members to contribute at the actuarially determined rate of 12.17 percent (12.03 percent for retirement and 0.14 percent for long-term disability) of the members’ annual covered payroll, and statute required the Town to contribute at the actuarially determined rate of 12.17 percent (11.92 percent for retirement, 0.11 percent for health insurance premium benefit, and 0.14 percent for long-term disability) of the active members’ annual covered payroll. The Town’s contributions for the year ended June 30, 2023, were as follows: Pension $1,895,413 Contributions Employers are also required to pay an Alternate Contribution Rate (ACR), for retired members who return to work in positions that would typically be filled by an employee who contributes to ASRS. The Town was required by statute to contribute at the actuarially determined rate of 9.68 percent (9.62 for retirement and 0.06 percent for long-term disability) of annual covered payroll. ACR contributions are included in employer contributions presented above. The Town’s pension contributions are paid by the same funds as the employee’s salary, with the largest component coming from the General Fund. Contributions from the Water Enterprise Fund were 16%, and contributions from the non-major enterprise fund were 4%. TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2023 76 NOTE 16 – PENSIONS (Continued) Pension Liability. The net pension liability was measured as of June 30, 2022. The total liability used to calculate the 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 Town’s proportion of the net asset/liability was based on the Town’s actual contributions to the plan relative to the total of all participating employers’ contributions for the year ended June 30, 2022. The Town’s proportions measured as of June 30, 2022, and the change from its proportions measured as of June 30, 2021, were: Pension $19,916,374 0.122 0.001 Town % Proportion Increase (Decrease) Net (Asset)/ Liability Pension Expense and Deferred Outflows/Inflows of Resources. The Town has deferred outflows and inflows of resources related to the net pension liability. 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 Town recognized pension expense as follows: Pension $1,895,331 Expense TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2023 77 NOTE 16 – PENSIONS (Continued) The Town reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows of Resources Differences between expected and actual experience $169,699 Changes of assumptions or other inputs 988,488 Net difference between projected and actual earnings on pension investments - Changes in proportion and differences between contributions and proportionate share of contributions 118,497 Contributions subsequent to the measurement date 1,895,413 Total $3,172,097 Deferred Inflows of Resources Differences between expected and actual experience $- Changes of assumptions or other inputs - Net difference between projected and actual earnings on pension investments 524,617 Changes in proportion and differences between contributions and proportionate share of contributions 147,325 Total $671,942 Pension Pension 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: $858,429 (182,503) (910,858) 839,674 - - Thereafter Pension 2024 2025 2026 2027 2028 TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2023 78 NOTE 16 – PENSIONS (Continued) Actuarial Assumptions. The significant actuarial assumptions used to measure the total pension liability are as follows: Pension Actuarial valuation date June 30, 2021 Actuarial roll forward date June 30, 2022 Actuarial cost method Entry age normal Investment rate of return 7.0% Projected salary increases 2.9-8.4% Inflation 2.3% Permanent base increases Included Mortality rates 2017 SRA Scale U-MP Recovery rates 2012 GLTD for long-term di disability Healthcare cost trend rate Not applicable Actuarial assumptions used in the June 30, 2021 valuation were based on the results of an actuarial experience study for the five-year period ended June 30, 2020. The 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 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 of ASRS are summarized in the following table: Asset Class Equity 50%3.90% Fixed income - credit 20%5.30% Interest rate sensitivity bonds 10%-0.20% Real estate 20%6.00% Total 100% Target Long-term Expected Real Allocation Rate of Return TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2023 79 NOTE 16 – PENSIONS (Continued) 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 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 table presents the Town’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 (6.0 percent) or 1-percentage-point higher (8.0 percent) than the current rate: $29,386,018 $19,916,374 $12,020,171 1% Decrease 1% Increase Pension Rate 6.0%7.0%8.0% Proportionate share of the net liability Discount Rate Current 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. TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2023 80 NOTE 16 – PENSIONS (Continued) B. Public Safety Personnel Retirement System and Corrections Officer Retirement Plan Plan Descriptions. Town public safety employees who are regularly assigned hazardous duty participate in the Public Safety Personnel Retirement System (PSPRS) or employees who became members on or after July 1, 2017, may participate in the Public Safety Personnel Defined Contribution Retirement Plan (PSDCRP). The PSPRS administers an agent and cost- sharing multiple-employer defined benefit pension plan and an agent and cost-sharing 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 the agent plans or cost- sharing plans (PSPRS Tier 3 Risk Pool). Town dispatchers participate in the Corrections Officer Retirement Plan (CORP) or the Public Safety Personnel Defined Contribution Retirement Plan. The CORP administers an agent multiple-employer defined benefit pension plan and an agent multiple-employer defined benefit health insurance premium benefit (OPEB) plan for dispatchers (agent plans), which were closed to new members as of July 1, 2018. Employees who were CORP members before July 1, 2018, participate in CORP or PSDCRP. Dispatcher employees who became members on or after July 1, 2018, participate in PSDCRP. The PSPRS Board of Trustees described above and the participating local boards govern CORP according to the provisions of A.R.S. Title 38, Chapter 5, Article 6. The PSPRS and CORP issue a publicly available financial report that includes their financial statements and required supplementary information. The report is available on the PSPRS website at www.psprs.com. The PSPRS Tier 3 Risk Pool plans and the PSPRS OPEB plans are not further disclosed because of their relative insignificance to the Town’s financial statements. Benefits Provided. The PSPRS and CORP provide retirement, health insurance premium supplement, disability, and survivor benefits. State statute establishes benefits terms. Retirement, disability, and survivor benefits are calculated on the basis of age, average monthly compensation, and service credit as follows. See the publicly available PSPRS and CORP financial report for additional benefits information. TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2023 81 NOTE 16 – PENSIONS (Continued) Retirement and disability Years of service and age required to receive benefit Final average salary is based on Benefit percent Normal retirement Accidental disability retirement Catastrophic disability retirement Ordinary disability retirement Survivor benefit Retired members Active members 20 years, not to exceed 80% 50% or normal retirement, whichever is greater 90% for the first 60 months then reduced to either 10 years, age 6210 years, age 62 years OR plus 2-2.5% for each year of credited service over monthly compensation if death was the result of injuries received on the job whichever is greater, multiplied by years of credited service (not to exceed 20 years) divided by 20, 62.5% or normal retirement, whichever is greater or 2.5% per year of credited service Normal retirement calculated with actual years of credited service or 20 years of credited service, On or after July 1, 2017 15 years of credited service, age 52.5* Highest 60 consecutive months of last 15 years 1.5-2.5% per year of credited service, not to exceed 80% 15 or more years of service, age 55 months of last 20 years On or after January 1, 2012 and before July 1, 2017 25 years of service or 15 years of credited service, age 52.5 Highest 60 consecutive 20-25 years of service, any age Highest 36 consecutive months of last 20 years 50% less 2% for each year of credited service less than 20 80%-100% of accidental disability retirement benefit or 100% of average 80%-100% of retired member's pension benefit Before January 1, 2012 15 years of service, age 62 Retirement and survivor benefits are subject to automatic cost-of-living adjustments based on inflation. PSPRS also provides temporary disability benefits of 50 percent of the member's compensation for up to 12 months. Health insurance premium benefits are available to retired or disabled members with 5 years of credited service. The benefits are payable only with respect to allowable health insurance premiums for which the member is responsible. Benefits range from $100 per month to $260 per month depending on the age of the member and dependents. TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2023 82 NOTE 16 – PENSIONS (Continued) Employees Covered by Benefit Terms. As of June 30, 2023, the following employees were covered by the agent plan’s benefit terms: Retirees & beneficiaries 52 6 Inactive, non-retired members 15 3 Active members 71 2 Total 138 11 Police CORP-Dispatchers Contributions. State statutes establish the pension contribution requirements for active PSPRS and CORP employees. In accordance with state statutes, annual actuarial valuations determine employer contribution requirements for PSPRS and CORP 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. CORP - PSPRS - Police Dispatchers Active members – pension 7.65% to 11.65% 7.96% Town: Pension 43.47% 118.45% Health insurance 0.00% 0.00% Employers are also required to pay an Alternate Contribution Rate (ACR), for retired members who return to work in positions that would typically be filled by an employee who contributes to PSPRS or CORP. The Town was required by statute to contribute at the actuarially determined rate of 30.38 percent for the PSPRS and 115.62 percent for the CORP. ACR contributions are included in employer contributions presented above. TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2023 83 NOTE 16 – PENSIONS (Continued) The contributions to the pension plans for the year ended June 30, 2023, were: Pension $1,523,896 $2,219,857 Contributions PSPRS-Police CORP-Dispatchers The Town’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. As of June 30, 2023, the Town reported the following liabilities. Pension $537,434 $2,059,061 PSPRS-Police CORP-Dispatchers Net Liability The net pension liability was measured as of June 30, 2022, and the total liability used to calculate the net liability was determined by an actuarial valuation as of that date. The total pension liability as of June 30, 2022, reflects changes of actuarial assumptions, including decreasing the investment rate of return from 7.3 percent to 7.2 percent, changing the wage inflation from 3.5 percent to a range of 3.0-6.25 percent, and increasing the cost-of-living adjustment from 1.75 percent to 1.85 percent. TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2023 84 NOTE 16 – PENSIONS (Continued) Actuarial Assumptions. The significant actuarial assumptions used to measure the total pension liability for both the PSPRS and CORP are as follows: Pension Actuarial valuation date June 30, 2022 Actuarial cost method Entry age normal Investment rate of return 7.2% Projected salary increases 3.0 – 6.25% Inflation 2.5% Cost-of-living adjustment 1.85% Mortality rates PubS-2010 tables Healthcare cost trend rate Not applicable 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 and CORP plan investments was determined to be 7.2 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: Cash - Mellon 1%-0.35% Core bonds 2%0.45% Other assets (Capital Appreciation)7%4.83% Diversifying strategies 10%2.68% International public equity 16%4.47% Global private equity 20%7.18% Private credit 20%5.10% U.S. public equity 24%3.49% Total 100% Asset Class Expected Real Long-term Target Allocation Rate of Return TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2023 85 NOTE 16 – PENSIONS (Continued) Changes in Net Liability PSPRS - Police Balances at June 30, 2022 $70,792,554 $51,161,889 $19,630,665 Changes for the year: Service cost 1,373,511 - 1,373,511 Interest on the total liability 5,155,618 - 5,155,618 Differences between expected and actual experience in the measurement of the total liability 1,479,536 - 1,479,536 Changes of assumptions or other inputs 719,444 - 719,444 Contributions - employer - 30,446,078 (30,446,078) Contributions - employee - 553,740 (553,740) Net investment income - (3,122,413) 3,122,413 Benefit payments, including refunds of employee contributions (3,082,329) (3,082,329) - Administrative expense - (56,065) 56,065 Other - - - Net changes 5,645,780 24,739,011 (19,093,231) Balances at June 30, 2023 $76,438,334 $75,900,900 $537,434 CORP - Dispatchers Balances at June 30, 2022 $3,551,295 $1,789,608 $1,761,687 Changes for the year: Service cost 16,669 - 16,669 Interest on the total liability 253,314 - 253,314 Differences between expected and actual experience in the measurement of the total liability 42,782 - 42,782 Changes of assumptions or other inputs 52,917 - 52,917 Contributions - employer - 123,193 (123,193) Contributions - employee - 12,377 (12,377) Net investment income - (66,048) 66,048 Benefit payments, including refunds of employee contributions (195,826) (195,826) - Administrative expense - (1,214) 1,214 Other - - - Net changes 169,856 (127,518) 297,374 Balances at June 30, 2023 $3,721,151 $1,662,090 $2,059,061 Plan Fiduciary Net Position Net Pension Liability Pension Increase/(Decrease) Total Pension Liability Liability Net Position Liability Pension Increase/(Decrease) Total Pension Plan Fiduciary Net Pension TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2023 86 NOTE 16 – PENSIONS (Continued) Discount Rate. At June 30, 2022, the discount rate used to measure the total pension liability was 7.2 percent, which was a decrease of .1 percent from the discount rate used as of June 30, 2021. The projection of cash flows used to determine the PSPRS and CORP discount rates assumed that plan member contributions will be made at the current contribution rate and that employer contributions will be made at rates equal to the difference between the actuarially determined contribution rate and the member rate. Based on those assumptions, the plans’ fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on plan investments was applied to all periods of projected benefit payments for these plans to determine the total pension liability. Sensitivity of the Net Pension Liability to Changes in the Discount Rate. The following table presents the Town’s net pension liability calculated using the discount rates noted above, as well as what the net liability would be if it were calculated using a discount rate that is 1- percentage-point lower or 1-percentage-point higher than the current rate: PSPRS-Police: Net Pension Liability $11,646,071 $537,434 $(8,440,783) CORP-Dispatchers: Net Pension Liability $2,521,353 $2,059,061 $1,678,219 6.2%7.2%8.2% 1% Decrease 1% IncreaseDiscount Rate Current Plan Fiduciary Net Position. Detailed information about the plans’ fiduciary net position is available in the separately issued PSPRS and CORP financial report. The report is available on the PSPRS website at www.psprs.com. TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2023 87 NOTE 16 – PENSIONS (Continued) Expense. For the year ended June 30, 2023, the Town recognized the following as pension expense: Pension Expense $2,460,488 $218,642 PSPRS-Police CORP-Dispatchers Deferred Outflows/Inflows of Resources. At June 30, 2023, the Town reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: PSPRS-Police: Differences between expected and actual experience $1,752,776 $514,967 Changes of assumptions or other inputs 1,273,242 - Net difference between projected and actual earnings on plan investments 2,479,324 - Contributions subsequent to the measurement date 1,523,896 - Total $7,029,238 $514,967 CORP-Dispatchers: Differences between expected and actual experience $21,391 $- Changes of assumptions or other inputs 26,459 - Net difference between projected and actual earnings on plan investments 14,810 - Contributions subsequent to the measurement date 2,219,857 - Total $2,282,517 $- Resources Resources Inflows of Deferred Outflows of Deferred TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2023 88 NOTE 16 – PENSIONS (Continued) The amounts of deferred outflows of resources resulting from contributions subsequent to the measurement date as reported in the table above will be recognized as an adjustment of the net pension 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 $1,273,935 $47,397 2025 1,129,125 (5,578) 2026 668,884 (18,048) 2027 1,918,431 38,889 2028 - - Thereafter - - Year Ending June 30:Pension Pension CORP-DispatchersPSPRS-Police 89 REQUIRED SUPPLEMENTARY INFORMATION TOWN OF ORO VALLEY, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES – BUDGET AND ACTUAL – GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2023 90 Variance Budgeted Amounts with Final Original Final Actual Budget REVENUES Sales taxes $24,505,959 $24,505,959 $26,449,853 $1,943,894 Franchise taxes 765,000 765,000 763,311 (1,689) Intergovernmental 19,673,693 19,673,693 21,480,681 1,806,988 Licenses, fees and permits 2,223,824 2,223,824 2,643,013 419,189 Fines, forfeitures and penalties 125,000 125,000 84,454 (40,546) Charges for services 3,046,515 3,046,515 2,897,311 (149,204) Donations - - 1,641,102 1,641,102 Investment income: Interest 150,000 150,000 297,228 147,228 Net increase in fair value of investments - - 75,150 75,150 Other 239,000 239,000 588,650 349,650 Total Revenues 50,728,991 50,728,991 56,920,753 6,191,762 EXPENDITURES General government: General administration 3,507,609 2,980,774 3,299,058 (318,284) Town council 199,145 199,145 197,986 1,159 Town clerk 422,705 470,168 428,728 41,440 Town manager 1,160,173 1,393,915 1,354,289 39,626 Human resources 569,905 598,616 545,050 53,566 Finance 1,111,460 921,857 888,629 33,228 Innovation and technology 4,787,809 4,889,643 4,252,139 637,504 Legal services 1,015,753 1,015,753 1,030,534 (14,781) Community and economic development 3,280,764 3,413,324 3,148,683 264,641 Town court 1,020,674 1,020,674 931,765 88,909 Public works 4,546,199 4,551,542 4,232,543 318,999 Public safety: Police 20,348,472 20,348,472 19,657,927 690,545 Transit: Transit 1,477,228 1,533,711 1,530,444 3,267 Culture and recreation: Parks and recreation 3,643,162 3,753,464 3,772,206 (18,742) Debt service Principal - - 193,312 (193,312) Interest - - 35,631 (35,631) Total debt service - - 228,943 (228,943) Capital outlay 982,425 982,425 2,965,799 (1,983,374) Contingency 5,000,000 5,000,000 - 5,000,000 Total Expenditures 53,073,483 53,073,483 48,464,723 4,608,760 REVENUES OVER/(UNDER) EXPENDITURES (2,344,492) (2,344,492) 8,456,030 10,800,522 OTHER FINANCING SOURCES/(USES) Sale of assets 10,000 10,000 16,924 6,924 Lease agreements - - 349,652 349,652 Subscription-based information technology arrangements - - 582,440 582,440 Transfers out (16,446,977) (16,446,977) (15,996,977) 450,000 Total Other Financing Sources/(Uses)(16,436,977) (16,436,977) (15,047,961) 1,389,016 NET CHANGE IN FUND BALANCE (18,781,469) (18,781,469) (6,591,931) 12,189,538 FUND BALANCE, Beginning of year 30,390,423 30,390,423 30,390,423 - FUND BALANCE, End of year $11,608,954 $11,608,954 $23,798,492 $12,189,538 See notes to required supplementary information TOWN OF ORO VALLEY, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES – BUDGET AND ACTUAL – COMMUNITY CENTER FUND FOR THE YEAR ENDED JUNE 30, 2023 91 Variance Budgeted Amounts with Final Original Final Actual Budget REVENUES Sales taxes $3,477,236 $3,477,236 $3,713,654 $236,418 Charges for services 4,868,049 4,868,049 6,265,647 1,397,598 Investment income:. Interest 3,000 3,000 50,784 47,784 Net increase in fair value of investments - - 59,939 59,939 Other 159,050 159,050 178,552 19,502 Total Revenues 8,507,335 8,507,335 10,268,576 1,761,241 EXPENDITURES Current: Culture and recreation 6,419,192 6,419,192 6,772,295 (353,103) Capital outlay 2,666,700 2,666,700 1,467,015 1,199,685 Debt service: Principal retirement - - 161,740 (161,740) Interest and fiscal charges - - 16,914 (16,914) Contingency 3,000,000 3,000,000 - 3,000,000 Total Expenditures 12,085,892 12,085,892 8,417,964 3,667,928 REVENUES OVER/(UNDER) EXPENDITURES (3,578,557) (3,578,557) 1,850,612 5,429,169 OTHER FINANCING SOURCES/(USES) Sale of assets - - 11,293 11,293 Financed purchase agreements - - 81,722 81,722 Transfers out (4,085,380) (4,085,380) (6,795,852) (2,710,472) Total other financing sources/(uses)(4,085,380) (4,085,380) (6,702,837) (2,617,457) NET CHANGE IN FUND BALANCE (7,663,937) (7,663,937) (4,852,225) 2,811,712 FUND BALANCE, Beginning of year 5,860,458 5,860,458 5,860,458 - FUND BALANCE, End of year $(1,803,479) $(1,803,479) $1,008,233 $2,811,712 See notes to required supplementary information TOWN OF ORO VALLEY, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES – BUDGET AND ACTUAL – GRANTS AND CONTRIBUTIONS FUND FOR THE YEAR ENDED JUNE 30, 2023 92 Variance Budgeted Amounts with Final Original Final Actual Budget REVENUES Intergovernmental $8,721,047 $8,721,047 $3,714,934 $(5,006,113) Investment income:. Interest 50 50 53,863 53,813 Net increase in fair value of investments - (125,793) (125,793) Other 1,500,000 1,500,000 - (1,500,000) Total Revenues 10,221,097 10,221,097 3,643,004 (6,578,093) EXPENDITURES Current: General Government 1,900,000 1,900,000 306,010 1,593,990 Public Safety 178,750 178,750 106,153 72,597 Transit 61,000 61,000 - 61,000 Culture and Recreation 40,000 40,000 - 40,000 Capital outlay 3,561,309 3,561,309 1,874,260 1,687,049 Contingency 100,000 100,000 - 100,000 Total Expenditures 5,841,059 5,841,059 2,286,423 3,554,636 REVENUES OVER/(UNDER) EXPENDITURES 4,380,038 4,380,038 1,356,581 (3,023,457) OTHER FINANCING SOURCES/(USES) Transfers in 898,012 898,012 448,012 (450,000) Transfers out (5,378,000) (5,378,000) (1,850,636) 3,527,364 Total other financing sources/(uses)(4,479,988) (4,479,988) (1,402,624) 3,077,364 NET CHANGE IN FUND BALANCE (99,950) (99,950) (46,043) 53,907 FUND BALANCE, Beginning of year 208,250 208,250 208,250 - FUND BALANCE, End of year $108,300 $108,300 $162,207 $53,907 See notes to required supplementary information TOWN OF ORO VALLEY, ARIZONA SCHEDULE OF THE PROPORTIONATE SHARE OF THE NET PENSION LIABILITY ARIZONA STATE RETIREMENT SYSTEM LAST NINE FISCAL YEARS 93 2023 2022 2021 2020 2019 Measurement date June 30, 2022 June 30, 2021 June 30, 2020 June 30, 2019 June 30, 2018 Town's proportion of the net pension (assets) liability 0.12%0.12%0.12%0.13%0.13% Town's proportionate share of the net pension (assets) liability 19,916,374$ 15,876,526$ 21,464,093$ 18,808,834$ 18,237,813$ Town's covered payroll 14,545,595$ 13,511,313$ 13,793,013$ 13,630,224$ 13,018,275$ Town's proportionate share of the net pension (assets) liability as a percentage of its covered payroll 136.92%117.51%155.62%137.99%140.09% Plan fiduciary net position as a percentage of the total pension liability 74.26%78.58%69.33%73.24%73.40% 2018 2017 2016 2015 2014 Measurement date June 30, 2017 June 30, 2016 June 30, 2015 June 30, 2014 June 30, 2013 Town's proportion of the net pension (assets) liability 0.12%0.12%0.12%0.11%Unavailable Town's proportionate share of the net pension (assets) liability 19,453,870$ 20,050,356$ 18,575,537$ 16,642,712$ Town's covered payroll 12,193,145$ 11,857,622$ 11,826,486$ 11,086,887$ Town's proportionate share of the net pension (assets) liability as a percentage of its covered payroll 159.55%169.09%157.07%150.11% Plan fiduciary net position as a percentage of the total pension liability 69.92%67.06%68.35%69.49% NOTE: The pension schedules in the required supplementary information are intended to show information for ten years, and additional information will be displayed as it becomes available. See notes to required supplementary information TOWN OF ORO VALLEY, ARIZONA SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY AND RELATED RATIOS PUBLIC SAFETY PERSONNEL RETIREMENT SYSTEM – POLICE LAST NINE FISCAL YEARS 94 2023 2022 2021 2020 Measurement date June 30, 2022 June 30, 2021 June 30, 2020 June 30, 2019 Total pension liability Service cost $ 1,373,511 $ 1,359,359 $ 1,418,920 $ 1,552,240 Interest 5,155,618 4,928,984 4,573,136 4,264,774 Changes of benefit terms - - - - 1,479,536 (577,199) 1,073,763 (303,721) Changes of assumptions or other inputs 719,444 - - 1,627,934 (3,082,329) (2,159,116) (2,104,146) (1,884,430) Net change in total pension liability 5,645,780 3,552,028 4,961,673 5,256,797 Total pension liability—beginning 70,792,554 67,240,526 62,278,853 57,022,056 Total pension liability—ending $ 76,438,334 $ 70,792,554 $ 67,240,526 $ 62,278,853 Plan fiduciary net position Contributions—employer $ 30,446,078 $ 3,343,850 $ 3,072,830 $ 2,624,761 Contributions—employee 553,740 554,204 563,652 575,136 Net investment income (3,122,413) 10,961,057 479,186 1,843,370 (3,082,329) (2,159,116) (2,104,146) (1,884,430) Administrative expense (56,065) (51,282) (39,077) (33,037) Other - 5,595 (52,206) 31,984 Net change in plan fiduciary net position 24,739,011 12,654,308 1,920,239 3,157,784 Plan fiduciary net position—beginning 51,161,889 38,507,581 36,587,342 33,429,558 Plan fiduciary net position—ending $ 75,900,900 $ 51,161,889 $ 38,507,581 $ 36,587,342 Net pension (assets) liability—ending $ 537,434 $ 19,630,665 $ 28,732,945 $ 25,691,511 99.30%72.27%57.27%58.75% Covered payroll $ 7,265,499 $ 6,181,716 $ 6,672,512 $ 6,942,593 7.40%317.56%430.62%370.06% Differences between expected and actual experience Benefit payments, including refunds of employee contributions Benefit payments, including refunds of employee contributions Plan fiduciary net position as a percentage of the total pension liability Net pension (assets) liability as a percentage of covered payroll NOTE: The pension schedules in the required supplementary information are intended to show information for ten years, and additional information will be displayed as it becomes available. See notes to required supplementary information 95 2019 2018 2017 2016 2015 2014 June 30, 2018 June 30, 2017 June 30, 2016 June 30, 2015 June 30, 2014 June 30, 2013 $ 1,515,028 $ 1,638,736 $ 1,363,768 $ 1,224,807 $ 1,157,832 Unavailable 3,922,057 3,615,210 3,185,633 2,842,514 2,408,825 - 435,327 3,164,555 - 444,387 136,020 247,905 (548,533) 1,312,293 (356,776) - 747,786 1,902,904 - 3,014,125 (1,588,615) (2,061,668) (1,106,968) (1,049,346) (1,304,993) 3,984,490 4,623,296 7,961,359 4,330,268 5,363,400 53,037,566 48,414,270 40,452,911 36,122,643 30,759,243 $ 57,022,056 $ 53,037,566 $ 48,414,270 $ 40,452,911 $ 36,122,643 $ $ 1,278,293 $ 1,811,735 $ 1,505,274 $ 1,669,125 $ 1,211,218 $ 622,233 905,024 840,020 794,478 698,036 2,159,685 3,228,386 154,181 874,562 2,774,126 (1,588,615) (2,061,668) (1,106,968) (1,049,346) (1,304,993) (33,570) (28,966) (22,586) (21,722) (22,342) 107,852 19,066 38,225 93,803 (93,142) 2,545,878 3,873,577 1,408,146 2,360,900 3,262,903 30,883,680 27,010,103 25,601,957 23,241,057 19,978,154 $ 33,429,558 $ 30,883,680 $ 27,010,103 $ 25,601,957 $ 23,241,057 $ $ 23,592,498 $ 22,153,886 $ 21,404,167 $ 14,850,954 $ 12,881,586 $ 58.63%58.23%55.79%63.29%64.34%#DIV/0! $ 7,209,721 $ 7,199,177 $ 7,355,092 $ 7,004,292 $ 6,021,786 $ 327.23%307.73%291.01%212.03%213.92%#DIV/0! TOWN OF ORO VALLEY, ARIZONA SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY AND RELATED RATIOS PUBLIC SAFETY PERSONNEL RETIREMENT SYSTEM – DISPATCHERS LAST NINE FISCAL YEARS 96 2023 2022 2021 2020 Measurement date June 30, 2022 June 30, 2021 June 30, 2020 June 30, 2019 Total pension liability Service cost $ 16,669 $ 22,257 $ 22,224 $ 30,922 Interest 253,314 242,038 233,081 215,182 Changes of benefit terms - - - - 42,782 75,279 18,688 124,217 Changes of assumptions or other inputs 52,917 - - 61,495 (195,826) (163,212) (139,459) (136,724) Net change in total pension liability 169,856 176,362 134,534 295,092 Total pension liability—beginning 3,551,295 3,374,933 3,240,399 2,945,307 Total pension liability—ending $ 3,721,151 $ 3,551,295 $ 3,374,933 $ 3,240,399 Plan fiduciary net position Contributions—employer $ 123,193 $ 138,372 $ 122,322 $ 120,338 Contributions—employee 12,377 14,583 16,244 16,099 Net investment income (66,048) 387,481 38,182 71,209 (195,826) (163,212) (139,459) (136,724) Administrative expense (1,214) (1,786) (1,478) (1,971) Other - - (264) - Net change in plan fiduciary net position (127,518) 375,438 35,547 68,951 Plan fiduciary net position—beginning 1,789,608 1,414,170 1,378,623 1,309,672 Plan fiduciary net position—ending $ 1,662,090 $ 1,789,608 $ 1,414,170 $ 1,378,623 Net pension (assets) liability—ending $ 2,059,061 $ 1,761,687 $ 1,960,763 $ 1,861,776 44.67%50.39%41.90%42.54% Covered payroll $ 158,877 $ 180,822 $ 210,542 $ 202,262 1296.01%974.27%931.29%920.48% Differences between expected and actual experience Benefit payments, including refunds of employee contributions Benefit payments, including refunds of employee contributions Plan fiduciary net position as a percentage of the total pension liability Net pension (assets) liability as a percentage of covered payroll NOTE: The pension schedules in the required supplementary information are intended to show information for ten years, and additional information will be displayed as it becomes available. See notes to required supplementary information 97 2019 2018 2017 2016 2015 2014 June 30, 2018 June 30, 2017 June 30, 2016 June 30, 2015 June 30, 2014 June 30, 2013 $ 34,542 $ 32,541 $ 32,257 $ 52,754 $ 53,985 Unavailable 223,773 185,568 182,053 174,403 154,443 (175,686) 395,457 14,504 - 29,545 (73,061) (12,524) (12,392) 14,554 (48,767) - 85,035 64,514 - 174,536 (141,910) (132,788) (119,180) (148,851) (68,874) (132,342) 553,289 161,756 92,860 294,868 3,077,649 2,524,360 2,362,604 2,269,744 1,974,876 $ 2,945,307 $ 3,077,649 $ 2,524,360 $ 2,362,604 $ 2,269,744 $ $ 87,566 $ 77,331 $ 52,583 $ 64,005 $ 63,179 $ 15,976 18,502 18,982 30,272 32,699 89,317 136,094 7,237 45,101 146,441 (141,910) (132,788) (119,180) (148,851) (68,874) (2,051) (1,591) (1,423) (1,490) (1,151) (24) (8) (8) (926) - 48,874 97,540 (41,809) (11,889) 172,294 1,260,798 1,163,258 1,205,067 1,216,956 1,044,662 $ 1,309,672 $ 1,260,798 $ 1,163,258 $ 1,205,067 $ 1,216,956 $ $ 1,635,635 $ 1,816,851 $ 1,361,102 $ 1,157,537 $ 1,052,788 $ 44.47%40.97%46.08%51.01%53.62%#DIV/0! $ 201,687 $ 233,934 $ 245,274 $ 380,303 $ 387,839 $ 810.98%776.65%554.93%304.37%271.45%#DIV/0! TOWN OF ORO VALLEY, ARIZONA SCHEDULE OF PENSION CONTRIBUTIONS – ALL PENSION PLANS LAST NINE FISCAL YEARS 98 2023 2022 2021 2020 Arizona State Retirement System: Actuarially determined contribution 1,895,413$ 1,746,926$ 1,574,068$ 1,579,300$ Contributions in relation to the actuarially determined contribution 1,895,413 1,746,926 1,574,068 1,579,300 Contribution deficiency (excess)- - - - Town's covered payroll 15,901,116$ 14,545,595$ 13,511,313$ 13,793,013$ Contributions as a percentage of covered payroll 11.92%12.01%11.65%11.45% Public Safety Personnel Retirement System - Police: Actuarially determined contribution 1,523,896$ 3,165,578$ 2,572,830$ 2,552,903$ Contributions in relation to the actuarially determined contribution 1,523,896 30,216,213 3,072,830 3,052,903 Contribution deficiency (excess)- (27,050,635) (500,000) (500,000) Town's covered payroll 6,622,521$ 7,265,499$ 6,181,716$ 6,672,512$ Contributions as a percentage of covered payroll 23.01%43.57%41.62%38.26% Public Safety Personnel Retirement System - Dispatchers Actuarially determined contribution 183,062$ 125,878$ 136,575$ 126,199$ Contributions in relation to the actuarially determined contribution 2,219,857 125,878 136,575 126,199 Contribution deficiency (excess)(2,036,795) - - - Town's covered payroll 154,548$ 158,877$ 180,822$ 210,542$ Contributions as a percentage of covered payroll 1436.36%79.23%75.53%59.94% NOTE: The pension schedules in the required supplementary information are intended to show information for ten years, and additional information will be displayed as it becomes available. See notes to required supplementary information 99 2019 2018 2017 2016 2015 2014 1,523,859$ 1,418,992$ 1,314,421$ 1,286,552$ 1,207,362$ Unavailable 1,523,859 1,418,992 1,314,421 1,286,552 1,207,362 - - - - - 13,630,224$ 13,018,275$ 12,193,145$ 11,857,622$ 11,826,486$ 11.18%10.90%10.78%10.85%10.21% 2,548,626$ 2,485,191$ 1,679,568$ 1,554,131$ 1,354,630$ 2,548,626 2,485,191 1,679,568 1,554,131 1,354,630 - - - - - 6,942,593$ 7,209,721$ 7,199,177$ 7,355,092$ 7,004,292$ 36.71%34.47%23.33%21.13%19.34% 124,108$ 87,996$ 77,830$ 54,083$ 64,005$ 124,108 87,996 77,830 54,083 64,005 - - - - - 202,262$ 201,687$ 233,934$ 245,274$ 380,303$ 61.36%43.63%33.27%22.05%16.83% TOWN OF ORO VALLEY, ARIZONA NOTES TO REQUIRED SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED JUNE 30, 2023 100 NOTE 1 – BUDGETARY BASIS OF ACCOUNTING The Town budget is prepared on a basis consistent with accounting principles generally accepted in the United States of America. NOTE 2 – BUDGETING AND BUDGETARY CONTROL A.R.S. requires the Town to prepare and adopt a balanced budget annually for each governmental fund. The Town Council must approve such operating budgets on or before the third Monday in July. A.R.S. prohibits expenditures in excess of the amounts budgeted. Expenditures may not legally exceed appropriations at the department level for the General Fund or at the fund level for all other funds. In certain instances, transfers of appropriations between departments or from the contingency account to a department may be made upon Town Manager or Town Council approval, respectively. NOTE 3 – PENSION SCHEDULES Actuarial Assumptions for Valuations Performed. The information presented in the required supplementary schedules was determined as part of the actuarial valuations at the dates indicated, which is the most recent actuarial valuation. The actuarial assumptions used are disclosed in the notes to the financial statements. Factors that Affect Trends. 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 contributions beginning in fiscal year 2016 for members who were retired as of the law’s effective date. These changes increased the PSPRS-required contributions beginning in fiscal year 2019 for members who retired or will retire after the law’s effective date. 101 COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES 102 (This page intentionally left blank) 103 GOVERNMENTAL FUNDS TOWN OF ORO VALLEY, ARIZONA COMBINING BALANCE SHEET – ALL NON-MAJOR GOVERNMENTAL FUNDS – BY FUND TYPE JUNE 30, 2023 104 ASSETS Cash and investments $803,142 $3,426,151 $4,229,293 Interest receivable 4,325 23,539 27,864 Intergovernmental receivable 397,487 317,076 714,563 Prepaid items 1,950 - 1,950 Total Assets $1,206,904 $3,766,766 $4,973,670 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $97,779 $721 $98,500 Unearned revenue - 15,900 15,900 Total Liabilities 97,779 16,621 114,400 Fund balances: Nonspendable 1,950 - 1,950 Restricted 1,107,175 3,732,928 4,840,103 Committed - 17,217 17,217 Total Fund Balances 1,109,125 3,750,145 4,859,270 Total Liabilities and Fund Balances $1,206,904 $3,766,766 $4,973,670 Special Revenue Capital Projects Funds Total Non-Major Governmental TOWN OF ORO VALLEY, ARIZONA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES – ALL NON-MAJOR GOVERNMENTAL FUNDS – BY FUND TYPE YEAR ENDED JUNE 30, 2023 105 REVENUES Development impact fees $- $419,210 $419,210 Charges for Services - 28,711 28,711 Intergovernmental 4,129,268 571,240 4,700,508 Licenses, fees and permits 27,567 - 27,567 Fines, forfeitures and penalties 46,176 - 46,176 Investment income: Interest 182,497 33,350 215,847 Net decrease in fair value of investments (4,837) 54,304 49,467 Other 7,805 - 7,805 Total Revenues 4,388,476 1,106,815 5,495,291 EXPENDITURES Current: General government - - - Public safety 61,953 557 62,510 Highway and streets 2,070,069 52,950 2,123,019 Culture and recreation - 1,948 1,948 Capital outlay 2,592,177 651,420 3,243,597 Total Expenditures 4,724,199 706,875 5,431,074 REVENUES OVER/(UNDER) EXPENDITURES (335,723) 399,940 64,217 OTHER FINANCING SOURCES/(USES) Transfers in/(out)- (121,500) (121,500) Total Other Financing Sources (Uses)- (121,500) (121,500) NET CHANGE IN FUND BALANCES (335,723) 278,440 (57,283) FUND BALANCES, Beginning of year 1,444,848 3,471,705 4,916,553 FUND BALANCES, End of year $1,109,125 $3,750,145 $4,859,270 Special Revenue Capital Projects Funds Total Non-Major Governmental 106 (This page intentionally left blank) 107 SPECIAL REVENUE FUNDS The Special Revenue Funds account for the proceeds of specific revenue sources, other than major capital projects, that are legally restricted to expenditures for specified purposes. Highway User Revenue – accounts for the Town’s share of motor fuel tax revenues. State Seizures and Forfeitures – accounts for state police seizures and forfeitures received by the Town. Federal Seizures and Forfeitures – accounts for federal police seizures and forfeitures received by the Town. TOWN OF ORO VALLEY, ARIZONA COMBINING BALANCE SHEET – NON-MAJOR SPECIAL REVENUE FUNDS JUNE 30, 2023 108 ASSETS Cash and investments $579,084 $151,605 $72,453 $803,142 Interest receivable 4,325 - - 4,325 Intergovernmental receivable 391,353 - 6,134 397,487 Prepaid items 1,950 - - 1,950 Total Assets $976,712 $151,605 $78,587 $1,206,904 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $97,779 $- $- $97,779 Total Liabilities 97,779 - - 97,779 Fund balances: Nonspendable 1,950 - - 1,950 Restricted 876,983 151,605 78,587 1,107,175 Total Fund Balances 878,933 151,605 78,587 1,109,125 Total Liabilities and Fund Balances $976,712 $151,605 $78,587 $1,206,904 Federal Seizures HURF and Forfeitures and Forfeitures Totals State Seizures TOWN OF ORO VALLEY, ARIZONA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES – NON-MAJOR SPECIAL REVENUE FUNDS YEAR ENDED JUNE 30, 2023 109 REVENUES Intergovernmental $4,129,268 $- $- $4,129,268 Licenses, fees and permits 27,567 - - 27,567 Fines, forfeitures and penalties - 43,888 2,288 46,176 Investment income: Interest 174,391 4,535 3,571 182,497 Net decrease in fair value of investments (4,837) - - (4,837) Other 7,805 - - 7,805 Total Revenues 4,334,194 48,423 5,859 4,388,476 EXPENDITURES Current: Public safety - 40,925 21,028 61,953 Highway and streets 2,070,069 - - 2,070,069 Capital outlay 2,592,177 - - 2,592,177 Total Expenditures 4,662,246 40,925 21,028 4,724,199 NET CHANGE IN FUND BALANCES (328,052) 7,498 (15,169) (335,723) FUND BALANCES, Beginning of year 1,206,985 144,107 93,756 1,444,848 FUND BALANCES, End of year $878,933 $151,605 $78,587 $1,109,125 State Seizures Federal Seizures HURF and Forfeitures and Forfeitures Totals TOWN OF ORO VALLEY, ARIZONA COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES – BUDGET AND ACTUAL – NON-MAJOR SPECIAL REVENUE FUNDS YEAR ENDED JUNE 30, 2023 110 Actual REVENUES Intergovernmental $4,127,100 $4,129,268 $2,168 Licenses, fees and permits 25,000 27,567 2,567 Fines, forfeitures and penalties - - - Investment income: Interest 8,000 174,391 166,391 Net decrease in fair value of investments - (4,837) (4,837) Other 3,000 7,805 4,805 Total Revenues 4,163,100 4,334,194 171,094 EXPENDITURES Current: Public safety - - - Highway and streets 2,026,189 2,070,069 (43,880) Capital outlay 2,626,000 2,592,177 33,823 Contingency 200,000 - 200,000 Total Expenditures 4,852,189 4,662,246 189,943 REVENUES OVER/ (UNDER) EXPENDITURES (689,089) (328,052) 361,037 NET CHANGE IN FUND BALANCE (689,089) (328,052) 361,037 FUND BALANCE, Beginning of year 1,206,985 1,206,985 - FUND BALANCE, End of year $517,896 $878,933 $361,037 HURF Budget Variance with Budget TOWN OF ORO VALLEY, ARIZONA COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES – BUDGET AND ACTUAL – NON-MAJOR SPECIAL REVENUE FUNDS YEAR ENDED JUNE 30, 2023 111 Actual Actual $- $- $- $- $- $- - - - - - - 85,000 43,888 (41,112) 15,000 2,288 (12,712) 2,000 4,535 2,535 - 3,571 3,571 - - - - - - - - - - - - 87,000 48,423 (38,577) 15,000 5,859 (9,141) 100,000 40,925 59,075 - 21,028 (21,028) - - - - - - - - - - - - 50,000 - 50,000 50,000 - 50,000 150,000 40,925 109,075 50,000 21,028 28,972 (63,000) 7,498 70,498 (35,000) (15,169) 19,831 (63,000) 7,498 70,498 (35,000) (15,169) 19,831 144,107 144,107 - 93,756 93,756 - $81,107 $151,605 $70,498 $58,756 $78,587 $19,831 State Seizures and Forfeitures Federal Seizures and Forfeitures Budget Budget Variance with Budget Variance with Budget (Continued) TOWN OF ORO VALLEY, ARIZONA COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES – BUDGET AND ACTUAL – NON-MAJOR SPECIAL REVENUE FUNDS YEAR ENDED JUNE 30, 2023 112 Variance with Actual Budget REVENUES Intergovernmental $4,127,100 $4,129,268 $2,168 Licenses, fees and permits 25,000 27,567 2,567 Fines, forfeitures and penalties 100,000 46,176 (53,824) Investment income: Interest 10,000 182,497 172,497 Net decrease in fair value of investments - (4,837) (4,837) Other 3,000 7,805 4,805 Total Revenues 4,265,100 4,388,476 123,376 EXPENDITURES Current: Public safety 100,000 61,953 38,047 Highway and streets 2,026,189 2,070,069 (43,880) Capital outlay 2,626,000 2,592,177 33,823 Contingency 300,000 - 300,000 Total Expenditures 5,052,189 4,724,199 327,990 REVENUES OVER/ (UNDER) EXPENDITURES (787,089) (335,723) 451,366 NET CHANGE IN FUND BALANCE (787,089) (335,723) 451,366 FUND BALANCE, Beginning of year 1,444,848 1,444,848 - FUND BALANCE, End of year $657,759 $1,109,125 $451,366 Budget Totals 113 CAPITAL PROJECTS FUNDS Capital Projects Funds are created to account for the purchase or construction of major capital facilities which are not financed by the general, enterprise, or special revenue funds. Townwide Roadway Development Impact Fees – to account for the collection and capital expenditures of the Townwide Roadway Development Impact Fees. General Impact Fees – accounts for the collection of development impact fees charged for new residential and nonresidential growth to be used for future general government facilities, vehicles, equipment, and other necessary general government infrastructure needed as a result of new growth. Townwide Facilities Projects – accounts for revenues dedicated to improvements to Town parks. General Government CIP – to account for governmental capital asset projects. PAG/RTA - to account for revenues dedicated to Town improvements funded through Pima Association of Governments and the Regional Transportation Authority. TOWN OF ORO VALLEY, ARIZONA COMBINING BALANCE SHEET – NON-MAJOR CAPITAL PROJECT FUNDS JUNE 30, 2023 114 ASSETS Cash and investments $2,185,530 $733,042 $17,140 $490,439 $3,426,151 Interest receivable 19,374 3,596 77 492 23,539 Intergovernmental receivable - - - 317,076 317,076 Total Assets $2,204,904 $736,638 $17,217 $808,007 $3,766,766 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $451 $270 $- $- $721 Unearned revenue 15,900 - - - 15,900 Total Liabilities 16,351 270 - - 16,621 Fund balances: Restricted 2,188,553 736,368 - 808,007 3,732,928 Committed - - 17,217 - 17,217 Total Fund Balances 2,188,553 736,368 17,217 808,007 3,750,145 Total Liabilities and Fund Balances $2,204,904 $736,638 $17,217 $808,007 $3,766,766 Townwide TownwideGeneral Impact Facilities Impact Fees Fees Projects Totals Roadway Development PAG/RTA TOWN OF ORO VALLEY, ARIZONA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES – NON-MAJOR CAPITAL PROJECT FUNDS YEAR ENDED JUNE 30, 2023 115 REVENUES Development impact fees $224,337 $194,873 $- $- $419,210 Charges for services - - - 28,711 28,711 Intergovernmental - - - 571,240 571,240 Investment income: Interest 19,946 5,824 91 7,489 33,350 Net increase in fair value of investments 8,757 17,642 509 27,396 54,304 Total Revenues 253,040 218,339 600 634,836 1,106,815 EXPENDITURES Current: Public safety - 557 - - 557 Highway and streets 4,175 - - 48,775 52,950 Culture and recreation - 1,948 - - 1,948 Capital outlay - - - 651,420 651,420 Total Expenditures 4,175 2,505 - 700,195 706,875 REVENUES OVER (UNDER) EXPENDITURES 248,865 215,834 600 (65,359) 399,940 OTHER FINANCING USES Transfers out - (121,500) - - (121,500) NET CHANGE IN FUND BALANCES 248,865 94,334 600 (65,359) 278,440 FUND BALANCES, Beginning of year 1,939,688 642,034 16,617 873,366 3,471,705 FUND BALANCES, End of year $2,188,553 $736,368 $17,217 $808,007 $3,750,145 Townwide General Townwide Impact Facilities Roadway Impact Fees Fees Projects Totals Development PAG/RTA TOWN OF ORO VALLEY, ARIZONA COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES – BUDGET AND ACTUAL - ALL CAPITAL PROJECTS FUNDS YEAR ENDED JUNE 30, 2023 116 Variance with Actual Budget REVENUES Development impact fees $388,300 $224,337 $(163,963) Intergovernmental - - - Charges for services - - - Investment income: Interest 4,000 19,946 15,946 Net increase in fair value of investments - 8,757 8,757 Other - - - Total Revenues 392,300 253,040 (139,260) EXPENDITURES Current: Public safety - - - Highway and streets 15,000 4,175 10,825 Culture and recreation - - - Capital outlay 750,000 - 750,000 Contingency 250,000 - 250,000 Total Expenditures 1,015,000 4,175 1,010,825 REVENUES OVER (UNDER) EXPENDITURES (622,700) 248,865 871,565 OTHER FINANCING SOURCES (USES) Sale of general capital assets - - - Insurance recoveries - - - Transfers in (out)- - - Total other financing sources (uses)- - - NET CHANGE IN FUND BALANCE (622,700) 248,865 871,565 FUND BALANCE, Beginning of year 1,939,688 1,939,688 - FUND BALANCE, End of year $1,316,988 $2,188,553 $871,565 Budget Townwide Roadway Development Impact Fees 117 Variance Variance with with Actual Budget Actual Budget $223,220 $194,873 $(28,347) $- $- $- - - - - - - - - - - - - 3,500 5,824 2,324 - 91 91 - 17,642 17,642 - 509 509 - - - - - - 226,720 218,339 (8,381) - 600 600 2,000 557 1,443 - - - - - - - - - 7,000 1,948 5,052 - - - - - - - - - 211,520 - 211,520 16,560 - 16,560 220,520 2,505 218,015 16,560 - 16,560 6,200 215,834 209,634 (16,560) 600 17,160 - - - - - - - - - - - - (121,500) (121,500) - - - - (121,500) (121,500) - - - - (115,300) 94,334 209,634 (16,560) 600 17,160 642,034 642,034 - 16,617 16,617 - $526,734 $736,368 $209,634 $57 $17,217 $17,160 General Impact Fees Budget Townwide Facilities Projects Budget (Continued) TOWN OF ORO VALLEY, ARIZONA COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES – BUDGET AND ACTUAL - ALL CAPITAL PROJECTS FUNDS YEAR ENDED JUNE 30, 2023 118 Variance with Actual Budget REVENUES Development impact fees $- $- $- Intergovernmental 420,000 - (420,000) Charges for services - - - Investment income: Interest 25,000 467,728 442,728 Net increase in fair value of investments - 62,610 62,610 Other 820,010 822,494 2,484 Total Revenues 1,265,010 1,352,832 87,822 EXPENDITURES Current: Public safety - 2,671 (2,671) Highway and streets - - - Culture and recreation 261,962 242,158 19,804 Capital outlay 28,882,446 18,942,864 9,939,582 Contingency 4,791,167 - 4,791,167 Total Expenditures 33,935,575 19,187,693 14,747,882 REVENUES OVER (UNDER) EXPENDITURES (32,670,565) (17,834,861) 14,835,704 OTHER FINANCING SOURCES (USES) Sale of general capital assets 170,000 113,204 (56,796) Insurance recoveries 30,000 51,229 21,229 Transfers in (out)15,557,314 18,267,786 2,710,472 Total other financing sources (uses)15,757,314 18,432,219 2,674,905 NET CHANGE IN FUND BALANCE (16,913,251) 597,358 17,510,609 FUND BALANCE, Beginning of year 23,952,930 23,952,930 - FUND BALANCE, End of year $7,039,679 $24,550,288 $17,510,609 General Government CIP Budget 119 Variance Variance with with Actual Budget Actual Budget $- $- $- $611,520 $419,210 $(192,310) 796,574 571,240 (225,334) 1,216,574 571,240 (645,334) 28,125 28,711 586 28,125 28,711 586 - 7,489 7,489 32,500 501,078 468,578 - 27,396 27,396 - 116,914 116,914 - - - 820,010 822,494 2,484 824,699 634,836 (189,863) 2,708,729 2,459,647 (249,082) - - - 2,000 3,228 (1,228) 200,000 48,775 151,225 215,000 52,950 162,050 - - - 268,962 244,106 24,856 1,108,574 651,420 457,154 30,741,020 19,594,284 11,146,736 - - - 5,269,247 - 5,269,247 1,308,574 700,195 608,379 36,496,229 19,894,568 16,601,661 (483,875) (65,359) 418,516 (33,787,500) (17,434,921) 16,352,579 - - - 170,000 113,204 (56,796) - - - 30,000 51,229 21,229 - - - 15,435,814 18,146,286 2,710,472 - - - 15,635,814 18,310,719 2,674,905 (483,875) (65,359) 418,516 (18,151,686) 875,798 19,027,484 873,366 873,366 - 27,424,635 27,424,635 - $389,491 $808,007 $418,516 $9,272,949 $28,300,433 $19,027,484 PAG/RTA Totals Budget Budget 120 (This page intentionally left blank) 121 MUNICIPAL DEBT SERVICE FUND Debt Service Funds are created to account for the accumulation of resources for, and the payment of, general long-term debt principal and interest. Municipal Debt Service – to account for the payments of debt service on the Series 2010 Excise Tax Revenue Obligations, the Series 2012 Excise Tax Revenue Obligations, the Series 2015 Excise Tax Revenue Refunding Obligations, the Series 2016 Excise Tax Revenue Obligations, the Series 2017 Refunding Excise Tax Revenue Obligations, the Series 2018 Excise Tax Revenue Obligations, the Series 2021 Parks and Recreation Excise Tax Revenue Obligations, and the 2021 Excise Tax PSPRS Pension Obligation Bonds. TOWN OF ORO VALLEY SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES – BUDGET AND ACTUAL – MUNICIPAL DEBT SERVICE FUND YEAR ENDED JUNE 30, 2023 122 Variance with Actual Budget REVENUES Intergovernmental $30,088 $13,976 $(16,112) Investment income: Interest 500 141,360 140,860 Other 100,000 93,082 (6,918) Total Revenues 130,588 248,418 117,830 EXPENDITURES Debt service: Principal retirement 2,895,660 2,895,660 - Interest and fiscal charges 1,445,399 1,444,147 1,252 Contingency 100,000 - 100,000 Total Expenditures 4,441,059 4,339,807 101,252 REVENUES OVER (UNDER) EXPENDITURES (4,310,471) (4,091,389) 219,082 OTHER FINANCING SOURCES Transfers in 4,200,971 4,200,971 - Total other financing sources 4,200,971 4,200,971 - NET CHANGE IN FUND BALANCE (109,500) 109,582 219,082 FUND BALANCE, Beginning of year 164,136 164,136 - FUND BALANCE, End of year $54,636 $273,718 $219,082 Municipal Debt Service Budget 123 STATISTICAL SECTION The statistical section presents financial statement trends as well as detailed financial and operational information not available elsewhere in the report. The statistical section is intended to enhance the reader’s understanding of the information presented in the financial statements, notes to the financial statements, and other supplementary information presented in this report. The statistical section is comprised of the five categories of statistical information presented below. Financial Trends These schedules contain information on financial trends to help the reader understand how the Town’s financial position and financial activities have changed over time. Revenue Capacity These schedules contain information to help the reader assess the factors affecting the Town’s ability to generate property revenue. Debt Capacity These schedules present information to help the reader evaluate the Town’s current levels of outstanding debt as well as assess the Town’s ability to make debt payments and/or issue additional debt in the future. Demographic and Economic Information These schedules present various demographic and economic indicators to help the reader understand the environment in which the Town’s financial activities take place and to help make comparisons with other municipalities. Operating Information These schedules contain information about the Town’s operations and various resources to help the reader draw conclusions as to how the Town’s financial information relates to the services provided by the Town. Note: For locally assessed property (i.e., excluding mines, utilities, etc.) Proposition 117, approved by voters in 2012, amended the Arizona Constitution to require that all property taxes after fiscal year 2014-15 be based upon property values limited to five percent in annual growth. The aggregate assessed value of all taxable properties within a taxing jurisdiction (i.e., after applying assessment ratios based on the use of a property), including property values with a growth limit, is currently referred to as net limited assessed value and formerly as primary assessed value. In accordance with Proposition 117, this value is used for all taxing purposes beginning fiscal year 2015-16. Aggregate assessed value without a growth limit is currently referred to as net full cash assessed value and formerly as secondary assessed value. This remains the value utilized for determining debt capacity limits. 124 (This page intentionally left blank) 125 TOWN OF ORO VALLEY, ARIZONA NET POSITION BY COMPONENT LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) 2023 2022 2021 2020 2019 Governmental Activities: Net investment in capital assets $181,274,918 $179,219,389 $184,355,212 $152,604,355 $141,506,384 Restricted 15,579,039 21,752,087 5,392,323 6,601,283 5,752,355 Unrestricted 13,237,690 1,104,482 335,300 (11,756,943) (10,619,492) Total governmental activities net position $210,091,647 $202,075,958 $190,082,835 $147,448,695 $136,639,247 Business-type Activities: Net investment in capital assets $95,456,678 $87,969,917 $84,049,866 $76,933,346 $73,170,068 Unrestricted 26,210,775 27,109,858 27,721,215 25,077,357 23,499,030 Total business-type activities net position $121,667,453 $115,079,775 $111,771,081 $102,010,703 $96,669,098 Primary Government: Net investment in capital assets $276,731,596 $267,189,306 $268,405,078 $229,537,701 $214,676,452 Restricted 15,579,039 21,752,087 5,392,323 6,601,283 5,752,355 Unrestricted 39,448,465 28,214,340 28,056,515 13,320,414 12,879,538 Total primary government net position $331,759,100 $317,155,733 $301,853,916 $249,459,398 $233,308,345 2018 2017 2016 2015 2014 Governmental Activities: Net investment in capital assets $137,311,856 $133,414,691 $132,419,826 $133,800,218 $133,714,821 Restricted 4,424,244 6,006,584 4,653,905 3,599,966 4,555,138 Unrestricted (11,583,669) (15,397,688) (10,883,206) (9,493,907) 18,430,146 Total governmental activities net position $130,152,431 $124,023,587 $126,190,525 $127,906,277 $156,700,105 Business-type Activities: Net investment in capital assets $69,036,006 $66,755,370 $61,261,271 $54,858,448 $52,775,561 Unrestricted 21,397,377 18,721,247 19,504,748 20,092,694 21,541,202 Total business-type activities net position $90,433,383 $85,476,617 $80,766,019 $74,951,142 $74,316,763 Primary Government: Net investment in capital assets $206,347,862 $200,170,061 $193,681,097 $188,658,666 $186,490,382 Restricted 4,424,244 6,006,584 4,653,905 3,599,966 4,555,138 Unrestricted 9,813,708 3,323,559 8,621,542 10,598,787 39,971,348 Total primary government net position $220,585,814 $209,500,204 $206,956,544 $202,857,419 $231,016,868 Source: Town of Oro Valley Finance Department 126 TOWN OF ORO VALLEY, ARIZONA CHANGES IN NET POSITION LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 Expenses Governmental activities: General government $21,118,167 $28,083,397 $19,633,975 $17,210,855 $14,727,150 $12,639,867 $12,130,905 $11,888,794 $11,533,702 $10,990,007 Public safety 20,002,651 8,232,307 18,291,873 19,416,010 18,958,436 17,683,197 22,251,172 16,123,500 16,587,168 13,814,914 Highways and streets 12,041,764 10,234,099 11,629,477 10,201,832 10,791,469 7,505,589 9,417,459 9,089,318 9,400,140 8,754,110 Transit 1,520,300 1,267,596 939,341 1,106,750 1,125,490 1,505,341 1,533,258 1,432,910 1,404,646 1,275,093 Culture and recreation 11,839,721 10,059,071 9,396,975 9,551,170 9,699,357 10,111,731 10,204,276 9,695,639 4,572,490 3,399,623 Interest on long-term debt 1,406,761 1,149,019 290,251 362,651 355,545 350,404 511,502 494,732 439,027 656,260 Total governmental activities expenses 67,929,364 59,025,489 60,181,892 57,849,268 55,657,447 49,796,129 56,048,572 48,724,893 43,937,173 38,890,007 Business-type activities: Water 17,438,890 16,202,611 16,157,523 15,953,546 15,089,673 15,568,288 14,753,418 14,406,074 13,608,931 13,572,677 Stormwater 1,409,674 1,282,283 1,368,001 1,444,865 1,291,490 1,190,898 1,115,494 917,898 854,510 749,038 Total business-type activities expenses 18,848,564 17,484,894 17,525,524 17,398,411 16,381,163 16,759,186 15,868,912 15,323,972 14,463,441 14,321,715 Total primary government expenses $86,777,928 $76,510,383 $77,707,416 $75,247,679 $72,038,610 $66,555,315 $71,917,484 $64,048,865 $58,400,614 $53,211,722 Program Revenues Governmental activities: Charges for services General government $5,567,269 $5,519,724 $6,305,121 $5,205,012 $4,920,132 $5,084,396 $4,901,504 $4,096,927 $3,516,359 $3,978,117 Public safety 245,285 341,334 340,430 157,312 173,488 128,651 138,075 168,808 29,097 35,976 Highways and streets 287,013 378,585 739,936 1,675,929 754,388 1,039,542 1,052,167 764,397 496,098 546,066 Transit - - 463 110,309 138,125 119,536 100,052 88,684 72,783 71,078 Culture and recreation 7,003,209 7,033,797 5,236,021 4,391,639 5,014,018 5,096,804 4,611,576 4,373,693 1,108,734 435,354 Operating grants and contributions 4,533,920 4,040,118 8,171,190 3,621,830 4,669,814 4,949,928 4,664,197 5,503,530 5,070,396 4,706,844 Capital grants and contributions 9,258,047 8,493,664 25,566,365 16,338,347 8,302,441 5,529,831 6,749,407 3,602,656 2,456,727 2,919,641 Total governmental activities program revenues 26,894,742 25,807,222 46,359,527 31,500,378 23,972,406 21,948,688 22,216,978 18,598,695 12,750,194 12,693,076 Business-type activities: Charges for services Water 17,702,458 18,333,445 18,199,075 20,218,758 17,519,158 19,455,685 18,158,385 16,739,580 16,088,681 19,286,794 Stormwater 1,474,130 1,495,382 1,472,363 1,443,616 1,426,246 1,386,278 1,314,787 828,258 771,594 759,428 Operating grants and contributions - - - - - - - 35,000.00 - - Capital grants and contributions 3,964,061 1,612,125 7,603,672 169,194 2,899,213 870,920 1,097,285 3,334,372 1,979,037 179,675 Total business-type activities program revenues 23,140,649 21,440,952 27,275,110 21,831,568 21,844,617 21,712,883 20,570,457 20,937,210 18,839,312 20,225,897 Total primary government program revenues $50,035,391 $47,248,174 $73,634,637 $53,331,946 $45,817,023 $43,661,571 $42,787,435 $39,535,905 $31,589,506 $32,918,973 Net (expense)/revenue: Governmental activities $(41,034,622) $(33,218,267) $(13,822,365) $(26,348,890) $(31,685,041) $(27,847,441) $(33,831,594) $(30,126,198) $(31,186,979) $(26,196,931) Business-type activities 4,292,085 3,956,058 9,749,586 4,433,157 5,463,454 4,953,697 4,701,545 5,613,238 4,375,871 5,904,182 Total primary government net expense $(36,742,537) $(29,262,209) $(4,072,779) $(21,915,733) $(26,221,587) $(22,893,744) $(29,130,049) $(24,512,960) $(26,811,108) $(20,292,749) 127 General Revenues and Other Changes in Net Position Governmental activities: Taxes: Sales $30,163,507 $30,583,921 $24,056,793 $22,757,403 $22,924,400 $21,664,398 $19,767,720 $16,998,464 $16,132,159 $15,286,001 Franchise 763,311 756,388 722,700 662,048 635,494 656,664 647,830 621,546 582,064 571,731 Unrestricted state revenue sharing 18,581,727 15,081,806 14,435,336 12,638,148 11,879,950 11,577,834 11,177,729 10,549,196 10,413,464 9,636,906 Investment earnings 1,389,962 (1,181,160) 136,789 1,098,267 1,132,215 74,542 68,435 238,210 216,175 255,702 Miscellaneous - 150,100 - - - - - - - - Transfers (1,848,196) (198,665) 2,522 2,472 2,581 2,847 2,942 3,030 3,119 3,178 Total governmental activities 49,050,311 45,192,390 39,354,140 37,158,338 36,574,640 33,976,285 31,664,656 28,410,446 27,346,981 25,753,518 Business-type activities: Investment earnings 436,397 (861,433) 59 910,920 774,842 5,916 11,995 204,669 124,887 111,816 Miscellaneous 11,000 15,404 13,255 - - - - - - - Transfers 1,848,196 198,665 (2,522) (2,472) (2,581) (2,847) (2,942) (3,030) (3,119) (3,178) Total business-type activities 2,295,593 (647,364) 10,792 908,448 772,261 3,069 9,053 201,639 121,768 108,638 Total primary government $51,345,904 $44,545,026 $39,364,932 $38,066,786 $37,346,901 $33,979,354 $31,673,709 $28,612,085 $27,468,749 $25,862,156 Change in Net Position Governmental activities 8,015,689 11,974,123 25,531,775 10,809,448 4,889,599 6,128,844 (2,166,938) (1,715,752) (3,839,998) (443,413) Business-type activities 6,587,678 3,308,694 9,760,378 5,341,605 6,235,715 4,956,766 4,710,598 5,814,877 4,497,639 6,012,820 Total primary government $14,603,367 $15,282,817 $35,292,153 $16,151,053 $11,125,314 $11,085,610 $2,543,660 $4,099,125 $657,641 $5,569,407 Source: Town of Oro Valley Finance Department TOWN OF ORO VALLEY, ARIZONA FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (MODIFIED ACCRUAL BASIS OF ACCOUNTING) 128 2023 2022 2021 2020 2019 General fund Nonspendable $360,848 $1,279,770 $204,193 $45,553 $129,504 Committed 12,116,181 12,813,742 9,883,194 10,485,304 13,608,565 Assigned - - - - 2,584,994 Unassigned 11,321,463 16,296,912 22,321,155 10,368,691 3,248,602 Total general fund $23,798,492 $30,390,424 $32,408,542 $20,899,548 $19,571,665 All other governmental funds Nonspendable $512,728 $308,947 $157,497 $73,201 $105,403 Restricted 17,289,074 29,043,570 5,392,323 5,471,396 5,752,355 Committed 841,463 5,749,810 2,602,097 805,717 406,247 Assigned 12,210,451 - 2,438,272 2,410,736 3,611,045 Unassigned - - - - - Total all other governmental funds $30,853,716 $35,102,327 $10,590,189 $8,761,050 $9,875,050 2018 2017 2016 2015 2014 General fund Nonspendable $141,676 $130,030 $97,269 $31,278 $- Committed - - - - - Assigned 1,441,862 1,441,862 1,441,862 1,553,999 1,608,035 Unassigned 14,384,104 11,831,322 8,985,422 8,566,598 9,925,988 Total general fund $15,967,642 $13,403,214 $10,524,553 $10,151,875 $11,534,023 All other governmental funds Nonspendable $130,202 $132,538 $127,600 $149,348 $- Restricted 4,424,244 6,006,584 4,031,923 3,599,966 4,555,138 Committed 1,594,293 1,829,232 2,617,856 4,637,773 5,343,506 Assigned 2,209,618 1,716,361 1,340,991 1,421,593 1,500,000 Unassigned (201,765) (237,769) (29,198) - - Total all other governmental funds $8,156,592 $9,446,946 $8,089,172 $9,808,680 $11,398,644 Source: Town of Oro Valley Finance Department TOWN OF ORO VALLEY, ARIZONA CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (MODIFIED ACCRUAL BASIS OF ACCOUNTING) 129 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 Revenues Taxes $30,926,818 $31,340,309 $24,779,493 $23,419,451 $23,559,894 $22,321,062 $20,415,550 $17,620,010 $16,714,223 $15,857,732 Intergovernmental 29,910,099 27,545,642 31,780,507 30,840,092 24,375,992 21,634,143 22,118,633 19,488,066 17,714,991 16,732,631 Fines, forfeitures, & penalties 130,630 233,228 233,331 183,381 247,283 529,687 558,692 283,470 221,571 673,336 Licenses, fees, & permits 2,670,580 2,418,918 3,362,933 2,400,899 2,387,832 2,679,690 2,388,951 1,915,992 1,605,937 2,116,700 Charges for services 9,191,669 9,392,716 7,162,259 7,463,179 7,206,705 6,599,847 6,226,578 5,956,058 2,991,826 1,850,181 Contributions & donations 1,641,102 - - - - 133,928 150,000 149,513 - - Special assessments - - 172,640 175,197 174,066 175,854 175,539 189,525 178,078 1,462,307 Development impact fees 419,210 605,406 1,256,426 980,302 1,039,763 1,346,402 1,348,528 795,471 439,637 569,338 Investment income 1,348,183 (1,091,168) 132,373 1,098,267 1,132,215 74,542 68,435 238,210 216,175 255,702 Other revenues 1,690,583 691,442 1,024,290 965,588 841,111 576,970 572,886 504,796 141,618 305,489 Total revenues $77,928,874 $71,136,493 $69,904,252 $67,526,356 $60,964,861 $56,072,125 $54,023,792 $47,141,111 $40,224,056 $39,823,416 Expenditures General government $20,615,414 $28,445,524 $17,610,897 $16,531,008 $14,424,463 $11,998,586 $11,098,844 $11,426,687 $10,862,553 $10,610,673 Public safety 19,829,261 35,253,398 16,438,199 16,767,994 16,250,498 16,731,963 15,725,029 15,494,532 15,071,396 13,539,322 Highways & streets 2,123,019 1,779,889 1,795,203 1,904,698 2,999,923 3,092,143 2,993,402 2,754,413 2,602,321 3,710,577 Transit 1,530,444 1,328,131 930,687 1,110,444 1,150,322 1,536,294 1,528,654 1,432,910 1,404,646 - Culture & recreation 10,788,607 9,284,693 8,363,664 8,735,394 8,880,611 9,399,598 9,433,339 9,097,752 4,078,817 2,445,131 Capital outlay 28,493,535 13,545,876 9,993,713 20,637,466 15,293,326 10,081,427 9,196,801 7,995,340 8,093,704 5,495,185 Debt service Principal 3,250,712 1,034,249 1,146,027 1,262,487 1,124,885 1,304,226 1,075,466 897,637 649,840 1,867,901 Interest 1,496,692 557,218 290,251 365,454 327,421 356,661 314,914 336,510 436,010 472,268 Issuance cost on bonds - 728,808 - - 35,000 - 67,959 104,533 - - Total expenditures $88,127,684 $91,957,786 $56,568,641 $67,314,945 $60,486,449 $54,500,898 $51,434,408 $49,540,314 $43,199,287 $38,141,057 Excess of revenues over/ (under) expenditures $(10,198,810) $(20,821,293) $13,335,611 $211,411 $478,412 $1,571,227 $2,589,384 $(2,399,203) $(2,975,231) $1,682,359 Other financing sources/(uses) Proceeds from lease agreements 349,652 - - - - - - 1,043,214 - 212,895 Proceeds from financed purchase agreements 81,722 - - - - - - - - - Proceeds from subscription-based information technology arrangements 582,440 - - - - - - - - - Payment to bond escrow agent - - - - - - (1,171,447) (2,523,121) - - Issuance of long-term debt - 39,095,000 - - 2,035,000 - 3,115,556 2,529,250 - - Premium on bonds issued - 4,247,224 - - - - - - - - Sale of general capital assets 141,421 150,796 - - - - - - - - Insurance recoveries 51,229 20,957 - - - - - - - - Transfers in 22,916,769 6,401,665 2,747,343 2,046,718 4,407,180 3,342,890 2,953,072 1,872,026 4,326,627 4,115,152 Transfers out (24,764,965) (6,600,330) (2,744,821) (2,044,246) (4,404,599) (3,640,043) (3,250,130) (1,868,996) (4,323,508) (4,111,974) Total other financing sources/(uses)(641,732) 43,315,312 2,522 2,472 2,037,581 (297,153) 1,647,051 1,052,373 3,119 216,073 Net change in fund balances $(10,840,542) $22,494,019 $13,338,133 $213,883 $2,515,993 $1,274,074 $4,236,435 $(1,346,830) $(2,972,112) $1,898,432 Debt service as a percentage of noncapital expenditures 7.71%2.01%3.06%3.40%3.16%3.66%3.32%3.00%3.17%7.30% Source: Town of Oro Valley Finance Department TOWN OF ORO VALLEY, ARIZONA PRINCIPAL SALES TAXPAYERS CURRENT FISCAL YEAR AND NINE YEARS PRIOR 130 % of Total % of Total Business Sales Tax Business Sales Tax Taxpayer Type Rank Payments Taxpayer Type Rank Payments Taxpayer A Utility $2,291,745 1 7.60%Taxpayer A Utility $1,797,531 1 11.73% Taxpayer B Accomodation 1,823,161 2 6.04%Taxpayer B Accomodation 1,236,804 2 8.07% Taxpayer C Retail 1,812,081 3 6.01%Taxpayer C Retail 828,798 3 5.41% Taxpayer D Retail 1,310,328 4 4.34%Taxpayer D Retail 602,684 4 3.93% Taxpayer E Retail 1,168,621 5 3.87%Taxpayer E Utility 493,888 5 3.22% Taxpayer F Construction 1,047,342 6 3.47%Taxpayer F Utility 403,191 6 2.63% Taxpayer G Accomodation 740,474 7 2.45%Taxpayer G Retail 388,882 7 2.54% Taxpayer H Construction 711,593 8 2.36%Taxpayer H Construction 341,502 8 2.23% Taxpayer I Utility 688,240 9 2.28%Taxpayer I Retail 312,409 9 2.04% Taxpayer J Utility 652,956 10 2.16%Taxpayer J Construction 288,453 10 1.88% $12,246,540 40.60%$6,694,142 43.68% Sales Tax Payments Sales Tax Payments June 30, 2023 June 30, 2014 Source: Arizona Department of Revenue TOWN OF ORO VALLEY, ARIZONA TAXABLE SALES BY CATEGORY LAST TEN FISCAL YEARS ($000’s) 131 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 Construction $5,311 $5,804 $3,893 $4,363 $4,191 $4,653 $4,295 $2,131 $3,199 $3,338 Manufacturing 724 639 283 198 173 140 137 156 141 257 Transportation, Warehousing, Communications & Utilities 3,921 3,771 3,593 3,288 3,335 3,384 3,171 3,133 3,068 2,959 Wholesale Trade 371 265 228 211 183 154 136 131 125 103 Retail Trade 11,381 12,058 10,890 9,830 8,430 7,733 7,086 6,844 5,808 5,243 Restaurants, Bars & Lodging 6,206 5,906 3,374 3,011 4,299 3,907 3,473 3,295 2,803 2,761 Finance, Insurance & Real Estate 376 383 313 442 1,114 646 562 443 270 75 Services 1,722 1,526 1,276 1,004 963 840 702 672 599 529 All Other 150 232 206 409 237 206 202 190 115 60 Cable Franchise 763 756 723 662 635 657 648 622 582 572 Total $30,925 $31,340 $24,779 $23,418 $23,560 $22,320 $20,412 $17,617 $16,710 $15,897 Town Sales Tax Rate*2.50% Fiscal Year 2.00%2.50%2.50%2.50%2.50%2.50%2.50%2.50%2.00% Source: Arizona Department of Revenue * Note: .5% Additional Sales Tax TOWN OF ORO VALLEY, ARIZONA DIRECT AND OVERLAPPING SALES TAX RATES LAST TEN FISCAL YEARS 132 Fiscal Year Ended Utility June 30,Sales Tax Bed Tax Sales Tax Sales Tax 2014 2.00%6.00%4.00%4.00%6.10% 2015*2.50%6.00%4.00%4.00%6.10% 2016 2.50%6.00%4.00%4.00%6.10% 2017 2.50%6.00%4.00%4.00%6.10% 2018 2.50%6.00%4.00%4.00%6.10% 2019 2.50%6.00%4.00%4.00%6.10% 2020 2.50%6.00%4.00%4.00%6.10% 2021 2.50%6.00%4.00%4.00%6.10% 2022 2.50%6.00%4.00%4.00%6.10% 2023 2.50%6.00%4.00%4.00%6.10% Town of Oro Valley Construction Pima County Sales Source: Arizona Department of Revenue *Note: .5% Additional Sales Tax Effective March 1, 2015 TOWN OF ORO VALLEY, ARIZONA NET LIMITED AND FULL CASH ASSESSED VALUE OF PROPERTY LAST TEN FISCAL YEARS 133 Fiscal Year Net Full Estimated Ended Assessed Cash Assessed Full Cash June 30,Value Value Value 2014 553,366,744 556,259,856 5,175,406,955 - 2015 556,566,167 560,863,509 5,252,917,489 - 2016 572,696,599 593,299,222 5,616,655,680 - 2017 593,580,247 616,216,705 5,688,443,027 - 2018 612,684,205 633,479,221 6,058,189,523 - 2019 645,311,769 683,985,966 6,456,152,108 - 2020 678,873,768 730,293,104 6,937,292,543 - 2021 758,352,130 813,753,982 7,742,926,046 - 2022 786,505,278 838,744,317 8,023,965,026 - 2023 828,970,219 1,002,518,296 9,695,469,656 - Net Limited Total Outstanding General Obligation Bond Debt Source: Arizona Department of Revenue Abstract of the Assessment Roll Note: On November 6, 2012, voters approved Proposition 117, an amendment to the Arizona Constitution. Beginning with Tax Yea r 2015 (Fiscal Year 2016), both primary and secondary taxes are levied against the net limited assessed value. The net full cash a ssessed value is used for determining the Town’s bonding capacity and as the ceiling for net limited assessed value. TOWN OF ORO VALLEY, ARIZONA HISTORICAL AND PROJECTED EXCISE TAX COLLECTIONS JUNE 30, 2023 134 Fiscal Year Fiscal Year Revenue Source Town Sales Tax $27,259,560 $25,633,318 $26,449,853 $27,048,414 $21,109,373 $20,172,487 $20,454,936 $19,333,457 $17,568,254 $14,967,714 Franchise Fees 765,000 765,000 763,311 756,388 722,700 662,048 635,494 656,664 647,830 621,546 Licenses & Permits 1,827,011 1,742,118 2,670,580 2,418,918 3,362,933 2,400,899 2,387,832 2,679,690 2,313,504 1,915,992 Fines 126,250 125,000 130,630 132,636 135,547 111,611 165,669 131,393 131,637 159,154 State-shared Sales Tax 7,496,744 7,207,659 7,077,517 6,637,079 5,462,343 4,694,491 4,469,774 4,210,168 3,989,179 3,887,673 State-shared Income Tax 11,455,664 12,839,525 9,082,721 6,174,401 6,580,331 5,870,231 5,370,779 5,422,693 5,329,864 4,937,719 Subtotal $48,930,229 $48,312,620 $46,174,612 $43,167,836 $37,373,227 $33,911,767 $33,484,484 $32,434,065 $29,980,268 $26,489,798 Parks and Recreation Sales Tax 3,843,990 3,726,016 3,713,654 3,535,507 2,947,420 2,584,916 2,469,464 2,330,941 2,199,466 2,030,750 Total $52,774,219 $52,038,636 $49,888,266 $46,703,343 $40,320,647 $36,496,683 $35,953,948 $34,765,006 $32,179,734 $28,520,548 Projected Fiscal Year 2016 Fiscal Year 2024 Fiscal Year 2025 Fiscal Year Fiscal Year 20182019 2017 Fiscal YearFiscal Year 2020 Fiscal Year 2023 20212022 Audited (a) All revenue sources are presented on a modified accrual basis of accounting except for Town sales taxes which are presented o n the cash basis of accounting per the Arizona Department of Revenue Standard Industry Summary Local Taxes Collection Reports Source: Oro Valley Finance Department Note: The above information is provided for bond requirements only and the bond does not require ten years of data. TOWN OF ORO VALLEY, ARIZONA RATIO OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS 135 Percentage Fiscal Financed Subscription Note of Personal Year Purchases Liabilities Payable Income 2014 $168,994 $- $- $- $8,703,428 $1,055,000 $40,811,243 $93,593 $6,371,529 $57,203,787 3.41%1,366 2015 128,594 - - 1,000,000 8,215,673 925,000 37,683,805 118,862 8,169,765 56,241,699 3.25%1,331 2016 966,962 - - 700,000 7,716,638 780,000 34,517,647 80,423 8,879,907 53,641,577 2.95%1,231 2017 716,622 - - 350,000 9,341,559 640,000 30,804,327 40,814 8,284,407 50,177,729 2.69%1,146 2018 458,744 - - - 8,788,954 490,000 28,079,939 - 7,690,874 45,508,511 2.35%1,022 2019 254,070 - - - 10,051,867 335,000 30,135,034 - 7,079,179 47,855,150 2.37%1,059 2020 33,937 - - - 9,171,710 170,000 25,669,708 - 6,448,759 41,494,114 1.95%901 2021 - - - - 8,229,620 - 24,909,835 - 2,713,108 35,852,563 1.62%762 2022 769,691 - - - 50,463,247 - 20,476,968 - 2,404,213 74,114,119 3.15%1,537 2023 827,109 69,254 466,860 - 43,457,370 - 16,231,628 - 2,087,126 63,139,347 2.42%1,291 Per CapitaLeases Loan Payable Business-Type Activities Total Primary GovernmentLeases Excise Tax Bonds Governmental Activities Revenue BondsBonds Assessment Special Source: Town of Oro Valley Finance Department and U.S. Census Bureau TOWN OF ORO VALLEY, ARIZONA DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT JUNE 30, 2023 136 Estimated Estimated Share Debt Percentage of Overlapping Governmental Unit Outstanding Applicable Debt Pima County $67,655,000 7.60%$5,139,023 Amphitheater Unified School District 76,275,000 42.47%32,392,136 Golder Ranch Fire District 55,760,732 69.95%39,007,071 Subtotal, overlapping debt 76,538,230 Town of Oro Valley 44,820,593 100.00%44,820,593 Total estimated direct and overlapping debt $121,358,823 Source: Pima County, Golder Ranch Fire District and Amphitheater Unified School District No. 10. (1) Estimated percentage of debt outstanding applicable to the Town is calculated based on a portion of the Town’s net limited assessed valuation as a percentage of the net limited assessed valuation of the overlapping jurisdiction. TOWN OF ORO VALLEY, ARIZONA LEGAL DEBT MARGIN INFORMATION LAST TEN FISCAL YEARS 137 2023 2022 2021 2020 2019 Debt Limit $260,654,757 $215,707,584 $211,576,035 $189,876,207 $177,836,351 Total net debt applicable to limit - - - - - Legal debt margin $260,654,757 $215,707,584 $211,576,035 $189,876,207 $177,836,351 Total net debt applicable to the limit as a percentage of debt limit 0.00%0.00%0.00%0.00%0.00% 2018 2017 2016 2015 2014 Debt Limit $164,704,598 $160,216,343 $154,257,798 $145,824,512 $144,627,563 Total net debt applicable to limit - - - - - Legal debt margin $164,704,598 $160,216,343 $154,257,798 $145,824,512 $144,627,563 Total net debt applicable to the limit as a percentage of debt limit 0.00%0.00%0.00%0.00%0.00% Source: Town of Oro Valley Finance Department TOWN OF ORO VALLEY, ARIZONA CALCULATION OF LEGAL DEBT MARGIN JUNE 30, 2023 138 Net Full Cash Assessed Valuation $1,002,518,296 Debt Limit - 20% of net full cash assessed valuation $200,503,659 Debt applicable to limit General obligation bonds outstanding $ Less amount set aside for repayment of debt Net debt applicable to limit 20% legal debt margin $200,503,659 Debt Limit - 6% of net full cash assessed valuation $60,151,098 Debt applicable to limit General obligation bonds outstanding $ Less amount set aside for repayment of debt Net debt applicable to limit All other general obligation bonds debt margin $60,151,098 Total legal debt margin $260,654,757 Water, Sewer, Light, Parks, Open Space and Recreational Facility Bonds All other general obligation bonds Source: Pima County Assessor’s Officer TOWN OF ORO VALLEY, ARIZONA PLEDGED REVENUE COVERAGE JUNE 30, 2023 139 Water Utility Revenue Bonds Fiscal Year 2014 $19,397,409 $2,406,000 $1,429,538 $3,835,538 5.06 2015 16,213,273 2,995,560 1,372,024 4,367,584 3.71 2016 16,943,615 3,054,080 1,239,488 4,293,568 3.95 2017 18,169,402 3,054,060 870,547 3,924,607 4.63 2018 19,455,685 2,607,710 897,871 3,505,581 5.55 2019 17,519,158 3,933,228 839,823 4,773,051 3.67 2020 20,218,758 4,348,648 775,538 5,124,186 3.95 2021 22,304,186 3,544,910 661,932 4,206,842 5.30 2022 19,515,935 4,051,414 527,252 4,578,666 4.26 2023 19,531,841 4,245,340 449,395 4,694,735 4.16 Governmental Revenue Bonds Fiscal Year 2014 $29,512,099 $444,000 $382,639 $826,639 35.70 2015 31,739,256 479,440 367,991 847,431 37.45 2016 31,883,978 530,920 289,630 820,550 38.86 2017 31,739,256 334,940 281,475 616,415 51.49 2018 34,262,128 544,290 280,170 824,460 41.56 2019 36,414,803 763,772 284,213 1,047,985 34.75 2020 36,511,067 877,352 312,875 1,190,227 30.68 2021 37,951,105 942,090 273,354 1,215,444 31.22 2022 43,590,851 971,586 243,858 1,215,444 35.86 2023 48,018,775 2,895,660 1,435,398 4,331,058 11.09 Coverage Principal Interest Total CoverageRevenues Debt Service Debt Service Gross Revenues Gross Principal Interest Total Source: Town of Oro Valley Finance Department TOWN OF ORO VALLEY, ARIZONA HISTORICAL AND PROJECTED WATER SYSTEM REVENUES, EXPENSES, DEBT SERVICE AND COVERAGE LAST TEN FISCAL YEARS 140 Revenues: Water revenues $14,539,682 $14,406,542 $14,679,253 $13,764,702 $12,413,502 $13,586,667 $12,493,557 $12,018,429 $11,280,269 $12,169,375 Water impact fees 1,818,383 1,167,086 4,100,556 - - - - - - - Water connection fees - - - 810,689 621,106 816,045 816,353 544,852 591,045 1,413,047 Alternative water connection fees - - - 1,627,435 1,246,838 1,638,175 1,638,792 1,094,460 1,172,170 2,376,682 Groundwater preservation fees 2,256,987 2,413,719 2,617,452 2,389,953 2,213,303 2,611,075 2,440,045 2,371,100 2,330,231 2,599,718 Other revenues 916,789 1,528,588 906,925 1,625,979 1,024,407 803,723 769,638 710,740 714,965 727,972 Interest income 426,923 (830,161) (1,211) 887,772 758,457 - 11,020 203,857 124,593 110,615 Total Revenues 19,958,764 18,685,774 22,302,975 21,106,530 18,277,613 19,455,685 18,169,405 16,943,438 16,213,273 19,397,409 Expenses: Personnel 3,519,660 3,233,737 3,480,942 3,392,481 3,236,682 3,155,109 3,021,915 2,952,249 2,767,143 2,659,895 Operations & maintenance 5,037,212 4,414,647 *4,133,238 4,288,975 3,445,511 3,838,409 4,719,579 5,059,998 4,530,436 4,303,230 CAP water costs 4,223,033 4,123,353 *3,736,489 3,696,131 3,393,317 3,523,052 2,892,392 1,952,117 1,570,793 1,499,594 Total Expenses 12,779,905 11,771,737 11,350,669 11,377,587 10,075,510 10,516,570 10,633,886 9,964,364 8,868,372 8,462,719 Net water system revenues 7,178,859 6,672,660 10,952,306 9,728,943 8,202,103 8,939,115 7,535,519 6,979,074 7,344,901 10,934,690 Water supported debt service 2007 WIFA Loan - - 2,198,236 306,657 310,866 311,000 311,130 311,256 311,377 311,494 2009 WIFA Loan - - 1,310,973 147,425 149,175 149,226 149,275 149,322 149,367 150,471 2014 WIFA Loan 376,642 372,565 372,867 373,072 377,060 377,158 395,534 361,059 296,972 - 2005 Excise tax bonds - - - - - - - - 152,516 152,565 2007 Excise tax bonds - - - - - - 1,245,403 1,197,678 1,255,948 790,822 2012 Refunding bonds 1,896,532 1,820,750 4,168,782 1,930,382 1,996,381 1,963,731 1,980,781 1,995,481 1,971,082 1,968,281 2013 Refunding bonds - - - 1,010,000 1,024,645 1,024,073 1,033,428 1,022,420 1,046,558 1,513,427 2015 Refunding revenue obligations 148,640 148,678 148,666 149,924 152,339 150,259 25,101 17,116 - - 2017 Refunding revenue obligations 1,622,426 1,623,122 1,623,896 1,624,758 1,658,306 235,873 - - - - 2018 Excise tax revenue obligations 509,822 509,580 510,498 409,122 - - - - - - 2021 Refunding revenue bonds 517,315 432,538 18,838 - - - - - - - 2021 Refunding revenue bonds - 24,778 11,081 - - - - - - - - Total water supported debt service $5,071,377 $4,932,011 $10,363,837 $5,951,340 $5,668,772 $4,211,320 $5,140,652 $5,054,332 $5,183,820 $4,887,060 Debt service coverage 1.42 1.35 1.63 1.45 2.12 1.47 1.38 1.42 2.24 1.85 * 2022 Updated figure 2023 2022 2019 2018 2017 2016 2015 201420212020 Source: Town of Oro Valley Finance Department TOWN OF ORO VALLEY, ARIZONA DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS 141 Fiscal Year Per Capita Ended Personal Unemployment June 30,Population Income Rate 2014 41,887 $1,679,965,408 $40,107 6.2% 2015 42,259 1,728,773,431 40,909 5.2% 2016 43,565 1,817,844,597 41,727 5.3% 2017 43,781 1,863,394,821 42,562 4.6% 2018 44,517 1,932,614,654 43,413 4.8% 2019 45,184 2,014,980,480 44,595 4.9% 2020 46,044 2,128,752,252 46,233 8.6% 2021 47,070 2,213,843,310 47,033 5.5% 2022 48,222 2,349,424,062 48,721 3.4% 2023 48,906 2,612,118,366 53,411 4.1% Income Personal Source: U.S. Census Bureau, Arizona Commerce Authority, Arizona Employment statistics, and Pima Association of Governments TOWN OF ORO VALLEY, ARIZONA PRINCIPAL EMPLOYERS CURRENT FISCAL YEAR AND NINE YEARS PRIOR 142 Employer Employees Rank Employer Employees Rank Roche Tissue Diagnostics 1,800 1 Ventana Medical Systems 1,500 1 Oro Valley Hospital 500 2 Oro Valley Hospital 533 2 Simpleview 470 3 Hilton El Conquistador Resort 475 3 Town of Oro Valley 449 4 Amphitheater Public Schools 477 4 Amphitheater Public Schools 439 5 Town of Oro Valley 433 5 Walmart 338 6 Wal-Mart Supercenter 346 6 El Conquistador Tucson 294 7 Fry's Food & Drug 243 7 Splendido at Rancho Vistoso 200 8 Securaplane 182 8 Fry's Food & Drug 182 9 Splendido at Rancho Vistoso 175 9 Casa de la Luz Hospice 155 10 Target 128 10 Total 4,827 4,827 Total 4,492 June 30, 2014June 30, 2023 Source: Town of Oro Valley Finance Department TOWN OF ORO VALLEY, ARIZONA FULL-TIME EQUIVALENT EMPLOYEES BY FUNCTION LAST TEN FISCAL YEARS 143 Function/Program 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 Administration Town Clerk 3.73 4.73 4.73 4.73 4.73 4.69 4.54 4.56 4.56 4.90 Town Manager 10.38 8.38 8.38 10.38 10.38 7.38 7.38 7.38 8.00 7.00 Human Resources 4.00 4.00 4.00 4.00 4.00 3.48 3.48 3.50 3.50 2.00 Economic Development 1.00 1.00 1.00 1.00 1.00 3.00 3.00 3.00 2.00 2.00 Finance 7.20 8.20 7.20 8.00 8.00 7.00 7.00 7.00 7.00 7.00 Information Systems 16.80 15.80 13.80 9.00 9.00 8.00 7.00 7.00 7.00 7.30 Legal 7.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 Development & Infrastructure Services 27.78 26.78 26.78 27.38 27.38 26.88 103.63 83.76 81.45 78.84 Parks & Recreation 67.08 63.06 63.10 63.10 63.10 60.78 48.02 49.36 36.20 37.61 Cultural Resources - - - - - - - 0.20 - - Police Civilians 31.73 30.73 30.25 31.25 31.25 30.25 31.25 30.25 30.25 25.93 Officers 107.00 104.00 106.88 106.88 101.88 104.88 101.88 102.88 102.88 101.91 Town Court 8.98 8.50 8.48 8.48 8.00 8.00 8.00 8.00 8.00 8.70 Public Works 75.71 71.37 70.89 70.29 70.29 65.79 - - - - Water Utility 40.48 40.48 40.48 39.48 39.48 39.48 39.48 38.48 37.48 37.00 Total 408.87 393.03 391.97 389.97 384.49 375.61 370.66 351.37 334.32 326.19 Source: Town of Oro Valley Finance Department TOWN OF ORO VALLEY, ARIZONA WATER UTILITY REVENUES BY USER TYPE LAST TEN FISCAL YEARS 144 Fiscal Year Ended June 30, 2014 $7,881,436 $886,712 $1,169,067 $187,622 $283,632 $816 $121,108 $1,638,981 $12,169,374 2015 7,649,136 779,877 981,545 214,848 271,815 - 115,955 1,267,093 11,280,269 2016 8,103,644 778,915 1,129,741 50,479 310,609 - 114,427 1,530,107 12,017,922 2017 8,416,714 814,041 1,170,946 51,373 224,532 8,733 104,880 1,702,338 12,493,557 2018 8,990,121 860,124 1,371,555 61,504 520,324 13,735 103,126 1,666,178 13,586,667 2019 8,849,732 856,941 1,087,648 69,363 302,780 9,627 69,091 1,168,322 12,413,504 2020 9,798,411 925,233 1,193,423 65,007 345,149 8,787 85,600 1,343,092 13,764,702 2021 10,394,919 902,536 1,513,518 65,537 228,950 8,575 65,356 1,499,862 14,679,253 2022 10,287,598 974,823 1,322,881 66,053 378,582 8,682 100,890 1,267,033 14,406,542 2023 10,552,884 1,034,275 1,298,563 82,649 297,443 41,631 82,598 1,149,640 14,539,682 TotalResidentialCommercialIrrigation Irrigation Reclaimed Construction Construction Reclaimed Turf Turf Reclaimed Source: Town of Oro Valley Water Utility Department TOWN OF ORO VALLEY, ARIZONA OPERATING INDICATORS BY FUNCTION LAST TEN FISCAL YEARS 145 Function/Program 2022 2021 2020 2019 2018 2017 2016 2015 2014 Police Burglaries 32 49 41 42 50 77 71 85 77 75 Citations (traffic)2,752 2,987 3,516 2,681 3,117 2,992 3,446 3,890 4,486 4,668 Investigations 928 977 1,164 932 963 915 818 824 832 765 Total arrests 1,359 1,385 1,438 1,251 1,488 1,786 1,458 1,598 1,721 1,679 Thefts 529 544 534 501 504 567 493 586 500 561 Development & Infrastructure Services Street resurfacing (miles)71 69 54 51 88 44 89 92 101 73 Parks & Recreation Recreation programs held annually 112 97 45 105 96 73 55 52 38 30 Months of public pool operations 11 12 11 12 12 12 12 12 12 12 Parks maintenance staff hours worked 21,145 19,677*18,720 18,220 18,311 17,842 15,463 15,083 16,255 20,000 Water New connections 186 183 505 273 264 331 340 176 202 165 Total connections 21,300 21,149 20,966 20,461 20,188 19,924 19,588 19,355 19,179 18,977 Transit Total route miles 625,554 593,117 350,248 455,777 454,277 468,346 568,657 529,170 392,071 439,512 Passengers 61,447 56,001 28,686 39,902 47,847 49,474 51,131 45,202 39,102 39,196 * Updated figure 2023 Source: Town of Oro Valley Finance Department TOWN OF ORO VALLEY, ARIZONA WATER RATES LAST TEN FISCAL YEARS 146 Fiscal Year Ended June 30, 2014 14.19 2.23 3.01 4.07 5.49 0.95 14.19 2015 14.19 2.27 3.10 4.23 5.76 0.90 14.19 2016 14.19 2.32 3.19 4.40 6.05 0.90 14.19 2017 14.62 2.34 3.25 4.53 6.29 0.90 14.62 2018 16.45 2.34 3.25 4.53 6.29 0.90 14.62 2019 18.26 2.34 3.25 4.53 6.29 0.90 14.62 2020 18.26 2.34 3.25 4.53 6.29 0.90 14.62 2021 18.26 2.34 3.25 4.53 6.29 0.90 14.62 2022 18.99 2.40 3.35 4.80 6.70 0.90 14.62 2023 19.94 2.52 3.52 5.04 7.04 0.90 14.62 Tier 2 Per 1,000 Base Rate Monthly Reclaimed WaterPotable Water Tier 3 Per 1,000 Tier 4 Per 1,000 GPF Per 1,000 Base Rate Monthly Tier 1 Per 1,000 Source: Town of Oro Valley Water Utility Department Note: The rate for all reclaimed water is $2.27 per 1,000 gallons. TOWN OF ORO VALLEY, ARIZONA CAPITAL ASSET STATISTICS BY FUNCTION LAST TEN FISCAL YEARS 147 Function/Program 2022 2021 2020 2019 2018 2017 2016 2015 2014 Police Stations 1 1 1 1 1 1 1 1 1 1 Substations 3 3 3 3 3 3 3 3 3 3 Patrol units 79 81 84 84 78 78 72 77 74 64 Other fleet 66 57 41 42 46 65 67 44 45 42 Development & Infrastructure Services Streets (miles)431 430 421 421 421 421 421 421 421 421 Streetlights 103 95 95 95 95 95 95 95 95 95 Traffic signals 22 22 22 22 22 22 19 19 19 19 Parks & Recreation Acreage 651 449 449 449 449 449 448 448 448 457 Playgrounds 3 3 3 3 2 2 2 2 2 2 Baseball/softball diamonds 7 7 7 7 7 7 7 7 7 7 Community centers 1 1 1 1 1 1 1 1 1 - Golf course holes 45 45 36 45 45 45 45 45 45 - Tennis courts 31 31 31 32 32 32 32 32 32 1 Swimming pools 2 2 2 2 3 4 4 4 4 2 Water Number of Wells 18 18 18 18 19 20 20 20 20 18 Reservoir Storage Capacity 11 11 11 11 11 11 11 12 12 13 Number of Booster Stations 26 26 26 26 26 26 26 27 27 26 Transit Transit vans 5 6 6 7 7 7 4 4 7 9 Transit mini buses 24 24 23 21 21 21 22 22 19 17 2023 Source: Town of Oro Valley Finance Department 148 (This page intentionally left blank)