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HomeMy WebLinkAboutFinancial Reports-Comprehensive Annual Financial Report (CAFR) - 6/30/2017Town of Oro Valley, Arizona COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Year Ended June 30, 2017 TOWN OF ORO VALLEY, ARIZONA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2017 ________________________________________________________________________________ 11000 North La Canada Drive – Oro Valley, Arizona 85737-7015 TOWN OF ORO VALLEY, ARIZONA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2017 Prepared by: Finance Department Stacey Lemos, CPA Finance Director (This page intentionally left blank) TOWN OF ORO VALLEY, ARIZONA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2017 TABLE OF CONTENTS INTRODUCTORY SECTION Page Letter of Transmittal 1 Organization Chart 9 List of Town Officials 10 GFOA Certificate of Achievement 11 FINANCIAL SECTION INDEPENDENT AUDITOR’S REPORT 15 MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) 19 BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements: Statement of Net Position 33 Statement of Activities 34 Fund Financial Statements: Balance Sheet – Governmental Funds 38 Reconciliation of the Balance Sheet – Governmental Funds to the Statement of Net Position 41 Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds 42 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds to the Statement of Activities 45 Statement of Net Position – Proprietary Funds 46 TOWN OF ORO VALLEY, ARIZONA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2017 TABLE OF CONTENTS FINANCIAL SECTION Page BASIC FINANCIAL STATEMENTS Statement of Revenues, Expenses and Changes in Fund Net Position – Proprietary Funds 48 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 92 Community Center Fund 93 Schedule of Proportionate Share of the Net Pension Liability 94 Schedules of Changes in the Net Pension Liability and Related Ratios 95 Schedule of Contributions 97 Schedule of Funding Progress 98 Notes to Required Supplementary Information 99 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 106 TOWN OF ORO VALLEY, ARIZONA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2017 TABLE OF CONTENTS FINANCIAL SECTION Page COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES Special Revenue Funds: Combining Balance Sheet 110 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 112 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual 114 Debt Service Fund: Combining Balance Sheet 120 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 121 Combining Schedule of Revenues, Expenditures and Changes in Fund Balance – Budget and Actual 122 Capital Projects Funds: Combining Balance Sheet 126 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 128 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual 130 Internal Service Funds: Combining Statement of Net Position 136 Combining Statement of Revenues, Expenses and Changes in Fund Net Position 137 Combining Statement of Cash Flows 138 TOWN OF ORO VALLEY, ARIZONA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2017 TABLE OF CONTENTS STATISTICAL SECTION Financial Trends: Net Position by Component 141 Changes in Net Position 142 Fund Balances of Governmental Funds 145 Changes in Fund Balances of Governmental Funds 146 Revenue Capacity: Principal Employers 147 Principal Sales Taxpayers 148 Taxable Sales by Category 149 Direct and Overlapping Sales Tax Rates 150 Limited and Full Cash Assessed Property Values 151 Historical and Projected Excise Tax Collections 152 Debt Capacity: Ratio of Outstanding Debt by Type 153 Direct and Overlapping Governmental Activities Debt 154 Legal Debt Margin Information 155 Calculation of Legal Debt Margin 156 Pledged-Revenue Coverage 157 Historical and Projected Water System Revenues, Expenses, Debt Service and Coverage 158 Demographic and Economic Information: Demographic and Economic Statistics 159 TOWN OF ORO VALLEY, ARIZONA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2017 TABLE OF CONTENTS STATISTICAL SECTION Page Operating Information: Full-Time Equivalent Town Employees by Function 160 Water Utility Revenues by User Type 161 Operating Indicators by Function 162 Water Rates 163 Capital Assets Statistics by Function 164 (This page intentionally left blank) INTRODUCTORY SECTION (This page intentionally left blank) Caring for our heritage, our community, our future. www.orovalleyaz.gov 11000 N. La Cañada Drive • Oro Valley, Arizona 85737 phone: (520) 229-4700 • fax: (520) 229-0428 Town of Oro Valley December 14, 2017 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 comprehensive annual financial report of the Town of Oro Valley, Arizona (Town) for the fiscal year ended June 30, 2017. This report consists of management’s representations concerning the finances of the Town. Consequently, management assumes full responsibility for the completeness and reliability of all of the information presented in this report. To provide a reasonable basis for making these representations, management of the Town has established a comprehensive internal control framework that is 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 Heinfeld, Meech & Co., P.C., 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, 2017, 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, 2017, 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. PROFILE OF THE TOWN The Town of Oro Valley was incorporated in 1974. It is located in northeastern Pima County, three miles north of Tucson and 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 43,781. The population of Oro Valley has increased 47% since the 2000 population of 29,700. Based on 2016 Census estimates, Oro Valley has a median household income of $75,966, compared to the median household income for the state of Arizona of $51,340. 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 Magistrate. 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; 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. The Town currently operates under the Alternative Expenditure Limitation – Home Rule Option. This option allows the Town Council to establish the budgetary limits locally, rather than being restricted by the State-imposed expenditure limitation. The voters must authorize this option every four years. It was last authorized by the citizens of Oro Valley in August of 2014. The annual budget serves as the foundation for the Town’s financial planning and control. The objective of these budgetary controls is to ensure compliance with legal provisions embodied in the annual budget approved by the Town Council. The Town’s budget preparation process usually begins in December, the Manager’s Recommended Budget is presented to the Town Council for review in April, and the final budget is typically 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 as a result of personnel reclassifications; transfers that would reduce or eliminate funding for items designated in the adopted Capital Improvement Program; and transfers that would reduce or eliminate funding for debt service. All other operational budget amendments that involve transfers between line items or expenditure categories require approval by the Town Manager. MAJOR INITIATIVES AND ACCOMPLISHMENTS FOR THE YEAR Oro Valley’s Strategic Plan was updated during FY 2016-17 and is centered around the vision expressed in the Council-adopted and voter-ratified Oro Valley General Plan. The Strategic Plan is organized around the framework of the following ten (10) focus areas: Economic Development Focusing on long-term financial and economic stability and sustainability, Oro Valley recognizes that a robust local economy and job market provide opportunities for quality employment. Complete Community Oro Valley continues to be a community with a wide range of services, amenities, shopping and dining opportunities and housing types that meet the needs of current and future residents. Parks and Recreation Oro Valley recognizes the need for a high-quality parks, recreation and open space system that is accessible, comprehensive and connected. Public Safety Oro Valley will continue its commitment to being a safe community with low crime, safe neighborhoods and positive relationships between law enforcement and community members. Town Assets Oro Valley provides high-quality and well-maintained Town assets, including streets, infrastructure and facilities. Water Resources and Energy Oro Valley delivers a high-quality, safe and reliable water supply that meets the long-term needs for the community while considering the natural environment. Cultural Resources Oro Valley protects and preserves its significant cultural sites, properties and resources to enhance our community character and heritage. Land Use and Design Oro Valley focuses on a built environment that creatively integrates landscape, architecture, open space and co Transportation Oro Valley will provide an integrated and connected transportation network that enhances mobility for people and goods while providing diverse transportation choices that are safe, user-friendly, efficient and accessible. Cost of Services Oro Valley will seek full recovery of the costs of services that serve new development. While the Strategic 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 2016-17.  Conducted the August 30, 2016 primary election at which all three Council seats were filled with voter turnout of 45%  Conducted the November 8, 2016 general election at which the Your Voice, Our Future General Plan update was approved with voter turnout of 77%  Adopted a new hands-free driving ordinance to increase public safety in Oro Valley  Honored with the United States Department of Transportation Educate and Enforce Award as part of the 2016 Mayors’ Challenge for Safer People, Safer Streets  Adopted the 2017 Strategic Plan, which focuses Town resources on community needs and desires  Adopted a balanced budget for FY 2017-18 in the amount of $128.6 million, reflecting our community’s values and priorities  Ended FY 2016-17 with a nearly $2.9 million increase in the General Fund ending fund balance  Issued a total of 2,371 building permits of all types – a 19% increase over the previous fiscal year  Completed phase one of the planning process for the creation of a central “district” in town, resulting in adoption of the Main Streets Concept Plan  Collected over $2 million in plan review and permit fees representing more than $170 million in work valuation for new private construction  Completed major development reviews for Alterra at Vistoso Trails, Nakoma Sky, Oro Valley Senior Care and Steam Pump Self-Storage  Commercial project inspections included El Corredor Apartments, Kneader’s Bakery, Freddy’s Frozen Custard and Steakburgers, Native Grill and Wings, Fry’s Fuel Center, Cathey’s Sew & Vac and various other tenant improvement projects  Completed design of the La Cholla roadway widening project  In Transit Services, provided 51,131 passenger trips, an increase of 11.5% over the prior fiscal year  Began the Lambert Lane phase II widening project  Secured regional funds for installation of a traffic signal on La Cañada at the Community Center  Successfully issued $14.3 million in excise tax revenue refunding obligations, resulting in overall net interest savings of nearly $1.1 million  Successfully issued $2 million in excise tax revenue obligations to fund energy efficiency improvements at the Oro Valley Community Center, with debt service fully paid for by resulting energy savings  Received the Achievement of Excellence in Financial Reporting Award, Distinguished Budget Presentation Award and Popular Annual Financial Reporting Award from the Government Finance Officers Association  Began construction on two new lit multi-sport fields at Naranja Park  Delivered a combined total of 3.03 billion gallons of water to water utility customers 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 within which the Town operates. Healthy economic growth is being observed at both the local and state levels, which has impacted our revenue collections for FY 2016-17 and is expected to continue into FY 2017-18. The Town continues to provide services and programs without a property tax to fund operations and, therefore, is dependent upon state shared revenues and local sales tax as major sources of operating revenue. These sources accounted for approximately 77% of total General Fund revenue for FY 2016-17. All of the major local sales tax categories experienced year-over-year increases or maintained their levels compared to amounts collected in FY 2015-16, as discussed below:  Retail tax collections totaled $7.1 million for FY 16-17, up 4.4%, or $300,000 over last fiscal year.  Restaurant and bar tax collections totaled $1.7 million for the fiscal year, up 6.9%, or $110,000 over last fiscal year.  Construction sales tax collections totaled $4.3 million for the fiscal year, up 79%, or nearly $1.9 million from last fiscal year.  Utility tax collections totaled $2.9 million for the fiscal year, which is flat to last year’s collections. The chart below is a look at the past five years’ local sales tax activity by category: In FY 2016-17, the Town received $11.2 million for state shared revenues in the General Fund, up 6%, or $600,000 over last fiscal year. The trend chart below depicts the performance of both of these revenue categories since FY 2007-08:  $‐  $1  $2  $3  $4  $5  $6  $7  $8 Utility Taxes Retail Taxes Restaurant/Bar Taxes Construction TaxesMillionsSales Tax  Activity by Sector ‐FY 12/13 through FY 16/17 FY 12/13 FY 13/14 FY 14/15 FY 15/16 FY 16/17 Critical to our success in this area is the preparation of realistic growth assumptions that help guide our revenue projections. We continue to see healthy economic growth in Oro Valley and the region. The projected residential development is considerable over the next three to four-year period. In FY 2016- 17, we estimated that 230 single family residential (SFR) building permits would be issued; a total of 339 were issued by year-end. The FY 2017-18 budget includes the assumption that 300 SFRs will be issued during the year as many developments have made their way through the planning and approval process and are in the building phase. The budget reflects continued growth in commercial activity with some new construction and tenant improvements of previously-vacant space. Commercial development activity projected for FY 2017- 18 includes three senior living facilities, a self-storage facility, the completion of two schools and continued office, restaurant and retail space. Local sales tax revenue in the General Fund is expected to grow by nearly 10% in FY 2017-18 due largely to construction, retail and restaurant taxes. License and permit revenues are projected to increase by nearly 28% over FY 2016-17 budgeted amounts, reflecting the increased commercial and residential development anticipated. 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 2007-08 through FY 2017-18 projections.  $‐  $2  $4  $6  $8  $10  $12  $14  $16  $18 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17‐18 budgetMillionsFiscal Year Local Sales Tax Collections and State Shared Revenues Local Sales Tax State Shared Revenues Future Focus During FY 2017-18, the Town will continue to identify and quantify both one-time revenues derived from increased 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 that sufficient recurring revenues exist to fund recurring expenditures in the budget. With the expectation of sustained and moderately increasing development activity continuing 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 2017-18, the Town will focus its efforts on supporting the elements of its adopted Strategic Plan in the areas previously outlined earlier in this transmittal letter. These strategies will be fulfilled in a number of different ways as highlighted below:  Employee performance merit and step increases have been budgeted for FY 2017-18 to maintain fair and competitive compensation provided to the Town’s most valuable assets, its employees.  The FY 2017-18 budget includes continued funding for its vehicle replacement program, which includes the replacement of several vehicles town-wide, as well as setting aside funding for the future replacement of vehicles at the end of their useful lives.  The FY 2017-18 budget includes more than $1.5 million for the Pavement Preservation Program in the Highway Fund, which maintains the current condition of our streets and roads.  The FY 2017-18 budget includes investments in our Town facilities including two new unlit multi-use fields at Naranja Park, Community Center energy efficiency improvements, tennis court improvements, golf cart path improvements and a Police Evidence and Substation Building.  $‐  $200,000  $400,000  $600,000  $800,000  $1,000,000  $1,200,000  $1,400,000  $1,600,000 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18 Budget 0 50 100 150 200 250 300 350 400 Permit RevenueFiscal YearSFR PermitsSFR Permits and Building Activity Revenue SFR Permits Residential Permit Revenues Commercial Permit Revenues The Town also continues to maintain strong investment grade ratings on its outstanding excise tax bonds, rated “AA” by Standard and Poor’s and “AA-“ by Fitch Ratings. 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 $13.4 million, or 37% of FY 2017-18 adopted expenditures of $36.7 million. This is well above the Council-adopted policy threshold of 25% of adopted 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 comprehensive annual financial report for the year ended June 30, 2016. This was the twenty- third 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 comprehensive annual 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 comprehensive annual financial report continues to meet the Certificate of Achievement Program’s requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. Acknowledgments. The preparation of this Comprehensive Annual Financial Report could not have been accomplished without the efficient and dedicated services of the entire staff of the Finance Department who assisted and contributed in 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 progressive manner. Respectfully submitted, Mary Jacobs Stacey Lemos, CPA Town Manager Finance Director Organizational Chart TOWN OF ORO VALLEY, ARIZONA LIST OF TOWN OFFICIALS ELECTED OFFICIALS Mayor Dr. Satish Hiremath Vice-Mayor Mr. Lou Waters Council Member Mr. Joe Hornat Council Member Ms. Rhonda Piña Council Member Mr. Bill Rodman Council Member Ms. Mary Snider Council Member Mr. Steve Solomon TOWN MANAGEMENT Town Manager Mary Jacobs Assistant Town Manager Chris Cornelison Finance Director Stacey Lemos, CPA Human Resources Director Gary Bridget Town Clerk Michael Standish Magistrate George Dunscomb Legal Services Director Tobin Sidles Water Utility Director Peter Abraham Chief of Police Daniel Sharp Community Development and Public Works Director/Town Engineer Paul Keesler Parks and Recreation Director Kristy Diaz-Trahan Information Technology Director Chuck Boyer (This page intentionally left blank) FINANCIAL SECTION (This page intentionally left blank) INDEPENDENT AUDITOR’S REPORT Honorable Mayor and Members of the Town Council Town of Oro Valley, Arizona Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Town of Oro Valley, Arizona (the Town), as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise the Town’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, business-type activities, each major fund, and the aggregate remaining fund information of the Town of Oro Valley, Arizona, as of June 30, 2017, 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. Change in Accounting Principle As described in Note 1, the Town implemented the provisions of the Governmental Accounting Standards Board (GASB) Statement No. 77, Tax Abatement Disclosures, for the year ended June 30, 2017, which represents a change in accounting principle. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis, budgetary comparison information, and net pension liability information, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Town’s basic financial statements. The Introductory Section, Combining and Individual Fund Financial Statements and Schedules, and Statistical Section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The Combining and Individual Fund Financial Statements and Schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Combining and Individual Fund Financial Statements and Schedules Information is fairly stated in all material respects in relation to the basic financial statements as a whole. The Introductory Section and Statistical Section have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 14, 2017, on our consideration of the Town of Oro Valley, Arizona’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is 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 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 of Oro Valley, Arizona’s internal control over financial reporting and compliance. Heinfeld, Meech & Co., P.C. Tucson, Arizona December 14, 2017 MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) (Required Supplementary Information) (This page intentionally left blank) TOWN OF ORO VALLEY, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2017 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, 2017. 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 those significant key financial highlights for 2016-17 as follows.  The Town’s total net position of governmental activities decreased $2.2 million to $124.0 million and business-type activities increased $4.7 million to $85.5 million representing 59 percent and 41 percent respectively, of the total net position of $209.5 million.  General revenues from governmental activities accounted for $31.7 million in revenue, or 59 percent of all revenues from governmental activities. Program specific revenues in the form of charges for services and grants and contributions accounted for $22.2 million or 41 percent of total governmental activities revenues. The Town had $20.6 million of program revenues and $11,995 in general revenues related to business-type activities.  The Town had $56.0 million in expenses related to governmental activities, an increase of 15 percent from the prior fiscal year. The Town had $15.9 million in expenses related to business- type activities, an increase of four percent from the prior fiscal year.  Among major funds, the General Fund had $35.7 million in revenues, which primarily consisted of sales taxes and intergovernmental revenues. The total expenditures of the General Fund were $30.7 million. The General Fund’s fund balance increased from $10.5 million to $13.4 million.  The Community Center Fund had $6.1 million in revenues, which consisted primarily of sales taxes and charges for services. The total expenditures of the Community Center Fund were $6.6 million.  The Water Fund operating revenues of $15.7 million exceeded operating expenses of $13.4 million. The increase in net position of $4.5 million was primarily due to revenues from charges for services exceeding operating expenses. TOWN OF ORO VALLEY, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2017 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 statement of net position presents information on all of the Town’s assets liabilities, and deferred inflows/outflows of resources with the difference between the two 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, 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 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, 2017 OVERVIEW OF FINANCIAL STATEMENTS 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 decision. 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 and Community Center Funds, both 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 internal service funds to account for its fleet maintenance services and to finance its self-insured employee health benefits. Because these services predominately benefit governmental rather than business-type functions, the internal service funds have 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 plan. 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 Fund as required supplementary information. Schedules for the pension plan have 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 $209.5 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, 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, 2017 GOVERNMENT-WIDE FINANCIAL ANALYSIS 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. The following table presents a summary of the Town’s net position for the fiscal years ended June 30, 2017 and June 30, 2016. 2017 Governmental Activities 2016 Governmental Activities 2017 Business-type Activities 2016 Business-type Activities 2017 Total 2016 Total Current and other assets $ 29,374,923 $ 25,492,595 $ 26,954,464 $ 26,967,200 $ 56,329,387 $ 52,459,795 Capital assets, net 143,894,535 143,475,577 104,318,221 103,167,086 248,212,756 246,642,663 Total assets 173,269,458 168,968,172 131,272,685 130,134,286 304,542,143 299,102,458 Deferred outflows 11,291,054 7,159,926 2,570,024 2,217,565 13,861,078 9,377,491 Current and other liabilities 6,204,548 5,531,577 4,173,610 3,515,815 10,378,158 9,047,392 Long-term liabilities 51,682,850 42,644,832 43,660,596 47,687,319 95,343,446 90,332,151 Total liabilities 57,887,398 48,176,409 47,834,206 51,203,134 105,721,604 99,379,543 Deferred inflows 2,649,527 1,761,164 531,886 382,698 3,181,413 2,143,862 Net investment in capital assets 133,414,691 132,419,826 66,755,370 61,261,271 200,170,061 193,681,097 Restricted 6,006,584 4,653,905 6,006,584 4,653,905 Unrestricted (15,397,688) (10,883,206) 18,721,247 19,504,748 3,323,559 8,621,542 Total net position $ 124,023,587 $126,190,525 $ 85,476,617 $ 80,766,019 $ 209,500,204 $ 206,956,544 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 that have had an impact on the Statement of Net position.  An increase of $3.9 million of governmental activities current assets primarily due to an increase in cash and investments as a result of higher than anticipated sales tax collections and license and permit revenues from construction and residential building permit activity.  The addition of $4.6 million in business-type activities capital assets through improvements to the existing water system.  The addition of $9.0 million in governmental activities capital assets, mostly consisting of road improvements, pavement preservation upgrades, and energy efficiency improvements.  The decrease of $4.1 million in business-type activities long-term liabilities was primarily due to the issuance of $13.2 million in refunding bonds and annual debt service payments of $3.7 million.  The increase of $9.0 million in governmental activities long-term liabilities was primarily due to an increase in net pension liabilities and the issuance of $2.0 million in revenue bonds for energy efficiency improvements. TOWN OF ORO VALLEY, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2017 GOVERNMENT-WIDE FINANCIAL ANALYSIS Changes in net position. The Town’s total revenues for the current fiscal year were $74.5 million. The total cost of all programs and services was $71.9 million. The following table presents a summary of the changes in net position for the fiscal years ended June 30, 2017 and June 30, 2016. 2017 Governmental Activities 2016 Governmental Activities 2017 Business-type Activities 2016 Business-type Activities 2017 Total 2016 Total Revenues: Program revenues: Charges for services $ 10,803,374 $ 9,492,509 $ 19,473,172 $ 17,567,838 $ 30,276,546 $ 27,060,347 Operating grants and contributions 4,664,197 5,503,530 35,000 4,664,197 5,538,530 Capital grants and contributions 6,749,407 3,602,656 1,097,285 3,334,372 7,846,692 6,937,028 General revenues: Sales taxes 19,767,720 16,998,464 19,767,720 16,998,464 Franchise taxes 647,830 621,546 647,830 621,546 Unrestricted state shared revenues 11,177,729 10,549,196 11,177,729 10,549,196 Investment earnings 68,435 238,210 11,995 204,669 80,430 442,879 Total revenues 53,878,692 47,006,111 20,582,452 21,141,879 74,461,144 68,147,990 Expenses: General government 12,130,905 11,888,794 12,130,905 11,888,794 Public safety 22,251,172 16,123,500 22,251,172 16,123,500 Highways and streets 9,417,459 9,089,318 9,417,459 9,089,318 Transit 1,533,258 1,432,910 1,533,258 1,432,910 Culture and recreation 10,204,276 9,695,639 10,204,276 9,695,639 Interest on long-term debt 511,502 494,732 511,502 494,732 Water 14,753,418 14,406,074 14,753,418 14,406,074 Stormwater drainage 1,115,494 917,898 1,115,494 917,898 Total expenses 56,048,572 48,724,893 15,868,912 15,323,972 71,917,484 64,048,865 Excess (deficiency) before transfers (2,169,880) (1,718,782) 4,713,540 5,817,907 2,543,660 4,099,125 Transfers 2,942 3,030 (2,942) (3,030) Changes in net position (2,166,938) (1,715,752) 4,710,598 5,814,877 2,543,660 4,099,125 Net position, beginning 126,190,525 127,906,277 80,766,019 74,951,142 206,956,544 202,857,419 Net position, ending $ 124,023,587 $126,190,525 $ 85,476,617 $ 80,766,019 $ 209,500,204 $ 206,956,544 Total expenses increased $7.9 million, or 12 percent, primarily due to an increase in the net pension liability for public safety. The increase of $6.3 million in total revenues was largely due to increased funding for road improvements and an increase in sales tax collections. Business-type activities capital grants and contributions decreased by $2.2 million due to a reduction in line extension agreements with housing developers. TOWN OF ORO VALLEY, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2017 GOVERNMENT-WIDE FINANCIAL ANALYSIS 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 State and Town’s taxpayers by each of these functions. 2017 2016 Governmental Activities Total Expenses Net (Expense)/ Revenue Total Expenses Net (Expense)/ Revenue General government $ 12,130,905 $ (6,835,638) $ 11,888,794 $ (7,610,593) Public safety 22,251,172 (21,068,318) 16,123,500 (15,271,780) Highways and streets 9,417,459 173,707 9,089,318 (1,547,930) Transit 1,533,258 (14,466) 1,432,910 (46,057) Culture and recreation 10,204,276 (5,575,377) 9,695,639 (5,155,106) Interest on long-term debt 511,502 (511,502) 494,732 (494,732) Total $ 56,048,572 $ (33,831,594) $ 48,724,893 $ (30,126,198) Business-type Activities Water $ 14,753,418 $ 4,502,252 $ 14,406,074 $ 5,667,878 Stormwater drainage 1,115,494 199,293 917,898 (54,640) Total $ 15,868,912 $ 4,701,545 $ 15,323,972 $ 5,613,238  The cost of all governmental activities this year was $56.0 million. The increase of $7.3 million from the prior year was due primarily to an increase in the net pension liability for public safety.  The cost of all business-type activities this year was $15.9 million. The increase of $544,940 from the prior year was primarily due to an increase in operation and maintenance costs associated with the Water Utility department.  Federal and State government grants, developer contributions, and charges for services subsidized certain governmental programs and business-type programs with revenues of $42.8 million.  Net cost of governmental activities of $33.8 million was financed by general revenues, which are made up of primarily sales taxes and state shared revenues of $30.9 million. 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. TOWN OF ORO VALLEY, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2017 FINANCIAL ANALYSIS OF THE TOWN’S FUNDS 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 $22.9 million, an increase of $4.2 million. This was primarily due to increased state sharing revenue and an increase in sales tax collections. The General Fund is the principal operating fund of the Town. The fund balance increased by $2.9 million in the General Fund to $13.4 million for the current fiscal year primarily due to increased state sharing revenue and an increase in sales tax collections. The Community Center Fund’s fund balance decreased $258,902 to a deficit of $97,157 primarily due to facility operating costs exceeding revenues. Operating costs, primarily water costs, exceeded expectations, and golf member dues revenues came in under budgeted expectations. Measures are being evaluated by Town management to better align revenues and expenditures in this fund in the future. Proprietary funds. Net position of the Enterprise Funds at the end of the year amounted to $85.5 million. This increased by $4.7 million during the fiscal year to the extent that revenues exceeded expenses in the fund and from capital contributions from developers. BUDGETARY HIGHLIGHTS There were amendments to the Town of Oro Valley’s fiscal year 2016-17 operating and capital budget. A schedule showing the original and final budget amounts compared to the Town’s actual financial activity for the General Fund is provided in this report as required supplementary information. The significant variances are summarized as follows:  The favorable variance of $1,352,605 in sales tax revenue was a result of increased construction sales tax collections due to commercial and residential development activity, and increased retail tax collections due to strong consumer confidence trends.  The favorable variance of $698,004 in licenses, fees, and permits was a result of residential and commercial building permit activity exceeding projections.  The favorable variance of $1,127,926 in public safety expenditures was a result of a budget amendment that was approved to accommodate the repayment of excess public safety personnel retirement system (PSPRS) contributions to members as a result of the Hall and Parker lawsuit settlements. Based on a recent opinion from the Arizona Auditor General’s office, these amounts will be expensed in fiscal year 2017-18. TOWN OF ORO VALLEY, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2017 CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets. At year end, the Town had invested $248.2 million in capital assets (net of accumulated depreciation), including buildings, facilities, vehicles, computers, equipment, and infrastructure assets. This amount represents a net increase of $1.6 million from last year. This was primarily due to road improvement projects and expansion of the Town’s water system, as well as depreciation expense of $12.6 million. The following schedule presents capital asset balances for the fiscal years ended June 30, 2017 and June 30, 2016. Governmental Activities As of June 30, 2017 As of June 30, 2016 Land $ 19,518,801 $ 19,518,801 Infrastructure 173,893,147 168,952,706 Buildings and improvements 30,461,644 30,092,900 Machinery, equipment, and vehicles 16,611,079 16,122,605 Construction in progress 9,248,205 6,070,883 Less: Accumulated depreciation (105,838,341) (97,282,318) Total $ 143,894,535 $ 143,475,577 Business-type Activities Land $ 2,410,660 $ 2,410,660 Water rights 8,534,490 8,534,490 Water system 130,279,801 126,061,264 Stormwater system 2,846,177 2,846,177 Equipment and vehicles 5,520,902 5,225,374 Construction in progress 921,300 874,446 Less: Accumulated depreciation (46,195,109) (42,785,325) Total $ 104,318,221 $ 103,167,086 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, 2017 CAPITAL ASSETS AND DEBT ADMINISTRATION Debt Administration. At year end, the Town had $48.9 million in long-term debt outstanding, $4.5 million due within one year. The following table presents a summary of the Town’s outstanding long- term debt for the fiscal years ended June 30, 2017 and June 30, 2016. Governmental Activities 2017 2016 Revenue bonds $ 9,322,126 $ 7,688,890 Special assessment bonds 640,000 780,000 Note payable 350,000 700,000 Capital leases 716,622 966,692 Total $ 11,028,748 $ 10,135,582 Business-type Activities Revenue bonds $ 29,520,874 $ 32,951,110 Loan payable 8,284,407 8,879,907 Capital leases 40,814 80,423 Total $ 37,846,095 $ 41,911,440 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 $123.2 million. The Town of Oro Valley has a bond rating of “AA-” rating from both Standard & Poor’s and Fitch Ratings on its excise tax revenue bonds and an “AA” rating from Standard & Poor’s on outstanding water revenue bonds. Additional information on the Town’s long-term debt can be found in Notes 7 through 11. ECONOMIC FACTORS AND NEXT YEAR’S BUDGET AND RATES  The unemployment rate for the Town of Oro Valley is currently 4.6 percent. Pima County’s and the State of Arizona’s unemployment rates are 4.9 percent and 5.1 percent, respectively.  The Town’s net full cash assessed valuation for the current year is $616,216,705.  Single family residential (SFR) building permits issued in this fiscal year totaled 339, as compared to 220 SFR building permits issued last fiscal year. Projections for SFR building permits are 300 for fiscal year 2017-18. TOWN OF ORO VALLEY, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2017 ECONOMIC FACTORS AND NEXT YEAR’S BUDGET AND RATES The adopted combined operating and capital expenditure budget for fiscal year 2017-18 totals $128.6 million, an increase of $2.7 million, or 2.1 percent over last year’s budget of $125.9 million. This increase is primarily due to allocating sufficient budget capacity for possible bond funded capital projects. The budget for fiscal year 2017-18 continues to place emphasis on achieving the goals identified in the Town’s adopted Strategic Plan, which was recently updated in fiscal year 2016-17 and includes the following focus areas: economic development, complete community, parks and recreation, public safety, Town assets, water resources and energy, cultural resources, land use and design, transportation and cost of services. 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. BASIC FINANCIAL STATEMENTS (This page intentionally left blank) GOVERNMENT-WIDE FINANCIAL STATEMENTS (This page intentionally left blank) ASSETS Current assets: Cash and cash equivalents Restricted cash and investments Taxes receivable Accounts receivable Intergovernmental receivable Special assessments Inventories Prepaid items Total current assets Noncurrent assets: Capital assets, non-depreciable Capital assets, depreciable (net) Total noncurrent assets Total assets DEFERRED OUTFLOWS OF RESOURCES Deferred charge on refunding Pension plan items Total deferred outflows of resources LIABILITIES Current liabilities: Accounts payable Accrued wages and benefits Intergovernmental payable Interest payable Unearned revenue Customer deposits payable Other accrued liabilities Judgments payable Compensated absences Capital leases payable Notes, loans and bonds payable Total current liabilities Noncurrent liabilities: Non-current portion of long-term obligations Total noncurrent liabilities Total liabilities DEFERRED INFLOWS OF RESOURCES Pension plan items NET POSITION Net investment in capital assets Restricted for: Public safety Capital outlay Debt service Unrestricted Total net position Governmental Activities $24,387,814 1,371,535 538,013 2,122,082 645,000 115,005 195,474 29,374,923 28,767,006 115,127,529 143,894,535 173,269,458 11,291,054 11,291,054 2,562,412 1,129,398 145,609 448,292 110,416 721,076 1,087,345 1,589,603 257,878 1,044,290 9,096,319 48,791,079 48,791,079 57,887,398 2,649,527 133,414,691 336,473 5,574,047 96,064 (15,397,688) $124,023,587 Business-type Activities $23,343,276 924,000 2,684,213 2,975 26,954,464 11,866,452 92,451,769 104,318,221 131,272,685 1,596,698 973,326 2,570,024 850,491 103,971 1,219,049 408,104 924,000 667,995 206,011 40,814 3,201,244 7,621,679 40,212,527 40,212,527 47,834,206 531,886 66,755,370 18,721,247 $85,476,617 Total $47,731,090 924,000 1,371,535 3,222,226 2,122,082 645,000 115,005 198,449 56,329,387 40,633,458 207,579,298 248,212,756 304,542,143 1,596,698 12,264,380 13,861,078 3,412,903 1,233,369 1,364,658 408,104 1,372,292 778,411 721,076 1,087,345 1,795,614 298,692 4,245,534 16,717,998 89,003,606 89,003,606 105,721,604 3,181,413 200,170,061 336,473 5,574,047 96,064 3,323,559 $209,500,204 TOWN OF ORO VALLEY, ARIZONA STATEMENT OF NET POSITION JUNE 30, 2017 The notes to the basic financial statements are an integral part of this statement. Program Revenues Net (Expense) Revenue and Changes in Net Position Functions/Programs Primary Government Governmental activities: General government Public safety Highway and streets Transit Culture and recreation Interest on long-term debt Total governmental activities Business-type activities: Water Stormwater drainage Total business-type activities Total primary government Expenses $12,130,905 22,251,172 9,417,459 1,533,258 10,204,276 511,502 56,048,572 14,753,418 1,115,494 15,868,912 $71,917,484 Charges for Services $4,901,504 138,075 1,052,167 100,052 4,611,576 10,803,374 18,158,385 1,314,787 19,473,172 $30,276,546 Operating Grants and Contributions $182,854 961,881 2,083,399 1,418,740 17,323 4,664,197 $4,664,197 Capital Grants and Contributions $210,909 82,898 6,455,600 6,749,407 1,097,285 1,097,285 $7,846,692 Governmental Activities $(6,835,638) (21,068,318) 173,707 (14,466) (5,575,377) (511,502) (33,831,594) (33,831,594) General revenues: Taxes: Sales taxes Franchise taxes Unrestricted state shared revenues Investment earnings Transfers Total general revenues and transfers Changes in net position Net position, beginning of year Net position, end of year 19,767,720 647,830 11,177,729 68,435 2,942 31,664,656 (2,166,938) 126,190,525 $124,023,587 TOWN OF ORO VALLEY, ARIZONA STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2017 The notes to the basic financial statements are an integral part of this statement. Net (Expense) Revenue and Changes in Net Position Business-type Activities $ 4,502,252 199,293 4,701,545 4,701,545 Totals $(6,835,638) (21,068,318) 173,707 (14,466) (5,575,377) (511,502) (33,831,594) 4,502,252 199,293 4,701,545 (29,130,049) 11,995 (2,942) 9,053 4,710,598 80,766,019 $85,476,617 19,767,720 647,830 11,177,729 80,430 31,673,709 2,543,660 206,956,544 $209,500,204 (This page intentionally left blank) FUND FINANCIAL STATEMENTS ASSETS Cash and cash equivalents Taxes receivable Accounts receivable Intergovernmental receivable Special assessments Due from other funds Inventories Prepaid items Total assets LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Accounts payable Accrued wages and benefits Intergovernmental payable Sales tax payable Unearned revenue Due to other funds Customer deposits payable Other accrued liabilities Total liabilities Deferred inflows of resources: Unavailable revenues - special assessments Fund balances (deficits): Nonspendable Restricted Committed Assigned Unassigned Total fund balances Total liabilities, deferred inflows of resources and fund balances General Fund $13,415,270 1,371,535 381,215 585,137 7,699 130,030 $15,890,886 $714,433 1,073,918 145,609 195,372 247,924 110,416 2,487,672 130,030 1,441,862 11,831,322 13,403,214 $15,890,886 Community Center $161,381 127,804 115,005 17,533 $421,723 $115,885 200,368 202,627 518,880 132,538 (229,695) (97,157) $421,723 Non-Major Governmental Funds $9,633,323 28,994 1,536,945 645,000 47,911 $11,892,173 $1,639,891 55,480 7,699 1,703,070 645,000 6,006,584 1,829,232 1,716,361 (8,074) 9,544,103 $11,892,173 TOWN OF ORO VALLEY, ARIZONA BALANCE SHEET - GOVERNMENTAL FUNDS JUNE 30, 2017 The notes to the basic financial statements are an integral part of this statement. Total Governmental Funds $23,209,974 1,371,535 538,013 2,122,082 645,000 7,699 115,005 195,474 $28,204,782 $2,470,209 1,129,398 145,609 195,372 448,292 7,699 110,416 202,627 4,709,622 645,000 262,568 6,006,584 1,829,232 3,158,223 11,593,553 22,850,160 $28,204,782 (This page intentionally left blank) Total governmental fund balances 22,850,160$ Amounts reported for governmental activities in the Statement of Net Position are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. Governmental capital assets 249,732,876$ Less accumulated depreciation (105,838,341)143,894,535 Special assessments receivable are not available to pay for current period expenditures and, therefore, are reported as unavailable revenues in the funds.645,000 Deferred items 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.(19,433) 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 11,266,245 Deferred inflows of resources related to pensions (2,635,970)8,630,275 The Internal Service Funds are used by management to charge the cost of insurance and fleet maintenance to the individual funds. The assets and liabilities of the Internal Service Funds are included in the Statement of Net Position.666,253 Long-term liabilities are not due and payable in the current period and, therefore, are not reported in the funds. Judgments payable (1,087,345) Special assessment bonds (640,000) Compensated absences payable (2,037,952) Revenue bonds payable (9,322,126) Note payable (350,000) Obligations under capital leases (716,622) Net pension liability (38,489,158)(52,643,203) Net position of governmental activities 124,023,587$ TOWN OF ORO VALLEY, ARIZONA RECONCILIATION OF THE BALANCE SHEET - GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION JUNE 30, 2017 The notes to the basic financial statements are an integral part of this statement. Revenues: Sales taxes Franchise taxes Development impact fees Special assessments Intergovernmental Licenses, fees & permits Fines, forfeitures & penalties Charges for services Contributions and donations Investment earnings Other Total revenues Expenditures: Current - General government Public safety Highway and streets Transit Culture and recreation Capital outlay Debt service - Principal retirement Interest and fiscal charges Bond issuance costs Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Sale of refunding bonds Issuance of revenue bonds Transfers in Transfers out Payment to bond escrow agent Total other financing sources (uses): Changes in fund balances Fund balances, beginning of year Fund balances, end of year General Fund $16,425,605 647,830 13,458,181 2,313,504 132,148 2,278,332 39,343 431,094 35,726,037 10,375,226 15,543,292 1,528,654 3,190,447 42,852 2,601 30,683,072 5,042,965 305,000 (2,469,304) (2,164,304) 2,878,661 10,524,553 $13,403,214 Community Center $2,199,466 3,873,067 5,438 6,077,971 6,242,892 72,414 207,674 43,893 6,566,873 (488,902) 350,000 (120,000) 230,000 (258,902) 161,745 $(97,157) Non-Major Governmental Funds $1,142,649 1,348,528 175,539 8,660,452 75,447 426,544 75,179 150,000 29,092 136,354 12,219,784 723,618 181,737 2,993,402 9,124,387 824,940 268,420 67,959 14,184,463 (1,964,679) 1,115,556 2,000,000 2,298,072 (660,826) (1,171,447) 3,581,355 1,616,676 7,927,427 $9,544,103 TOWN OF ORO VALLEY, ARIZONA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2017 The notes to the basic financial statements are an integral part of this statement. Total Governmental Funds $19,767,720 647,830 1,348,528 175,539 22,118,633 2,388,951 558,692 6,226,578 150,000 68,435 572,886 54,023,792 11,098,844 15,725,029 2,993,402 1,528,654 9,433,339 9,196,801 1,075,466 314,914 67,959 51,434,408 2,589,384 1,115,556 2,000,000 2,953,072 (3,250,130) (1,171,447) 1,647,051 4,236,435 18,613,725 $22,850,160 (This page intentionally left blank) Changes in fund balances - total governmental funds 4,236,435$ 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 capitalized assets 9,587,394$ Less current year depreciation (9,160,380) 427,014 Special assessment revenues in the Statement of Activities do not provide current financial resources and therefore are not reported as revenues in the governmental funds. (145,100) Issuance of revenue bonds provides current financial resources to governmental funds, but the issuance increases long term liabilities in the Statement of Net Position. (2,000,000) 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. Capital lease principal retirement 250,070 Note payable principal retirement 350,000 Revenue bond principal retirement 334,940 Special assessment bond principal retirement 140,000 1,075,010 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. Current year pension contributions 2,786,182 Pension expense (7,344,445) (4,558,263) 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. Judgments (1,087,345) Loss on disposal of assets (8,056) Amortization of deferred bond items (72,282) Compensated absences (239,147) (1,406,830) The Internal Service Funds are used by management to charge the cost of insurance and fleet maintenance to the individual funds. The changes in net position of the Internal Service Funds are reported with governmental activities in the Statement of Activities. 204,796 Changes in net position in governmental activities (2,166,938)$ 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, 2017 The notes to the basic financial statements are an integral part of this statement. Enterprise Funds ASSETS Current assets: Cash and cash equivalents Restricted cash and investments Accounts receivable Prepaid items Total current assets Noncurrent assets: Capital assets, non-depreciable Capital assets, depreciable (net) Total noncurrent assets Total assets DEFERRED OUTFLOWS OF RESOURCES Deferred charge on refunding Pension plan items Total deferred outflows of resources LIABILITIES Current liabilities: Accounts payable Accrued wages and benefits Intergovernmental payable Interest payable Unearned revenue Customer deposits payable Compensated absences Capital leases payable Loans payable Bonds payable Claims payable Total current liabilities Noncurrent liabilities: Non-current portion of long-term obligations Total noncurrent liabilities Total liabilities DEFERRED INFLOWS OF RESOURCES Pension plan items NET POSITION Net investment in capital assets Unrestricted Total net position Water $22,724,342 924,000 2,500,565 2,975 26,151,882 11,866,452 89,388,667 101,255,119 127,407,001 1,596,698 842,832 2,439,530 726,223 88,158 1,219,049 408,104 924,000 667,995 196,910 593,534 2,607,710 7,431,683 39,759,663 39,759,663 47,191,346 460,576 63,763,082 18,431,527 $82,194,609 Non-Major Enterprise Funds $618,934 183,648 802,582 3,063,102 3,063,102 3,865,684 130,494 130,494 124,268 15,813 9,101 40,814 189,996 452,864 452,864 642,860 71,310 2,992,288 289,720 $3,282,008 Totals $23,343,276 924,000 2,684,213 2,975 26,954,464 11,866,452 92,451,769 104,318,221 131,272,685 1,596,698 973,326 2,570,024 850,491 103,971 1,219,049 408,104 924,000 667,995 206,011 40,814 593,534 2,607,710 7,621,679 40,212,527 40,212,527 47,834,206 531,886 66,755,370 18,721,247 $85,476,617 TOWN OF ORO VALLEY, ARIZONA STATEMENT OF NET POSITION PROPRIETARY FUNDS JUNE 30, 2017 The notes to the basic financial statements are an integral part of this statement. Governmental Activities: Internal Service Funds $1,177,840 1,177,840 1,177,840 24,809 24,809 92,203 323,077 415,280 107,559 107,559 522,839 13,557 666,253 $666,253 Enterprise Funds Operating revenues: Charges for services Other Self insurance premiums Total operating revenues Operating expenses: Costs of sales and services Contractual services Depreciation and amortization Claims payments Administrative fees Reinsurance premiums Total operating expenses Operating income (loss) Nonoperating revenues (expenses): Development impact fees Connection fees Investment earnings Interest expense Total nonoperating revenues (expenses) Income (loss) before capital contributions and transfers Capital contributions Transfers in Transfers out Changes in net position Total net position, beginning of year Total net position, end of year Water $15,680,947 22,293 15,703,240 10,389,944 62,990 2,962,118 13,415,052 2,288,188 1,638,792 816,353 11,017 (1,338,366) 1,127,796 3,415,984 1,097,285 (2,942) 4,510,327 77,684,282 $82,194,609 Non-Major Enterprise Funds $1,314,757 30 1,314,787 953,236 154,522 1,107,758 207,029 978 (7,736) (6,758) 200,271 200,271 3,081,737 $3,282,008 Totals $16,995,704 22,323 17,018,027 11,343,180 62,990 3,116,640 14,522,810 2,495,217 1,638,792 816,353 11,995 (1,346,102) 1,121,038 3,616,255 1,097,285 (2,942) 4,710,598 80,766,019 $85,476,617 TOWN OF ORO VALLEY, ARIZONA STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION - PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2017 The notes to the basic financial statements are an integral part of this statement. Governmental Activities: Internal Service Funds $1,630,329 72,354 3,047,980 4,750,663 1,393,438 2,761,967 57,000 633,462 4,845,867 (95,204) (95,204) 300,000 204,796 461,457 $666,253 Governmental Activities Water Non-Major Enterprise Funds Total Internal Service Funds Increase (Decrease) in Cash and Cash Equivalents Cash flows from operating activities: Cash received from customers 15,350,991$ 1,298,575$ 16,649,566$ 1,702,683$ Cash received from premiums 3,123,048 Cash payments to suppliers for goods and services (7,416,676) (397,044) (7,813,720) (1,978,377) Cash payments to employees for services (3,121,445) (449,522) (3,570,967) (87,468) Cash payments for claims (2,687,926) Net cash provided by (used for) operating activities 4,812,870 452,009 5,264,879 71,960 Cash flows from noncapital and related financing activities: Interfund transfers (2,942) (2,942) 300,000 Connection fees 816,353 816,353 Net cash provided by noncapital financing activities 813,411 813,411 300,000 Cash flows from capital and related financing activities: Development impact fees 1,638,792 1,638,792 Acquisition of capital assets (3,417,046) (76,507) (3,493,553) Proceeds from refunding bonds 13,186,444 13,186,444 Principal paid on long-term debt (3,649,560) (39,609) (3,689,169) Payment to bond escrow agent (13,847,109) (13,847,109) Interest on long-term debt (1,235,561) (7,736) (1,243,297) Net cash used for capital and related financing activities (7,324,040) (123,852) (7,447,892) Cash flows from investing activities: Investment income 11,017 978 11,995 Net cash provided by investing activities 11,017 978 11,995 Net increase (decrease) in cash and cash equivalents (1,686,742) 329,135 (1,357,607) 371,960 Cash and cash equivalents, beginning of year 24,411,084 289,799 24,700,883 805,880 Cash and cash equivalents, end of year 22,724,342$ 618,934$ 23,343,276$ 1,177,840$ Reconciliation of Operating Income (Loss) to Net Cash Provided by (Used for) Operating Activities Operating income (loss)2,288,188$ 207,029$ 2,495,217$ (95,204)$ Adjustments to reconcile operating income (loss) to net cash provided by (used for) operating activities: Depreciation and amortization 2,962,118 154,522 3,116,640 Change in assets and liabilities: Accounts receivable (405,184) (16,212) (421,396) 75,068 Prepaid items 525 525 Accounts payable (713) 108,071 107,358 17,584 Claims payable 74,041 Accrued payroll and related benefits (68,976) (3,882) (72,858) Deposits held for others 52,935 52,935 Pension items (16,023) 2,481 (13,542) 471 Total adjustments 2,524,682 244,980 2,769,662 167,164 Net cash provided by (used for) operating activities 4,812,870$ 452,009$ 5,264,879$ 71,960$ Non-cash capital and financing activities Contribution of assets from developers 1,097,285$ 1,097,285$ Enterprise Funds TOWN OF ORO VALLEY, ARIZONA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2017 The notes to the basic financial statements are an integral part of this statement. TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 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. During the year ended June 30, 2017, the Town implemented the provisions of GASB Statement No. 77, Tax Abatement Disclosures. This Statement requires governments that enter into tax abatement agreements to disclose information about the agreements, the gross dollar of taxes abated, and other commitments made by the government. 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. As required by accounting principles generally accepted in the United States of America, these financial statements present the Town and its component units, entities for which the Town is considered to be financially accountable. Blended component units, although legally separate entities, are, in substance, part of the Town’s operations and so data from these units are combined with data of the Town, the primary government. The blended component units presented have a June 30 year end. 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 activities of the Town and its component units. 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. TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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. 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. TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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. Grants and similar awards are recognized as revenue as soon as all eligibility requirements imposed by the grantor or provider have been met. Miscellaneous revenue is not susceptible to accrual because generally they are 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. 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 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. The Town reports the following major proprietary funds. Water Fund – This fund accounts for the costs to operate, construct and finance the Town’s water system. 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 and charges to user departments for fleet maintenance services. The principal operating revenues of the Town’s enterprise fund 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 JUNE 30, 2017 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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. 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 trade 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 JUNE 30, 2017 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 property, plant, and equipment, 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. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed. Certain capital assets of the Town are depreciated 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 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 position that applies to a future period and so will not be recognized as an outflow of resources (expense/expenditure) until then. TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES In addition to liabilities, the statement of financial position may report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period and so will not be recognized as an inflow of resources (revenue) until that time. 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 employment shall be paid in a lump sum. Full-time employees accumulate sick leave at the rate of one work day 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. Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the pension plan’s fiduciary net position and additions to/deductions from the plan’s fiduciary net position have been determined on the same basis as they are reported by the plan. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. M. Long-term Obligations In the government-wide financial statements and proprietary fund financial statements, long- term debt and other long-term obligations are reported as liabilities in the applicable business- type activities and proprietary fund type statement of net position. 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. TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES N. 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. O. 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. P. 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. NOTE 2 – STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY Individual Deficit Fund Balance – At year end, the Community Center Fund, a major governmental fund, and the Federal Seizures and Forfeitures, and Self Insurance Funds, non- major governmental funds, reported deficits in fund balance of $97,157, $8,074, $113,357, respectively. The deficits arose because of operations during current and prior years. Additional revenues received in fiscal year 2017-18 are expected to eliminate the deficit. NOTE 3 – 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. TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 3 – FUND BALANCE CLASSIFICATIONS Nonspendable. The nonspendable fund balance classification includes amounts that cannot be spent because they are not in spendable form, or 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 Bed Tax Fund is to be used for local economic development purposes. The committed fund balance reported in the Highway User Revenue Fund is to be used for roadway maintenance and preservation purposes. 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. 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)11-30, which amended the Town Financial and Budgetary Policies. The assigned fund balance in the General Fund is set aside for the payout of compensated absences and for unemployment compensation claims. 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 be 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 JUNE 30, 2017 NOTE 3 – FUND BALANCE CLASSIFICATIONS The table below provides detail of the major components of the Town’s fund balance classifications at year end. General Fund Community Center Fund Non-Major Governmental Funds Fund Balances: Nonspendable: Inventory $ $ 115,005 $ Prepaid items 130,030 17,533 Restricted: Debt service 96,064 Capital projects 5,574,047 Public safety 336,473 Committed Economic development 462,611 Roadway maintenance 1,350,903 Park improvements 15,718 Assigned: Compensated absences 1,244,471 Unemployment claims 197,391 Townwide capital 1,716,361 Unassigned 11,831,322 (229,695) (8,074) Total fund balances $ 13,403,214 $ (97,157) $ 9,544,103 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. 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. No regulatory oversight is provided for the County Treasurer’s investment pool and that pool’s structure does not provide for shares. Participants in the pool are not required to categorize the value of shares in accordance with the fair value hierarchy. TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 4 – CASH AND INVESTMENTS 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. Participants in the pool are not required to categorize the value of shares in accordance with the fair value hierarchy 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 $2,852,066 and the bank balance was $2,470,578. 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 securities classified in Level 1 of the fair value hierarchy are valued using prices quoted in active markets for those securities. Debt securities classified in Level 2 of the of the fair value hierarchy are valued using a matrix pricing techniques. Matrix pricing is used to value securities based on the securities’ relationship to benchmark quoted prices. TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 4 – CASH AND INVESTMENTS 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: Investments Maturities (in Years) Investment Type Category Fair Value Less than 1 1-5 Money Market - U.S. Treasuries Level 2 $ 6,241,138 $ 6,241,138 $ Commercial Paper Level 2 3,608,640 3,608,640 U.S. Treasury Bonds/Notes Level 2 10,038,034 10,038,034 U.S. Agencies Bonds/Notes Level 2 21,152,250 21,152,250 Supranational Agency Bonds Level 2 1,889,868 1,889,868 $ 9,849,778 $ 33,080,152 County Treasurer’s investment pool Not Applicable 421,301 306 days average maturities State Treasurer’s investment pool 5 Not Applicable 2,451,793 37 days average maturities Total $45,803,024 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. TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 4 – CASH AND INVESTMENTS As of year end, the Town’s investment in the State and County Treasurers’ investment pools did not receive a credit quality rating from a national rating agency. The State Treasurer’s investment pool 5 was rated AAAf/S1+ by Standard and Poor’s at year end. The Town’s investments in U.S. agencies, municipal bonds, and commercial paper were rated AA+, AAA, and A-1 respectively, by Standard and Poor’s. 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. Concentration of Credit Risk. The Town places no limit on the amount the Town may invest in any one issuer. More than five percent of the Town’s investments are in Federal Home Loan Mortgage Corporation notes, FNMA notes, and Federal Home Loan Banks notes, which make up 12, 23, and 15 percent of the Town’s total investments. 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 fund in the aggregate, were as follows: General Fund Non-Major Governmental Funds Intergovernmental receivables: Due from federal government $ 148,730 $ Due from state government 436,407 294,485 Due from other governments 1,242,460 Net intergovernmental receivables $ 585,137 $ 1,536,945 TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 6 – CAPITAL ASSETS A summary of capital asset activity for the current fiscal year follows: Governmental Activities Beginning Balance Increase Decrease Ending Balance Capital assets, not being depreciated: Land $ 19,518,801 $ $ $ 19,518,801 Construction in progress 6,070,883 6,998,454 3,821,132 9,248,205 Total capital assets, not being depreciated 25,589,684 6,998,454 3,821,132 28,767,006 Capital assets, being depreciated: Infrastructure 168,952,706 4,940,441 173,893,147 Buildings and improvements 30,092,900 368,744 30,461,644 Machinery, equipment, and vehicles 16,122,605 1,100,887 612,413 16,611,079 Total capital assets being depreciated 215,168,211 6,410,072 612,413 220,965,870 Less accumulated depreciation for: Infrastructure (80,320,623) (6,618,554) (86,939,177) Buildings and improvements (6,432,892) (824,382) (7,257,274) Machinery, equipment, and vehicles (10,528,803) (1,717,444) (604,357) (11,641,890) Total accumulated depreciation (97,282,318) (9,160,380) (604,357) (105,838,341) Total capital assets, being depreciated, net 117,885,893 (2,750,308) 8,056 115,127,529 Governmental activities capital assets, net $ 143,475,577 $ 4,248,146 $ 3,829,188 $ 143,894,535 Business-Type Activities Beginning Balance Increase Decrease Ending Balance Capital assets, not being depreciated: Land $ 2,410,660 $ $ $ 2,410,660 Water rights 8,534,490 8,534,490 Construction in progress 874,446 801,637 754,783 921,300 Total capital assets, not being depreciated 11,819,596 801,637 754,783 11,866,450 Capital assets, being depreciated: Water system 126,061,264 4,218,537 130,279,801 Stormwater system 2,846,177 2,846,177 Equipment and vehicles 5,225,374 325,447 29,919 5,520,902 Total capital assets being depreciated 134,132,815 4,543,984 29,919 138,646,880 Less accumulated depreciation for: Water system (38,874,345) (3,086,429)(41,960,774) Stormwater system (371,976) (60,626)(432,602) Equipment and vehicles (3,539,004) (292,648) (29,919) (3,801,733) Total accumulated depreciation (42,785,325) (3,439,703) (29,919) (46,195,109) Total capital assets, being depreciated, net 91,347,490 1,104,281 92,451,771 Business-type activities capital assets, net $ 103,167,086 $ 1,905,918 $ 754,783 $ 104,318,221 TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 6 – CAPITAL ASSETS Depreciation expense was charged to functions/programs as follows: Governmental activities: General government $ 975,412 Public Safety 712,062 Highways and streets 6,716,302 Culture and recreation 756,604 Total depreciation expense – governmental activities $9,160,380 Business-type activities: Water $3,285,181 Stormwater 154,522 Total depreciation expense – business-type activities $3,439,703 Construction Commitments – As of year end, the Town was involved in several construction projects. The estimated cost to complete the construction projects is $25.0 million. NOTE 7 – LOANS PAYABLE The Town has loans from the Water Infrastructure Finance Authority of Arizona for water system projects. The loans payable at current fiscal year end are presented below. Business-type activities: Interest Rate (Including Fees) Remaining Maturities Outstanding Principal June 30, 2017 Due Within One Year WIFA Loan, 2007 2.04% 7/1/17-27 $ 2,828,106 $ 214,797 WIFA Loan, 2009 2.75% 7/1/17-29 1,585,381 100,547 WIFA Loan, 2014 2.65% 7/1/17-25 3,870,921 278,190 Total $ 8,284,408 $ 593,534 TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 7 – LOANS PAYABLE Principal and interest payments on the business-type activities loans payable at June 30, 2017 are summarized as follows: Business-type Activities Year ending June 30: Principal Interest 2018 $ 593,534 $ 243,579 2019 611,695 225,134 2020 630,420 206,387 2021 649,730 186,780 2022 669,642 166,557 2023-27 3,669,310 506,674 2028-30 1,460,077 45,302 Total $ 8,284,408 $ 1,580,413 NOTE 8 – 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 Original Amount Issued Interest Rates Remaining Maturities Outstanding Principal June 30, 2017 Due Within One Year Governmental activities: Excise Tax Revenue Obligations, 2010 $ 2,445,000 3.72-6.59% 7/1/17-27 $ 1,645,000 $ 135,000 Revenue Bonds, 2012 2,580,000 2.00-4.00% 7/1/17-27 2,035,000 150,000 Refunding Excise Tax Revenue Obligations, 2015 2,529,250 1.91% 7/1/17-25 2,526,570 259,290 Excise Tax Revenue Obligations, 2016 2,000,000 2.20% 7/1/18-31 2,000,000 Refunding Excise Tax Revenue Obligations, 2017 1,115,556 2.43% 7/1/18-26 1,115,556 Total $ 9,322,126 $ 544,290 TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 8 – BONDS PAYABLE Annual debt service requirements to maturity on revenue and refunding bonds for governmental activities at year end are summarized as follows: Governmental Activities Year ending June 30: Principal Interest 2018 $ 544,290 $ 280,170 2019 763,772 264,898 2020 800,102 240,975 2021 827,590 215,959 2022 853,836 189,970 2023-27 4,331,536 529,861 2028-31 1,201,000 55,212 Total $ 9,322,126 $ 1,777,045 Purpose Original Amount Issued Interest Rates Remaining Maturities Outstanding Principal June 30, 2017 Due Within One Year Business-type activities: Refunding Revenue Bonds, 2012 $ 16,595,000 2.00-5.00% 7/1/17-28 $ 12,095,000 $ 1,490,000 Refunding Revenue Bonds, 2013 6,355,000 1.45% 7/1/17-19 2,995,000 990,000 Refunding Revenue Bonds, 2015 1,245,750 1.91% 7/1/17-25 1,244,430 127,710 Refunding Revenue Bonds, 2017 13,186,444 2.43% 7/1/18-26 13,186,444 Total $ 29,520,874 $ 2,607,710 Annual debt service requirements to maturity revenue and refunding bonds for business-type activities at year end are summarized as follows: Business-type Activities Year ending June 30: Principal Interest 2018 $ 2,607,710 $ 768,403 2019 3,933,228 767,514 2020 4,116,898 655,490 2021 3,201,410 546,549 2022 3,303,164 432,927 2023-27 11,648,464 819,366 2028 710,000 24,084 Total $ 29,520,874 $ 4,014,334 TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 8 – BONDS PAYABLE Refunding issuance. During the year ended June 30, 2017, the Town issued $14,302,000 in refunding bonds (allocated to governmental and business-type activities debt), with an effective interest rate of 2.43 percent, to advance refund $15,018,556 of outstanding Excise Tax Revenue Refunding Bonds, Series 2007, with an average interest rate of 4.6 percent. The net proceeds of $15,018,556, which includes a Town contribution of $950,000, (after payment of $233,444 of issuance fees) were used to purchase U.S. government securities. Those securities were deposited in an irrevocable trust with an escrow agent, to provide for all future debt service payments of the refunded bonds. As a result, the refunded excise tax obligations are considered to be defeased, and the liability for those obligations has been removed from the government-wide financial statements. The reacquisition price exceeded the net carrying amount of the old debt by $907,557. This advance refunding was undertaken to reduce total debt service payments over the next 10 fiscal years by $1,285,946 and resulted in an economic gain of $1,086,944. Pledged revenues – governmental activities. The Town has pledged future sales (excise) tax revenues to repay outstanding revenue bonds and refunding revenue bonds of $9.3 million as of June 30, 2017. 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 2032. 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 $11.1 million. The current total sales tax revenues were $19.8 million and the total principal and interest paid on the bonds was $616,415, or three 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 $29.5 million as of June 30, 2017. 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 2029. 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 $33.5 million. The current total customer gross revenues were $18.2 million and the total principal and interest paid on the bonds was $3.9 million or 22 percent of gross revenues. TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 9 – SPECIAL ASSESSMENT BONDS Special assessment bonds at year end consisted of the following outstanding bonds. The bonds are both callable and noncallable with interest payable semiannually. Special assessments from the Oracle Road Debt Service Fund are used to pay bonded debt. Purpose Original Amount Issued Interest Rates Remaining Maturities Outstanding Principal June 30, 2017 Due Within One Year Governmental activities: Special assessments debt $3,945,000 4.55-4.75% 1/1/17-21 $ 640,000 $ 150,000 Total $ 640,000 $ 150,000 Annual debt service requirements to maturity on special assessment bonds at year end are summarized as follows: Governmental Activities Year ending June 30: Principal Interest 2018 $ 150,000 $ 26,405 2019 155,000 19,428 2020 165,000 11,912 2021 170,000 4,038 Total $ 640,000 $ 61,783 NOTE 10 – OBLIGATIONS UNDER CAPITAL LEASES The governmental activities of the Town have acquired police motorcycles and community center utility vehicles under the provisions of long-term lease agreements classified as capital leases. The lease agreements qualify as capital leases for accounting purposes and, therefore, have been recorded at the present value of their future minimum lease payments as of the inception date. Revenues from the General Fund and Community Center Fund are used to pay the capital lease obligations. Amortization of assets recorded under capital leases is included with depreciation expense. Governmental Activities Asset: Vehicles $ 1,341,558 Less: Accumulated depreciation 432,336 Total $ 909,222 TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 10 – OBLIGATIONS UNDER CAPITAL LEASES The future minimum lease obligations and the net present value of these minimum lease payments at year end were as follows: Year Ending June 30: Governmental Activities 2018 $ 277,212 2019 216,133 2020 213,008 2021 46,470 Total minimum lease payments 752,823 Less: amount representing interest 36,201 Present value of minimum lease payments $ 716,622 Due within one year $ 257,878 The business-type activities of the Town have acquired a wheel loader under the provisions of a long-term lease agreement classified as a capital lease. The lease agreement qualifies as a capital lease for accounting purposes and, therefore, has been recorded at the present value of its future minimum lease payments as of the inception date. Revenues from the Stormwater Fund are used to pay the capital lease obligations. Amortization of assets recorded under capital leases is included with depreciation expense. The assets capitalized and acquired through capital leases are as follows: Business-type Activities Asset: Machinery, equipment, and vehicles $ 234,362 Less: Accumulated depreciation 56,613 Total $ 177,749 As of June 30, 2017, the future minimum lease obligation was $42,055, less the amount representing interest of $1,241, resulting in a net present value of $40,814 to be paid during the fiscal year ended June 30, 2018. TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 11 – CHANGES IN LONG-TERM LIABILITIES Long-term liability activity for the current fiscal year was as follows: Beginning Balance Additions Reductions Ending Balance Due Within One Year Governmental activities: Revenue bonds payable $ 7,688,890 $ 3,115,556 $ 1,482,320 $ 9,322,126 $ 544,290 Deferred bond premium 27,748 8,315 19,433 Total bonds payable 7,716,638 3,115,556 1,490,635 9,341,559 544,290 Special assessments payable 780,000 140,000 640,000 150,000 Note payable 700,000 350,000 350,000 350,000 Capital leases payable 966,692 250,070 716,622 257,878 Net pension liability 30,682,698 7,914,019 38,596,717 Compensated absences payable 1,798,804 1,777,633 1,538,485 2,037,952 1,589,603 Governmental activity long-term liabilities $ 42,644,832 $ 12,807,208 $ 3,769,190 $ 51,682,850 $ 2,891,771 Beginning Balance Additions Reductions Ending Balance Due Within One Year Business-type activities: Revenue bonds payable $ 32,951,110 $ 13,186,444 $16,616,680 $ 29,520,874 $ 2,607,710 Deferred bond premium 1,566,537 283,084 1,283,453 Total bonds payable 34,517,647 13,186,444 16,899,764 30,804,327 2,607,710 Loan payable 8,879,907 595,500 8,284,407 593,534 Capital leases payable 80,423 39,609 40,814 40,814 Net pension liability 3,901,231 317,678 4,218,909 Compensated absences payable 308,111 267,873 263,845 312,139 206,011 Business-type activities long-term liabilities $ 47,687,319 $ 13,771,995 $17,798,718 $ 43,660,596 $ 3,448,069 TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 12 – INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS At year end, interfund balances were as follows: Due to/from other funds: At year end, the Federal Seizures and Forfeitures Fund, a non-major governmental fund, had a negative cash balance of $7,699. Negative cash on deposit was reduced by interfund borrowing with the General Fund. All interfund balances are expected to be paid within one year. Interfund transfers: Transfers in Transfers out General Fund Community Center Fund Non-Major Governmental Funds Internal Service Funds Total General Fund $ $ 350,000 $ 1,819,304 $ 300,000 $ 2,469,304 Community Center Fund 120,000 120,000 Non-Major Governmental Funds 185,000 475,826 660,826 Water Fund 2,942 2,942 Total $ 305,000 $ 350,000 $ 2,298,072 $ 300,000 $ 3,253,072 Transfers were made from the General, HURF, Bed Tax, and Water Funds to the Municipal Debt Service Fund for debt service. Transfers were also made from the General Fund to the HURF and Community Center Funds to subsidize operations. In addition, transfers were made from the General, Bed Tax, and General Impact Fees Funds to the General Government CIP Fund to fund capital projects. Transfers were made from the General Fund to the Self Insurance Fund to fund insurance claims. Finally, transfers were made from the Bed Tax and Community Center Fund to the General Fund to repay loaned amounts. NOTE 13 – 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 JUNE 30, 2017 NOTE 14 – 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 for $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 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 $125,000 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. The Town limits its exposure through specific and aggregate stop-loss coverage. All claims handling procedures are performed by a third-party claims administrator. Reported unpaid claims, as well as incurred but not reported claims, have been accrued as a liability based upon monthly claims lag summary reports. These claims are expected to be fully paid within one year of the financial statement date. Claims Payable Beginning of Year Current Year Claims and Changes in Estimates Claim Payments Claims Payable at End of Year 2016-17 $ 249,036 $ 2,761,967 $ 2,687,926 $ 323,077 2015-16 162,701 2,513,124 2,426,789 249,036 TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 15 – PENSIONS AND OTHER POSTEMPLOYMENT BENEFITS The Town contributes to the pension plans described below. The plans are component units of the State of Arizona. The Town reported $2.8 million of pension expenditures in the governmental funds and $297,040 in enterprise funds related to all pension plans to which it contributes. A. Arizona State Retirement System Plan Description. Town employees not covered by the other pension plans described after this section participate in the Arizona State Retirement System (ASRS). The ASRS administers a cost-sharing multiple-employer defined benefit pension plan, a cost-sharing multiple-employer defined benefit health insurance premium benefit (OPEB) plan, and a cost-sharing multiple- employer defined benefit long-term disability (OPEB) plan. The Arizona State Retirement System Board governs the ASRS according to the provisions of A.R.S. Title 38, Chapter 5, Articles 2 and 2.1. The ASRS issues a publicly available financial report that includes its financial statements and required supplementary information. The report is available on the ASRS website at www.azasrs.gov. Benefits Provided. The ASRS provides retirement, health insurance premium supplement, long-term disability, and survivor benefits. State statute establishes benefit terms. Retirement benefits are calculated on the basis of age, average monthly compensation, and service credit as follows: Retirement Initial Membership Date: Before July 1, 2011 On or After July 1, 2011 Years of service and age required to receive benefit Sum of years and age equals 80 10 years age 62 5 years age 50* Any years age 65 30 years age 55 25 years age 60 10 years age 62 5 years age 50* Any years age 65 Final average salary is based on Highest 36 months of last 120 months Highest 60 months of last 120 months Benefit percent per year of service 2.1% to 2.3% 2.1% to 2.3% *With actuarially reduced benefits TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 15 – PENSIONS AND OTHER POSTEMPLOYMENT BENEFITS Retirement benefits for members who joined the ASRS prior to September 13, 2013, are subject to automatic cost-of-living adjustments based on excess investment earnings. Members with a membership date on or after September 13, 2013, are not eligible for cost-of-living adjustments. Survivor benefits are payable upon a member’s death. For retired members, the survivor benefit is determined by the retirement benefit option chosen. For all other members, the beneficiary is entitled to the member’s account balance that includes the member’s contributions and employer’s contributions, plus interest earned. Contributions. In accordance with state statutes, annual actuarial valuations determine active member and employer contribution requirements. The combined active member and employer contribution rates are expected to finance the costs of benefits employees earn during the year, with an additional amount to finance any unfunded accrued liability. For the current fiscal year, active ASRS members were required by statute to contribute at the actuarially determined rate of 11.48 percent (11.34 percent for retirement and 0.14 percent for long-term disability) of the members’ annual covered payroll, and the Town was required by statute to contribute at the actuarially determined rate of 11.48 percent (10.78 percent for retirement, 0.56 percent for health insurance premium benefit, and 0.14 percent for long-term disability) of the members’ annual covered payroll. The Town’s contributions to the pension plan for the year ended June 30, 2017 were $1.3 million. The Town’s contributions for the current and two preceding years for the Arizona State Retirement System OPEB, all of which were equal to the required contributions, were as follows: Health Benefit Supplement Fund Long-Term Disability Fund Year ending June 30: 2017 $ 68,282 $ 17,070 2016 59,288 14,229 2015 65,413 13,304 Pension Liability. At June 30, 2017, the Town reported a liability of $20.0 million for its proportionate share of the net pension liability of the ASRS. The net pension liability was measured as of June 30, 2016. The total pension liability used to calculate the net pension liability was determined using update procedures to roll forward the total pension liability from an actuarial valuation as of June 30, 2015, to the measurement date of June 30, 2016. The total pension liability as of June 30, 2016, reflects a change in actuarial assumption for a decrease in loads for future potential permanent benefit increases. TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 15 – PENSIONS AND OTHER POSTEMPLOYMENT BENEFITS The Town’s proportion of the net pension liability was based on a projection of the Town’s long-term share of contributions to the pension plan relative to the projected contributions of all participating employers, actuarially determined. At June 30, 2016, the Town’s proportion was 0.124 percent, which was an increase of 0.005 from its proportion measured as of June 30, 2015. Pension Expense and Deferred Outflows/Inflows of Resources. The Town has deferred outflows and inflows of resources related to the net pension liability of retirement benefits. 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, 2017, the Town recognized pension expense for ASRS of $1.4 million and reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual experience $ 121,845 $ 1,379,318 Changes of assumptions or other inputs 1,060,824 Net difference between projected and actual earnings on pension plan investments 2,172,791 Changes in proportion and differences between contributions and proportionate share of contributions 984,098 69,845 Contributions subsequent to the measurement date 1,314,421 Total $ 4,593,155 $ 2,509,987 The deferred outflows of resources related to ASRS pensions resulting from contributions subsequent to the measurement date as reported in the table above will be recognized as a reduction of the net pension liability in the year ended June 30, 2018. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to ASRS pensions will be recognized in pension expense as follows: Year Ending June 30: 2018 $ (406,159) 2019 (370,761) 2020 936,423 2021 609,244 TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 15 – PENSIONS AND OTHER POSTEMPLOYMENT BENEFITS Actuarial Assumptions. The significant actuarial assumptions used to measure the total ASRS pension liability are as follows: Actuarial valuation date June 30, 2015 Actuarial roll forward date June 30, 2016 Actuarial cost method Entry age normal Investment rate of return 8.0% Projected salary increases 3.0-6.75% Inflation 3.0% Permanent base increases Included Mortality rates 1994 GAM Scale BB The actuarial assumptions used in the June 30, 2015 valuation were based on the results of an actuarial experience study for the five-year period ended June 30, 2012. The purpose of the experience study was to review actual experience in relation to the actuarial assumptions in effect. The ASRS Board adopted the experience study recommended changes which were applied to the June 30, 2013, actuarial valuation. The study did not include an analysis of the assumed investment rate of return. The long-term expected rate of return on ASRS pension plan investments was determined to be 8.75 percent using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 15 – PENSIONS AND OTHER POSTEMPLOYMENT BENEFITS The target allocation and best estimates of arithmetic real rates of return for each major asset class of ASRS are summarized in the following table: Asset Class Target Allocation Long-Term Expected Real Rate of Return Equity 58% 6.73% Fixed income 25% 3.70 Real estate 10% 4.25 Multi-asset 5% 3.41% Commodities 2% 3.84 Total 100% Discount Rate. The discount rate used to measure the ASRS total pension liability was 8.0 percent, which is less than the long-term expected rate of return of 8.75 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 pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long- term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of the Proportionate Share of the Net Pension Liability to Changes in the Discount Rate. The following presents the Town’s proportionate share of the net pension liability calculated using the discount rate of 8.0 percent, as well as what the proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1- percentage-point lower or 1-percentage-point higher than the current rate: 1% Decrease (7.0%) Current Discount Rate (8.0%) 1% Increase (9.0%) Proportionate share of the net pension liability $25,565,726 $20,050,356 $15,628,234 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 JUNE 30, 2017 NOTE 15 – PENSIONS AND OTHER POSTEMPLOYMENT BENEFITS 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). The PSPRS administers an agent multiple-employer defined benefit pension plan and an agent multiple- employer defined benefit health insurance premium benefit (OPEB) plan. A nine-member board known as the Board of Trustees and the participating local boards govern the PSPRS according to the provisions of A.R.S. Title 38, Chapter 5, Article 4. Town dispatchers participate in the Corrections Officer Retirement Plan (CORP). The CORP administers an agent multiple-employer defined benefit pension plan and an agent multiple- employer defined benefit health insurance premium benefit (OPEB) plan. The Board of Trustees 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 publicly available financial reports that include their financial statements and required supplementary information. The reports are available on the PSPRS website at www.psprs.com. Benefits Provided. The PSPRS and CORP provide retirement, health insurance premium supplement, disability, and survivor benefits. State statute establishes benefits terms. Certain retirement and disability benefits are calculated on the basis of age, average monthly compensation, and service credit as follows. See the publicly available PSPRS and CORP financial reports for additional benefits information. TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 15 – PENSIONS AND OTHER POSTEMPLOYMENT BENEFITS Public Safety Personnel Retirement System: Retirement Initial Membership Date: Before January 1, 2012 On or After January 1, 2012 Years of service and age required to receive benefit 20 years any age 15 years age 62 25 years and age 52.5 Final average salary is based on Highest 36 months of last 20 years Highest 60 months of last 20 years Normal retirement 50% less 2.0% for each year of credited service less than 20 years or plus 2.0% to 2.5% for each year of credited service over 20 years, not to exceed 80% 2.5% per year of credited service, not to exceed 80% Accidental disability retirement 50% or normal retirement, whichever is greater Survivor benefit: Retired members 80% of retired member’s pension benefit Active members 80% to 100% of accidental disability retirement benefit or 100% of average monthly compensation if death was the result of injuries received on the job Corrections Officer Retirement Plan: Retirement Initial Membership Date: Before January 1, 2012 On or After January 1, 2012 Years of service and age required to receive benefit Sum of years and age equals 80 25 years any age 10 years age 62 25 years and age 52.5 10 years age 62 Final average salary is based on Highest 36 months of last 10 years Highest 60 months of last 10 years Normal retirement 2.0% to 2.5% per year of credited service, not to exceed 80% Accidental disability retirement 50% or normal retirement if more than 20 years of credited service 50% of normal retirement if more than 25 years of credited service Survivor benefit: Retired members 80% of retired member’s pension benefit Active members 40% of accidental disability retirement benefit or 100% of average monthly compensation if death was the result of injuries received on the job TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 15 – PENSIONS AND OTHER POSTEMPLOYMENT BENEFITS Retirement and survivor benefits are subject to automatic cost-of-living adjustments based on excess investment earning. In addition, the Legislature may enact permanent one-time benefit increases after a Joint Legislative Budget Committee analysis of the increase’s effects on the plan. PSPRS also provides temporary disability benefits of 50 percent of the member's compensation for up to 12 months. Employees Covered by Benefit Terms. At June 30, 2017, the following employees were covered by the agent pension plans’ benefit terms: PSPRS – Police CORP – Dispatchers Retirees and beneficiaries 29 5 Inactive, non-retired members 13 3 Active members 92 4 Total 134 12 Contributions and Annual OPEB Cost. 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, 2017, are indicated below. Rates are a percentage of active members’ annual covered payroll. PSPRS – Police CORP – Dispatchers Active members – pension 11.65% 7.96% Town: Pension 25.32 33.27 Health insurance 0.33 0.00 TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 15 – PENSIONS AND OTHER POSTEMPLOYMENT BENEFITS For the agent plans, the contributions to the pension plan and annual OPEB cost and contributions for the health insurance premium benefit for the year ended were: PSPRS – Police CORP – Dispatchers Pension: Contributions made $ 1,679,568 $ 77,830 Health insurance premium benefit: Annual OPEB cost 37,502 - 0 - Contributions made 37,502 - 0 - Pension Liability. At June 30, 2017, the Town reported the following net pension liabilities: PSPRS – Police $ 21,404,167 CORP – Dispatchers 1,361,102 The net pension liabilities were measured as of June 30, 2016, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The total pension liability as of June 30, 2016, reflects changes of benefit terms and actuarial assumptions.  In May 2016 voters approved Proposition 124 that authorized certain statutory adjustments to PSPRS’ automatic cost-of-living adjustments. The statutory adjustments change the basis for future cost-of-living adjustments from excess investment earnings to the change in the consumer price index, limited to a maximum annual increase of two percent. The change in the Town’s net pension liability as a result of the statutory adjustments is not known.  Laws 2016, Chapter 2, changed the benefit formula and contribution requirements for members hired on or after July 1, 2017.  The investment rate of return actuarial assumption was decreased from 7.85 percent to 7.50 percent for PSPRS and CORP plans. The net pension liabilities measured as of June 30, 2017, will reflect changes of actuarial assumptions based on the results of an actuarial experience study for the 5-year period ended June 30, 2016. The change in the Town’s net pension liabilities as a result of these changes is not known. TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 15 – PENSIONS AND OTHER POSTEMPLOYMENT BENEFITS Actuarial Assumptions. The significant actuarial assumptions used to measure the total pension liability are as follows: PSPRS CORP Actuarial valuation date June 30, 2016 June 30, 2016 Actuarial cost method Entry age normal Entry age normal Investment rate of return 7.50% 7.50% Projected salary increases 4.0 - 8.0% 4.0 - 7.25% Inflation 4.0% 4.0% Permanent benefit increase Included Included Mortality rates RP-2000 mortality table, adjusted by 105% for both males and females RP-2000 mortality table, adjusted by 105% for both males and females Actuarial assumptions used in the June 30, 2016, valuation were based on the results of an actuarial experience study for the 5-year period ended June 30, 2011. The long-term expected rate of return on PSPRS and CORP pension plan investments was determined to be 7.50 percent using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expenses and inflation) are developed for each major asset class. The target allocation and best estimates of arithmetic real rates of return for each major asset class for all agent pension plans are summarized in the following table: Asset Class Target Allocation Long-Term Expected Real Rate of Return Short-term investments 2% 0.75% Absolute return 5% 4.11% Risk parity 4% 5.13% Fixed income 7% 2.92% Real assets 8% 4.77% GTAA 10% 4.38% Private equity 11% 9.50% Real estate 10% 4.48% Credit opportunities 13% 7.08% Non-U.S. equity 14% 8.25% U.S. equity 16% 6.23% Total 100% TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 15 – PENSIONS AND OTHER POSTEMPLOYMENT BENEFITS Pension Discount Rates. The following discount rates were used to measure the total pension liabilities: PSPRS – Police CORP – Dispatchers Discount rates 7.50% 7.50% 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 rates and the member rate. Based on those assumptions, the PSPRS and CORP pension plans’ fiduciary net position were projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Changes in the Agent Plans Net Pension Liability: PSPRS – Police Increase/Decrease Total Pension Liability Plan Fiduciary Net Position Net Pension Liability Balances at June 30, 2016 $ 40,452,911 $ 25,601,957 $ 14,850,954 Changes for the year: Service cost 1,363,768 1,363,768 Interest on the total pension liability 3,185,633 3,185,633 Changes in benefit terms 3,164,555 3,164,555 Differences between expected and actual experience in the measurement of the pension liability (548,533) (548,533) Changes of assumptions or other inputs 1,902,904 1,902,904 Contributions – employer 1,505,274 (1,505,274) Contributions – employee 840,020 (840,020) Net investment income 154,181 (154,181) Benefit payments, including refunds of employee contributions (1,106,968) (1,106,968) Administrative expense (22,586) 22,586 Other 38,225 (38,225) Net changes 7,961,359 1,408,146 6,553,213 Balances at June 30, 2017 $ 48,414,270 $ 27,010,103 $ 21,404,167 TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 15 – PENSIONS AND OTHER POSTEMPLOYMENT BENEFITS Changes in the Agent Plans Net Pension Liability: CORP – Dispatchers Increase/Decrease Total Pension Liability Plan Fiduciary Net Position Net Pension Liability Balances at June 30, 2016 $ 2,362,604 $ 1,205,067 $ 1,157,537 Changes for the year: Service cost 32,257 32,257 Interest on the total pension liability 182,053 182,053 Changes of benefit terms 14,504 14,504 Differences between expected and actual experience in the measurement of the pension liability (12,392)(12,392) Changes of assumptions or other inputs 64,514 64,514 Contributions – employer 52,583 (52,583) Contributions – employee 18,982 (18,982) Net investment income 7,237 (7,237) Benefit payments, including refunds of employee contributions (119,180) (119,180) Administrative expense (1,423)1,423 Other changes (8)8 Net changes 161,756 (41,809) 203,565 Balances at June 30, 2017 $ 2,524,360 $ 1,163,258 $ 1,361,102 Sensitivity of the Net Pension Liability to Changes in the Discount Rate. The following presents the Town’s net pension liabilities calculated using the discount rates noted above, as well as what the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower or 1-percentage-point higher than the current rate: 1% Decrease Current Discount Rate 1% Increase PSPRS – Police: Rate 6.50% 7.50% 8.50% Net pension liability $28,539,103 $21,404,167 $15,605,305 CORP – Dispatchers: Rate 6.50% 7.50% 8.50% Net pension liability $ 1,641,445 $ 1,361,102 $ 1,126,172 Pension Plan Fiduciary Net Position. Detailed information about the pension plans’ fiduciary net position is available in the separately issued PSPRS and CORP financial reports. The reports are available on the PSPRS website at www.psprs.com. TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 15 – PENSIONS AND OTHER POSTEMPLOYMENT BENEFITS Pension Expense. For the year ended June 30, 2017, the Town’s recognized the following pension expense: Pension Expense PSPRS – Police $ 6,067,260 CORP – Dispatchers 180,056 Pension Deferred Outflows/Inflows of Resources. At June 30, 2017, the Town reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: PSPRS – Police: Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual experience $ 884,321 $ 643,264 Changes of assumptions or other inputs 3,159,043 Net difference between projected and actual earnings on pension plan investments 1,675,058 Contributions subsequent to the measurement date 1,679,568 Total $ 7,397,990 $ 643,264 CORP – Dispatchers: Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual experience $ 7,490 $ 28,162 Changes of assumptions or other inputs 114,499 Net difference between projected and actual earnings on pension plan investments 73,417 Contributions subsequent to the measurement date 77,830 Total $ 273,236 $ 28,162 TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 15 – PENSIONS AND OTHER POSTEMPLOYMENT BENEFITS The amounts reported as deferred outflows of resources related to pension resulting from contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability (or an increase in the net pension asset) in the year ended June 30, 2018. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year Ending June 30: PSPRS – Police CORP – Dispatchers 2018 $ 1,219,078 $ 59,966 2019 1,219,077 59,967 2020 1,445,925 30,223 2021 938,535 17,088 2022 252,543 Agent Plan OPEB Trend Information. The table below presents the annual OPEB cost information for the health insurance premium benefit for the current and two preceding years: Fiscal Year Ended Annual OPEB Cost Percentage of Annual Cost Contributed Net OPEB Obligation PSPRS – Police: June 30, 2017 $ 25,074 100% $- 0 - June 30, 2016 27,214 100% - 0 - June 30, 2015 88,254 100% - 0 - CORP – Dispatchers: June 30, 2017 $ - 0 - 100% $- 0 - June 30, 2016 - 0 - 100% - 0 - June 30, 2015 4,374 100% - 0 - TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 15 – PENSIONS AND OTHER POSTEMPLOYMENT BENEFITS Agent Plan OPEB Actuarial Assumptions. Actuarial valuations involve estimates of the reported amounts’ value and assumptions about the probability of events in the future. Amounts determined regarding the funded status of the plans and the annual required contributions are subject to continual revision as actual results are compared to past expectations and new estimates are made. The required schedule of funding progress for the health insurance premium benefit presented as required supplementary information provides multiyear trend information that shows whether the actuarial value of the plans’ assets are increasing or decreasing over time relative to the actuarial accrued liability for benefits. Projections of benefits are based on (1) the plans as understood by the Town and plans’ members and include the types of benefits inforce at the valuation date, and (2) the pattern of sharing benefit costs between the Town and plans’ members to that point. Actuarial calculations reflect a long-term perspective and employ methods and assumptions that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets. The significant actuarial methods and assumptions used are the same for all PSPRS and CORP plans and related benefits (unless noted), and the actuarial methods and assumptions used to establish the fiscal year 2017 contribution requirements, are as follows: PSPRS CORP Actuarial valuation date June 30, 2015 June 30, 2015 Actuarial cost method Entry age normal Entry age normal Amortization method Level percent of pay closed for unfunded actuarial accrued liability, open for excess Level percent closed for unfunded actuarial accrued liability, open for excess Remaining amortization period 21 years for unfunded actuarial accrued liability, 20 years for excess 21 years for unfunded actuarial accrued liability, 20 years for excess Asset valuation method 7-year smoothed market value (80%/120% market) 7-year smoothed market value (80%/120% market) Actuarial assumptions: Investment rate of return 7.85% 7.85% Projected salary increases includes inflation at 4%-8% 4% 4%-7.25% 4% TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 15 – PENSIONS AND OTHER POSTEMPLOYMENT BENEFITS The funded status of the all the PSPRS and CORP health insurance premium benefit plans in the June 30, 2016, actuarial valuation was determined using the following actuarial methods and assumptions, applied to all periods included in the measurement. PSPRS CORP Actuarial valuation date June 30, 2016 June 30, 2016 Actuarial cost method Entry age normal Entry age normal Amortization method Level percent of pay closed Level percent of pay closed Remaining amortization period 20 years for unfunded, 20 years for excess 20 years for unfunded, 20 years for excess Asset valuation method 7-year smoothed market value (80%/120% market) 7-year smoothed market value (80%/120% market) Actuarial assumptions: Investment rate of return 7.50% 7.50% Projected salary increases includes inflation at 4%-8% 4% 4%-7.25% 4% Agent Plan OPEB Funded Status. The following table presents the funded status of the health insurance premium benefit plans as of the most recent valuation date, June 30, 2016. PSPRS – Police CORP – Dispatchers Actuarial value of assets $ 1,147,164 $ 68,438 Actuarial accrued liability 1,108,855 48,337 Unfunded actuarial accrued asset (liability) 38,309 20,101 Funded ratio 103.45% 141.59% Annual covered payroll 7,011,663 222,308 Unfunded actuarial accrued asset (liability) as a percentage of covered payroll 0.55% 9.04% At June 30, 2017, the Town reported the following aggregate amounts related to pensions for all plans to which it contributes: Governmental Activities Business-type Activities Total Pension assets $ 28,173,361 $ $ 28,173,361 Pension liabilities 50,938,630 50,938,630 Net pension liabilities 38,596,717 4,218,909 42,815,626 Deferred outflows of resources 11,291,054 973,326 12,264,380 Deferred inflows of resources 2,649,527 531,886 3,181,413 Pension expense 7,352,016 297,040 7,649,056 Pension contributions 2,793,282 278,536 3,071,818 TOWN OF ORO VALLEY, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 16 – TAX ABATEMENTS The Town enters into property tax abatement agreements with local businesses under A.R.S. §9-500.11. Under the statute, a city or town may enter into a retail development tax incentive agreement for the purpose of economic development activities. To be eligible, the tax incentive agreement must be expected to raise more revenue than the amount of the incentive within the duration of the agreement, and in the absence of a tax incentive, the retail business facility would not locate in the city or town in the same time, place or manner. For the fiscal year ended June 30, 2017, the Town abated sales taxes totaling $740,975. Of this amount, $740,356 was a 45 percent sales tax abatement to a developer, for developing a regional lifestyle and entertainment retail shopping center to create additional jobs, generate additional sales tax revenue, and provide diverse commercial and retail service opportunities to the Town’s residents. NOTE 17 – JUDGMENTS PAYABLE During the fiscal year, the Supreme Court ruled on the Parker v. Public Safety Personnel Retirement System Plan lawsuit. The courts found that a 2011 law’s increases in employee contribution rates for active PSPRS plan members hired prior to the law’s effective date were unconstitutional. As a result, these members are entitled to refunds of their excess employee contributions, plus interest. Employers must provide these refunds because Internal Revenue Service regulations prevent PSPRS from issuing them from the plan’s trusts. As such, the Town of Oro Valley refunded the excess contributions subsequent to year end. The excess contributions and interest totaling $1,087,345 is reflected on the Statement of Net Position as Judgments Payable and Statement of Activities within the respective function. (This page intentionally left blank) REQUIRED SUPPLEMENTARY INFORMATION Revenues: Sales taxes Franchise taxes Intergovernmental Licenses, fees & permits Fines, forfeitures & penalties Charges for services Investment earnings Other Total revenues Expenditures: Current - General government Public safety Transit Culture and recreation Debt service - Principal retirement Interest and fiscal charges Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Total other financing sources (uses): Changes in fund balances Fund balances, beginning of year Fund balances (deficits), end of year Budgeted Amounts Original $15,073,000 580,000 13,080,452 1,615,500 130,000 2,128,601 89,200 140,000 32,836,753 10,816,981 15,598,167 1,617,395 3,203,204 42,852 2,601 31,281,200 1,555,553 305,000 (1,825,304) (1,520,304) 35,249 $35,249 Final $15,073,000 580,000 13,080,452 1,615,500 130,000 2,128,601 89,200 140,000 32,836,753 10,816,981 16,671,218 1,712,170 3,203,204 42,852 2,601 32,449,026 387,727 305,000 (2,475,304) (2,170,304) (1,782,577) $(1,782,577) Actual $16,425,605 647,830 13,458,181 2,313,504 132,148 2,278,332 39,343 431,094 35,726,037 10,375,226 15,543,292 1,528,654 3,190,447 42,852 2,601 30,683,072 5,042,965 305,000 (2,469,304) (2,164,304) 2,878,661 10,524,553 $13,403,214 Variance with Final Budget Positive (Negative) $1,352,605 67,830 377,729 698,004 2,148 149,731 (49,857) 291,094 2,889,284 441,755 1,127,926 183,516 12,757 1,765,954 4,655,238 6,000 6,000 4,661,238 10,524,553 $15,185,791 TOWN OF ORO VALLEY, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND YEAR ENDED JUNE 30, 2017 See accompanying notes to this schedule. Revenues: Sales taxes Charges for services Other Total revenues Expenditures: Current - Culture and recreation Capital outlay Debt service - Principal retirement Interest and fiscal charges Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Total other financing sources (uses): Changes in fund balances Fund balances, beginning of year Fund balances (deficits), end of year Budgeted Amounts Original $2,105,163 4,482,214 27,861 6,615,238 6,424,366 496,000 6,920,366 (305,128) (120,000) (120,000) (425,128) $(425,128) Final $2,105,163 4,482,214 27,861 6,615,238 6,424,366 496,000 6,920,366 (305,128) 350,000 (120,000) 230,000 (75,128) $(75,128) Actual $2,199,466 3,873,067 5,438 6,077,971 6,242,892 72,414 207,674 43,893 6,566,873 (488,902) 350,000 (120,000) 230,000 (258,902) 161,745 $(97,157) Variance with Final Budget Positive (Negative) $94,303 (609,147) (22,423) (537,267) 181,474 423,586 (207,674) (43,893) 353,493 (183,774) (183,774) 161,745 $(22,029) TOWN OF ORO VALLEY, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL COMMUNITY CENTER YEAR ENDED JUNE 30, 2017 See accompanying notes to this schedule. 2017 2016 2015 Measurement date June 30, 2016 June 30, 2015 June 30, 2014 Town's proportion of the net pension liability (asset)0.12%0.12%0.11% Town's proportionate share of the net pension liability (asset)20,050,356$ 18,575,537$ 16,642,712$ Town's covered payroll 11,857,622$ 11,826,486$ 11,086,887$ Town's proportionate share of the net pension liability (asset) as a percentage of its covered payroll 169.09% 157.07% 150.11% Plan fiduciary net position as a percentage of the total pension liability 67.06%68.35%69.49% NOTE: TOWN OF ORO VALLEY, ARIZONA SCHEDULE OF THE PROPORTIONATE SHARE OF THE NET PENSION LIABILITY LAST THREE FISCAL YEARS ARIZONA STATE RETIREMENT SYSTEM 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 accompanying notes to this schedule. 2017 2016 2015 Measurement date June 30, 2016 June 30, 2015 June 30, 2014 Total pension liability Service cost $ 1,363,768 $ 1,224,807 $ 1,157,832 Interest 3,185,633 2,842,514 2,408,825 Changes of benefit terms 3,164,555 444,387 Differences between expected and actual experience (548,533) 1,312,293 (356,776) Changes of assumptions 1,902,904 3,014,125 (1,106,968) (1,049,346) (1,304,993) Net change in total pension liability 7,961,359 4,330,268 5,363,400 Total pension liability—beginning 40,452,911 36,122,643 30,759,243 Total pension liability—ending $ 48,414,270 $ 40,452,911 $ 36,122,643 Plan fiduciary net position Contributions—employer $ 1,505,274 $ 1,669,125 $ 1,211,218 Contributions—employee 840,020 794,478 698,036 Net investment income 154,181 874,562 2,774,126 (1,106,968) (1,049,346) (1,304,993) Administrative expense (22,586) (21,722) (22,342) Other 38,225 93,803 (93,142) Net change in plan fiduciary net position 1,408,146 2,360,900 3,262,903 Plan fiduciary net position—beginning 25,601,957 23,241,057 19,978,154 Plan fiduciary net position—ending $ 27,010,103 $ 25,601,957 $ 23,241,057 Net pension liability—ending $ 21,404,167 $ 14,850,954 $ 12,881,586 Plan fiduciary net position as a percentage of the total pension liability 55.79% 63.29% 64.34% Covered payroll $ 7,355,092 $ 7,004,292 $ 6,021,786 Net pension liability as a percentage of covered payroll 291.01% 212.03% 213.92% TOWN OF ORO VALLEY, ARIZONA SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY AND RELATED RATIOS PUBLIC SAFETY PERSONNEL RETIREMENT SYSTEM - POLICE LAST THREE FISCAL YEARS 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. Benefit payments, including refunds of employee contributions Benefit payments, including refunds of employee contributions See accompanying notes to this schedule. 2017 2016 2015 Measurement date June 30, 2016 June 30, 2015 June 30, 2014 Total pension liability Service cost $ 32,257 $ 52,754 $ 53,985 Interest 182,053 174,403 154,443 Changes of benefit terms 14,504 29,545 Differences between expected and actual experience (12,392) 14,554 (48,767) Changes of assumptions 64,514 174,536 (119,180) (148,851) (68,874) Net change in total pension liability 161,756 92,860 294,868 Total pension liability—beginning 2,362,604 2,269,744 1,974,876 Total pension liability—ending $ 2,524,360 $ 2,362,604 $ 2,269,744 Plan fiduciary net position Contributions—employer $ 52,583 $ 64,005 $ 63,179 Contributions—employee 18,982 30,272 32,699 Net investment income 7,237 45,101 146,441 (119,180) (148,851) (68,874) Administrative expense (1,423) (1,490) (1,151) Other (8) (926) Net change in plan fiduciary net position (41,809) (11,889) 172,294 Plan fiduciary net position—beginning 1,205,067 1,216,956 1,044,662 Plan fiduciary net position—ending $ 1,163,258 $ 1,205,067 $ 1,216,956 Net pension liability—ending $ 1,361,102 $ 1,157,537 $ 1,052,788 Plan fiduciary net position as a percentage of the total pension liability 46.08% 51.01% 53.62% Covered payroll $ 245,274 $ 380,303 $ 387,839 Net pension liability as a percentage of covered payroll 554.93% 304.37% 271.45% 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. TOWN OF ORO VALLEY, ARIZONA SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY AND RELATED RATIOS PUBLIC SAFETY PERSONNEL RETIREMENT SYSTEM - DISPATCHERS LAST THREE FISCAL YEARS Benefit payments, including refunds of employee contributions Benefit payments, including refunds of employee contributions See accompanying notes to this schedule. 2017 2016 2015 Arizona State Retirement System: Actuarially determined contribution 1,314,421$ 1,286,552$ 1,207,362$ Contributions in relation to the actuarially determined contribution 1,314,421 1,286,552 1,207,362 Contribution deficiency (excess) $ $ $ Town's covered payroll 12,193,145$ 11,826,486$ 11,086,887$ Contributions as a percentage of covered payroll 10.78% 10.88% 10.89% Public Safety Personnel Retirement System - Police: Actuarially determined contribution 1,679,568$ 1,554,131$ 1,354,630$ Contributions in relation to the actuarially determined contribution 1,679,568 1,554,131 1,354,630 Contribution deficiency (excess) $ $ $ Town's covered payroll 7,199,177$ 7,355,092$ 7,004,292$ Contributions as a percentage of covered payroll 23.33% 21.13% 19.34% Public Safety Personnel Retirement System - Fire: Actuarially determined contribution 77,830$ 54,083$ 64,005$ Contributions in relation to the actuarially determined contribution 77,830 54,083 64,005 Contribution deficiency (excess) $ $ $ Town's covered-employee payroll 233,934$ 245,274$ 380,303$ Contributions as a percentage of covered-employee payroll 33.27% 22.05% 16.83% NOTE: TOWN OF ORO VALLEY, ARIZONA SCHEDULE OF CONTRIBUTIONS 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. ALL PENSION PLANS LAST THREE FISCAL YEARS See accompanying notes to this schedule. Public Safety Personnel Retirement System - Police: 2016 1,147,164$ 1,108,855$ 38,309$ 103.45 % 7,011,663$ 0.55 % 2015 1,062,519 1,029,881 32,638 103.17 7,024,821 0.46 2014 920,139 937,923 (17,784) 98.10 6,446,142 (0.28) Public Safety Personnel Retirement System - Dispatchers: 2016 68,438$ 48,337$ 20,101$ 141.59 % 222,308$ 9.04 % 2015 85,050 48,723 36,327 174.56 272,189 13.35 2014 78,501 67,692 10,809 115.97 410,789 2.63 UAAL as a percentage of Covered Payroll Actuarial Valuation Date TOWN OF ORO VALLEY, ARIZONA SCHEDULE OF FUNDING PROGRESS PUBLIC SAFETY PERSONNEL RETIREMENT SYSTEM OTHER POSTEMPLOYMENT BENEFITS LAST THREE ACTUARIAL VALUATIONS Actuarial Valuation of Assets Actuarial Accrued Liability (AAL) Unfunded AAL (UAAL) Funded Ratio Covered Payroll See accompanying notes to this schedule. TOWN OF ORO VALLEY, ARIZONA NOTES TO REQUIRED SUPPLEMENTARY INFORMATION JUNE 30, 2017 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 – PENSION PLAN SCHEDULES Factors that Affect Trends. The actuarial assumptions used in the June 30, 2015, valuation for ASRS were based on the results of an actuarial experience study for the five-year period ended June 30, 2012. The purpose of the experience study was to review actual experience in relation to the actuarial assumptions in effect. The ASRS Board adopted the experience study recommended changes which were applied to the June 30, 2013, actuarial valuation. The study did not include an analysis of the assumed investment rate of return. The actuarial assumptions used in the June 30, 2016, valuation for PSPRS were based on the results of an actuarial experience study for the 5-year period ended June 30, 2011. The total pension liability used to calculate the net pension liability for PSPRS was determined by an actuarial valuation as of that date. The total pension liability as of June 30, 2016, reflects changes of benefit terms and actuarial assumptions for a court ruling for funding permanent benefit increases and a decrease in the wage growth assumption from 4.5% to 4.0%. (This page intentionally left blank) COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES (This page intentionally left blank) GOVERNMENTAL FUNDS ASSETS Cash and cash equivalents Accounts receivable Intergovernmental receivable Special assessments Prepaid items Total assets LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Accounts payable Accrued wages and benefits Due to other funds Total liabilities Deferred inflows of resources: Unavailable revenues - special assessments Fund balances (deficits): Restricted Committed Assigned Unassigned Total fund balances Total liabilities, deferred inflows of resources and fund balances Special Revenue $2,036,220 28,994 294,485 $2,359,699 $154,607 55,480 7,699 217,786 336,473 1,813,514 (8,074) 2,141,913 $2,359,699 Debt Service $49,213 645,000 47,911 $742,124 $1,060 1,060 645,000 96,064 96,064 $742,124 Capital Projects $7,547,890 1,242,460 $8,790,350 $1,484,224 1,484,224 5,574,047 15,718 1,716,361 7,306,126 $8,790,350 TOWN OF ORO VALLEY, ARIZONA COMBINING BALANCE SHEET - ALL NON-MAJOR GOVERNMENTAL FUNDS - BY FUND TYPE JUNE 30, 2017 Total Non- Major Governmental Fund $9,633,323 28,994 1,536,945 645,000 47,911 $11,892,173 $1,639,891 55,480 7,699 1,703,070 645,000 6,006,584 1,829,232 1,716,361 (8,074) 9,544,103 $11,892,173 Revenues: Sales taxes Development impact fees Special assessments Intergovernmental Licenses, fees & permits Fines, forfeitures & penalties Charges for services Contributions and donations Investment earnings Other Total revenues Expenditures: Current - General government Public safety Highway and streets Capital outlay Debt service - Principal retirement Interest and fiscal charges Bond issuance costs Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Sale of refunding bonds Issuance of revenue bonds Transfers in Transfers out Payment to bond escrow agent Total other financing sources (uses): Changes in fund balances Fund balances, beginning of year Fund balances, end of year Special Revenue $1,142,649 3,485,976 75,447 426,544 75,179 17,643 7,951 5,231,389 723,618 61,678 2,993,402 1,439,648 5,218,346 13,043 100,000 (548,226) (448,226) (435,183) 2,577,096 $2,141,913 Debt Service $ 175,539 91,139 917 105,003 372,598 474,940 268,420 18,209 761,569 (388,971) 1,115,556 471,472 (1,171,447) 415,581 26,610 69,454 $96,064 Capital Projects $ 1,348,528 5,083,337 150,000 10,532 23,400 6,615,797 120,059 7,684,739 350,000 49,750 8,204,548 (1,588,751) 2,000,000 1,726,600 (112,600) 3,614,000 2,025,249 5,280,877 $7,306,126 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, 2017 Total Non- Major Governmental Funds $1,142,649 1,348,528 175,539 8,660,452 75,447 426,544 75,179 150,000 29,092 136,354 12,219,784 723,618 181,737 2,993,402 9,124,387 824,940 268,420 67,959 14,184,463 (1,964,679) 1,115,556 2,000,000 2,298,072 (660,826) (1,171,447) 3,581,355 1,616,676 7,927,427 $9,544,103 (This page intentionally left blank) 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. Bed Tax – accounts for the collection of the 6 percent bed tax revenues which funds economic development and tourism initiatives. Impound Fee – accounts for the collection of administrative fees for processing vehicles impounded by the Oro Valley police department. ASSETS Cash and cash equivalents Accounts receivable Intergovernmental receivable Total assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable Accrued wages and benefits Due to other funds Total liabilities Fund balances (deficits): Restricted Committed Unassigned Total fund balances Total liabilities and fund balances HURF $1,128,091 28,994 294,485 $1,451,570 $45,187 55,480 100,667 1,350,903 1,350,903 $1,451,570 State Seizures and Forfeitures $348,376 $348,376 $37,221 37,221 311,155 311,155 $348,376 Federal Seizures and Forfeitures $ $ $375 7,699 8,074 (8,074) (8,074) $ TOWN OF ORO VALLEY, ARIZONA COMBINING BALANCE SHEET - NON-MAJOR SPECIAL REVENUE FUNDS JUNE 30, 2017 Bed Tax $534,411 $534,411 $71,800 71,800 462,611 462,611 $534,411 Impound Fee $25,342 $25,342 $24 24 25,318 25,318 $25,342 Totals $2,036,220 28,994 294,485 $2,359,699 $154,607 55,480 7,699 217,786 336,473 1,813,514 (8,074) 2,141,913 $2,359,699 Revenues: Sales taxes Intergovernmental Licenses, fees & permits Fines, forfeitures & penalties Charges for services Investment earnings Other Total revenues Expenditures: Current - General government Public safety Highway and streets Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Total other financing sources (uses): Changes in fund balances Fund balances (deficits), beginning of year Fund balances (deficits), end of year HURF $ 3,485,976 75,447 75,179 15,495 4,451 3,656,548 2,993,402 1,402,577 4,395,979 (739,431) 100,000 (38,032) 61,968 (677,463) 2,028,366 $1,350,903 State Seizures and Forfeitures $ 359,938 1,297 361,235 52,747 37,071 89,818 271,417 271,417 39,738 $311,155 Federal Seizures and Forfeitures $ 29,740 315 30,055 8,931 8,931 21,124 21,124 (29,198) $(8,074) TOWN OF ORO VALLEY, ARIZONA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - NON-MAJOR SPECIAL REVENUE FUNDS YEAR ENDED JUNE 30, 2017 Bed Tax $1,142,649 536 3,500 1,146,685 666,257 666,257 480,428 (510,194) (510,194) (29,766) 492,377 $462,611 Impound Fee $ 36,866 36,866 57,361 57,361 (20,495) (20,495) 45,813 $25,318 Totals $1,142,649 3,485,976 75,447 426,544 75,179 17,643 7,951 5,231,389 723,618 61,678 2,993,402 1,439,648 5,218,346 13,043 100,000 (548,226) (448,226) (435,183) 2,577,096 $2,141,913 Total revenues Revenues: Sales taxes Intergovernmental Licenses, fees & permits Fines, forfeitures & penalties Charges for services Investment earnings Other Expenditures: Current - General government Public safety Highway and streets Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Total other financing sources (uses): Changes in fund balances Fund balances (deficits), beginning of year Fund balances (deficits), end of year HURF Budget $ 3,195,000 52,500 134,000 28,600 80,000 3,490,100 3,875,045 1,678,750 5,553,795 (2,063,695) 100,000 (38,032) 61,968 (2,001,727) $(2,001,727) Actual $ 3,485,976 75,447 75,179 15,495 4,451 3,656,548 2,993,402 1,402,577 4,395,979 (739,431) 100,000 (38,032) 61,968 (677,463) 2,028,366 $1,350,903 Variance - Positive (Negative) $ 290,976 22,947 (58,821) (13,105) (75,549) 166,448 881,643 276,173 1,157,816 1,324,264 1,324,264 2,028,366 $3,352,630 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, 2017 State Seizures and Forfeitures Budget $ 275,000 275,000 342,328 342,328 (67,328) (67,328) $(67,328) Actual $ 359,938 1,297 361,235 52,747 37,071 89,818 271,417 271,417 39,738 $311,155 Variance - Positive (Negative) $ 84,938 1,297 86,235 289,581 (37,071) 252,510 338,745 338,745 39,738 $378,483 Federal Seizures and Forfeitures Budget $ 22,768 22,768 (22,768) (22,768) $(22,768) Actual $ 29,740 315 30,055 8,931 8,931 21,124 21,124 (29,198) $(8,074) Variance - Positive (Negative) $ 29,740 315 30,055 13,837 13,837 43,892 43,892 (29,198) $14,694 (Continued) Total revenues Revenues: Sales taxes Intergovernmental Licenses, fees & permits Fines, forfeitures & penalties Charges for services Investment earnings Other Expenditures: Current - General government Public safety Highway and streets Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Total other financing sources (uses): Changes in fund balances Fund balances (deficits), beginning of year Fund balances (deficits), end of year Bed Tax Budget $1,085,805 6,200 1,092,005 914,589 914,589 177,416 (510,194) (510,194) (332,778) $(332,778) Actual $1,142,649 536 3,500 1,146,685 666,257 666,257 480,428 (510,194) (510,194) (29,766) 492,377 $462,611 Variance - Positive (Negative) $56,844 (5,664) 3,500 54,680 248,332 248,332 303,012 303,012 492,377 $795,389 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, 2017 Impound Fee Budget $ 40,000 40,000 80,814 80,814 (40,814) (40,814) $(40,814) Actual $ 36,866 36,866 57,361 57,361 (20,495) (20,495) 45,813 $25,318 Variance - Positive (Negative) $ (3,134) (3,134) 23,453 23,453 20,319 20,319 45,813 $66,132 Totals Budget $1,085,805 3,195,000 52,500 315,000 134,000 34,800 80,000 4,897,105 995,403 365,096 3,875,045 1,678,750 6,914,294 (2,017,189) 100,000 (548,226) (448,226) (2,465,415) $(2,465,415) Actual $1,142,649 3,485,976 75,447 426,544 75,179 17,643 7,951 5,231,389 723,618 61,678 2,993,402 1,439,648 5,218,346 13,043 100,000 (548,226) (448,226) (435,183) 2,577,096 $2,141,913 Variance - Positive (Negative) $56,844 290,976 22,947 111,544 (58,821) (17,157) (72,049) 334,284 271,785 303,418 881,643 239,102 1,695,948 2,030,232 2,030,232 2,577,096 $4,607,328 (This page intentionally left blank) MUNICIPAL DEBT SERVICE FUNDS Municipal Debt Service - to account for the payments of debt service on the Series 2005 Excise Tax Revenue Obligations, the Series 2007 MPC Excise Tax Revenue Refunding Bonds, the Series 2010 Excise Tax Revenue Clean Renewable Energy Bonds (CREBs), the Series 2012 Excise Tax Revenue Obligations, and the Series 2015 Excise Tax Revenue Refunding Obligations. Oracle Road Debt Service – to account for the special assessment collections and payment of the outstanding Oracle Road bond issue. ASSETS Cash and cash equivalents Special assessments Prepaid items Total assets LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Accounts payable Total liabilities Deferred inflows of resources: Unavailable revenues - special assessments Fund balances: Restricted Total fund balances Total liabilities, deferred inflows of resources and fund balances Municipal Debt Service $42,476 47,911 $90,387 $1,060 1,060 89,327 89,327 $90,387 Oracle Road Debt Service $6,737 645,000 $651,737 $ 645,000 6,737 6,737 $651,737 Totals $49,213 645,000 47,911 $742,124 $1,060 1,060 645,000 96,064 96,064 $742,124 TOWN OF ORO VALLEY, ARIZONA COMBINING BALANCE SHEET - NON-MAJOR DEBT SERVICE FUNDS JUNE 30, 2017 Revenues: Special assessments Intergovernmental Investment earnings Other Total revenues Expenditures: Debt service - Principal retirement Interest and fiscal charges Bond issuance costs Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Sale of refunding bonds Transfers in Payment to bond escrow agent Total other financing sources (uses): Changes in fund balances Fund balances, beginning of year Fund balances, end of year Municipal Debt Service $ 91,139 917 104,847 196,903 334,940 232,494 18,209 585,643 (388,740) 1,115,556 471,472 (1,171,447) 415,581 26,841 62,486 $89,327 Oracle Road Debt Service $175,539 156 175,695 140,000 35,926 175,926 (231) (231) 6,968 $6,737 Totals $175,539 91,139 917 105,003 372,598 474,940 268,420 18,209 761,569 (388,971) 1,115,556 471,472 (1,171,447) 415,581 26,610 69,454 $96,064 TOWN OF ORO VALLEY, ARIZONA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - NON-MAJOR DEBT SERVICE FUNDS YEAR ENDED JUNE 30, 2017 Total revenues Revenues: Special assessments Intergovernmental Investment earnings Other Expenditures: Debt service - Principal retirement Interest and fiscal charges Bond issuance costs Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Sale of refunding bonds Transfers in Payment to bond escrow agent Total other financing sources (uses): Changes in fund balances Fund balances, beginning of year Fund balances (deficits), end of year Municipal Debt Service Budget $ 54,945 90,000 144,945 334,940 355,717 690,657 (545,712) 471,472 471,472 (74,240) $(74,240) Actual $ 91,139 917 104,847 196,903 334,940 232,494 18,209 585,643 (388,740) 1,115,556 471,472 (1,171,447) 415,581 26,841 62,486 $89,327 Variance - Positive (Negative) $ 36,194 917 14,847 51,958 123,223 (18,209) 105,014 156,972 1,115,556 (1,171,447) (55,891) 101,081 62,486 $163,567 TOWN OF ORO VALLEY, ARIZONA COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL NON-MAJOR DEBT SERVICE FUNDS YEAR ENDED JUNE 30, 2017 Oracle Road Debt Service Budget $178,558 178,558 140,000 43,504 183,504 (4,946) 3,000 3,000 (1,946) $(1,946) Actual $175,539 156 175,695 140,000 35,926 175,926 (231) (231) 6,968 $6,737 Variance - Positive (Negative) $(3,019) 156 (2,863) 7,578 7,578 4,715 (3,000) (3,000) 1,715 6,968 $8,683 Totals Budget $178,558 54,945 90,000 323,503 474,940 399,221 874,161 (550,658) 474,472 474,472 (76,186) $(76,186) Actual $175,539 91,139 917 105,003 372,598 474,940 268,420 18,209 761,569 (388,971) 1,115,556 471,472 (1,171,447) 415,581 26,610 69,454 $96,064 Variance - Positive (Negative) $(3,019) 36,194 917 15,003 49,095 130,801 (18,209) 112,592 161,687 1,115,556 (3,000) (1,171,447) (58,891) 102,796 69,454 $172,250 (This page intentionally left blank) 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. Energy Efficiency Project – to account for bond proceeds to fund energy improvements at the Oro Valley Community Center. ASSETS Cash and cash equivalents Intergovernmental receivable Total assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable Total liabilities Fund balances: Restricted Committed Assigned Total fund balances Total liabilities and fund balances Townwide Roadway Development Impact Fees $3,097,156 $3,097,156 $ 3,097,156 3,097,156 $3,097,156 General Impact Fees $1,023,792 $1,023,792 $ 1,023,792 1,023,792 $1,023,792 Townwide Facilities Projects $15,718 $15,718 $ 15,718 15,718 $15,718 TOWN OF ORO VALLEY, ARIZONA COMBINING BALANCE SHEET - NON-MAJOR CAPITAL PROJECTS FUNDS JUNE 30, 2017 General Government CIP $1,737,570 $1,737,570 $21,209 21,209 1,716,361 1,716,361 $1,737,570 PAG/RTA $584,695 1,242,460 $1,827,155 $942,393 942,393 884,762 884,762 $1,827,155 Energy Efficiency Project $1,088,959 $1,088,959 $520,622 520,622 568,337 568,337 $1,088,959 Totals $7,547,890 1,242,460 $8,790,350 $1,484,224 1,484,224 5,574,047 15,718 1,716,361 7,306,126 $8,790,350 Revenues: Development impact fees Intergovernmental Contributions and donations Investment earnings Other Total revenues Expenditures: Current - Public safety Capital outlay Debt service - Principal retirement Bond issuance costs Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Issuance of revenue bonds Transfers in Transfers out Total other financing sources (uses): Changes in fund balances Fund balances, beginning of year Fund balances, end of year Townwide Roadway Development Impact Fees $873,690 8,391 882,081 1,000,000 1,000,000 (117,919) (117,919) 3,215,075 $3,097,156 General Impact Fees $474,838 150,000 2,141 626,979 199,680 199,680 427,299 (112,600) (112,600) 314,699 709,093 $1,023,792 Townwide Facilities Projects $ 15,718 $15,718 TOWN OF ORO VALLEY, ARIZONA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - NON-MAJOR CAPITAL PROJECTS FUNDS YEAR ENDED JUNE 30, 2017 General Government CIP $ 60,909 60,909 440,157 350,000 790,157 (729,248) 1,726,600 1,726,600 997,352 719,009 $1,716,361 PAG/RTA $ 5,022,428 23,400 5,045,828 120,059 4,662,989 4,783,048 262,780 262,780 621,982 $884,762 Energy Efficiency Project $ 1,381,913 49,750 1,431,663 (1,431,663) 2,000,000 2,000,000 568,337 $568,337 Totals $1,348,528 5,083,337 150,000 10,532 23,400 6,615,797 120,059 7,684,739 350,000 49,750 8,204,548 (1,588,751) 2,000,000 1,726,600 (112,600) 3,614,000 2,025,249 5,280,877 $7,306,126 Total revenues Revenues: Development impact fees Intergovernmental Contributions and donations Investment earnings Other Expenditures: Current - Public safety Capital outlay Debt service - Principal retirement Bond issuance costs Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Issuance of revenue bonds Transfers in Transfers out Total other financing sources (uses): Changes in fund balances Fund balances, beginning of year Fund balances (deficits), end of year Townwide Roadway Development Impact Fees Budget $340,167 3,000 343,167 3,317,088 3,317,088 (2,973,921) (2,973,921) $(2,973,921) Actual $873,690 8,391 882,081 1,000,000 1,000,000 (117,919) (117,919) 3,215,075 $3,097,156 Variance - Positive (Negative) $533,523 5,391 538,914 2,317,088 2,317,088 2,856,002 2,856,002 3,215,075 $6,071,077 TOWN OF ORO VALLEY, ARIZONA COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL NON-MAJOR CAPITAL PROJECTS FUNDS YEAR ENDED JUNE 30, 2017 General Impact Fees Budget $206,680 150,000 356,680 696,530 696,530 (339,850) (250,000) (250,000) (589,850) $(589,850) Actual $474,838 150,000 2,141 626,979 199,680 199,680 427,299 (112,600) (112,600) 314,699 709,093 $1,023,792 Variance - Positive (Negative) $268,158 2,141 270,299 496,850 496,850 767,149 137,400 137,400 904,549 709,093 $1,613,642 Townwide Facilities Projects Budget $ 27,918 27,918 (27,918) (27,918) $(27,918) Actual $ 15,718 $15,718 Variance - Positive (Negative) $ 27,918 27,918 27,918 27,918 15,718 $43,636 (Continued) Total revenues Revenues: Development impact fees Intergovernmental Contributions and donations Investment earnings Other Expenditures: Current - Public safety Capital outlay Debt service - Principal retirement Bond issuance costs Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Issuance of revenue bonds Transfers in Transfers out Total other financing sources (uses): Changes in fund balances Fund balances, beginning of year Fund balances (deficits), end of year General Government CIP Budget $ 81,000 81,000 2,648,000 2,648,000 (2,567,000) 1,867,000 1,867,000 (700,000) $(700,000) Actual $ 60,909 60,909 440,157 350,000 790,157 (729,248) 1,726,600 1,726,600 997,352 719,009 $1,716,361 Variance - Positive (Negative) $ (20,091) (20,091) 2,207,843 (350,000) 1,857,843 1,837,752 (140,400) (140,400) 1,697,352 719,009 $2,416,361 TOWN OF ORO VALLEY, ARIZONA COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL NON-MAJOR CAPITAL PROJECTS FUNDS YEAR ENDED JUNE 30, 2017 PAG/RTA Budget $ 9,249,971 22,500 9,272,471 9,552,166 9,552,166 (279,695) (279,695) $(279,695) Actual $ 5,022,428 23,400 5,045,828 120,059 4,662,989 4,783,048 262,780 262,780 621,982 $884,762 Variance - Positive (Negative) $ (4,227,543) 900 (4,226,643) (120,059) 4,889,177 4,769,118 542,475 542,475 621,982 $1,164,457 Energy Efficiency Project Budget $ 3,000,000 3,000,000 (3,000,000) (3,000,000) $(3,000,000) Actual $ 1,381,913 49,750 1,431,663 (1,431,663) 2,000,000 2,000,000 568,337 $568,337 Variance - Positive (Negative) $ 1,618,087 (49,750) 1,568,337 1,568,337 2,000,000 2,000,000 3,568,337 $3,568,337 (Continued) Total revenues Revenues: Development impact fees Intergovernmental Contributions and donations Investment earnings Other Expenditures: Current - Public safety Capital outlay Debt service - Principal retirement Bond issuance costs Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Issuance of revenue bonds Transfers in Transfers out Total other financing sources (uses): Changes in fund balances Fund balances, beginning of year Fund balances (deficits), end of year Totals Budget $546,847 9,330,971 150,000 3,000 22,500 10,053,318 19,241,702 19,241,702 (9,188,384) 1,867,000 (250,000) 1,617,000 (7,571,384) $(7,571,384) Actual $1,348,528 5,083,337 150,000 10,532 23,400 6,615,797 120,059 7,684,739 350,000 49,750 8,204,548 (1,588,751) 2,000,000 1,726,600 (112,600) 3,614,000 2,025,249 5,280,877 $7,306,126 Variance - Positive (Negative) $801,681 (4,247,634) 7,532 900 (3,437,521) (120,059) 11,556,963 (350,000) (49,750) 11,037,154 7,599,633 2,000,000 (140,400) 137,400 1,997,000 9,596,633 5,280,877 $14,877,510 TOWN OF ORO VALLEY, ARIZONA COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL NON-MAJOR CAPITAL PROJECTS FUNDS YEAR ENDED JUNE 30, 2017 INTERNAL SERVICE FUNDS Self Insurance - to account for the financial activity associated with the Town’s self-insurance program for employee health care. Fleet Maintenance - to account for the Town’s fleet maintenance services. ASSETS Current assets: Cash and cash equivalents Total current assets Total assets DEFERRED OUTFLOWS OF RESOURCES Pension plan items LIABILITIES Current liabilities: Accounts payable Claims payable Total current liabilities Noncurrent liabilities: Non-current portion of long-term obligations Total noncurrent liabilities Total liabilities DEFERRED INFLOWS OF RESOURCES Pension plan items NET POSITION Unrestricted Total net position Fleet Maintenance $952,371 952,371 952,371 24,809 76,454 76,454 107,559 107,559 184,013 13,557 779,610 $779,610 Self Insurance $225,469 225,469 225,469 15,749 323,077 338,826 338,826 (113,357) $(113,357) Totals $1,177,840 1,177,840 1,177,840 24,809 92,203 323,077 415,280 107,559 107,559 522,839 13,557 666,253 $666,253 TOWN OF ORO VALLEY, ARIZONA COMBINING STATEMENT OF NET POSITION - ALL INTERNAL SERVICE FUNDS JUNE 30, 2017 Operating revenues: Charges for services Other Self insurance premiums Total operating revenues Operating expenses: Costs of sales and services Claims payments Administrative fees Reinsurance premiums Total operating expenses Operating income (loss) Income (loss) before transfers Transfers in Changes in net position Total net postion, beginning of year Total net position, end of year Fleet Maintenance $1,630,329 72,354 1,702,683 1,353,330 1,353,330 349,353 349,353 349,353 430,257 $779,610 Self Insurance $ 3,047,980 3,047,980 40,108 2,761,967 57,000 633,462 3,492,537 (444,557) (444,557) 300,000 (144,557) 31,200 $(113,357) Totals $1,630,329 72,354 3,047,980 4,750,663 1,393,438 2,761,967 57,000 633,462 4,845,867 (95,204) (95,204) 300,000 204,796 461,457 $666,253 TOWN OF ORO VALLEY, ARIZONA COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION - ALL INTERNAL SERVICE FUNDS FOR THE YEAR ENDED JUNE 30, 2017 Fleet Maintenance Self Insurance Total Increase (Decrease) in Cash and Cash Equivalents Cash flows from operating activities: Cash received from customers 1,702,683$ $1,702,683$ Cash received from premiums 3,123,048 3,123,048 Cash payments to suppliers for goods and services (1,232,283) (746,094) (1,978,377) Cash payments to employees for services (87,468)(87,468) Cash payments for claims (2,687,926) (2,687,926) Net cash provided by (used for) operating activities 382,932 (310,972)71,960 Cash flows from noncapital and related financing activities: Interfund transfers 300,000 300,000 Net cash provided by noncapital financing activities 300,000 300,000 Net increase (decrease) in cash and cash equivalents 382,932 (10,972)371,960 Cash and cash equivalents, beginning of year 569,439 236,441 805,880 Cash and cash equivalents, end of year 952,371$ 225,469$ 1,177,840$ Reconciliation of Operating Income (Loss) to Net Cash Provided by (Used for) Operating Activities Operating income (loss)349,353$ (444,557)$ (95,204)$ Adjustments to reconcile operating income (loss) to net cash provided by (used for) operating activities: Change in assets and liabilities: Accounts receivable 75,068 75,068 Accounts payable 33,108 (15,524)17,584 Claims payable 74,041 74,041 Pension items 471 471 Total adjustments 33,579 133,585 167,164 Net cash provided by (used for) operating activities 382,932$ (310,972)$ 71,960$ TOWN OF ORO VALLEY, ARIZONA COMBINING STATEMENT OF CASH FLOWS ALL INTERNAL SERVICE FUNDS FOR THE YEAR ENDED JUNE 30, 2017 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. (This page intentionally left blank) 2013 2014 2015 2016 2017 Governmental activities Net investment in capital assets 134,512,094$ 133,714,821$ 133,800,218$ 132,419,826$ 133,414,691$ Restricted 3,730,312 4,555,138 3,599,966 4,653,905 6,006,584 Unrestricted 18,901,112 18,430,146 (9,493,907) (10,883,206) (15,397,688) Total governmental activities net position 157,143,518$ 156,700,105$ 127,906,277$ 126,190,525$ 124,023,587$ Business-type activities Net investment in capital assets 48,802,267$ 52,775,561$ 54,858,448$ 61,261,271$ 66,755,370$ Restricted Unrestricted 19,501,676 21,541,202 20,092,694 19,504,748 18,721,247 Total business-type activities net position 68,303,943$ 74,316,763$ 74,951,142$ 80,766,019$ 85,476,617$ Primary government Net investment in capital assets 183,314,361$ 186,490,382$ 188,658,666$ 193,681,097$ 200,170,061$ Restricted 3,730,312 4,555,138 3,599,966 4,653,905 6,006,584 Unrestricted 38,402,788 39,971,348 10,598,787 8,621,542 3,323,559 Total primary government net position 225,447,461$ 231,016,868$ 202,857,419$ 206,956,544$ 209,500,204$ Governmental activities 2008 2009 2010 2011 2012 Net investment in capital assets Restricted Unrestricted 115,177,344$ 120,515,962$ 127,712,057$ 132,956,156$ 135,336,862$ 14,072,781 7,537,331 9,580,610 9,048,505 11,454,390 Total governmental activities net position 26,698,611 26,135,593 15,979,093 10,588,160 10,808,596 Business-type activities 155,948,736$ 154,188,886$ 153,271,760$ 152,592,821$ 157,599,848$ Net investment in capital assets Restricted Unrestricted 21,274,023$ 28,212,750$ 31,383,715$ 40,005,568$ 45,669,488$ Total business-type activities net position 24,651,948 24,393,984 24,404,427 20,371,225 19,067,780 Primary government 45,925,971$ 52,606,734$ 55,788,142$ 60,376,793$ 64,737,268$ Net investment in capital assets Restricted Unrestricted 136,451,367$ 148,728,712$ 159,095,772$ 172,961,724$ 181,006,350$ 14,072,781 7,537,331 9,580,610 9,048,505 11,454,390 Total primary government net position 51,350,559 50,529,577 40,383,520 30,959,385 29,876,376 201,874,707$ 206,795,620$ 209,059,902$ 212,969,614$ 222,337,116$ Source: Town of Oro Valley Finance Department TOWN OF ORO VALLEY, ARIZONA NET POSITION BY COMPONENT LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) 2008200920102011201220132014201520162017ExpensesGovernmental activities:General government9,080,766$ 9,936,639$ 9,950,053$ 9,887,523$ 9,961,376$ 9,861,131$ 10,990,007$ 11,533,702$ 11,888,794$ 12,130,905$ Public Safety14,347,250 15,019,980 13,730,593 12,509,201 12,349,948 12,770,224 13,814,914 16,587,168 16,123,500 22,251,172 Highways and streets7,292,972 9,481,040 9,353,689 8,895,987 9,339,062 9,255,004 8,754,110 9,400,140 9,089,318 9,417,459 Transit1,275,093 1,404,646 1,432,910 1,533,258 Culture and recreation3,644,973 3,806,555 3,527,949 3,375,281 3,227,895 2,783,633 3,399,623 4,572,490 9,695,639 10,204,276 Interest on long-term debt987,074 954,645 1,767,155 430,570 654,262 522,917 656,260 439,027 494,732 511,502 Total governmental activities/expenses35,353,035 39,198,859 38,329,439 35,098,562 35,532,543 35,192,909 38,890,007 43,937,173 48,724,893 56,048,572 Business-type activities:Water12,676,275 13,495,124 12,830,137 12,527,851 11,984,829 13,047,373 13,572,677 13,608,931 14,406,074 14,753,418 Stormwater drainage177,673 494,166 486,994 586,006 636,966 983,975 749,038 854,510 917,898 1,115,494 Total business-type activities expenses12,853,948 13,989,290 13,317,131 13,113,857 12,621,795 14,031,348 14,321,715 14,463,441 15,323,972 15,868,912 Total primary government expenses48,206,983$ 53,188,149$ 51,646,570$ 48,212,419$ 48,154,338$ 49,224,257$ 53,211,722$ 58,400,614$ 64,048,865$ 71,917,484$ Program RevenuesGovernmental activities:Fees, Fines and Charges for Services:General government3,830,060$ 2,835,884$ 2,261,815$ 2,455,182$ 3,079,526$ 3,740,046$ 3,978,117$ 3,516,359$ 4,096,927$ 4,901,504$ Public Safety69,256 83,279 28,785 33,976 33,109 45,346 35,976 29,097 168,808 138,075 Highways and streets211,088 119,847 137,436 400,977 329,420 1,052,581 546,066 496,098 764,397 1,052,167 Transit71,078 72,783 88,684 100,052 Culture and recreation73,149 110,857 119,273 126,290 82,832 169,965 435,354 1,108,734 4,373,693 4,611,576 Operating grants and contributions5,619,003 5,392,667 4,728,050 4,887,283 5,247,844 5,318,097 4,706,844 5,070,396 5,503,530 4,664,197 Capital grants and contributions10,264,829 1,781,571 6,514,602 8,980,239 7,107,063 2,920,335 2,919,641 2,456,727 3,602,656 6,749,407 Total governmental activities program revenues20,067,385 10,324,105 13,789,961 16,883,947 15,879,794 13,246,370 12,693,076 12,750,194 18,598,695 22,216,978 Business-type activities:Charges for services:Water 16,803,950 16,098,086 15,136,784 15,119,065 15,817,345 16,732,600 19,286,794 16,088,681 16,739,580 18,158,385 Stormwater Utility357,602 746,655 927,238 888,391 752,212 813,400 759,428 771,594 828,258 1,314,787 Operating grants and contributions35,000 Capital grants and contributions3,567,083 3,697,229 362,273 1,655,307 245,607 48,871 179,675 1,979,037 3,334,372 1,097,285 Total business-type activities program revenues 20,728,635 20,541,970 16,426,295 17,662,763 16,815,164 17,594,871 20,225,897 18,839,312 20,937,210 20,570,457 Total primary government program revenues40,796,020$ 30,866,075$ 30,216,256$ 34,546,710$ 32,694,958$ 30,841,241$ 32,918,973$ 31,589,506$ 39,535,905$ 42,787,435$ (ACCRUAL BASIS OF ACCOUNTING)(UNAUDITED)TOWN OF ORO VALLEY, ARIZONACHANGES IN NET POSITIONLAST TEN FISCAL YEARS 2008200920102011201220132014201520162017Net (Expense)/RevenuesGovernmental activities(15,285,650)$ (28,874,754)$ (24,539,478)$ (18,214,615)$ (19,652,749)$ (21,946,539)$ (26,196,931)$ (31,186,979)$ (30,126,198)$ (33,831,594)$ Business-type activities7,874,687 6,552,680 3,109,164 4,548,906 4,193,369 3,563,523 5,904,182 4,375,871 5,613,238 4,701,545 Total primary government net expenses(7,410,963)$ (22,322,074)$ (21,430,314)$ (13,665,709)$ (15,459,380)$ (18,383,016)$ (20,292,749)$ (26,811,108)$ (24,512,960)$ (29,130,049)$ General Revenues and Other Changes in Net PositionGovernmental activities:Taxes:Sales taxes17,168,998$ 15,376,408$ 12,970,865$ 11,572,148$ 12,799,678$ 14,241,065$ 15,286,001$ 16,132,159$ 16,998,464$ 19,767,720$ Franchise taxes516,652 506,685 509,285 514,814 525,427 539,477 571,731 582,064 621,546 647,830 Impact fees*910,741 441,020 584,113 Unrestricted state revenue sharing5,544,763 5,886,132 5,086,953 4,520,935 3,461,359 9,048,365 9,636,906 10,413,464 10,549,196 11,177,729 Unrestricted state sales tax revenue sharing3,621,016 3,134,789 2,891,386 2,569,666 3,204,612 Unrestricted auto lieu tax revenue sharing1,738,875 1,655,875 1,484,125 1,318,989 1,479,094 Investment earnings (loss)1,590,654 113,995 95,625 39,124 189,606 265,787 255,702 216,175 238,210 68,435 Special item - Capital asset conveyance(2,606,804) Transfers1,600,000 2,319 3,178 3,119 3,030 2,942 Total governmental activities32,691,699 27,114,904 23,622,352 20,535,676 21,659,776 21,490,209 25,753,518 27,346,981 28,410,446 31,664,656 Business-type activities:Investment earnings (loss)864,494 128,083 72,244 39,745 167,106 5,471 111,816 124,887 204,669 11,995 Transfers(1,600,000) (2,319) (3,178) (3,119) (3,030) (2,942) Total business-type activities(735,506) 128,083 72,244 39,745 167,106 3,152 108,638 121,768 201,639 9,053 Total primary government31,956,193$ 27,242,987$ 23,694,596$ 20,575,421$ 21,826,882$ 21,493,361$ 25,862,156$ 27,468,749$ 28,612,085$ 31,673,709$ Change in Net PositionGovernmental activities17,406,049$ (1,759,850)$ (917,126)$ 2,321,061$ 2,007,027$ (456,330)$ (443,413)$ (3,839,998)$ (1,715,752)$ (2,166,938)$ Business-type activities7,139,181 6,680,763 3,181,408 4,588,651 4,360,475 3,566,675 6,012,820 4,497,639 5,814,877 4,710,598 Total primary government24,545,230$ 4,920,913$ 2,264,282$ 6,909,712$ 6,367,502$ 3,110,345$ 5,569,407$ 657,641$ 4,099,125$ 2,543,660$ Source: Town of Oro Valley Finance Department* Impact fees in fiscal year 2011 are now presented in program revenues. (This page intentionally left blank) 2008200920102011201220132014201520162017General FundNonspendable$$$$$$$31,278$ 97,269$ 130,030$ RestrictedCommittedAssigned1,769,333 1,608,035 1,608,035 1,608,035 1,553,999 1,441,862 1,441,862 Unassigned9,237,805 9,793,614 11,529,070 9,925,988 8,566,598 8,985,422 11,831,322 ReservedUnreserved16,666,388 15,940,438 11,904,429 Total general fund16,666,388$ 15,940,438$ 11,904,429$ 11,007,138$ 11,401,649$ 13,137,105$ 11,534,023$ 10,151,875$ 10,524,553$ 13,403,214$ All Other Governmental FundsNonspendable$$$$$$$149,348$ 127,600$ 132,538$ Restricted9,128,505 11,454,390 3,730,312 4,555,138 3,599,966 4,031,923 6,006,584 Committed 840,704 622,919 4,166,818 5,343,506 4,637,773 2,617,856 1,829,232 Assigned1,500,000 1,421,593 1,340,991 1,716,361 Unassigned(29,198) (237,769) ReservedUnreserved, reported in:Special revenue funds5,534,192 5,887,082 5,868,523 Capital projects funds15,396,024 9,071,398 3,933,044 Debt service funds263,478 158,816 1,929,635 Total all other governmental funds21,193,694$ 15,117,296$ 11,731,202$ 9,969,209$ 12,077,309$ 7,897,130$ 11,398,644$ 9,808,680$ 8,089,172$ 9,446,946$ Source: Town of Oro Valley Finance DepartmentNote:(MODIFIED ACCRUAL BASIS OF ACCOUNTING)(UNAUDITED)The provisions of the Governmental Accounting Standards Board (GASB) Statement No. 54 were adopted in fiscal year 2011. The standard replaces the previous reserved and unreserved fundbalance categories with the following five fund balance classifications; nonspendable, restricted, committed, assigned, and unassigned fund balance.Fiscal YearTOWN OF ORO VALLEY, ARIZONAFUND BALANCES OF GOVERNMENTAL FUNDSLAST TEN FISCAL YEARS 2008200920102011201220132014201520162017RevenuesTaxes 17,685,650$ 15,883,093$ 13,480,150$ 12,086,962$ 13,325,105$ 14,780,542$ 15,857,732$ 16,714,223$ 17,620,010$ 20,415,550$ Intergovernmental21,863,875 17,616,213 17,940,749 18,040,619 19,723,086 16,817,756 16,732,631 17,714,991 19,488,066 22,118,633 Fines and forfeitures391,921 413,720 612,031 560,941 895,820 551,962 673,336 221,571 283,470 558,692 Licenses and permits2,792,684 1,507,930 1,108,411 1,059,309 1,185,862 1,813,947 2,116,700 1,605,937 1,915,992 2,388,951 Charges for services1,040,694 1,066,376 965,455 926,135 1,209,814 1,630,238 1,850,181 2,991,826 5,956,058 6,226,578 Contributions and donations249,999 1,000 59 15,000 995 27,229 149,513 150,000 Special assessments193,023 367,539 368,152 365,811 366,028 365,935 1,462,307 178,078 189,525 175,539 Impact fees910,741 441,020 584,113 481,619 417,742 988,342 569,338 439,637 795,471 1,348,528 Investment earnings1,590,654 113,995 95,625 39,124 189,606 265,787 255,702 216,175 238,210 68,435 Other revenues555,790 233,123 216,030 297,109 460,512 349,326 305,489 141,618 504,796 572,886 Total revenues47,275,031$ 37,644,009$ 35,370,775$ 33,872,629$ 37,774,570$ 37,591,064$ 39,823,416$ 40,224,056$ 47,141,111$ 54,023,792$ ExpendituresGeneral government8,767,496$ 9,586,029$ 9,452,778$ 9,848,393$ 9,212,866$ 9,289,771$ 10,610,673$ 10,862,553$ 11,426,687$ 11,098,844$ Public safety13,549,170 14,289,423 12,979,291 11,928,567 11,993,864 12,342,349 13,539,322 15,071,396 15,494,532 15,725,029 Highways and streets4,107,871 3,848,725 3,475,556 3,288,349 3,191,654 3,513,479 3,710,577 2,602,321 2,754,413 2,993,402 Transit1,404,646 1,432,910 1,528,654 Culture and recreation3,324,066 3,416,305 3,157,369 3,031,520 2,954,549 2,468,129 2,445,131 4,078,817 9,097,752 9,433,339 Capital Outlay13,090,313 11,332,914 3,189,765 7,014,659 6,929,834 11,053,739 5,495,185 8,093,704 7,995,340 9,196,801 Debt ServicePrincipal retirement3,403,102 938,900 3,400,877 3,459,970 3,052,953 571,910 1,867,901 649,840 897,637 1,075,466 Interest and fiscal charges907,658 1,034,061 831,580 470,578 554,274 498,729 472,268 436,010 336,510 314,914 Payment to bond escrow agent6,279,112 Bond Issuance costs26,550 75,800 104,533 67,959 Total expenditures47,149,676$ 44,446,357$ 42,792,878$ 39,042,036$ 37,965,794$ 39,738,106$ 38,141,057$ 43,199,287$ 49,540,314$ 51,434,408$ Excess of revenues125,355$ (6,802,348)$ (7,422,103)$ (5,169,407)$ (191,224)$ (2,147,042)$ 1,682,359$ (2,975,231)$ (2,399,203)$ 2,589,384$ over (under) expendituresOther Financing Sources (Uses)Premium on bonds issued$$$$113,835$ $$$$$Proceeds from capital lease agreements212,895 1,043,214 Issuance of long-term loan payable8,000,000 Payment to bond escrow agent(2,523,121) (1,171,447) Issuance of long-term debt2,445,000 2,580,000 2,529,250 3,115,556 Transfers in8,447,951 1,950,898 10,012,679 860,143 1,003,666 1,704,272 4,115,152 4,326,627 1,872,026 2,953,072 Transfers out(6,847,951) (1,950,898) (10,012,679) (795,020) (1,003,666) (2,001,953) (4,111,974) (4,323,508) (1,868,996) (3,250,130) Total other financing sources (uses)9,600,000$ $ $ 2,510,123$ 2,693,835$ (297,681)$ 216,073$ 3,119$ 1,052,373$ 1,647,051$ Net change in fund balances9,725,355$ (6,802,348)$ (7,422,103)$ (2,659,284)$ 2,502,611$ (2,444,723)$ 1,898,432$ (2,972,112)$ (1,346,830)$ 4,236,435$ Debt service as a percentage of12.36%5.88%10.60%12.36%11.55%3.76%7.30%3.17%3.00%3.32%noncapital expendituresSource: Town of Oro Valley Finance DepartmentLAST TEN FISCAL YEARS(MODIFIED ACCRUAL BASIS OF ACCOUNTING)(UNAUDITED)Fiscal YearTOWN OF ORO VALLEY, ARIZONACHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS 20162007PercentagePercentageof Total Townof Total TownEmployerEmployees Rank Employment Employees Rank EmploymentVentana Medical Systems 1,291 1 7.53% 680 1 4.55%Oro Valley Hospital 674 2 3.93% 560 4Town of Oro Valley 558 4 3.26% 448 5 3.00%Amphitheater Public Schools 435 3 2.54% 602 2 4.03%Hilton El Conquistador Golf & Tennis Resort 254 5 1.48% 600 3 4.02%Casa de la luz Hospice 207 6 1.21% 0.00%Splendido at Rancho Vistoso 156 7 0.91%Securaplane 154 8 0.90%Walmart Supercenter 125 9 0.73%Target 100 10 0.58% 135 8Fry's Food & Drug Store220 6 1.47%Home Depot150 7 1.00%Long Realty125 9 0.84%Stone Canyon Golf/Golf Club at Vistoso80 10 0.54%Total 3,954 23.07% 3,600 19.44%Source: U.S. Bureau of Labor StatisticsTOWN OF ORO VALLEY, ARIZONAPRINCIPAL EMPLOYERS(UNAUDITED)CURRENT FISCAL YEAR AND FISCAL YEAR NINE YEARS PRIOR Fiscal Year 2017Fiscal Year 2008Percentage ofPercentage ofSales TaxTotal SalesSales TaxTotal SalesTaxpayerBusiness TypePaymentsRankTax PaymentsPaymentsRankTax PaymentsTaxpayer AUtility1,896,696$ 19.67%728,819$ 34.39%Taxpayer B Construction1,728,988 38.81%Taxpayer C Accomodation1,175,238 45.99%1,705,616 110.27%Taxpayer D Retail Trade1,075,738 55.48%Taxpayer E Retail Trade876,931 94.47%637,204 43.84%Taxpayer F Government546,744 72.79%Taxpayer G Retail Trade475,812 62.43%634,572 53.82%Taxpayer H Construction470,501 82.40%Taxpayer I Construction461,665 22.35%0.00%Taxpayer J Retail Trade452,660 102.31%298,627 101.80%Taxpayer K Construction831,304 25.01%Taxpayer L Construction605,515 63.65%Taxpayer M Construction374,619 72.26%Taxpayer N Retail Trade324,055 81.95%Taxpayer O Construction298,948 91.80%Total9,160,973$ 46.70%6,439,279$ 38.78%Source: Arizona Department of RevenueTOWN OF ORO VALLEY, ARIZONAPRINCIPAL SALES TAXPAYERSCURRENT FISCAL YEAR AND FISCAL YEAR NINE YEARS PRIOR(UNAUDITED) 2008 2009 2010 2011 2012 2013 2014 2015 20162017Construction7,038$ 5,143$ 2,110$ 1,707$ 1,738$ 2,842$ 3,338$ 3,199$ 2,131$ 4,295$ Manufacturing280 230 230 266 258 258 257 141 156 137 Transportation, Warehousing, Communications & Utilities1,279 1,632 1,554 1,534 2,450 2,785 2,959 3,068 3,133 3,171 Wholesale Trade69 54 75 93 106 110 103 125 131 136 Retail Trade4,017 4,264 4,544 4,720 4,925 5,153 5,243 5,808 6,844 7,086 Restaurants, Bars & Lodging2,775 2,333 2,283 2,314 2,314 2,164 2,761 2,803 3,295 3,324 Finance, Insurance & Real Estate496 324 381 324 333 335 75 270 443 562 Services312 322 378 417 456 456 529 599 672 702 All Other 337 896 627 102 103 75 60 115 190 202 Cable Franchise517 507 509 515 525 540 572 582 622 648 Total17,120$ 15,705$ 12,691$ 11,992$ 13,208$ 14,718$ 15,897$ 16,710$ 17,617$ 20,263$ Town sales tax rate*2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.50% 2.50% 2.50%Source: Arizona Department of Revenue*Note:1% Additional Bed Tax Effective May 1, 19903% Additional Bed Tax Effective September 1, 20014% Construction Sales Tax Effective May 1, 20046% Additional Bed Tax Effective January 1, 20062% Utility Sales Tax Effective April 1, 20072% Additional Utility Sales Tax Effective August 1, 2011.5% Additional sales tax effective March 1, 2015Fiscal YearTOWN OF ORO VALLEY, ARIZONATAXABLE SALES BY CATEGORYLAST TEN FISCAL YEARS (UNAUDITED)($000's) Town of Oro Town of Oro Town of Oro Valley Town of Oro Fiscal Valley Valley Construction Valley Year Sales Tax Bed Tax Sales Tax Utility Sales Tax Pima County 2008 2.00% 6.00% 4.00% 2.00% 6.10% 2009 2.00% 6.00% 4.00% 2.00% 6.10% 2010 2.00% 6.00% 4.00% 2.00% 7.10% 2011 2.00% 6.00% 4.00% 2.00% 7.10% 2012 2.00% 6.00% 4.00% 4.00% 7.10% 2013 2.00% 6.00% 4.00% 4.00% 6.10% 2014 2.00% 6.00% 4.00% 4.00% 6.10% 2015* 2.50% 6.00% 4.00% 4.00% 6.10% 2016 2.50% 6.00% 4.00% 4.00% 6.10% 2017 2.50% 6.00% 4.00% 4.00% 6.10% *.5% Additional sales tax effective March 1, 2015 Source: Arizona Department of Revenue TOWN OF ORO VALLEY, ARIZONA DIRECT AND OVERLAPPING SALES TAX RATES LAST TEN FISCAL YEARS (UNAUDITED) Year Limited Assessed Valuation Full Cash Assesed Valuation Estimated Full Cash Value Total Outstanding General Obligation Bond Debt 2008 515,095,975$ 582,838,439$ 5,098,720,276$ 0 2009 582,236,657 686,707,506 6,141,419,229 0 2010 642,601,840 693,924,598 6,140,054,657 0 2011 649,015,575 672,309,638 6,041,904,306 0 2012 618,976,953 629,340,548 5,716,229,517 0 2013 589,160,533 592,761,968 5,461,131,133 0 2014 553,366,744 556,259,856 5,175,406,955 0 2015 556,566,167 560,863,509 5,252,917,489 0 2016 572,696,599 593,299,222 5,616,655,680 0 2017 593,580,247 616,216,705 5,688,443,027 0 Source: State of Arizona Department of Revenue Abstract of the Assessment Roll Note: TOWN OF ORO VALLEY, ARIZONA LIMITED & FULL CASH ASSESSED PROPERTY VALUES LAST TEN FISCAL YEARS (UNAUDITED) Beginning in FY 2016, due to Proposition 117, the primary (limited assessed valuation) is to be used by municipalities when levying for maintenance and operation and for debt retirement. Prior to that date, the secondary (full cash) assessed valuation was used when levying for debt retirement, voter-approved budget overrides, and maintenance and operation of special service districts. FiscalFiscalFiscalFiscalFiscalFiscalFiscalFiscalFiscalFiscalYearYearYearYearYearYearYearYearYearYearRevenue Source2010201120122013201420152016201720182019Town Sales and Franchise Taxes 13,480,150$ 12,086,962$ 13,325,106$ 14,780,543$ 15,857,732$ 16,714,223$ 17,620,010$ 20,415,550$ 20,599,640$ 21,217,629$ Licenses and Permits1,108,411 1,059,309 1,185,862 1,813,947 2,116,700 1,605,937 1,915,992 2,313,504 2,063,121 2,125,015 Fines202,144 195,933 200,672 180,875 172,232 148,050 159,154 131,637 120,000 123,600 State-Shared Sales Tax2,891,386 3,024,857 3,204,612 3,356,826 3,569,711 3,747,944 3,887,673 3,989,179 4,140,787 4,265,011 State-Shared Income Tax5,086,954 3,834,911 3,461,359 4,189,186 4,571,196 4,964,635 4,937,719 5,329,864 5,467,916 5,631,953 Total22,769,045$ 20,201,972$ 21,377,611$ 24,321,377$ 26,287,571$ 27,180,789$ 28,520,548$ 32,179,734$ 32,391,465$ 33,363,208$ (a) All revenue sources are presented on a modified accrual basis of accounting except for Town sales taxes which are presented on the cash basis of accounting per the Arizona Department of Revenue Standard Industry Summary Local Taxes Collection Reports.Source: Oro Valley Finance DepartmentNote: The above information is provided for bond requirements only and the bond does not require ten years of data.TOWN OF ORO VALLEY, ARIZONAHISTORICAL AND PROJECTED EXCISE TAX COLLECTIONSJUNE 30, 2017(UNAUDITED)ProjectedAcutal Business-Type ActivitiesSpecialTotal PercentageFiscal Capital Note Loan Excise TaxAssessmentRevenueCapital Loan Primaryof Personal PerYearLeases PayablePayableBonds BondsBondsLeases PayableGovernmentIncome Capita2008$ $ 8,000,000$ 12,183,046$ 3,565,000$ 59,586,954$ $ 5,731,766$ 89,066,766$ 5.02% 2,040$ 20098,000,000 11,449,146 3,360,000 57,575,854 107,046 5,788,122 86,280,168 4.72% 1,975 20105,513,133 4,939,750 3,145,000 52,305,500 123,883 6,305,650 72,332,916 3.86% 1,662 20112,513,133 7,149,780 2,920,000 49,803,970 35,392 5,473,096 67,895,371 3.73% 1,656 20129,485,968 2,685,000 45,988,331 5,893,122 64,052,421 3.85% 1,550 20139,155,743 2,435,000 43,349,121 185,307 5,575,041 60,700,212 3.59% 1,409 2014168,994 8,703,428 1,055,000 40,811,243 93,593 6,371,529 57,203,787 3.41% 1,366 2015128,594 1,000,000 8,215,673 925,000 37,683,805 118,862 8,169,765 56,241,699 3.25% 1,331 2016966,962 700,000 7,716,638 780,000 34,517,647 80,423 8,879,907 53,641,577 2.95% 1,231 2017716,622 350,000 9,341,559 640,000 30,804,327 40,814 8,284,407 50,177,729 2.69% 1,146 Source: Town of Oro Valley Finance Department and U.S. Census BureauTOWN OF ORO VALLEY, ARIZONARATIO OF OUTSTANDING DEBT BY TYPELAST TEN FISCAL YEARS (UNAUDITED)Governmental Activities Estimated Estimated Share of Debt Percentage Overlapping Governmental Unit Outstanding Applicable Debt Pima County 336,954,000$ 7.46% 25,136,768$ Amphitheater Unified School District No. 10 93,685,000 40.83% 38,251,586 Total Overlapping 63,388,354 Town of Oro Valley 11,048,181 100% 11,048,181 Total Direct 11,048,181 Total direct and overlapping debt 74,436,535$ Source: Pima County, Pima County Community College District and Amphitheater Unified School District No. 10. (1) Proportion applicable to the Town of Oro Valley, Arizona, is computed on the ratio of secondary assessed valuation for 2016-17. TOWN OF ORO VALLEY, ARIZONA DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT JUNE 30, 2017 (UNAUDITED) 2008200920102011201220132014201520162017Debt Limit151,537,994$ 178,543,952$ 180,420,396$ 174,800,436$ 163,628,543$ 154,118,112$ 144,627,563$ 145,824,512$ 154,257,798$ 160,216,343$ Total net debt applicable to limitLegal debt margin120,435,053$ 151,537,994$ 178,543,952$ 180,420,396$ 174,800,436$ 163,628,543$ 154,118,112$ 145,824,512$ 154,257,798$ 160,216,343$ Total net debt applicable to the limitas a percentage of debt limit0.00%0.00%0.00%0.00%0.00%0.00%0.00%0.00%0.00%0.00%Source: Town of Oro Valley Finance DepartmentFiscal YearTOWN OF ORO VALLEY, ARIZONALEGAL DEBT MARGIN INFORMATIONLAST TEN FISCAL YEARS(UNAUDITED) Net secondary assessed valuation 616,216,705$ Water, Sewer, Light, Parks, Open Space and Recreational Facility Bonds Debt limit - 20% of secondary net assessed valuation 123,243,341$ 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 123,243,341$ All other general obligation bonds Debt Limit - 6% of secondary net assessed valuation 36,973,002$ 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 36,973,002$ Total legal debt margin 160,216,343$ Source: Pima County Assessor's Office TOWN OF ORO VALLEY CALCULATION OF LEGAL DEBT MARGIN JUNE 30, 2017 (UNAUDITED) Water Utility Revenue Bonds Fiscal Gross Year Revenues Principal Interest Total Coverage 2008 17,668,212$ 1,981,898$ 2,452,583$ 4,434,481$ 3.98 2009 16,223,544 2,011,100 2,784,444 4,795,544 3.38 2010 15,207,113 5,270,354 2,689,427 7,959,781 1.91 2011 15,359,681 2,501,530 2,505,960 5,007,490 3.07 2012 15,983,999 2,370,180 2,190,894 4,561,074 3.50 2013 16,732,600 2,536,840 1,732,008 4,268,848 3.92 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 Governmental Revenue Bonds Fiscal Gross Year Revenues Principal Interest Total Coverage 2008 30,629,130$ 708,102$ 501,150$ 1,209,252$ 25.33 2009 28,084,482 733,900 486,372 1,220,272 23.01 2010 25,695,598 6,510,516 933,536 7,444,052 3.45 2011 23,921,715 234,970 253,984 488,954 48.92 2012 25,085,767 304,820 314,703 619,523 40.49 2013 28,135,868 321,910 371,951 693,861 40.55 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 Special Assessment Fiscal Gross Year Revenues Principal Interest Total Coverage 2008 365,810$ 195,000$ 177,577$ 372,577$ 0.98 2009 367,539 205,000 248,429 453,429 0.81 2010 368,152 215,000 152,203 367,203 1.00 2011 365,811 225,000 147,548 372,548 0.98 2012 366,028 235,000 132,423 367,423 1.00 2013 365,935 250,000 117,576 367,576 1.00 2014 1,462,307 1,380,000 80,020 1,460,020 1.00 2015 178,078 130,000 45,917 175,917 1.01 2016 189,525 145,000 58,189 203,189 0.93 2017 175,539 140,000 33,203 173,203 1.01 Source: Town of Oro Valley Finance Department Debt Service TOWN OF ORO VALLEY, ARIZONA PLEDGED-REVENUE COVERAGE LAST TEN FISCAL YEARS (UNAUDITED) Debt Service Debt Service Historical Historical Historical Historical Historical HistoricalActualActualActual2008/092009/102010/112011/122012/132013/142014/152015/162016/17Revenues:Water revenues11,424,787$ 12,071,031$ 12,038,482$ 11,578,981$ 11,585,181$ 12,169,375$ 11,280,269$ 12,018,429$ 12,493,557$ Water connection fees1,588,084 293,607 244,376 462,762 706,159 1,413,047 591,045 544,852 816,353 Alternative water connection fees812,740 475,973 400,988 759,958 1,253,055 2,376,682 1,172,170 1,094,460 1,638,792 Groundwater preservation fees1,632,549 1,769,142 2,096,093 2,315,277 2,527,524 2,599,718 2,330,231 2,371,100 2,440,045 Other revenues639,926 527,031 541,299 557,222 660,681 727,972 714,965 710,740 769,638 Interest income125,458 70,329 38,445 166,654 110,615 124,593 203,857 11,020 Total revenues16,223,544 15,207,113 15,359,683 15,840,854 16,732,600 19,397,409 16,213,273 16,943,438 18,169,405 Expenses:Personnel2,447,642 2,514,595 2,418,118 2,497,865 2,537,150 2,659,895 2,767,143 2,952,249 3,021,915 Operations & maintenance5,415,423 4,505,751 3,721,167 3,559,807 4,564,894 4,303,230 4,530,436 5,059,998 4,719,579 CAP water costs185,490 154,575 903,855 636,519 1,093,105 1,499,594 1,570,793 1,952,117 2,892,392 Total expenses8,048,555 7,174,921 7,043,140 6,694,191 8,195,149 8,462,719 8,868,372 9,964,364 10,633,886 Net water system revenues8,174,989 8,032,192 8,316,544 9,146,662 8,537,452 10,934,690 7,344,901 6,979,074 7,535,519 Water supported debt service:2007 WIFA Loan308,406 369,627 316,983 316,875 316,763 311,494 311,377 311,256 311,130 2009 WIFA Loan161,554 182,268 186,817 150,471 149,367 149,322 149,275 2014 WIFA Loan296,972 361,059 395,534 2003 Revenue Bonds2,544,423 2,544,973 2,545,935 2,545,435 980,000 2003 Refunding Revenue Bonds648,674 647,374 1,152,546 1,238,996 1,243,058 2005 Excise Tax Bonds151,946 152,672 151,744 152,099 151,245 152,565 152,516 2007 Excise Tax Bonds1,136,077 1,516,494 791,099 791,203 791,111 790,822 1,255,948 1,197,678 1,245,403 2012 Refunding Bonds956,975 1,968,281 1,971,082 1,995,481 1,980,781 2013 Refunding Bonds1,513,427 1,046,558 1,022,420 1,015,424 2015 Refunding Revenue Obligations17,116 25,101 Total water supported debt service4,789,526$ 5,231,140$ 5,119,860$ 5,226,876$ 4,625,969$ 4,887,060$ 5,183,820$ 5,054,333$ 5,122,648$ Debt service coverage1.711.541.621.751.852.241.421.381.47Source: Oro Valley Finance DepartmentTOWN OF ORO VALLEY, ARIZONAHISTORICAL AND PROJECTED WATER SYSTEM REVENUES, EXPENSES, DEBT SERVICE AND COVERAGEJUNE 30, 2017(UNAUDITED) Personal Per Income Capita (thousands Personal Unemployment Year Population of dollars)Income Rate 2008 43,651 1,773,226,205$ 40,623$ 3.0% 2009 43,694 1,828,222,176 41,841 5.1% 2010 43,521 1,875,613,105 43,097 6.2% 2011 41,011 1,820,460,164 44,390 6.0% 2012 41,335 1,661,839,665 40,204 6.4% 2013 43,070 1,692,780,210 39,303 6.4% 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% Source: US Census Bureau, Arizona Employment statistics and Pima Association of Governments TOWN OF ORO VALLEY, ARIZONA DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS (UNAUDITED) 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 Function/Program Administration Town Clerk 4.54 4.56 4.56 4.90 4.54 4.44 4.60 4.00 4.60 4.60 Town Manager 7.38 7.38 8.00 7.00 7.00 7.10 7.10 8.10 8.50 8.10 Human Resources 3.48 3.50 3.50 2.00 5.00 5.00 5.00 4.00 4.00 4.00 Economic Development 3.00 3.00 2.00 2.00 3.00 1.00 1.00 1.40 1.40 2.25 Finance 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 9.00 9.00 Information Systems 7.00 7.00 7.00 7.30 6.50 6.50 8.00 8.00 7.00 8.00 Legal 6.00 6.00 6.00 6.00 6.00 8.00 8.00 7.00 10.00 10.25 Community Development Building Safety 0.00 0.00 0.00 0.00 0.00 0.00 0.00 13.00 16.00 18.00 Community Development Admin.0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Planning & Zoning 0.00 0.00 0.00 0.00 0.00 0.00 0.00 13.00 16.00 16.00 Development & Infrastructure Services 103.63 83.76 81.45 78.84 77.22 73.38 73.10 0.00 0.00 0.00 Parks and Recreation 48.02 49.36 36.20 37.61 27.26 20.62 22.70 27.50 27.60 28.10 Cultural Resources 0.00 0.20 0.00 0.00 1.35 1.30 1.30 0.00 0.00 0.00 Library 0.00 0.00 0.00 0.00 0.00 18.55 18.40 18.50 18.70 19.40 Police Civilians 31.25 30.25 30.25 25.93 30.25 30.25 29.70 30.70 33.00 34.00 Officers 101.88 102.88 102.88 101.91 101.44 97.96 95.00 97.90 102.40 108.00 Magistrate Court 8.00 8.00 8.00 8.70 8.00 8.00 9.00 9.00 9.00 8.50 Public Works 0.00 0.00 0.00 0.00 0.00 0.00 0.00 47.70 52.90 56.10 Water Utility 39.48 38.48 37.48 37.00 36.00 36.00 34.00 35.00 36.30 35.50 Total 370.66 351.37 334.32 326.19 320.56 325.10 323.90 331.80 356.40 369.80 Source: Town of Oro Valley Finance Department TOWN OF ORO VALLEY, ARIZONA FULL-TIME EQUIVALENT EMPLOYEES BY FUNCTION LAST TEN FISCAL YEARS (UNAUDITED) Full-time Equivalent Employees as of June 30 FiscalIrrigationConstructionTurfYear Residential Commercial Irrigation Reclaimed Construction Reclaimed TurfReclaimedTotal20087,511,067$ 667,910$ 1,146,222$ 796$ 652,446$ 1,630$ 666,558$ 1,039,969$ 11,686,598$ 20097,573,960 749,019 1,093,852 9,007 349,994 3,757 265,413 1,389,783 11,434,785 20108,040,762 902,432 1,152,529 14,240 222,447 720 354,308 1,383,592 12,071,030 20118,043,658 921,825 1,166,921 13,258 92,257 814 130,704 1,669,045 12,038,482 20127,761,639 954,472 1,050,602 13,466 120,830 653 115,568 1,561,750 11,578,980 20137,752,934 962,824 1,040,793 19,000 196,354 884 135,720 1,507,574 11,616,083 20147,881,436 886,712 1,169,067 187,622 283,632 816 121,108 1,638,981 12,169,374 20157,649,136 779,877 981,545 214,848 271,815 115,955 1,267,093 11,280,269 20168,103,644 778,915 1,129,741 50,479 310,609 114,427 1,530,107 12,017,922 20178,416,714 814,041 1,170,946 51,373 224,532 8,733 104,880 1,702,338 12,493,557 Source: Town of Oro Valley Water Utility DepartmentWATER UTILITY REVENUES BY USER TYPELAST TEN FISCAL YEARS(UNAUDITED)TOWN OF ORO VALLEY, ARIZONA 2008200920102011201220132014201520162017Function/ProgramPoliceBurglaries125 125 120 100 134 105 75 77 85 71Citations (traffic)7,497 9,256 6,736 5,244 5,084 5,456 4,668 4,486 3,890 3,446Investigations6,892 917 732 746 711 681 765 832 824 818Total Arrests2,254 2,478 2,176 1,932 1,716 1,564 1,679 1,721 1,598 1,458Thefts577 528 567 656 571 563 561 500 586 493Development & Infrastructure ServicesStreet resurfacing (miles)10.5 53.4 14.8 13.9 22.4 30.5 73.4 101.0 92.0 89.0Parks and RecreationRecreation Programs Held Annually46 46 40 47 37 35 30 38 52 55Months of Public Pool Operations10 10 12 12 12 10 12 12 12 12Parks Maintenance Man-Hours Worked 17,472 16,288 16,120 18,680 16,016 17,000 20,000 16,255 15,083 15,463LibraryCollection volume96,000 95,750 100,142 100,652 97,36400000WaterNew connections346 196 68 61 97 213 165 202 176 340Total connections18,177 18,373 18,441 18,502 18,599 18,812 18,977 19,179 19,355 19,588TransitTotal route miles175,841 163,964 138,752 138,333 200,058 353,936 439,512 392,071 529,170 568,657Passengers16,908 17,101 15,573 14,873 20,119 32,442 39,196 39,102 45,202 51,131Source: Town of Oro Valley Finance DepartmentNote: Oro Valley Library was transferred to Pima County Library District on January 1, 2013.TOWN OF ORO VALLEY, ARIZONAOPERATING INDICATORS BY FUNCTIONLAST TEN FISCAL YEARS(UNAUDITED) Base Rate Tier 1 Tier 2 Tier 3 Tier 4 GPF Year monthly per 1,000 per 1,000 per 1,000 per 1,000 per 1,000 2008 13.25$ 2.08$ 2.81$ 3.76$ 5.00$ 0.40$ 2009 13.91 2.18 2.95 3.95 5.25 0.55 2010 14.19 2.20 2.99 4.03 5.38 0.75 2011 14.19 2.20 2.99 4.03 5.38 0.75 2012 14.19 2.20 2.99 4.03 5.38 0.95 2013 14.19 2.20 2.99 4.03 5.38 0.95 2014 14.19 2.23 3.01 4.07 5.49 0.95 2015 14.19 2.27 3.10 4.23 5.76 0.90 2016 14.19 2.32 3.19 4.40 6.05 0.90 2017 14.62 2.34 3.25 4.53 6.29 0.90 Source: Town of Oro Valley Water Utility TOWN OF ORO VALLEY, ARIZONA WATER RATES LAST TEN FISCAL YEARS (UNAUDITED) 2008200920102011201220132014201520162017Function/ProgramPoliceStations1111111111Substations2233333333Patrol units113 109 108 53 67 66 64 74 77 72Other fleet0 0 0 55 42 43 42 45 44 67Development & Infrastructure ServicesStreets (miles)220.1 220.1 214.0 203.8 203.8 205.1 421.0 421.0 421.0 421.0Streetlights93 93 93 93 93 95 95 95 95 95Traffic signals16 16 18 16 17 19 19 19 19 19Parks and recreationAcreage300 300 374 374 436 436 457 448 448 448Playgrounds2222222222Baseball/softball diamonds7777777777Community centers0000000111Golf course holes0000000454545Tennis courts1111111323232Swimming pools1111222444WaterWells 19 22 18 22 22 22 18 20 20 20Storage capacity (MG) 18 19 19 20 20 20 13 12 12 12Booster capacity 27 27 26 25 25 25 26 27 27 27TransitTransit vans9995559744Transit mini buses0005101217192222Source: Town of Oro Valley Finance DepartmentTOWN OF ORO VALLEY, ARIZONACAPITAL ASSETS STATISTICS BY FUNCTIONLAST TEN FISCAL YEARS(UNAUDITED)