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HomeMy WebLinkAboutPackets - Council Packets (1329)         AGENDA ORO VALLEY TOWN COUNCIL REGULAR SESSION JUNE 17, 2020 ONLINE ZOOM MEETING Join Zoom Meeting: https://orovalley.zoom.us/j/95482445499 To attend via phone only, dial 1-346-248-7799 Executive Sessions – Upon a vote of the majority of the Town Council, the Council may enter into Executive Sessions pursuant to Arizona Revised Statutes §38-431.03 (A)(3) to obtain legal advice on matters listed on the Agenda.        REGULAR SESSION AT OR AFTER 6:00 PM   CALL TO ORDER   ROLL CALL   PLEDGE OF ALLEGIANCE   UPCOMING MEETING ANNOUNCEMENTS   COUNCIL REPORTS   TOWN MANAGER'S REPORT   The Mayor and Council may consider and/or take action on the items listed below: ORDER OF BUSINESS: MAYOR WILL REVIEW THE ORDER OF THE MEETING   INFORMATIONAL ITEMS   CALL TO AUDIENCE – At this time, any member of the public is allowed to address the Mayor and Town Council on any issue not listed on today’s agenda. Pursuant to the Arizona Open Meeting Law, individual Council Members may ask Town Staff to review the matter, ask that the matter be placed on a future agenda, or respond to criticism made by speakers. However, the Mayor and Council may not discuss or take legal action on matters raised during “Call to Audience.” In order to speak during “Call to Audience” please specify what you wish to discuss when completing the blue speaker card.   PRESENTATIONS   CONSENT AGENDA  (Consideration and/or possible action)   A.Minutes - May 22, May 27, and May 28, 2020   B.Request for approval of a Final Plat Amendment to remove a portion of the no access easement along the south side of Tortolita Mountain Circle in Stone Canyon Neighborhood II   C.Resolution No. (R)20-28, authorizing and approving an intergovernmental agreement between the Town of Oro Valley and Pima County regarding payment for the incarceration of municipal prisoners   REGULAR AGENDA   1.PUBLIC HEARING: ORDINANCE NO. (O)20-04, AMENDING THE ORO VALLEY TOWN DEVELOPMENT IMPACT FEES BY REPEALING AND REPLACING WITH NEW FEES AS PROVIDED IN EXHIBIT "A"   2.PUBLIC HEARING: RESOLUTION NO. (R)20-31, ADOPTION OF THE TENTATIVE BUDGET FOR FY 2020/21 AND SETTING THE LOCAL ALTERNATIVE EXPENDITURE LIMITATION FOR FY 2020/21   3.RESOLUTION NO. (R)20-29, DISCUSSION AND POSSIBLE ACTION REGARDING ADOPTING THE PUBLIC SAFETY PERSONNEL RETIREMENT SYSTEM (PSPRS) PENSION FUNDING POLICY AND ACCEPTING THE TOWN'S SHARE OF ASSETS AND LIABILITIES UNDER THE PSPRS ACTUARIAL VALUATION REPORT   4.RESOLUTION NO. (R)20-30, AUTHORIZING AND APPROVING AN AMENDMENT TO THE TOWN FINANCIAL AND BUDGETARY POLICIES TO COMPLY WITH GOVERNMENTAL ACCOUNTING STANDARDS BOARD STATEMENT NO.54, COMMITTING THE ENDING FUND BALANCE FOR CERTAIN SPECIAL REVENUE FUNDS FOR SPECIFIC PURPOSES, AND AUTHORIZING THE TOWN MANAGER OR A DESIGNEE TO ASSIGN FUND BALANCE TO A SPECIFIC PURPOSE   FUTURE AGENDA ITEMS (The Council may bring forth general topics for future meeting agendas. Council may not discuss, deliberate or take any action on the topics presented pursuant to ARS 38-431.02H)   ADJOURNMENT The Mayor and Council may, at the discretion of the meeting chairperson, discuss any Agenda item.   POSTED: 6/10/20 at 5:00 p.m. by pp When possible, a packet of agenda materials as listed above is available for public inspection at least 24 hours prior to the Council meeting in the office of the Town Clerk between the hours of 8:00 a.m. – 5:00 p.m. The Town of Oro Valley complies with the Americans with Disabilities Act (ADA). If any person with a disability needs any type of accommodation, please notify the Town Clerk’s Office at least five days prior to the Council meeting at 229-4700. INSTRUCTIONS TO SPEAKERS Members of the public have the right to speak during any posted Public Hearing. However, those items not listed as a Public Hearing are for consideration and action by the Town Council during the course of their business meeting. Members of the public may be allowed to speak on these topics at the discretion of the Chair. In accordance with Amendment #2 of the Mayoral Proclamation of Emergency issued on March 27, 2020, the following restrictions have been placed on all public meetings until further notice: 1. In-person attendance by members of the public is prohibited. 2. Members of the public can either watch the public meeting online https://www.orovalleyaz.gov/town/departments/town-clerk/meetings-and-agendas or, if they would like to participate in the meeting (e.g. speak at Call to Audience or speak on a Regular Agenda item), they can attend the meeting and participate via the on-line meeting application, Zoom, https://orovalley.zoom.us/j/95482445499, or may participate telephonically only by dialing 1-346-248-7799 prior to or during the posted meeting. 3. If a member of the public would like to speak at either Call to Audience or on a Regular Agenda item, it is highly encouraged to email your request to speak to Bluecard@orovalleyaz.gov and include your name and town/city of residence in order to provide the Mayor/Chair with advance notice so you can be called upon more efficiently during the Zoom meeting. 4. All members of the public who participate in the Zoom meeting either with video or telephonically will enter the meeting with microphones muted. For those participating via computer/tablet/phone device, you may choose whether to turn your video on or not. If you have not provided your name to speak prior to the meeting as specified in #3 above, you will have the opportunity to be recognized when you “raise your hand.” Those participating via computer/tablet/phone device can click the “raise your hand” button during the Call to the Public or Regular Agenda item, and the Chair will call on you in order, following those who submit their names in advance. For those participating by phone, you can press *9, which will show the Chair that your hand is raised. When you are recognized at the meeting by the Chair, your microphone will be unmuted by a member of staff and you will have three minutes to speak before your microphone is again muted. 5. If a member of the public would like to submit written comments to the Town Council for their consideration prior to the meeting, please email those comments to mstandish@orovalleyaz.gov no later than sixty minutes before the public meeting. Those comments will then be electronically distributed to the public body prior to the meeting. If you have questions, please contact Town Clerk, Mike Standish, at 520-229-4700 or email at mstandish@orovalleyaz.gov Thank you for your cooperation.    Town Council Regular Session A. Meeting Date:06/17/2020   Requested by: Mike Standish Submitted By:Michelle Stine, Town Clerk's Office Department:Town Clerk's Office SUBJECT: Minutes - May 22, May 27, and May 28, 2020 RECOMMENDATION: Staff recommends approval.  EXECUTIVE SUMMARY: N/A BACKGROUND OR DETAILED INFORMATION: N/A FISCAL IMPACT: N/A SUGGESTED MOTION: I MOVE to approve (approve with the following changes) the May 22, May 27, and May 28, 2020 minutes.  Attachments 5-22-20 Draft Minutes  5-27-20 Draft Minutes  5-28-20 Draft Minutes  D R A F T   MINUTES ORO VALLEY TOWN COUNCIL SPECIAL SESSION MAY 22, 2020 ONLINE ZOOM MEETING   Executive Sessions - Upon a vote of the majority of the Town Council, the Council may enter into Executive Sessions pursuant to Arizona Revised Statutes 38-431.03 (A)(3) to obtain legal advice on matters listed on the Agenda.   SPECIAL SESSION AT OR AFTER 9:00 AM   CALL TO ORDER    Mayor Winfield called the meeting to order at 9:01 a.m.   ROLL CALL Present: Joseph C. Winfield, Mayor Melanie Barrett, Vice-Mayor Joyce Jones-Ivey, Councilmember Josh Nicolson, Councilmember Rhonda Piña, Councilmember Bill Rodman, Councilmember Steve Solomon, Councilmember SPECIAL SESSION AGENDA   EXECUTIVE SESSION - 1. Pursuant to A.R.S. §38-431.03 (A)(3) about pending proposed General Plan Amendments and issues related thereto 2. Pursuant to A.R.S. §38-431.03 (A)(3) and (A)(4) about Town Golf Operations and Agreements related to those operations with HSL, Canada Hills Home Owner's Association, and/or Villages Home Owner's Association    Mayor Winfield announced that the following staff members would be joining Council in the Executive Session: Legal Services Director Tobin Sidles, Town Attorney Gary Cohen, Attorney Bill Sims, Town Manager Mary Jacobs, Assistant Town Manager Chris Cornelison and Town Clerk Mike Standish.    Motion by Mayor Joseph C. Winfield, seconded by Councilmember Joyce Jones-Ivey to go into Executive Session at 9:03 a.m. 1. Pursuant to A.R.S. §38-431.03 (A)(3) about pending proposed General Plan Amendments and issues related thereto 2. Pursuant to A.R.S. §38-431.03 (A)(3) and (A)(4) about Town Golf Operations and Agreements related to those operations with HSL, Canada Hills Home Owner's Association, and/or Villages Home Owner's Association.  Vote: 7 - 0 Carried   ADJOURNMENT    Motion by Mayor Joseph C. Winfield, seconded by Vice-Mayor Melanie Barrett to adjourn the Special Session at 12:28 p.m.   5/22/20 Minutes, Town Council Special Session  1   Vote: 6 - 0 Carried     _________________________________ Michelle Stine Deputy Town Clerk I hereby certify that the foregoing minutes are a true and correct copy of the minutes of the special session of the Town of Oro Valley Council of Oro Valley, Arizona held on the 22nd day of May 2020. I further certify that the meeting was duly called and held and that a quorum was present. Dated this _____ day of ____________________, 2020. ___________________________ Michael Standish, CMC Town Clerk 5/22/20 Minutes, Town Council Special Session  2  D R A F T   AGENDA ORO VALLEY TOWN COUNCIL BUDGET STUDY SESSION May 27, 2020 ONLINE ZOOM MEETING              BUDGET STUDY SESSION AT OR AFTER 6:00 PM   CALL TO ORDER    Mayor Winfield called the meeting to order at 6:00 p.m.   ROLL CALL Present: Joseph C. Winfield, Mayor      Melanie Barrett, Vice Mayor      Joyce Jones-Ivey, Councilmember      Josh Nicolson, Councilmember      Rhonda Piña, Councilmember      Bill Rodman, Councilmember      Steve Solomon, Councilmember    BUDGET STUDY SESSION AGENDA    Mayor Winfield provided the guidelines for participation in the Town Council's Study Session Zoom meeting.    1.PRESENTATION AND DISCUSSION OF THE FY 2020/21 TOWN MANAGER'S RECOMMENDED BUDGET AND PRELIMINARY FIVE-YEAR FINANCIAL FORECAST       Mayor Winfield announced the following order for the presentations:    Budget Snapshot Review1. Budget Adoption Process 2. Preliminary 5-Year Forecast3. Public Works4. Police5. Community and Economic Development6. Parks and Recreation 7. Water Administrative Function8. Capital 9. Budget Snapshot Review  Town Manager Mary Jacobs provided a brief summary of the FY 2020/21 Budget Snapshot Review and included the following: 5/27/20                                                   Minutes, Town Council Budget Study Session             1        FY 2020/21 Town Manger's Recommended Budget  Budget Adoption Process Chief Financial Officer David Gephart presented the Budget Adoption Process and included the following :    Budget Defined The Need for a Budget Developing a Budget Budgetary Control Balanced Budget Required Budget Cycle Role of Elected Officials Lower revenues mean fewer resources Resources Revenues Requirements Expenditures One time vs. ongoing Personnel Operations & Maintenance (O&M) Capital Outlay Contingency Capital Improvement Plan (CIP) Budget Monitoring Five-Year Forecast General Fund and Highway Fund Finance and Budget Administrator Wendy Gomez presented the Five-Year Forecast General Fund and Highway Fund and included the following:    Forecast Overview General Fund Revenue Assumptions General Fund Expenditure Assumptions General Fund Forecast General Fund Revenues General Fund Expenditures Highway Fund Revenue Assumptions Highway Fund Expenditure Assumptions Highway Fund Forecast Highway Fund Revenues Highway Fund Expenditures Discussion ensued amongst Council and staff regarding the proposed Budget Snap Shot Review, Budget Adoption Process and the Five-Year Forecast General Fund and Highway Fund.    Mayor Winfield recessed the meeting at 7:30 p.m. Mayor Winfield reconvened the meeting at 7:40 p.m.    Public Works 5/27/20                                                   Minutes, Town Council Budget Study Session             2      Public Works Town Engineer and Public Works Department Director Paul Keesler presented the proposed Public Works budget and included the following:  Public Works - Awards Department Overview Administration - General Fund Transportation Engineering - Highway & PAG/RTA Funds Street Maintenance - Highway Fund Fleet & Facility Maintenance - General Fund Stormwater Utility Fund Transit Services - RTA/General Fund Roadway Development Impact Fee Fund Discussion ensued amongst Council and staff regarding the proposed Public Works budget.     Police Department  Police Chief Kara Riley gave an overview of the proposed Police Department budget and included the following:    Major Accomplishments - Police Strategic Plan and Public Safety Departmental approach Fiscal year comparison COVID-19 Pandemic Response Future Goals Discussion ensued amongst Council and staff regarding the proposed Police Department budget.    ADJOURNMENT    Mayor Winfield adjourned the meeting at 9:11 p.m.                                                                     _________________________________                                                                 Michelle Stine, MMC                                                                 Deputy Town Clerk                                                                               I hereby certify that the foregoing minutes are a true and correct copy of the minutes of the budget study session of the Town of Oro Valley Council of Oro Valley, Arizona held on the 27th day of May, 2020.  I further certify that the meeting was duly called and held and that a quorum was present.   Dated this _____ day of ____________________, 2020.     _____________________________ Michael Standish, CMC Town Clerk 5/27/20                                                   Minutes, Town Council Budget Study Session             3     D R A F T AGENDA ORO VALLEY TOWN COUNCIL BUDGET STUDY SESSION May 28, 2020 ONLINE ZOOM MEETING            CONTINUATION OF BUDGET STUDY SESSION FROM MAY 27, 2020   CALL TO ORDER    Mayor Winfield called the meeting to order at 6:00 p.m.   ROLL CALL Present: Joseph C. Winfield, Mayor Melanie Barrett, Vice Mayor Joyce Jones-Ivey, Councilmember Josh Nicolson, Councilmember Rhonda Piña, Councilmember Bill Rodman, Councilmember Steve Solomon, Councilmember BUDGET STUDY SESSION AGENDA    Mayor Winfield provided the guidelines for participation in the Town Council's Budget Study Session Zoom meeting.   1.PRESENTATION AND DISCUSSION OF THE FY 2020/21 TOWN MANAGER'S RECOMMENDED BUDGET AND PRELIMINARY FIVE-YEAR FINANCIAL FORECAST       Town Manager Mary Jacobs provided an update regarding Cares Act Funds and the possible effects it could have on the Town.    Community and Economic Development Community and Economic Development Director JJ Johnston presented the proposed Community and Economic Development Department budget and included the following: Major Accomplishments - CED CED Essential Functions for OV CED Major Goals for 2020 CED Goals 2020 CED Summary Budget Comparison FY 19/20 and FY 20/21 Summary Discussion ensued amongst Council and staff regarding the proposed Community and Economic 5/28/20 Minues, Town Council Budget Study Session 1 Development Department budget.    Parks and Recreation Parks and Recreation Director Kristy Diaz-Trahan provided an overview of the proposed Parks and Recreation budget and included the following: Major Accomplishments - Parks & Recreation Big Picture Strategic Plan Implementation Parks & Recreation Department Administration Division Aquatics Division Community Center Recreation and Culture Park Management Department Comparison - General Fund Thank you Discussion ensued amongst Council and staff regrading the proposed Parks and Recreation budget.    Water Utility Water Utility Director Peter Abraham gave an overview of the following proposed Water Utility budget highlights: Major Accomplishments - Water Utility Oro Valley Water Utility Recommendation on water rates Operating Fund Budget Operating Fund Expenses - Personnel Operating Fund Expenses - O&M Operating Fund Expenses - Capital Operating Fund Expenses - Debt Service Impact Fee Fund Discussion ensued amongst Council and staff regarding the proposed Water Utility budget.    Mayor Winfield recessed the meeting at 8:00 p.m. Mayor Winfield reconvened the meeting at 8:10 p.m.    Town Administration Assistant Town Manager Chris Cornelison presented the proposed Town Administration budget and included the following: Major Accomplishments - Administration Administrative Department Overviews Strategic Leadership Plan Goals and Objectives Budget Comparison Town Manager's Office Town Clerk Finance 5/28/20 Minues, Town Council Budget Study Session 2 Human Resources Town Benefits Overview Information Technology General Administration Legal Services Magistrate Court Discussion ensued amongst Council and staff regarding the proposed Town Administration budget.    Capital Improvement Projects Town Manager Mary Jacobs presented the proposed Capital Improvement Projects and included the following: CIP Overview FY 20/21 Recommended CIP $20,465,287 FY 20/21 CIP - Streets and Roads FY 20/21 CIP - Water System FY 20/21 CIP Parks & Recreation FY 20/21 CIP - Safety & other Public Facilities FY 20/21 CIP - Technology & Vehicles FY 20/21 CIP - Budgeted Project Carryover Discussion ensued amongst Council and staff regarding the proposed Capital Improvement Projects budget.   ADJOURNMENT    Mayor Winfield adjourned the meeting at 9:18 p.m.     _______________________________ Michelle Stine, MMC Deputy Town Clerk I hereby certify that the foregoing minutes are a true and correct copy of the minutes of the budget study session of the Town of Oro Valley Council of Oro Valley, Arizona held on the 28th day of May 2020. I further certify that the meeting was duly called and held and that a quorum was present. Dated this _____ day of ____________________, 2020. ___________________________ Michael Standish, CMC Town Clerk 5/28/20 Minues, Town Council Budget Study Session 3    Town Council Regular Session B. Meeting Date:06/17/2020   Requested by: Bayer Vella, Community and Economic Development  Submitted By:Milini Simms, Community and Economic Development Case Number: 2001004 SUBJECT: Request for approval of a Final Plat Amendment to remove a portion of the no access easement along the south side of Tortolita Mountain Circle in Stone Canyon Neighborhood II RECOMMENDATION: Staff recommends approval. EXECUTIVE SUMMARY: The purpose of the Stone Canyon Community Association's (applicant) request is to remove a portion of the no access easement along the south side of Tortolita Mountain Circle in Stone Canyon Neighborhood II (see Attachment 1). Tortolita Mountain Circle provides the main access to the Stone Canyon area. It is privately owned and maintained by the applicant. The subject portion for the request is approximately 2,496 feet long (outlined in yellow on the image to the right). Approved in 2000, the Final Plat includes several no access easements along Tortolita Mountain Circle. No access easements are recorded on a plat to prevent new driveways and vehicular access. In this case, the intent was to only allow road use by Stone Canyon residents - and not the adjacent lots outside of the subdivision. This particular easement was recorded to restrict access from the lots located south of Tortolita Mountain Circle, which are all vacant except for two. Approval of the Stone Canyon HOA's request will allow the 10-12 larger lots, south of Tortolita Mountain Circle to locate their personal driveways and use the private road. The addition of these driveways will not generate a substantial amount of traffic nor create any traffic issues. Public notice was provided to surrounding residents, including all of Stone Canyon Neighborhood II. A few comments were received regarding the use and ongoing maintenance of the road. Functionally, these lots will become part of Stone Canyon by using the gate to access their homes. However, agreements for roadway and gate maintenance will remain private between the applicant (Stone Canyon Community Association) and the property owners. In summary, staff finds the applicant's request acceptable and therefore recommends approval.        BACKGROUND OR DETAILED INFORMATION: Final Plat Amendments (per Section 22.9.F.8 of the Zoning Code) require Town Council approval. Plats are legal documents recorded with Pima County. In 2000, the Town Council approved a Final Plat for Stone Canyon Neighborhood II. The main road to access the Stone Canyon area, which includes several neighborhoods, is Tortolita Mountain Circle. As the main road, several no access easements have been legally recorded to reduce the number of driveways located along it. Tortolita Mountain Circle is privately owned and maintained by Stone Canyon Community Association (applicant).  The applicant's request is to remove a portion (approximately 2,496 feet) of the no access easement along the south side of Tortolita Mountain Circle (see Attachment 1). This particular easement was recorded to prevent access by property owners outside of the subdivision and located south of Tortolita Mountain Circle. Approval of this request will allow the 10-12 larger lots to locate their driveways and use the private road. These lots are mostly vacant, except for two existing homes. However, allowing access to these additional lots will not generate a substantial amount of traffic nor create any safety issues. Public notice was provided to notify those affected about the applicant's request. Specifically, postcards were sent to residents, including all of Stone Canyon Neighborhood II and signs were posted onsite to notify those who frequent Tortolita Mountain Circle. A few inquiries were received regarding the use and ongoing maintenance of the road. By allowing the larger lots access to Tortolita Mountain Circle, they will functionally become part of Stone Canyon and able to use the gate to get to their homes. However, agreements for road and gate maintenance will remain private between the applicant/ owner of the road (Stone Canyon Community Association) and the property owners. In conclusion, staff (including the Town Engineer) finds the request to be acceptable and therefore recommends approval.  FISCAL IMPACT: N/A SUGGESTED MOTION: The Town Council may want to consider the following motion: I MOVE to APPROVE the Final Plat Amendment to remove the portion depicted in Attachment 1 of the no access easement along the south side of Tortolita Mountain Circle in Stone Canyon Neighborhood II. OR I MOVE to DENY the Final Plat Amendment to remove a portion of the no access easement depicted in Attachment 1 along the south side of Tortolita Mountain Circle in Stone Canyon Neighborhood II.  Attachments ATTACHMENT 1 - APPLICANT'S REQUEST     Town Council Regular Session C. Meeting Date:06/17/2020   Submitted By:Mike Standish, Town Clerk's Office Department:Town Clerk's Office SUBJECT: Resolution No. (R)20-28, authorizing and approving an intergovernmental agreement between the Town of Oro Valley and Pima County regarding payment for the incarceration of municipal prisoners RECOMMENDATION: Staff recommends approval. EXECUTIVE SUMMARY: The annual intergovernmental agreement with Pima County that permits the Town to house Oro Valley municipal prisoners in the Pima County jail is up for renewal as of June 30, 2020. Payment for incarceration of municipal prisoners in county jails is necessary because of a state law passed in 1989 mandating that cities and towns pay for this service. Pima County has set the incarceration fees for FY 2020/21 as follows: $420.65 to cover booking and intake expenditures and prisoner housing for the first day, and $127.02 per subsequent day for each prisoner. The initial day amount has increased by $71.84, and the cost for each additional day has increased by $24.18. The alternative is for the Town to house its own municipal prisoners, which would be cost prohibitive. BACKGROUND OR DETAILED INFORMATION: N/A FISCAL IMPACT: The FY 2020/21 Custody of Prisoners budget has been recommended in the amount of $180,000, and it is anticipated that this will be sufficient budget capacity even with the projected prisoner housing costs outlined above. SUGGESTED MOTION: I MOVE to (APPROVE or DENY) Resolution No. (R)20-28, authorizing and approving an intergovernmental agreement between the Town of Oro Valley and Pima County regarding payment for the incarceration of municipal prisoners. Attachments (R)20-28 Resolution Prisoner Housing IGA  IGA  RESOLUTION NO. (R)20-28 A RESOLUTION OF THE MAYOR AND COUNCIL OF THE TOWN OF ORO VALLEY, ARIZONA, AUTHORIZING AND APPROVING AN INTERGOVERNMENTAL AGREEMENT BETWEEN THE TOWN OF ORO VALLEY AND PIMA COUNTY FOR PAYMENT FOR THE INCARCERATION OF MUNICIPAL PRISONERS; AND DIRECTING THE TOWN MANAGER, TOWN CLERK, TOWN LEGAL SERVICES DIRECTOR, OR THEIR DULY AUTHORIZED OFFICERS AND AGENTS TO TAKE ALL STEPS NECESSARY TO CARRY OUT THE PURPOSES AND INTENT OF THIS RESOLUTION WHEREAS, pursuant to A.R.S. § 11-952, the Town of Oro Valley is authorized to enter into or renew agreements for joint and cooperative action with other public agencies; and WHEREAS, the Town of Oro Valley is authorized to establish and maintain the Oro Valley Police Department, pursuant to A.R.S. § 9-240 (B)(12); and WHEREAS, pursuant to A.R.S. § 31-121(D), an individual may be incarcerated in a county jail and the costs of incarceration shall be paid by the municipality having established the municipal court in which the charges have been filed; and WHEREAS, Pima County shall receive and detain all municipal prisoners who are medically fit to be incarcerated in the detention facilities maintained and operated by Pima County; and WHEREAS, the Town desires to enter into an Intergovernmental Agreement with Pima County to set forth the terms and conditions for the incarceration of municipal prisoners in the detention facilities maintained and operated by Pima County; and WHEREAS, it is in the best interest of the Town to enter into the Intergovernmental Agreement, attached hereto as “Exhibit “A” and incorporated herein by this reference, in order to set forth the terms and conditions relating to the incarceration of municipal prisoners in the detention facilities maintained and operated by Pima County for a term effective July 1, 2020 through June 30, 2021. NOW, THEREFORE, BE IT RESOLVED by the Mayor and Council of the Town of Oro Valley, Arizona, that SECTION 1. the Intergovernmental Agreement, attached hereto as “Exhibit “A”, between the Town of O ro Valley and Pima County for the incarceration of municipal prisoners is hereby authorized and approved. SECTION 2. the Mayor and any other administrative officials of the Town of Oro Valley are hereby authorized to take such steps as are necessary to execute and implement the terms of the Intergovernmental Agreement. C:\Windows\TEMP\BCL Technologies\easyPDF 7 \@BCL@0C13F714\@BCL@0C13F714.doc 2 SECTION3. The Town Manager, Town Clerk, Town Legal Services Director, or their duly authorized officers and agents are hereby authorized and directed to take all steps necessary to carry out the purposes and intent of this resolution. PASSED AND ADOPTED by the Mayor and Council of the Town of Oro Valley, Arizona, this 17th day of June, 2020. TOWN OF ORO VALLEY, ARIZONA Joseph C. Winfield, Mayor ATTEST: APPROVED AS TO FORM: Michael Standish, Town Clerk Tobin Sidles, Legal Services Director Date: Date: C:\Windows\TEMP\BCL Technologies\easyPDF 7 \@BCL@0C13F714\@BCL@0C13F714.doc 3 EXHIBIT “A” Page 1 of 9 INTERGOVERNMENTAL AGREEMENT BETWEEN PIMA COUNTY AND TOWN OF ORO VALLEY FOR PAYMENT FOR THE INCARCERATION OF MUNICIPAL PRISONERS This Intergovernmental Agreement (IGA) is entered into by and between Pima County, a body politic and corporate of the State of Arizona (“County”) and the Town of Oro Valley, a municipal corporation (“Town”) pursuant to A.R.S. § 11-952. Recitals County and Town may contract for services and enter into agreements with one another for joint or cooperative action pursuant to A.R.S. § 11-951, et seq. County and Town desire to enter into an agreement to incarcerate Town’s municipal prisoners in the Pima County Adult Detention Complex (“PCADC”). NOW, THEREFORE, County and Town, pursuant to the above, mutually agree as follows: Agreement I. Purpose This IGA sets forth the terms and conditions under which Town’s municipal prisoners shall be incarcerated in the PCADC. II. Scope County shall receive and detain all Town municipal prisoners who are medically fit to be incarcerated by County. County shall provide booking services, and after booking provide for the care, feeding and medical care of said prisoners. “Town municipal prisoner” shall mean any person who has been incarcerated as a result of a charge pending in the Town of Oro Valley Court, or as a result of an agreement between the Town and another jurisdiction to allow the person to serve his sentence locally, or has been sentenced pursuant to an order of the Oro Valley Town Court and for whom the Town has the legal obligation to provide or pay for prisoner housing. A prisoner arrested by Town of Oro Page 2 of 9 Valley Police Department solely on another governmental entity’s warrant is not a Town prisoner. In regard to booking and related services and procedures, upon submission of the completed booking document to the PCADC Intake Support Specialist , County will immediately accept into custody all Town arrestees that present no obvious health issues that make the prisoner medically unacceptable for booking. Town agrees that such conditional acceptance will shorten the time officers spend in the booking process and benefit the Town. Within the initial ninety (90) minutes, County medical providers shall make a determination as to the prisoner’s medical condition. Town agrees that if the prisoner presents a serious, emergent medical problem requiring hospital examination or medical rejection for booking within ninety (90) minutes of the time of conditional acceptance, Town shall send an officer to the PCADC to transport the prisoner for such medical examination or care as may be medically required as soon as possible. If a prisoner is taken from the PCADC for medical evaluation and returned to be incarcerated, Town shall not be charged twice for the first day billing rate of $420.65. By conditionally accepting the prisoner for the initial ninety (90) minute evaluation period, County does not in any way accept responsibility for the cost of medical care to be provided to that prisoner should it be determined by County that the prisoner requires hospitalization or that the prisoner is medically unacceptable for booking. Transportation of prisoners to Town of Oro Valley Court or other locations, only as ordered by Town of Oro Valley Court, shall be the responsibility of the Town. County shall be responsible for transportation of prisoners for medical care after the prisoner has been in PCADC custody for ninety (90) minutes or more. III. Financing Town shall pay a first day billing rate of $420.65 to cover booking and intake expenditures. For each billable day following the first day, Town shall pay $127.02 per day. The two rates are applicable to the period July 1, 2020 through June 30, 2021. The billing day as defined herein applies to each Town prisoner who is an inmate in, or under the control of the PCADC. A. Criteria and Rules Governing Billing: 1. A “billable day” means that period commencing at 0000 hours and ending as 2359 hours that same day, or any fractional part thereof, of any day the Town prisoner is in the custody or control of the PCADC. 2. A “modified billable day” means a billable day which is modified to reduce billing to one billable day at the first rate. “Modified billable days” are only applicable when applied to pretrial Town defendants who are booked between 1800-2359 hours one day and released on the Town charge at the first AM initial appearance the following day. Page 3 of 9 3. “Local limited jurisdiction courts” means those courts whose criminal jurisdiction is limited to misdemeanor offenses. B. Criteria for Assessment of Billing: 1. The costs of incarceration of Town prisoners shall commence on the day the prisoner is booked or held based on a Town charge into, or sentenced by, Town Of Oro Valley Court. Costs for incarceration shall cease under the guidelines established under the definition of “billable day.” For Town pretrial defendants booked between 1800 and 2400 hours one day and released on all Town charges at or by the AM initial appearance the following morning, the Town shall be billed according to the guidelines established under the definition of “modified billable day.” 2. When a prisoner is in custody for a charge or sentence from more than one local limited jurisdiction court, the billing charges for days of joint custody shall be apportioned. Costs for incarceration for days of joint custody shall be apportioned evenly based on the guidelines established under the definition of “billable day” among those jurisdictions from which the joint custody arises. 3. A Town prisoner who is subsequently charged into Pima County Superior Court and held in-custody on felony charges will cease to accrue billing charges after 2359 hours on the date that custody for felony charges is established. Felony custody shall take effect on the date when charging information is received in the PCADC Records Section and the prisoner is actually being held in-custody on the felony charges. 4. In the event of an escape, billing charges will cease to accrue after 2359 hours on the day of escape. In the event of a failure to report from authorized leave, billing charges will cease after 2359 hours of the last day of custody. Billing charges will begin again on the day the prisoner is recaptured or returned to custody and is actually being held in the PCADC. County will submit a statement of Town prisoner charges on a monthly basis. This statement shall provide information in alphabetical order as follows: name of prisoner, booking date, release date, indication of booking day billing or subsequent day billing, billing period, daily rates, total billing days, and the total bill. Any individual prisoner charges disputed shall be made known to the County within thirty (30) days after receipt of the monthly billing. If Town notifies County of a dispute within thirty (30) days of receipt of the monthly billing, Town may withhold payment on those specific prisoners for whom billing is disputed until the dispute is resolved. No dispute will be accepted Page 4 of 9 if not made within thirty (30) days after receipt of the monthly billing. Disputes about the billing statement shall be jointly reviewed by both parties and satisfactorily resolved within forty-five (45) days of the monthly billing. All charges shall be paid within sixty (60) days of receipt of the monthly billing, excluding disputed charges. Disputed charges shall be paid within thirty (30) days of resolution of the dispute. Charges remaining unresolved after the sixty (60) day period may be arbitrated by a mutually accepted third party. Town agrees to pay interest on outstanding charges beginning on the tenth day after resolution of the billing at a rate of 10% per annum until paid. Town agrees that when a check is sent to County in payment of a previously disputed charge, Town will attach an invoice detailing what specific charges are being paid. Town agrees that when funds are withheld due to a disputed charge, the specific charge disputed and the amount of payment being withheld will be specified on an invoice attached to the payment check for the period in which the disputed charge was included. Town agrees to attach to each check submitted to County an invoice indicating the dates for which that check is to be applied. Neither Party shall be obligated to the other for any costs incurred pursuant to this IGA except as proved herein. IV. Term This IGA is for the period July 1, 2020 through June 30, 2021 and shall be effective upon execution by the governing boards of the Parties. The Parties shall have the option of extending this IGA for four (4) additional one-year periods or any portion thereof. Any revisions or extensions of this IGA shall be by written amendment executed by the governing boards of the Parties. V. Termination Either Party may at any time and without cause terminate this IGA by providing the other Party ninety (90) days written notice of intent to terminate. VI. Jurisdiction Nothing in this IGA shall be construed as either limiting or extending the statutory jurisdiction of the Parties. VII. Indemnification To the extent permitted by law, each party (as Indemnitor) agrees to indemnify, defend and hold harmless the other party (as Indemnitee) from and against any and all claims, losses, liability, costs or expenses (including reasonable attorney’s fees) (hereinafter collectively referred to as “claims”) arising out of bodily injury of any person (includi ng death) or property damage, but only to the extent that such claims which result in vicarious/derivative liability to the Indemnitee, are caused by the act, omission, negligence, misconduct, or other fault of the Indemnitor, its officers, officials, agents, employees, or volunteers. VIII. Insurance Page 5 of 9 Each Party shall obtain and maintain at its own expense, during the entire term of this IGA the following type(s) and amounts of insurance: a) Commercial General Liability in the amount of $1,000,000.00 combined single limit Bodily Injury and Property Damage. b) Commercial or Business automobile liability coverage for owned, non-owned and hired vehicles used in the performance of this Contract with limits in the amount of $1,000,000.00 combined single limit or $1,000,000.00 Bodily Injury, $1,000,000.00 Property Damage. c) If required by law, workers’ compensation coverage including employees’ liability coverage. Parties to this IGA shall provide thirty (30) days written notice to all other Parties of cancellation, non-renewal or material change of coverage. The above requirement may be alternatively met through self insurance pursuant to A.R.S. §§ 11-261 and 11-981 (or if a school district, § 15-382) or participation in an insurance risk pool under A.R.S. § 11.952.01 (if a school district, § 15-382), at no less than the minimal coverage levels set forth in this article. Parties to this agreement shall provide thirty (30) days written notice to all other Parties of cancellation, non-renewal or material change of coverage. IX. Compliance With Laws The Parties shall comply with all federal, state and local laws, rules, regulations, standards and Executive Orders, without limitation to those designated within this IGA. The laws and regulations of the State of Arizona shall govern the rights of the Parties, the performance of this IGA and any disputes hereunder. Any action relating to this IGA shall be brought in an Arizona court in Pima County. X. Arbitration The Parties agree to be bound by arbitration, as provided by in Arizona Revised Statutes § 12-1501 et. seq., to resolve disputes arising out of this IGA where the sole relief sought is monetary damages not in excess of the jurisdictional limit set by the Pima County Superior Court. XI. Non-Discrimination The Parties shall not discriminate against any County or Town employee, client or any other individual in any way because of that person’s age, race, creed, color, religion, sex, Page 6 of 9 disability or national origin in the course of carrying out their duties pursuant to this IGA. The Parties shall comply with the provisions of Executive Order 75-5, as amended by Executive Order 99-4, which is incorporated into this IGA by reference, as if set forth in full herein. XII. ADA The Parties shall comply with all applicable provisions of the Americans with Disabilities Act (Public Law 101-336, 42 U.S.C. 12101-12213) and all applicable federal regulations under the Act, including 28 CFR Parts 35 and 36. XIII. Severability If any provision of this IGA, or any application thereof to the Parties or any person or circumstances, is held invalid, such invalidity shall not affect other provisions or applications of this IGA which can be given effect, without the invalid provision or application and to this end the provisions of this IGA are declared to be severable. XIV. Conflict of Interest This contract is subject to cancellation for conflict of interest pursuant to A.R.S. § 38- 511, the pertinent provisions of which are incorporated herein by reference. XV. Non-Appropriation Notwithstanding any other provision in this IGA, this IGA may be terminated if for any reason the Pima County Board of Supervisors does not appropriate sufficient monies for the purpose of maintaining this IGA. In the event of such cancellation, County shall have no further obligation to Town other than for payment for services rendered prior to cancellation. XVI. Legal Authority Neither Party warrants to the other its legal authority to enter into this IGA. If a court, at the request of a third person, should declare that either Party lacks authority to enter into this IGA, or any part of it, then the IGA, or parts of it affected by such order, shall be null and void, and no recovery may be had by either Party against the other for lack of performance or otherwise. XVII. Worker’s Compensation Each Party shall comply with the notice of A.R.S. § 23-1022 (E). For purposes of A.R.S. § 23-1022, irrespective of the operations protocol in place, each Party is solely responsible for the payment of worker’s compensation benefits for its employees. XVIII. No Joint Venture Page 7 of 9 It is not intended by this IGA to, and nothing contained in this IGA shall be construed to, create any partnership, joint venture or employment relationship between the Parties or create any employer-employee relationship between County and any Town employees, or between Town and any County employees. Neither Party shall be liable for any debts, accounts, obligations or other liabilities whatsoever of the other, including (without limitation) the other party's obligation to withhold Social Security and income taxes for itself or any of its employees. XIX. No Third Party Beneficiaries Nothing in the provisions of this IGA is intended to create duties or obligations to or rights in third parties not parties to this IGA or affects the legal liability of either Party to the IGA by imposing any standard of care with respect to the maintenance of public facilities different from the standard of care imposed by law. XX. Notices Any notice required or permitted to be given under this IGA shall be in writing and shall be served by delivery or by certified mail upon the other Party as follows (or at such other address as may be identified by a party in writing to the other party): County: Town: Pima County Sheriff’s Department TOWN OF ORO VALLEY Corrections Bureau Chief 11000 North La Canada Dr. 1750 E. Benson Hwy. Oro Valley, AZ 85737 Tucson, AZ 85714 With copies to: County Administrator 130 West Congress Street, 10th Floor Tucson, Arizona 85701 Clerk of the Board 130 West Congress, 5th Floor Tucson, Arizona 85701 XXI. Entire Agreement Page 8 of 9 This document constitutes the entire Agreement between the Parties pertaining to the subject matter hereof, and all prior or contemporaneous agreements and understandings, oral or written, are hereby superseded and merged herein. This IGA shall not be modified, amended, altered or extended except through a written amendment signed by the Parties. In Witness Whereof, County has caused this Intergovernmental Agreement to be executed by the Chair of its Board of Supervisors, upon resolution of the Board and attested to by the Clerk of the Board, and Town has caused this Intergovernmental Agreement to be executed by the Mayor upon resolution of the Town Council and attested to by the Town Clerk: PIMA COUNTY: TOWN OF ORO VALLEY Chairman, Board of Supervisors Mayor Date Date Clerk, Board of Supervisors Town of Oro Valley Clerk Date Date Page 9 of 9 Intergovernmental Agreement Determination The foregoing Intergovernmental Agreement between Pima County and the Town Of Oro Valley has been reviewed pursuant to A.R.S. § 11-952 by the undersigned, who have determined that it is in proper form and is within the powers and authority granted under the laws of the State of Arizona to those parties to the Intergovernmental Agreement represented by the undersigned. PIMA COUNTY: TOWN OF ORO VALLEY Deputy County Attorney Town of Oro Valley Attorney    Town Council Regular Session 1. Meeting Date:06/17/2020   Submitted By:Amanda Jacobs, Town Manager's Office Department:Town Manager's Office SUBJECT: PUBLIC HEARING: ORDINANCE NO. (O)20-04, AMENDING THE ORO VALLEY TOWN DEVELOPMENT IMPACT FEES BY REPEALING AND REPLACING WITH NEW FEES AS PROVIDED IN EXHIBIT "A" RECOMMENDATION: Staff recommends approval of Ordinance No. (O)20-04 amending the Oro Valley Development Impact Fees by repealing and replacing new development impact fees, effective July 1, 2021, due to COVID-19 impacts. If the recommendation is approved as presented, the Town would begin collecting new fees July 1, 2021. EXECUTIVE SUMMARY: At the February 19, 2020 regular Town Council meeting, Council approved the land use assumptions (LUA) and infrastructure improvement plans (IIP) sections of the development impact fee study prepared for parks, police, streets and water. On May 6, 2020, Town Council was presented with the proposed development impact fees and directed staff to provide options for approval/denial, due to the impacts of COVID-19. This agenda item is the final step in the Town's development impact fee process in adopting new impact fees.    BACKGROUND OR DETAILED INFORMATION: Development impact fees are assessed by the Town to fund one-time infrastructure improvements needed as a result of new growth.  These fees are accumulated to construct specific improvements or portions of improvements within the Town in accordance with the LUA and IIP adopted by the elected body.  The Your Voice, Our Future general plan specifies that new growth pay for itself. Development impact fees are the primary way in which that occurs. The last comprehensive update of the Town's impact fees was completed in 2014.  At that time, the Town adopted fees for parks, police, transportation and water.  In January 2019, the Town retained the services of TischlerBise to prepare the updated impact fee report. The detailed report was made available on the Town of Oro Valley website for public review on November 1, 2019, and the updated report was made available on March 9, 2020 (Attachment 1). Copies of the draft report were sent to various stakeholders to include the Southern Arizona Home Builders Association, Metropolitan Pima Alliance, Greater Oro Valley Chamber of Commerce, Tucson Metro Chamber of Commerce, Larsen Baker LLC, Engineering and Environmental Consultants, Inc. and the Arizona Multi-housing Association. Stakeholder meetings were held on November 18, 2019, and December 17, 2019. The development fees are included in the Development Fee Report chapter (pages 1-13). Oro Valley's proposed fees are competitive within the local market. FISCAL IMPACT: Based on the TischlerBise draft report, the combined total of the fees would be approximately 7% decrease for residential uses, approximately 33% higher for retail/commercial and 18% decrease for office, industrial and warehouse uses. The TischlerBise draft report summarizes the proposed and current fees on page 12. SUGGESTED MOTION: Motion 1 I MOVE to APPROVE Ordinance No. (O)20-04, amending the Oro Valley Town Development Impact Fees by repealing and replacing with the new development impact fees as provided in "Exhibit A," and repealing all resolutions, ordinances and rules of the Town of Oro Valley in conflict therewith; or Motion 2 I MOVE to APPROVE Ordinance No. (O)20-04, amending the Oro Valley Town Development Impact Fees by repealing and replacing with the new development impact fees as provided in "Exhibit A," and repealing all resolutions, ordinances and rules of the Town of Oro Valley in conflict therewith, effective July 1, 2021; or Motion 3 I MOVE to DENY Ordinance No. (O)20-04, amending the Oro Valley Town Development Impact Fees  as provided in "Exhibit A."  Motion 4 I MOVE to APPROVE Ordinance No. (O)20-04, amending the Oro Valley Town Development Impact Fees by repealing and replacing with the new development impact fees, except for the retail/commercial land use category, which will remain unchanged, as provided in "Exhibit A," and repealing all resolutions, ordinances and rules of the Town of Oro Valley in conflict therewith. Attachments (O)20-04 Development Impact Fees  Exhibit A - Development Impact Fee Report FINAL June 2020  Staff Impact Fee Presentation  ORDINANCE NO. (O)20-04 AN ORDINANCE OF THE MAYOR AND COUNCIL OF THE TOWN OF ORO VALLEY, ARIZONA, AMENDING DEVELOPMENT IMPACT FEES IN THE AREAS OF PARKS AND RECREATION, POLICE, STREET AND WATER , BY AMENDING THE ORO VALLEY TOWN CODE, SECTION 13-1-16 “FEE SCHEDULE” BY REPEALING AND REPLACING WITH A NEW FEE SCHEDULE; AND REPEALING ALL RESOLUTIONS, ORDINANCES, AND RULES OF THE TOWN OF ORO VALLEY IN CONFLICT THEREWITH WHEREAS, pursuant to A.R.S. § 9-463.05 the Town has the requisite statutory authority to assess development fees to offset costs to the municipality associated with providing necessary public services to a development ; and WHEREAS, on February 19, 2020, the Town approved the updated Land Use Assumptions and Infrastructure Improvement Plans and Resolution No. (R)20-09, providing notice of intent to increase certain development impact fees. WHEREAS, on November 1, 2019 and March 9, 2020 the Town released reports outlining the method by which these development impact fees were calculated, (see Exhibit “A”); and WHEREAS, on November 18, 2019 and December 17, 2019, the Town held stakeholder meetings on proposed development impact fees and the infrastr ucture improvement plans; and WHEREAS, no less than thirty (30) days have passed since the time of the public hearings on the proposed fees and infrastructure improvement plans; and WHEREAS, the Mayor and Council have determined that it is in the best interest of the Town to amend the Town’s development impact fees. NOW, THEREFORE, BE IT ORDAINED by the Mayor and Council of the Town of Oro Valley, Arizona, that: SECTION 1. Repealing the existing Oro Valley Town Code Section 13-1-16, Fee Scheduled, and replacing with a new Fee Schedule as provided in Exhibit “A”, and repealing all resolutions, ordinances, and rules of the Town of Oro Valley in conflict therewith. SECTION 2. This Ordinance shall become effective on _____________________. SECTION 3. If any section, subsection, sentence, clause, phrase or portion of this Ordinance is for any reason held to be invalid or unconstitutional by the decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining po rtions thereof. PASSED AND ADOPTED by the Mayor and Council of the Town of Oro Valley, Arizona, this 17th day of June, 2020. TOWN OF ORO VALLEY Joseph C. Winfield, Mayor ATTEST: APPROVED AS TO FORM : Michael Standish, Town Clerk Tobin Sidles, Legal Services Director Date: Date: EXHIBIT “A” Land Use Assumptions, Infrastructure Improvements Plan and Development Fee Report Prepared for: Town of Oro Valley, Arizona June 17, 2020 4701 Sangamore Road, Suite S240 Bethesda, MD 301.320.6900 www.tischlerbise.com Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona ii TABLE OF CONTENTS EXECUTIVE SUMMARY .............................................................................................................. 1 ARIZONA DEVELOPMENT FEE ENABLING LEGISLATION ......................................................................................... 1 Necessary Public Services ..................................................................................................................... 1 Infrastructure Improvements Plan ........................................................................................................ 2 Qualified Professionals ......................................................................................................................... 2 Conceptual Development Fee Calculation ............................................................................................ 3 Evaluation of Offsets ............................................................................................................................ 3 DEVELOPMENT FEE REPORT ...................................................................................................... 4 METHODOLOGY ........................................................................................................................................... 4 Figure 1: Recommended Calculation Methodologies .......................................................................................................... 5 A Note on Rounding .............................................................................................................................. 5 SERVICE AREA .............................................................................................................................................. 5 Figure 2: Current Development Fee Service Area ................................................................................................................ 6 Figure 3: Proposed Development Fee Service Area ............................................................................................................. 7 CURRENT DEVELOPMENT FEES ........................................................................................................................ 8 Figure 4: Current Non-Utility Development Fees ................................................................................................................. 8 Figure 5: Current Residential Water Facilities Development Fees ....................................................................................... 8 Figure 6: Current Nonresidential Water Facilities Development Fees ................................................................................. 9 Figure 7: Current Irrigation Development Fees .................................................................................................................... 9 PROPOSED DEVELOPMENT FEES ...................................................................................................................... 9 Figure 8: Water Facilities Development Fees Comparative Analysis (proposed vs. current nonresidential) ..................... 11 Figure 9: Residential Development Fees Comparative Analysis (proposed vs. current) .................................................... 12 Figure 10: Nonresidential Development Fees Comparative Analysis (proposed vs. current) ............................................ 12 Figure 11: Single-Family Unit All Development Fees Comparative Analysis (proposed vs. current) ................................. 12 PARKS AND RECREATIONAL FACILITIES INFRASTRUCTURE IMPROVEMENT PLAN ....................... 13 Service Area ........................................................................................................................................ 13 Proportionate Share ........................................................................................................................... 13 Figure PR1: Daytime Population in 2015 ............................................................................................................................ 14 RATIO OF SERVICE UNITS TO DEVELOPMENT UNITS .......................................................................................... 14 Figure PR2: Parks and Recreational Facilities Ratio of Service Unit to Development Unit ................................................. 14 ANALYSIS OF CAPACITY, USAGE, AND COSTS OF EXISTING PUBLIC SERVICES .......................................................... 15 Park Land Improvements – Incremental Expansion ............................................................................ 15 Figure PR3: Park Land Inventory and Level-of-Service Standards ..................................................................................... 16 Park Amenities and Improvements – Incremental Expansion ............................................................. 16 Figure PR4: Park Amenities Inventory and Level-of-Service Standards ............................................................................. 17 Development Fee Report – Plan-Based ............................................................................................... 18 Figure PR5: Development Fee Report Cost Allocation ....................................................................................................... 18 PROJECTED DEMAND FOR SERVICES AND COSTS .............................................................................................. 18 Figure PR6: Projected Demand for Improved Park Land .................................................................................................... 19 Figure PR7: Projected Demand for Parks and Recreational Amenities .............................................................................. 20 Figure PR8: Necessary Parks & Recreational Improvements and Expansions ................................................................... 21 Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona iii PARKS AND RECREATIONAL FACILITIES DEVELOPMENT FEES ............................................................................... 21 Required Offsets ................................................................................................................................. 21 Proposed Parks and Recreational Facilities Development Fees .......................................................... 21 Figure PR9: Proposed Parks and Recreational Facilities Development Fees ..................................................................... 22 FORECAST OF REVENUES .............................................................................................................................. 22 Parks and Recreational Facilities Development Fee Revenue ............................................................. 22 Figure PR10: Projected Parks and Recreational Facilities Development Fee Revenue ..................................................... 23 POLICE FACILITIES INFRASTRUCTURE IMPROVEMENT PLAN ...................................................... 24 Service Area ........................................................................................................................................ 24 Proportionate Share ........................................................................................................................... 24 Figure P1: Police Proportionate Share ............................................................................................................................... 25 RATIO OF SERVICE UNITS TO DEVELOPMENT UNITS .......................................................................................... 25 Figure P2: Police Facilities Ratio of Service Unit to Development Unit .............................................................................. 27 ANALYSIS OF CAPACITY, USAGE, AND COSTS OF EXISTING PUBLIC SERVICES .......................................................... 27 Police Facilities – Cost Recovery ......................................................................................................... 27 Figure P3: Police Facilities and Level-of-Service Analysis ................................................................................................... 28 Figure P4: Police Facilities Service Unit Cost Summary ...................................................................................................... 28 Police Vehicles and Equipment – Incremental Expansion ................................................................... 28 Figure P5: Police Vehicles and Equipment Inventory and Level-of-Service Standards ...................................................... 29 Development Fee Report – Plan-Based ............................................................................................... 30 Figure P6: Development Fee Report Cost Allocation ......................................................................................................... 30 PROJECTED SERVICE UNITS AND PROJECTED DEMAND FOR SERVICES ................................................................... 30 Figure P7: Projected Demand for Police Vehicles ............................................................................................................. 31 Figure P8: Necessary Police Improvements and Expansions (10-Yr Total) ........................................................................ 32 POLICE FACILITIES DEVELOPMENT FEES ........................................................................................................... 32 Required Offsets ................................................................................................................................. 32 Proposed Police Facilities Development Fees ..................................................................................... 33 Figure P10: Proposed Police Facilities Development Fees ................................................................................................ 34 FORECAST OF REVENUES .............................................................................................................................. 34 Development Fee Revenues for Police Facilities and Vehicles ............................................................ 34 Figure P11: Projected Police Development Fee Revenue ................................................................................................. 35 STREET FACILITIES INFRASTRUCTURE IMPROVEMENT PLAN ...................................................... 36 Service Area ........................................................................................................................................ 36 METHODOLOGY ......................................................................................................................................... 36 Proportionate Share ........................................................................................................................... 36 RATIO OF SERVICE UNITS TO DEVELOPMENT UNITS .......................................................................................... 36 Service Units ....................................................................................................................................... 37 Figure S1: Summary of Service Units .................................................................................................................................. 37 Trip Generation Rates ......................................................................................................................... 37 Adjustments for Commuting Patterns and Pass-By Trips ................................................................... 37 Figure S2: Inflow/Outflow Analysis .................................................................................................................................... 38 ANALYSIS OF CAPACITY, USAGE, AND COSTS OF EXISTING PUBLIC SERVICES .......................................................... 38 Figure S3: Arterial Road Network Capacity and Usage ....................................................................................................... 39 Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona iv Vehicle Trips ........................................................................................................................................ 39 Figure S4: Vehicle Trips ...................................................................................................................................................... 39 Average Trip Length ............................................................................................................................ 39 Figure S5: National Average Trip Lengths .......................................................................................................................... 40 Figure S6. Expected VMT in the Town of Oro Valley .......................................................................................................... 40 Figure S7. Local Trip Length Adjustment Factor ................................................................................................................. 41 Figure S8. Local Average Trip Lengths by Land Use ............................................................................................................ 41 Figure S9. VMT per Service Unit on Arterial Network ........................................................................................................ 41 Cost per VMT and Infrastructure Improvement Plan .......................................................................... 41 Figure S10: Street Facilities Improvement Improvements Plan ......................................................................................... 42 Figure S11: Cost per VMT Factors ...................................................................................................................................... 42 SERVICE UNITS, DEMAND, AND COST FOR SERVICES ......................................................................................... 42 Travel Demand Model ........................................................................................................................ 42 Figure S12: Projected Travel Demand Model ..................................................................................................................... 43 Figure S13: Adjusted Cost per Vehicle Mile of Travel/Vehicle Mile of Capacity ................................................................ 44 Development Fee Report – Plan-Based ............................................................................................... 44 Figure S14: Development Fee Report Cost Allocation ....................................................................................................... 44 STREET FACILITIES DEVELOPMENT FEES .......................................................................................................... 44 Required Offsets ................................................................................................................................. 44 Figure S15: Offset for Excess Construction Sales Tax Revenue .......................................................................................... 45 Proposed Street Facilities Development Fees ..................................................................................... 45 Figure S16: Proposed and Existing Fees Comparison ......................................................................................................... 46 PROJECTED STREET FACILITIES DEVELOPMENT FEE REVENUE .............................................................................. 46 Figure S17: Projected Street Facilities Development Fee Revenue ................................................................................... 47 WATER FACILITIES INFRASTRUCTURE IMPROVEMENT PLAN ...................................................... 48 Service Area ........................................................................................................................................ 48 Proportionate Share ........................................................................................................................... 48 RATIO OF SERVICE UNITS TO DEVELOPMENT UNITS .......................................................................................... 49 Figure W2: Water Facilities Ratio of Service Unit to Development Unit ............................................................................ 50 ANALYSIS OF CAPACITY AND USAGE OF EXISTING PUBLIC SERVICES ...................................................................... 50 Water Facilities Level-of-Service Standards ........................................................................................ 50 PROJECTED DEMAND FOR WATER FACILITIES ................................................................................................... 51 Figure W3: Water Facilities Level-of-Service Standards .................................................................................................... 51 Figure W4: Future Projections of Water Consumption ...................................................................................................... 52 WATER FACILITIES INFRASTRUCTURE IMPROVEMENT PLAN ................................................................................ 52 Cost Recovery for Excess Capacity in Supply Projects ......................................................................... 52 Figure W5: Cost Recovery for Supply Projects ................................................................................................................... 52 Water Facilities Projects – Plan Based ................................................................................................ 53 Water Facilities Supply Projects – Plan Based .................................................................................... 53 Figure W6: Infrastructure Improvement Plan: Water Supply ............................................................................................ 53 Water Facilities Storage Projects – Plan Based ................................................................................... 53 Water Facilities Distribution Projects – Plan Based ............................................................................ 54 Development Fee Report – Plan-Based ............................................................................................... 54 Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona v Figure W9: Development Fee Report Cost Allocation ........................................................................................................ 54 WATER FACILITIES DEVELOPMENT FEE ........................................................................................................... 55 Required Offsets ................................................................................................................................. 55 Proposed Water Facilities Development Fees ..................................................................................... 55 Figure W10: Proposed Water Facilities Development Fees .............................................................................................. 56 FORECAST OF REVENUES .............................................................................................................................. 57 Development Fee Revenues for Water Facilities ................................................................................. 57 Figure W11: Projected Water Facilities Development Fee Revenue .................................................................................. 57 APPENDIX A: LAND USE ASSUMPTIONS ................................................................................... 58 EXECUTIVE SUMMARY ................................................................................................................................. 58 SERVICE AREA ............................................................................................................................................ 58 Figure A1: Current Development Fee Service Area ............................................................................................................ 59 RESIDENTIAL DEVELOPMENT ......................................................................................................................... 60 Persons per Housing Unit .................................................................................................................... 60 Figure A2: Year-Round Persons per Unit by Type of Housing ........................................................................................... 61 Current Residential Estimates ............................................................................................................. 61 Figure A3: Oro Valley Population and Housing Estimates for 2018 and 2028 ................................................................... 61 Figure A4: Recent Residential Permits by Fiscal Year ........................................................................................................ 62 Residential Projections ........................................................................................................................ 62 Figure A5: Oro Valley Residential Development Projections ............................................................................................. 63 NONRESIDENTIAL DEVELOPMENT .................................................................................................................. 63 Jobs by Type of Nonresidential Development ..................................................................................... 63 Figure A6: Oro Valley Jobs Estimates for 2018 and 2028 .................................................................................................. 63 Figure A7: Oro Valley Employment Projections ................................................................................................................ 64 Nonresidential Floor Area by Type of Development ........................................................................... 64 Figure A8: Nonresidential Floor Area Estimates for 2018 and 2028 .................................................................................. 64 Figure A9: ITE Employee and Trip Generation Ratios ........................................................................................................ 65 AVERAGE WEEKDAY VEHICLE TRIPS ............................................................................................................... 65 Trip Rate Adjustments ........................................................................................................................ 65 Commuter Trip Adjustment ................................................................................................................ 65 Figure A10: Commuter Trip Adjustment ............................................................................................................................ 66 Adjustment for Pass-By Trips .............................................................................................................. 66 Estimated Residential Vehicle Trip Rates ............................................................................................ 66 Figure A11: Average Weekday Vehicle Trip Ends by Housing Type ................................................................................... 67 Functional Population ......................................................................................................................... 68 Figure A12: Functional Population ..................................................................................................................................... 68 SUMMARY OF GROWTH INDICATORS .............................................................................................................. 69 Figure A13: Municipal Planning Area Projections and Growth Rates ................................................................................ 69 APPENDIX B: FORECAST OF REVENUES .................................................................................... 70 APPENDIX C: ARTERIAL STREET SEGMENTS INVENTORY ............................................................ 71 Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 1 E XECUTIVE SUMMARY The Town of Oro Valley hired TischlerBise, Inc., to document land use assumptions, prepare an Infrastructure Improvements Plan (hereinafter referred to as the “IIP”), and update development fees pursuant to Arizona Revised Statutes (“ARS”) § 9-436.05 (hereinafter referred to as the “Enabling Legislation”). Municipalities in Arizona may assess development fees to offset infrastructure costs to a municipality for necessary public services. The development fees must be based on an Infrastructure Improvements Plan and Land Use Assumptions. The IIPs for each type of infrastructure are located in each infrastructure type’s corresponding section, and the Land Use Assumptions can be found in Appendix A. The proposed development fees are displayed in the Development Fee Report chapter. Development fees are one-time payments used to construct system improvements needed to accommodate new development. The fee represents future development’s proportionate share of infrastructure costs. Development fees may be used for infrastructure improvements or debt service for growth related infrastructure. In contrast to general taxes, development fees may not be used for operations, maintenance, replacement, or correcting existing deficiencies. This update of the Town’s Infrastructure Improvements Plan and associated update to its development fees includes the following necessary public services: • Parks and Recreational Facilities • Police Facilities • Street Facilities • Water Facilities This plan also includes all necessary elements required to be in full compliance with Arizona Revised Statutes (“ARS”) § 9-436.05 (SB 1525). ARIZONA DEVELOPMENT FEE ENABLING LEGISLATION The Enabling Legislation governs how development fees are calculated for municipalities in Arizona. Necessary Public Services Under the requirements of the Enabling Legislation, development fees may only be used for construction, acquisition or expansion of public facilities that are necessary public services. “Necessary public service” means any of the following categories of facilities that have a life expectancy of three or more years and that are owned and operated on behalf of the municipality: water, wastewater, storm water, drainage, flood control, library, streets, fire and police, and neighborhood parks and recreation. Additionally, a necessary public service includes any facility, not included in the aforementioned categories (e.g., general government facilities), that was financed before June 1, 2011 and that meets the following requirements: 1. Development fees were pledged to repay debt service obligations related to the construction of the facility. 2. After August 1, 2014, any development fees collected are used solely for the payment of principal and interest on the portion of the bonds, notes, or other debt service obligations issued before June 1, 2011 to finance construction of the facility. Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 2 Infrastructure Improvements Plan Development fees must be calculated pursuant to an IIP. For each necessary public service that is the subject of a development fee, by law, the IIP shall include the following seven elements: • A description of the existing necessary public services in the service area and the costs to update, improve, expand, correct or replace those necessary public services to meet existing needs and usage and stricter safety, efficiency, environmental or regulatory standards, which shall be prepared by qualified professionals licensed in this state, as applicable. • An analysis of the total capacity, the level of current usage and commitments for usage of capacity of the existing necessary public services, which shall be prepared by qualified professionals licensed in this state, as applicable. • A description of all or the parts of the necessary public services or facility expansions and their costs necessitated by and attributable to development in the service area based on the approved Land Use Assumptions, including a forecast of the costs of infrastructure, improvements, real property, financing, engineering and architectural services, which shall be prepared by qualified professionals licensed in this state, as applicable. • A table establishing the specific level or quantity of use, consumption, generation or discharge of a service unit for each category of necessary public services or facility expansions and an equivalency or conversion table establishing the ratio of a service unit to various types of land uses, including residential, commercial and industrial. • The total number of projected service units necessitated by and attributable to new development in the service area based on the approved Land Use Assumptions and calculated pursuant to generally accepted engineering and planning criteria. • The projected demand for necessary public services or facility expansions required by new service units for a period not to exceed 10 years. • A forecast of revenues generated by new service units other than development fees, which shall include estimated state-shared revenue, highway users revenue, federal revenue, ad valorem property taxes, construction contracting or similar excise taxes and the capital recovery portion of utility fees attributable to development based on the approved Land Use Assumptions and a plan to include these contributions in determining the extent of the burden imposed by the development. Qualified Professionals The IIP must be developed by qualified professionals using generally accepted engineering and planning practices. A qualified professional is defined as “a professional engineer, surveyor, financial analyst or planner providing services within the scope of the person’s license, education, or experience.” TischlerBise is a fiscal, economic, and planning consulting firm specializing in the cost of growth services and is licensed to do business in Arizona. Our services include development fees, fiscal impact analysis, infrastructure financing analyses, user fee/cost of service studies, capital improvement plans, and fiscal software. TischlerBise has prepared over 900 development fee studies over the past 40 years for local governments across the United States. Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 3 Conceptual Development Fee Calculation In contrast to project-level improvements, development fees fund growth-related infrastructure that will benefit multiple development projects, or the entire service area (usually referred to as system improvements). The first step is to determine an appropriate demand indicator for the particular type of infrastructure. The demand indicator measures the number of service units for each unit of development. For example, an appropriate indicator of the demand for parks is population growth and the increase in population can be estimated from the average number of persons per housing unit. The second step in the development fee formula is to determine infrastructure improvement units per service unit, typically called Level-of-Service standards, sometimes referred to as LOS. In keeping with the park example, a common LOS standard is improved park acres per thousand people. The third step in the development fee formula is the cost of various infrastructure units. To complete the park example, this part of the formula would establish a cost per acre for land acquisition and/ or park improvements. Evaluation of Offsets Regardless of the methodology, a consideration of offsets is integral to the development of a legally defensible development fee. There are two types of offsets that should be addressed in development fee studies and ordinances. The first is a revenue offset due to possible double payment situations, which could occur when other revenues may contribute to the capital costs of infrastructure covered by the development fee. This type of offset is integrated into the fee calculation, thus reducing the fee amount. The second is a site-specific credit or developer reimbursement for dedication of land or construction of system improvements. This type of credit is addressed in the administration and implementation of the development fee program. For ease of administration, TischlerBise normally recommends developer reimbursements for system improvements. Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 4 DEVELOPMENT FEE REPORT METHODOLOGY Development fees for the necessary public services made necessary by new development must be based on the same level-of-service provided to existing development in the service area. There are three basic methodologies used to calculate development fees. They examine the past, present, and future status of infrastructure. The objective of evaluating these different methodologies is to determine the best measure of the demand created by new development for additional infrastructure capacity. Each method has advantages and disadvantages in a particular situation and can be used simultaneously for different cost components. Additionally, development fees for public services can also include the cost of professional services for preparing IIP’s and the related Development Fee report. Reduced to its simplest terms, the process of calculating development fees involves two main steps: (1) determining the cost of development-related capital improvements and (2) allocating those costs equitably to various types of development. In practice, though, the calculation of development fees can become quite complicated because of the many variables involved in defining the relationship between development and the need for facilities within the designated service area. The following paragraphs discuss basic methods for calculating development fees and how those methods can be applied. • Cost Recovery (past improvements) - The rationale for recoupment, often called cost recovery, is that new development is paying for its share of the useful life and remaining capacity of facilities already built, or land already purchased, from which new growth will benefit. This methodology is often used for utility systems that must provide adequate capacity before new development can take place. • Incremental Expansion (concurrent improvements) - The incremental expansion method documents current level-of-service standards for each type of public facility, using both quantitative and qualitative measures. This approach assumes there are no existing infrastructure deficiencies or surplus capacity in infrastructure. New development is only paying its proportionate share for growth-related infrastructure. Revenue will be used to expand or provide additional facilities, as needed, to accommodate new development. An incremental expansion cost method is best suited for public facilities that will be expanded in regular increments to keep pace with development. • Plan-Based (future improvements) - The plan-based method allocates costs for a specified set of improvements to a specified amount of development. Improvements are typically identified in a long-range facility plan and development potential is identified by a land use plan. There are two basic options for determining the cost per demand unit: (1) total cost of a public facility can be divided by total demand units (average cost), or (2) the growth-share of the public facility cost can be divided by the net increase in demand units over the planning timeframe (marginal cost). A summary is provided in Figure 1 showing the methodology for each of the facility and fee study types, as well as the service area and cost allocation method used to develop the IIP and calculate the development fees. Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 5 Figure 1: Recommended Calculation Methodologies A Note on Rounding A note on rounding: Calculations throughout this report are based on an analysis conducted using Excel software. Most results are discussed in the report using two, three, and four-digit places, which represent rounded figures. However, the analysis itself uses figures carried to their ultimate decimal places; therefore, the sums and products generated in the analysis may not equal the sum or product if the reader replicates the calculation with the factors shown in the report (due to the rounding of figures shown, not in the analysis). SERVICE AREA ARS 9-63.05 defines “service area” as follows: Any specified area within the boundaries of a municipality in which development will be served by necessary public services or facility expansions and within which a substantial nexus exists between the necessary public services or facility expansions and the development being served as prescribed in the infrastructure improvements plan. The Town’s previous Land Use Assumptions, Infrastructure Improvement Plan and Development Study recommended one services area, shown below in Figure 2. Incremental Expansion Parks and Recreational Townwide Developed Parks, Park Amenities Development Fee Study N/A Population, Jobs Police Townwide Vehicles Development Fee Study Facilities Population, Nonres. Trips Street Townwide Arterial Lane Miles, Signalized Intersections Development Fee Study N/A VMT Water Townwide N/A Development Fee Study, Water Distribution, Storage and Supply CAP Water Allocation Gallons per Service Unit Facility Type Service Area Plan-Based Cost Recovery Cost Allocation Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 6 Figure 2: Current Development Fee Service Area Much of the land in Oro Valley is characterized by a built environment of dispersed, detached single family housing, transected by arterial roadways leading to concentrated nodes of businesses, institutions and commercial development with, largely single-family lots spread out to the northern edges. As a result of the development pattern, the Town relies on a variety of revenues and funding mechanisms to pay for public infrastructure and facilities which service residents. Oro Valley has embraced numerous policies and plans to guide future development, most notably the 2016 Your Voice, Our Future General Plan aimed at encouraging new development as much as possible to pay the proportional share of growth-related infrastructure improvements for area roads, parks, police, fire and public facilities. In light of the plan- specific policies outlined by the Town along with discussions with Town staff regarding anticipated development patterns and infrastructure needs, TischlerBise is recommending no changes to the Development Fee Service Area as displayed in Figure 2. The single Development Fee Service Area is supported first and foremost because, parks and recreation, police, and roadway infrastructure are intended to serve the entire Town with a standard level-of-service as opposed to bounded districts or subareas. As an example, referring to Figure 2, a new residential development in the northeast area is still likely to also utilize regional parks or police facilities located throughout Town. Furthermore, many services such as police and roadway infrastructure react to deployment changes over time based on migration patterns of people and are not necessarily restricted to specific geographic sub-zones. As such, TischlerBise is recommending all fees for these categories be assessed as a Townwide fee. Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 7 Figure 3: Proposed Development Fee Service Area Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 8 CURRENT DEVELOPMENT FEES Oro Valley’s current development fees are shown below in Figures 4, 5, 6 and 7. Demand for non-utility services (transportation, parks & recreation and police) is driven by the intensity of the use on those particular services; therefore, fees are assessed based on development type – Residential or Non- Residential; current non-utility fees are shown in Figure 4. The Town of Oro Valley assess Water Facilities development fees for water based on meter type — and include the following classifications: Single Family Residential, Multifamily Residential, Commercial and Irrigation. Each of these categories include independent impact fee charges attributed to Alternative Water Resources Development Impact Fee (AWRDIF), which is related to alternative water resource projects such as Central Arizona Project and the Potable Water System Development Impact Fee (PWSDIF). Current Water Facilities fees are shown in Figure 5, 6 and 7. Figure 4: Current Non-Utility Development Fees Figure 5: Current Residential Water Facilities Development Fees Residential (per unit) Unit Type Transportation Parks Police Current Fees Single Unit $1,990 $856 $310 $3,156 Multifamily $1,231 $599 $215 $2,045 Mobile Home Park (per space)$649 $651 $234 $1,534 Nonresidential (per 1,000 square feet) Land Use Type Transportation Parks Police Current Fee Hotel/Motel (room)$758 $0 $200 $958 Retail/Commercial $2,412 $0 $447 $2,859 Office & Other Services $1,822 $0 $156 $1,978 Industrial $983 $0 $65 $1,048 Warehouse $915 $0 $63 $978 Public/Institutional $1,379 $0 $118 $1,497 Residential Residential OVWU Meter Size AWRDIF Fee PWSDIF Fee Total Fees 5/8" $4,045 $2,015 $6,060 3/4"$6,067 $3,022 $9,089 1"$10,111 $5,037 $15,148 1.5" standard $20,223 $10,074 $30,297 2" compound $32,356 $16,118 $48,474 Mulit-Family (Per Unit)$1,941 $967 $2,908 Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 9 Figure 6: Current Nonresidential Water Facilities Development Fees Figure 7: Current Irrigation Development Fees PROPOSED DEVELOPMENT FEES The proposed fees are based on a policy-level concept that development fees should fund 100 percent of growth-related infrastructure, therefore the fees shown below represent the maximum allowable fees. Oro Valley may adopt fees that are less than the amounts shown; however, a reduction in development fee revenue will necessitate an increase in other revenues, a decrease in planned capital improvements and/or a decrease in Oro Valley’s level-of-service standards. All costs in the Development Fee Report are in current dollars with no assumed inflation rate over time. If cost estimates change significantly over time, development fees should be recalibrated. Proposed development fees are shown below in Figures 8, 9 and 10. All tables show the proposed fee, the current fee and the total dollar change. Proposed utility development fees shown in Figure 8 are assessed per meter based on capacity ratios referenced from the American Water Works Association Manual of Water Supply Practices and apply a Demand Adjustment Factor calculated from 2017-2018 consumption data per nonresidential and irrigation meter classifications. Utilization of these capacity ratios replicate current fee methodologies and yield the Town a consistent comparison and approach. Further, and at the direction of staff, the Water Facilities development fees have been consolidated into a single fee. The relationship between infrastructure funded with current PWSDIF revenue and Irrigation Meter Size AWRDIF Fee PWSDIF Fee Total Fees 5/8" x 3/4"$7,280 $3,626 $10,906 3/4" x 3/4"$10,920 $5,440 $16,360 1"$18,200 $9,066 $27,266 1.5" standard $36,401 $18,132 $54,533 2" compound $58,241 $29,012 $87,253 3" compound $116,482 $58,024 $174,506 4" compound $182,004 $90,662 $272,666 6" compound $364,007 $181,324 $545,331 8" compound $582,412 $290,118 $872,530 Nonresidential OVWU Meter Size AWRDIF Fee PWSDIF Fee Total Fees 5/8"$5,258 $2,619 $7,877 3/4" $7,887 $3,929 $11,816 1"$13,145 $6,548 $19,693 1.5" standard $26,289 $13,096 $39,385 2" compound $42,063 $20,953 $63,016 3" compound $84,126 $41,906 $126,032 4" compound $131,447 $65,478 $196,925 6" compound $262,894 $130,956 $393,850 8" compound $420,631 $209,530 $630,161 Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 10 infrastructure funded with AWRDIF revenue are very similar. Both are potable water resource driven and both are required to meet the demands of growth. As such, the infrastructure needs are being combined into one IIP resulting in the creation of one new development impact fee to replace the two existing impact fees. The new development fee will be known as the Water Facilities development fee. The Water Facilities development fee is intended to fund all types of water resources, the infrastructure to deliver those resources and any related debt including CAP capital infrastructure repayment costs. All other non-utility services (transportation, parks & recreation, police) are shown in Figures 9 and 10 based on residential or nonresidential development type. Development fees for residential development are assessed per dwelling unit, based on the type of unit. Nonresidential development fees are assessed per 1,000 square feet of floor area. Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 11 Figure 8: Water Facilities Development Fees Comparative Analysis (proposed vs. current nonresidential) Residential Residential Meter Size Proposed Fees Current Total Fees Change 5/8" $6,387 $6,060 $327 3/4" $9,569 $9,089 $480 1"$15,934 $15,148 $786 1.5" standard $31,846 $30,297 $1,549 2" compound $50,941 $48,474 $2,467 Mulit-Family (Per Unit)$2,044 $2,908 ($864) Nonresidential Meter Size Nonresidential Meter Size Proposed Fees Current Total Fees Change 5/8" $7,087 $7,877 ($790) 3/4"$10,619 $11,816 ($1,197) 1"$17,684 $19,693 ($2,009) 1.5" standard $35,347 $39,385 ($4,038) 2" compound $56,542 $63,016 ($6,474) 3" compound $113,062 $126,032 ($12,970) 4" compound $176,647 $196,925 ($20,278) 6" compound $353,273 $393,850 ($40,577) 8" compound $565,224 $630,161 ($64,937) Irrigation Meter Size $0 Irrigation Meter Size Proposed Fees Current Total Fees Change 5/8" $14,343 $10,906 $3,437 3/4" $21,503 $16,360 $5,143 1"$35,824 $27,266 $8,558 1.5" standard $71,627 $54,533 $17,094 2" compound $114,590 $87,253 $27,337 3" compound $229,158 $174,506 $54,652 4" compound $358,047 $272,666 $85,381 6" compound $716,072 $545,331 $170,741 8" compound $1,145,702 $872,530 $273,172 Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 12 Figure 9: Residential Development Fees Comparative Analysis (proposed vs. current) Figure 10: Nonresidential Development Fees Comparative Analysis (proposed vs. current) To demonstrate the impact of the proposed development fees, the example in Figure 11 below contemplates all fees (Utility and Non-Utility) for a single-family unit, assuming a 0.625-inch water meter, in Oro Valley, representing a 4.8 percent increase. Figure 11: Single-Family Unit All Development Fees Comparative Analysis (proposed vs. current) Unit Type Current Fee Proposed Fee Difference Single-Family $9,216 $9,383 $167 Nonresidential (per 1,000 square foot unless noted otherwise) Land Use Type Transportation Parks Police Proposed Fee Current Fee Difference Hotel/Motel (room)$839 $222 $227 $1,288 $958 $330 Retail/Commercial $2,567 $558 $680 $3,805 $2,859 $946 Office & Other Services $978 $708 $260 $1,946 $1,978 ($32) Industrial $498 $389 $130 $1,017 $1,048 ($31) Warehouse $175 $81 $50 $306 $978 ($672) Public/Institutional $1,294 $222 $350 $1,866 $1,497 $369 Residential (per unit) Unit Type Transportation Parks Police Proposed Fee Current Fee Difference Single-Family $1,660 $1,054 $283 $2,997 $3,156 ($159) Multi-Family $870 $762 $204 $1,837 $2,045 ($208) Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 13 PARKS AND RECREATION AL FACILITIES INFRASTRUCTURE IMPROVEMENT PLAN ARS § 9-463.05 (T)(7)(g) defines the facilities and assets that can be included in the Parks and Recreational Facilities IIP: “Neighborhood parks and recreational facilities on real property up to thirty acres in area, or parks and recreational facilities larger than thirty acres if the facilities provide a direct benefit to the development. Park and recreational facilities do not include vehicles, equipment or that portion of any facility that is used for amusement parks, aquariums, aquatic centers, auditoriums, arenas, arts and cultural facilities, bandstand and orchestra facilities, bathhouses, boathouses, clubhouses, community centers greater than three thousand square feet in floor area, environmental education centers, equestrian facilities, golf course facilities, greenhouses, lakes, museums, theme parks, water reclamation or riparian areas, wetlands, zoo facilities or similar recreational facilities, but may include swimming pools.” The Parks and Recreational Facilities IIP includes components for park amenities, park land improvements and the cost of professional services for preparing the Parks and Recreational Facilities IIP and related Development Fee report. An incremental expansion methodology is used for park amenities and park land improvement, and a plan-based methodology is used for the Development Fee Report. Service Area The Town of Oro Valley plans to provide a uniform level-of-service and equal access to parks and recreational facilities within the Town limits. The parks and recreation programs are structured and provided to make full use of Oro Valley’s total inventory of facilities. Therefore, the recommended service area for the Parks and Recreational Facilities IIP is Townwide. Proportionate Share ARS § 9-463.05 (B)(3) states that the development fee shall not exceed a proportionate share of the cost of necessary public services needed to accommodate new development. TischlerBise recommends daytime population as a reasonable indicator of the potential demand for Parks and Recreational Facilities from residential and nonresidential development. According to the U.S. Census Bureau web application OnTheMap, there were 8,201 inflow commuters in 2015, which is the number of persons who work in Oro Valley but live outside the Town. OnTheMap is a web-based mapping and reporting application that shows where workers are employed and where they live. It describes geographic patterns of jobs by their employment locations and residential locations as well as the connections between the two locations. OnTheMap was developed through a unique partnership between the U.S. Census Bureau and its Local Employment Dynamics (LED) partner states. OnTheMap data is used, as shown in Figure PR1, to derive Functional Population shares for Oro Valley. The estimated Town population in 2015 from PAG is estimated at 42,259. The study uses 2015 data because this the most recent year available for inflow/outflow data. Therefore, it is compared to the population estimate for the corresponding year. As shown in Figure PR1, the proportionate share is based on cumulative impact days per year. Oro Valley residents were allocated 365 days per year, for a total of 15,424,535 impact days. Inflow commuters were allocated 4 days per week, and 50 weeks per year, for a total of 1,640,200 impact days per year. Adding Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 14 the respective impact days of residents and inflow commuters (shown below in days) yields the total annual impact days for both residential and nonresidential categories. Residential’s proportionate share of the total impact hours is 90%, while the nonresidential share is 10%. Figure PR1: Daytime Population in 2015 RATIO OF SERVICE UNITS TO DEVELOPMENT UNITS ARS § 9-463.05(E)(4) requires: “A table establishing the specific level or quantity of use, consumption, generation or discharge of a service unit for each category of necessary public services or facility expansions and an equivalency or conversion table establishing the ratio of a service unit to various types of land uses, including residential, commercial and industrial.” Figure PR2 displays the demand indicators for residential and nonresidential land uses. For residential development, the table displays the persons per housing unit for single-family (or single unit) and multifamily units. For nonresidential development, the table displays the number of employees per thousand square feet for four different types of nonresidential development. Figure PR2: Parks and Recreational Facilities Ratio of Service Unit to Development Unit Residential Development Single Family 2.09 Multi-Family 1.51 Source: Land Use Assumptions Nonresidential Development Industrial 1.63 Commercial 2.34 Institutional 0.93 Office & Other 2.97 Source: Institute of Transportation Engineers, 2017 Housing Type Persons per Housing Unit Type Jobs per 1,000 Square Feet Residents Inflow Commuters Residential1 Nonresidential2 Total Residential Nonresidential 42,259 8,201 15,424,535 1,640,200 17,064,735 90%10% 1. Days per Year =365 2. 4 Days per Week x 50 Weeks per Year =200 Source: Pima Association of Goverments 2015 Population Estimate; U.S. Census Bureau, OnTheMap 6.6 Application, 2015. Cost Allocation for ParksCumulative Impact Days per Year Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 15 ANALYSIS OF CAPACITY, USAGE, AND COSTS OF EXISTING PUBLIC SERVICES ARS § 9-463.05(E)(1) requires: “A description of the existing necessary public services in the service area and the costs to upgrade, update, improve, expand, correct or replace those necessary public services to meet existing needs and usage and stricter safety, efficiency, environmental or regulatory standards, which shall be prepared by qualified professionals licensed in this state, as applicable.” ARS § 9-463.05(E)(2) requires: “An analysis of the total capacity, the level of current usage and commitments for usage of capacity of the existing necessary public services, which shall be prepared by qualified professionals licensed in this state, as applicable.” Park Land Improvements – Incremental Expansion The summary of park land in Oro Valley is displayed in Figure PR3. Town-owned golf courses, regional parks, retention ponds, and conservation parks were excluded from the inventory. Oro Valley has a total of 389 acres of park land. The level-of-service for residential development is 0.0020 acres per resident, which is found by multiplying the total number of improved acres (99) by the residential proportionate share (90%) and dividing this total by the 2018 population (45,184). The nonresidential level-of-service is 0.009 developed acres per job, which is found by multiplying the total number of improved acres (99) by the nonresidential proportionate share (10%) and dividing this total by the number of jobs in 2018 (10,642). According to information provided by Town staff, the average cost to develop an acre of park land is $68,769. The cost per demand unit is determined by multiplying the level-of-service standard by the average development cost per acre. This results in a cost per person of $135.47 (0.0020 x $68,769) and $63.96 per job (0.0009 x $68,769). Because the Town of Oro Valley does not anticipate any substantial neighborhood or community park land purchases over the next 10 years (or, developers will be asked to dedicate a reasonable portion of land to the Town for development as park land), the cost of additional park land acquisition is not recommended for inclusion in the Development Fee Report and is excluded from the Town’s development fee calculations. Park land improvements—including but not limited to elements such as irrigation, landscaping, lighting or turf —however are included in the Fee with the expectation that the Town will maintain the current level-of-service through incremental improvements on existing but unimproved park land. Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 16 Figure PR3: Park Land Inventory and Level-of-Service Standards Park Amenities and Improvements – Incremental Expansion The inventory summary of Oro Valley’s park amenities is displayed in Figure PR4. Oro Valley parks have 87 amenities that have a total replacement cost of approximately $18.3 million. Dividing the total replacement cost by the total number of amenities yields an average cost per improvement of $210,936. The current residential level-of-service is 0.00173 amenities per resident, which was obtained by multiplying the 87 amenities by the residential proportionate share (90%) and dividing this amount by the current population (45,184). Similarly, the nonresidential level-of-service is 0.0082 units per job (90 x 10% x 10,642). Multiplying the average cost per amenity ($210,936) by the residential and nonresidential levels-of-service results in a cost per person of $364.92 and $172.97 per job. Note that while the LOS Standards shown are rounded to the fifth decimal place, the analysis does not round these figures. Therefore, the cost analysis calculations may not produce the same result if the reader replicates the calculations using the factors shown (due to the rounding of figures shown, not in the analysis). Park Land Total Acres Improved Acres Canada del Oro 30 30 Jame D. Kriegh 29 29 West Lambert Lane 40 2 Naranja 213 30 Honey Bee Canyon 77 8 TOTAL 389 99 Improvement Cost per Acre1 $68,769 90% 45,184 0.0020 $135.47 10% 10,642 0.0009 $63.96 Nonresidential Share 2018 Jobs LOS: Developed Acres per Job Cost per Job Residential Nonresidential 2018 Population LOS: Developed Acres per Persons Cost per Person Level-of-Service (LOS) Standards Residential Share Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 17 Figure PR4: Park Amenities Inventory and Level-of-Service Standards Description Units Unit Cost Replacement Cost Restrooms (lighted)6 $215,000 $1,290,000 Playground (shaded)2 $150,000 $300,000 Accessible Playground (shaded)1 $150,000 $150,000 Covered Ramada (lighted)5 $90,000 $450,000 Covered Ramada (lighted)3 $50,000 $150,000 Soccer Fields (lighted)2 $210,000 $420,000 Softball Fields (lighted)4 $250,000 $1,000,000 Multiuse Field (lighted)4 $1,200,000 $4,800,000 Baseball Fields (lighted)3 $250,000 $750,000 Sand Volleyball 2 $25,000 $50,000 Horseshoe Pits 2 $1,000 $2,000 Concession Stand 2 $150,000 $300,000 Tennis Court 32 $140,000 $4,480,000 Basketball Court (lighted)1 $100,000 $100,000 Parking Lot (lighted)7 $340,000 $2,380,000 Walking Path 1 $54,400 $54,400 Racquetball Courts (lighted)4 $50,000 $200,000 Dog Park 2 $150,000 $300,000 Splash Pad 1 $875,000 $875,000 Archery Range (fixed)1 $150,000 $150,000 Archery Range (walk around)2 $75,000 $150,000 Total 87 $210,936 $18,351,400 * Average Cost Per Pool, Town of Oro Valley. Existing Amenities 87 Residential Share 90% 2018 Population 45,184 Amenities per Person 0.00173 Cost per Person $364.92 Nonresidential Share 10% 2018 Jobs 10,642 Amenities per Job 0.00082 Cost per Job $172.97 Level-of-Service Standards Residential Nonresidential Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 18 Development Fee Report – Plan-Based The cost to prepare the Parks and Recreational Development Fees and IIP totals $15,268. Oro Valley plans to update its report every five years. Based on this cost, proportionate share, and five-year projections of new development from the Land Use Assumptions document, the cost per person is $4.39 and the cost per job is $1.71. Figure PR5: Development Fee Report Cost Allocation PROJECTED DEMAND FOR SERVICES AND COSTS ARS § 9-463.05(E)(5) requires: “The total number of projected service units necessitated by and attributable to new development in the service area based on the approved land use assumptions and calculated pursuant to generally accepted engineering and planning criteria.” As shown in Figure PR6 and PR7, the Land Use Assumptions projects an additional 5,991 persons and 1,831 jobs over the next 10 years. ARS § 9-463.05(E)(6) requires: “The projected demand for necessary public services or facility expansions required by new service units for a period not to exceed ten years.” These projected service units are multiplied by the current levels-of-service for the IIP components shown in Figure PR6 and PR7. New development will demand an additional 13 acres of improved park land. The park improvements totals demanded by new development multiplied by the respective costs suggests the Town will need to spend approximately $927,694 on new park land improvements to accommodate projected demand. Necessary Public Service Cost Assessed Against Proportionate Share Demand Unit 2019 2024 Change Cost per Demand Unit Residential 90%Population 45,857 48,989 3,132 $4.39 Nonresidential 10%Jobs 10,812 11,705 893 $1.71$15,268Parks Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 19 Figure PR6: Projected Demand for Improved Park Land The park amenities demanded by new development multiplied by the respective costs suggests the Town will need to spend $2.5 million on new park amenities to accommodate projected demand. Demand Unit Cost per Acre 0.002 Improved Acres Persons 0.001 Improved Acres Jobs Year Population Jobs Residential Acres Nonresidential Acres Total Acres Base 2018 45,184 10,642 89 10 99 Year 1 2019 45,857 10,812 90 10 100 Year 2 2020 46,536 10,985 92 10 102 Year 3 2021 47,192 11,160 93 10 103 Year 4 2022 47,820 11,340 94 11 105 Year 5 2023 48,413 11,522 95 11 106 Year 6 2024 48,989 11,705 97 11 107 Year 7 2025 49,557 11,892 98 11 109 Year 8 2026 50,112 12,082 99 11 110 Year 9 2027 50,648 12,275 100 11 111 Year 10 2028 51,175 12,473 101 12 112 10-Yr Increase 5,991 1,831 12 2 13 Growth-Related Expenditures =>$810,787 $116,907 $927,694 Total $927,694 Level of Service Need for Parks Infrastructure $68,769Park Land Improvements Type of Infrastructure Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 20 Figure PR7: Projected Demand for Parks and Recreational Amenities PARKS AND RECREATION FACILITIES IIP ARS § 9-463.05(E)(3) requires: “A description of all or the parts of the necessary public services or facility expansions and their costs necessitated by and attributable to development in the service area based on the approved land use assumptions, including a forecast of the costs of infrastructure, improvements, real property, financing, engineering and architectural services, which shall be prepared by qualified professionals licensed in this state, as applicable.” Potential Parks and Recreational Facilities that Oro Valley may use development fees for in order to accommodate new development over the next 10 years are shown in Figure PR8. Demand Unit Cost per Amenity 0.0017 Amenities Persons 0.0008 Amenities Jobs Year Population Jobs Residential Units Nonresidential Units Total Amenities Base 2018 45,184 10,642 78 9 87 Year 1 2019 45,857 10,812 79 9 88 Year 2 2020 46,536 10,985 81 9 90 Year 3 2021 47,192 11,160 82 9 91 Year 4 2022 47,820 11,340 83 9 92 Year 5 2023 48,413 11,522 84 9 93 Year 6 2024 48,989 11,705 85 10 94 Year 7 2025 49,557 11,892 86 10 95 Year 8 2026 50,112 12,082 87 10 97 Year 9 2027 50,648 12,275 88 10 98 Year 10 2028 51,175 12,473 89 10 99 10-Yr Increase 5,991 1,831 10 2 12 Growth-Related Expenditures =>$2,185,293 $316,403 $2,501,696 Total $2,501,696 $210,936 Need for Parks Infrastructure Type of Infrastructure Level of Service Park Amenities Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 21 Figure PR8: Necessary Parks & Recreational Improvements and Expansions PARKS AND RECREATIONAL FACILITIES DEVELOPMENT FEES Required Offsets An offset is not necessary for the Parks and Recreational Facilities development fees because 10-year growth costs exceed the amount of revenue that is projected to be generated by development fees according to the Land Use Assumptions, as shown in Figure PR10. Proposed Parks and Recreational Facilities Development Fees Infrastructure standards and cost factors for Parks and Recreational Facilities, including park amenities, park land improvements and pool facilities, and the professional services cost for the IIP and Development Fee Report are summarized at the top of Figure PR9. Updated development fees for Parks and Recreational Facilities are shown in the column with green shading alongside the current development fees, and the net change is shown in the far-right column. The proposed development fees for parks and recreation increased across all development types from the current fee amounts. Estimated Cost $1,500,000 Playground and Parking Lot $1,700,000 Multiuse Fields (lighted)$1,200,000 $150,000 Total $4,550,000 Improvement Park Infrastructure Improvement Plan Skate Park Dog Park Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 22 Figure PR9: Proposed Parks and Recreational Facilities Development Fees FORECAST OF REVENUES Appendix B contains the forecast of revenues required by Arizona’s Enabling Legislation. Parks and Recreational Facilities Development Fee Revenue The top of Figure PR10 summarizes the growth-related cost of infrastructure in Oro Valley over the next 10 years (approximately $3.4 million for Parks and Recreational Facilities). Oro Valley should receive approximately $3.2 million in Parks and Recreational Facilities development fee revenue over the next 10 years if actual development matches the Land Use Assumptions. This yields a minor net deficit of approximately $209,000. Fee Component Cost per Person Cost per Job Park Land Improvements $135.33 $63.85 Park Amenities $364.76 $172.80 Development Fee Study $4.39 $1.71 TOTAL $504.48 $238.36 Residential (per unit) Development Type Persons per Housing Unit Proposed Fees Current Fee Increase / Decrease Single Unit 2.09 $1,054 $856 $198 2+ Units 1.51 $762 $599 $163 Nonresidential (per square foot unless noted otherwise) Development Type Jobs per 1,000 Sq Ft Proposed Fees Current Fee Increase / Decrease Hotel/Motel (room)0.93 $0.22 $0 $0.22 Retail/Commercial 2.34 $0.56 $0 $0.56 Office & Other Services 2.97 $0.71 $0 $0.71 Industrial 1.63 $0.39 $0 $0.39 Warehouse 0.34 $0.08 $0 $0.08 Public/Institutional 0.93 $0.22 $0 $0.22 Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 23 Figure PR10: Projected Parks and Recreational Facilities Development Fee Revenue Growth Share Developed Park Land $927,694 Park Amenities $2,501,696 Development Fee Report $15,268 Total $3,444,658 Single Family Multi-Family Industrial Commercial Institutional Office $1,054 $762 $0.39 $0.56 $0.22 $0.71 per unit per unit per sq. ft.per sq. ft.per sq. ft.per sq. ft. Year Housing Units Housing Units KSF KSF KSF KSF Base 2018 17,158 5,478 620 1,407 545 1,965 Year 1 2019 17,407 5,497 630 1,430 554 1,996 Year 2 2020 17,613 5,562 640 1,453 563 2,028 Year 3 2021 17,822 5,628 650 1,476 571 2,061 Year 4 2022 18,033 5,695 661 1,500 581 2,094 Year 5 2023 18,246 5,762 671 1,524 591 2,127 Year 6 2024 18,463 5,830 681 1,548 599 2,162 Year 7 2025 18,682 5,899 692 1,573 609 2,196 Year 8 2026 18,903 5,969 704 1,598 619 2,231 Year 9 2027 19,128 6,040 715 1,624 628 2,267 Year 10 2028 19,354 6,112 726 1,650 639 2,303 2,196 634 106 243 94 338 Projected Revenue $2,315,104 $483,066 $41,234 $135,594 $20,868 $239,304 $3,235,170 ($209,488) Fee Component 10-Year Increase Surplus/(Deficit) Projected Fee Revenue Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 24 POLICE FACILITIES INFRASTRUCTURE IMPROVEMENT PLAN ARS § 9-463.05 (T)(7)(f) defines the facilities and assets that can be included in the Police Facilities IIP: “Fire and police facilities, including all appurtenances, equipment and vehicles. Fire and police facilities do not include a facility or portion of a facility that is used to replace services that were once provided elsewhere in the municipality, vehicles and equipment used to provide administrative services, helicopters or airplanes or a facility that is used for training firefighters or officers from more than one station or substation.” The Police Facilities IIP and Development Fees includes components for police stations, police vehicles, and the cost of professional services for preparing the Police Facilities IIP and related Development Fee Report. Three different methodologies are utilized across the Police IIP. A cost recovery methodology is used for police facilities, an incremental approach is utilized for vehicles, and a plan-based methodology is used for the Development Fee Report. Service Area The Town of Oro Valley’s Police Department strives to provide a uniform response time Townwide. Therefore, a Townwide service area is recommended for the Police Facilities IIP. Proportionate Share ARS § 9-463.05 (B)(3) states that the development fee shall not exceed a proportionate share of the cost of necessary public services needed to accommodate new development. TischlerBise recommends functional population to allocate the cost of police facilities to residential and nonresidential development. Functional population is similar to what the U.S. Census Bureau calls "daytime population," by accounting for people living and working in a jurisdiction, but also considers commuting patterns and time spent at home and at nonresidential locations. OnTheMap is a web-based mapping and reporting application that shows where workers are employed and where they live. It describes geographic patterns of jobs by their employment locations and residential locations as well as the connections between the two locations. OnTheMap was developed through a unique partnership between the U.S. Census Bureau and its Local Employment Dynamics (LED) partner states. OnTheMap data is used, as shown in Figure P1, to derive Functional Population shares for Oro Valley. Residents that do not work are assigned 20 hours per day to residential development and 4 hours per day to nonresidential development (annualized averages). Residents that work in Oro Valley are assigned 14 hours to residential development and 10 hours to nonresidential development. Residents that work outside Oro Valley are assigned 14 hours to residential development. Inflow commuters are assigned 10 hours to nonresidential development. Based on 2015 functional population data for Oro Valley, the cost allocation for residential development is 78 percent while nonresidential development accounts for 22 percent of the demand for police facilities. Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 25 Figure P1: Police Proportionate Share RATIO OF SERVICE UNITS TO DEVELOPMENT UNITS ARS § 9-463.05(E)(4) requires: “A table establishing the specific level or quantity of use, consumption, generation or discharge of a service unit for each category of necessary public services or facility expansions and an equivalency or conversion table establishing the ratio of a service unit to various types of land uses, including residential, commercial/retail, industrial, and office/other services.” Figure P2 displays the ratio of service units to various types of land uses for residential and nonresidential development. The residential development table displays the persons per housing unit for single-family (or single unit) and multifamily units. TischlerBise recommends using nonresidential vehicle trips as the best demand indicator for police facilities and vehicles. Trip generation rates are used for nonresidential development because vehicle trips are highest for commercial/retail developments, such as shopping centers, and lowest for industrial development. Office and institutional trip rates fall between the other two categories. This ranking of trip rates is consistent with the relative demand for police from nonresidential development. Other possible nonresidential demand indicators, such as employment or floor area, will not accurately reflect the Demand Person Proportionate Hours/Day Hours Share Residential Estimated Residents 42,259 Residents Not Working 27,298 20 545,960 Employed Residents 14,961 Employed in Oro Valley 1,946 14 27,244 Employed outside Oro Valley 13,015 14 182,210 Residential Subtotal 755,414 78% Nonresidential Non-working Residents 27,298 4 109,192 Jobs in Oro Valley 10,147 Residents Employed in Oro Valley 1,946 10 19,460 Non-Resident Workers (inflow Commuters)8,201 10 82,010 Nonresidential Subtotal 210,662 22% TOTAL 966,076 100% Source: Pima Association of Governments 2015 Population Estimate; U.S. Census Bureau, OnTheMap 6.6 Application, 2015. Demand Units in 2015 Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 26 demand for service. For example, if employees per thousand square feet were used as the demand indicator, police development fees would be too high for office and institutional development because offices typically have more employees per 1,000 square feet than retail uses. Trip generation rates per average weekday are from the reference book Trip Generation published by the Institute of Transportation Engineers (ITE 10th Edition 2017). A vehicle trip end represents a vehicle either entering or exiting a development (as if a traffic counter were placed across a driveway). To calculate development fees, trip generation rates require an adjustment factor to avoid double counting each trip at both the origin and destination points. Therefore, the basic trip adjustment factor is 50%. For commercial and institutional development, the trip adjustment factor is less than 50% because retail development and some services attract vehicles as they pass by on arterial and collector roads. For example, when someone stops at a convenience store on the way home from work, the convenience store is not the primary destination. For the average shopping center, the ITE data indicates that 34% of the vehicles that enter are passing by on their way to some other primary destination. In other words, 34% of trips to the average shopping center are already being counted because the shopping center is not their final destination, and therefore these trips must be discounted. The remaining 66% of attraction trips have the commercial site as their primary destination. Because attraction trips are half of all trips, the trip adjustment factor is 66% multiplied by 50%, or approximately 33% of the vehicle trips. These factors are shown to derive inbound vehicle trips for each type of nonresidential land use. The ratio of service unit to development unit for each type of nonresidential development is calculated by multiplying the ITE trip generation rate by the trip rate adjustment factor to avoid double-counting trips, as discussed above. By way of example, the service unit to development unit ratio for a Commercial development is found by multiplying the ITE trip generation rate of 37.75 trips (per 1,000 square feet) by the trip rate adjustment factor of 33%, yielding an adjusted trip rate of 12.46 trips per 1,000 square feet. Therefore, it is reasonable to assume a 100,000 square foot commercial development would generate 1,246 primary destination trips per average weekday. Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 27 Figure P2: Police Facilities Ratio of Service Unit to Development Unit ANALYSIS OF CAPACITY, USAGE, AND COSTS OF EXISTING PUBLIC SERVICES ARS § 9-463.05(E)(1) requires: “A description of the existing necessary public services in the service area and the costs to upgrade, update, improve, expand, correct or replace those necessary public services to meet existing needs and usage and stricter safety, efficiency, environmental or regulatory standards, which shall be prepared by qualified professionals licensed in this state, as applicable.” ARS § 9-463.05(E)(2) requires: “An analysis of the total capacity, the level of current usage and commitments for usage of capacity of the existing necessary public services, which shall be prepared by qualified professionals licensed in this state, as applicable.” Police Facilities – Cost Recovery The Police Department recently opened a new Police Station, totaling 24,000 square feet of floor area. Prior to the opening of this facility, the Police Department was housed in a 15,165 square foot facility. As shown in Figure P3, the construction of this new station represents a substantial increase to the Town’s level-of-service. For example, the level-of-service per person in 2018 is 0.262 square feet per person. In 2019, with the construction of the new stations, the level-of-service person is 0.408 square feet per person. To ensure that new development is not correcting an existing deficiency, TischlerBise is utilizing a cost recovery method based on the total projected service units in 2033, the last year of debt service. As shown in Figure P3, the level-of-service per person is projected to be 0.349 square feet in 2033, an Type of Household Persons per Housing Unit1 Single-Family 2.09 Multi-Family 1.51 Type Trips per 1,000 Sq. Ft.2 Trip Rate Adjustment Adjusted Trips per 1,000 Sq. Ft. Industrial 4.96 50%2.48 Commercial/Retail 37.75 33%12.46 Institutional 19.52 33%6.44 Office and Other 9.74 50%4.87 Hotel (per room)8.36 50%4.18 1. Derived from U.S. Census Bureau American Community Survey 1-year Estimates, 2017 2. ITE Trip Generation Rates, 10th Edition (2017). Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 28 increase of 25% over the current level-of-service. The level-of-service per nonresidential vehicle trip is projected to be 0.129 in 2033, an increase of 20% over the current level-of-service. Figure P3: Police Facilities and Level-of-Service Analysis As shown in Figure P4, the total facility cost (including principal and interest) totaled $2,549,274. The cost recovery portion of the Police Facilities development fee will be used to cover new development’s share of Police Station debt service payments. When this cost is spread over the projected service unit (population and nonresidential vehicle trips) in 2033 (the year the debt obligation is retired), the cost per person is $37.04 and the cost per nonresidential trip is $13.75. Based on the land use assumptions, it is projected that new development will generate development fee revenue of approximately $298,000 over the next 10 years. Figure P4: Police Facilities Service Unit Cost Summary Police Vehicles and Equipment – Incremental Expansion The first step in applying the incremental expansion method to Police Vehicles is determining the cost of new vehicles. The Town provided an inventory of police vehicles along with cost which is displayed in Facility Cost Proportionate Share Demand Unit Demand Units in 2033 Cost per Demand Unit 78%person 53,684 $37.04 22%nonres. trip 40,798 $13.75 10-Year Increase in Population 5,991 10-Year Increase in Nonresidential Vehicle Trips 5,534 10-Year Cost Recovery $297,984 Current Remaining Principal $2,549,274 10-Year Development Fee Revenue $297,984 Remaining Principal in 2028 $2,251,290 Oro Valley Police Station $2,549,274 Year Square Feet Residential Proportionate Share Residential Share of Square Footage Residential Service Units (Population) LOS per Person Nonesidential Proportionate Share Nonresidential Share of Square Footage Nonresidential Service Units (Vehicle Trips) LOS per Nonres. Trip 2018 15,165 78%11,829 45,184 0.262 22%3,336 32,153 0.104 2019 24,000 78%18,720 45,857 0.408 22%5,280 32,668 0.162 2033 24,000 78%18,720 53,684 0.349 22%5,280 40,798 0.129 Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 29 Figure P5. The Oro Valley Police Department has an inventory of 129 vehicles, which have a total estimated replacement cost of $6 million. Dividing the total cost by the total number of units yields an average cost per unit of $46,563. The level-of-service standards and cost analysis for police vehicles are continued on the following page. The current residential level-of-service is 0.0022 units per resident, which was obtained by multiplying the 129 units by the residential proportionate share (78%) and dividing this amount by the current population (45,184). Similarly, the nonresidential level-of-service is 0.0009 units per vehicle trip. Multiplying the average cost per unit ($46,563) by the residential and nonresidential levels-of-service results in a cost per person of $102.44 and $41.91 per vehicle trip. Note that while the LOS Standards shown are rounded to the fifth decimal place, the analysis does not round these figures. Therefore, the cost analysis calculations may not produce the same result if the reader replicates the calculations using the factors shown (due to the rounding of figures shown, not in the analysis). Figure P5: Police Vehicles and Equipment Inventory and Level-of-Service Standards Description Number of Units Cost per Unit Replacement Cost Patrol Tahoe 62 $62,362 $3,866,470 Van 3 $35,000 $105,000 ID Truck 3 $55,023 $165,069 Motorcycle 8 $30,480 $243,840 CRU Truck 4 $30,688 $122,752 Specialty/Under Cover 8 $62,362 $498,899 C.V.A.P.5 $27,440 $137,200 Other-Crown Victoria, Impala, Camry 36 $24,095 $867,420 Total 129 $46,563 $6,006,650 Level-of-Service (LOS) Standards Existing Units 129 2018 Population 45,184 2018 Nonresidential Vehicle Trips 32,153 Residential Share 78% Nonresidential Share 22% LOS per Person 0.0022 LOS per Nonresidential Trip 0.0009 Cost Analysis Cost per Vehicle $46,563 LOS: Vehicles per Person 0.0022 LOS: Vehicles per Vehicle Trip 0.0009 Cost per Person $102.44 Cost per Vehicle Trip $41.91 Source: Town of Oro Valley, AZ Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 30 Development Fee Report – Plan-Based The cost to prepare the Police Facilities IIP and related Development Fee Report totals $15,268. Oro Valley plans to update its report every five years. Based on this cost, proportionate share, and five-year projections of new residential and nonresidential development from the Land Use Assumptions document, the cost per person is $3.80 and the cost per nonresidential trip is $1.05. Figure P6: Development Fee Report Cost Allocation PROJECTED SERVICE UNITS AND PROJECTED DEMAND FOR SERVICES ARS § 9-463.05(E)(5) requires: “The total number of projected service units necessitated by and attributable to new development in the service area based on the approved land use assumptions and calculated pursuant to generally accepted engineering and planning criteria.” The Land Use Assumptions projects an additional 5,991 persons and 5,534 nonresidential vehicle trips over the next 10 years, as shown in Figure P7. ARS § 9-463.05(E)(6) requires: “The projected demand for necessary public services or facility expansions required by new service units for a period not to exceed ten years.” As shown in Figure P7, this new development will demand approximately 18 additional units of vehicles. The 10-year total of the projected demand for new police vehicles/equipment is multiplied by the cost to determine the total cost to accommodate the projected demand over the next 10 years. The projected demand for additional police vehicles and equipment will cost approximately $846,050 in total. Necessary Public Service Cost Assessed Against Proportionate Share Demand Unit 2019 2024 Change Cost per Demand Unit Residential 78%Population 45,857 48,989 3,132 $3.80 Nonresidential 22%Trips 32,153 35,364 3,211 $1.05 Police $15,268 Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 31 Figure P7: Projected Demand for Police Vehicles POLICE FACILITIES IIP ARS § 9-463.05(E)(3) requires: “A description of all or the parts of the necessary public services or facility expansions and their costs necessitated by and attributable to development in the service area based on the approved land use assumptions, including a forecast of the costs of infrastructure, improvements, real property, financing, engineering and architectural services, which shall be prepared by qualified professionals licensed in this state, as applicable.” Potential Police Facilities that Oro Valley may use development fees for in order to accommodate new development over the next 10 years are shown in Figure P8. Additional vehicles will be procured as necessitated by growth. Demand Unit Cost per Unit 0.0022 Units Per Person 0.0009 Units Per Nonres. Trip Year Population Nonres. Trips Residential Nonresidential Total Patrol Vehicles Base 2018 45,184 32,153 99 29 128 Year 1 2019 45,857 32,668 101 29 130 Year 2 2020 46,536 33,191 102 30 132 Year 3 2021 47,192 33,717 104 30 134 Year 4 2022 47,820 34,264 105 31 136 Year 5 2023 48,413 34,814 107 31 138 Year 6 2024 48,989 35,364 108 32 140 Year 7 2025 49,557 35,930 109 32 141 Year 8 2026 50,112 36,505 110 33 143 Year 9 2027 50,648 37,088 111 33 145 Year 10 2028 51,175 37,688 113 34 147 10-Yr Increase 5,991 5,534 13 5 18 Growth-Related Expenditures =>$614,166 $231,884 $846,050 Type of Infrastructure Level of Service Police Vehicles $46,563 Need for Police Vehicles and Equipment Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 32 Figure P8: Necessary Police Improvements and Expansions (10-Yr Total) POLICE FACILITIES DEVELOPMENT FEES Required Offsets The Town of Oro Valley will fund the new Police Station with a bond that will be retired using sales tax. Since new development will generate future sales tax that may be used to retire debt, TischlerBise has calculated an offset for the Police Facilities development fee. As discussed previously, the new Police Station will elevate the level-of-service for station space within the Town. The cost per service unit for the station component was determined based on the projected 2033 demand base, which would represent a 25% increase in the level-of-service for residential development and a 20% increase for nonresidential development. To determine the offset for future principal payments, TischlerBise obtained the amortization schedule for this debt. Given the fact this new facility results in an increase in the level-of- service, TischlerBise apportioned the share of future principal payments to residential and nonresidential development that is used to elevate the existing level-of-service (discussed above) and calculated a net present value of the offset. For example, the projected principal payment in FY2021-22 is $121,500. This payment is multiplied the Police Facilities proportionate share factors (shown in Figure P1) to determine the residential and nonresidential shares, which is then multiplied further by the projected level-of-service increase (25% for residential development and 20% for nonresidential development). These residential and nonresidential shares are then divided by the residential and nonresidential service units to determine the appropriate offset. As shown in Figure P9, projected future principal payments from residential development that is directed toward the level-of-service increase is $396,825. Annual principal payments are discounted using a net present value formula based on the bond interest rate of 3.02%. The nonresidential share is $89,540. This results in offset per person of $7.89 and $2.42 per nonresidential vehicle trip. Timeframe Estimated Cost 2020-2028 $846,050 Total $846,050 Police Infrastructure Improvement Plan Improvement Police Vehicles Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 33 Figure P9: Offset for Future Principal Payments Proposed Police Facilities Development Fees The proposed Police development fees are shown in Figure P10. Cost factors for police facilities, vehicles and equipment, and professional services are summarized at the top of the figure. The residential development fees are calculated by multiplying the $135.39 cost per person by the service unit ratios (persons per housing unit) for each housing type. Nonresidential development fees are calculated by multiplying the $54.28 per vehicle trip by the average weekday vehicle trips per 1,000 square feet ratios and the trip adjustment factors for each development type. Proposed development fees for Police increased for most all nonresidential development type and decrease slightly for residential from the current fees. Principal Payments Residential Share (x25%)Population Debt Cost Per Capita Nonresidential Share (x20%) Nonres Vehicle Trips Debt Cost Per Trip End 2018-2019 $77,250 $15,064 45,857 $0.33 $3,399 32,668 $0.10 2019-2020 $114,500 $22,328 46,536 $0.48 $5,038 33,191 $0.15 2020-2021 $117,750 $22,961 47,192 $0.49 $5,181 33,717 $0.15 2021-2022 $121,500 $23,693 47,820 $0.50 $5,346 34,264 $0.16 2022-2023 $125,000 $24,375 48,413 $0.50 $5,500 34,814 $0.16 2023-2024 $129,000 $25,155 48,989 $0.51 $5,676 35,364 $0.16 2024-2025 $132,750 $25,886 49,557 $0.52 $5,841 35,930 $0.16 2025-2026 $136,750 $26,666 50,112 $0.53 $6,017 36,505 $0.16 2026-2027 $141,000 $27,495 50,648 $0.54 $6,204 37,088 $0.17 2027-2028 $145,250 $28,324 51,175 $0.55 $6,391 37,688 $0.17 2028-2029 $149,500 $29,153 51,687 $0.56 $6,578 38,288 $0.17 2029-2030 $154,000 $30,030 52,188 $0.58 $6,776 38,898 $0.17 2030-2031 $158,750 $30,956 52,679 $0.59 $6,985 39,522 $0.18 2031-2032 $163,500 $31,883 53,190 $0.60 $7,194 40,156 $0.18 2032-2033 $168,500 $32,858 53,684 $0.61 $7,414 40,798 $0.18 Total $2,035,000 $396,825 $89,540 3.02%3.02% $7.89 $2.42 Discount Rate Net Present Value Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 34 Figure P10: Proposed Police Facilities Development Fees FORECAST OF REVENUES Appendix B contains the forecast of revenues required by Arizona’s Enabling Legislation. Development Fee Revenues for Police Facilities and Vehicles Revenue projections shown below assume implementation of the proposed Police development fees and that development over the next 10 years is consistent with the Land Use Assumptions. To the extent the rate of development either accelerates or slows down, there will be a corresponding change in the development fee revenue. As shown in Figure P11, the 10-year costs of police facilities and vehicles total approximately $2.0 million, and approximately $1.05 million will be collected from development fees. The result is a deficit of approximately $1.0 million. This deficit is due to the share of costs for the new Police Station that is attributable to the existing development base. Cost per Person Cost per Nonres. Trip $37.04 $13.75 $102.44 $41.91 $3.80 $1.05 ($7.89)($2.42) $135.39 $54.28 Residential (per unit) Unit Type Persons per Housing Unit Proposed Fee Current Fee Increase / Decrease Single Unit 2.09 $283 $310 ($27) Multifamily 1.51 $204 $215 ($11) Nonresidential (per square foot unless noted otherwise) Land Use Type Avg Wkdy Veh Trip Ends Trip Rate Adjustment Proposed Fee Current Fee Increase / Decrease Hotel/Motel (room)8.36 50%$227 $200 $27 Retail/Commercial 37.75 33%$0.68 $0.45 $0.23 Office & Other Services 9.74 50%$0.26 $0.16 $0.10 Industrial 4.96 50%$0.13 $0.07 $0.07 Warehouse 1.74 50%$0.05 $0.06 ($0.01) Public/Institutional 19.52 33%$0.35 $0.12 $0.23 Fee Component Substation Debt Vehicles and Equipment Offest for Future Principal Payment Total Development Fee Study Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 35 Figure P11: Projected Police Development Fee Revenue Infrastructure Cost for Police Facilities Growth Share $1,198,500 $846,050 $15,268 $2,059,818 Police Facilities Development Fee Revenue Single-Family Multi-Family Industrial Commercial Institutional Office $283 $204 $0.13 $0.68 $0.35 $0.26 per unit per unit per sq. ft.per sq. ft.per sq. ft.per sq. ft. Hsg Unit Hsg Unit KSF KSF KSF KSF Base 2018 17,158 5,478 620 1,407 545 1,965 Year 1 2019 17,407 5,497 630 1,430 554 1,996 Year 2 2020 17,613 5,562 640 1,453 563 2,028 Year 3 2021 17,822 5,628 650 1,476 571 2,061 Year 4 2022 18,033 5,695 661 1,500 581 2,094 Year 5 2023 18,246 5,762 671 1,524 591 2,127 Year 6 2024 18,463 5,830 681 1,548 599 2,162 Year 7 2025 18,682 5,899 692 1,573 609 2,196 Year 8 2026 18,903 5,969 704 1,598 619 2,231 Year 9 2027 19,128 6,040 715 1,624 628 2,267 Year 10 2028 19,354 6,112 726 1,650 639 2,303 2,196 634 106 243 94 338 Projected Revenue $621,541 $129,605 $13,831 $164,924 $32,759 $87,883 $1,050,544 ($1,009,274) Projected Fee Revenue Surplus/(Deficit) Fee Component Substation Debt Police Vehicles Development Fee Report Total Year Ten-Year Increase Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 36 STREET FACILITIES INFRASTRUCTURE IMPROVEMENT PLAN ARS § 9-463.05 (T)(7)(e) defines the facilities and assets that can be included in the Street Facilities IIP: “Street facilities located in the service area, including arterial or collector streets or roads that have been designated on an officially adopted plan of the municipality, traffic signals and rights- of-way and improvements thereon.” The Street Facilities IIP includes components for arterial street improvements and the cost of professional services for preparing the Street Facilities IIP and related Development Fee Report. An incremental expansion methodology is used for arterial and related street improvements, and a plan-based methodology is used for the Development Fee Report. Service Area The service area for the Street Facilities IIP is Townwide, however due to the probability of incremental development outside existing Town limits, Oro Valley may want to enter into development/annexation agreements, or use some other instrument with prospective developers working outside established Town limits which may include payments to the Town to help cover the cost of street infrastructure improvements and/or mitigation measures that are determined to be necessary. METHODOLOGY Street Facilities development fees use an incremental expansion methodology and allocate capital costs to residential and nonresidential development based on vehicle miles of travel using average weekday vehicle trips and average trip lengths. This methodology allows Oro Valley to maintain the current level- of-service standard as growth occurs. Development fee revenue collected using this methodology may not be used to replace or rehabilitate existing improvements. Proportionate Share ARS § 9-463.05 (B)(3) states that the development fee shall not exceed a proportionate share of the cost of necessary public services needed to provide necessary public services to the development. Trip length, trip generation rates and trip adjustment factors are used to determine the proportionate impact of residential, commercial, office, and industrial land uses on the Town’s street network. RATIO OF SERVICE UNITS TO DEVELOPMENT UNITS ARS § 9-463.05(E)(4) requires: “A table establishing the specific level or quantity of use, consumption, generation or discharge of a service unit for each category of necessary public services or facility expansions and an equivalency or conversion table establishing the ratio of a service unit to various types of land uses, including residential, commercial and industrial.” Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 37 Service Units The appropriate service unit for the Street Facilities development fees is vehicle miles of travel (VMT). VMT creates the link between supply (roadway capacity) and demand (traffic generated by new development). Components used to determine VMT include: trip generation rates, adjustments for commuting patterns and pass-by trips, and trip length weighting factors, are discussed further in this section. Figure S1: Summary of Service Units Trip Generation Rates For nonresidential development, the trip generation rates are from the 10th edition of the reference book Trip Generation published by the Institute of Transportation Engineers (2017). A vehicle trip end represents a vehicle either entering or exiting a development (as if a traffic counter were placed across a driveway). As an alternative to using the national average trip generation rate for residential development, the Institute of Transportation Engineers (ITE) publishes regression curve formulas that may be used to derive custom trip generation rates using local demographic data. This is explained in more detail in Appendix A: Land Use Assumptions. Adjustments for Commuting Patterns and Pass-By Trips To calculate Street Facilities Development Fees, trip generation rates require an adjustment factor to avoid double counting each trip at both the origin and destination points. Therefore, the basic trip adjustment factor is 50%. As discussed further below, the development fee methodology includes additional adjustments to make the fees proportionate to the infrastructure demand for particular types of development. Residential development has a larger trip adjustment factor of 63% to account for commuters leaving Oro Valley for work. According to the 2009 National Household Travel Survey, weekday work trips are typically 31% of production trips (i.e., all out-bound trips, which are 50% of all trips). As shown in Figure S2, the Census Bureau’s web application OnTheMap indicates that 87% of resident workers traveled outside the Town for work in 2015. In combination, these factors (0.31 X 0.50 X 0.87 = .13) support the additional 13% allocation of trips to residential development. Single Units 210 8.20 HU 63%5.17 3.10 Multifamily 220 4.30 HU 63%2.71 3.10 Industrial (KSF)110 4.96 KSF 50%2.48 1.94 Commercial / Retail (KSF)820 37.75 KSF 33%12.46 1.99 Institutional (KSF)520 19.52 KSF 33%6.44 1.94 Office & Other (KSF)710 9.74 KSF 50%4.87 1.94 Local Trip LengthDevelopment Type ITE Code Weekday VTE Dev Unit Trip Adj Adj Trip Rate Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 38 Figure S2: Inflow/Outflow Analysis For commercial development, the trip adjustment factor is less than 50% because retail development and some services attract vehicles as they pass by on arterial and collector roads. For example, when someone stops at a convenience store on the way home from work, the convenience store is not the primary destination. For the average shopping center, the ITE data indicates that 34% of the vehicles that enter are passing by on their way to some other primary destination. The remaining 66% of attraction trips have the commercial site as their primary destination. Because attraction trips are half of all trips, the trip adjustment factor is 66% multiplied by 50%, or approximately 33% of the trips. These factors are shown to derive inbound vehicle trips for each type of nonresidential land use. ANALYSIS OF CAPACITY, USAGE, AND COSTS OF EXISTING PUBLIC SERVICES ARS § 9-463.05(E)(1) requires: “A description of the existing necessary public services in the service area and the costs to upgrade, update, improve, expand, correct or replace those necessary public services to meet existing needs and usage and stricter safety, efficiency, environmental or regulatory standards, which shall be prepared by qualified professionals licensed in this state, as applicable.” As shown in Appendix C, the Town of Oro Valley provided an inventory of arterial road segments, including segment lengths, lane quantities, and annual average daily traffic (AADT) counts. Multiplying each segment’s length by the number of lanes yields the number of lane miles per segment. The Town’s arterial road network consists of 118.5 lane miles. By multiplying the traffic counts and segment lengths, the daily vehicle miles of travel (VMT) is obtained. The sum of each arterial road segment’s VMT is 383,580. Trip Adjustment Factor for Commuters 1 Employed Residents 14,961 Residents Working in Oro Valley 1,946 Residents Working Outside Oro Valley (Commuters)13,015 Percent Commuting out of Oro Valley 87% Additional Production Trips2 13% Residential Trip Adjustment Factor 63% 1. U.S. Census Bureau, OnTheMap Application (version 6.6) and LEHD Origin-Destination Employment Statistics, 2015. 2. According to the National Household Travel Survey (2009)*, published in December 2011 (see Table 30), home-based work trips are typically 30.99 percent of “production” trips, in other words, out-bound trips (which are 50 percent of all trip ends). Also, LED OnTheMap data from 2015 indicate that 87 percent of Oro Valley workers travel outside the town for work. In combination, these factors (0.3099 x 0.50 x 0.87 = 0.1347) account for 13 percent of additional production trips. The total adjustment factor for residential includes attraction trips (50 percent of trip ends) plus the journey-to-work commuting adjustment (13 percent of production trips) for a total of 63 percent. *http://nhts.ornl.gov/publications.shtml ; Summary of Travel Trends - Table "Daily Travel Statistics Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 39 Figure S3 documents the capacity of Oro Valley’s arterial road network. According to Town staff, the Town’s arterial streets operate at a Level-of-Service A, and the average number of lanes for arterials is roughly 4 lanes. A mile segment of a 4-lane arterial street with a Level-of-Service A should maintain a daily volume of 12,600 vehicles, or 3,150 vehicles per lane mile over a 24-hour period. Given the incremental expansion methodology used in this analysis, and the Town’s current level-of-service (LOS A), the baseline VMC/VMT ratio for any incremental expansion method is 1.0 (i.e., VMC=VMT). Figure S3: Arterial Road Network Capacity and Usage Vehicle Trips Figure S4 shows the calculation of vehicle trips generated by existing development. When the average weekday VTE and Trip Adjustment percentages (shown in Figure S1) are multiplied by the development unit quantities for Oro Valley from the Land Use Assumption in Appendix A (housing units and nonresidential KSF), the total number of vehicle trips generated by existing development is determined. As shown in Figure S4, this totals 135,631 adjusted vehicle trips. Figure S4: Vehicle Trips Average Trip Length For the incremental expansion methodology, it is necessary to determine the average trip length on the Town’s arterial network. To do this, national trip generation rates and average trip lengths from the 2017 National Household Travel Survey are used to determine expected VMT on the Town’s transportation network. Figure S5 shows average trip lengths from the National Household Travel Survey (2017).1 1 U.S. Department of Transportation, Federal Highway Administration, 2017 National Household Travel Survey. URL: http://nhts.ornl.gov 118.5 3,150 383,580 383,580 1.00 VMC/VMT Ratio Total Vehicle Lane Miles Capacity per Lane Mile (LOS A) Total Vehicle Miles of Capacity Existing Vehicle Miles of Travel Single Units 210 8.20 HU 63%88,638 Multifamily 220 4.30 HU 63%14,840 Industrial (KSF)110 4.96 KSF 50%1,537 Commercial / Retail (KSF)820 37.75 KSF 33%17,533 Institutional 520 19.52 KSF 33%3,514 Office & Other (KSF)710 9.74 KSF 50%9,570 135,631 2018 Dev UnitsDevelopment Type ITE Code Weekday VTE Dev Unit Trip Adj Total Adjusted Vehicle Trips Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 40 Figure S5: National Average Trip Lengths The national average trip length needs to be adjusted to reflect actual local demand on the Town’s arterial network. To do this, TischlerBise first determines expected demand (VMT) on the Town’s complete transportation network using the above national travel demand characteristics. Average daily trips from existing development in each land use category are multiplied by the applicable average trip lengths. Figure S6. Expected VMT in the Town of Oro Valley Because expected VMT reflects anticipated travel demand from Town development on the entire roadway system, it is therefore higher than actual VMT on the arterial system in the Town. To calibrate demand on the arterial system, expected travel demand is compared to actual VMT obtained from the Town of Oro Valley. The ratio between actual and expected VMT provides a local adjustment factor that can be applied to national average trip lengths by type of land use. The local adjustment factor is shown in Figure S7. Land Use National Average Trip Lenght (miles) Residential 12.32 Industrial 7.70 Commercial/Retail 7.90 Institutional 7.70 Office and Other 7.70 * U.S. Department of Transportation, Federal Highway Administration, 2017 National Household Transportation Survey, adjusted for land use Land Use ADT National Avg Trip Length (miles) Expected VMT Single Units 88,638 12.32 1,092,023 Multifamily 14,840 12.32 182,828 Industrial 1,537 7.70 11,838 Commercial/Retail 17,533 7.90 138,507 Institutional 3,514 7.70 27,054 Office & Other 9,570 7.70 73,687 Total 1,525,937 Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 41 Figure S7. Local Trip Length Adjustment Factor As shown in Figure S8, the national average trips lengths are adjusted to reflect local conditions. Figure S8. Local Average Trip Lengths by Land Use Using the above factors, VMT per service unit is calculated, shown below in Figure S9. Figure S9. VMT per Service Unit on Arterial Network Cost per VMT and Infrastructure Improvement Plan Figure S10 contains a list of planned transportation projects including intersection improvements and multi-modal facilities which Oro Valley plans to construct over the next 10 years. The total estimated cost of these projects includes a credit of $2.86 million for street development impact fees which were collected between 2014 and 2018 but have not yet been spent. Actual Local VMT on Arterials*383,580 Expected Local VMT^1,525,937 Actual to Expected VMT 0.251 * Town of Oro Valley 2018 Inventory ^ TischlerBise analysis Type National Avg Trip Length (miles) Local Adj. Factor Local Trip Length Residential 12.32 0.251 3.10 Industrial 7.70 0.251 1.94 Commercial/Retail 7.90 0.251 1.99 Institutional 7.70 0.251 1.94 Office and Other 7.70 0.251 1.94 Hotel (per room)7.70 0.251 1.94 Sources: National trip length from 2017 NHTS and TischlerBise; local adjustment from Figure S9. Single Units 210 8.20 63%5.17 3.10 16.00 Multifamily 220 4.30 63%2.71 3.10 8.39 Industrial (KSF)110 4.96 50%2.48 1.94 4.80 Commercial / Retail (KSF)820 37.75 33%12.46 1.99 24.74 Institutional (KSF)520 19.52 33%6.44 1.94 12.47 Office & Other (KSF)710 9.74 50%4.87 1.94 9.43 Hotel (per room)310 8.36 50%4.18 1.94 8.09 Warehousing (KSF)150 1.74 50%0.87 1.94 1.68 Development Type ITE Code Weekday VTE Trip Adj Adj Trip Rate Local Trip Length VMT per Service Unit Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 42 Figure S10: Street Facilities Improvement Improvements Plan A cost per vehicle mile of capacity (VMC) is calculated based on the average cost per lane mile of $429,245 and the average lane capacity of 3,150 average daily vehicle trips (per 1 lane mile). This results in a $136.27 cost per VMC. The incremental expansion methodology assumes the ratio of VMC to VMT is 1, therefore the cost per VMT is also $136.27. Figure S11: Cost per VMT Factors SERVICE UNITS, DEMAND, AND COST FOR SERVICES ARS § 9-463.05(E)(2) requires: “An analysis of the total capacity, the level of current usage and commitments for usage of capacity of the existing necessary public services, which shall be prepared by qualified professionals licensed in this state, as applicable.” TischlerBise created an aggregate travel model to convert development units within Oro Valley to vehicle trips and vehicle miles of travel. This includes the factors discussed above, as well as average trip length, and is shown in Figure S12. Travel Demand Model ARS § 9-463.05(E)(5) requires: “The total number of projected service units necessitated by and attributable to new development in the service area based on the approved land use assumptions and calculated pursuant to generally accepted engineering and planning criteria.” Cost per Lane Mile $429,245 Capacity per Lane Mile 3,150 Cost per VMC $136.27 Location Description New Lanes Distance Lane Miles Total Project Cost La Cholla Blvd, Tangerine Rd-Lambert Ln Road Widening 2.0 3.0 6.0 $1,700,000 Shannon Rd, Tangerine Rd-Naranja Dr New Road 2.0 1.0 2.0 $1,000,000 Lambert Ln. .5 mi E of Shannnon-Rancho Sonora Road Widening 2.0 1.0 2.0 $1,000,000 Rancho Vistosto & Woodbume Intersection Improvement 0.0 0.0 0.0 $750,000 Oracle Rd & Rams Field Intersection Intersection Improvement 0.0 0.0 0.0 $750,000 Moore Rd La Cholla Blvd Intersection Improvement 0.0 0.0 0.0 $900,000 Moore Rd -extension E of Rancho Vistoso Blvd New Road & Intersection 2.0 2.0 4.0 $1,026,840 Moore Rd & La Canada Dr Intersection Intersection Improvement 0.0 0.0 0.0 $1,200,000 Glover Rd Multi Use Path Multi-modal facility 0.0 0.3 0.0 $150,000 Glover Rd south half widening Road Widening 1.0 0.3 0.3 $500,000 Total 14.25 $8,976,840 $2,860,095 $6,116,745 14.25 $429,245 2018 DIF Balance Total Cost Lane Miles Cost per Lane Mile Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 43 Projected development in Oro Valley over the next 10 years, and the corresponding need for additional lane miles is shown in Figure S12. Trip generation rates and trip adjustment factors convert project development into average weekday vehicle trips. New development in Oro Valley will generate 18,599 trips. ARS § 9-463.05(E)(6) requires: “The projected demand for necessary public services or facility expansions required by new service units for a period not to exceed ten years.” The travel demand model inputs above (Figure S9) are used to derive level-of-service in Vehicle Miles of Travel and future needs of lane miles. A Vehicle Mile of Travel (VMT) is a measurement unit equal to one vehicle traveling one mile. As shown in Figure S12, based on the increase in vehicle miles of travel (51,323), the Town of Oro Valley would need to construct an additional 16.3 lane miles of arterials to accommodate projected development over the next 10 years in order to maintain current level-of-service. Figure S12: Projected Travel Demand Model ARS § 9-463.05(E)(3) requires: “A description of all or the parts of the necessary public services or facility expansions and their costs necessitated by and attributable to development in the service area based on the approved land use assumptions, including a forecast of the costs of infrastructure, improvements, real property, financing, engineering and architectural services, which shall be prepared by qualified professionals licensed in this state, as applicable.” Multiplying the increase in number of lane miles (16.3) by the cost per lane mile from Figure S10 ($429,245) results in a 10-year cost of approximately $6.99 million attributed to arterial lane miles. However, the Town of Oro Valley only expects plans to build approximately 14.25 lane and intersections, at a net cost of $6.1 million, which yields an adjusted cost per VMT of $119.18. 2018 2019 2020 2021 2022 2023 2028 Base 1 2 3 4 5 10 Single Units 17,158 17,407 17,613 17,822 18,033 18,246 19,354 2,196 Multifamily 5,478 5,497 5,562 5,628 5,695 5,762 6,112 634 Industrial KSF 620 630 640 650 661 671 726 106 Commercial / Retail (KSF)1,407 1,430 1,453 1,476 1,500 1,524 1,650 243 Institutional 545 554 563 571 581 591 639 94 Office & Other (KSF)1,965 1,996 2,028 2,061 2,094 2,127 2,303 338 Single Unit Res Trips 88,638 89,924 90,989 92,067 93,157 94,261 99,985 11,347 Multifamily Unit Res Trips 14,840 14,891 15,068 15,246 15,427 15,609 16,557 1,717 Industrial Trips 1,537 1,562 1,586 1,612 1,638 1,664 1,801 264 Commercial Trips 17,533 17,815 18,102 18,389 18,687 18,985 20,554 3,021 Institutional 3,514 3,569 3,624 3,680 3,742 3,805 4,116 603 Office & Other Trips 9,570 9,722 9,878 10,036 10,197 10,361 11,216 1,646 Total Nonresidential Trips 32,153 32,668 33,191 33,717 34,264 34,814 37,688 Total Vehicle Trips 135,631 137,483 139,247 141,030 142,848 144,685 154,230 18,599 VMT Vehicle Miles of Travel 383,580 388,732 393,602 398,524 403,535 408,600 434,903 51,323 25,021 Additional Lane Miles 1.64 1.55 1.56 1.59 1.61 1.72 16.3 Growth-Related Cost $702,066 $663,621 $670,815 $682,823 $690,203 $737,272 $6,993,749 10-Year Increase DevelopmentAverage Weekday Vehicle TripsNEED Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 44 Figure S13: Adjusted Cost per Vehicle Mile of Travel/Vehicle Mile of Capacity Development Fee Report – Plan-Based The cost to prepare the Street Facilities IIP and Development Fee Report totals $15,268. Oro Valley plans to update its report every five years. Based on this cost, proportionate share, and five-year projections of new residential and nonresidential development from the Land Use Assumptions document, the cost is $0.61 per vehicle mile of travel. Figure S14: Development Fee Report Cost Allocation STREET FACILITIES DEVELOPMENT FEES Required Offsets The Arizona Development Impact Fee Act requires consideration of any ‘excess” construction sales tax that may be used to fund growth-related capital facilities. The Town has a construction sales tax rate of 4 percent, of which 1.5% is in excess of the Town’s regular sales tax rate of 2.5%. However, the Town accounts for all sales tax within its General Fund, so there is no dedicated portion directed towards growth-related capital improvements. However, the Town does have a policy of allocating a minimum of 5% of the Town’s estimated excise tax collections to fund capital needs including asset repair and maintenance, subject to Council approval and funding availability. For purposes of the development fees, an offset for “excess” construction sales tax is provided for the Street Facilities development fee although at present, any construction sales tax directed toward capital improvements is dedicated to debt service payments for capital facilities that are not development fee eligible or credits have already been evaluated. The Town of Oro Valley provided a 5-year projection of total construction sales tax, which totals $21.6 million, or $4.3 million on an average annual basis. The “excess” portion of that sales tax totals $8.1 million, or $1.6 million annually. As stated previously (an in more detail in Appendix B), much of this revenue is already committed to non-development fee eligible debt obligations. However, in keeping with the Town’s policy of allocating 5% of sales tax collections, TischlerBise has provided an offset for 5% of the “excess” construction sales tax, which results in an offset per VMT of $16.05. IIP Cost $6,116,745 10-Year Increase in VMT/VMC 51,323 Cost per VMC $119.18 Necessary Public Service Cost Assessed Against Proportionate Share Demand Unit 2019 2024 Change Cost per Demand Unit Residential All Development Nonresidential All Development 388,732 413,714 24,982 $0.61VMTTransportation$15,268 Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 45 Figure S15: Offset for Excess Construction Sales Tax Revenue Proposed Street Facilities Development Fees The existing Street Facilities development fees and how much they differ from the proposed development fees are shown in Figure S16. Cost factor for road improvements and professional services are summarized at the top of the figure. Proposed fees represent a decrease across all categories of development. Residential development fees are expressed per housing unit. Nonresidential development fees are expressed per square foot of floor area. The Street Facilities development fees are calculated by multiplying the $103.74 net cost per VMT/VMC by the VMT per development unit for each land use type. Construction Excess 5% of Excess Annual VMT Sales Tax (4%)Portion (1.5%)Portion Increase FY 20/21 $4,550,000 $1,706,250 $85,313 4,923 FY 21/22 $5,099,004 $1,912,127 $95,606 5,011 FY 22/23 $4,762,470 $1,785,926 $89,296 5,065 FY 23/24 $3,709,964 $1,391,237 $69,562 5,114 FY 24/25 $3,535,596 $1,325,849 $66,292 5,193 Total $21,657,034 $8,121,388 $406,069 25,305 Avg. Annual $4,331,407 $1,624,278 $81,214 5,061 Offset per VMT $16.05 Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 46 Figure S16: Proposed and Existing Fees Comparison PROJECTED STREET FACILITIES DEVELOPMENT FEE REVENUE Projected fee revenue shown in Figure S17 is based on the development projections in the Land Use Assumptions (see Appendix A) and the updated Street Facilities development fees (see Figure S16). Expenditures on arterial street improvements are derived from the anticipated need for approximately 14.25 new lane miles over the next 10 years (see Figure S10) at a cost of $6.1 million. Anticipated development fee revenue is approximately $800,000 less than expenditures due to the offset for “excess” construction sales tax revenue. Input Variables $119.18 $0.61 ($16.05) $103.74 Residential Development (per Housing Unit) Development Type VMT per Development Unit Proposed Fees Current Fee Increase / Decrease Single Unit 16.00 $1,660 $1,990 ($330) Multifamily 8.39 $870 $1,231 ($361) Nonresidential (per square foot unless noted otherwise) Development Type VMT per Development Unit Proposed Fees Current Fee Increase / Decrease Hotel/Motel (room)8.09 $839 $758 $81 Retail/Commercial 24.74 $2.57 $2.41 $0.15 Office & Other Services 9.43 $0.98 $1.82 ($0.84) Industrial 4.80 $0.50 $0.98 ($0.49) Warehouse 1.68 $0.17 $0.92 ($0.74) Public/Institutional 12.47 $1.29 $1.38 ($0.09) Cost per VMT/VMC Development Fee Study Net Cost per VMT Offset for "Excess" Construction Sales Tax Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 47 Figure S17: Projected Street Facilities Development Fee Revenue Growth Share Within 10 Yrs. $6,116,745 $15,268 $6,132,013 Street Facilities Development Fee Revenue Single Unit Multi-Family Industrial Commercial Institutional Office $1,660 $870 $0.50 $2.57 $1.29 $0.98 per unit per unit per sq. ft.per sq. ft.per sq. ft.per sq. ft. Hsg Unit Hsg Unit KSF KSF KSF KSF Base 2018 17,158 5,478 620 1,407 545 1,965 Year 1 2019 17,407 5,497 630 1,430 554 1,996 Year 2 2020 17,613 5,562 640 1,453 563 2,028 Year 3 2021 17,822 5,628 650 1,476 571 2,061 Year 4 2022 18,033 5,695 661 1,500 581 2,094 Year 5 2023 18,246 5,762 671 1,524 591 2,127 Year 6 2024 18,463 5,830 681 1,548 599 2,162 Year 7 2025 18,682 5,899 692 1,573 609 2,196 Year 8 2026 18,903 5,969 704 1,598 619 2,231 Year 9 2027 19,128 6,040 715 1,624 628 2,267 Year 10 2028 19,354 6,112 726 1,650 639 2,303 2,196 634 106 243 94 338 $3,645,692 $551,768 $52,984 $622,471 $121,068 $330,549 Projected Development Fee Revenue $5,324,532 Total Expenditures $6,132,013 Surplus/(Deficit)($807,481) 10-Year Increase Year Fee Component Total Arterial Street Improvements Development Fee Study 10-Year Projected Revenue Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 48 WATER FACILITIES INFRASTRUCTURE IMPROVEMENT PLAN ARS § 9-463.05 (T)(7)(a) defines the facilities and assets that can be included in the Water Facilities IIP: “Water facilities, including the supply, transportation, treatment, purification and distribution of water, and any appurtenances for those facilities.” The Water Facilities IIP includes components for the plan-based development of various improvements to integrate the delivery of additional CAP water needed to serve future growth. The Town completed a master plan in 2006 which provided recommended system improvements to allow for the initial delivery of CAP water allocation. Beginning in 2012, the Town began delivering a portion of this water allocation through the Tucson Water distribution system and, in 2024, the Town will significantly expand their CAP water deliveries through the Northwest Recharge, Recovery, and Delivery System (NWRRDS). The project will result in a transition from majority well supply to a more balanced well and CAP water supply and will require a significant change in the way the distribution system is operated and how water is delivered across the system. These changes are required to accommodate the water demands attributed to growth and to ensure that groundwater pumping stays below 5,000 AFY as an established target identified in the Master Plan. In 2018, the Town adopted the Potable Water Master Plan (the Master Plan) which provides a 10-year planning horizon road map for the Town Water Utility. The Master Plan includes infrastructure improvements that will benefit existing customers as well as future growth. The relationship between infrastructure historically funded with PWSDIF revenue and infrastructure funded with AWRDIF revenue are very similar. Both are potable water resource driven and both are required to meet the demands of growth. As such, the infrastructure needs are being combined into one IIP resulting in the creation of one new development impact fee to replace the two existing impact fees. The new development impact fee will be known as the Water Facilities Development Impact Fee. The Water Facilities Development Impact Fee is intended to fund all types of water resources, the infrastructure to deliver those resources and any related debt including CAP capital infrastructure repayment costs. Upon the completion of the 10-year infrastructure improvement plan (IIP), the Town will have the capacity to deliver 4,960 acre-feet per year (AFY) of CAP water into the main service area which will reduce groundwater pumping from 5,320 AFY to 4,400 AFY thereby complying with the Town’s targeted groundwater production goal of no more than 5,000 AFY. The Master Plan identifies a number of system improvements required to accommodate future growth, including new wells, storage, pipelines and approximately 20 separate NWRRDS projects to allow integration of additional CAP supply into the distribution system. In addition to these costs, the cost of professional services for preparing the Water Facilities IIP and related Development Fee Report have been included. Service Area Because new development in Oro Valley will connect to the Town’s water system, the service area for Water Facilities IIP is Townwide. Proportionate Share ARS § 9-463.05 (B)(3) states that the development fee shall not exceed a proportionate share of the cost of necessary public services needed to provide necessary public services to the development. Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 49 The Water Facilities IIP and development fees are assessed on both residential and nonresidential development as both types of development create a burden for additional water facilities. Customers by land use are used to determine the proportionate share of this burden. In 2017-2018, approximately 82% of water connections in Oro Valley were for single family residential units, accounting for approximately 75% of the average daily demand. Approximately 12% of connections were for multifamily housing and nonresidential connections, accounting for approximately 13% of the average daily demand. Irrigation use accounts for the remaining 12% of use. As shown in Figure W1, equivalent residential service unit factors for commercial/industrial meters recognize these types of meters use far more water on average than a comparably sized single family water meter. For example, a typical single family meter demands 0.28 acre feet a year, whereas commercial/industrial users in Oro Valley demand 0.31 acre feet annually, which is 1.11 times the single family residential equivalent. Figure W1: Water Facilities Consumption Data and Service Unit Capacity Factor RATIO OF SERVICE UNITS TO DEVELOPMENT UNITS ARS § 9-463.05(E)(4) requires: “A table establishing the specific level or quantity of use, consumption, generation or discharge of a service unit for each category of necessary public services or facility expansions and an equivalency or conversion table establishing the ratio of a service unit to various types of land uses, including residential, commercial and industrial.” Water Facilities development fees are assessed by meter. Therefore, capacity ratios by meter size are the appropriate demand indicator for Water Facilities. Capacity ratios equate 5/8" (0.625) meters to the average day gallons per single-family residential unit. Utilizing average day gallons is the most efficient way to show a direct relationship between development units, usage, and system capacity. The nonresidential Water Facilities development fees are calculated by multiplying the number of gallons per single-family unit by the capacity ratio for the corresponding size and type of water meter, which are provided by the American Water Works Association (2012) and shown in Figure W2 below. Total# SU Total Water Use % Annual Water Use per SU AF per SU per Year SU Capacity Factor Single Family 19,918 1,812,556,000 75%91,001 0.28 1.00 Multi-Family 1,002 112,985,000 5%112,759 0.09 0.32 Commercial 1,967 200,660,000 8%102,013 0.31 1.11 Irrigation 1,351 277,513,000 12%205,413 0.63 2.25 Total 24,238 2,403,714,000 100% Source: TOVWU Classification and Consumption 2017-2018 Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 50 Figure W2: Water Facilities Ratio of Service Unit to Development Unit ANALYSIS OF CAPACITY AND USAGE OF EXISTING PUBLIC SERVICES ARS § 9-463.05(E)(5) requires: “The total number of projected service units necessitated by and attributable to new development in the service area based on the approved land use assumptions and calculated pursuant to generally accepted engineering and planning criteria.” ARS § 9-463.05(E)(2) requires: “An analysis of the total capacity, the level of current usage and commitments for usage of capacity of the existing necessary public services, which shall be prepared by qualified professionals licensed in this state, as applicable.” Water Facilities Level-of-Service Standards The Town delivers a combination of groundwater and CAP water wheeled through the Tucson Water distribution system to meet its potable water demands within its service area. The existing water distribution system consists of approximately 366 miles of public water mains, 13 storage reservoirs and 24 pump stations. In 2017, the Town main service area potable water production consisted of 5,069 acre- feet of groundwater (73 percent of total production) and 1,842 acre-feet of CAP water (27 percent of production). The Town manages 17 active wells with a total approximate pumping capacity of 12.5 million gallons per day (MGD). The well demand fluctuates daily, but according to the Master Plan, typical well demand during average day conditions is approximately 4 MGD, and during peak day conditions typically increases to 8 MGD. All of the wells are permitted by ADWR as recovery wells, which allows the use of recharge credits to offset its annual replenishment obligations as determined by the state’s Assured Water Meter Size (inches)Capacity Ratio** 5/8" 1.00 3/4" 1.50 1"2.50 1.5"5.00 2" 8.00 3" 16.00 4" 25.00 6" 50.00 8" 80.00 **AWWA Manual of Water Supply Practices Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 51 Supply (AWS) rules. In addition to the wells, the Town receives approximately 2,600 AFY of CAP water wheeled through the Tucson Water distribution system, which based on the IIP will increase to 4,960 AFY upon completion of the NWRRDS project. Finally, the Town is served by 13 storage reservoirs representing 10.45 million gallons (MG) of storage for the distribution system. The Town maintains operating storage criteria of 1.25 times average day demand. PROJECTED DEMAND FOR WATER FACILITIES ARS § 9-463.05(E)(1) requires: “A description of the existing necessary public services in the service area and the costs to upgrade, update, improve, expand, correct or replace those necessary public services to meet existing needs and usage and stricter safety, efficiency, environmental or regulatory standards, which shall be prepared by qualified professionals licensed in this state, as applicable.” ARS § 9-463.05(E)(3) requires: “A description of all or the parts of the necessary public services or facility expansions and their costs necessitated by and attributable to development in the service area based on the approved land use assumptions, including a forecast of the costs of infrastructure, improvements, real property, financing, engineering and architectural services, which shall be prepared by qualified professionals licensed in this state, as applicable.” ARS § 9-463.05(E)(6) requires: “The projected demand for necessary public services or facility expansions required by new service units for a period not to exceed ten years.” Current water consumption and number of connections area shown in Figure W3. Figure W3 also shows the ratio of connections to housing units and jobs for residential and nonresidential development. These standards are used for calculating future demand shown below in Figure W4. Figure W3: Water Facilities Level-of-Service Standards Residential 4,965,907 19,918 249 0.94 Nonresidential 549,753 1,967 279 0.19 Irrigation 760,310 1,351 563 0.06 Total 6,585,518 24,238 272 1. 2018 Oro Valley Water Utility Water Classification by use. Connections per HU/JobTypeAverage Gallons per Day1 Connections1 Gallons per Connection per Day Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 52 Future projections of water connections and consumption are shown in Figure W4, divided between residential and nonresidential development. Water connection projections are derived from the connections per HU/Job ratios in Figure W3 and the projected growth contained in the Land Use Assumptions (Appendix A). Over the next 10 years, it is projected there will be an increase of 2,811 residential connections and 344 nonresidential connections. Water consumption projections were derived using the Gallons per Day per Connection ratios in Figure W3. As shown in Figure W4, this will result in an estimated additional 892,818 gallons of water consumption per day by 2028. Figure W4: Future Projections of Water Consumption WATER FACILITIES INFRASTRUCTURE IMPROVEMENT PLAN Cost Recovery for Excess Capacity in Supply Projects In 2007 the Town acquired 3,557 acre feet of additional CAP water to meet the water demands for future growth. As of December of 2019, the Town’s Water Utility has calculated that of the original 3,557 acre feet earmarked for growth, approximately 3,000 acre feet (2,678,227 gallons per day) remains available. Based on current consumption rates, this remaining capacity can serve additional 10,715 equivalent service units. Remaining debt for this water allocation is $3,436,451. Therefore, the Water Facilities development fee includes a cost recovery component shown in Figure W5, which recognizes the original acquisition in the form of a cost recovery of $320.74 per service unit ($3,436,451/10,714=$320.74). Figure W5: Cost Recovery for Supply Projects Service Units Avg. Gallons per Day Service Units Avg. Gallons per Day Base 2018 6,585,518 20,920 1,967 1,351 24,238 1 2019 6,683,971 21,236 1,999 1,370 24,605 367 98,453 367 98,453 2 2020 6,783,305 21,554 2,031 1,389 24,975 370 99,335 737 197,788 3 2021 6,879,749 21,862 2,064 1,408 25,335 359 96,443 1,097 294,231 4 2022 6,972,664 22,157 2,098 1,426 25,681 346 92,916 1,443 387,146 5 2023 7,061,071 22,435 2,132 1,443 26,010 329 88,407 1,772 475,554 6 2024 7,147,290 22,705 2,167 1,459 26,331 321 86,219 2,093 561,772 7 2025 7,232,676 22,972 2,202 1,475 26,649 318 85,386 2,411 647,158 8 2026 7,316,460 23,232 2,237 1,491 26,961 312 83,784 2,723 730,942 9 2027 7,397,895 23,484 2,274 1,506 27,264 303 81,436 3,026 812,378 10 2028 7,478,336 23,731 2,311 1,521 27,563 299 80,441 3,325 892,818 892,818 2,811 344 170 3,325 3,325 892,818 Source: TischlerBise, using Average Day Demand factors, Figure W3 and projected development shown in Figure A13. Residential ConnectionsYearAvg. Gallons per Day Nonresidential Connections Irrigation Connections Total Service Units Annual Increase Cumulative Increase 10-year Change Cost Recovery Summary: Supply Projects Year*Description Remaining Capacity (AF)Capacity (GPD)Cost 2007 Growth-Related CAP Water Entitlement 3,000 2,678,227 $3,436,451 Total Cost $3,436,451 Gallons of Capacity (GPD)2,678,227 Additional SU 10,714 Cost per SU $320.74 Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 53 Water Facilities Projects – Plan Based The Town recently completed the 2018 Water Utility Potable Water Master Plan which identifies a variety of projects required to meet the water demand of future growth through the anticipated integration and increase of CAP water deliveries into the system. As identified in the Master Plan, the cost of the various projects is attributed to existing deficiencies and those improvements required to serve future growth. The following projects are directly related to Water Facilities and include a combination of supply, storage, transmission capacity expansion to meet future growth demands of the system. The total cost of improvements planned over the next 10 years is $39,549,923 million ($6.3 million for supply projects, $19.4 million for storage and $13.8 million for distribution). As is discussed below, each project provides additional fixed system capacity which corresponds to fee levels and the duration that the fee will be imposed. Water Facilities Supply Projects – Plan Based Illustrated in Figure W6, Water Facilities supply projects identified by Oro Valley staff will add an additional 1,400 Acre Feet of capacity, able to provide for 5,143 service units with a total cost of $6.3 million. The Town has been collecting development fees in anticipation of developing these projects and as a result maintains an existing Water Facilities balance of $14.8 million which is proportionately applied to the supply projects resulting in a net cost of supply projects of $3.9 million and shown in Figure W6. The resulting cost per acre foot of supply is $4,021 and cost per service unit is $1,125.80 ( $3,937,882 / 5,143 = $1,125.80). Figure W6: Infrastructure Improvement Plan: Water Supply Water Facilities Storage Projects – Plan Based The Town has identified and plans on activating a variety of new storage facilities over the next 15 years to help meet additional water demand from new development. Figure W7 shows each new storage element, cost, reduction of existing impact fee balance, net cost and added average capacity in acre feet per year. The new storage projects will have a net growth related cost of $12.1 million and will add an additional 1,400 AFY of capacity. Dividing the net cost by the total added capacity yields a cost per acre foot of capacity of $10,453 and a cost per service unit of $2,926.93. Infrastructure Improvement Plan: Supply Year Description Cost less Existing DIF Balance Net Cost Capacity (acre-feet) Net Cost per AF Service Units Cost per Service Unit (ERU) 2018-2019 Steam Pump D-Zone Well $1,500,000 ($562,409)$937,591 484 $1,937 1,729 $542.41 2018-2023 (P)Program Management Support Services $1,050,000 ($393,686)$656,314 1,440 $456 5,143 $127.62 2019-2020 (P)Well Improvement Analysis and Recovery Permits $150,000 ($56,241)$93,759 1,440 $65 5,143 $18.23 2020-2021 (P)Well Drilling and Testing $300,000 ($112,482)$187,518 1,440 $130 5,143 $36.46 2022-2023 (P)Construction Permitting, Drilling, Development and Testing $1,500,000 ($562,409)$937,591 1,440 $651 5,143 $182.31 2022-2023 (P)Well Equipment Design and Site Improvements $1,800,000 ($674,891)$1,125,109 1,440 $781 5,143 $218.77 Source: 2018 TOVWU Potable Water Master Plan $6,300,000 ($2,362,118)$3,937,882 $4,021 Total Cost per SU $1,125.80 Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 54 Figure W7: Infrastructure Improvement Plan: Storage Water Facilities Distribution Projects – Plan Based Ten distribution related projects identified by staff all work in concert to help meet additional water demand from new development. Figure W8 shows each component associated with the new distribution architecture cost and added capacity in acre feet per year. Water Facilities distribution projects will in total will add an additional 1,400 acre feet of capacity, able to support water distribution for 5,143 service units with a total net cost of $8.6 million. The resulting cost per acer foot of distribution capacity is $7,112 resulting in a cost per service unit of $1,991.43. Figure W8: Infrastructure Improvement Plan: Distribution Development Fee Report – Plan-Based The cost to prepare the Water Facilities Development Fees and IIP report totals $30,536. Oro Valley plans to update its report every five years. Based on this cost, proportionate share, and five-year water meter connection projections, the cost is $21.73 per meter. Figure W9: Development Fee Report Cost Allocation Necessary Public Service Cost Assessed Against Proportionate Share Demand Unit 2019 2024 Change Cost per Demand Unit Residential Nonresidential 26,010 $21.7324,605 1,405Connections100%$30,536Water Infrastructure Improvement Plan: Distribution Year Description Cost less Existing DIF Balance Net Cost Capacity (acre-feet) Net Cost per AF Service Units Cost per Service Unit (ERU) 2020-2021 Moore Road F-Zone Interconnect $750,000 ($281,205)$468,795 807 $581 2,882 $162.66 2019-2024 Water Plant 14 Booster Capacity Expansion $250,000 ($93,735)$156,265 161 $971 575 $271.77 2019-2020 (P)Pipeline Design (Recovery Water & Transmission)$660,692 ($247,719)$412,973 1,440 $287 5,143 $80.30 2021-2023 (P)Pipeline Construction $4,320,000 ($1,619,738)$2,700,262 1,440 $1,875 5,143 $525.05 2018-2019 (Ind.)Pipeline Route Study and Preliminary Design $120,000 ($44,993)$75,007 1,440 $52 5,143 $14.58 2019-2020 (Ind.)Pipeline Easement Acquisition $450,000 ($168,723)$281,277 1,440 $195 5,143 $54.69 2019-2020 (Ind.)Pipeline Design $600,000 ($224,964)$375,036 1,440 $260 5,143 $72.92 2024-2025 (Ind.)Pipeline Construction NWRRDS to La Canada Res.$5,880,000 ($2,204,643)$3,675,357 1,440 $2,552 5,143 $714.65 2024-2025 (Int.)Interconnect to Tangerine Rd.$270,000 ($101,234)$168,766 1,440 $117 5,143 $32.82 2024-2025 (Int.)Interconnect to Lambert Lane $510,000 ($191,219)$318,781 1,440 $221 5,143 $61.99 $13,810,692 ($5,178,172)$8,632,520 $7,112 Total Cost per SU $1,991.43 Infrastructure Improvement Plan: Storage Year Description Cost less Existing DIF Balance Net Cost Capacity (acre-feet) Net Cost per AF Service Units Cost per Service Unit (ERU) 2019-2023 Palisades C-Zone Storage Tank and Pipeline $4,250,000 ($1,593,492)$2,656,508 1,120 $2,372 4,000 $664.13 2028-2033 Pressure Zone G Storage Expansion $8,000,000 ($2,999,515)$5,000,485 1,120 $4,465 4,000 $1,250.12 2028-2033 Pressure Zone G, H and I Storage Expansion $4,000,000 ($1,499,757)$2,500,243 1,120 $2,232 4,000 $625.06 2019-2020 (P)Forebay Design $99,231 ($37,206)$62,025 1,440 $43 5,143 $12.06 2021-2023 (P)Forebay Reservoir Construction $900,000 ($337,445)$562,555 1,440 $391 5,143 $109.39 2020-2021 (Ind.)Shannon Rd Forebay Reservoir And Booster Station Prop $240,000 ($89,985)$150,015 1,440 $104 5,143 $29.17 2019-2020 (Ind.)Forebay Reservoir Booster Station Design $90,000 ($33,745)$56,255 1,440 $39 5,143 $10.94 2020-2021 (Ind.)Shannon Rd Forebay Reservoir and Booster Station Design $180,000 ($67,489)$112,511 1,440 $78 5,143 $21.88 2021-2022 (Ind.)Booster Station Construction Forebay Res.$300,000 ($112,482)$187,518 1,440 $130 5,143 $36.46 2022-2024 (Ind.)Shannon Road Forebay Res. Construction $840,000 ($314,949)$525,051 1,440 $365 5,143 $102.09 2022-2024 (Ind.)Shannon Road Forebay Res. Construction $540,000 ($202,467)$337,533 1,440 $234 5,143 $65.63 Source: 2018 TOVWU Potable Water Master Plan $19,439,231 ($7,288,533)$12,150,698 $10,453 Total Cost per SU $2,926.93 Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 55 WATER FACILITIES DEVELOPMENT FEE Required Offsets A revenue credit/offset is not necessary for the Water Facilities development fees because 10-year growth costs approximates the amount of revenue that is projected to be generated by development fees according to the Land Use Assumptions, as shown in Figure W11. Proposed Water Facilities Development Fees The proposed Water Facilities development fees for Water Facilities are shown in Figures W10. For a single family residential 5/8”-inch water meter, the proposed fee is found by multiplying the cost per ERU ($6,249.40) by the AWWA capacity ratio (1.0) and the demand adjustment factor (1.0) and adding the $21.73 fee study cost per meter (see Figure W9). Equivalent residential service unit factors for commercial/industrial meters recognize that these types of meters use more water on average than a comparably sized single family water meter. For example, a typical single family meter demands 0.28 acre feet a year, whereas commercial/industrial users in Oro Valley demand 0.31 acre feet annually, which is 1.11 times the single family residential equivalent. The development fee for irrigation and nonresidential meters is determined by multiplying the cost per service unit by the meter capacity ratio and the demand adjustment factor then adding the cost per meter of $21.73. Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 56 Figure W10: Proposed Water Facilities Development Fees Demand Factor per Service Unit (1 EDU)Component Supply $1,125.80 Storage $2,926.93 Distribution $1,991.43 Excess Capacity CAP Water $320.74 Net Capital Cost per Service Unit $6,364.89 Cost Factors per Connection Fee Study $21.73 Share Net Capital Cost per Meter $21.73 Proposed and Current Utility Development Fees (PWSDIF) Residential Residential Meter Size Capacity Ratio 1 Demand Adjustment Factor 2 Proposed Fee Current Fees Increase / (Decrease) 5/8" 1.00 1.00 $6,387 $6,060 $327 3/4" 1.50 1.00 $9,569 $9,089 $480 1"2.50 1.00 $15,934 $15,148 $786 1.5" standard 5.00 1.00 $31,846 $30,297 $1,549 2" compound 8.00 1.00 $50,941 $48,474 $2,467 Mulit-Family (Per Unit)N/A 0.32 $2,044 $2,908 ($864) Nonresidential Nonresidential Meter Size Capacity Ratio 1 Demand Adjustment Factor 2 Proposed Fee Current Fees Increase / (Decrease) 5/8" 1.00 1.11 $7,087 $7,877 ($790) 3/4" 1.50 1.11 $10,619 $11,816 ($1,197) 1"2.50 1.11 $17,684 $19,693 ($2,009) 1.5" standard 5.00 1.11 $35,347 $39,385 ($4,038) 2" compound 8.00 1.11 $56,542 $63,016 ($6,474) 3" compound 16.00 1.11 $113,062 $126,032 ($12,970) 4" compound 25.00 1.11 $176,647 $196,925 ($20,278) 6" compound 50.00 1.11 $353,273 $393,850 ($40,577) 8" compound 80.00 1.11 $565,224 $630,161 ($64,937) Irrigation Meter Size Irrigation Meter Size Capacity Ratio 1 Demand Adjustment Factor 2 Proposed Fee Current Fees Increase / (Decrease) 5/8" 1.00 2.25 $14,343 $10,906 $3,437 3/4" 1.50 2.25 $21,503 $16,360 $5,143 1"2.50 2.25 $35,824 $27,266 $8,558 1.5" standard 5.00 2.25 $71,627 $54,533 $17,094 2" compound 8.00 2.25 $114,590 $87,253 $27,337 3" compound 16.00 2.25 $229,158 $174,506 $54,652 4" compound 25.00 2.25 $358,047 $272,666 $85,381 6" compound 50.00 2.25 $716,072 $545,331 $170,741 8" compound 80.00 2.25 $1,145,702 $872,530 $273,172 1. AWWA Manual of Water Supply Practices M1, 7th Edition. 2. Based on local water demand Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 57 FORECAST OF REVENUES Appendix B contains the forecast of revenues required by Arizona’s Enabling Legislation. Development Fee Revenues for Water Facilities Revenue projections shown below assume implementation of the proposed Water Facilities development fees and that development over the next 10 years is consistent with the Land Use Assumptions. To the extent the rate of development either accelerates or slows down, there will be a corresponding change in the development fee revenue. As shown in Figure W11, the 10-year water improvement costs total $24.75 million and approximately $24.1 million will be collected from development fees. Figure W11: Projected Water Facilities Development Fee Revenue Costs for Water Facilities Expansion $6,300,000 $19,439,231 $13,810,692 Fee Study $30,536 TOTAL $39,580,459 Less AWR & PWS DIF Balances ($14,828,823) Net WRS System Facility Expansion Cost $24,751,636 Ten-Year Water Facility Development Fee Revenue $6,387 $10,619 $14,343 $21.73 per SU per SU per SU per connection Residential Nonresidential Irrigation Connections Base 2018 20,920 1,967 1,351 24,238 Year 1 2019 21,236 1,999 1,370 24,605 Year 2 2020 21,554 2,031 1,389 24,975 Year 3 2021 21,862 2,064 1,408 25,335 Year 4 2022 22,157 2,098 1,426 25,681 Year 5 2023 22,435 2,132 1,443 26,010 Year 6 2024 22,705 2,167 1,459 26,331 Year 7 2025 22,972 2,202 1,475 26,649 Year 8 2026 23,232 2,237 1,491 26,961 Year 9 2027 23,484 2,274 1,506 27,264 Year 10 2028 23,731 2,311 1,521 27,563 2,811 344 170 3,325 $17,953,073 $3,651,510 $2,443,332 $72,268 Total Revenue $24,120,183 Total Expenditures $24,751,636 Surplus / (Deficit)($631,453) Supply Projects Storage Projects Distribution Projects Year Ten-Year Increase Projected Revenue Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 58 APPENDIX A: LAND USE ASSUMPTIONS EXECUTIVE SUMMARY For municipalities in Arizona, the state enabling legislation requires supporting documentation on land use assumptions, a plan for infrastructure improvements, and development fee calculations. This document contains the land use assumptions for the Town of Oro Valley’s 2019 development fee update. Development fees must be updated every five years, making short-range projections the critical time frame. The Infrastructure Improvements Plan (IIP) is limited to 10 years for non-utility fees, thus a very long-range “build-out” analysis may not be used to derive development fees. Arizona Revised Statuses (ARS) § 9-463.05 (T)(6) requires the preparation of a Land Use Assumptions document which shows: “Projections of change in land uses, densities, intensities and population for a specified service area over a period of at least 10 years and pursuant to the General Plan of the municipality.” TischlerBise prepared current demographic estimates and future development projections for both residential and nonresidential development that will be used in the Infrastructure Improvement Plan (IIP) and calculation of the development fees. Demographic data for FY 18-19 (beginning July 1, 2018) are used in calculating levels-of-service provided to existing development in the Town of Oro Valley. Although long- range projections are necessary for planning infrastructure systems, a shorter time frame of five to 10 years is critical for the impact fees analysis. TischlerBise used compound growth rates to produce conservative projections that increase over time. SERVICE AREA ARS § 9-63.05 defines “service area” as follows: “Any specified area within the boundaries of a municipality in which development will be served by necessary public services or facility expansions and within which a substantial nexus exists between the necessary public services or facility expansions and the development being served as prescribed in the infrastructure improvements plan.” The Town’s previous Land Use Assumptions, Infrastructure Improvement Plan and Development Study recommended a single services area, shown below in Figure A1. Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 59 Figure A1: Current Development Fee Service Area Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 60 Much of the land in Oro Valley is characterized by a built environment of dispersed, detached single family housing, transected by arterial roadways leading to concentrated nodes of businesses, institutions and commercial development from with, largely single-family lots spread out to the northern edges. As a result of the development pattern, the Town relies on a variety of revenues and funding mechanisms to pay for public infrastructure and facilities which service residents. Oro Valley has embraced numerous policies and plans to guide future development, most notably the 2016 Your Voice, Our Future General Plan aimed at encouraging new development as much as possible to pay the proportional share of growth- related infrastructure improvements for area roads, parks, police, fire and public facilities. In light of the plan-specific policies outlined by the Town along with discussions with Town staff regarding anticipated development patterns and infrastructure needs, TischlerBise is recommending no changes to the Development Fee Service Area as displayed in Figure A1. The single Development Fee Service Area is supported first and foremost because, parks and recreation, police, and roadway infrastructure are intended to serve the entire Town with a standard level-of-service as opposed to bounded districts or subareas. As an example, referring to Figure A1, a new residential development in the northeast area is still likely to also utilize regional parks or police facilities located throughout Town. Furthermore, many services such as police and roadway infrastructure react to deployment changes over time based on migration patterns of people and are not necessarily restricted to specific geographic sub-zones. As such, TischlerBise is recommending all fees for these categories be assessed as a Townwide fee. RESIDENTIAL DEVELOPMENT Current estimates and future projections of residential development are detailed in this section, including population and housing units by type (single family versus multi-family units). Current (2018) estimates of housing units were obtained using annual housing unit permit data provided by the Town of Oro Valley’s Planning & Development Services department. Population estimates were derived from the Arizona Office of Economic Opportunity (AOEO), 2018 Place Level Population tables along with 2016-2050 Sub-County projections and the persons per housing unit ratio derived from the 2017 U.S. Census Bureau’s American Community Survey 5-year estimates. Persons per Housing Unit In 2010 the U.S. Census Bureau transitioned from the traditional long-form questionnaire to the American Community Survey, which is less detailed and has smaller sample sizes. As a result, Census data now has more limitations than before. For example, data on detached housing units are now combined with attached single units (commonly known as townhouses). For development fees in Oro Valley, “single-unit” residential includes detached units and townhouses that share a common sidewall, but are constructed on an individual parcel of land. The second residential category includes all structures with two or more units on an individual parcel of land. According to the Census Bureau, a household is a housing unit that is occupied by year-round residents. Development fees often use per capita standards and persons per housing unit, or persons per household, to derive proportionate-share fee amounts. When persons per housing unit are used in the fee calculations, infrastructure standards are derived using year-round population. When persons per Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 61 household are used in the fee calculations, the development fee methodology assumes all housing units will be occupied, this requiring seasonal or peak population to be used when deriving infrastructure standards. TischlerBise recommends that development fees for residential development in the Town of Oro Valley be imposed according to a number of year-round residents per housing unit. For the development fee calculations, TischlerBise used the ACS results shown at the top of Figure A2 to indicate the relative number of persons per housing unit, by units in a residential structure, and the housing mix in Oro Valley. The ratio of persons per housing unit (PPHU) across housing types is 2.00. To estimate population for future years, however, PAG average annual growth rates are applied to base year population estimates and described further in this report. According to the 2017 ACS estimates, the share of multi-family housing in Oro Valley is approximately 16%. In 2017, approximately 13% of the housing stock in Oro Valley was vacant or used by seasonal residents. Figure A2: Year-Round Persons per Unit by Type of Housing Current Residential Estimates To estimate the current number of housing units, TischlerBise used building permit data from 2010 through 2018 provided by the Town of Oro Valley’s Planning & Development Services Department which were added to the total housing unit count from the 100 percent 2010 Decennial Census. Base year population estimates were derived from AOEO. These estimates are shown in Figure A3 below, along with 2028 projections. The estimates show there were 45,184 persons and 22,636 housing units in Oro Valley in 2018, and project 51,175 residents and 25,632 housing units by 2028. Figure A3: Oro Valley Population and Housing Estimates for 2018 and 2028 Figure A4 shows Oro Valley’s recent housing unit permit totals by fiscal year, provided by the Town’s Planning & Development Services. The average number of residential units permitted per year during this Single-Family Unit1 37,509 17,908 2.09 83.6%12% Multi-Family Unit 2 5,305 3,517 1.51 16.4%14% TOTAL 42,814 21,425 2.00 13% Source: U.S. Census Bureau, 2013-2017 American Community Survey, 5-Year Estimates. 1. Includes detached, attached (townhouse), and manufactured units. 2. Includes duplexes, structures with two or more units, and all other units. Persons per Housing Unit Housing Units Vacancy Rate Housing MixPersonsUnit Type 2018 2028 2018 2028 22,636 25,632 45,184 51,175 Increase Housing Units Population 2,996 5,991 Source: Population-AOEO 2018 Population Estimates. 2019-2028 growth rates from AOEO. 2018 Housing derived from Oro Valley Building Permit Data. Housing projections based on population growth and 2017 ACS PPHU estimates. Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 62 eight-year period was 287, although there was a high degree of variation from year to year. Single family permits have been steadily increasing from a low of 47 at the tail end of the Great Recession to a high of 338 in 2017, while multi-family unit permits appear to far more inconsistent ranging from a high of 646 in 2014 to zero in other years, but have averaged 101 per year over the time period. The general trend in housing unit permits is increasing. Figure A4: Recent Residential Permits by Fiscal Year Residential Projections To derive the 10-year housing unit projections, TischlerBise started with the 100 percent 2010 Decennial Census figure of 20,340 housing units and added the permit figures for fiscal years 2010-18 from Figure A4 (1,490 SF and 806 MF units = 2,296) resulting in a base year figure of 22,636 housing units. Housing unit estimates for 2018 through 2028 were calculated using the AOEO 2016-2028 population estimated average annual growth rate of 1.20 percent and applying the 2017 ACS PPHU figure of 2.00 across all housing types. The resulting annual growth in housing units for the 2018-2028 period is 299 units per year, shown in Figure A5. The 2010 through 2018 building permit data show an average of 287 total units per year and imply an average annual growth rate in housing units of 1.28 percent. These growth rates likely reflect the recent short-term increase in building activity and favorable economic conditions. According to Town building permit data, the housing mix of 76 percent single family units and 24 percent multi-family units was assumed to remain constant. Oro Valley is projected to add 2,996 housing units between 2018 and 2028. Oro Valley’s population projections, also shown in Figure A5, were derived by first establishing a base year population from AOEO and then applying their annual rate of growth projection of 1.20 percent. Oro Valley is projected to add 5,991 residents between 2018 and 2028. Year Single Family Multi-Family Total Cumulative 2010/11 47 0 47 47 2011/12 63 0 63 110 2012/13 217 144 361 471 2013/14 136 646 782 1,253 2014/15 142 0 142 1,395 2015/16 220 0 220 1,615 2016/17 338 0 338 1,953 2017/18 327 16 343 2,296 Avg.186 101 287 Source: Planning Division, Oro Valley, Arizona. Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 63 Figure A5: Oro Valley Residential Development Projections NONRESIDENTIAL DEVELOPMENT In addition to data on residential development, the infrastructure improvements plan and development fees require data on nonresidential development in Oro Valley. Current estimates and future projections of nonresidential development are detailed in this section, including jobs and floor area by type. TischlerBise uses the terms “jobs” to refer to employment by place of work. Jobs by Type of Nonresidential Development To estimate the current number of jobs, TischlerBise applied most recent, (2015) U.S. Census OnTheMap Longitudinal-Employer Household statistics for the Town of Oro Valley to the 2016-2026 Arizona Office of Economic Opportunity annual industry growth estimate for the area of 1.6 percent. Jobs were aggregated into one of four categories: Industrial, Commercial, Institutional, and Office & Other. These estimates are shown in Figure A6 below. Analysis estimates there were 10,642 jobs in Oro Valley in 2018, and the number of jobs will grow to 12,473 by 2028. Figure A6: Oro Valley Jobs Estimates for 2018 and 2028 Looking more closely at the projections, AOEO forecast 1.6% annual growth in employment per year between 2018 and 2028. Oro Valley’s 10-year job projections through 2028 are shown in Figure A7. The Multi Year Increments>>> Base 1 2 3 4 5 10 10-Year Population 2018 2019 2020 2021 2022 2023 2028 Increase Population 45,184 45,857 46,536 47,192 47,820 48,413 51,175 5,991 Housing Units 22,636 22,973 23,312 23,640 23,954 24,250 25,632 2,996 Population Single Family Population 39,585 40,175 40,770 41,345 41,894 42,414 44,834 5,249 Multi-Family Population 5,599 5,682 5,766 5,847 5,925 5,999 6,341 742 Total Population 45,184 45,857 46,536 47,192 47,820 48,413 51,175 Housing Units Single-Family 17,158 17,459 17,717 17,966 18,205 18,430 19,480 2,322 Multi-Family 5,478 5,513 5,595 5,674 5,749 5,820 6,152 674 2018 2028 Industrial Jobs 1,008 1,181 173 Commercial & Retail Jobs 3,296 3,864 568 Institutional Jobs 507 594 87 Office & Other Jobs 5,831 6,834 1,003 Total Jobs 10,642 12,473 1,831 Oro Valley Employment Increase Source: 2015 estimates from OnTheMap. Sector Growth rates (1.6%) based on AOEO 2016-2026 projections. Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 64 Town is expected to add a total of 1,831 jobs by 2028, and 54 percent this job growth (1,003 jobs) is projected to come from the Office and Other Services jobs category. Figure A7: Oro Valley Employment Projections Nonresidential Floor Area by Type of Development Figure A8 indicates 2018 floor area estimates for the Town of Oro Valley grouped into four industry classifications: Industrial, Commercial/Retail, Institutional and Office/Other Services. Floor area by sector was derived from 2015 OnTheMap employment figures which were adjusted to 2018 by applying the AOEO employment growth rate of 1.6%. Utilizing 2018 employment estimates, TischlerBise then applied ITE square foot per employee figures to derive current estimated nonresidential floor area by industry sector. 2019-2028 projections utilize AOEO growth in employment and ITE factors in the same manner. Institutional uses have the highest square foot per job ratio at 1,076, followed by Industrial at 615 square feet per job, Commercial at 427 square feet per job, and Office & Other at 337 square feet per job. The last column in Figure A9 shows the ratio of jobs per 1,000 square feet from the Institute of Transportation Engineers (ITE) Trip Generation Manual (2017). In total, Oro Valley is projected to add 781,000 square feet of nonresidential floor area by 2028. Figure A8: Nonresidential Floor Area Estimates for 2018 and 2028 Figure A9 shows the ITE’s ratios of jobs per 1,000 square feet and average weekday vehicle trip ends per 1,000 square feet, broken down by nonresidential land use category. Gray shading indicates the four nonresidential development prototypes used by TischlerBise to correlate Oro Valley’s projected job growth with nonresidential floor area growth and vehicle trips generated by development. Multi Year Increments>>> Base 1 2 3 4 5 10 10-Year 2018 2019 2020 2021 2022 2023 2028 Increase Industrial 1,008 1,024 1,040 1,057 1,074 1,091 1,181 173 Commercial / Retail 3,296 3,349 3,403 3,457 3,513 3,569 3,864 568 Institutional 507 515 523 531 540 549 594 87 Office & Other Services 5,831 5,924 6,019 6,115 6,213 6,313 6,834 1,003 Total Jobs 10,642 10,812 10,985 11,160 11,340 11,522 12,473 1,831 Multi Year Increments>>> Base 1 2 3 4 5 10 10-Year Nonresidential Floor Area (KFS)2018 2019 2020 2021 2022 2023 2028 Increase Industrial 620 630 640 650 661 671 726 106 Commercial / Retail 1,407 1,430 1,453 1,476 1,500 1,524 1,650 243 Institutional 545 554 563 571 581 591 639 94 Office & Other Services 1,965 1,996 2,028 2,061 2,094 2,127 2,303 338 Total 4,538 4,610 4,684 4,758 4,835 4,913 5,318 781 Source: 2018 Floor Area Estimate by sector , Base 2015 OnTheMap employment by sector. Employment Growth rates based on AOEO 2016-2026 growth projections. Sq. Ft. conversion from ITE 10th Edition (2017) Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 65 Figure A9: ITE Employee and Trip Generation Ratios AVERAGE WEEKDAY VEHICLE TRIPS Average Weekday Vehicle Trips are used as a measure of demand by land use. Vehicle trips are estimated using average weekday vehicle trip ends from the reference book, Trip Generation, 10th Edition, published by the Institute of Transportation Engineers (ITE) in 2017. A vehicle trip end represents a vehicle entering or exiting a development (as if a traffic counter were placed across a driveway). Trip Rate Adjustments To calculate street development fees, trip generation rates require an adjustment factor to avoid double counting each trip at both the origin and destination points. Therefore, the basic trip adjustment factor is 50 percent. As discussed further below, the development impact fee methodology includes additional adjustments to make the fees proportionate to the infrastructure demand for particular types of development. Commuter Trip Adjustment Residential development has a larger trip adjustment factor of 63 percent to account for commuters leaving Oro Valley for work. According to the 2009 National Household Travel Survey (see Table 30) weekday work trips are typically 31 percent of production trips (i.e., all out-bound trips, which are 50 percent of all trip ends). As shown in Figure A10, the U.S. Census Bureau’s OnTheMap web application indicates that 87 percent of resident workers traveled outside of Oro Valley for work in 2015. In combination, these factors (0.31 x 0.50 x 0.87 = 0.13) support the additional 13 percent allocation of trips to residential development. ITE Demand Wkdy Trip Ends Wkdy Trip Ends Emp Per Sq Ft Code Unit Per Dmd Unit1 Per Employee1 Dmd Unit Per Emp 110 Light Industrial 1,000 Sq Ft 4.96 3.05 1.63 615 130 Industrial Park 1,000 Sq Ft 3.37 2.91 1.16 864 140 Manufacturing 1,000 Sq Ft 3.93 2.47 1.59 628 150 Warehousing 1,000 Sq Ft 1.74 5.05 0.34 2,902 520 Elementary School 1,000 Sq Ft 19.52 21.00 0.93 1,076 610 Hospital 1,000 Sq Ft 10.72 3.79 2.83 354 710 General Office (average size)1,000 Sq Ft 9.74 3.28 2.97 337 720 Medical-Dental Office 1,000 Sq Ft 34.80 8.70 4.00 250 730 Government Office 1,000 Sq Ft 22.59 7.45 3.03 330 760 Research & Dev Center 1,000 Sq Ft 11.26 3.29 3.42 292 820 Shopping Center (average size)1,000 Sq Ft 37.75 16.11 2.34 427 1. Trip Generation , Institute of Transportation Engineers, 10th Edition (2017). Land Use / Size Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 66 Figure A10: Commuter Trip Adjustment Adjustment for Pass-By Trips For commercial development, the trip adjustment factor is less than 50 percent because retail development attracts vehicles as they pass by on arterial and collector roads. For example, when someone stops at a convenience store on the way home from work, the convenience store is not the primary destination. For the average shopping center, ITE data indicate 34 percent of the vehicles that enter are passing by on their way to some other primary destination. The remaining 66 percent of attraction trips have the commercial site as their primary destination. Because attraction trips are half of all trips, the trip adjustment factor is 66 percent multiplied by 50 percent, or approximately 33 percent of the trip ends. Estimated Residential Vehicle Trip Rates As an alternative to simply using the national average trip generation rate for residential development, the Institute of Transportation Engineers (ITE) publishes regression curve formulas that may be used to derive custom trip generation rates, using local demographic data. Key independent variables needed for the analysis (i.e. vehicles available, housing units, households, and persons) are available from American Community Survey data. Shown in Figure A11, custom trip generation rates for Oro Valley vary slightly from the national averages. For example, single-family residential development is expected to generate 8.20 average weekday vehicle trip ends per dwelling – compared to the national average of 9.44 (ITE 210). Multi-family residential development is expected to generate 4.30 average weekday vehicle trip ends per dwelling, which is lower than the national average of 5.44 (ITE 221). Trip Adjustment Factor for Commuters 1 Employed Residents 14,961 Residents Working in Oro Valley 1,946 Residents Working Outside Oro Valley (Commuters)13,015 Percent Commuting out of Oro Valley 87% Additional Production Trips2 13% Residential Trip Adjustment Factor 63% 1. U.S. Census Bureau, OnTheMap Application (version 6.6) and LEHD Origin-Destination Employment Statistics, 2015. 2. According to the National Household Travel Survey (2009)*, published in December 2011 (see Table 30), home-based work trips are typically 30.99 percent of “production” trips, in other words, out-bound trips (which are 50 percent of all trip ends). Also, LED OnTheMap data from 2015 indicate that 87 percent of Oro Valley workers travel outside the town for work. In combination, these factors (0.3099 x 0.50 x 0.87 = 0.1347) account for 13 percent of additional production trips. The total adjustment factor for residential includes attraction trips (50 percent of trip ends) plus the journey-to-work commuting adjustment (13 percent of production trips) for a total of 63 percent. *http://nhts.ornl.gov/publications.shtml ; Summary of Travel Trends - Table "Daily Travel Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 67 Figure A11: Average Weekday Vehicle Trip Ends by Housing Type Owner-occupied 26,777 13,920 164 14,084 1.90 Renter-occupied 6,732 1,757 2,850 4,607 1.46 TOTAL 33,509 15,677 3,014 18,691 1.79 Persons in Trip Vehicles by Trip Average Housing Households 3 Ends 4 Type of Unit Ends 5 Trip Ends Units 6 Oro Valley ITE 7 Single-Family 37,509 104,432 29,033 189,224 146,828 17,908 8.20 9.44 Multi-Family 5,305 12,067 4,476 17,931 14,999 3,517 4.30 5.44 TOTAL 42,814 116,500 33,509 207,155 161,827 21,425 7.60 1. Vehicles available by tenure from Table B25046, American Community Survey, 2013-2017 5-Year Estimates. 2. Households by tenure and units in structure from Table B25032, American Community Survey, 2013-2017 5-Year Estimates. 3. Total population in households from Table25033, American Community Survey, 2013-2017 5-Year Estimates. 6. Housing units from Table B25024, American Community Survey, 2013-2017 5-Year Estimates. 7. Trip Generation, Institute of Transportation Engineers, 10th Edition (2017). Trip Ends per Unit 4. Vehicle trips ends based on persons using formulas from Trip Generation (ITE 2017). For single-family housing (ITE 210), the fitted curve equation is EXP(0.89*LN(persons)+1.72). To approximate the average population of the ITE studies, persons were divided by 67 and the equation result multiplied by 67. For multi-family housing (ITE 221), the fitted curve equation is (2.29*persons)-81.02. 5. Vehicle trip ends based on vehicles available using formulas from Trip Generation (ITE 2017). For single-family housing (ITE 210), the fitted curve equation is EXP(0.99*LN(vehicles)+1.93). To approximate the average number of vehicles in the ITE studies, vehicles available were divided by 113 and the equation result multiplied by 113. For multi-family housing (ITE 221), the fitted curve equation is (3.94*vehicles)+293.58. Households by Structure Type 2 Vehicles Available1 Single- Family Multi-Family Total Vehicles per HH by Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 68 Functional Population TischlerBise recommends functional population to allocate the cost of certain facilities to residential and nonresidential development. As shown in Figure A12, functional population accounts for people living and working in a jurisdiction. OnTheMap is a web-based mapping and reporting application that shows where workers are employed and where they live. It describes geographic patterns of jobs by their employment locations and residential locations as well as the connections between the two locations. OnTheMap was developed through a unique partnership between the U.S. Census Bureau and its Local Employment Dynamics (LED) partner states. Residents that do not work are assigned 20 hours per day to residential development and four hours per day to nonresidential development (annualized averages). Residents that work in Oro Valley are assigned 14 hours to residential development and 10 hours to nonresidential development. Residents that work outside Oro Valley are assigned 14 hours to residential development. Inflow commuters are assigned 10 hours to nonresidential development. Based on 2015 functional population data for Oro Valley, the proportionate share is 78 percent for residential development and 22 percent for nonresidential development. Figure A12: Functional Population Demand Person Proportionate Hours/Day Hours Share Residential Estimated Residents 42,259 Residents Not Working 27,298 20 545,960 Employed Residents 14,961 Employed in Oro Valley 1,946 14 27,244 Employed outside Oro Valley 13,015 14 182,210 Residential Subtotal 755,414 78% Nonresidential Non-working Residents 27,298 4 109,192 Jobs in Oro Valley 10,147 Residents Employed in Oro Valley 1,946 10 19,460 Non-Resident Workers (inflow Commuters)8,201 10 82,010 Nonresidential Subtotal 210,662 22% TOTAL 966,076 100% Source: Pima Association of Governments 2015 Population Estimate; U.S. Census Bureau, OnTheMap 6.6 Application, 2015. Demand Units in 2015 Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 69 SUMMARY OF GROWTH INDICATORS Development projections for the Town are summarized in Figure A13. These projections will be used to estimate development fee revenue and to indicate the anticipated need for growth-related infrastructure. However, development fees methodologies are designed to reduce sensitivity to accurate development projections in the determination of the proportionate-share fee amounts. If actual development is slower than projected, development fees revenues will decline, but so will the need for growth-related infrastructure. In contrast, if development is faster than anticipated, the Town will receive an increase in development fee revenue but will also need to accelerate capital improvements to keep pace with development. Figure A13: Municipal Planning Area Projections and Growth Rates Development projections are based on U.S. Census OnTheMap 2015 employment estimates with 2016- 2028 AOEO industry growth rates applied by sector for 2019 through 2028. TischlerBise used historical Town building permit data to estimate 2018 housing unit totals and AOEO 2016-2050 growth rates to project future population growth. Population data were converted to housing units utilizing Oro Valley’s PPHU size of 2.00 and job data were converted to nonresidential floor area using the methods described in this Land Use Assumptions document. Multi Year Increments>>> 2018 2019 2020 2021 2022 2023 2028 Cumulative Increase Base Yr 1 2 3 4 5 10 Population 45,184 45,857 46,536 47,192 47,820 48,413 51,175 5,991 Housing Units 22,636 22,973 23,312 23,640 23,954 24,250 25,632 2,996 Jobs Industrial 1,008 1,024 1,040 1,057 1,074 1,091 1,181 173 Commercial / Retail 3,296 3,349 3,403 3,457 3,513 3,569 3,864 568 Institutional 507 515 523 531 540 549 594 87 Office & Other Services 5,831 5,924 6,019 6,115 6,213 6,313 6,834 1,003 Total Jobs 10,642 10,812 10,985 11,160 11,340 11,522 12,473 1,831 Nonresidential Floor Area (x 1,000) Industrial KSF 620 630 640 650 661 671 726 106 Commercial / Retail KSF 1,407 1,430 1,453 1,476 1,500 1,524 1,650 243 Institutional KSF 545 554 563 571 581 591 639 94 Office & Other Services KSF 1,965 1,996 2,028 2,061 2,094 2,127 2,303 338 Total Nonresidential KSF 4,538 4,610 4,684 4,758 4,835 4,913 5,318 781 10-Year Increase Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 70 APPENDIX B: FORECAST OF REVENUES SB 1525 requires that the infrastructure improvements plan include (Section 9-463.05.E.7): A forecast of revenues generated by new service units other than development fees, which shall include estimated state-shared revenue, highway users revenue, federal revenue, ad valorem property taxes, construction contracting or similar excise taxes and the capital recovery portion of utility fees attributable to development based on the approved land use assumptions, and a plan to include these contributions in determining the extent of the burden imposed by the development as required in subsection B, paragraph 12 of this section. Only revenue generated by new development that is dedicated to growth-related capital improvements needs to be considered in determining the extent of the burden imposed by new development. As discussed in greater detail in the Legal Framework section, offsets against impact fees are warranted in the following cases: (a) new development will be paying taxes or fees used to retire debt on existing facilities serving existing development; (b) new development will be paying taxes or fees used to fund an existing deficiency, (c) new development will be paying taxes or fees that are dedicated to be used for growth-related improvements, or (d) excess construction sales tax. The analyses provided in the legal framework, street facilities, parks and recreational facilities, police facilities and water facilities sections of this report have identified that the only need for offsets is against the street facilities development fees for a portion of the “excess” construction sales tax and the police facilities development fees for future debt payments used to elevate the existing level-of service. The reasons for this conclusion are, in the order listed above, as follows. (a) The Town has no debt for past capacity-expanding street facilities and parks and recreational facilities included in the development fee calculations. The Town does have debt as part of the Municipal Operations Center and for the Aquatics Center, but neither facility is included in the development fee calculations. (b) The street facilities and parks and recreational facilities are all calculated on the basis of the existing, system-wide level-of-service (actually, a lower level-of-service in the case of transportation impact fees). Consequently, there are no existing deficiencies, and no offsets for deficiencies are warranted. As discussed above, the police facilities development fees have an offset for the portion of future debt used to elevate the existing level-of-service. (c) The only funding the Town has that is dedicated to capacity-expanding capital improvements is future regional funding for major road improvements. Since only the Town’s share of anticipated costs is used to determine the cost per service unit, so an offset for anticipated regional funding is not required. (d) An offset is provided for excess construction sales tax as defined by State law, and the offset is provided against the transportation impact fee. Land Use Assumptions, IIP and Development Fee Report Town of Oro Valley, Arizona 71 APPENDIX C: ARTERIAL STREET SEGMENTS INVENTORY Street Location Segment Length (Miles) Total Lanes Lane Miles Total AADT Vehicle Miles of Travel 1st Ave Oracle Rd to Lambert Ln 0.414 4.0 1.7 24,340 10,077 1st Ave Lambert Ln to Naranja Dr 0.365 4.0 1.5 15,746 5,747 1st Ave Naranja Dr to Tangerine Rd 0.997 4.0 4.0 15,746 15,699 Calle Buena Vista Calle Concordia to Hardy 1.000 2.0 2.0 3,533 3,533 Calle Concordia Calle Loma Linda to Calle Buena Vista 0.499 2.0 1.0 4,300 2,146 Calle Concordia Calle Buena Vista to Overlook 0.708 2.0 1.4 4,300 3,044 Calle Concordia Overlook to Hwy 77 0.708 2.0 1.4 4,300 3,044 Hardy Rd Calle Loma Linda to Calle Buena Vista 0.501 2.0 1.0 5,384 2,697 Hardy Rd Calle Buena Vista to Oracle Rd 0.534 2.0 1.1 5,384 2,875 Innovation Park SR -989 to Rancho Vistoso 1.248 2.0 2.5 6,000 7,488 La Canada Dr Oro Valley TB to Calle Concordia 0.505 4.0 2.0 11,749 5,933 La Canada Dr Oro Valley TB to Rancho Sonora 0.647 4.0 2.6 11,750 7,602 La Canada Dr Rancho Sonora Dr to Lambert lane 0.414 4.0 1.7 11,750 4,865 La Canada Dr Lambert Ln to Naranja Dr 0.997 4.0 4.0 14,658 14,614 La Canada Dr Naranja Dr to Tangerine Rd 0.971 4.0 3.9 10,382 10,081 La Canada Dr Tangerine Rd to Moore Rd 1.000 4.0 4.0 5,058 5,058 La Cholla Blvd 0.5 mi. S of Lambert to Lambert Ln 0.500 2.0 1.0 14,246 7,123 La Cholla Blvd Lambert Ln to Naranja Dr 1.007 2.0 2.0 10,669 10,744 La Cholla Blvd Naranja Dr to Tangerine Rd 0.966 2.0 1.9 9,870 9,534 La Cholla Blvd Tangerine Rd to Oro Valley TB 0.258 2.0 0.5 2,798 722 Lambert Ln La Cholla Blvd to Rancho Sonora 0.625 2.0 1.3 9,437 5,898 Lambert Ln Rancho Sonora Dr to La Canada Dr 0.369 2.0 0.7 9,437 3,482 Lambert Ln La Canada Dr to Highlands Dr 1.290 2.0 2.6 11,938 15,400 Lambert Ln Pusch View to 1st Ave 1.017 2.0 2.0 11,931 12,134 Linda Vista Linda Vista Widening E of Oracle Rd 0.100 2.0 0.2 2,798 280 Magee Road Northern Ave to Oracle Rd 0.219 2.0 0.4 14,146 3,098 Magee Road Oracle Rd to Town Limits 0.787 2.0 1.6 1,888 1,486 Moore Road La Cholla Blvd to Copper Spring Trl 1.558 2.0 3.1 3,621 5,642 Moore Road Moore Rd, Yellow Orchard -Mystic View 0.300 2.0 0.6 3,620 1,086 Moore Road Copper Spring Trl to Woodburne Ave.0.804 2.0 1.6 3,621 2,911 Moore Road Woodburne Ave. to Rancho Vistoso 0.286 2.0 0.6 3,621 1,036 Naranja Dr Naranja Two-Way Left Turn Lane 1.000 3.0 3.0 2,000 5,432 Naranja Dr Shannon Road to La Cholla Blvd 1.000 2.0 2.0 2,000 2,000 Naranja Dr La Cholla Blvd to La Canada Dr 0.998 2.0 2.0 7,883 7,867 Naranja Dr La Canada Dr to 1st Ave 2.020 2.0 4.0 3,977 8,034 Northern Ave.Magee Road to Camino Cortaro 0.496 2.0 1.0 8,440 4,186 Northern Ave.Camino Cortaro to Hardy Road 0.507 2.0 1.0 8,440 4,279 Pusch View Lane Lambert Lane to Oracle Road 0.644 4.0 2.6 5,926 3,816 Rancho Vistoso Tangerine Rd to Moore Rd 1.466 4.0 5.9 18,566 27,218 Rancho Vistoso Moore Rd to Sun City Blvd 2.447 4.0 9.8 3,481 8,518 Rancho Vistoso Sun City Blvd to Del webb Blvd 1.117 4.0 4.5 8,209 9,169 Rancho Vistoso Del webb Blvd to Innovation Park 0.815 4.0 3.3 12,938 10,544 Rancho Vistoso Innovation Park Dr to SR-77 0.414 4.0 1.7 12,932 5,354 Shannon Rd Lambert Ln to Naranja 0.985 2.0 2.0 2,582 2,543 Tangerine Rd Tangerine Rd, Shannon Rd-La Canada Dr 2.000 4.0 8.0 11,241 44,968 Tangerine Rd Shannon Rd to La Cholla Blvd 0.981 2.0 2.0 11,242 11,028 Tangerine Rd La Cholla Blvd to La Canada Dr 1.007 2.0 2.0 13,316 13,409 Tangerine Rd La Canada Dr to Mandarin Ln 1.580 4.0 6.3 18,640 29,451 Vistoso Comm Lp Rancho Vistoso Bd to Oracle Road 0.444 4.0 1.8 1,538 683 TOTAL 41.5 118.5 383,580 Public Hearing: Amending Oro Valley’s Development Impact Fees June 17, 2020 Presented by: Amanda Jacobs, Strategic Initiatives Manager Purpose The purpose of this agenda item is to present Council the Development Impact Fees for approval or denial. Impact Fee Process Meeting Date Post IIP and LUA to Town Website Friday, November 1, 2019 Stakeholders Meeting Monday, November 18, 2019 Stakeholders Meeting Tuesday, December 17, 2019 Public Hearing: IIP and LUA to Council Wednesday, January 8, 2020 Council Approve/Deny IIP and LUA Wednesday, February 19, 2020 Notice of Intent: Development Fees Wednesday, February 19, 2020 Public Hearing: Development Fees to Council Wednesday, May 6, 2020 Council Approve/Deny: Impact Fees Wednesday, June 17, 2020 75-day Waiting Period to Collect new Fees Monday, September 1, 2020 Proposed Development Impact Fees Motion 1 Suggested Motions I MOVE to APPROVE Ordinance No. (O)20-04, amending the Oro Valley Town Development Impact Fees by repealing and replacing with the new development impact fees as provided in "Exhibit A," and repealing all resolutions, ordinances and rules of the Town of Oro Valley in conflict therewith; or Motion 2 Suggested Motions I MOVE to APPROVE Ordinance No. (O)20-04, amending the Oro Valley Town Development Impact Fees by repealing and replacing with the new development impact fees as provided in "Exhibit A," and repealing all resolutions, ordinances and rules of the Town of Oro Valley in conflict therewith, effective July 1, 2021, due to the impacts of COVID-19; or Motion 3 Suggested Motions I MOVE to DENY Ordinance No. (O)20-04, amending the Oro Valley Town Development Impact Fees as provided in "Exhibit A." Motion 4 Suggested Motions I MOVE to APPROVE Ordinance No. (O)20-04, amending the Oro Valley Town Development Impact Fees by repealing and replacing with the new development impact fees, except for the retail/commercial land use category, which will remain unchanged, as provided in "Exhibit A," and repealing all resolutions, ordinances and rules of the Town of Oro Valley in conflict therewith. Motion 2 Staff Recommendation I MOVE to APPROVE Ordinance No. (O)20-04, amending the Oro Valley Town Development Impact Fees by repealing and replacing with the new development impact fees as provided in "Exhibit A," and repealing all resolutions, ordinances and rules of the Town of Oro Valley in conflict therewith, effective July 1, 2021, due to the impacts of COVID-19. Questions?    Town Council Regular Session 2. Meeting Date:06/17/2020   Submitted By:Michael Dyckman, Finance Department:Finance SUBJECT: PUBLIC HEARING: RESOLUTION NO. (R)20-31, ADOPTION OF THE TENTATIVE BUDGET FOR FY 2020/21 AND SETTING THE LOCAL ALTERNATIVE EXPENDITURE LIMITATION FOR FY 2020/21 RECOMMENDATION: Staff recommends approval of the Tentative Budget for FY 2020/21 EXECUTIVE SUMMARY: This item is for Council consideration and adoption of the Town's Tentative Budget for FY 2020/21. Adoption of this resolution will also set the maximum local expenditure limitation for FY 2020/21. Once the limitation is set, expenditures for the year may not exceed that amount. The Council has the authority to make changes to the budget prior to the final budget adoption scheduled for July 15, 2020; however, the total amount of the final budget may not exceed the expenditure limitation set this evening. The Council also has the authority to modify the budget throughout the fiscal year. BACKGROUND OR DETAILED INFORMATION: Staff presented the FY 2020/21 Manager's Recommended Budget in the amount of $100,907,063 at the May 20, 2020 regular Town Council meeting. The full copy of the Recommended Budget has been posted on the Town's website, www.orovalleyaz.gov. Council budget study sessions were held on May 27, May 28 and June 10, 2020, to provide overviews of the larger service delivery department budgets, Town administrative department budgets and the Capital Improvement Program. The Budget and Finance Commission met and reviewed the Manager's Recommended Budget on June 2, 2020. Figures and Official Auditor General budget forms for the FY 2020/21 Tentative Budget will be finalized and added to this agenda item upon the conclusion of the budget study session scheduled for June 10, 2020.  This agenda item is a public hearing and approval of the resolution to adopt the FY 2020/21 Tentative Budget. Once approved, the Auditor General Budget forms with the approved budget amounts will be published for two consecutive weeks prior to the next public hearing for Final Budget approval scheduled for July 15, 2020. FISCAL IMPACT: The proposed Tentative Budget for FY20/21 sets the alternative expenditure limitation for the fiscal year. SUGGESTED MOTION: I MOVE to (approve or deny) Resolution No. (R)20-31, adopting the Tentative Budget for Fiscal Year 2020/21, and I MOVE to (approve or deny) Resolution No. (R)20-31, adopting the Tentative Budget for Fiscal Year 2020/21, and setting the local alternative expenditure limitation for Fiscal Year 2020/21 at $XXX,XXX,XXX or I MOVE... Attachments (R)20-31 Tentative Budget Adoption  RESOLUTION NO. (R)20-31 A RESOLUTION OF THE MAYOR AND TOWN COUNCIL OF THE TOWN OF ORO VALLEY, ARIZONA, ADOPTING ESTIMATES OF THE AMOUNTS REQUIRED FOR THE FISCAL YEAR 2020/2021 AS A TENTATIVE BUDGET; SETTING FORTH THE RECEIPTS AND EXPENDITURES/EXPENSES FOR THE FISCAL YEAR 2020/2021; GIVING NOTICE OF THE TIME FOR THE FINAL PUBLIC HEARING FOR ADOPTING THE BUDGET FOR THE FISCAL YEAR 2020/2021; PROVIDING FOR CONTINGENCIES; PROVIDING FOR THE USE OF FUNDS; SETTING THE LOCAL ALTERNATIVE EXPENDITURE LIMITATION FOR FISCAL YEAR 2020/2021 WHEREAS, the A.R.S. 42-17101 requires that cities and towns in Arizona adopt a tentative budget by the third Monday in July of each year; and WHEREAS, the Town Council and staff held Council Budget Study Sessions on May 27, May 28 and June 10, 2020 to establish and review the proposed budget; and WHEREAS, adoption of the budget will allow the Town of Oro Valley local government to provide the necessary public services for the health, welfare and safety of its citizenry. NOW, THEREFORE, BE IT RESOLVED by the Mayor and Town Council of the Town of Oro Valley, Arizona that: SECTION 1. The statements and schedules of the tentative budget for the fiscal year 2020/2021 accompany and be included as part of this Resolution as attached hereto. SECTION 2. The statements and schedules herein contained be adopted for the purpose as hereafter set forth as the tentative budget for the Town of Oro Valley, Arizona for the fiscal year 2020/2021 SECTION 3. The statements setting forth the receipts, expenditures/expenses and amounts collectible for the fiscal year 2020/2021 accompany and be included as part of this resolution. SECTION 4 The local alternative expenditure limitation as noted on the Summary Schedule of Estimated Revenues and Expenditures/Expenses for the fiscal year 2020/2021 be included as part of this resolution. SECTION 5. The Town Clerk is hereby authorized and directed to publish in the manner prescribed by law, the estimates of expenditures/expenses, as hereinafter set forth, together with a notice that the Town Council will meet for the purpose of final public hearing and for adoption of the budget for fiscal year 2020/2021 for the Town of Oro Valley, Arizona on the 15th day of July , 2020. SECTION 6. The money from any fund may be used for any of the appropriations except money specifically restricted by State Law or by Town Ordinance or Resolution. SECTION 7. The various Town officers and employees are hereby directed to perform all acts necessary or desirable to give effect to this resolution. PASSED AND ADOPTED by the Mayor and Town Council of the Town of Oro Valley, Arizona , this 17th day of June, 2020. TOWN OF ORO VALLEY ___ Joseph C. Winfield, Mayor ATTEST: APPROVED AS TO FORM: ____________________________ Michael Standish, Town Clerk Tobin Sidles, Legal Services Director Date:_______________________ Date:_____________________    Town Council Regular Session 3. Meeting Date:06/17/2020   Submitted By:David Gephart, Finance Department:Finance SUBJECT: RESOLUTION NO. (R)20-29, DISCUSSION AND POSSIBLE ACTION REGARDING ADOPTING THE PUBLIC SAFETY PERSONNEL RETIREMENT SYSTEM (PSPRS) PENSION FUNDING POLICY AND ACCEPTING THE TOWN'S SHARE OF ASSETS AND LIABILITIES UNDER THE PSPRS ACTUARIAL VALUATION REPORT RECOMMENDATION: Both staff and the Budget and Finance Commission recommend approval. EXECUTIVE SUMMARY: The State of Arizona House Bill 2097 was passed into law on April 3, 2018, requiring the Town Council to adopt a pension funding policy for the Public Safety Personnel Retirement System (PSPRS) before July 1, 2019, and annually each year thereafter. This bill was codified into Arizona Revised Statutes section 38-863.01 and requires the Town to adopt a pension funding policy to communicate how the Town will maintain stability of the Town's required contributions, how and when the Town's funding requirements will be met, and defining the Town's funded ratio target under PSPRS and when it will be met. The Town is also required to formally accept the Town's share of the assets and liabilities based on the PSPRS actuarial report and post the pension funding policy on its website. While the Town's sworn police personnel are members of the PSPRS plan, PSPRS also administers the Correction Officers Retirement Plan (CORP). Three (3) police dispatch personnel are currently active members of the CORP plan. As such, the draft pension funding policy, attached hereto, also incorporates the funding requirements for the CORP plan. The attached recommended policy was completed using a template created by the League of Arizona Cities and Towns for the benefit of all municipal agencies required to comply with this State law and incorporates comments and feedback from the Budget and Finance Commission. BACKGROUND OR DETAILED INFORMATION: Annually, PSPRS and CORP provide the Town with an actuarial report that includes the Town's assets, liabilities, unfunded actuarial liability, funding ratio, and the projected minimum contributions required for the upcoming fiscal year. The PSPRS and CORP actuarial reports from June 30, 2019, (please see attached) reflect an overall funded ratio of 60.8% for police and 44.0% for dispatchers. The Town's unfunded liabilities are $24.4 million for police and $1.8 million for dispatchers according to the reports. Town and employee annual contribution rates vary depending upon the employee's hire date. The Town's FY 2020/21 contribution rates for PSPRS beginning July 1, 2020, are 41.65% or 37.61%, and employee rates are 7.65% or 9.94%. The proposed FY 2020/21 budget includes approximately $3.267 million for the Town's contribution to PSPRS. Roughly $2 million of that total is the Town's contribution specifically toward paying down the unfunded liability, currently estimated at $24.4 million. The proposed funding strategy for use of the $5.3M of revenue that will be made available as a result of the CARES Act reimbursement by the state includes $500,000 toward the PSPRS unfunded liability, subject to final budget approval by the Town Council. The Town's FY 2020/21 contribution rate for CORP beginning July 1, 2020, is 75.53%, and the employee rate is 7.96%. The proposed FY 2020/21 budget includes approximately $152,800 for the Town's contribution to CORP. Approximately $146,000 of that total is the contribution specifically toward paying down the unfunded liability, currently estimated at $1.8 million. Based on the actuarial analysis, it is anticipated that the unfunded liabilities for both plans will be paid in 17 years, or by June 30, 2036, as amortized in both actuarial reports. To comply with the new statutory requirement, staff recommends continuing to pay the higher of the annual required minimum contributions (ARC) each year or the prior year rate in the even the ARC is reduced in the future, which include a portion of the amortized unfunded component to reach 100% funded status by 2036, plus any additional lump sums dependent on funding availability and Council approval, and formally accept the Town's share of the assets and liabilities included in the actuarial reports.  The attached recommended policy is consistent with that recommendation, and is based upon a model PSPRS policy drafted by the Arizona League of Cities and Towns that also includes a requirement to review and adopt the policy annually.  This provides the Town Council with flexibility to reconsider its level of effort toward the retirement of the PSPRS liability based upon Town resources and demands. FISCAL IMPACT: The FY 2020/21 proposed budget includes approximately $3.267 million to fund the annual minimum required Town contributions, plus a recommened lump sum amount of $500,000 for the PSPRS plan. The proposed budget also includes approximately $152,800 to fund the annual minimum required Town contributions for the CORP plan. SUGGESTED MOTION: I MOVE to (approve/deny) Resolution No. (R)20-29, adopting the Public Safety Personnel Retirement System (PSPRS) Pension Funding Policy and accepting the Town's share of assets and liabilities under the PSPRS actuarial valuation report. Attachments (R)20-29 PSPRS Fund 2020 Resolution  Proposed Pension Funding Policy FY 20-21  PSPRS Actuarial OVPD  CORP Actuarial OVDispatchers  RESOLUTION NO. (R)20-29 A RESOLUTION OF THE MAYOR AND COUNCIL OF THE TOWN OF ORO VALLEY, ARIZONA, ADOPTING THE PUBLIC SAFETY PERSONNEL RETIREMENT SYSTEM (PSPRS) PENSION FUNDING POLICY AND ACCEPTING THE TOWN’S SHARE OF ASSETS AND LIABILITIES UNDER THE PSPRS ACTUARIAL VALUATION REPORT; AND DIRECTING THE TOWN MANAGER, TOWN CLERK, TOWN LEGAL SERVICES DIRECTOR, TOWN CHIEF FINANCIAL OFFICER, OR THEIR DULY AUTHORIZED OFFICERS AND AGENTS TO TAKE ALL STEPS NECESSARY TO CARRY OUT THE PURPOSES AND INTENT OF THIS RESOLUTION WHEREAS, A.R.S. Title 38, Chapter 5, Article 4 and related statutes establish a Public Safety Personnel Retirement System; and WHEREAS, on April 3, 2018, House Bill 2097 was passed into law, requiring the Town Council to adopt a pension funding policy for the Public Safety Personnel Retirement System (PSPRS) before July 1, 2020 and annually each year after; and WHEREAS, pursuant to A.R.S. §38-863.01, the Town is required to adopt a pension funding policy to communicate how the Town will maintain the stability of the Town’s required contributions, how and when the Town’s funding requirements will be met, and defining the Town’s funded ratio target under PSPRS and how it will be met ; and WHEREAS, the Town’s sworn police officers are members of the PSPRS plan, PSPRS also administers the Correction Officers Retirement Plan (CORP) and three (3) Town police dispatch personnel are currently active members of the CORP plan; and WHEREAS, annually, PSPRS and CORP provide the Town with an actuarial repo rt that includes the Town’s assets, liabilities, unfunded actuarial liability, funding ratio, and the projected minimum contributions required for the upcoming fiscal year; and WHEREAS, it is in the best interest of the Town to adopt the Public Safety Personnel Retirement System (PSPRS) Pension Funding Policy, attached hereto as Exhibit “A” and incorporated herein by reference, and accept the Town’s share of assets and liabilities under the PSPRS actuarial valuation report. NOW THEREFORE, BE IT RESOLVED by the Mayor and Council of the Town of Oro Valley, that: SECTION 1. The Mayor and Council hereby adopt the Public Safety Personnel Retirement System Pension Funding Policy, attached hereto as Exhibit “A” and accept the Town’s share of assets and liabilities under the PSPRS actuarial valuation report. SECTION 2. The Town Manager, Town Clerk, Town Legal Services Director, Town Chief Financial Officer, or their duly authorized officers and agents are hereby authorized and directed to take all steps necessa ry to carry out the purposes and intent of this resolution. PASSED, AND ADOPTED by the Mayor and Council of the Town of Oro Valley Arizona, this 17th day of June, 2020. TOWN OF ORO VALLEY Joseph C. Winfield, Mayor ATTEST: APPROVED AS TO FORM: Michael Standish, Town Clerk Tobin Sidles, Legal Services Director Date: Date: EXHIBIT “A” 1 Town of Oro Valley Public Safety Personnel Retirement System (PSPRS) Pension Funding Policy The intent of this policy is to clearly communicate the Town Council’s pension funding objectives, its commitment to employees and the sound financial management of the Town of Oro Valley, and maintain compliance with new statutory requirements of A.R.S. 38-863.01. The Council shall annually assess the status of the Town’s PSPRS trust fund annually, and take formal action to update this policy in concert with the final annual budget approval. This policy shall also apply to the Town’s participation in the Correction Officer Retirement Plan (CORP). Several terms are used throughout this policy and are defined as follows: Unfunded Actuarial Accrued Liability (UAAL) – Is the difference between trust assets and the estimated future cost of pensions earned by employees. This UAAL results from actual results (interest earnings, member mortality, disability rates, etc.) being different from the assumptions used in previous actuarial valuations. Annual Required Contribution (ARC) – Is the annual amount required to pay into the pension funds, as determined through annual actuarial valuations. It is comprised of two primary components: normal pension cost – which is the estimated cost of pension benefits earned by employees in the current year; and, amortization of UAAL – which is the cost needed to cover the unfunded portion of pensions earned by employees in previous years. The UAAL is collected over a period of time referred to as the amortization period. The ARC is a percentage of the current payroll. Funded Ratio – Is a ratio of fund assets to actuarial accrued liability. The higher the ratio the better funded the pension is with 100% being fully funded. Intergenerational equity – Is a concept used to describe the policy expectation that no generation is burdened by substantially more or less pension costs than past or future generations. The Town’s sworn police employees who are regularly assigned hazardous duty participate in the Public Safety Personnel Retirement System (PSPRS). Selected individuals who serve as dispatchers in the Oro Valley Police Department participate in the CORP plan, which is also administered by the Public Safety Personnel Retirement System. Public Safety Personnel Retirement System (PSPRS) PSPRS is administered as an agent multiple-employer pension plan. An agent multiple-employer plan has two main functions: 1) to comingle assets of all plans under its administration, thus achieving economy of scale for more cost efficient investments, and invest those assets for the benefit of all members under its administration and 2) serve as the statewide uniform administrator for the distribution of benefits. 2 Under an agent multiple-employer plan, each agency participating in the plan has an individual trust fund reflecting that agencies ’ assets and liabilities. Under this plan all contributions are deposited to and distributions are made from that fund’s assets, each fund has its own funded ratio and contribution rate, and each fund has a unique annual actuarial valuation. The Town of Oro Valley has one trust fund for police employees. The Town also contributes to the Correction Officer Retirement Plan (CORP), administered by the Public Safety Personnel Retirement System, on behalf of selected individuals who serve as dispatchers in the Oro Valley Police Department. CORP maintains one trust fund for dispatchers. Council formally accepts the assets, liabilities, and current funding ratio of the Town’s PSPRS and CORP trust funds from the June 30, 2019 actuarial valuations specified below. Trust Fund Assets Accrued Liability Unfunded Actuarial Accrued Liability Funded Ratio Oro Valley Police $37,842,906 $62,278,853 $24,435,947 60.8% Oro Valley Dispatchers $ 1,424,947 $ 3,240,399 $ 1,815,452 44.0% PSPRS and CORP Funding Goal Pensions that are less than fully funded place the cost of service provided in earlier periods (amortization of UAAL) on the current taxpayers. Fully funded pension plans are the best way to achieve taxpayer and member intergenerational equity. The Council’s PSPRS and CORP funding ratio goal is 100% (fully funded) by June 30, 2036. Council establishes this goal for the following reasons:  The PSPRS and CORP trust funds represent only the Town of Oro Valley’s liability  The fluctuating cost of an UAAL causes strain on the Town’s budget, affecting the Town’s ability to provide services  A fully funded pension is the best way to achieve taxpayer and member intergenerational equity Council has determined that in order to achieve the 100% funding ratio goal, the following actions will be taken:  Maintain ARC payment from operating revenues – Council is committed to maintaining the full ARC payment (normal cost and UAAL amortization) from operating funds. The estimated combined ARC for FY19/20 is estimated at $2.9 million for PSPRS and at $153,000 for CORP and shall be paid from operating funds.  At such time the ARC is projected to be reduced, the Town should endeavor to continue paying the ARC at the higher rate, to help accelerate the reduction of the UAAL, based on funding availability.  Retain 20-year amortization of unfunded liability rather.  Review Local board practices annually. 3  Budget an additional payment of at least $500,000 toward the Unfunded Actuarial Accrued Liability as part of the FY 20/21 annual budget process, based on funding availability. The Town will strive to designate an ongoing revenue source for this payment annually. It is hereby the Town Council’s intent to achieve its goal of 100% funding by June 30, 2036, in accordance with the amortization timeline set forth by the PSPRS and CORP June 30, 2019 Actuarial Valuation. In that vein, the Town should strive to achieve the following funding ratio targets:  2024 – 70% funding  2028 – 80% funding  2032 – 90% funding The attached appendix shows the historical performance of the unfunded actuarial accrued liability. 4 Appendix A Unfunded Accrued Actuarial Accrued Funded Year Trust Fund Assets Liability Liability Ratio 2014 Oro Valley Police 23,241,057 36,122,643 (12,881,586) 64% 2014 Oro Valley Dispatchers 1,216,956 2,269,744 (1,052,788) 54% 2015 Oro Valley Police 25,601,957 40,452,911 (14,850,954) 63% 2015 Oro Valley Dispatchers 1,205,067 2,362,604 (1,157,537) 51% 2016 Oro Valley Police 27,010,103 48,414,270 (21,404,167) 56% 2016 Oro Valley Dispatchers 1,163,258 2,524,360 (1,361,102) 46% 2017 Oro Valley Police 30,883,680 53,037,566 (22,153,886) 58% 2017 Oro Valley Dispatchers 1,260,798 3,077,649 (1,816,851) 41% 2018 Oro Valley Police 34,172,618 57,022,056 (22,849,438) 60% 2018 Oro Valley Dispatchers 1,337,558 2,945,307 (1,607,749) 45% Information comes from Note 17 in Town Comprehensive Annual Financial Report for June 30, 2019. ARIZONA PUBLIC SAFETY PERSONNEL RETIREMENT SYSTEM ORO VALLEY POLICE DEPT. (122) ACTUARIAL VALUATION AS OF JUNE 30, 2019 CONTRIBUTIONS APPLICABLE TO THE PLAN/FISCAL YEAR ENDING JUNE 30, 2021 VIA E-MAIL 13420 Parker Commons Boulevard, Suite 104 Fort Myers, FL 33912 · (239) 433-5500 · Fax (239) 481-0634 · www.foster-foster.com December 5, 2019 Board of Trustees Arizona Public Safety Personnel Retirement System Phoenix, AZ Re: Actuarial Valuation Report as of June 30, 2019 for Oro Valley Police Dept. (122) Dear Members of the Board: We are pleased to present to the Board this report of the annual actuarial valuation of the Arizona Public Safety Personnel Retirement System (PSPRS). The valuation was performed to determine whether the assets and contributions are sufficient to provide the prescribed benefits and to develop the appropriate funding requirements for the applicable plan year. This report was prepared at the request of the Board and is intended for use by PSPRS and those designated or approved by the Board. It documents the valuation of the consolidated plan and provides summary information for PSPRS participating employers. This report may be provided to parties other than PSPRS only in its entirety and only with the permission of the Board. Foster & Foster is not responsible for the unauthorized use of this report. The valuation has been conducted in accordance with generally accepted actuarial principles and practices, including the applicable Actuarial Standards of Practice as issued by the Actuarial Standards Board, and reflects laws and regulations issued to date pursuant to the provisions of Title 38, Chapter 5, Article 4 of the Arizona Revised Statutes, as well as applicable federal laws and regulations. In our opinion, the assumptions used in this valuation, as adopted by the Board of Trustees, represent reasonable expectations of anticipated plan experience. Future actuarial measurements may differ significantly from the current measurements presented in this report for a variety of reasons including changes in applicable laws, changes in plan provisions, changes in assumptions, or plan experience differing from expectations. Due to the limited scope of the valuation, we did not perform an analysis of the potential range of such future measurements. The computed contribution rates shown in the “Contribution Results” section should be considered minimum contribution rates that comply with the Board’s funding policy and Arizona Statutes. Users of this report should be aware that contributions made at that rate do not guarantee benefit security. Given the importance of benefit security to any retirement system, we suggest that contributions to the System in excess of those presented in this report be considered. In conducting the valuation, we have relied on personnel, plan design, and asset information supplied by PSPRS through June 30, 2019 and the actuarial assumptions and methods described in the Actuarial Assumptions section of this report. While we cannot verify the accuracy of all this information, the supplied information was reviewed for consistency and reasonableness. As a result of this review, we have no reason to doubt the substantial accuracy of the information and believe that it has produced appropriate results. This information, along with any adjustments or modifications, is summarized in various sections of this report. Board of Trustees Arizona Public Safety Personnel Retirement System | Page 2 13420 Parker Commons Boulevard, Suite 104 Fort Myers, FL 33912 · (239) 433-5500 · Fax (239) 481-0634 · www.foster-foster.com This valuation assumes the continuing ability of the participating employers to make the contributions necessary to fund this plan. A determination regarding whether or not the participating employers are actually able to do so is outside our scope of expertise. Consequently, we did not perform such an analysis. The undersigned are familiar with the immediate and long-term aspects of pension valuations and meet the Qualification Standards of the American Academy of Actuaries necessary to render the actuarial opinions contained herein. All sections of this report are considered an integral part of the actuarial opinions. To our knowledge, no associate of Foster & Foster, Inc. working on valuations of the program has any direct financial interest or indirect material interest in the Arizona Public Safety Personnel Retirement System, nor does anyone at Foster & Foster, Inc. act as a member of the Board of Trustees of the Arizona Public Safety Personnel Retirement System. Thus, there is no relationship existing that might affect our capacity to prepare and certify this actuarial report. If there are any questions, concerns, or comments about any of the items contained in this report, please contact us at 239-433-5500. Respectfully Submitted, Foster & Foster, Inc. By: ________________________________ Bradley R. Heinrichs, FSA, EA, MAAA By: ________________________________ Jason L. Franken, FSA, EA, MAAA By: ________________________________ Paul M. Baugher, FSA, EA, MAAA Arizona Public Safety Personnel Retirement System Actuarial Valuation Report as of June 30, 2019 – Oro Valley Police Dept. (122) TABLE OF CONTENTS I. Summary of Report ..........................................................................................................................................1 II. Contribution Results ........................................................................................................................................4 III. Liability Support ............................................................................................................................................9 IV. Asset Support ...............................................................................................................................................13 V. Member Statistics ..........................................................................................................................................18 VI. Actuarial Assumptions and Methods ...........................................................................................................20 VII. Discussion of Risk ......................................................................................................................................21 VIII. Summary of Current Plan..........................................................................................................................28 IX. Actuarial Funding Policy .............................................................................................................................34 X. Glossary ........................................................................................................................................................36 Arizona Public Safety Personnel Retirement System Actuarial Valuation Report as of June 30, 2019 – Oro Valley Police Dept. (122) 1 I. S UMMARY OF REPORT The regular annual actuarial valuation of the Arizona Public Safety Personnel Retirement System for the Oro Valley Police Dept., performed as of June 30, 2019, has been completed and the results are presented in this Report. The purpose of this valuation is to:  Compute the liabilities associated with benefits likely to be paid on behalf of current retired and active members. This information is contained in the section entitled “Liability Support.”  Compare accumulated assets with the liabilities to assess the funded condition. This information is contained in the section entitled “Liability Support.”  Compute the employers’ recommended contribution rates for the Fiscal Year beginning July 1, 2020. This information is contained in the section entitled “Contribution Results.” 1. Key Valuation Results The funded status as of June 30, 2019 and the employer contribution amounts applicable to the plan/fiscal year ending June 30, 2021 are as follows: Tier 1 & Tier 2 Members Tier 3 Members * Pension Health Total Pension Health Total Employer Contribution Rate 41.62% 0.03% 41.65% 9.21% 0.14% 9.35% Funded Status 60.8% 146.2% 62.0% 116.9% 205.3% 118.4% 2. Comparison of Key Results to Prior Year The chart below compares the results from this valuation with the results of the prior year’s valuation, as prepared and reported by Gabriel, Roeder, Smith & Company: Contribution Rate Tier 1 & Tier 2 Members Tier 3 Members * Valuation Date Pension Health Total Pension Health Total June 30, 2018 38.26% 0.33% 38.59% 9.80% 0.21% 10.01% June 30, 2019 41.62% 0.03% 41.65% 9.21% 0.14% 9.35% Funded Status Tier 1 & Tier 2 Members Tier 3 Members Valuation Date Pension Health Total Pension Health Total June 30, 2018 59.9% 115.9% 61.0% 89.3% 110.5% 89.7% June 30, 2019 60.8% 146.2% 62.0% 116.9% 205.3% 118.4% * The Tier 3 rates shown are the calculated rates as of the valuation date and do not reflect any Legacy costs that the employer must also contribute. Arizona Public Safety Personnel Retirement System Actuarial Valuation Report as of June 30, 2019 – Oro Valley Police Dept. (122) 2 3. Reasons for Change Changes in the results from the prior year’s valuation can be illustrated in the following tables along with high-level explanations for the entire System below: Contribution Rate Tier 1 & Tier 2 Tier 3 Members Pension Health Pension Health Contribution Rate Last Valuation 38.26% 0.33% 9.80% 0.21% Asset Experience 0.28% 0.01% 0.00% 0.00% Payroll Base 1.75% 0.00% 0.08% 0.00% Liability Experience (1.24%) (0.02%) 0.07% 0.00% Assumption/Method Change 2.62% 0.03% 0.41% 0.00% Other (0.05%) (0.32%) (1.16%) (0.07%) Contribution Rate This Valuation 41.62% 0.03% 9.21% 0.14% Funded Status Tier 1 & Tier 2 Tier 3 Members Pension Health Pension Health Funded Status Last Valuation 59.9% 115.9% 89.3% 110.5% Asset Experience (0.4%) (1.2%) 0.2% 0.5% Liability Experience 0.2% 21.0% (4.2%) 0.7% Assumption/Method Change (1.6%) (1.9%) (1.4%) 0.6% Other 2.7% 12.4% 33.0% 93.0% Funded Status This Valuation 60.8% 146.2% 116.9% 205.3% Assets Experience – Asset gains and losses (relative to the assumed earnings rate) are smoothed over seven years for Tiers 1 and 2 and over five years for Tier 3. The return on the market value of assets for the year ending June 30, 2019 was 5.4% for Tiers 1 and 2 and 9.0% for Tier 3. On a smoothed, actuarial value of assets basis, however, the average return was 6.7% for Tiers 1 and 2 and 7.3% for Tier 3. This fell short of the 2018 assumed earnings rate for Tiers 1 and 2 of 7.4% but exceeded the rate for Tier 3 of 7.0%. Liability Experience – Experience overall was unfavorable, driven by greater than expected active retirements. Gains from greater than expected terminations and lower than expected salary increases partially offset those losses. A decrease in normal costs has a significant impact on the contribution reconciliation for this bucket, as well. Payroll Base – Under the current amortization policy for Tiers 1 and 2, the contribution rate is developed as a level percentage of payroll. The payroll is expected to increase each year in line with the growth assumption (currently 3.50%). To the extent that actual payroll is lower/greater than expected, the contribution rate will increase/decrease as a result. Assumption / Method Change – The interest rate (assumed earnings rate) was decreased from 7.40% to 7.30% and the mortality tables were updated to the latest available information. These changes both resulted in liability losses. Arizona Public Safety Personnel Retirement System Actuarial Valuation Report as of June 30, 2019 – Oro Valley Police Dept. (122) 3 Other – This is the combination of all other factors that could impact liabilities year-over-year, with the primary sources being the transition of actuarial services and changes in member data. Note that Tier 3 is primarily driven by contributions that are currently outpacing accruals; this will stabilize as the plan matures. 4. Looking Ahead The continuing effect of prior asset losses was dampened by the asset smoothing reflected in the actuarial value of assets and further offset by the effect of lower than expected pay increases. There remain unrecognized investment losses that will, in the absence of other gains, put upward pressure on the contribution rate next year. If the June 30, 2019 pension valuation results were based on the market value of assets instead of the actuarial value of assets, the pension funded percentage for Tiers 1 and 2 would be 58.7% (instead of 60.8%) and the pension employer contribution requirement would be 43.12% of payroll (instead of 41.62%). The funded status for Tiers 1 and 2 will continue to improve if assumptions are met and contributions at least equal to the rates determined for each employer are made to the fund. The funded status for Tier 3 will stabilize as the population continues to grow, as contributions appear sufficient to keep the liabilities fully funded. Arizona Public Safety Personnel Retirement System Actuarial Valuation Report as of June 30, 2019 – Oro Valley Police Dept. (122) 4 II. CONTRIBUTION RESULTS Contribution Requirements Development of Employer Contributions - Tiers 1 & 2 Members Valuation Date June 30, 2019 June 30, 2018 Applicable to Fiscal Year Ending 2021 2020 Rate Dollar Rate Dollar Pension Normal Cost Total Normal Cost 21.60% $1,418,920 Employee Cost (7.65%) (502,556) Employer (Net) Normal Cost 13.95% 916,364 14.15% Amortization of Unfunded Liability 27.67% 1,947,211 24.11% Total Employer Cost (Pension) 41.62% 2,863,575 38.26% Health Normal Cost 0.49% $32,433 0.33% Amortization of Unfunded Liability (0.46%) (32,371) 0.00% Total Employer Cost (Health) 0.03% 62 0.33% Total Employer Cost (Pension + Health) 41.65% 2,863,637 38.59% 2,783,346 Total Minimum Contribution Requirement (if applicable) 0.00% 0.00% Alternate Contribution Rate (ACR) * 27.67% 24.11% Underlying Payroll (as of valuation date) 6,569,363 * The Alternate Contribution Rate is the sum of the positive amortization rates for Tiers 1 & 2 Pension and Health and is charged when retirees return to active status. The results above are shown both prior to and after the application of the statutory minimum contribution requirement of 8% of payroll (5% of payroll if the actual employer contribution is less than 5% for the 2006/2007 Fiscal Year) and are based on the current amortization schedule approved by the Board of Trustees for your individual plan (see "Actuarial Assumptions and Methods"). A.R.S. 38-843, subsection I allows for the employer to request a one-time increase in the amortization period up to a maximum of 30 years. The costs below are provided to assist with that decision, where needed. If the current approved amortization period is greater than those below, that request has already been made for this plan and the following is provided to facilitate earlier payoff, if desired. Rate Dollar Total Pension Employer Cost (25-year amortization) 35.33% 2,418,882 Total Pension Employer Cost (30-year amortization) 33.17% 2,266,877 Arizona Public Safety Personnel Retirement System Actuarial Valuation Report as of June 30, 2019 – Oro Valley Police Dept. (122) 5 Development of Employer Contributions – Tier 3 Members Valuation Date June 30, 2019 June 30, 2018 Applicable to Fiscal Year Ending 2021 2020 Defined Benefit (DB) Retirement Plan Rate Dollar Rate Dollar Pension Total Normal Cost 18.41% $ 29,478 19.46% Amortization of Unfunded Liability 0.00% 0 0.14% Total Pension Cost 18.41% 29,478 19.60% Employee (EE) Pension Cost 9.21% 14,739 9.80% Employer (ER) Pension Cost 9.21% 14,739 9.80% Health Total Normal Cost 0.28% 448 0.42% Amortization of Unfunded Liability 0.00% 0 0.00% Total Health Cost 0.28% 448 0.42% Employee (EE) Health Cost 0.14% 224 0.21% Employer (ER) Health Cost 0.14% 224 0.21% Total Total Calculated Tier 3 Required EE/ER Individual Cost 9.35% 14,963 10.01% Board Approved Tier 3 Required EE/ER Individual Cost 1 9.94% 15,916 9.94% ER Legacy Cost of Tiers 1 & 2 Amort of Unfunded Liabilities 2 27.67% 47,460 24.11% Total Calculated Tier 3 Required ER Defined Benefit Cost 37.02% 62,423 34.12% Total Board Approved Tier 3 Required ER Defined Benefit Cost 37.61% 63,376 34.05% 19,546 Underlying Payroll (as of valuation date) 160,118 1 The Board decided to keep Tier 3 rates level (as calculated with the June 30, 2018 valuation) for the fiscal year ending June 30, 2021. 2 Pursuant to ARS § 38-843(B), the amortization of positive unfunded liabilities for Tiers 1 & 2 shall be applied to all Tier 3 payroll on a level percent basis. However, while it is statutorily required to present the rates in this manner, these are the minimums where alternate methods for paying down that unfunded liability is at the discretion of each employer. Further, to understand the effects of reform in relation to Tier 3, compare the total rate of Tier 3 before application of those legacy costs. Arizona Public Safety Personnel Retirement System Actuarial Valuation Report as of June 30, 2019 – Oro Valley Police Dept. (122) 6 Development of Employer Contributions – Tier 3 Members Valuation Date June 30, 2019 June 30, 2018 Applicable to Fiscal Year Ending 2021 2020 Defined Contribution (DC) Retirement Plan Rate Dollar Rate Dollar Tier 2 & 3 DB / Non-Social Security Employee Cost 3.00% 3.00% Employer Cost 1 3.00% 3.00% Tier 3 DC Only Employee Cost 9.00% $0 9.00% Employee Disability Program Cost 1.41% 0 1.51% Total Employee Cost 10.41% 0 10.51% Employer Cost 9.00% 0 9.00% Employer Disability Program Cost 1.41% 0 1.51% Total Employer Cost (before Legacy) 10.41% 0 10.51% ER Legacy Cost of Tiers 1 & 2 Amort of Unfunded Liabilities 2 27.67% 0 24.11% Total Employer Cost 38.08% 0 34.62% Underlying Payroll (as of valuation date) 0 1 Employer rate is 4% for Tier 2 members for a period of time depending on the individual's membership date. 2 Pursuant to ARS § 38-843(B), the amortization of positive unfunded liabilities for Tiers 1 & 2 shall be applied to all Tier 3 payroll on a level percent basis. However, while it is statutorily required to present the rates in this manner, these are the minimums where alternate methods for paying down that unfunded liability is at the discretion of each employer. Further, to understand the effects of reform in relation to Tier 3, compare the total rate of Tier 3 before application of those legacy costs. Arizona Public Safety Personnel Retirement System Actuarial Valuation Report as of June 30, 2019 – Oro Valley Police Dept. (122) 7 Contribution Rate Summary Tier 1 Tier 2 Tier 3 Membership Date On or After 7/1/1968 7/20/2011 7/20/2011 7/1/2017 Participates in Social Security N/A N/A Yes No Yes No N/A Available Retirement Plan ¹ DB Only DB Only DB Only Hybrid DB Only Hybrid DC Only Employee Contribution Rate PSPRS DB Rate 7.65% 11.65% 11.65% 11.65% 9.94% 9.94% PSPRS DC Rate 3.00% 3.00% 9.00% PSPDCRP Disability Program Rate 1.41% Total EE Contribution Rate 7.65% 11.65% 11.65% 14.65% 9.94% 12.94% 10.41% Employer Contribution Rate PSPRS DB Normal Cost 14.44% 14.44% 14.44% 14.44% 9.94% 9.94% PSPRS DB Tier 1 & 2 Legacy Cost ² 27.21% 27.21% 27.21% 27.21% 27.67% 27.67% 27.67% PSPRS DC Rate ³ 4.00% 3.00% 9.00% PSPDCRP Disability Program Rate 1.41% Total ER Contribution Rate 41.65% 41.65% 41.65% 45.65% 37.61% 40.61% 38.08% ¹ Employers that pay into Social Security on behalf of their members do not participate in the Hybrid Plan. ² Per statute (ARS § 38-843(B)), any positive unfunded liability for Tiers 1 and 2 is to be applied to all Tier 3 (DB and DC) payrolls. ³ The 4.00% employer match for Tier 2 Hybrid members is for a short period of time depending on the membership date of the employee at which point the rate will change to 3.00% (ARS § 38-868(C)). Exhibit summarizes employee and employer contributions based on Statute and the results of June 30, 2019 actuarial valuation. Pension and health components are combined, where applicable. Arizona Public Safety Personnel Retirement System Actuarial Valuation Report as of June 30, 2019 – Oro Valley Police Dept. (122) 8 Impact of Additional Contributions Additional Contribution (000s) $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 $10,000 Impact On Funded Status 06/30/2019 60.8% 62.4% 64.0% 65.6% 67.2% 68.8% 70.4% 72.0% 73.6% 75.2% 76.8% FYE 2021 Contribution Rate 41.65% 40.54% 39.43% 38.32% 37.21% 36.10% 34.99% 33.88% 32.77% 31.66% 30.55% Table shows the hypothetical change in the funded status and contribution rate from the June 30, 2019 actuarial valuation results for Tiers 1 & 2 if an additional contribution of the amount shown had been made to the Fund on June 30, 2019. This illustration can help estimate the impact of contributing additional monies to the fund in the future. Historical Summary of Employer Rates Pension Health Valuation Date June 30 Fiscal Year Ending June 30 Normal Cost Unfunded Amortization Total Normal Cost Unfunded Amortization Total TIERS 1 & 2 2018 2020 14.15% 24.11% 38.26% 0.33% 0.00% 0.33% 2019 2021 13.95% 27.67% 41.62% 0.49% (0.46%) 0.03% TIER 3 1 2018 2 2020 9.68% 0.00% 9.68% 0.26% 0.00% 0.26% 2019 3 2021 9.21% 0.00% 9.21% 0.14% 0.00% 0.14% 2019 2 2021 9.68% 0.00% 9.68% 0.26% 0.00% 0.26% 1 Does not reflect Legacy costs that the employer must also contribute. 2 Rates shown are Board approved EE/ER rates 3 Rates shown are calculated EE/ER rates Arizona Public Safety Personnel Retirement System Actuarial Valuation Report as of June 30, 2019 – Oro Valley Police Dept. (122) 9 III. LIABILITY SUPPORT Liabilities and Funded Ratios by Benefit - Tiers 1 & 2 June 30, 2019 June 30, 2018 Pension Actuarial Present Value of Benefits Retirees and Beneficiaries $ 25,296,073 DROP Members 8,661,914 Vested Members 525,750 Active Members 39,375,074 Total Actuarial Present Value of Benefits 73,858,811 Actuarial Accrued Liability (AAL) All Inactive Members 34,483,737 28,120,209 Active Members 27,795,116 28,901,847 Total Actuarial Accrued Liability 62,278,853 57,022,056 Actuarial Value of Assets (AVA) 37,842,906 34,172,618 Unfunded Actuarial Accrued Liability Gross Unfunded Actuarial Accrued Liability 24,435,947 22,849,438 Stabilization Reserve 0 0 Net Unfunded Actuarial Accrued Liability 24,435,947 22,849,438 Funded Ratio (AVA / AAL) 60.8% 59.9% Health Present Value of Benefits Retirees and Beneficiaries $ 231,511 DROP Members 129,090 Active Members 828,102 Total Present Value of Benefits 1,188,703 Actuarial Accrued Liability (AAL) All Inactive Members 360,601 Active Members 585,833 Total Actuarial Accrued Liability 946,434 1,105,975 Actuarial Value of Assets (AVA) 1,383,468 1,281,346 Unfunded Actuarial Accrued Liability (437,034) (175,371) Funded Ratio (AVA / AAL) 146.2% 115.9% Arizona Public Safety Personnel Retirement System Actuarial Valuation Report as of June 30, 2019 – Oro Valley Police Dept. (122) 10 Liabilities and Funded Ratios by Benefit - Tier 3 June 30, 2019 June 30, 2018 Pension Actuarial Present Value of Benefits Retirees and Beneficiaries 0 Vested Members 203,244 Active Members 120,826,663 Total Actuarial Present Value of Benefits 121,029,907 Actuarial Accrued Liability (AAL) All Inactive Members 203,244 Active Members 7,753,481 Total Actuarial Accrued Liability 7,956,725 1,831,715 Actuarial Value of Assets (AVA) 9,305,220 1,635,349 Unfunded Actuarial Accrued Liability (1,348,495) 196,366 Funded Ratio (AVA / AAL) 116.9% 89.3% Health Present Value of Benefits Retirees and Beneficiaries 0 Active Members 1,814,082 Total Present Value of Benefits 1,814,082 Actuarial Accrued Liability (AAL) All Inactive Members 0 Active Members 136,597 Total Actuarial Accrued Liability 136,597 39,635 Actuarial Value of Assets (AVA) 280,404 43,798 Unfunded Actuarial Accrued Liability (143,807) (4,163) Funded Ratio (AVA / AAL) 205.3% 110.5% The liabilities shown on this page are the liabilities for all Tier 3 members grouped together in the Risk Sharing group. These liabilities are NOT the liabilities for Oro Valley Police Dept. Tier 3 members. Arizona Public Safety Personnel Retirement System Actuarial Valuation Report as of June 30, 2019 – Oro Valley Police Dept. (122) 11 Derivation of Experience (Gain)/Loss Tiers 1 & 2 Tier 3 Pension Health Pension Health (1) Unfunded Actuarial Accrued Liability as of June 30, 2018 22,849,438 (175,371) 196,366 (4,163) (2) Normal Cost Developed in Last Valuation 977,103 22,788 5,626 121 (3) Actual Contributions 2,624,761 22,442 3,684,117 225,397 (4) Expected Interest On (1), (2), and (3) 1,667,781 (12,107) (118,932) (8,490) (5) Expected Unfunded Actuarial Accrued Liability as of June 30, 2019 (1)+(2)-(3)+(4) 22,869,561 (187,132) (3,601,057) (237,929) (6) Changes to UAAL Due to Assumptions, Methods and Benefits 1,627,934 11,846 91,273 (391) (7) Change to UAAL Due to Actuarial (Gain)/Loss (61,548) (261,748) 2,161,289 94,513 (8) Unfunded Actuarial Accrued Liability as of June 30, 2019 24,435,947 (437,034) (1,348,495) (143,807) Arizona Public Safety Personnel Retirement System Actuarial Valuation Report as of June 30, 2019 – Oro Valley Police Dept. (122) 12 Amortization of Unfunded Liabilities - Tiers 1 & 2 Pension Health Unfunded Liability to Amortize Unfunded Actuarial Accrued Liability 24,435,947 (437,034) Maintenance of Effort 430,389 0 Anticipated Contribution Towards Unfunded 1,679,265 0 Unfunded Liability to Amortize 1 24,926,114 (468,937) Amortization Period 17 20 Projected Payroll 7,208,788 7,208,788 Rate of Amortization of Unfunded Liability 27.67% (0.46%) 1 Adjusted with interest to beginning of next fiscal year. Amortization of Unfunded Liabilities - Tier 3 Date Established Outstanding Balance Years Remaining Amortization Rate 2 Pension 06/30/2018 182,154 9 0.05% 06/30/2019 (1,530,649) 10 (0.38%) Total (1,348,495) 0.00% Health 06/30/2018 (3,862) 9 0.00% 06/30/2019 (139,945) 10 (0.03%) Total (143,807) 0.00% 2 By Statute, negative amortization rates are not subtracted in Tier 3 rate calculations. Arizona Public Safety Personnel Retirement System Actuarial Valuation Report as of June 30, 2019 – Oro Valley Police Dept. (122) 13 IV. ASSET SUPPORT Statement of Changes in Fiduciary Net Position for Year Ended June 30, 2019 Market Value Basis Tiers 1 & 2 Tier 3 Pension Health Pension Health Additions Contributions Member Contributions $ 121,556,582 $ 0 $ 7,390,215 $ 0 Employer Contributions 844,585,444 0 7,425,607 0 Health Insurance Contributions 0 4,853,600 0 448,692 Total Contributions 966,142,026 4,853,600 14,815,822 448,692 Investment Income Net Increase in Fair Value 303,530,849 14,803,383 732,462 24,444 Interest and Dividends 82,589,482 2,347,594 199,300 3,876 Other Income 61,188,380 1,941,632 147,656 3,205 Less Investment Expenses (44,360,237) (1,597,190) (107,047) (2,637) Net Investment Income 402,948,474 17,495,419 972,371 28,888 Transfers In 285,197 0 31,689 0 Total Additions 1,369,375,697 22,349,019 15,819,882 477,580 Deductions Distributions to Members Benefit Payments 818,430,053 0 0 0 Health Insurance Subsidy 0 16,732,865 0 0 Refund of Contributions 15,556,115 0 77,140 0 Total Distributions 833,986,168 16,732,865 77,140 0 Administrative Expenses 7,233,020 301,997 18,010 499 Transfers Out 144,434 0 0 0 Other 0 0 0 0 Total Deductions 841,363,622 17,034,862 95,150 499 Net Increase / (Decrease) 528,012,075 5,314,157 15,724,732 477,081 Net Position Held in Trust Prior Valuation 7,284,786,674 328,284,037 3,198,018 77,352 Beginning of the Year Adjustment (1,807,999) 2,953,522 0 0 End of the Year 7,810,990,750 336,551,716 18,922,750 554,433 Arizona Public Safety Personnel Retirement System Actuarial Valuation Report as of June 30, 2019 – Oro Valley Police Dept. (122) 14 Development of Pension Actuarial Value of Assets - Tiers 1 & 2 A. Investment Income A1. Actual Investment Income $ 395,715,454 A2. Expected Amount for Immediate Recognition 555,730,379 A3. Amount Subject to Amortization (160,014,925) Year Ended June 30 B. Amortization Schedule 2019 2020 2021 2022 2023 2024 2025 2019 Experience (A3 / 7) (22,859,275) (22,859,275) (22,859,275) (22,859,275) (22,859,275) (22,859,275) (22,859,275) 2018 Experience (6,266,349) (6,266,349) (6,266,349) (6,266,349) (6,266,349) (6,266,351) 2017 Experience 33,380,149 33,380,149 33,380,149 33,380,149 33,380,148 2016 Experience (64,250,729) (64,250,729) (64,250,729) (64,250,726) 2015 Experience (36,894,248) (36,894,248) (36,894,251) 2014 Experience 33,458,496 33,458,496 2013 Experience 9,542,556 Total Amortization (53,889,400) (63,431,956) (96,890,455) (59,996,201) 4,254,524 (29,125,626) (22,859,275) C. Actuarial Value of Assets Total Employer C1. Actuarial Value of Assets, 06/30/2018 7,444,902,139 C2. Noninvestment Net Cash Flow 132,296,621 C3. Preliminary Actuarial Value of Assets, 06/30/2019 (A2 + B + C1 + C2) 8,079,039,739 C4. Market Value of Assets, 06/30/2019 7,810,990,750 36,587,342 C5. Final Actuarial Value of Assets, 06/30/2019 (C3 Within 20% Corridor of C4) 8,079,039,739 37,842,906 D. Rates of Return D1. Market Value Rate of Return 5.4% D2. Actuarial Value Rate of Return 6.7% Arizona Public Safety Personnel Retirement System Actuarial Valuation Report as of June 30, 2019 – Oro Valley Police Dept. (122) 15 Development of Health Actuarial Value of Assets - Tiers 1 & 2 A. Investment Income A1. Actual Investment Income $ 17,193,422 A2. Expected Amount for Immediate Recognition 24,722,408 A3. Amount Subject to Amortization (7,528,986) Year Ended June 30 B. Amortization Schedule 2019 2020 2021 2022 2023 2024 2025 2019 Experience (A3 / 7) (1,075,569) (1,075,569) (1,075,569) (1,075,569) (1,075,569) (1,075,569) (1,075,572) 2018 Experience (304,653) (304,653) (304,653) (304,653) (304,653) (304,656) 2017 Experience 1,532,136 1,532,136 1,532,136 1,532,136 1,532,136 2016 Experience (3,221,043) (3,221,043) (3,221,043) (3,221,044) 2015 Experience (1,796,589) (1,796,589) (1,796,586) 2014 Experience 1,653,381 1,653,381 2013 Experience 451,740 Total Amortization (2,760,597) (3,212,337) (4,865,715) (3,069,130) 151,914 (1,380,225) (1,075,572) C. Actuarial Value of Assets Total Employer C1. Actuarial Value of Assets, 06/30/2018 339,920,235 C2. Noninvestment Net Cash Flow (11,879,265) C3. Preliminary Actuarial Value of Assets, 06/30/2019 (A2 + B + C1 + C2) 350,002,781 C4. Market Value of Assets, 06/30/2019 336,551,716 1,330,299 C5. Final Actuarial Value of Assets, 06/30/2019 (C3 Within 20% Corridor of C4) 350,002,781 1,383,468 D. Rates of Return D1. Market Value Rate of Return 5.3% D2. Actuarial Value Rate of Return 6.6% Arizona Public Safety Personnel Retirement System Actuarial Valuation Report as of June 30, 2019 – Oro Valley Police Dept. (122) 16 Development of Pension Actuarial Value of Assets - Tiers 3 A. Investment Income A1. Actual Investment Income $ 954,361 A2. Expected Amount for Immediate Recognition 732,184 A3. Amount Subject to Amortization 222,177 Year Ended June 30 B. Amortization Schedule 2019 2020 2021 2022 2023 2019 Experience (A3 / 5) 44,435 44,435 44,435 44,435 44,437 2018 Experience (370) (370) (370) (371) 2017 Experience 0 0 0 2016 Experience 0 0 2015 Experience 0 Total Amortization 44,065 44,065 44,065 44,064 44,437 C. Actuarial Value of Assets Total Employer C1. Actuarial Value of Assets, 06/30/2018 3,199,499 C2. Noninvestment Net Cash Flow 14,770,371 C3. Preliminary Actuarial Value of Assets, 06/30/2019 (A2 + B + C1 + C2) 18,746,119 C4. Market Value of Assets, 06/30/2019 18,922,750 9,392,896 C5. Final Actuarial Value of Assets, 06/30/2019 (C3 Within 20% Corridor of C4) 18,746,119 9,305,220 D. Rates of Return D1. Market Value Rate of Return 9.0% D2. Actuarial Value Rate of Return 7.3% Arizona Public Safety Personnel Retirement System Actuarial Valuation Report as of June 30, 2019 – Oro Valley Police Dept. (122) 17 Development of Health Actuarial Value of Assets - Tiers 3 A. Investment Income A1. Actual Investment Income $ 28,389 A2. Expected Amount for Immediate Recognition 20,853 A3. Amount Subject to Amortization 7,536 Year Ended June 30 B. Amortization Schedule 2019 2020 2021 2022 2023 2019 Experience (A3 / 5) 1,507 1,507 1,507 1,507 1,508 2018 Experience 0 0 0 (2) 2017 Experience 0 0 0 2016 Experience 0 0 2015 Experience 0 Total Amortization 1,507 1,507 1,507 1,505 1,508 C. Actuarial Value of Assets Total Employer C1. Actuarial Value of Assets, 06/30/2018 77,354 C2. Noninvestment Net Cash Flow 448,692 C3. Preliminary Actuarial Value of Assets, 06/30/2019 (A2 + B + C1 + C2) 548,406 C4. Market Value of Assets, 06/30/2019 554,433 283,486 C5. Final Actuarial Value of Assets, 06/30/2019 (C3 Within 20% Corridor of C4) 548,406 280,405 D. Rates of Return D1. Market Value Rate of Return 9.4% D2. Actuarial Value Rate of Return 7.4% Arizona Public Safety Personnel Retirement System Actuarial Valuation Report as of June 30, 2019 – Oro Valley Police Dept. (122) 18 V. MEMBER STATISTICS 06/30/2019 Valuation Data Summary Tiers 1 & 2 Tier 3 Actives Number 78 3 Average Current Age 40.9 28.7 Average Age at Employment 27.2 28.2 Average Past Service 13.7 0.5 Average Annual Salary $79,934 $53,373 Actives (Transferred from Another Employer) Number 6 0 Average Current Age 32.0 N/A Average Age at Employment 24.6 N/A Average Past Service 7.5 N/A Average Annual Salary $55,751 N/A Retirees Number 22 0 Average Current Age 58.0 N/A Average Annual Benefit $50,316 N/A Drop Retirees Number 8 N/A Average Current Age 52.7 N/A Average Annual Benefit $66,777 N/A Beneficiaries Number 6 0 Average Current Age 68.2 N/A Average Annual Benefit $34,059 N/A Disability Retirees Number 12 0 Average Current Age 52.1 N/A Average Annual Benefit $37,274 N/A Inactive / Vested Number 8 1 Average Current Age 40.7 24.5 Average Accumulated Contributions $28,487 $9,493 Total Number 140 4 Former Members (transferred to another employer) 3 0 Arizona Public Safety Personnel Retirement System Actuarial Valuation Report as of June 30, 2019 – Oro Valley Police Dept. (122) 19 Counts and Pay Summary by Service - Tiers 1 & 2 Past Service Age 0-4 5-9 10-14 15-19 20-24 25-29 30+ Total Count Total Pay Average Pay 15 - 19 0 0 0 0 0 0 0 0 0 0 20 - 24 0 0 0 0 0 0 0 0 0 0 25 - 29 6 6 0 0 0 0 0 12 772,969 64,414 30 - 34 4 8 3 0 0 0 0 15 1,036,658 69,111 35 - 39 0 2 11 3 0 0 0 16 1,289,877 80,617 40 - 44 0 1 8 6 2 0 0 17 1,381,975 81,293 45 - 49 0 0 1 2 5 1 0 9 812,942 90,327 50 - 54 0 1 1 4 3 2 0 11 947,841 86,167 55 - 59 0 0 1 0 0 0 2 3 259,973 86,658 60 - 64 0 0 0 0 0 0 0 0 0 0 65+ 0 0 0 1 0 0 0 1 67,128 67,128 Total 10 18 25 16 10 3 2 84 6,569,363 78,207 Counts and Pay Summary by Service - Tier 3 Past Service Age 0-4 5-9 10-14 15-19 20-24 25-29 30+ Total Count Total Pay Average Pay 15 - 19 0 0 0 0 0 0 0 0 0 0 20 - 24 0 0 0 0 0 0 0 0 0 0 25 - 29 2 0 0 0 0 0 0 2 107,310 53,655 30 - 34 1 0 0 0 0 0 0 1 52,808 52,808 35 - 39 0 0 0 0 0 0 0 0 0 0 40 - 44 0 0 0 0 0 0 0 0 0 0 45 - 49 0 0 0 0 0 0 0 0 0 0 50 - 54 0 0 0 0 0 0 0 0 0 0 55 - 59 0 0 0 0 0 0 0 0 0 0 60 - 64 0 0 0 0 0 0 0 0 0 0 65+ 0 0 0 0 0 0 0 0 0 0 Total 3 0 0 0 0 0 0 3 160,118 53,373 Arizona Public Safety Personnel Retirement System Actuarial Valuation Report as of June 30, 2019 – Oro Valley Police Dept. (122) 20 VI. ACTUARIAL ASSUMPTIONS AND METHODS Interest Rate This is the assumed earnings rate on System assets, compounded annually, net of investment and administrative expenses. Tiers 1 & 2: 7.30% per year. Tier 3: 7.00% per year. Salary Increases See table below. This is annual increase for individual member’s salary. These rates, which are based on a 2017 experience study using actual plan experience, consist of 3.5% for wage inflation with the remaining portion for merit / seniority increases. Inflation 2.50%. Tier 3 Compensation Limit $110,000 for 2019. Assumed increases of 2.00% per year. Cost-of-Living Adjustment 1.75%. Mortality Rates These rates are used to project future decrements from the population due to death. Active Lives: PubS-2010 Employee mortality, loaded 110% for males and females, projected with future mortality improvements reflected generationally using 75% of scale MP-2018. 100% of active deaths are assumed to be in the line of duty. Inactive Lives PubS-2010 Healthy Retiree mortality, loaded 110% for males and females, projected with future mortality improvements reflected generationally using 75% of scale MP-2018. Maricopa Pima Maricopa Pima County County Other County County Other Age Police Police Police Fire Fire Fire 20 7.50% 7.50% 7.50% 7.50% 7.50% 7.20% 25 7.14% 6.24% 6.60% 7.35% 6.36% 6.60% 30 6.00% 5.16% 5.25% 6.74% 5.48% 5.60% 35 4.77% 4.55% 4.15% 5.56% 4.83% 4.96% 40 3.90% 3.89% 3.60% 4.46% 4.03% 4.44% 45 3.54% 3.56% 3.50% 3.74% 3.60% 3.78% 50+ 3.50% 3.50% 3.50% 3.50% 3.50% 3.50% Arizona Public Safety Personnel Retirement System Actuarial Valuation Report as of June 30, 2019 – Oro Valley Police Dept. (122) 21 Beneficiaries: PubS-2010 Survivor mortality, projected with future mortality im- provements reflected generationally using 75% of scale MP-2018. Disabled Lives: PubS-2010 Disabled mortality, projected with future mortality im- provements reflected generationally using 75% of scale MP-2018. The mortality assumptions sufficiently accommodate anticipated future mortality improvements. Retirement / DROP Rates These rates are used to project future decrements from the active population due to retirement. The rates below are based on a 2017 experience study using actual plan experience. Tier 1 – reaching age 62 before attaining 20 years of service: Age-related rates based on age at retirement: 60% assumed at age 62, 50% assumed at ages 63 – 69, and 100% assumed at age 70. Rates are the same for all employers. Tier 1 – reaching age 62 after attaining 20 years of service: Service-related rates based on service at retirement: 60% are assumed to enter the DROP program while the remaining 40% are assumed to retire and commence benefits immediately. Maricopa Pima Maricopa Pima County County Other County County Other Service Police Police Police Fire Fire Fire 20 27% 24% 35% 14% 18% 23% 21 18% 19% 30% 14% 18% 18% 22 14% 14% 23% 7% 11% 11% 23 10% 10% 10% 7% 7% 8% 24 8% 7% 10% 7% 7% 5% 25 38% 32% 36% 22% 22% 30% 26 36% 32% 30% 26% 26% 30% 27 29% 22% 30% 19% 19% 30% 28 29% 22% 30% 32% 25% 25% 29 29% 22% 30% 30% 25% 16% 30 34% 35% 30% 30% 30% 32% 31 34% 35% 30% 30% 30% 35% 32 65% 65% 70% 55% 55% 60% 33 65% 65% 70% 55% 55% 60% 34+ 100% 100% 100% 100% 100% 100% Arizona Public Safety Personnel Retirement System Actuarial Valuation Report as of June 30, 2019 – Oro Valley Police Dept. (122) 22 Tiers 2 & 3: Age-related rates based on age at retirement: Termination Rate These rates are used to project future decrements from the active population due to termination. Service-related rates based on service at termination are shown below. The rates below apply to members prior to retirement eligibility and are based on a 2017 experience study using actual plan experience. Maricopa Pima Maricopa Pima County County Other County County Other Age Police Police Police Fire Fire Fire 53 38% 32% 36% 22% 22% 30% 54 36% 32% 30% 26% 26% 30% 55 29% 22% 30% 19% 19% 30% 56 29% 22% 30% 32% 25% 25% 57 29% 22% 30% 30% 25% 16% 58 34% 35% 30% 30% 30% 32% 59 34% 35% 30% 30% 30% 35% 60-63 65% 65% 70% 55% 55% 60% 64+ 100% 100% 100% 100% 100% 100% Maricopa Pima Maricopa Pima County County Other County County Other Service Police Police Police Fire Fire Fire 1 14.00% 16.00% 16.00% 7.00% 10.00% 9.50% 2 8.50% 9.00% 12.50% 4.50% 5.00% 9.00% 3 6.50% 7.50% 11.50% 3.70% 5.00% 7.50% 4 4.50% 6.00% 9.00% 3.00% 4.00% 7.50% 5 3.60% 6.00% 8.00% 2.50% 4.00% 6.50% 6 3.30% 4.50% 8.00% 1.70% 3.50% 4.50% 7 3.30% 4.50% 7.00% 1.70% 3.00% 4.00% 8 3.30% 3.20% 7.00% 1.70% 2.40% 3.50% 9 2.70% 3.20% 6.50% 1.70% 2.40% 3.50% 10 2.70% 3.20% 6.00% 1.50% 2.40% 3.00% 11 2.70% 3.20% 5.00% 1.10% 2.40% 2.70% 12 1.80% 1.40% 4.00% 0.70% 1.00% 2.00% 13 1.30% 1.40% 3.50% 0.70% 1.00% 2.00% 14 1.30% 1.40% 3.00% 0.70% 1.00% 1.70% 15 1.30% 1.00% 3.00% 0.60% 1.00% 1.20% 16 0.70% 1.00% 2.00% 0.50% 1.00% 1.20% 17 0.70% 1.00% 1.75% 0.50% 0.50% 1.20% 18 0.70% 1.00% 1.75% 0.40% 0.50% 1.20% 19 0.50% 1.00% 1.75% 0.40% 0.50% 1.20% 20+ 0.50% 1.00% 1.75% 0.40% 0.50% 0.50% Arizona Public Safety Personnel Retirement System Actuarial Valuation Report as of June 30, 2019 – Oro Valley Police Dept. (122) 23 Disability Rate These rates are used to project future decrements from the active population due to disability. Sample age-related rates based on age at disability are provided below. These rates are based on a 2017 experience study using actual plan experience. 100% of disablements are assumed to be duty-related. Marital Status For active members, 85% of males and 60% of females are assumed to be married. Actual marital status is used, where applicable, for inactive members. Spouse’s Age Males are assumed to be three years older than females. Health Care Utilization For active members, 70% of retirees are expected to utilize retiree health care. Actual utilization is used for inactive members. Funding Method Entry Age Normal Cost Method. Actuarial Asset Method Method described below. Note that during periods when investment performance exceeds (falls short) of the assumed rate, the actuarial value of assets will tend to be less (greater) than the market value of assets. Tiers 1 & 2: Each year the assumed investment income is recognized in full while the difference between actual and assumed investment income are smoothed over a 7-year period subject to a 20% corridor around the market value. Tier 3: Each year the assumed investment income is recognized in full while the difference between actual and assumed investment income are smoothed over a 5-year period subject to a 20% corridor around the market value. Maricopa Pima Maricopa Pima County County Other County County Other Age Police Police Police Fire Fire Fire 20 0.08% 0.08% 0.10% 0.03% 0.03% 0.03% 25 0.08% 0.08% 0.10% 0.03% 0.03% 0.03% 30 0.17% 0.16% 0.20% 0.04% 0.03% 0.03% 35 0.22% 0.21% 0.26% 0.09% 0.07% 0.08% 40 0.36% 0.35% 0.44% 0.17% 0.16% 0.17% 45 0.51% 0.49% 0.62% 0.17% 0.43% 0.48% 50 0.78% 0.75% 0.95% 0.43% 0.59% 0.65% 55 1.02% 0.98% 1.23% 1.00% 1.01% 1.13% Arizona Public Safety Personnel Retirement System Actuarial Valuation Report as of June 30, 2019 – Oro Valley Police Dept. (122) 24 Funding Policy Amortization Method Tiers 1 & 2: Any positive UAAL (assets less than liabilities) is amortized according to a Level Percentage of Payroll method over a closed period of 17 years. Any negative UAAL (assets greater than liabilities) is amortized according to a Level Dollar method over an open period of 20 years. Tier 3: Any positive UAAL (assets less than liabilities) is amortized according to a Level Dollar method over a closed period of 10 years. No amortization is made of any negative UAAL (assets greater than liabilities). Payroll Growth 3.50% per year. This is annual increase for total employer payroll. Stabilization Reserve Beginning with the June 30, 2007 valuation and with each subsequent valuation, if the actuarial value of assets exceeds the actuarial accrued liability, one half of this excess in each year is allocated to a Stabilization Reserve. This Reserve is excluded from the calculation of the employer contribution rates. The Reserve accumulates as long as the plan is overfunded. Once the plan becomes underfunded, the Stabilization Reserve will be used to dampen increases in the employer contribution rates. Changes to Actuarial Assumptions and Methods Since the Prior Valuation  The interest rate (assumed earnings rate) for Tiers 1 & 2 was lowered from 7.40% to 7.30%.  The mortality rates were updated to reflect the PubS-2010 tables; previously, rates were based on the RP- 2014 tables. Arizona Public Safety Personnel Retirement System Actuarial Valuation Report as of June 30, 2019 – Oro Valley Police Dept. (122) 25 VII. DISCUSSION OF RISK ASOP No. 51, Assessment and Disclosure of Risk Associated with Measuring Pension Obligations and Determining Pension Plan Contributions, states that the actuary should identify risks that, in the actuary’s professional judgment, may reasonably be anticipated to significantly affect the plan’s future financial condition. Throughout this report, actuarial results are determined under various assumption scenarios. These results are based on the premise that all future plan experience will align with the plan’s actuarial assumptions; however, there is no guarantee that actual plan experience will align with the plan’s assumptions. Whenever possible, the recommended assumptions in this report reflect conservatism to allow for some margin of unfavorable future plan experience. However, it is still possible that actual plan experience will differ from anticipated experience in an unfavorable manner that will negatively impact the plan’s funded position. Below are examples of ways in which plan experience can deviate from assumptions and the potential impact of that deviation. Typically, this results in an actuarial gain or loss representing the current-year financial impact on the plan’s unfunded liability of the experience differing from assumptions; this gain or loss is amortized over a period of time determined by the plan’s amortization method. When assumptions are selected that adequately reflect plan experience, gains and losses typically offset one another in the long term, resulting in a relatively low impact on the plan’s contribution requirements associated with plan experience. When assumptions are too optimistic, losses can accumulate over time and the plan’s amortization payment could potentially grow to an unmanageable level.  Investment Return: When the rate of return on the Actuarial Value of Assets falls short of the assumption, this produces a loss representing assumed investment earnings that were not realized. Further, it is unlikely that the plan will experience a scenario that matches the assumed return in each year as capital markets can be volatile from year to year. Therefore, contribution amounts can vary in the future.  Salary Increases: When a plan participant experiences a salary increase that was greater than assumed, this produces a loss representing the cost of an increase in anticipated plan benefits for the participant as compared to the previous year. The total gain or loss associated with salary increases for the plan is the sum of salary gains and losses for all active participants.  Payroll Growth: The plan’s payroll growth assumption, if one is used, causes a predictable annual increase in the plan’s amortization payment in order to produce an amortization payment that remains constant as a percentage of payroll if all assumptions are realized. If payroll does not increase according to the plan’s payroll growth assumption, the plan’s amortization payment can increase significantly as a percentage of payroll even if all assumptions other than the payroll growth assumption are realized.  Demographic Assumptions: Actuarial results take into account various potential events that could happen to a plan participant, such as retirement, termination, disability, and death. Each of these potential events is assigned a liability based on the likelihood of the event and the financial consequence of the event for the plan. Accordingly, actuarial liabilities reflect a blend of financial consequences associated with various possible outcomes (such as retirement at one of various possible ages). Once the outcome is known (e.g. the participant retires) the liability is adjusted to reflect the known outcome. This adjustment Arizona Public Safety Personnel Retirement System Actuarial Valuation Report as of June 30, 2019 – Oro Valley Police Dept. (122) 26 produces a gain or loss depending on whether the outcome was more or less favorable than other outcomes that could have occurred.  Contribution risk: This risk results from the potential that actual employer contributions may deviate from actuarially determined contributions, which are determined in accordance with the Board’s funding policy. The funding policy is intended to result in contribution requirements that if paid when due, will result in a reasonable expectation that assets will accumulate to be sufficient to pay plan benefits when due. Contribution deficits, particularly large deficits and those that occur repeatedly, increase future contribution requirements and put the plan at risk for not being able to pay plan benefits when due. Impact of Plan Maturity on Risk For newer pension plans, most of the participants and associated liabilities are related to active members who have not yet reached retirement age. As pension plans continue in operation and active members reach retirement ages, liabilities begin to shift from being primarily related to active members to being shared amongst active and retired members. Plan maturity is a measure of the extent to which this shift has occurred. It is important to understand that plan maturity can have an impact on risk tolerance and the overall risk characteristics of the plan. For example, plans with a large amount of retired liability do not have as long of a time horizon to recover from losses (such as losses on investments due to lower than expected investment returns) as plans where the majority of the liability is attributable to active members. For this reason, less tolerance for investment risk may be warranted for highly mature plans with a substantial inactive liability. Similarly, mature plans paying substantial retirement benefits resulting in a small positive or net negative cash flow can be more sensitive to near term investment volatility, particularly if the size of the fund is shrinking, which can result in less assets being available for investment in the market. To assist with determining the maturity of the plan, we have provided some relevant metrics in the table following titled “Plan Maturity Measures and Other Risk Metrics.” For a better understanding of the overall Plan and the impact of these risks, please refer to the consolidated PSPRS valuation report. Arizona Public Safety Personnel Retirement System Actuarial Valuation Report as of June 30, 2019 – Oro Valley Police Dept. (122) 27 Plan Maturity Measures and Other Risk Metrics Tiers 1 & 2 Tier 3 06/30/2018 06/30/2019 06/30/2018 06/30/2019 Support Ratio Total Actives 90 84 1 3 Total Inactives 52 56 0 1 Actives / Inactives 173.1% 150.0% N/A 300.0% Asset Volatility Ratio Market Value of Assets (MVA) 36,587,342 9,392,896 Total Annual Payroll 6,569,363 160,118 MVA / Total Annual Payroll 556.9% 5,866.2% Accrued Liability (AL) Ratio Inactive Accrued Liability 28,120,209 34,483,737 203,244 Total Accrued Liability 57,022,056 62,278,853 7,956,725 Inactive AL / Total AL 49.3% 55.4% 2.6% Funded Ratio Actuarial Value of Assets (AVA) 34,172,618 37,842,906 1,635,349 9,305,220 Total Accrued Liability 57,022,056 62,278,853 1,831,715 7,956,725 AVA / Total Accrued Liability 59.9% 60.8% 89.3% 116.9% Net Cash Flow Ratio Net Cash Flow * 1,315,467 26,259 Market Value of Assets (MVA) 36,587,342 9,392,896 Net Cash Flow / MVA 3.6% 0.3% * Determined as total contributions minus benefit payments. Administrative expenses are typically included but are considered part of the net interest rate assumption for this plan. Arizona Public Safety Personnel Retirement System Actuarial Valuation Report as of June 30, 2019 – Oro Valley Police Dept. (122) 28 VIII. SUMMARY OF CURRENT PLAN The following is a summary of the benefit provisions provided in Title 38, Chapter 5, Article 4 of the Arizona Revised Statutes. Membership Full-time employees of an eligible group, prior to attaining age 65, who are engaged to work for more than six months in a calendar year. Benefit Tiers Benefits differ for members based on their hire date: Tier Hire Date 1 Hired before January 1, 2012 2 Hired on or after January 1, 2012 but before July 1, 2017 3 Hired on or after July 1, 2017 Compensation Compensation is the amount including base salary, overtime pay, shift and military differential pay, compensatory time used in lieu of overtime pay, and holiday pay, paid to an employee on a regular payroll basis and longevity pay paid at least every six months for which contributions are made to the System. For Tier 3 members, compensation is limited by statutory cap ($110,000 with adjustments by the Board). Average Monthly Benefit Tier 1: Compensation The highest compensation paid to member during three consecutive years out of the last 20 years of Credited Service, divided by months. Tier 2: The highest compensation paid to member during five consecutive years out of the last 20 years of Credited Service, divided by months. Tier 3: The highest compensation paid to member during five consecutive years out of the last 15 years of Credited Service, divided by months. Credited Service Total periods of service, both before and after the member’s date of participation, for which the member made contributions to the fund. Normal Retirement Date Tier 1: First day of month following attainment of 1) 20 years of service or 2) 62nd birthday and completion of 15 years of service. Arizona Public Safety Personnel Retirement System Actuarial Valuation Report as of June 30, 2019 – Oro Valley Police Dept. (122) 29 Tier 2: First day of month following the attainment of age 52.5 and com- pletion of 15 years of service. Tier 3: First day of month following the attainment of age 55 and comple- tion of 15 years of service. Benefit Tier 1: 50% of Average Monthly Benefit Compensation, adjusted based on Credited Service as follows (maximum benefit of 80% of Average Monthly Benefit Compensation): Credited Service Benefit Adjustment 15 years, but less than 20 Reduced 4% per year less than 20 20 years, but less than 25 Plus 2% per year between 20 and 25 25+ years Plus 2.5% per year above 20 Tier 2: Benefit multiplier (below) times Average Monthly Benefit Compensation times Credited Service (maximum benefit of 80% of Average Monthly Benefit Compensation): Credited Service Benefit Multiplier 15 years, but less than 17 1.50% 17 years, but less than 19 1.75% 19 years, but less than 22 2.00% 22 years, but less than 25 2.25% 25+ years 2.50% Tier 3: Benefit multiplier (below) times Average Monthly Benefit Compensation times Credited Service (maximum benefit of 80% of Average Monthly Benefit Compensation): Credited Service Benefit Multiplier 15 years, but less than 17 1.50% 17 years, but less than 19 1.75% 19 years, but less than 22 2.00% 22 years, but less than 25 2.25% 25+ years 2.50% Form of Benefit For married retirees, an annuity payable for the life of the member with 80% continuing to the eligible spouse upon death. For unmarried retirees, the normal form is a single life annuity. Arizona Public Safety Personnel Retirement System Actuarial Valuation Report as of June 30, 2019 – Oro Valley Police Dept. (122) 30 Early Retirement Only applicable to Tier 3 members: Date Attainment of age 52.5 and 15 years of Credited Service. Benefit Actuarial equivalent of Normal Retirement benefit. Disability Benefit – Accidental (duty-related) Eligibility Total and permanent disability incurred in performance of duty. Benefit Amount A maximum of: a.) 50% of Average Monthly Benefit Compensation, and; b.) The monthly Normal Retirement pension that the member is entitled to receive if he or she retired immediately. Disability Benefit – Ordinary (not duty-related) Eligibility Total and permanent disability not incurred in performance of duty. Benefit Amount Normal Retirement pension that the member is entitled to receive prorated on Credited Service (maximum 20 years) over 20. Disability Benefit – Other Temporary Benefit equals 1/12 of 50% of compensation during year preceding date of disability. Payments terminate after 12 months. Catastrophic Benefit equals 90% of Average Monthly Benefit Compensation. After 60 months member receives greater of 62.5% Average Monthly Benefit Compensation and accrued normal pension. Pre-Retirement Death Benefit Service Incurred 100% of Average Monthly Benefit Compensation, reduced by child’s pension. Non-Service Incurred 80% of benefit based on calculation for accidental disability retirement. Child’s Pension 10% of pension for each child (maximum 20% paid) based on calculation for accidental disability retirement. Payable to dependent child under age 18 (23, if full-time student). Guardian’s Pension Same as spouse’s pension. Payable (along with child’s pension) when no spouse is being paid and there is at least one child under 18 (23, if full-time student). Vesting (Termination) Vesting Service Requirement Tier 1: 10 years of Credited Service. Arizona Public Safety Personnel Retirement System Actuarial Valuation Report as of June 30, 2019 – Oro Valley Police Dept. (122) 31 Tiers 2 & 3: 15 years of Credited Service. Non-Vested Benefit Tier 1: Lump sum payment of accumulated contributions, plus additional amount based on years of Credited Service. Service Additional % of Contributions Less than 5 years 0% 5 years 25% 6 years 40% 7 years 55% 8 years 70% 9 years 85% 10+ years 100% Tiers 2 & 3: Lump sum payment of accumulated contributions, with interest at rate determined by the Board. Vested Benefit Tier 1: Deferred retirement annuity based on two times member’s accumulated contributions, deferred to age 62. Member is not entitled to survivor benefits, benefit increases, or group health insurance subsidy. Tiers 2 & 3: Calculated same as normal retirement pension. Payable if contributions left in fund until reach age requirement. Member is entitled to survivor benefits, benefit increases, and group health insurance subsidy. Cost-of-Living Adjustment Payable to retired member or survivor of retired member Tiers 1 & 2: Compound cost-of-living adjustment on base benefit. First payment is made on July 1, 2018, with annual adjustments effective every July 1 thereafter. Cost-of-living adjustment will be based on the average annual percentage change in the Metropolitan Phoenix-Mesa Consumer Price Index published by the United States Department of Labor, Bureau of Statistics. Maximum increase of 2%. Arizona Public Safety Personnel Retirement System Actuarial Valuation Report as of June 30, 2019 – Oro Valley Police Dept. (122) 32 Tier 3: Compound cost-of-living adjustment on base benefit beginning earlier of first calendar year after the 7th anniversary of retirement or when the retired member reaches 60 years of age. A cost-of-living adjustment shall be paid on July 1 each year that the funded ratio for members hired on or after July 1, 2017 is 70% or more. The cost-of-living adjustment will be based on the average annual percentage change in the Metropolitan Phoenix-Mesa Consumer Price Index published by the United States Department of Labor, Bureau of Statistics. The cost-of-living adjustment will not exceed:  2%, if funded ratio for members who are hired on or after July 1, 2017 is 90% or more;  1.5%, if funded ratio for members who are hired on or after July 1, 2017 is 80-90%;  1%, if funded ratio for members who are hired on or after July 1, 2017 is 70-80%. Deferred Retirement Option Plan (DROP): Eligibility Tier 1 and 20 years of Credited Service. DROP Period Maximum 60 months. Member Contributions Cease upon DROP entry. Benefit Amount Calculated based on Credited Service and average monthly compensation as of the beginning of the DROP period, credited to DROP participation account for DROP period. Interest on DROP Beginning Year Interest Rate Participation Account July 1, 2015 7.50% July 1, 2016 7.40% July 1, 2017 7.40% July 1, 2018 7.30% July 1, 2019 7.30% Payment of DROP Payable as lump sum distribution to Public Safety Personnel Participation Account Defined Contribution Retirement Plan at end of DROP period or at termination. Payment Monthly Benefit System commences payment of benefit amount at the earlier of 1) the end of the DROP period and 2) at termination. Arizona Public Safety Personnel Retirement System Actuarial Valuation Report as of June 30, 2019 – Oro Valley Police Dept. (122) 33 Post-Retirement Health Insurance Subsidy Eligibility Retired member or survivor who elect health coverage provided by the state or participating employer. Maximum Subsidy Amounts Member Only With Dependents (monthly) Medicare Eligible $100 $170 One w/ Medicare N/A $215 Not Medicare Eligible $150 $260 Employee Contributions Members hired before July 20, 2011: 7.65% Members hired on/after July 20, 2011, but before July 1, 2017: 11.65%. Amounts in excess of 7.65% are not used to reduce the employer contribution (“maintenance of effort”). Tier 3: 50% of total contribution, which is Normal Cost plus a level- dollar amortization of unfunded actuarial accrued liability over a closed period not to exceed 10 years. Employer Contributions Tiers 1 & 2: Normal Cost plus amortization of unfunded actuarial accrued liability over a closed period not to exceed 20 years (subject to one-time election to extend to closed period not to exceed 30 years). Contribution will never be less than 8% of payroll. Tier 3: 50% of total contribution, which is Normal Cost plus a level- dollar amortization of unfunded actuarial accrued liability over a closed period not to exceed 10 years. Changes to Benefit Provisions Since the Prior Valuation  DROP members with less than 20 years of credited service on January 1, 2012 are now given interest at the assumed earnings rate instead of the 7-year smoothed rate of return. Arizona Public Safety Personnel Retirement System Actuarial Valuation Report as of June 30, 2019 – Oro Valley Police Dept. (122) 34 IX. ACTUARIAL FUNDING POLICY The purpose of this Actuarial Funding Policy is to record the funding objectives and policy set by the Board for the Arizona Public Safety Personnel Retirement System (PSPRS). The Board establishes this Funding Policy to help ensure the systematic funding of future benefit payments for members of the Retirement System. This funding policy was reviewed by the Board annually for several years following initial adoption until the 2017 experience study. Subsequently, it shall be reviewed every five years in conjunction with the experience study, although some adjustments may be warranted sooner to properly reflect the new Tier 3 benefits. Funding Objectives 1. Maintain adequate assets so that current plan assets plus future contributions and investment earnings are sufficient to fund all benefits expected to be paid to members and their beneficiaries. 2. Maintain stability of employer contribution rates, consistent with other funding objectives. 3. Maintain public policy goals of accountability and transparency. Each policy element is clear in intent and effect, and each should allow an assessment of whether, how and when the funding requirements of the plan will be met. 4. Promote intergenerational equity. Each generation of members and employers should incur the cost of benefits for the employees who provides services to them, rather than deferring those costs to future members and employers. 5. Provide a reasonable margin for adverse experience to help offset risks. 6. Continue progress of systematic reduction of the Unfunded Actuarial Accrued Liability (UAAL). Elements of Actuarial Funding Policy 1. Actuarial Cost Method a. The Entry Age Normal level percent of pay actuarial cost method of valuation shall be used in determining the Actuarial Accrued Liability (AAL) and Normal Cost. Differences in the past between assumed experience and actual experience (“actuarial gains and losses”) shall become part of the AAL. The Normal Cost shall be determined on an individual basis for each active member. 2. Asset Smoothing Method a. The investment gains or losses of each valuation period, resulting from the difference between the actual investment return and assumed investment return, shall be recognized annually in level amounts over seven years in calculating the Actuarial Value of Assets. b. The Actuarial Value of Assets so determine shall be subject to a 20% corridor relative to the Market Value of Assets. 3. Amortization Method a. The Actuarial Value of Assets are subtracted from the computed AAL. Any unfunded amount is amortized as a level percent of payroll over a closed period. If the Actuarial Value of Assets exceeds Arizona Public Safety Personnel Retirement System Actuarial Valuation Report as of June 30, 2019 – Oro Valley Police Dept. (122) 35 the AAL, the excess is amortized over an open period of 20 years and applied as a credit to reduce the Normal Cost otherwise payable. 4. Funding Target a. The targeted funded ratio shall be 100%. b. The maximum amortization period shall be 30 years. c. If the funding ratio is between 100% and 120%, a minimum contribution equal to the Normal Cost will be made. 5. Risk Management a. Assumption Changes i. The actuarial assumptions used shall be those last adopted by the PSPRS Board based on the most recent experience study and upon the advice and recommendation of the actuary. In accordance with best practices, the actuary shall conduct an experience study every five years. The results of the study shall be the basis for the actuarial assumption changes recommended to the PSPRS Board. ii. The actuarial assumptions can be updated during the five-year period if significant plan design changes or other significant events occur, as advised by the actuary. b. Amortization Method i. The amortization method, Level Percent Closed, will ensure full payment of the UAAL over a finite, systematically decreasing period not to exceed 30 years. The amortization period will be reviewed once the period reaches 15 years. c. Risk Measures i. The following risk measures will be annually determined to provide quantifiable measurements of risk and their movement over time. 1. Classic measures currently determined  Funded ratio (assets / liability) 2. UAAL / Total Payroll  Measures the risk associated with contribution decreases relative impact on the ability to fund the UAAL. An increase in this measure indicates an increase in contribution risk. 3. Total Liability / Total Payroll  Measures the risk associated with the ability to respond to liability experience through adjustments in contributions. An increase in this measure indicates an increase in experience risk. Arizona Public Safety Personnel Retirement System Actuarial Valuation Report as of June 30, 2019 – Oro Valley Police Dept. (122) 36 X. GLOSSARY Actuarial Accrued Liability – Computed differently under different funding methods, the actuarial accrued liability generally represents the portion of the actuarial present value of benefits attributable to service credit earned (or accrued) as of the valuation date. Actuarial Present Value of Benefits – Amount which, together with future interest, is expected to be sufficient to pay all benefits to be paid in the future, regardless of when earned, as determined by the application of a particular set of actuarial assumptions; equivalent to the actuarial accrued liability plus the present value of future normal costs attributable to the members. Actuarial Assumptions – Assumptions as to the occurrence of future events affecting pension costs. These assumptions include rates of investment earnings, changes in salary, rates of mortality, withdrawal, disablement, and retirement as well as statistics related to marriage and family composition. Actuarial Cost Method – A method of determining the portion of the cost of a pension plan to be allocated to each year; sometimes referred to as the "actuarial funding method." Each cost method allocates a certain portion of the actuarial present value of benefits between the actuarial accrued liability and future normal costs. Actuarial Equivalence – Series of payments with equal actuarial present values on a given date when valued using the same set of actuarial assumptions. Actuarial Present Value - The amount of funds required as of a specified date to provide a payment or series of payments in the future. It is determined by discounting future payments at predetermined rates of interest, and by probabilities of payments between the specified date and the expected date of payment. Actuarial Value of Assets – The value of cash, investments, and other property belonging to the pension plan as used by the actuary for the purpose of the actuarial valuation. This may correspond to market value of assets, or some modification using an asset valuation method to reduce the volatility of asset values. Asset Gain (Loss) – That portion of the actuarial gain attributable to investment performance above (below) the expected rate of return in the actuarial assumptions. Amortization – Paying off an interest-discounted amount with periodic payments of interest and (generally) principal, as opposed to paying off with a lump sum payment. Amortization Payment – That portion of the pension plan contribution designated to pay interest and reduce the outstanding principal balance of unfunded actuarial accrued liability. If the amortization payment is less than the accrued interest on the unfunded actuarial accrued liability the outstanding principal balance will increase. Assumed Earnings Rate – The interest rate used in developing present values to reflect the time value of money. Decrements – Events which result in the termination of membership in the system such as retirement, disability, withdrawal, or death. Arizona Public Safety Personnel Retirement System Actuarial Valuation Report as of June 30, 2019 – Oro Valley Police Dept. (122) 37 Entry Age Normal (EAN) Funding Method – A standard actuarial funding method whereby each member’s normal costs (service costs) are generally level as a percentage of pay from entry age until retirement. The annual cost of benefits is comprised of the normal cost plus an amortization payment to reduce the UAL. Experience Gain (Loss) – The difference between actual unfunded actuarial accrued liabilities and anticipated unfunded actuarial accrued liabilities during the period between two valuation dates. It is a measurement of the difference between actual and expected experience, and may be related to investment earnings above (or below) those expected or changes in the liability due to fewer (or greater) than expected numbers of retirements, deaths, disabilities, or withdrawals, or variances in pay increases relative to assumed pay increases. The effect of such gains (or losses) is to decrease (or increase) future costs. Funded Ratio – A measure of the ratio of the actuarial value of assets to liabilities of the system. Typically, the assets used in the measure are the actuarial value of assets as determined by the asset valuation method. The funded ratio depends not only on the financial strength of the plan but also on the asset valuation method used to determine the assets and on the funding method used to determine the liabilities. Market Value of Assets (MVA) – The value of assets as they would trade on an open market. Normal Cost – Computed differently under different funding methods, generally that portion of the actuarial present value of benefits allocated to the current plan year. Unfunded Actuarial Accrued Liability (UAAL) – The excess of the actuarial accrued liability over the valuation assets; sometimes referred to as "unfunded past service liability". UAL increases each time an actuarial loss occurs and when new benefits are added without being fully funded initially and decreases when actuarial gains occur. ARIZONA CORRECTIONS OFFICER RETIREMENT PLAN TOWN OF ORO VALLEY - DISPATCHERS (556) ACTUARIAL VALUATION AS OF JUNE 30, 2019 CONTRIBUTIONS APPLICABLE TO THE PLAN/FISCAL YEAR ENDING JUNE 30, 2021 VIA E-MAIL 13420 Parker Commons Boulevard, Suite 104 Fort Myers, FL 33912 · (239) 433-5500 · Fax (239) 481-0634 · www.foster-foster.com December 5, 2019 Board of Trustees Arizona Corrections Officer Retirement Plan Phoenix, AZ Re: Actuarial Valuation Report as of June 30, 2019 for Town Of Oro Valley - Dispatchers (556) Dear Members of the Board: We are pleased to present to the Board this report of the annual actuarial valuation of the Arizona Corrections Officer Retirement Plan (CORP). The valuation was performed to determine whether the assets and contributions are sufficient to provide the prescribed benefits and to develop the appropriate funding requirements for the applicable plan year. This report was prepared at the request of the Board and is intended for use by CORP and those designated or approved by the Board. It documents the valuation of the consolidated plan and provides summary information for CORP participating employers. This report may be provided to parties other than CORP only in its entirety and only with the permission of the Board. Foster & Foster is not responsible for the unauthorized use of this report. The valuation has been conducted in accordance with generally accepted actuarial principles and practices, including the applicable Actuarial Standards of Practice as issued by the Actuarial Standards Board, and reflects laws and regulations issued to date pursuant to the provisions of Title 38, Chapter 5, Article 6 of the Arizona Revised Statutes, as well as applicable federal laws and regulations. In our opinion, the assumptions used in this valuation, as adopted by the Board of Trustees, represent reasonable expectations of anticipated plan experience. Future actuarial measurements may differ significantly from the current measurements presented in this report for a variety of reasons including changes in applicable laws, changes in plan provisions, changes in assumptions, or plan experience differing from expectations. Due to the limited scope of the valuation, we did not perform an analysis of the potential range of such future measurements. The computed contribution rates shown in the “Contribution Results” section should be considered minimum contribution rates that comply with the Board’s funding policy and Arizona Statutes. Users of this report should be aware that contributions made at that rate do not guarantee benefit security. Given the importance of benefit security to any retirement system, we suggest that contributions to the Plan in excess of those presented in this report be considered. In conducting the valuation, we have relied on personnel, plan design, and asset information supplied by CORP through June 30, 2019 and the actuarial assumptions and methods described in the Actuarial Assumptions section of this report. While we cannot verify the accuracy of all this information, the supplied information was reviewed for consistency and reasonableness. As a result of this review, we have no reason to doubt the substantial accuracy of the information and believe that it has produced appropriate results. This information, along with any adjustments or modifications, is summarized in various sections of this report. Board of Trustees Arizona Corrections Officer Retirement Plan | Page 2 13420 Parker Commons Boulevard, Suite 104 Fort Myers, FL 33912 · (239) 433-5500 · Fax (239) 481-0634 · www.foster-foster.com This valuation assumes the continuing ability of the participating employers to make the contributions necessary to fund this plan. A determination regarding whether or not the participating employers are actually able to do so is outside our scope of expertise. Consequently, we did not perform such an analysis. The undersigned are familiar with the immediate and long-term aspects of pension valuations and meet the Qualification Standards of the American Academy of Actuaries necessary to render the actuarial opinions contained herein. All sections of this report are considered an integral part of the actuarial opinions. To our knowledge, no associate of Foster & Foster, Inc. working on valuations of the program has any direct financial interest or indirect material interest in the Arizona Corrections Officer Retirement Plan, nor does anyone at Foster & Foster, Inc. act as a member of the Board of Trustees of the Arizona Corrections Officer Retirement Plan. Thus, there is no relationship existing that might affect our capacity to prepare and certify this actuarial report. If there are any questions, concerns, or comments about any of the items contained in this report, please contact us at 239-433-5500. Respectfully Submitted, Foster & Foster, Inc. By: ______________________________ Bradley R. Heinrichs, FSA, EA, MAAA By: ______________________________ Jason L. Franken, FSA, EA, MAAA By: ______________________________ Paul M. Baugher, FSA, EA, MAAA Arizona Corrections Officer Retirement Plan Actuarial Valuation Report as of June 30, 2019 – Town Of Oro Valley - Dispatchers (556) TABLE OF CONTENTS I. Summary of Report ..........................................................................................................................................1 II. Contribution Results ........................................................................................................................................4 III. Liability Support ............................................................................................................................................8 IV. Asset Support ...............................................................................................................................................11 V. Member Statistics ..........................................................................................................................................14 VI. Actuarial Assumptions and Methods ...........................................................................................................16 VII. Discussion of Risk ......................................................................................................................................17 VIII. Summary of Current Plan..........................................................................................................................24 IX. Actuarial Funding Policy .............................................................................................................................29 X. Glossary ........................................................................................................................................................31 Arizona Corrections Officer Retirement Plan Actuarial Valuation Report as of June 30, 2019 – Town Of Oro Valley - Dispatchers (556) 1 I. S UMMARY OF REPORT The regular annual actuarial valuation of the Arizona Corrections Officer Retirement Plan for the Town Of Oro Valley - Dispatchers, performed as of June 30, 2019, has been completed and the results are presented in this Report. The purpose of this valuation is to:  Compute the liabilities associated with benefits likely to be paid on behalf of current retired and active members. This information is contained in the section entitled “Liability Support.”  Compare accumulated assets with the liabilities to assess the funded condition. This information is contained in the section entitled “Liability Support.”  Compute the employers’ recommended contribution rates for the Fiscal Year beginning July 1, 2020. This information is contained in the section entitled “Contribution Results.” 1. Key Valuation Results The funded status as of June 30, 2019 and the employer contribution amounts applicable to the plan/fiscal year ending June 30, 2021 are as follows: Tier 1 & Tier 2 Members Pension Health Total Employer Contribution Rate 75.53% 0.00% 75.53% Funded Status 44.0% 138.5% 45.4% 2. Comparison of Key Results to Prior Year The chart below compares the results from this valuation with the results of the prior year’s valuation, as prepared and reported by Gabriel, Roeder, Smith & Company: Contribution Rate Tier 1 & Tier 2 Members Valuation Date Pension Health Total June 30, 2018 59.94% 0.00% 59.94% June 30, 2019 75.53% 0.00% 75.53% Funded Status Tier 1 & Tier 2 Members Valuation Date Pension Health Total June 30, 2018 45.4% 137.1% 47.0% June 30, 2019 44.0% 138.5% 45.4% Arizona Corrections Officer Retirement Plan Actuarial Valuation Report as of June 30, 2019 – Town Of Oro Valley - Dispatchers (556) 2 3. Reasons for Change Changes in the results from the prior year’s valuation can be illustrated in the following tables along with high-level explanations for the entire Plan below: Contribution Rate Tier 1 & Tier 2 Pension Health Contribution Rate Last Valuation 59.94% 0.00% Asset Experience 0.35% 0.02% Payroll Base 9.39% (0.02%) Liability Experience (4.86%) 0.08% COLA (0.74%) N/A Assumption/Method Change 2.91% 0.03% Other 8.54% (0.11%) Contribution Rate This Valuation 75.53% 0.00% Funded Status Tier 1 & Tier 2 Pension Health Funded Status Last Valuation 45.4% 137.1% Asset Experience (0.3%) (1.0%) Liability Experience 0.3% 10.4% COLA 0.3% N/A Assumption/Method Change (0.9%) (1.4%) Other (0.8%) (6.6%) Funded Status This Valuation 44.0% 138.5% Assets Experience – Asset gains and losses (relative to the assumed earnings rate) are smoothed over seven years for Tiers 1 and 2. The return on the market value of assets for the year ending June 30, 2019 was 5.4%. On a smoothed, actuarial value of assets basis, however, the average return was 6.7%. This fell short of the 2018 assumed earnings rate of 7.4%. Liability Experience – Experience overall was favorable, driven by greater than expected active terminations and lower than expected salary increases. A decrease in normal costs had a significant impact on the contribution reconciliation for this bucket, as well. Payroll Base – Under the current amortization policy for Tiers 1 and 2, the contribution rate is developed as a level percentage of payroll. The payroll is expected to increase each year in line with the growth assumption (currently 3.50%). To the extent that actual payroll is lower/greater than expected, the contribution rate will increase/decrease as a result. COLA – The pension valuation reflects June 30, 2019 as the effective date for cost-of-living adjustments (previously June 30, 2020), resulting in a liability loss. Assumption / Method Change – The interest rate (assumed earnings rate) was decreased from 7.40% to 7.30% and the mortality tables were updated to the latest available information. These changes both resulted in liability losses. Arizona Corrections Officer Retirement Plan Actuarial Valuation Report as of June 30, 2019 – Town Of Oro Valley - Dispatchers (556) 3 Other – This is the combination of all other factors that could impact liabilities year-over-year, with the primary source being the transition of actuarial services, including a standardization of actuarial funding methods. 4. Looking Ahead The continuing effect of prior asset losses was dampened by the asset smoothing reflected in the actuarial value of assets and further offset by the effect of lower than expected pay increases. There remain unrecognized investment losses that will, in the absence of other gains, put upward pressure on the contribution rate next year. If the June 30, 2019 pension valuation results were based on the market value of assets instead of the actuarial value of assets, the pension funded percentage for Tiers 1 and 2 would be 42.5% (instead of 44.0%) and the pension employer contribution requirement would be 77.49% of payroll (instead of 75.53%). The funded status for Tiers 1 and 2 will continue to improve if assumptions are met and contributions at least equal to the rates determined for each employer are made to the fund. Arizona Corrections Officer Retirement Plan Actuarial Valuation Report as of June 30, 2019 – Town Of Oro Valley - Dispatchers (556) 4 II. CONTRIBUTION RESULTS Contribution Requirements Development of Employer Contributions - Tiers 1 & 2 Members Valuation Date June 30, 2019 June 30, 2018 Applicable to Fiscal Year Ending 2021 2020 Rate Dollar Rate Dollar Pension Normal Cost Total Normal Cost 10.99% $22,224 Employee Cost (7.96%) (16,099) Employer (Net) Normal Cost 3.03% 6,125 6.42% Amortization of Unfunded Liability 72.50% 146,628 53.52% Total Employer Cost (Pension) 75.53% 152,753 59.94% Health Normal Cost 0.34% $692 0.11% Amortization of Unfunded Liability (0.34%) (692) (0.11%) Total Employer Cost (Health) 0.00% 0 0.00% Total Employer Cost (Pension + Health) 75.53% 152,753 59.94% 138,398 Total Minimum Contribution Requirement (if applicable) 0.00% 0.00% Alternate Contribution Rate (ACR) * 72.50% 53.52% Underlying Payroll (as of valuation date) 202,246 * The Alternate Contribution Rate is the sum of the positive amortization rates for Tiers 1 & 2 Pension and Health and is charged when retirees return to active status. The results above are shown both prior to and after the application of the statutory minimum contribution requirement of 6% of payroll. Arizona Corrections Officer Retirement Plan Actuarial Valuation Report as of June 30, 2019 – Town Of Oro Valley - Dispatchers (556) 5 Development of Employer Contributions – Tier 3 Members Valuation Date June 30, 2019 June 30, 2018 Applicable to Fiscal Year Ending 2021 2020 Defined Contribution (DC) Retirement Plan Rate Dollar Rate Dollar Tier 3 DC Only Employee Cost 7.00% $ 0 7.00% Employee Disability Program Cost 0.65% 0 0.70% Total Employee Cost 7.65% 0 7.70% Employer Cost 5.00% 0 5.00% Employer Disability Program Cost 0.65% 0 0.70% Total Employer Cost (before Legacy) 5.65% 0 5.70% ER Legacy Cost of Tiers 1 & 2 Amort of Unfunded Liabilities * 72.50% 0 53.52% Total Employer Cost 78.15% 0 59.22% Underlying Payroll (as of valuation date) 0 * Pursuant to ARS § 38-891(A), the amortization of positive unfunded liabilities for Tiers 1 & 2 shall be applied to all Tier 3 payroll on a level percent basis. However, while it is statutorily required to present the rates in this manner, these are the minimums where alternate methods for paying down that unfunded liability is at the discretion of each employer. Further, to understand the effects of reform in relation to Tier 3, compare the total rate of Tier 3 before application of those legacy costs. Arizona Corrections Officer Retirement Plan Actuarial Valuation Report as of June 30, 2019 – Town Of Oro Valley - Dispatchers (556) 6 Contribution Rate Summary Tier 1 Tier 2 Tier 3 Membership Date On or After 7/1/1986 1/1/2012 7/1/2018 Available Retirement Plan DB Plan DB Plan DB Plan 1 DC Plan Employee Contribution Rate CORP DB Rate 7.96% 7.96% 0.00% CORP DC Rate 2 7.00% CODCRP Disability Program Rate 0.65% Total EE Contribution Rate 7.96% 7.96% 0.00% 7.65% Employer Contribution Rate CORP DB Normal Cost 3.03% 3.03% 0.00% CORP DB Tier 1 & 2 Legacy Cost 3 72.50% 72.50% 0.00% 72.50% CORP DC Rate 5.00% CODCRP Disability Program Rate 0.65% Total ER Contribution Rate 75.53% 75.53% 0.00% 78.15% 1 Applicable to AOC Probation and Surveillance only. 2 Although the default contribution rate is 7%, Tier 3 members in the DC plan may choose an employee contribution rate anywhere between 5% and 40%. 3 Per statute (ARS § 38-891(A), any positive unfunded liability for Tiers 1 and 2 is to be applied to all Tier 3 (DB and DC) payrolls. Exhibit summarizes employee and employer contributions based on Statute and the results of June 30, 2019 actuarial valuation. Pension and health components are combined, where applicable. Arizona Corrections Officer Retirement Plan Actuarial Valuation Report as of June 30, 2019 – Town Of Oro Valley - Dispatchers (556) 7 Impact of Additional Contributions Additional Contribution (000s) $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 Impact On Funded Status 06/30/2019 44.0% 44.3% 44.6% 44.9% 45.2% 45.5% 45.8% 46.1% 46.4% 46.8% 47.1% FYE 2021 Contribution Rate 75.53% 75.13% 74.73% 74.34% 73.94% 73.55% 73.15% 72.76% 72.36% 71.96% 71.57% Table shows the hypothetical change in the funded status and contribution rate from the June 30, 2019 actuarial valuation results for Tiers 1 & 2 if an additional contribution of the amount shown had been made to the Fund on June 30, 2019. This illustration can help estimate the impact of contributing additional monies to the fund in the future. Historical Summary of Employer Rates Pension Health Valuation Date June 30 Fiscal Year Ending June 30 Normal Cost Unfunded Amortization Total Normal Cost Unfunded Amortization Total TIERS 1 & 2 2018 2020 6.42% 53.52% 59.94% 0.11% (0.11%) 0.00% 2019 2021 3.03% 72.50% 75.53% 0.34% (0.34%) 0.00% Arizona Corrections Officer Retirement Plan Actuarial Valuation Report as of June 30, 2019 – Town Of Oro Valley - Dispatchers (556) 8 III. LIABILITY SUPPORT Liabilities and Funded Ratios by Benefit - Tiers 1 & 2 June 30, 2019 June 30, 2018 Pension Actuarial Present Value of Benefits Retirees and Beneficiaries $ 1,720,080 Vested Members 72,053 Active Members 1,588,169 Total Actuarial Present Value of Benefits 3,380,302 Actuarial Accrued Liability (AAL) All Inactive Members 1,792,133 1,756,856 Active Members 1,448,266 1,188,451 Total Actuarial Accrued Liability 3,240,399 2,945,307 Actuarial Value of Assets (AVA) 1,424,947 1,337,558 Unfunded Actuarial Accrued Liability Gross Unfunded Actuarial Accrued Liability 1,815,452 1,607,749 Stabilization Reserve 0 0 Net Unfunded Actuarial Accrued Liability 1,815,452 1,607,749 Funded Ratio (AVA / AAL) 44.0% 45.4% Health Present Value of Benefits Retirees and Beneficiaries $ 25,421 Active Members 28,573 Total Present Value of Benefits 53,994 Actuarial Accrued Liability (AAL) All Inactive Members 25,421 Active Members 25,739 Total Actuarial Accrued Liability 51,160 50,808 Actuarial Value of Assets (AVA) 70,878 69,668 Unfunded Actuarial Accrued Liability (19,718) (18,860) Funded Ratio (AVA / AAL) 138.5% 137.1% Arizona Corrections Officer Retirement Plan Actuarial Valuation Report as of June 30, 2019 – Town Of Oro Valley - Dispatchers (556) 9 Derivation of Experience (Gain)/Loss Tiers 1 & 2 Pension Health (1) Unfunded Actuarial Accrued Liability as of June 30, 2018 1,607,749 (18,860) (2) Normal Cost Developed in Last Valuation 14,823 254 (3) Actual Contributions 120,338 0 (4) Expected Interest On (1), (2), and (3) 115,697 (1,377) (5) Expected Unfunded Actuarial Accrued Liability as of June 30, 2019 (1)+(2)-(3)+(4) 1,617,931 (19,983) (6) Changes to UAAL Due to Assumptions, Methods and Benefits 61,495 494 (7) Change to UAAL Due to Actuarial (Gain)/Loss 136,026 (229) (8) Unfunded Actuarial Accrued Liability as of June 30, 2019 1,815,452 (19,718) Arizona Corrections Officer Retirement Plan Actuarial Valuation Report as of June 30, 2019 – Town Of Oro Valley - Dispatchers (556) 10 Amortization of Unfunded Liabilities - Tiers 1 & 2 Pension Health Unfunded Liability to Amortize Unfunded Actuarial Accrued Liability 1,815,452 (19,718) Anticipated Contribution Towards Unfunded 112,029 (230) Unfunded Liability to Amortize 1 1,831,934 (20,919) Amortization Period 17 20 Projected Payroll 202,246 202,246 Rate of Amortization of Unfunded Liability 72.50% (0.74%) 1 Adjusted with interest to beginning of next fiscal year. Arizona Corrections Officer Retirement Plan Actuarial Valuation Report as of June 30, 2019 – Town Of Oro Valley - Dispatchers (556) 11 IV. ASSET SUPPORT Statement of Changes in Fiduciary Net Position for Year Ended June 30, 2019 Market Value Basis Tiers 1 & 2 Pension Health Additions Contributions Member Contributions $ 48,549,598 $ 0 Employer Contributions 176,324,186 0 Health Insurance Contributions 0 683,424 Total Contributions 224,873,784 683,424 Investment Income Net Increase in Fair Value 77,752,816 5,273,949 Interest and Dividends 21,487,349 836,369 Other Income 15,837,287 691,738 Less Investment Expenses (11,940,605) (149,343) Net Investment Income 103,136,847 6,652,713 Transfers In 71,970 0 Total Additions 328,082,601 7,336,137 Deductions Distributions to Members Benefit Payments 155,887,468 0 Health Insurance Subsidy 0 4,302,679 Refund of Contributions 30,693,463 0 Total Distributions 186,580,931 4,302,679 Administrative Expenses 1,870,035 118,721 Transfers Out 781,245 0 Other 0 0 Total Deductions 189,232,211 4,421,400 Net Increase / (Decrease) 138,850,390 2,914,737 Net Position Held in Trust Prior Valuation 1,857,422,954 123,525,328 Beginning of the Year Adjustment 0 (1) End of the Year 1,996,273,344 126,440,064 Arizona Corrections Officer Retirement Plan Actuarial Valuation Report as of June 30, 2019 – Town Of Oro Valley - Dispatchers (556) 12 Development of Pension Actuarial Value of Assets - Tiers 1 & 2 A. Investment Income A1. Actual Investment Income $ 101,266,812 A2. Expected Amount for Immediate Recognition 141,741,614 A3. Amount Subject to Amortization (40,474,802) Year Ended June 30 B. Amortization Schedule 2019 2020 2021 2022 2023 2024 2025 2019 Experience (A3 / 7) (5,782,115) (5,782,115) (5,782,115) (5,782,115) (5,782,115) (5,782,115) (5,782,112) 2018 Experience (1,511,828) (1,511,828) (1,511,828) (1,511,828) (1,511,828) (1,511,825) 2017 Experience 8,429,734 8,429,734 8,429,734 8,429,734 8,429,733 2016 Experience (16,290,498) (16,290,498) (16,290,498) (16,290,497) 2015 Experience (9,194,258) (9,194,258) (9,194,260) 2014 Experience 8,714,006 8,714,004 2013 Experience 2,691,224 Total Amortization (12,943,735) (15,634,961) (24,348,967) (15,154,706) 1,135,790 (7,293,940) (5,782,112) C. Actuarial Value of Assets Total Employer C1. Actuarial Value of Assets, 06/30/2018 1,896,970,783 C2. Noninvestment Net Cash Flow 37,583,578 C3. Preliminary Actuarial Value of Assets, 06/30/2019 (A2 + B + C1 + C2) 2,063,352,240 C4. Market Value of Assets, 06/30/2019 1,996,273,344 1,378,623 C5. Final Actuarial Value of Assets, 06/30/2019 (C3 Within 20% Corridor of C4) 2,063,352,240 1,424,947 D. Rates of Return D1. Market Value Rate of Return 5.4% D2. Actuarial Value Rate of Return 6.7% Arizona Corrections Officer Retirement Plan Actuarial Valuation Report as of June 30, 2019 – Town Of Oro Valley - Dispatchers (556) 13 Development of Health Actuarial Value of Assets - Tiers 1 & 2 A. Investment Income A1. Actual Investment Income $ 6,533,992 A2. Expected Amount for Immediate Recognition 9,209,489 A3. Amount Subject to Amortization (2,675,497) Year Ended June 30 B. Amortization Schedule 2019 2020 2021 2022 2023 2024 2025 2019 Experience (A3 / 7) (382,214) (382,214) (382,214) (382,214) (382,214) (382,214) (382,213) 2018 Experience (81,544) (81,544) (81,544) (81,544) (81,544) (81,541) 2017 Experience 574,691 574,691 574,691 574,691 574,693 2016 Experience (1,140,445) (1,140,445) (1,140,445) (1,140,442) 2015 Experience (623,076) (623,076) (623,078) 2014 Experience 584,150 584,154 2013 Experience 173,947 Total Amortization (894,491) (1,068,434) (1,652,590) (1,029,509) 110,935 (463,755) (382,213) C. Actuarial Value of Assets Total Employer C1. Actuarial Value of Assets, 06/30/2018 126,229,888 C2. Noninvestment Net Cash Flow (3,619,255) C3. Preliminary Actuarial Value of Assets, 06/30/2019 (A2 + B + C1 + C2) 130,925,631 C4. Market Value of Assets, 06/30/2019 126,440,064 68,450 C5. Final Actuarial Value of Assets, 06/30/2019 (C3 Within 20% Corridor of C4) 130,925,631 70,878 D. Rates of Return D1. Market Value Rate of Return 5.4% D2. Actuarial Value Rate of Return 6.7% Arizona Corrections Officer Retirement Plan Actuarial Valuation Report as of June 30, 2019 – Town Of Oro Valley - Dispatchers (556) 14 V. MEMBER STATISTICS 06/30/2019 Valuation Data Summary Tiers 1 & 2 Actives Number 3 Average Current Age 53.3 Average Age at Employment 31.9 Average Past Service 21.4 Average Annual Salary $67,415 Actives (Transferred from Another Employer) Number 0 Average Current Age N/A Average Age at Employment N/A Average Past Service N/A Average Annual Salary N/A Retirees Number 3 Average Current Age 63.9 Average Annual Benefit $33,345 Beneficiaries Number 1 Average Current Age 65.0 Average Annual Benefit $34,908 Disability Retirees Number 1 Average Current Age 48.0 Average Annual Benefit $4,514 Inactive / Vested Number 4 Average Current Age 44.2 Average Accumulated Contributions $16,262 Total Number 12 Former Members (transferred to another employer) 0 Arizona Corrections Officer Retirement Plan Actuarial Valuation Report as of June 30, 2019 – Town Of Oro Valley - Dispatchers (556) 15 Counts and Pay Summary by Service - Tiers 1 & 2 Past Service Age 0-4 5-9 10-14 15-19 20-24 25-29 30+ Total Count Total Pay Average Pay 15 - 19 0 0 0 0 0 0 0 0 0 0 20 - 24 0 0 0 0 0 0 0 0 0 0 25 - 29 0 0 0 0 0 0 0 0 0 0 30 - 34 0 0 0 0 0 0 0 0 0 0 35 - 39 0 0 0 0 0 0 0 0 0 0 40 - 44 0 0 0 0 0 0 0 0 0 0 45 - 49 0 0 1 0 0 0 0 1 59,909 59,909 50 - 54 0 0 0 0 1 0 0 1 80,434 80,434 55 - 59 0 0 0 0 0 0 0 0 0 0 60 - 64 0 0 0 0 0 0 1 1 61,903 61,903 65+ 0 0 0 0 0 0 0 0 0 0 Total 0 0 1 0 1 0 1 3 202,246 67,415 Arizona Corrections Officer Retirement Plan Actuarial Valuation Report as of June 30, 2019 – Town Of Oro Valley - Dispatchers (556) 16 VI. ACTUARIAL ASSUMPTIONS AND METHODS Interest Rate 7.30% per year. This is the assumed earnings rate on System assets, compounded annually, net of investment and administrative expenses. Salary Increases See table below. This is annual increase for individual member’s salary. These rates, which are based on a 2017 experience study using actual plan experience, consist of 3.5% for wage inflation with the remaining portion for merit / seniority increases. Inflation 2.50%. Tier 3 Compensation Limit The 2019 limit is $70,000. Assumed 2.00% increases per year. Cost-of-Living Adjustment 1.75%. Reverse DROP Interest 2.00%. Mortality Rates These rates are used to project future decrements from the population due to death. Active Lives: PubS-2010 Employee mortality, loaded 125% for males and 115% for females, projected with future mortality improvements reflected generationally using 75% of scale MP-2018. 100% of active deaths are assumed to be in the line of duty. Inactive Lives PubS-2010 Healthy Retiree mortality, loaded 125% for males and 115% for females, projected with future mortality improvements reflected generationally using 75% of scale MP-2018. Age Rate 20 6.5% 25 6.1% 30 5.4% 35 4.7% 40 4.2% 45 4.0% 50 3.9% 55 3.7% 60+ 3.5% Arizona Corrections Officer Retirement Plan Actuarial Valuation Report as of June 30, 2019 – Town Of Oro Valley - Dispatchers (556) 17 Beneficiaries: PubS-2010 Survivor mortality, projected with future mortality im- provements reflected generationally using 75% of scale MP-2018. Disabled Lives: PubS-2010 Disabled mortality, projected with future mortality im- provements reflected generationally using 75% of scale MP-2018. The mortality assumptions sufficiently accommodate anticipated future mortality improvements. Retirement These rates are used to project future decrements from the active population due to retirement. The rates below are based on a 2017 experience study using actual plan experience. Tier 1 – reaching age 62 before attaining 20 (25 for dispatchers) years of service: Age-related rates based on age at retirement: 45% per year from age 60 - 74 and 100% assumed at age 75. Tier 1 – reaching age 62 after attaining 20 (25 for dispatchers) years of service: Service-related rates based on service at retirement: Service Rate 20 30% 21 28% 22 19% 23 17% 24 13% 25-26 26% 27-29 19% 30-31 27% 32-33 40% 34-35 50% 36 60% 37+ 100% Arizona Corrections Officer Retirement Plan Actuarial Valuation Report as of June 30, 2019 – Town Of Oro Valley - Dispatchers (556) 18 Tiers 2 & 3: Age-related rates based on age at retirement: Termination Rate These rates are used to project future decrements from the active population due to termination. Service-related rates based on service at termination are shown below. The rates below apply to members prior to retirement eligibility and are based on a 2017 experience study using actual plan experience. Disability Rate These rates are used to project future decrements from the active population due to disability. Sample age-related rates based on age at disability are provided below. These rates are based on a 2017 experience study using actual plan experience. 100% of disablements are assumed to be duty-related. Service Rate 0 23.00% 1 20.00% 2 16.50% 3 14.50% 4 13.00% 5 10.50% 6 9.50% 7 9.00% 8-10 8.50% 11 6.00% 12 5.00% 13 4.50% 14-16 3.00% 17+ 2.00% Age Rate 20 0.03% 25 0.03% 30 0.03% 35 0.04% 40 0.05% 45 0.06% 50 0.08% 55 0.08% Arizona Corrections Officer Retirement Plan Actuarial Valuation Report as of June 30, 2019 – Town Of Oro Valley - Dispatchers (556) 19 Marital Status For active members, 75% of males and 50% of females are assumed to be married. Actual marital status is used, where applicable, for inactive members. Spouse’s Age Males are assumed to be three years older than females. Health Care Utilization For active members, 60% of retirees are expected to utilize retiree health care. Actual utilization is used for inactive members. Funding Method Entry Age Normal Cost Method. Actuarial Asset Method Method described below. Note that during periods when investment performance exceeds (falls short) of the assumed rate, the actuarial value of assets will tend to be less (greater) than the market value of assets. Tiers 1 & 2: Each year the assumed investment income is recognized in full while the difference between actual and assumed investment income are smoothed over a 7-year period subject to a 20% corridor around the market value. Tier 3: Each year the assumed investment income is recognized in full while the difference between actual and assumed investment income are smoothed over a 5-year period subject to a 20% corridor around the market value. Funding Policy Amortization Method Tiers 1 & 2: Any positive UAAL (assets less than liabilities) is amortized according to a Level Percentage of Payroll method over a closed period of 17 years. Any negative UAAL (assets greater than liabilities) is amortized according to a Level Dollar method over an open period of 20 years. Tier 3: Any positive UAAL (assets less than liabilities) is amortized according to a Level Dollar method over a closed period of 10 years. No amortization is made of any negative UAAL (assets greater than liabilities). Payroll Growth 3.50% per year. This is annual increase for total employer payroll. Arizona Corrections Officer Retirement Plan Actuarial Valuation Report as of June 30, 2019 – Town Of Oro Valley - Dispatchers (556) 20 Stabilization Reserve Beginning with the June 30, 2007 valuation and with each subsequent valuation, if the actuarial value of assets exceeds the actuarial accrued liability, one half of this excess in each year is allocated to a Stabilization Reserve. This Reserve is excluded from the calculation of the employer contribution rates. The Reserve accumulates as long as the plan is overfunded. Once the plan becomes underfunded, the Stabilization Reserve will be used to dampen increases in the employer contribution rates. Changes to Actuarial Assumptions and Methods Since the Prior Valuation  The interest rate (assumed earnings rate) was lowered from 7.40% to 7.30%.  The mortality rates were updated to reflect the PubS-2010 tables; previously, rates were based on the RP- 2014 tables. Arizona Corrections Officer Retirement Plan Actuarial Valuation Report as of June 30, 2019 – Town Of Oro Valley - Dispatchers (556) 21 VII. DISCUSSION OF RISK ASOP No. 51, Assessment and Disclosure of Risk Associated with Measuring Pension Obligations and Determining Pension Plan Contributions, states that the actuary should identify risks that, in the actuary’s professional judgment, may reasonably be anticipated to significantly affect the plan’s future financial condition. Throughout this report, actuarial results are determined under various assumption scenarios. These results are based on the premise that all future plan experience will align with the plan’s actuarial assumptions; however, there is no guarantee that actual plan experience will align with the plan’s assumptions. Whenever possible, the recommended assumptions in this report reflect conservatism to allow for some margin of unfavorable future plan experience. However, it is still possible that actual plan experience will differ from anticipated experience in an unfavorable manner that will negatively impact the plan’s funded position. Below are examples of ways in which plan experience can deviate from assumptions and the potential impact of that deviation. Typically, this results in an actuarial gain or loss representing the current-year financial impact on the plan’s unfunded liability of the experience differing from assumptions; this gain or loss is amortized over a period of time determined by the plan’s amortization method. When assumptions are selected that adequately reflect plan experience, gains and losses typically offset one another in the long term, resulting in a relatively low impact on the plan’s contribution requirements associated with plan experience. When assumptions are too optimistic, losses can accumulate over time and the plan’s amortization payment could potentially grow to an unmanageable level.  Investment Return: When the rate of return on the Actuarial Value of Assets falls short of the assumption, this produces a loss representing assumed investment earnings that were not realized. Further, it is unlikely that the plan will experience a scenario that matches the assumed return in each year as capital markets can be volatile from year to year. Therefore, contribution amounts can vary in the future.  Salary Increases: When a plan participant experiences a salary increase that was greater than assumed, this produces a loss representing the cost of an increase in anticipated plan benefits for the participant as compared to the previous year. The total gain or loss associated with salary increases for the plan is the sum of salary gains and losses for all active participants.  Payroll Growth: The plan’s payroll growth assumption, if one is used, causes a predictable annual increase in the plan’s amortization payment in order to produce an amortization payment that remains constant as a percentage of payroll if all assumptions are realized. If payroll does not increase according to the plan’s payroll growth assumption, the plan’s amortization payment can increase significantly as a percentage of payroll even if all assumptions other than the payroll growth assumption are realized.  Demographic Assumptions: Actuarial results take into account various potential events that could happen to a plan participant, such as retirement, termination, disability, and death. Each of these potential events is assigned a liability based on the likelihood of the event and the financial consequence of the event for the plan. Accordingly, actuarial liabilities reflect a blend of financial consequences associated with various possible outcomes (such as retirement at one of various possible ages). Once the outcome is known (e.g. the participant retires) the liability is adjusted to reflect the known outcome. This adjustment Arizona Corrections Officer Retirement Plan Actuarial Valuation Report as of June 30, 2019 – Town Of Oro Valley - Dispatchers (556) 22 produces a gain or loss depending on whether the outcome was more or less favorable than other outcomes that could have occurred.  Contribution risk: This risk results from the potential that actual employer contributions may deviate from actuarially determined contributions, which are determined in accordance with the Board’s funding policy. The funding policy is intended to result in contribution requirements that if paid when due, will result in a reasonable expectation that assets will accumulate to be sufficient to pay plan benefits when due. Contribution deficits, particularly large deficits and those that occur repeatedly, increase future contribution requirements and put the plan at risk for not being able to pay plan benefits when due. Impact of Plan Maturity on Risk For newer pension plans, most of the participants and associated liabilities are related to active members who have not yet reached retirement age. As pension plans continue in operation and active members reach retirement ages, liabilities begin to shift from being primarily related to active members to being shared amongst active and retired members. Plan maturity is a measure of the extent to which this shift has occurred. It is important to understand that plan maturity can have an impact on risk tolerance and the overall risk characteristics of the plan. For example, plans with a large amount of retired liability do not have as long of a time horizon to recover from losses (such as losses on investments due to lower than expected investment returns) as plans where the majority of the liability is attributable to active members. For this reason, less tolerance for investment risk may be warranted for highly mature plans with a substantial inactive liability. Similarly, mature plans paying substantial retirement benefits resulting in a small positive or net negative cash flow can be more sensitive to near term investment volatility, particularly if the size of the fund is shrinking, which can result in less assets being available for investment in the market. To assist with determining the maturity of the plan, we have provided some relevant metrics in the table following titled “Plan Maturity Measures and Other Risk Metrics.” For a better understanding of the overall Plan and the impact of these risks, please refer to the consolidated CORP valuation report. Arizona Corrections Officer Retirement Plan Actuarial Valuation Report as of June 30, 2019 – Town Of Oro Valley - Dispatchers (556) 23 Plan Maturity Measures and Other Risk Metrics Tiers 1 & 2 06/30/2018 06/30/2019 Support Ratio Total Actives 4 3 Total Inactives 8 9 Actives / Inactives 50.0% 33.3% Asset Volatility Ratio Market Value of Assets (MVA) 1,378,623 Total Annual Payroll 202,246 MVA / Total Annual Payroll 681.7% Accrued Liability (AL) Ratio Inactive Accrued Liability 1,756,856 1,792,133 Total Accrued Liability 2,945,307 3,240,399 Inactive AL / Total AL 59.6% 55.3% Funded Ratio Actuarial Value of Assets (AVA) 1,337,558 1,424,947 Total Accrued Liability 2,945,307 3,240,399 AVA / Total Accrued Liability 45.4% 44.0% Net Cash Flow Ratio Net Cash Flow * (288) Market Value of Assets (MVA) 1,378,623 Net Cash Flow / MVA (0.0%) * Determined as total contributions minus benefit payments. Administrative expenses are typically included but are considered part of the net interest rate assumption for this plan. Arizona Corrections Officer Retirement Plan Actuarial Valuation Report as of June 30, 2019 – Town Of Oro Valley - Dispatchers (556) 24 VIII. SUMMARY OF CURRENT PLAN The following is a summary of the benefit provisions provided in Title 38, Chapter 5, Article 6 of the Arizona Revised Statutes. Membership Full-time employees of a participating employer in a designated position, whose customary employment is at least 40 hours each week. Includes employees hired after July 1, 2018 only if they are a judiciary probation or surveillance officer who makes the irrevocable election to participate in the plan. Benefit Tiers Benefits differ for members based on their hire date: Tier Hire Date 1 Hired before January 1, 2012 2 Hired on or after January 1, 2012 but before July 1, 2018 3 Hired on or after July 1, 2018 Salary Salary is the amount including base salary, shift and military differential pay, and holiday pay, paid to an employee on a regular payroll basis. For Tier 3 members, salary is limited by statutory cap ($70,000 with adjustments by the Board). Average Monthly Benefit Tier 1: Salary One-thirty-sixth of the highest total salary during a period of thirty-six consecutive months of service within the last one hundred twenty months of service. Tier 2 & 3: One-sixtieth of the highest total salary during a period of sixty consecutive months of service within the last one hundred twenty months of service. Credited Service Total periods of service, both from service other State plans and those compensated periods of service for which the member made contributions to the fund. Normal Retirement Date Tier 1: First day of the month following attainment of 1) age 62 with 10 years of Credited Service, 2) 20 (25, if dispatcher) years of Cred- ited Service, or 3) age and Credited Service points equal to 80. Arizona Corrections Officer Retirement Plan Actuarial Valuation Report as of June 30, 2019 – Town Of Oro Valley - Dispatchers (556) 25 Tier 2: First day of month following the attainment of 1) age 52.5 with 25 years of Credited Service, or 2) age 62 with 10 years of Credited Service. Tier 3: First day of month following the attainment of age 55 with 10 years of Credited Service. Benefit Tier 1: 2.50% times Credited Service (up to 20 years) times Average Monthly Salary. If Credited Service exceeds 20 years, an additional 2.00% accrual is provided for up to five years. If Credited Service exceeds 25 years, the additional accrual for service in excess of 20 years is increased to 2.50%. Maximum benefit equals 80% of Average Monthly Salary. Tier 2: 2.50% times Credited Service times Average Monthly Salary (maximum benefit equals 80% of Average Monthly Salary). Tier 3: Benefit multiplier (below) times Average Monthly Benefit Salary times Credited Service (maximum benefit of 80% of Average Monthly Benefit Salary): Credited Service Benefit Multiplier 10 years, but less than 15 1.25% 15 years, but less than 20 1.50% 20 years, but less than 22 1.75% 22 years, but less than 25 2.00% 25+ years 2.25% Form of Benefit For married retirees, an annuity payable for the life of the member with 80% continuing to the eligible spouse upon death. For unmarried retirees, the normal form is a single life annuity. Early Retirement Only applicable to Tier 3 members: Date Attainment of age 52.5 and 10 years of Credited Service. Benefit Actuarial equivalent of Normal Retirement benefit. Disability Benefit – Duty-Related Eligibility Total and permanent disability incurred in performance of duty. Arizona Corrections Officer Retirement Plan Actuarial Valuation Report as of June 30, 2019 – Town Of Oro Valley - Dispatchers (556) 26 Benefit Amount The greater of 1) 50% of Average Monthly Salary, and 2) the Normal Retirement pension that the member is entitled to receive. Disability Benefit – Ordinary Eligibility Total and permanent disability not incurred in performance of duty. Benefit Amount Dispatchers Normal Retirement pension that the member is entitled to receive prorated on Credited Service (maximum 25 years) over 25. All Others Normal Retirement pension that the member is entitled to receive prorated on Credited Service (maximum 20 years) over 20. Pre-Retirement Death Benefit Payable to Eligible Survivor Payable to eligible spouse for life; payable to eligible children until adopted, age 18, or age 23 if full-time student. Service Incurred 100% of Average Monthly Salary Non-Service Incurred 40% of Average Monthly Salary. No survivors Two times member’s accumulated contributions. Vesting (Termination) Deferred Annuity Tier 1: For those with 10 or more years of Credited Service, an annuity based on two times member’s accumulated contributions, deferred to age 62. Member is not entitled to survivor benefits, benefit increases, or group health insurance subsidy. Return of Contributions Tier 1: Lump sum payment of accumulated contributions, plus additional amount based on years of credited service. Service Additional % of Contributions Less than 5 years 0% 5 years 25% 6 years 40% 7 years 55% 8 years 70% 9 years 85% 10+ years 100% Arizona Corrections Officer Retirement Plan Actuarial Valuation Report as of June 30, 2019 – Town Of Oro Valley - Dispatchers (556) 27 Tiers 2 & 3: Lump sum payment of accumulated contributions, with interest at rate determined by the Board. Cost-of-Living Adjustment Payable to retired member or survivor of retired member Tiers 1 & 2 Compound cost-of-living adjustment on base benefit. First payment is made on July 1, 2018, with annual adjustments effective every July 1 thereafter. Cost-of-living adjustment will be based on the average annual percentage change in the Metropolitan Phoenix-Mesa Consumer Price Index published by the United states Department of Labor, Bureau of Statistics. Maximum increase of 2%. Tier 3 Compound cost-of-living adjustment on base benefit beginning earlier of fist calendar year after the 7th anniversary of retirement or when the retired member reaches 60 years of age. A cost-of-living adjustment shall be paid on July 1 each year that the funded ratio for members hired on or after July 1, 2018 is 70% or more. The cost-of-living adjustment will be based on the average annual percentage change in the Metropolitan Phoenix-Mesa Consumer Price Index published by the United States Department of Labor, Bureau of Statistics. The cost-of-living adjustment will not exceed:  2%, if funded ratio for members who are hired on or after July 1, 2018 is 90% or more;  1.5%, if funded ratio for members who are hired on or after July 1, 2018 is 80-90%;  1%, if funded ratio for members who are hired on or after July 1, 2018 is 70-80%. Reverse Deferred Retirement Option Plan (Reverse DROP): Eligibility Tier 1 and eligible for normal pension with at least 24 years of Credited Service (25 years for dispatchers). Must not have been awarded disability pension. Reverse DROP Date First day of month immediately following completion of required Credited Service or date not more than 60 consecutive months before the date the member elects to participate in the Reverse DROP, whichever is later. Arizona Corrections Officer Retirement Plan Actuarial Valuation Report as of June 30, 2019 – Town Of Oro Valley - Dispatchers (556) 28 Benefit Amount Calculated based on Credited Service and Average Monthly Salary as of the Reverse DROP Date. Reverse DROP Lump Sum Accumulated benefit amounts (with interest) from Reverse DROP date to the date the member elected to participate in Reverse DROP. Interest is equal to the yield on five-year Treasury note as of the first day of the month, as published by the Federal Reserve Board. Post-Retirement Health Insurance Subsidy Eligibility Retired member or survivor who elect health coverage provided by the state or participating employer. Maximum Subsidy Amounts Member Only With Dependents (monthly) Medicare Eligible $100 $170 One w/ Medicare N/A $215 Not Medicare Eligible $150 $260 Employee Contributions Tiers 1 and 2: Non-dispatchers: 8.41% of salary, or 50/50 split of total employer and employee costs, whichever is lower, until the plan is 100% funded. Minimum contribution of 7.65% of salary. Dispatchers: 0.45% less than non-dispatcher rate until plan is 100% funded; equal thereafter. Tier 3: 66.7% of the Normal Cost plus 50% of a level-dollar amortiza- tion of unfunded actuarial accrued liability over a closed pe- riod not to exceed 10 years. Employer Contributions Tiers 1 & 2: Normal Cost, plus amortization of unfunded actuarial accrued liability over a closed period not to exceed 20 years. Contribu- tion will never be less than 6% of payroll. Tier 3: 33.3% of the Normal Cost plus 50% of a level-dollar amortiza- tion of unfunded actuarial accrued liability over a closed pe- riod not to exceed 10 years. Changes to Benefit Provisions Since the Prior Valuation  None. Arizona Corrections Officer Retirement Plan Actuarial Valuation Report as of June 30, 2019 – Town Of Oro Valley - Dispatchers (556) 29 IX. ACTUARIAL FUNDING POLICY The purpose of this Actuarial Funding Policy is to record the funding objectives and policy set by the Board for the Arizona Corrections Officer Retirement Plan. The Board establishes this Funding Policy to help ensure the systematic funding of future benefit payments for members of the Retirement System. This funding policy was reviewed by the Board annually for several years following initial adoption until the 2017 experience study. Subsequently, it shall be reviewed every five years in conjunction with the experience study, although some adjustments may be warranted sooner to properly reflect the new Tier 3 benefits. Funding Objectives 1. Maintain adequate assets so that current plan assets plus future contributions and investment earnings are sufficient to fund all benefits expected to be paid to members and their beneficiaries. 2. Maintain stability of employer contribution rates, consistent with other funding objectives. 3. Maintain public policy goals of accountability and transparency. Each policy element is clear in intent and effect, and each should allow an assessment of whether, how and when the funding requirements of the plan will be met. 4. Promote intergenerational equity. Each generation of members and employers should incur the cost of benefits for the employees who provides services to them, rather than deferring those costs to future members and employers. 5. Provide a reasonable margin for adverse experience to help offset risks. 6. Continue progress of systematic reduction of the Unfunded Actuarial Accrued Liability (UAAL). Elements of Actuarial Funding Policy 1. Actuarial Cost Method a. The Entry Age Normal level percent of pay actuarial cost method of valuation shall be used in determining the Actuarial Accrued Liability (AAL) and Normal Cost. Differences in the past between assumed experience and actual experience (“actuarial gains and losses”) shall become part of the AAL. The Normal Cost shall be determined on an individual basis for each active member. 2. Asset Smoothing Method a. The investment gains or losses of each valuation period, resulting from the difference between the actual investment return and assumed investment return, shall be recognized annually in level amounts over seven years in calculating the Actuarial Value of Assets. b. The Actuarial Value of Assets so determine shall be subject to a 20% corridor relative to the Market Value of Assets. 3. Amortization Method a. The Actuarial Value of Assets are subtracted from the computed AAL. Any unfunded amount is amortized as a level percent of payroll over a closed period. If the Actuarial Value of Assets exceeds Arizona Corrections Officer Retirement Plan Actuarial Valuation Report as of June 30, 2019 – Town Of Oro Valley - Dispatchers (556) 30 the AAL, the excess is amortized over an open period of 20 years and applied as a credit to reduce the Normal Cost otherwise payable. 4. Funding Target a. The targeted funded ratio shall be 100%. b. The maximum amortization period shall be 30 years. c. If the funding ratio is between 100% and 120%, a minimum contribution equal to the Normal Cost will be made. 5. Risk Management a. Assumption Changes i. The actuarial assumptions used shall be those last adopted by the PSPRS Board based on the most recent experience study and upon the advice and recommendation of the actuary. In accordance with best practices, the actuary shall conduct an experience study every five years. The results of the study shall be the basis for the actuarial assumption changes recommended to the PSPRS Board. ii. The actuarial assumptions can be updated during the five-year period if significant plan design changes or other significant events occur, as advised by the actuary. b. Amortization Method i. The amortization method, Level Percent Closed, will ensure full payment of the UAAL over a finite, systematically decreasing period not to exceed 30 years. The amortization period will be reviewed once the period reaches 15 years. c. Risk Measures i. The following risk measures will be annually determined to provide quantifiable measurements of risk and their movement over time. 1. Classic measures currently determined  Funded ratio (assets / liability) 2. UAAL / Total Payroll  Measures the risk associated with contribution decreases relative impact on the ability to fund the UAAL. An increase in this measure indicates an increase in contribution risk. 3. Total Liability / Total Payroll  Measures the risk associated with the ability to respond to liability experience through adjustments in contributions. An increase in this measure indicates an increase in experience risk. Arizona Corrections Officer Retirement Plan Actuarial Valuation Report as of June 30, 2019 – Town Of Oro Valley - Dispatchers (556) 31 X. GLOSSARY Actuarial Accrued Liability – Computed differently under different funding methods, the actuarial accrued liability generally represents the portion of the actuarial present value of benefits attributable to service credit earned (or accrued) as of the valuation date. Actuarial Present Value of Benefits – Amount which, together with future interest, is expected to be sufficient to pay all benefits to be paid in the future, regardless of when earned, as determined by the application of a particular set of actuarial assumptions; equivalent to the actuarial accrued liability plus the present value of future normal costs attributable to the members. Actuarial Assumptions – Assumptions as to the occurrence of future events affecting pension costs. These assumptions include rates of investment earnings, changes in salary, rates of mortality, withdrawal, disablement, and retirement as well as statistics related to marriage and family composition. Actuarial Cost Method – A method of determining the portion of the cost of a pension plan to be allocated to each year; sometimes referred to as the "actuarial funding method." Each cost method allocates a certain portion of the actuarial present value of benefits between the actuarial accrued liability and future normal costs. Actuarial Equivalence – Series of payments with equal actuarial present values on a given date when valued using the same set of actuarial assumptions. Actuarial Present Value - The amount of funds required as of a specified date to provide a payment or series of payments in the future. It is determined by discounting future payments at predetermined rates of interest, and by probabilities of payments between the specified date and the expected date of payment. Actuarial Value of Assets – The value of cash, investments, and other property belonging to the pension plan as used by the actuary for the purpose of the actuarial valuation. This may correspond to market value of assets, or some modification using an asset valuation method to reduce the volatility of asset values. Asset Gain (Loss) – That portion of the actuarial gain attributable to investment performance above (below) the expected rate of return in the actuarial assumptions. Amortization – Paying off an interest-discounted amount with periodic payments of interest and (generally) principal, as opposed to paying off with a lump sum payment. Amortization Payment – That portion of the pension plan contribution designated to pay interest and reduce the outstanding principal balance of unfunded actuarial accrued liability. If the amortization payment is less than the accrued interest on the unfunded actuarial accrued liability the outstanding principal balance will increase. Assumed Earnings Rate – The interest rate used in developing present values to reflect the time value of money. Decrements – Events which result in the termination of membership in the system such as retirement, disability, withdrawal, or death. Arizona Corrections Officer Retirement Plan Actuarial Valuation Report as of June 30, 2019 – Town Of Oro Valley - Dispatchers (556) 32 Entry Age Normal (EAN) Funding Method – A standard actuarial funding method whereby each member’s normal costs (service costs) are generally level as a percentage of pay from entry age until retirement. The annual cost of benefits is comprised of the normal cost plus an amortization payment to reduce the UAL. Experience Gain (Loss) – The difference between actual unfunded actuarial accrued liabilities and anticipated unfunded actuarial accrued liabilities during the period between two valuation dates. It is a measurement of the difference between actual and expected experience, and may be related to investment earnings above (or below) those expected or changes in the liability due to fewer (or greater) than expected numbers of retirements, deaths, disabilities, or withdrawals, or variances in pay increases relative to assumed pay increases. The effect of such gains (or losses) is to decrease (or increase) future costs. Funded Ratio – A measure of the ratio of the actuarial value of assets to liabilities of the system. Typically, the assets used in the measure are the actuarial value of assets as determined by the asset valuation method. The funded ratio depends not only on the financial strength of the plan but also on the asset valuation method used to determine the assets and on the funding method used to determine the liabilities. Market Value of Assets (MVA) – The value of assets as they would trade on an open market. Normal Cost – Computed differently under different funding methods, generally that portion of the actuarial present value of benefits allocated to the current plan year. Unfunded Actuarial Accrued Liability (UAAL) – The excess of the actuarial accrued liability over the valuation assets; sometimes referred to as "unfunded past service liability". UAL increases each time an actuarial loss occurs and when new benefits are added without being fully funded initially and decreases when actuarial gains occur.    Town Council Regular Session 4. Meeting Date:06/17/2020   Requested by: David Gephart Submitted By:David Gephart, Finance Department:Finance SUBJECT: RESOLUTION NO. (R)20-30, AUTHORIZING AND APPROVING AN AMENDMENT TO THE TOWN FINANCIAL AND BUDGETARY POLICIES TO COMPLY WITH GOVERNMENTAL ACCOUNTING STANDARDS BOARD STATEMENT NO.54, COMMITTING THE ENDING FUND BALANCE FOR CERTAIN SPECIAL REVENUE FUNDS FOR SPECIFIC PURPOSES, AND AUTHORIZING THE TOWN MANAGER OR A DESIGNEE TO ASSIGN FUND BALANCE TO A SPECIFIC PURPOSE RECOMMENDATION: STAFF RECOMMENDS APPROVAL OF RESOLUTION NO.(R)20-30 IN ORDER TO COMPLY WITH GOVERNMENTAL ACCOUNTING STANDARDS BOARD (GASB) STATEMENT NO.54. EXECUTIVE SUMMARY: The Governmental Accounting Standards Board (GASB) is the rule-making body for governmental accounting.  One of its statements, Statement No.54, deals with classification of fund balance with the objective to provide clearer and more consistent fund balance application and disclosure.  Fund balance refers to the difference between assets and deferred outflows, and liabilities and deferred inflows, in the governmental funds balance sheet.  This information is one of the most widely used elements of local government financial statements.  Staff has been reviewing the existing fund structure and identified changes that simplify and provide greater flexibility to utilization of fund balance.  These changes have no impact on enterprise funds. BACKGROUND OR DETAILED INFORMATION: Governmental Accounting Standards Board (GASB) Statement No.54 created five classifications of fund balance.  Each classification depicts the relative strength of the spending constraint for which resources can be used.  From most to least constrained, the classifications are as follows: Nonspendable Fund Balance - the portion of fund balance that includes amounts which cannot be spent because they are either (a) not in spendable form; or (b) legally or contractually required to be maintained intact, such as the principal portion of an endowment. Restricted Fund Balance  - the portion of fund balance reflecting constraints placed on the use of resources (other than nonspendable items) which are either (a) externally imposed by creditors, grantors, contributors, or laws or regulations of other governments; or (b) imposed by law through constitutional provisions or enabling legislation. Committed Fund Balance - the portion of fund balance which includes amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the government's highest level of decision-making authority and remain binding unless removed in the same manner. Assigned Fund Balance - the portion of fund balance which includes amounts that are constrained by the government's intent to be used for specific purposes, but are neither restricted nor committed.  Such intent must be established at either the highest level of decision-making or by an official designated for that purpose. Unassigned Fund Balance - the portion of fund balance which includes amounts that do not fall into one of the above four categories.  The General Fund is the only fund that should report this category of fund balance. GASB Statement No.54 also requires local governments to implement or update their financial and budgetary policies to reflect the fund balance classifications and comply with the requirements of the Statement.  The Town's amended Financial and Budgetary Policies are attached as Exhibit A. From when the Town first implemented GASB Statement No.54, the Town has had some changes as to its fund structure, specifically with migrating the Bed Tax fund into the General fund.  After discussions with Town auditors during this past financial audit, it was determined that the Town policy in force was unnecessarily constraining utilization of the Bed Tax monies.  The change proposed is meant to alleviate this constraint, as well as re-affirm classifications of existing fund balances. FISCAL IMPACT: None SUGGESTED MOTION: I MOVE to approve Resolution No. (R)20-30, amending the Town Financial and Budgetary Policies to comply with Governmental Accounting Standards Board Statement No. 54, committing the ending fund balance for certain Special Revenue Funds for specific purposes, and authorizing the Town Manager or a designee to assign fund balance to a specific purpose.    Attachments (R)20-30 FBP Resolution  Financial Policies  RESOLUTION NO. (R)20-30 A RESOLUTION OF THE MAYOR AND COUNCIL OF THE TOWN OF ORO VALLEY, ARIZONA, AMENDING THE TOWN FINANCIAL AND BUDGETARY POLICES TO COMPLY WITH GOVERNMENTAL ACCOUNTING STANDARDS, COMMITTING THE ENDING FUND BALANCE FOR CERTAIN SPECIAL R EVENUE FUNDS FOR SPECIFIC PURPOSES AND AUTHORIZING THE TOWN MANAGER OR A DESIGNEE TO ASSIGN FUND BALANCE TO A SPECIFIC PURPOSE; AND DIRECTING THE TOWN MANAGER, TOWN CLERK, TOWN LEGAL SERVICES DIRECTOR, THE CHIEF FINANCIAL OFFICER, OR THEIR DULY AUTHORIZED OFFICERS AND AGENTS TO TAKE ALL STEPS NECESSARY TO CARRY OUT THE PURPOSES AND INTENT OF THIS RESOLUTION WHEREAS, on June 17, 2015, the Town Council approved Resolution No. (R) 15 -50, adopting the “Town of Oro Valley Financial and Budgetary Policies” as a mended; and WHEREAS, the Governmental Accounting Standards Board (GASB), issued Statement No. 54, which deals with classification of fund balance with the objective to provide clearer and more consistent fund balance application and disclosure; and WHEREAS, the Council has determined that it is appropriate and necessary to amend the “Town of Oro Valley Financial and Budgetary Policies” to comply with governmental accounting standards, attached hereto as Exhibit “A”, and incorporated by reference. NOW, THEREFORE, BE IT RESOLVED by the Mayor and Council of the Town of Oro Valley, Arizona that: SECTION 1. The amendment to the Town of Oro Valley Financial and Budgetary Policies is hereby adopted and approved. SECTION 2. The Town Manager and any other ad ministrative officials, or their designees of the Town of Oro Valley are hereby authorized to take such steps as are necessary to implement the Town of Oro Valley Financial and Budgetary Policies as amended and to assign fund balances to specific purposes. SECTION 3. All Oro Valley Ordinances, Resolutions, or Motions and parts of Ordinances, Resolutions or Motions of the Council in conflict with the provisions of this Resolution are hereby repealed. SECTION 4. The Town Manager, Town Clerk, Town Legal Services Director, Chief Financial Officer or their duly authorized officers and agents are hereby authorized and directed to take all steps necessary to carry out the purposes and intent of this resolution. PASSED AND ADOPTED by the Mayor and Council of the Town of Oro Valley, Arizona, this 17th day of June, 2020. TOWN OF ORO VALLEY Joseph C. Winfield, Mayor ATTEST: APPROVED AS TO FORM: Michael Standish, Town Clerk Tobin Sidles, Legal Services Director Date: Date: EXHIBIT “A”