HomeMy WebLinkAboutPopular Annual Financial Report (PAFR) - 6/30/2018INSIDE
Overview 1
Oro Valley Fast Facts 2
Message from
the Town Manager 2
Accomplishments &
Accolades 3
GFOA Award 3
Net Position 4
Activities 5
Revenues 6
Expenses 7
Debt & Financial Ratings 9
Town Assets 10
Employment &
Economic Statistics 11
Town of Town of ORO VALLEY, ARIZONA
Fiscal Year ending June 30, 2018
POPULAR ANNUAL FINANCIAL REPORT
Left to right:
Rhonda Piña, Councilmember
Bill Rodman, Councilmember
Joe Hornat, Councilmember
Dr. Satish I. Hiremath, Mayor
Mary Snider, Councilmember
Lou Waters, Vice Mayor
Steve Solomon, Councilmember
OVERVIEW
The Town of Oro Valley is proud to present its seventh annual Popular Annual Financial Report (PAFR). The
purpose of the PAFR is to provide a user-friendly summary of the financial position of the Town of Oro Valley
and other interesting information for citizens who want a better understanding of the Town’s finances. The
financial information in the PAFR is taken from the Town’s Comprehensive Annual Financial Report (CAFR). The
CAFR outlines the Town’s financial position and operating activities each fiscal year presented in conformity with
generally accepted accounting principles (GAAP) and includes financial statements audited by Heinfeld Meech &
Co., P.C., certified public accountants. The Town received an unmodified (or clean) audit opinion, which is the best
audit opinion that the financial statements could receive.
While the numbers in the PAFR come from an audited source, they are presented in a summarized, unaudited,
non-GAAP format that is more accessible to the public. Additionally, some of the information in the PAFR is
from the Town’s Annual Budget. Citizens who wish to review the audited, GAAP-based, full disclosure financial
statements can refer to the Town’s Comprehensive Annual Financial Report (CAFR) available on the Town’s
website at www.orovalleyaz.gov, or contact the Finance Department by phone at 520-229-4700 or in person at
11000 N. La Cañada Drive, Oro Valley, AZ 85737.
ORO VALLEY COUNCIL
1
Connect with us! Visit www.orovalleyaz.gov.
INCORPORATED 1974
SERVICES Police, Parks and Recreation, Water
Utility, Stormwater Utility, Public
Transit, Community Development
and Public Works
FORM OF GOVERNMENT Council/Manager
GOVERNING BODY Mayor elected at large to four-
year term; 6 councilmembers
elected at large to four-year
terms
POPULATION
(2016 census estimate)
45,184
# OF HOUSEHOLDS
(2016 census data)
18,691
BACHELOR’S DEGREE
OR HIGHER (AGE 25+)
50.7%
MEDIAN INCOME
(2016 census data)
$75,966
# OF PARKS 7
PARK ACRES MAINTAINED
772
TRAILS AND PATHS 76 miles
PARKS PROGRAMS
HELD ANNUALLY
33
2018 BUDGET $128.6 million
ORO VALLEY FAST FACTS
MESSAGE from the TOWN MANAGER
We are honored to present the
Town of Oro Valley Popular
Annual Financial Report (PAFR)
for fiscal year 2017/18. This is
the seventh consecutive year
that we have produced this
summarized overview of various
financial aspects of the Town,
including sources of revenues and
expenditures, financial trends,
assets and liabilities and debt
obligations. We are humbled to
have earned recognition from the Government Finance Officers
Association (GFOA) for the past six years with their Popular
Annual Financial Reporting Award. The Town is only one of only
fourteen (14) government agencies in Arizona to prepare a PAFR,
representing the Town’s ongoing commitment to transparency,
accountability and communicating the financial position of the
Town in this easy-to-understand format.
The Town’s audited financial statements once again received an
unmodified or “clean” audit opinion by our outside, independent
auditors, which is the highest form of audit opinion given.
In addition, the Town demonstrated continued strong financial
performance during fiscal year 2017/18. We are pleased to report
that in the General Fund, our main operating fund, revenues
exceeded expenditures by nearly $2.6 million. These surplus
funds will be allocated toward future capital project funding and
reducing the Town’s Public Safety Personnel Retirement System
(PSPRS) unfunded liability.
The Town’s disciplined approach to budgeting, adherence to
strong financial management principles and policies and a track
record of prudent financial decision-making helps to ensure
both near and long-term fiscal health and sustainability. This is
evidenced by the Town’s strong credit ratings, including our ‘AA’
rating from Standard and Poor’s and ‘AA-‘ rating from Fitch Ratings.
In the coming year, we look forward to making investments in
our facilities that provide maximum benefit to our community
and managing your taxpayer dollars in the most efficient and
effective manner to ensure long-term financial sustainability in our
operations.
We hope that our 2018 Popular Annual Financial Report fulfills
its purpose as an understandable, informative publication, and
thank you for your interest in the Town of Oro Valley government
functions and finances.
Respectfully,
Mary Jacobs, Town Manager
HISTORY
After World War II, the Tucson area experienced dramatic
population growth. In the early 1950s, the Oro Valley
Country Club opened at the base of Pusch Ridge, and
land owners began building residential homes. As the
community continued to grow, area residents increasingly
desired local control of the land in the area. In the late
1960s, a petition to incorporate began to circulate in Oro
Valley, and Oro Valley was successfully incorporated in
1974. What began as a Town with only 2.4 square miles
and 1,200 residents has grown into a vibrant community
and tourist destination featuring world-class amenities
and outdoor attractions, excellent
schools, and a diverse
business environment.
2
Mary Jacobs
Town Manager
The Government Finance Officers Association of the United States and
Canada (GFOA) has given an Award for Outstanding Achievement in
Popular Annual Financial Reporting to the Town of Oro Valley for its
Popular Annual Financial Report for the fiscal year ended June 30, 2017.
The Award for Outstanding Achievement in Popular Annual Financial
Reporting is a prestigious national award recognizing conformance with
the highest standards for preparation of state and local government
popular reports.
In order to receive this award, a government unit must publish a
Popular Annual Financial Report, the contents of which conform to
program standards of creativity, presentation, understandability and
reader appeal.
The award is valid for a period of one year only. We believe our current
report continues to conform to program requirements, and we are
submitting it to GFOA to determine eligibility for another award.
ACCOLADES
• Oro Valley ranked as the 2017 Safest City
in Arizona by Safe Home
• Police Chief named Chair for
International Association of Chiefs of
Police Highway Safety Committee
• Mayor selected for League of Arizona
Cities and Towns Executive Committee
• Certificate of Achievement for Financial
Reporting Excellence for FY 2016/17
from the Government Finance Officers
Association (GFOA) for the 24th
consecutive year
• Popular Annual Financial Report (PAFR)
award for FY 2016/17 from the GFOA for
the sixth consecutive year
• Distinguished Budget Presentation
Award from the GFOA for the tenth
consecutive year
• Achievement of Excellence in
Procurement Award from the National
Procurement Institute for the tenth
consecutive year
FY 17/18 ACCOMPLISHMENTS
3
Simpleview relocated their headquarters
from Pima County to Oro Valley, bringing 184
employees
Successfully integrated Community
Development and Economic Development
divisions into new Community and Economic
Development Department
Collected over $2 million in plan review and
permit fees representing more than $223
million in work valuation for new private
construction
Issued a total of 2,357 permits and performed
approximately 28,000 building inspections
Received the Achievement of Excellence
in Procurement Award from the National
Procurement Institute
Ended FY 2017-18 with a nearly $2.6 million
increase in the General Fund ending fund
balance
Expanded and improved the Economic
Expansion Zone to help attract primary
employers
Honored with Safety Leadership
Award by American Society of
Safety Engineers Southern Arizona
Chapter specific to the hands-free
driving ordinance adoption
Installed two additional multi-
sport lighted fields at Naranja Park
Achieved full deployment of the
Axon body-worn camera program
in Patrol Division of Police
Department
Completed the Lambert Lane
Phase II roadway widening
Installed new traffic signal at
the entrance to the Oro Valley
Community Center
Installed new multi-use path for
pedestrian access into Naranja
Park
Delivered a combined total of
3.18 billion gallons of water to Oro
Valley Water Utility customers
STATEMENT OF NET POSITION
This Statement of Net Position is presented in much more detail in the Town’s
Comprehensive Annual Financial Report. This is a very high-level summary
that captures total assets and liabilities and compares them to prior years. This
Statement of Net Position may serve as a useful overall indicator of the Town’s
financial position and trends over the last two years.
The Town’s activities are presented in two categories. Governmental activities
include most of the Town’s core services, such as public safety, parks and
recreation, and street maintenance. Sales taxes, state-shared revenues and
grants finance most of these activities. Business-type activities are the Water and
Stormwater utilities, which are primarily financed through user fees and charges.
The largest portion of the Town’s net position reflects its investment in capital
assets such as land, buildings and improvements, vehicles, machinery and
equipment, and construction, less any outstanding debt used to acquire those
assets. The Town uses these capital assets to provide services to its citizens;
consequently, these assets are not available for future spending.
The following are significant transactions that impacted the Statement of Net
Position:
• An increase of $3.4 million of governmental activities current assets
primarily due to an increase in cash and investments from construction sales
tax collections and license and permit revenue collections.
• The addition of $2.7 million in business-type activities capital assets through
improvements to the existing water system.
• The addition of $12.5 million in governmental activities capital assets,
mostly consisting of streets infrastructure, park improvements, and energy
efficiency upgrades.
• The decrease of $3.3 million in business-type activities long-term liabilities,
primarily due to annual debt service payments.
WHAT IT MEANSi
Current Assets and Other Assets
are assets that one can reasonably
expect to convert to cash, sell, or
consume within one year.
Capital Assets, Net are the Town’s
land, buildings, equipment,
improvements, infrastructure, and
construction in progress, net of
accumulated depreciation.
Deferred Outflows are outflows of
resources that have already occurred
but are applicable to future periods.
Deferred Inflows are inflows of
resources that have already occurred
but are applicable to future periods.
Liabilities are payments due to
vendors and employees, lease
payments due, and other long term
debt of the Town.
Net Position is the difference
between assets plus deferred
outflows and liabilities plus deferred
inflows, of which may or may not be
available for future spending.
4
Statement of Net Position for the year ended June 30, 2018
2018 2017
Assets
Current assets and other assets $ 62,576,122 $ 56,329,387
Capital assets, net 250,529,464 248,212,756
Total assets 313,105,586 304,542,143
Deferred outflows 11,223,394 13,861,078
Liabilities
Current and other liabilities 17,912,402 10,378,158
Long-term liabilities 83,904,682 95,343,446
Total liabilities 101,817,084 105,721,604
Deferred inflows 1,926,082 3,181,413
Net Position $ 220,585,814 $ 209,500,204
STATEMENT OF ACTIVITIES
The Statement of Activities, often referred to as the Town’s income
statement, reflects all of the financial activity for the Town during
the fiscal year ended June 30, 2018. This statement presents
information to show how the Town’s net position changed during
the year as a result of the financial activity (e.g., revenues and
expenses). Over time, increases or decreases in net position may
serve as a useful indicator of whether the Town’s financial position
is improving or deteriorating. Below is a summarized version of the
detailed statement of activities found in the Town’s Comprehensive
Annual Financial Report.
The Statement of Activities shows that the Town’s total net position
has improved over the beginning net position. The decrease of $5.4
million in total expenses was largely due to a decrease in public
safety pension expenses, as well as a decrease in highways and
street expenses due to improvements provided and performed by
Pima County. Total revenues increased $3.2 million, or 4 percent,
largely due to an increase in sales tax collections.
Statement of Activities for the year ended
June 30, 2018
Note: The totals below reflect both the governmental and business-type activities
of the Town.
2018 2017
Revenues $ 77,640,925 $ 74,461,144
Expenses 66,555,315 71,917,484
Change in net
position
11,085,610
2,543,660
Net position,
beginning of year
209,500,204
206,956,544
Net position, end
of year $ 220,585,814 $ 209,500,204
5
Revenues by Source
Includes Governmental & Business-Type Activities
This chart illustrates the sources and percentages of the Town’s revenues totaling $77.6
million for FY 2017/18. The Town’s primary revenue sources during 2018 include charges for
services, sales taxes and state-shared revenues. Together these three categories represented
85% of all revenue collections in FY 2017/18.
The Town Council and management are focused on efforts to maintain long-term
financial health through diversified revenue sources while strategically investing in
community initiatives. These decisions range from increasing efficiencies to using
valuable intergovernmental partnerships to enhance and expand services.
Three-Year Historical Comparison - Revenues
Governmental funds only
REVENUES
Where the money comes from
MillionsIntergove
r
n
m
e
n
t
al
Charges f
o
r
S
e
r
v
i
c
e
s
Sales & F
r
a
n
c
hi
s
e
T
a
x
e
s
Investme
n
t
E
a
r
ni
n
g
s
Other Re
v
e
n
u
e
s
Charges for Services are
revenues collected for
services rendered to the
public. Water sales make
up the majority of these
revenues.
Sales Taxes are levied on
retail sales at 2.5%, utilities
and construction activity at
4%, and lodging at 6%.
Franchise Taxes are
negotiated fee revenues from
a local cable provider.
Unrestricted State Shared
Revenues consist of the
Town’s portion of Arizona
state income tax, sales
tax, and vehicle license
tax revenue shared with
incorporated cities, towns,
and counties.
Capital Grants and
Contributions are dedicated
towards specific capital
expenditures and purposes,
such as highways and streets.
Operating Grants and
Contributions are dedicated
towards specific operating
expenditures and purposes,
such as employee salaries
and ongoing maintenance
costs for roadways, public
safety, and culture and
recreation.
Investment Earnings consist
of interest income earned on
the Town’s invested funds.
WHAT IT MEANSi
$24
$20
$16
$12
$8
$4
$-
2016 2017 2018
6
Franchise Taxes
656,664
1%
Charges for Services
32,310,892
42%
Investment Earnings
80,458
0%
Unrestricted State Shared Revenues
11,577,834
15%
Sales Taxes
21,664,398 28%
Capital Grants & Contributions
6,400,751
8%
Operating Grants & Contributions
4,949,928
6%
EXPENSES
Where the money goes
This chart illustrates the uses and percentages of the Town’s
expenses across all funds totaling $66.6 million for FY 2017/18.
The majority of expenses relate to public safety (police),
general government operations and Water Utility operations.
More than two-thirds of the Town’s total expenses (69%) are
from these three areas.
Expenses by Category
Includes Governmental & Business-Type Activities
General Government expenses are incurred by
the Town’s administrative departments, including
Mayor and Town Council, Town Manager, Legal
Services, Finance, Town Clerk, Human Resources,
Magistrate Court, and include other non-
departmental costs.
Highways and Streets expenses are related
to the design, construction, maintenance and
operation of all roadways, sidewalks and related
infrastructure within the town.
Culture and Recreation expenses are those
incurred by the Town to enrich the quality of life
in Oro Valley through parks, recreational and
cultural activities.
Public Safety expenses are those incurred by the
Town to provide police services to the public.
Water expenses are those incurred by the Town
to provide water to the public.
Transit expenses are those related to the
operation of the Sun Shuttle Dial-a-Ride service
funded through a partnership with the Regional
Transportation Authority (RTA).
Stormwater Drainage expenses are those related
to the design, construction, maintenance and
operation of all stormwater drainageways within
the town.
Interest on Long-Term Debt reflects the interest
costs for long-term debt, such as bonds and
loans. This does not include any interest costs on
water-related debt.
WHAT IT MEANSi
7
The Five-Year Historical Comparison chart provides a snapshot of the Town’s revenue and expenditure growth for the last five
fiscal years. The revenue and expenditure increase shown for FY 2015/16 mainly represents full-year operations of the Oro
Valley Community Center. Revenue growth through FY 2017/18 reflects continued economic recovery with increased sales tax
collections and state-shared revenues.
General Government
12,639,867
19%
Stormwater Drainage
1,190,898
2%Water
15,568,288
23%Interest on
Long-term debt
350,404
1%
Culture &
Recreation
10,111,731
15%
Transit
1,505,341
2%Highways & Streets
7,505,589
11%
Public Safety
17,683,197
27%
Three-Year Historical Comparison - Expenditures
Governmental Funds Only
Five-Year Historical Comparison - Revenues & Expenditures
Governmental Funds Only
$60
$50
$40
$30
$20
$10
$-Millions$18
$16
$14
$12
$10
$8
$6
$4
$2
$-
The Five-Year Historical Comparison chart provides a snapshot of the Town’s revenue and expenditure growth for the last five
fiscal years. The revenue and expenditure increase shown for FY 2015/16 mainly represents full-year operations of the Oro
Valley Community Center. Revenue growth through FY 2017/18 reflects continued economic recovery with increased sales tax
collections and state-shared revenues.
8
The charts on this page reflect
information for the Town’s
governmental funds only.
These funds account for most
of the Town’s basic services,
such as general government,
public safety, highways
and streets, and culture
and recreation. Sales taxes,
state-shared revenues and
charges for services finance
most of these activities.
As such, the business-type
activities related to Water and
Stormwater operations are
excluded.
2014 2015 2016 2017
2016 2017
General G
o
v
e
r
n
m
e
n
t
Public Saf
et
y
Highways
&
S
t
r
e
e
t
s
Transit
Culture &
R
e
c
r
e
a
ti
o
n
Capital O
u
tl
a
y
Debt Servi
c
e
2018
Millions2018
47.14
54.02
56.07
39.82
40.2238.14
49.54
43.20 51.43 54.50
Expenditures Revenues
FITCH AFFIRMS ORO VALLEY, AZ’S WATER
REVS AT AA-, OUTLOOK STABLE
Fitch has reaffirmed Oro Valley’s 2012 Senior
Lien Water Project revenues as AA- based on
factors such as robust liquidity, ample water
supply, a manageable capital plan and strong
economic base.
The Town continues to maintain strong investment grade ratings
on its outstanding excise tax bonds, rated “AA-“ by both Standard &
Poor’s and Fitch Ratings, and on its water revenue bonds, rated “AA”
by Standard & Poor’s. This is largely achieved by the Council’s goal
of continuing to diversify the Town’s revenue base and maintaining
strong fund balance reserves in the General Fund, currently at $16
million, or 38% of FY 2018-19 adopted expenditures of $42 million.
DEBT & FINANCIAL RATINGS
As of June 30, 2018, the Town had $44.3 million in long-term
debt outstanding with $5.7 million due within one year. The
majority of the outstanding debt relates to the Water Utility capital
improvement revenue bonds. The chart below depicts the Town’s
outstanding debt for the fiscal year ended June 30, 2018.MillionsWhat they’re saying...
WIFA Utility Loans are low-interest loans from
the Water Infrastructure Finance Authority of
Arizona (WIFA). They finance the construction
and improvement of drinking water,
wastewater, wastewater reclamation, and other
water quality projects.
Governmental Bonds are used to finance long-
lived capital improvements, including land
acquisition and construction or improvement
of Town facilities. The Town’s excise taxes are
pledged as repayment of the debt.
Utility Bonds are issued to finance long-lived
utility capital improvements for the Town’s
Water Utility. This debt is repaid with Water
Utility revenues.
Special Assessment Bonds are used to
finance specific infrastructure or improvement
projects. A district is formed and the debt
is repaid with assessments on properties
within the district. The Town currently has one
outstanding special assessment bond issue,
which was used for roadway improvements.
WHAT IT MEANSi
9
Outstanding Debt Obligations as of June 30, 2018
$35
$30
$25
$20
$15
$10
$5
$-
Utility
Loans -
WIFA
Governmental
Bonds
Utility
Bonds
Special Asmt.
Bonds, Capital
Leases, Note
Payable
$7.69
$0.95
$26.91
$8.78
WIFA Utility Loans are low-interest loans from
the Water Infrastructure Finance Authority of
Arizona (WIFA). They finance the construction
and improvement of drinking water,
wastewater, wastewater reclamation, and other
water quality projects.
Governmental Bonds are used to finance long-
lived capital improvements, including land
acquisition and construction or improvement
of Town facilities. The Town’s excise taxes are
pledged as repayment of the debt.
Utility Bonds are issued to finance long-lived
utility capital improvements for the Town’s
Water Utility. This debt is repaid with Water
Utility revenues.
Special Assessment Bonds are used to
finance specific infrastructure or improvement
projects. A district is formed and the debt
is repaid with assessments on properties
within the district. The Town currently has one
outstanding special assessment bond issue,
which was used for roadway improvements.
WHAT IT MEANS
TOWN ASSETS
The Town develops a ten-year Capital Improvement Program (CIP) to systematically identify, plan, schedule, finance, track
and monitor capital projects and acquisitions necessary to support service delivery to the community. Capital improvement
projects are defined as infrastructure, equipment and vehicle purchases or construction which results in or makes
improvements to a capitalized asset costing more than $50,000 and having a useful life of five or more years. These capital
projects and acquisitions comprise the capital assets of the Town. As of June 30, 2018, the Town had invested $250.5 million
in capital assets (net of accumulated depreciation), including buildings, facilities, vehicles, computers, equipment and
infrastructure assets. (Millions)Outstanding debtDebt per Capita$70
$60
$50
$40
$30
$20
$10
$-
$1,600
$1,400
$1,200
$1,000
$800
$600
$400
$200
$-
2014 2015 2016 2017 2018
Total
Outstanding
Debt
Debt Per
Capita
Five Year Historical Comparison
Total Outstanding Debt & Debt Per Capita
10
Capital Assets
Governmental Activities*
Capital Assets
Business-Type Activities*
Land
$19,518,801
7%
Construction
in Progress
$5,426,591
2%
Machinery,
Equipment
and Vehicles
$17,243,799
7%
Buildings and
Improvements
$34,019,586
13%
Infrastructure
$185,768,295
71%
Land
$2,410,660
2%
Equipment
and Vehicles
$5,752,158
4%Stormwater System
$2,956,995
2%
Water System
$133,215,431
87%
Water Rights
$8,534,490
5%
Construction
in Progress
$310,223 0%
*Totals do not include accumulated depreciation
ECONOMIC DEVELOPMENT
The Town Council and management are focused on creating
long-term economic sustainability, fostering a robust local
economy and job market that provide opportunities for quality
employment, and sustaining a strong sector of targeted
industries, including bioscience, aerospace, and high tech
that provide opportunities for synergy and growth. The
Town’s continued investment in the business sector through
recruitment, retention and attraction has paid dividends
in creating a vibrant, thriving community in Oro Valley.
Partnerships with Visit Tucson and the Greater Oro Valley
Chamber of Commerce focus heavily on tourism efforts as
an additional economic development tool. At Town facilities,
numerous special events are held throughout the year, as well as
a number of regional and state sporting events. In FY 2017/18,
the Town issued a total of 325 single family residential permits,
closely mirroring the number of permits issued the prior year.
There continues to be healthy economic growth in Oro Valley,
the Tucson metropolitan region and state-wide. Arizona remains
well-positioned to outpace the nation and most states in job,
income and population growth. The Tucson Metropolitan
Statistical Area (MSA-region) is on pace for its fastest growth
since 2006. According to the University of Arizona’s Eller College,
it is projected that the Tucson region will see 19,000 net new
jobs over the next two years. With Oro Valley’s close proximity
to the Tucson metro region, it is likely that the Town’s local
economy will continue to benefit with increased housing sales,
retail and tourism growth, and overall personal income growth.
Town Demographic & Economic Statistics Personal Income (Millions)PopulationPopulation Personal Income
11
Town Employment Statistics
Principal Employers in Oro Valley
Employees % of Total Town
Employment
Roche Tissue
Diagnostics 1,306 7.26%
Oro Valley Hospital 571 3.17%
Town of Oro Valley 311 1.73%
Amphitheater Public
Schools 535 2.97%
Hilton El Conquistador
Golf & Tennis Resort 235 1.31%
Casa de la luz Hospice 215 1.19%
Splendido at Rancho
Vistoso 156 0.87%
Securaplane 164 0.91%
Simpleview 184 1.02%
Walmart Supercenter 119 0.66%
45,000
44,000
43,500
43,000
42,500
42,000
41,500
41,000
40,500
$2,000
$1,950
$1,900
$1,850
$1,800
$1,750
$1,700
$1,675
$1,600
$1,55020182014201520162017