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TOWN OF ORO VALLEY, ARIZONA
COMPREHENSIVE ANNUAL
FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED
JUNE 30,2012
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ORO VALLEY,ARIZONA 85737—7015 I.!! `. rc� , �
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TOWN OF ORO VALLEY,ARIZONA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30,2012
Prepared by:
Finance Department
Stacey Lemos, CPA
Finance Director
(This page intentionally left blank)
TOWN OF ORO VALLEY,ARIZONA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30,2012
TABLE OF CONTENTS
INTRODUCTORY SECTION Page
Letter of Transmittal
Organization Chart
viii
List of Town Officials ix
GFOA Certificate of Achievement x
FINANCIAL SECTION
INDEPENDENT AUDITORS' REPORT 1
MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A)
(Required supplementary information) 5
BASIC FINANCIAL STATEMENTS
Government-Wide Financial Statements:
Statement of Net Assets 19
Statement of Activities 20
Fund Financial Statements:
Balance Sheet—Governmental Funds 24
Reconciliation of the Balance Sheet—
Governmental Funds to the Statement of Net Assets 27
Statement of Revenues, Expenditures and Changes in Fund Balances—
Governmental Funds 28
Reconciliation of the Statement of Revenues, Expenditures and
Changes in Fund Balances—Governmental Funds to the
Statement of Activities 31
Statement of Net Assets—Proprietary Funds 32
TOWN OF ORO VALLEY,ARIZONA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30,2012
TABLE OF CONTENTS (Cont'd)
FINANCIAL SECTION (Cont'd) Page
BASIC FINANCIAL STATEMENTS (Concl'd)
Statement of Revenues, Expenses and Changes in Fund Net Assets—
Proprietary Funds 34
Statement of Cash Flows—Proprietary Funds 36
Notes to Financial Statements 37
SCHEDULES OF REVENUES, EXPENDITURES AND CHANGES IN
FUND BALANCES—BUDGET AND ACTUAL
(Required Supplementary Information)
General Fund 62
Highway User Fund 63
Note to Required Supplementary Information 64
COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND
SCHEDULES
Governmental Funds:
Combining Balance Sheet—All Non-Major Governmental Funds
By Fund Type 68
Combining Statement of Revenues, Expenditures and Changes in
Fund Balances—All Non-Major Governmental Funds—By Fund Type 70
Special Revenue Funds:
Combining Balance Sheet 74
Combining Statement of Revenues, Expenditures and
Changes in Fund Balances 76
Combining Schedule of Revenues, Expenditures and
Changes in Fund Balances—Budget and Actual 78
TOWN OF ORO VALLEY,ARIZONA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30,2012
TABLE OF CONTENTS (Cont'd)
FINANCIAL SECTION (Concl'd) Page
COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND
SCHEDULES (Concl'd)
Debt Service Fund:
Combining Balance Sheet 84
Combining Statement of Revenues, Expenditures and
Changes in Fund Balances 85
Combining Schedule of Revenues, Expenditures and Changes in
Fund Balance—Budget and Actual 86
Capital Projects Funds:
Combining Balance Sheet 90
Combining Statement of Revenues, Expenditures and
Changes in Fund Balances 92
Combining Schedule of Revenues, Expenditures and
Changes in Fund Balances—Budget and Actual 94
STATISTICAL SECTION
Financial Trends:
Net Assets by Component 99
Changes in Net Assets 100
Fund Balances of Governmental Funds 102
Changes in Fund Balances of Governmental Funds 104
TOWN OF ORO VALLEY,ARIZONA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30,2012
TABLE OF CONTENTS (Concl'd)
STATISTICAL SECTION (Concl'd) Page
Revenue Capacity:
Principal Employers 106
Principal Sales Taxpayers 107
Taxable Sales by Category 108
Direct and Overlapping Sales Tax Rates 109
Debt Capacity:
Ratio of Outstanding Debt by Type 110
Direct and Overlapping Governmental Activities Debt 111
Legal Debt Margin Information 112
Calculation of Legal Debt Margin 113
Pledged-Revenue Coverage 114
Demographic and Economic Information:
County-Wide Demographic and Economic Statistics 115
Operating Information:
Full-Time Equivalent Town Employees by Function 116
Water Utility Revenues by User Type 117
Operating Indicators by Function 118
Water Rates 119
Capital Assets Statistics by Function 120
INTRODUCTORY SECTION
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‘'*
,41
C'atNt?ED
Town of Oro Valley
October 17, 2012
Honorable Mayor,Members of Town Council and
Citizens of the Town of Oro Valley,Arizona:
State law mandates that cities publish a complete set of financial statements presented in conformity
with accounting principles generally accepted in the United States of America and audited in
accordance with auditing standards generally accepted in the United States of America by a certified
public accounting firm licensed in the State of Arizona. Pursuant to that requirement, we hereby
issue the comprehensive annual financial report of the Town of Oro Valley, Arizona (Town) for the
fiscal year ended June 30, 2012.
This report consists of management's representations concerning the finances of the Town.
Consequently, management assumes full responsibility for the completeness and reliability of all of
the information presented in this report. To provide a reasonable basis for making these
representations, management of the Town has established a comprehensive internal control
framework that is designed both to protect the Town's assets from loss, theft, or misuse and to
compile sufficient reliable information for the preparation of the Town's financial statements in
conformity with accounting principles generally accepted in the United States of America. Because
the cost of internal controls should not outweigh their benefits, the Town's comprehensive
framework of internal controls has been designed to provide reasonable rather than absolute
assurance that the financial statements will be free of material misstatement. As management, we
assert that, to the best of our knowledge and belief,this financial report is complete and reliable in all
material respects.
The Town's financial statements have been audited by Heinfeld, Meech & Co., P.C., a certified
public accounting firm. The goal of the independent audit was to provide reasonable assurance that
the financial statements of the Town for the fiscal year ended June 30, 2012, are free of material
misstatement. The independent audit involved examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements; assessing the accounting principles used and
significant estimates made by management; and evaluating the overall financial statement
presentation. The independent auditors concluded, based upon the audit, that there was a reasonable
basis for rendering an unqualified opinion that the Town's financial statements for the fiscal year
ended June 30, 2012, are fairly presented in conformity with accounting principles generally
accepted in the United States of America. The independent auditors' report is presented as the first
component of the financial section of this report.
Accounting principles generally accepted in the United States of America require that management
provide a narrative introduction, overview, and analysis to accompany the basic financial statements
in the form of Management's Discussion and Analysis (MD&A). This letter of transmittal is
designed to complement the MD&A and should be read in conjunction with it. The Town of Oro
Valley's MD&A can be found immediately following the report of the independent auditors.
Caring for our heritage, our community, our future.
www.orovalleyaz.gov
11000 N.La Canada Drive•Oro Valley,Arizona 85737
phone: (520)229-4700•fax:(520)229-0428
PROFILE OF THE TOWN
The Town of Oro Valley was incorporated in 1974. It is located in northeastern Pima County, six
miles north of Tucson. The Town currently occupies a land area of 34.95 square miles and serves a
population of 41,335 per the U.S. Census Bureau as of 7/1/2011. The population of Oro Valley has
increased 39.2% since the 2000 population of 29,700.
Based on the 2010 Census data, Oro Valley has a median household income of$71,628, compared to
the median household income for the state of Arizona of $50,296. Oro Valley residents enjoy a
comfortable hometown feel with a strong family orientation, excellent education system and
abundant opportunities in a safe environment.
The Town of Oro Valley operates under the Council-Manager form of government. Policymaking
and legislative authority is vested in the Town Council, which consists of a Mayor and six Council
Members. Council Members are elected to four-year staggered terms. The citizens of Oro Valley
elect the Mayor. The Council, from among its members, selects the Vice-Mayor. The Town Council
is responsible, among other things, for the adoption of local ordinances, budget adoption, the
development of citizen advisory committees, the hiring and removal of the Town Manager, the
Police Chief, Town Attorney and Town Magistrate. The Town Manager is responsible for
implementation of the policies of the Town Council. The Town Manager appoints all other
department heads except those mentioned above under Town Council responsibilities.
The Town of Oro Valley provides a full range of services including police protection; the
construction and maintenance of streets and related infrastructure; the provision of water and
stormwater services; public transportation services; recreational activities, a public library and
cultural events. In addition to general government activities, the governing body is financially
accountable for the Municipal Property Corporation; therefore, this activity is included in the
reporting entity. Additional information in regards to the Municipal Property Corporation can be
found in Note 1 in the notes to the basic financial statements.
As with all cities in the State of Arizona, the Town of Oro Valley is required to comply with Article
IX, Section 20 (1)of the Arizona Constitution, which sets limits on the Town's legal budget capacity.
The Town currently operates under the Alternative Expenditure Limitation — Home Rule Option.
This option allows the Town Council to establish the budgetary limits locally, rather than being
restricted by the State-imposed expenditure limitation. The voters must authorize this option every
four years. It was last authorized by the citizens of Oro Valley in March of 2010.
The annual operating budget serves as the foundation for the Town's financial planning and control.
The objective of these budgetary controls is to ensure compliance with legal provisions embodied in
the annual operating budget approved by the Town Council. The Town's proposed operating budget
is presented to the Town Council for review throughout the budget cycle starting in January and
approved in June. The Town Council is required to hold a public hearing on the proposed budget and
to adopt the final budget by no later than the second Monday in August. Budget amendments
requiring the approval of the Town Council include the following: budget transfers between funds;
transfers to fund additional personnel or increased expenditures as a result of personnel
reclassifications; transfers that would reduce or eliminate funding for items designated in the adopted
Capital Improvement Plan; and transfers that would reduce or eliminate funding for debt service. All
other operational budget amendments that involve transfers between line items or expenditure
categories require approval by the Town Manager.
11
MAJOR INITIATIVES AND ACCOMPLISHMENTS FOR THE YEAR
Oro Valley's Strategic Plan was revised during FY 2010/11 and includes the three main focus areas
listed below. Also shown below are the Town's accomplishments in these areas during FY 2011/12.
• Leadership and Communication
Council and management are focused on efforts to build trust through effective public
outreach and communication, create an environment conducive to effective dialogue
among the Council and staff, and maintain strong intergovernmental relationships.
o Began the transition to electronic devices used by members of the Town Council to
streamline the production of Council meeting packets
o Conducted a fair and impartial election by providing timely and accurate information
to candidates and voters
o Completed spring and fall Community Academies,providing residents a chance to
learn more about their local government
o Initiated Community Budget Forum and Employee Budget Forum sessions to solicit
input on FY 2012/13 annual budget
o Held community outreach meetings to discuss the benefits of annexation into the
Town of Oro Valley
o Expanded use of NEOGOV software system to volunteer application process and
expanded volunteer program
o Created online forms to simplify the process for customers to reserve parks and
recreation facilities
o Collaborated with various partners for the provision of parks, recreation and cultural
events, including Southern Arizona Arts and Cultural Alliance,the Town of Marana,
Catalina State Park and Pusch Ridge Christian Academy
• Finance and Economic Development
The Town will continue to implement sound financial management policies and uphold
our fiduciary duty to the residents of Oro Valley. Beyond fiscal responsibility,the Town
is also committed to facilitating the expansion of the local economy. Commercial
business growth, and the Town's continued success in attracting high-tech and bio-
science industry,point the way toward a sustainable model for economic development.
o Town Council approved transition of the Oro Valley Public Library from an affiliate
status to a branch status within the Pima County Public Library District, resulting in
savings of approximately $600,000 per year to the Town's General Fund
o Implemented self-funded medical insurance program and optional Health Savings
Accounts for employees
o Town realized approximately $900,000 savings from position vacancies during FY
2011/12
o Implemented streamlined development review process
o Completed a refunding of the Town's Water Utility debt resulting in net present value
savings of approximately $3.4 million
o Launched OV Dollars program to enhance the existing Shop Oro Valley campaign
o Completed the issuance of$2.55 million in excise tax revenue obligations to fund the
Aquatic Center Facility expansion project and created full funding strategy for entire
$5 million project
o Maintained investment grade `AA-` bond rating on Town excise tax obligations and
received upgraded bond rating to 'AA' on Town Water Utility revenue obligations
o Water Utility completed the installation of energy efficient motors at wells and
booster pump facilities to reduce power costs
111
• Community Infrastructure
Community infrastructure encompasses both the social and physical factors that
determine a community's strength. The Town's investment in both social and physical
infrastructure creates the complex network of facilities,programs and services that are
referred to a quality of life. The Town of Oro Valley strives for excellence in the
provision of community services,the development of social relations and the construction
and maintenance of the built environment.
o Began delivery and distribution of approximately 1,500 acre feet of Central Arizona
Project(CAP)water in partnership with Tucson Water, reducing our reliance on
groundwater and preserving our aquifer
o Began capital improvements to the historic property Steam Pump Ranch, allowing
the property to be opened to the public
o Initiated Sun Shuttle Dial-A-Ride service in partnership with the Regional
Transportation Authority(RTA), expanding mobility options for the residents of the
community
o Initiated construction of the $5 million Aquatic Center Facility at James D. Kriegh
Park to include a 50-meter competition pool, a 25-yard community pool, splash pad,
water slide, family changing rooms, community multi-use classroom and concession
stand
o Town secured transfer of Honeybee Park from Pima County
o Began development of an archery facility at Naranja Park, funded primarily by
donations and grants
o Renovated Green Field at James D. Kriegh Park through a partnership with the
Dodgers Dream Foundation and the Arizona Diamondbacks
o Completed construction of an accessible playground at James D. Kriegh Park funded
by a grant from the Keg Steakhouse
o Continued construction on the widening of Lambert Lane
o Street crews crack sealed 100 lane-miles of paved streets and completed 55 lane-
miles of pavement preservation treatments on town roadways
o Oro Valley police officers have adopted 139 local businesses under the Adopt-a-
Business program
o The Citizen Volunteer Assistants Program(CVAP)volunteers donated 13,867 hours
and conducted 8,650 dark house checks
o Water Utility completed construction of the 3 million gallon North La Canada
reservoir and the La Canada 24-inch water main
o Water Utility replaced 2,747 water meters under the meter replacement program
ECONOMIC CONDITIONS AND OUTLOOK
The information presented in the financial statements is perhaps best understood when it is
considered from the broader perspective of the specific environment within which the Town
operates.
Fiscal year 2011/12 in Oro Valley saw continued economic progress and recovery after enduring a
somewhat sluggish period over the last three to four years during the recession. The Town continues
to provide services and programs without a property tax to fund operations and, therefore, is
dependent upon state shared revenues and local sales tax as major sources of operating revenue.
These sources accounted for approximately 80% of total General Fund revenue for FY 2011/12.
All of the major local sales tax categories experienced year-over-year increases compared to amounts
collected in FY 2010/11 as discussed below:
iv
• Retail tax collections totaled $4.9 million for FY 11/12, up 4.3%, or$205,000 over last fiscal
year.
• Restaurant and bar tax collections totaled almost $1.1 million for the fiscal year, up 3.8%, or
$39,000 over last fiscal year.
• Construction sales tax collections totaled $1.8 million for the fiscal year, up 2.8%, or$50,000
over last fiscal year.
• Utility tax collections totaled $2.3 million for the fiscal year, up 72%, or $1.0 million over
last fiscal year due to the increase in the tax rate from 2% to 4% that became effective in
August of 2011.
The chart below is a look at the past four years' local sales tax activity by category:
Oro Valley Sales Tax Activity by Sector - FY 09 thru FY 12
5.0
4.5
4.0
3.5
3.0
44* 2.5
2.0
1.5
1.0
0.5
tow I Al lift, /ft.
Utility Taxes Retail Taxes Restaurant/Bar Construction
Taxes Taxes
•FY 08/09 ■FY 09/10 0 FY 10/11 • FY 11/12
In FY 2011/12, the Town experienced its lowest amount collected for state shared revenues since FY
2005/06 at $8.1 million. For FY 2012/13, state shared revenues are budgeted to increase by 12%, or
by $1 million, over FY 2011/12 indicating signs of a slowly recovering State economy as well. The
trend chart below depicts the expected upward movement of both of these revenue categories for next
fiscal year:
Town of Oro Valley
State Shared Revenues and Local Sales Tax Collections
$14 -
I Local Sales Tax Collections
$12
•
c $10
0
$8
State Shared Revenue Collections
9- $6
0
• $4
$2
04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 est 12/13 budget
Fiscal Year
V
For the immediate future, as the forecasted revenues for the Town are slowly increasing, efforts to
reduce recurring expenditures through significant vacancy savings were achieved during FY
2011/12. As staff vacancies occurred last year, management evaluated whether those positions
needed to be refilled, filled with a part-time position or outsourced. This type of systematic
personnel evaluation resulted in nearly $900,000 in salary and benefit savings town-wide.
Significant operations and maintenance savings, estimated at $600,000, were also achieved during
FY 2011/12, largely attributable to the staffing reductions mentioned above.
By achieving the sizable savings in our budget outlined above, along with a more positive revenue
picture in FY 2012/13, the Town was in the enviable position of not having to close a significant
General Fund budget deficit going into the FY 2012/13 budget process for the first time in four fiscal
years.
Future Focus
In the next several years to come, the Town will focus its efforts on investing in the very elements of
our operation that provide the highest return on investment for the future — our employees, our
infrastructure and assets, economic development opportunities, enhanced programs and services for
our community and regional partnerships.
These strategies will be fulfilled a number of different ways as highlighted below:
• A modest 2.5% cost of living adjustment (COLA) has been budgeted for our employees in
FY 2012/13, the first since FY 2008/09. A commitment to provide performance merit and
step increases has also been pledged for FY 2013/14.
• The FY 2012/13 budget includes the return of fleet replacement at a modest level for public
safety vehicles and other vehicles used in the field. Also included is funding for the
appropriate replacement of computers and other technology that is critical to maintaining
smooth administrative functions.
• During FY 2011/12, the Oro Valley Town Council and the Pima County Board of
Supervisors approved an intergovernmental agreement (IGA) transferring library operations
to the Pima County Library District effective January 1, 2013. This will result in General
Fund savings of$583,000 to the Town and expanded library services to the community.
• The Town Council has approved a $5 million Aquatic Center Facility expansion to the Oro
Valley Municipal Pool located at James D. Kriegh Park. Completion of this facility will
enable us to host large-scale events, generating increased tourism and becoming a source of
economic activity.
• The Town will continue its successful partnership with the Regional Transportation
Authority (RTA) for the provision of transit services to our residents. This partnership has
expanded mobility options for our community and resulted in annual savings of
approximately $200,000 to the Town.
• The Town will continue to deliver 1,500 acre feet of Central Arizona Project (CAP)water to
its customers through a partnership with Tucson Water. By utilizing Tucson Water's
infrastructure, the Town saves significant capital costs by not having to construct a separate
delivery system.
Additionally, annexation and the expansion of arts and culture will continue to be top priorities in the
future. Extensive annexation outreach has been conducted and will increase in the coming year as
more resources are allocated to this area.
vi
AWARDS AND ACKNOWLEDGMENTS
Award. The Government Finance Officers Association of the United States and Canada (GFOA)
awarded a Certificate of Achievement for Excellence in Financial Reporting to the Town of Oro
Valley for its comprehensive annual financial report for the year ended June 30, 2011. This was the
eighteenth consecutive year that the Town has achieved this prestigious award. In order to be
awarded a Certificate of Achievement, a government must publish an easily readable and efficiently
organized comprehensive annual financial report. This report must satisfy both generally accepted
accounting principles and applicable legal requirements.
A Certificate of Achievement is valid for a period of one year only. We believe that our current
comprehensive annual financial report continues to meet the Certificate of Achievement Program's
requirements and we are submitting it to the GFOA to determine its eligibility for another certificate.
Acknowledgments. The preparation of this Comprehensive Annual Financial Report could not have
been accomplished without the efficient and dedicated services of the entire staff of the Finance
Department who assisted and contributed in its preparation. We thank the Mayor and members of
the Town Council for their interest and support in planning and conducting the financial affairs of the
Town in a responsible and progressive manner.
Respectfully submitted,
jtdet44-.
reg Cato, ICMA-CM Stacey Lemos, CPA
Town M. ager Finance Director
vii
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Organizational Chart
Oro Valley Residents
Town Council
Appd
Boardsointe&
Commissions
Town
Manager
Assistant
Communications TownEconomic
Development
Manager
Clerk IT Water PRL&CR DIS Human Finance Chief of Town Town
Utility Resources Police Attorney Magistrate
GIS Utility Parks& Development Personnel Procurement Field Civil
Services Administration Recreation Services Services Services
Planning& Infrastructure Budgeting Prosecution
Technical Enginering Library Services Safes& Support
Risk
Services Management Accounting Services
Operations Cultural
Business Resources
Application&
Development
viii
TOWN OF ORO VALLEY,ARIZONA
LIST OF TOWN OFFICIALS
ELECTED OFFICIALS
Mayor Dr. Satish Hiremath
Vice-Mayor Mr. Lou Waters
Council Member Mr. William Garner
Council Member Mr. Joe Horvat
Council Member Ms. Mary Snider
Council Member Mr. Mike Zinkin
Council Member Mr. Brendan Burns
DEPARTMENT HEADS
Town Manager Greg Caton
Finance Director Stacey Lemos, CPA
Human Resources Director Ron Corbin
Town Clerk Julie Bower
Magistrate George Dunscomb
Town Attorney Tobin Rosen
Water Utility Director Philip Saletta
Chief of Police Daniel G. Sharp
Development& Infrastructure
Services Director Paul Keesler
Parks, Recreation, Library and
Cultural Resources Director Ainsley Legner
Information Technology Director Kevin Verville
ix
Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
Town of Oro Valley
Arizona
For its Comprehensive Annual
Financial Report
for the Fiscal Year Ended
June 30, 2011
A Certificate of Achievement for Excellence in Financial
Reporting is presented by the Government Finance Officers
Association of the United States and Canada to
government units and public employee retirement
systems whose comprehensive annual financial
reports(CAFRs)achieve the highest
standards in government accounting
and financial reporting.
PNCE OPp/_. 4:4, 444464fra.
kt ;tr
A%tarn SIATEA- ("9'
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COrRADtiON President
eite:kst 4*(40, 4eAst,„,,
Executive Director
FINANCIAL SECTION
(This page intentionally left blank)
10120 N.Oracle Road
HEINFELD, MEECH & CO., P.C. Tucson,Arizona 85704
Tel(520)742-2611
CPAs and Business Consultants Fax(520)742-2718
INDEPENDENT AUDITORS' REPORT
Honorable Mayor and Members of the Town Council
Town of Oro Valley,Arizona
We have audited the accompanying financial statements of the governmental activities, the
business-type activities, each major fund, and the aggregate remaining fund information of the
Town of Oro Valley, Arizona (Town), as of and for the year ended June 30, 2012, which
collectively comprise the Town's basic financial statements as listed in the table of contents.
These financial statements are the responsibility of the Town's management. Our responsibility
is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United
States of America and the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall basic financial statement presentation. We believe
that our audit provides a reasonable basis for our opinions.
In our opinion, the financial statements referred to above present fairly, in all material respects,
the respective financial position of the governmental activities, the business-type activities, each
major fund, and the aggregate remaining fund information of the Town of Oro Valley, Arizona,
as of June 30, 2012, and the respective changes in financial position and cash flows, where
applicable, thereof for the year then ended in conformity with accounting principles generally
accepted in the United States of America.
In accordance with Government Auditing Standards, we have also issued our report dated
October 17, 2012 on our consideration of the Town's internal control over financial reporting
and on our tests of its compliance with certain provisions of laws, regulations, contracts, and
grant agreements and other matters. The purpose of that report is to describe the scope of our
testing of internal control over financial reporting and compliance and the results of that testing,
and not to provide an opinion on the internal control over financial reporting or on compliance.
That report is an integral part of an audit performed in accordance with Government Auditing
Standards and should be considered in assessing the results of our audit.
TUCSON • PHOENIX • FLAGSTAFF • ALBUQUERQUE
www.heinfeldmeech.com
Accounting principles generally accepted in the United States of America require that the
management's discussion and analysis on pages 5 through 14 and budgetary comparison
information on pages 62 through 64 be presented to supplement the basic financial statements.
Such information, although not a part of the basic financial statements, is required by
Governmental Accounting Standards Board, who considers it to be an essential part of financial
reporting for placing the basic financial statements in an appropriate operational, economic, or
historical context. We have applied certain limited procedures to the required supplementary
information in accordance with auditing standards generally accepted in the United States of
America, which consisted of inquiries of management about the methods of preparing the
information and comparing the information for consistency with management's responses to our
inquiries, the basic financial statements, and other knowledge we obtained during our audit of the
basic financial statements. We do not express an opinion or provide any assurance on the
information because the limited procedures do not provide us with sufficient evidence to express
an opinion or provide any assurance.
Our audit was conducted for the purpose of forming opinions on the financial statements that
collectively comprise the Town's financial statements as a whole. The accompanying
supplementary information such as the introductory section, combining and individual fund
financial statements and schedules, and statistical section are presented for purposes of additional
analysis and are not a required part of the financial statements. The combining and individual
fund financial statements and schedules are the responsibility of management and were derived
from and relate directly to the underlying accounting and other records used to prepare the
financial statements. The information has been subjected to the auditing procedures applied in
the audit of the financial statements and certain additional procedures, including comparing and
reconciling such information directly to the underlying accounting and other records used to
prepare the financial statements or to the financial statements themselves, and other additional
procedures in accordance with auditing standards generally accepted in the United States of
America. In our opinion, the information is fairly stated in all material respects in relation to the
financial statements as a whole. The introductory and statistical sections have not been subjected
to the auditing procedures applied in the audit of the basic financial statements and, accordingly,
we do not express an opinion or provide any assurance on them.
Oct4C1 111lilkgrA 4-eo
)
HEINFELD, MEECH& CO., P.C.
CPAs and Business Consultants
October 17, 2012
Page 2
MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A)
(Required Supplementary Information)
Page 3
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Page 4
TOWN OF ORO VALLEY,ARIZONA
MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A)
YEAR ENDED JUNE 30,2012
As management of the Town of Oro Valley, Arizona (Town), we offer readers of the Town's
financial statements this narrative overview and analysis of the financial activities of the Town for
the fiscal year ended June 30, 2012. We encourage readers to consider the information presented
here in conjunction with additional information that we have furnished in our letter of transmittal,
which can be found in the introductory section of this report.
FINANCIAL HIGHLIGHTS
The financial statements which follow the Management's Discussion and Analysis provide those
significant key financial highlights for 2011-12 as follows.
• The Town's total net assets of governmental activities increased $2.0 million to $157.6 million
and business-type activities increased $4.4 million to $64.7 million representing 71 percent and
29 percent respectively, of the total net assets of$222.3 million.
• General revenues from governmental activities accounted for $21.7 million in revenue, or 58
percent of all revenues from governmental activities. Program specific revenues in the form of
charges for services and grants and contributions accounted for $15.9 million or 42 percent of
total governmental activities revenues. The Town had $16.8 million of program revenues and
$167,106 in general revenues related to business-type activities.
• The Town had $35.5 million in expenses related to governmental activities, an increase of one
percent from the prior fiscal year. The Town had $12.6 million in expenses related to business-
type activities, a decrease of 4 percent from the prior fiscal year.
• Among major funds, the General Fund had $25.1 million in revenues, which primarily consisted
of sales taxes and intergovernmental revenues. The total expenditures of the General Fund were
$24.8 million. The General Fund's fund balance increased from $11.0 million to $11.4 million.
• The Highway User Revenue Fund, had $3.1 million in revenues, which primarily consisted of
intergovernmental revenues. The total expenditures of the Highway User Revenue Fund were
$3.8 million.
• The Townwide Roadway Development Impact Fee Fund had $7.2 million in revenues, which
primarily consisted of intergovernmental revenues. The total expenditures of the Townwide
Roadway Development Impact Fee Fund were $7.5 million.
• The Water Fund operating revenues of $14.6 million exceeded operating expenses of $9.6
million. The increase in net assets of$4.2 million was primarily due to revenues from charges
for services exceeding operating expenses.
Page 5
TOWN OF ORO VALLEY,ARIZONA
MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A)
YEAR ENDED JUNE 30,2012
OVERVIEW OF FINANCIAL STATEMENTS
This discussion and analysis are intended to serve as an introduction to the Town's basic
financial statements. The Town's basic financial statements comprise three components: 1)
government-wide financial statements, 2) fund financial statements, and 3) notes to the financial
statements. This report also contains other supplementary information in addition to the basic
financial statements themselves.
Government-wide financial statements. The government-wide financial statements are
designed to provide readers with a broad overview of the Town's finances, in a manner similar to
a private-sector business.
The statement of net assets presents information on all of the Town's assets and liabilities, with
the difference between the two reported as net assets. Over time, increases or decreases in net
assets may serve as a useful indicator of whether the financial position of the Town is improving
or deteriorating.
The statement of activities presents information showing how the Town's net assets changed
during the most recent fiscal year. All changes in net assets are reported as soon as the
underlying event giving rise to the change occurs, regardless of the timing of related cash flows.
Thus, revenues and expenses are reported in this statement for some items that will only result in
cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused compensated
absences).
In the government-wide financial statements the Town's activities are presented in the following
categories:
• Governmental activities — Most of the Town's basic services are included here, such as
general government, public safety, highways and streets, and culture and recreation. Sales
taxes, intergovernmental, and charges for services finance most of these activities.
• Business-type activities—The services provided by the Town included here are water and
stormwater utilities. The services are primarily financed through user fees and charges.
Fund Financial Statements. A fund is a grouping of related accounts that is used to maintain
control over resources that have been segregated for specific activities or objectives. The Town
uses fund accounting to ensure and demonstrate compliance with finance-related legal
requirements. All of the funds of the Town can be divided into two categories: governmental
funds and proprietary funds.
Page 6
TOWN OF ORO VALLEY,ARIZONA
MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A)
YEAR ENDED JUNE 30,2012
OVERVIEW OF FINANCIAL STATEMENTS (Concl'd)
Governmental funds. Governmental funds are used to account for essentially the same
functions reported as governmental activities in the government-wide financial statements.
However, unlike the government-wide financial statements, governmental fund financial
statements focus on near-term inflows of spendable resources, as well as on balances of
spendable resources available at the end of the fiscal year. Such information may be useful in
evaluating the Town's near-term financing requirements.
Because the focus of governmental funds is narrower than that of the government-wide
financial statements, it is useful to compare the information presented for governmental funds
with similar information presented for governmental activities in the government-wide
financial statements. By doing so, readers may better understand the long-term impact of the
Town's near-term financing decision. Both the governmental fund balance sheet and the
governmental fund statement of revenues, expenditures and changes in fund balances provide
a reconciliation to facilitate this comparison between governmental funds and governmental
activities.
Information is presented separately in the governmental fund balance sheet and in the
governmental fund statement of revenues, expenditures and changes in fund balances for the
General, Highway User Revenue (HURF), Oracle Road Debt Service, and Townwide
Roadway Development Impact Fees Funds, all of which are considered to be major funds.
Data from the other governmental funds are combined into a single, aggregated presentation.
Individual fund data for each of these non-major governmental funds is provided in the form
of combining statements and schedules.
Proprietary funds. The Town of Oro Valley maintains two types of proprietary funds.
Enterprise funds are used to report the same functions presented as business-type activities in
the government-wide financial statements. The Town of Oro Valley uses enterprise funds to
account for its Oro Valley Water Utility and Stormwater Drainage Utility. The Town uses an
internal service fund to account for its fleet maintenance services. Because these services
predominately benefit governmental rather than business-type functions, the internal service
fund has been included within governmental activities in the government-wide financial
statements.
Notes to the financial statements. The notes provide additional information that is essential to
a full understanding of the data provided in the government-wide and fund financial statements.
The notes to the financial statements can be found immediately following the basic financial
statements.
Other information. In addition to the basic financial statements and accompanying notes, this
report also presents certain required supplementary information concerning the Town's budget
process. The Town adopts an annual expenditure budget for all governmental funds. A schedule
of revenues, expenditures and changes in fund balances — budget and actual has been provided
for the General Fund and major Special Revenue Fund as required supplementary information.
Page 7
TOWN OF ORO VALLEY,ARIZONA
MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A)
YEAR ENDED JUNE 30,2012
GOVERNMENT-WIDE FINANCIAL ANALYSIS
Net assets may serve over time as a useful indicator of a government's financial position. In the
case of the Town, assets exceeded liabilities by $222.3 million as of the current fiscal year end.
The largest portion of the Town's net assets reflects its investment in capital assets (e.g., land,
buildings and improvements, improvements other than buildings, infrastructure, vehicles,
machinery and equipment and construction in progress), less any related debt used to acquire
those assets that is still outstanding. The Town uses these capital assets to provide services to its
citizens; consequently, these assets are not available for future spending. Although the Town's
investment in its capital assets is reported net of related debt, it should be noted that the resources
needed to repay this debt must be provided from other sources, since the capital assets
themselves cannot be used to liquidate these liabilities.
The following table presents a summary of the Town's net assets for the fiscal years ended
June 30, 2012 and June 30, 2011.
2012 2011 2012 2011
Governmental Governmental Business-type Business-type
Activities Activities Activities Activities 2012 Total 2011 Total
Current and other assets $ 29,405,939 $ 28,438,518 $ 22,316,206 $ 24,653,197 $51,722,145 $53,091,715
Capital assets,net 144,898,110 145,539,069 97,550,941 95,282,634 242,449,051 240,821,703
Total assets,net 174,304,049 173,977,587 119,867,147 119,935,831 294,171,196 293,913,418
Current and other liabilities 2,882,086 4,219,096 3,006,139 3,139,539 5,888,225 7,358,635
Long-term liabilities 13,822,115 14,165,670 52,123,740 56,419,499 65,945,855 70,585,169
Total liabilities 16,704,201 18,384,766 55,129,879 59,559,038 71,834,080 77,943,804
Invested in capital assets,net
of related debt 135,336,862 132,956,156 45,669,488 40,005,568 181,006,350 172,961,724
Restricted 11,454,390 12,048,505 11,454,390 12,048,505
Unrestricted 10,808,596 10,588,160 19,067,780 20,371,225 29,876,376 30,959,385
Total net assets $157,599,848 $ 155,592,821 $ 64,737,268 $ 60,376,793 $222,337,116 $215,969,614
Page 8
TOWN OF ORO VALLEY,ARIZONA
MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A)
YEAR ENDED JUNE 30,2012
GOVERNMENT-WIDE FINANCIAL ANALYSIS (Cont'd)
The Town's financial position is the product of several financial transactions including the net
results of activities, the acquisition and payment of debt, the acquisition and disposal of capital
assets, and the depreciation of capital assets. The following are significant current year
transactions that have had an impact on the Statement of Net Assets.
• The addition of $8.9 million in business-type activities capital assets through
improvements to the existing water system.
• The addition of $7.2 million in governmental activities capital assets, mostly consisting
of street improvements.
• The change of$472,953 in governmental activities long-term debt was due to the payoff
of a $2.5 million Highway Extension Loan Program (HELP) loan from the La Canada
Drive widening project and the issuance of$2.6 million in revenue bonds for the Town's
aquatic center project.
• The decrease of$5.6 million in business-type activities long-term debt was due mainly to
the issuance of$16.6 million in revenue refunding bonds and a Town cash contribution
of$3.0 million to refund $20.2 million of the 2003 Revenue Bonds.
Changes in net assets. The Town's total revenues for the current fiscal year were $54.5 million.
The total cost of all programs and services was $48.2 million. The following table presents a
summary of the changes in net assets for the fiscal years ended June 30, 2012 and June 30, 2011.
2012 2011 2012 2011
Governmental Governmental Business-type Business-type 2012 2011
Activities Activities Activities Activities Total Total
Revenues:
Program revenues:
Charges for services $ 3,524,887 $ 3,016,425 $ 16,569,557 $ 16,007,456 $ 20,094,444 $19,023,881
Operating grants and contributions 5,247,844 4,887,283 5,247,844 4,887,283
Capital grants and contributions 7,107,063 8,980,239 245,607 1,655,307 7,352,670 10,635,546
General revenues:
Sales taxes 12,799,678 11,572,148 12,799,678 11,572,148
Franchise taxes 525,427 514,814 525,427 514,814
Unrestricted state shared revenues 8,145,065 8,409,590 8,145,065 8,409,590
Investment earnings 189,606 39,124 167,106 39,745 356,712 78,869
Total revenues 37,539,570 37,419,623 16,982,270 17,702,508 54,521,840 55,122,131
Expenses:
General government 9,961,376 9,887,523 9,961,376 9,887,523
Public safety 12,349,948 12,509,201 12,349,948 12,509,201
Highways and streets 9,339,062 8,895,987 9,339,062 8,895,987
Culture and recreation 3,227,895 3,375,281 3,227,895 3,375,281
Interest on long-term debt 654,262 430,570 654,262 430,570
Water 11,984,829 12,527,851 11,984,829 12,527,851
Stormwater drainage 636,966 586,006 636,966 586,006
Total expenses 35,532,543 35,098,562 12,621,795 13,113,857 48,154,338 48,212,419
Change in net assets 2,007,027 2,321,061 4,360,475 4,588,651 6,367,502 6,909,712
Net assets,beginning 155,592,821 153,271,760 60,376,793 55,788,142 215,969,614 209,059,902
Net assets,ending $ 157,599,848 $ 155,592,821 $ 64,737,268 $ 60,376,793 $222,337,116 $215,969,614
Page 9
TOWN OF ORO VALLEY,ARIZONA
MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A)
YEAR ENDED JUNE 30,2012
GOVERNMENT-WIDE FINANCIAL ANALYSIS (Concl'd)
Total revenues decreased $600,291, or one percent, primarily due to a decrease in capital grants and
contributions received from the prior year for street and stormwater projects. The increase of$1.2
million in sales tax was largely due to an increase in the sales tax rate on utilities from 2% to 4% on
August 1, 2011. Charges for services increased by $1.1 million due to an increase in fees collected in
the General Fund for administrative and financial services provided to the Water Utility. The Water
Utility fund had an increase in charges for services due to an increase in the groundwater
preservation fee rate from 0.75 cents to 0.95 cents per 1,000 gallons effective on October 1, 2011.
Governmental and Business-type activities. The following table presents the cost of the Town's
major functional activities. The table also shows each function's net cost(total cost less charges for
services generated by the activities and intergovernmental aid provided for specific programs). The
net cost shows the financial burden that was placed on the State and Town's taxpayers by each of
these functions.
2012 2011
Total Net(Expense)/ Total Net(Expense)/
Governmental Activities Expenses Revenue Expenses Revenue
General government $ 9,961,376 $ (6,560,335) $ 9,887,523 $ (6,916,415)
Public safety 12,349,948 (11,126,636) 12,509,201 (11,495,163)
Highways and streets 9,339,062 1,228,958 8,895,987 3,254,449
Culture and recreation 3,227,895 (2,540,474) 3,375,281 (2,626,916)
Interest on long-term debt 654,262 (654,262) 430,570 (430,570)
Total $ 35,532,543 $ (19,652,749) $ 35,098,562 (18,214,615)
Business-type Activities
Water $ 11,984,829 $ 4,037,800 $ 12,527,851 $ 2,793,387
Stormwater drainage 636,966 155,569 586,006 1,755,519
Total $ 12,621,795 $ 4,193,369 $ 13,113,857 $ 4,548,906
• The cost of all governmental activities this year was $35.5 million. The increase of$433,981
from the prior year was due primarily to an increase in subdivision street improvements in
the highway fund. Overall, personnel costs were reduced due to vacancy savings in all
departments.
• The cost of all business-type activities this year was $12.6 million, a decrease of$492,062
from the prior year. Costs decreased slightly due to a decrease in Central Arizona Project
(CAP) delivery charges and power purchased for pumping.
• Federal and State governments, developer contributions, and charges for services subsidized
certain governmental programs and business-type programs with revenues of$32.7 million.
• Net cost of governmental activities of$19.7 million was financed by general revenues, which
are made up of primarily sales taxes and state shared revenues of$20.9 million.
Page 10
TOWN OF ORO VALLEY,ARIZONA
MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A)
YEAR ENDED JUNE 30,2012
FINANCIAL ANALYSIS OF THE TOWN'S FUNDS
As noted earlier, the Town uses fund accounting to ensure and demonstrate compliance with
finance-related legal requirements.
Governmental funds. The focus of the Town's governmental funds is to provide information
on near-term inflows, outflows, and balances of spendable resources. Such information is useful
in assessing the Town's financing requirements. In particular, unassigned fund balance may
serve as a useful measure of the Town's net resources available for spending at the end of the
fiscal year.
The financial performance of the Town as a whole is reflected in its governmental funds. As the
Town completed the year, its governmental funds reported a combined fund balance of $23.5
million, an increase of $2.5 million. This was primarily due to expended proceeds from the
issuance of$2.6 million in revenue bonds for the Town's aquatic center project.
The General Fund is the principal operating fund of the Town. The fund balance increased by
$394,511 in the General Fund to $11.4 million for the current fiscal year.
The fund balance of the Highway User Revenue Fund showed a decrease of $637,517 to $3.0
million for the current fiscal year due to the planned use of fund balance for subdivision street
improvements.
The Townwide Roadway Development Impact Fees Fund showed a decrease of$267,550 to $2.2
million for the current fiscal year due to the planned use of fund balance for the Lambert Lane
road widening project.
Proprietary funds. Net assets of the Enterprise Funds at the end of the year amounted to $64.7
million. The increase of $4.4 million from the prior fiscal year was primarily due to operating
income of$5.0 million from the Water Utility Fund.
BUDGETARY HIGHLIGHTS
There were no amendments to the Town of Oro Valley's fiscal year 2011-12 operating and
capital budget. A schedule showing the original and final budget amounts compared to the
Town's actual financial activity for the General Fund is provided in this report as required
supplementary information. The significant variances are summarized as follows:
• The favorable variance of$77,749 in revenues was primarily a result of interest earnings
from funds invested with PFM Asset Management.
• The favorable variance of$1.3 million in expenditures was a result of personnel vacancy
savings and operational cost savings.
Page 11
TOWN OF ORO VALLEY,ARIZONA
MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A)
YEAR ENDED JUNE 30,2012
CAPITAL ASSETS AND DEBT ADMINISTRATION
Capital Assets. At year end, the Town had invested $242.4 million in capital assets (net of
accumulated depreciation), including buildings, facilities, vehicles, computers, equipment, and
infrastructure assets. This amount represents a net increase of $1.6 million from last year. In
governmental activities, this was primarily due to street improvement projects. In business-type
activities this was due to water system expansion of$6.6 million and $2.0 million in stormwater
drainage facilities. Total depreciation expense for the year was $10.2 million.
The following schedule presents capital asset balances for the fiscal years ended June 30, 2012
and June 30, 2011.
As of As of
Governmental Activities June 30, 2012 June 30, 2011
Land $ 18,878,468 $ 18,878,468
Infrastructure 152,734,484 151,204,783
Buildings and improvements 24,330,218 24,218,778
Machinery, equipment, and vehicles 11,328,666 10,654,213
Construction in progress 6,083,031 1,778,211
Less: Accumulated depreciation (68,456,757) (61,195,384)
Total $ 144,898,110 $145,539,069
As of As of
Business-type Activities June 30, 2012 June 30, 2011
Land $ 2,410,660 $ 2,410,660
Water rights 8,534,490 8,534,490
Water system 107,415,415 100,847,841
Stormwater system 2,779,503 2,474,862
Equipment and vehicles 3,894,930 3,835,184
Construction in progress 2,572,273 4,397,627
Less: Accumulated depreciation (30,056,330) (27,218,030)
Total $ 97,550,941 $ 95,282,634
Additional information on the Town's capital assets can be found in Note 5.
Page 12
TOWN OF ORO VALLEY,ARIZONA
MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A)
YEAR ENDED JUNE 30,2012
CAPITAL ASSETS AND DEBT ADMINISTRATION (Concl'd)
Debt Administration. At year end, the Town had $61.8 million in long-term debt outstanding,
$3.4 million due within one year. The following table presents a summary of the Town's
outstanding long-term debt for the fiscal years ended June 30, 2012 and June 30, 2011.
Governmental Activities
2012 2011
Revenue bonds $ 9,424,960 $ 7,149,780
Special assessment bonds 2,685,000 2,920,000
Loan payable 2,513,133
Total $ 12,109,960 $ 12,582,913
Business-type Activities
2012 2011
Revenue bonds $ 43,843,790 $ 49,803,970
Loan payable 5,893,122 5,473,096
Capital leases 35,392
$ 49,736,912 $ 55,312,458
State statutes currently limit the amount of general obligation debt a Town may issue to 20
percent of its total assessed valuation for water, sewer, lights, open space preserves, parks,
playgrounds and recreational facilities. The current debt limitation for the Town is $125.9
million.
The Town of Oro Valley has a bond rating of "AA-" rating from both Standard & Poor's and
Fitch Ratings on its excise tax revenue bonds and an "AA" rating from Standard & Poor's on
outstanding water revenue bonds.
Additional information on the Town's long-term debt can be found in Notes 6 through 10.
Page 13
TOWN OF ORO VALLEY,ARIZONA
MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A)
YEAR ENDED JUNE 30,2012
ECONOMIC FACTORS AND NEXT YEAR'S BUDGET AND RATES
• The unemployment rate for the Town of Oro Valley is currently 6.4%. Pima County's
and the State of Arizona's unemployment rates are 7.6%and 8.5%, respectively.
• The Town's secondary assessed valuation for the current year is $629,340,548.
• Single family residential (SFR) building permits issued in this fiscal year totaled 56, as
compared to 47 SFR building permits issued last fiscal year. Projections for SFR
building permits are 70 for fiscal year 2012-13.
The adopted combined operating and capital expenditure budget for fiscal year 2012-13 totals
$95.4 million, an increase of 1.3% over last year's budget of $94.2 million. This increase is
primarily attributed to the expansion of the aquatics facility at James D. Kriegh Park. The
budget for fiscal year 2012-13 continues to place emphasis on the following: investing in our
employees and infrastructure assets, streamlining service delivery, increasing operating
efficiencies through regional partnerships, and capitalizing on economic development
opportunities that provide a significant return on investment for the Town.
CONTACTING THE TOWN'S FINANCIAL MANAGEMENT
This financial report is designed to provide our citizens, taxpayers, customers, and investors and
creditors with a general overview of the Town's finances and to demonstrate the Town's
accountability for the resources it receives. If you have questions about this report or need
additional information, contact the Finance Department, Town of Oro Valley, Arizona, 11000
North La Canada Drive, Oro Valley,Arizona 85737.
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BASIC FINANCIAL STATEMENTS
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Page 16
GOVERNMENT-WIDE FINANCIAL STATEMENTS
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Page 18
TOWN OF ORO VALLEY,ARIZONA
STATEMENT OF NET ASSETS
JUNE 30,2012
Governmental Business-type
Activites Activites Total
ASSETS
Current assets:
Cash and cash equivalents $ 22,532,206 $ 15,761,719 $ 38,293,925
Taxes receivable 820,887 820,887
Accounts receivable 407,533 2,418,611 2,826,144
Intergovernmental receivable 2,570,748 157,132 2,727,880
Special assessments 2,685,000 2,685,000
Loan proceeds receivable 554,569 554,569
Prepaid items 29,670 29,670
Total current assets 29,046,044 18,892,031 47,938,075
Noncurrent assets:
Deferred bond charges 359,895 3,424,175 3,784,070
Capital assets,non-depreciable 24,961,499 13,517,423 38,478,922
Capital assets,depreciable(net) 119,936,611 84,033,518 203,970,129
Total noncurrent assets 145,258,005 100,975,116 246,233,121
Total assets 174,304,049 119,867,147 294,171,196
LIABILITIES
Current liabilities:
Accounts payable 1,402,755 468,552 1,871,307
Accrued wages and benefits 825,295 104,486 929,781
Intergovernmental payable 120,008 997,755 1,117,763
Interest payable 1,188,297 1,188,297
Sales tax payable 278,774 278,774
Unearned revenue 182,486 182,486
Customer deposits payable 72,768 247,049 319,817
Compensated absences 1,287,895 159,909 1,447,804
Loans payable 311,742 311,742
Special assessment bonds 250,000 250,000
Revenue bonds 321,910 2,536,840 2,858,750
Total current liabilities 4,741,891 6,014,630 10,756,521
Noncurrent liabilities:
Compensated absences 363,252 82,378 445,630
Loans payable 5,581,380 5,581,380
Special assessment bonds 2,435,000 2,435,000
Revenue bonds 9,164,058 43,451,491 52,615,549
Total noncurrent liabilities 11,962,310 49,115,249 61,077,559
Total liabilities 16,704,201 55,129,879 71,834,080
NET ASSETS
Invested in capital assets,net of related debt 135,336,862 45,669,488 181,006,350
Restricted for:
Public safety 1,058,088 1,058,088
Highways and streets 3,017,431 3,017,431
Capital outlay 6,210,546 6,210,546
Debt service 1,168,325 1,168,325
Unrestricted 10,808,596 19,067,780 29,876,376
Total net assets $ 157,599,848 $ 64,737,268 $ 222,337,116
The notes to the basic financial statements are an integral part of this statement.
Page 19
TOWN OF ORO VALLEY,ARIZONA
STATEMENT OF ACTIVITIES
YEAR ENDED JUNE 30,2012
Net(Expense)
Revenue and
Changes in Net
Program Revenues Assets
Operating Capital Grants
Charges for Grants and and Governmental
Functions/Programs Expenses Services Contributions Contributions Activities
Primary Government
Governmental activities:
General government $ 9,961,376 $ 3,079,526 $ 321,515 $ $ (6,560,335)
Public safety 12,349,948 33,109 1,190,203 (11,126,636)
Highway and streets 9,339,062 329,420 3,131,537 7,107,063 1,228,958
Culture and recreation 3,227,895 82,832 604,589 (2,540,474)
Interest on long-term debt 654,262 (654,262)
Total governmental activites 35,532,543 3,524,887 5,247,844 7,107,063 (19,652,749)
Business-type activities:
Water 11,984,829 15,817,345 205,284
Stormwater drainage 636,966 752,212 40,323
Total business-type activites 12,621,795 16,569,557 245,607
Total primary government $ 48,154,338 $ 20,094,444 $ 5,247,844 $ 7,3 52,670 (19,652,749)
General revenues:
Taxes:
Sales taxes 12,799,678
Franchise taxes 525,427
Unrestricted state shared revenues 8,145,065
Investment earnings 189,606
Total general revenues 21,659,776
Changes in net assets 2,007,027
Net assets,beginning of year 155,592,821
Net assets,end of year $ 157,599,848
The notes to the basic financial statements are an integral part of this statement.
Page 20
Net(Expense)Revenue and
Changes in Net Assets
Business-type
Activities Totals
$ $ (6,560,335)
(11,126,636)
1,228,958
(2,540,474)
(654,262)
(19,652,749)
4,037,800 4,037,800
155,569 155,569
4,193,369 4,193,369
4,193,369 (15,459,3 80)
12,799,678
525,427
8,145,065
167,106 356,712
167,106 21,826,882
4,360,475 6,367,502
60,376,793 215,969,614
$ 64,737,268 $ 222,337,116
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Page 22
FUND FINANCIAL STATEMENTS
Page 23
TOWN OF ORO VALLEY,ARIZONA
BALANCE SHEET- GOVERNMENTAL FUNDS
JUNE 30,2012
Oracle Road
General Fund HURF Debt Service
ASSETS
Cash and cash equivalents $ 11,559,886 $ 3,339,235 $ 3,592
Taxes receivable 820,887
Accounts receivable 400,885 6,648
Intergovernmental receivable 459,461 242,798
Special assessments 2,685,000
Prepaid items 29,670
Total assets $ 13,270,789 $ 3,588,681 $ 2,688,592
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable $ 455,477 $ 505,582 $
Accrued wages and benefits 759,627 65,668
Intergovernmental payable 120,008
Sales tax payable 278,774
Deferred revenue 182,486 2,685,000
Customer deposits payable 72,768
Total liabilities 1,869,140 571,250 2,685,000
Fund balances:
Restricted 3,017,431 3,592
Committed
Assigned 1,608,035
Unassigned 9,793,614
Total fund balances 11,401,649 3,017,431 3,592
Total liabilities and fund balances $ 13,270,789 $ 3,588,681 $ 2,688,592
The notes to the basic financial statements are an integral part of this statement.
Page 24
Townwide
Roadway Non-Major Total
Development Governmental Governmental
Impact Fees Funds Funds
$ 556,223 $ 7,047,515 $ 22,506,451
820,887
407,533
1,868,489 2,570,748
2,685,000
$ 2,424,712 29,670
,712 $ 7,047,515 $ 29,020,289
$ 195,716 $ 220,225 $ 1,377,000
825,295
120,008
278,774
2,867,486
72,768
195,716 220,225 5,541,331
2,228,996 6,204,371 11,454,390
622,919 622,919
1,608,035
9,793,614
2,228,996 6,827,290 23,478,958
$ 2,424,712 $ 7,047,515 $ 29,020,289
Page 25
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Page 26
TOWN OF ORO VALLEY,ARIZONA
RECONCILIATION OF THE BALANCE SHEET-GOVERNMENTAL FUNDS
TO THE STATEMENT OF NET ASSETS
JUNE 30,2012
Total governmental fund balances $ 23,478,958
Amounts reported for governmental activities in the Statement of Net Assets are
different because:
Capital assets used in governmental activities are not financial
resources and therefore are not reported in the funds.
Governmental capital assets $ 213,354,867
Less accumulated depreciation (68,456,757) 144,898,110
Special assessments receivable are not available to pay for current period
expenditures and therefore are not reported in the funds. 2,685,000
Deferred items related to the issuance of bonds are amortized over the life of
the associated issuance in the government-wide statements but not
reported in the funds.
Deferred bond charges 359,895
Deferred bond premium (61,008) 298,887
Long-term liabilities are not due and payable in the current period and therefore
are not reported in the funds.
Special assessment bonds (2,685,000)
Revenue bonds (9,424,960)
Compensated absences (1,651,147) (13,761,107)
Net assets of governmental activities $ 157,599,848
The notes to the basic financial statements are integral part of this statement.
Page 27
TOWN OF ORO VALLEY,ARIZONA
STATEMENT OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCES-
GOVERNMENTAL FUNDS
YEAR ENDED JUNE 30,2012
Oracle Road
General Fund HURF Debt Service
Revenues:
Sales taxes $ 11,656,582 $ 348,378 $
Franchise taxes 525,427
In lieu fees
Impact fees
Special assessments 366,028
Intergovernmental 9,968,445 2,694,079
Licenses,fees&permits 1,138,348 47,514
Fines,forfeitures&penalties 212,922
Charges for services 1,209,814
Contributions and donations 995
Investment earnings 159,182 10,809
Other 214,052 25,173
Total revenues 25,085,767 3,125,953 366,028
Expenditures:
Current-
General government 8,974,197
Public safety 11,874,887
Highway and streets 572,827 2,618,827
Culture and recreation 2,954,549
Capital outlay 447,982 1,144,643
Debt service-
Bond issuance costs
Principal retirement 235,000
Interest and fiscal charges 132,423
Total expenditures 24,824,442 3,763,470 367,423
Excess(deficiency)of revenues over expenditures 261,325 (637,517) (1,395)
Other financing sources(uses):
Issuance of revenue bonds
Premium on bonds issued
Transfers in 318,426
Transfers out (185,240)
Total other financing sources(uses): 133,186
Changes in fund balances 394,511 (637,517) (1,395)
Fund balances,beginning of year 11,007,138 3,654,948 4,987
Fund balances,end of year $ 11,401,649 $ 3,017,431 $ 3,592
The notes to the basic financial statements are an integral part of this statement.
Page 28
Townwide
Roadway Non-Major Total
Development Governmental Governmental
Impact Fees Funds Funds
$ $ 794,718 $ 12,799,678
525,427
834 834
238,733 178,175 416,908
366,028
6,976,035 84,527 19,723,086
1,185,862
682,898 895,820
1,209,814
995
1,534 18,081 189,606
18,000 203,287 460,512
7,234,302 1,962,520 37,774,570
238,669 9,212,866
118,977 11,993,864
3,191,654
2,954,549
4,886,385 450,824 6,929,834
75,800 75,800
2,513,133 304,820 3,052,953
102,334 319,517 554,274
7,501,852 1,508,607 37,965,794
(267,550) 453,913 (191,224)
2,580,000 2,580,000
113,835 113,835
685,240 1,003,666
(818,426) (1,003,666)
2,560,649 2,693,835
(267,550) 3,014,562 2,502,611
2,496,546 3,812,728 20,976,347
$ 2,228,996 $ 6,827,290 $ 23,478,958
Page 29
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Page 30
TOWN OF ORO VALLEY,ARIZONA
RECONCILIATION OF THE STATEMENT OF REVENUES,EXPENDITURES
AND CHANGES IN FUND BALANCES-GOVERNMENTAL FUNDS
TO THE STATEMENT OF ACTIVITIES
YEAR ENDED JUNE 30,2012
Net changes in fund balances-total governmental funds $ 2,502,611
Amounts reported for governmental activities in the Statement of Activities are different because:
Governmental funds report capital outlays as expenditures. However,in the Statement of Activities,
the cost of those assets is allocated over their estimated useful lives as depreciation expense.
Expenditures for capital assets $ 6,723,230
Less current year depreciation (7,364,189) (640,959)
Special assessment revenues in the Statement of Activities do not provide current financial resources
and therefore are not reported as revenues in the governmental funds. (235,000)
Repayment of debt principal are expenditures in the governmental funds,but the repayment reduces
long-term liabilities in the Statement of Net Assets.
Loan principal retirement 2,513,133
Revenue bond principal retirement 304,820
Special assessment bond principal retirement 235,000 3,052,953
Issuance of revenue bonds provides current financial resources to governmental
funds,but the issuance increases long term liabilities in the Statement of Net Assets. (2,580,000)
Some expenses reported in the Statement of Activities do not require the use of current
financial resources and therefore are not reported as expenditures in governmental funds.
Amortization of deferred charges (24,188)
Compensated absences (68,390) (92,578)
Change in net assets in governmental activities $ 2,007,027
The notes to the basic financial statements are integral part of this statement.
Page 31
TOWN OF ORO VALLEY,ARIZONA
STATEMENT OF NET ASSETS
PROPRIETARY FUNDS
JUNE 30,2012
Enterprise Funds
Non-Major
Water Enterprise Funds Totals
ASSETS
Current assets:
Cash and cash equivalents $ 15,211,745 $ 549,974 $ 15,761,719
Accounts receivable 2,354,532 64,079 2,418,611
Due from federal govenment 157,132 157,132
Loan proceeds receivable 554,569 554,569
Total current assets 18,120,846 771,185 18,892,031
Noncurrent assets:
Deferred bond charges 3,424,175 3,424,175
Capital assets,non-depreciable 13,517,423 13,517,423
Capital assets,depreciable(net) 81,010,687 3,022,831 84,033,518
Total noncurrent assets 97,952,285 3,022,831 100,975,116
Total assets 116,073,131 3,794,016 119,867,147
LIABILITIES
Current liabilities:
Accounts payable 465,348 3,204 468,552
Accrued wages and benefits 94,460 10,026 104,486
Intergovernmental payable 997,755 997,755
Interest payable 1,188,297 1,188,297
Customer deposits payable 247,049 247,049
Compensated absences 146,910 12,999 159,909
Loans payable 311,742 311,742
Revenue bonds 2,536,840 2,536,840
Total current liabilities 5,988,401 26,229 6,014,630
Noncurrent liabilities:
Compensated absences 75,681 6,697 82,378
Loans payable 5,581,380 5,581,380
Revenue bonds 43,451,491 43,451,491
Total noncurrent liabilities 49,108,552 6,697 49,115,249
Total liabilities 55,096,953 32,926 55,129,879
NET ASSETS
Invested in capital assets,net of related debt 42,646,657 3,022,831 45,669,488
Unrestricted 18,329,521 738,259 19,067,780
Total net assets $ 60,976,178 $ 3,761,090 $ 64,737,268
The notes to the basic financial statements are an integral part of this statement.
Page 32
Governmental
Activites:
Internal Service
Funds
$ 25,755
25,755
25,755
25,755
25,755
25,755
$
Page 33
TOWN OF ORO VALLEY,ARIZONA
STATEMENT OF REVENUES,EXPENSES AND CHANGES IN FUND NET ASSETS-
PROPRIETARY FUNDS
FOR THE YEAR ENDED JUNE 30,2012
Enterprise Funds
Non-Major
Water Enterprise Funds Totals
Operating revenues:
Charges for services $ 14,451,480 $ 752,212 $ 15,203,692
Other 143,145 143,145
Total operating revenues 14,594,625 752,212 15,346,837
Operating expenses:
Costs of sales and services 6,694,191 538,295 7,232,486
Depreciation and amortization 2,909,579 96,890 3,006,469
Total operating expenses 9,603,770 635,185 10,238,955
Operating income(loss) 4,990,855 117,027 5,107,882
Nonperating revenues(expenses):
Development impact fees 759,958 759,958
Connection fees 462,762 462,762
Investment earnings 166,654 452 167,106
Interest expense (2,381,059) (1,781) (2,382,840)
Total nonoperating revenues(expenses) (991,685) (1,329) (993,014)
Income(loss)before capital contributions 3,999,170 115,698 4,114,868
Capital contributions 205,284 40,323 245,607
Changes in net assets 4,204,454 156,021 4,360,475
Total net assets,beginning of year 56,771,724 3,605,069 60,376,793
Total net assets,end of year $ 60,976,178 $ 3,761,090 $ 64,737,268
The notes to the basic financial statements are an integral part of this statement.
Page 34
Governmental
Activities:
Internal Service
Funds
$ 436,271
436,271
436,271
436,271
$
Page 35
TOWN OF ORO VALLEY,ARIZONA
STATEMENT OF CASH FLOWS
PROPRIETARY FUNDS
FOR THE YEAR ENDED JUNE 30,2012
Governmental
Enterprise Funds Activities
Non-Major Internal Service
Water Enterprise Funds Total Fund
Increase(Decrease)in Cash and Cash Equivalents
Cash flows from operating activities:
Cash received from customers $ 14,398,175 $ 736,022 $ 15,134,197 $ 436,271
Cash payments to suppliers for goods and services (4,307,238) (384,272) (4,691,510) (380,513)
Cash payments to employees for services (2,439,204) (252,121) (2,691,325) (86,817)
Net cash provided by(used for) operating activities 7,651,733 99,629 7,751,362 (31,059)
Cash flows from noncapital and related financing activities:
Connection fees 462,762 462,762
Grants received 301,777 301,777
Net cash provided by noncapital financing activities 462,762 301,777 764,539
Cash flows from capital and related financing activities:
Development impact fees 759,958 759,958
Acquisition of capital assets (4,469,255) (189,663) (4,658,918)
Proceeds from loans 173,127 173,127
Proceeds from sale of bonds 16,595,000 16,595,000
Principal paid on long-term debt (22,862,850) (35,392) (22,898,242)
Interest on long-term debt (2,422,531) (1,781) (2,424,312)
Net cash used for capital and related
financing activities (12,226,551) (226,836) (12,453,387)
Cash flows from investing activities:
Investment income 166,654 452 167,106
Net cash provided by investing activities 166,654 452 167,106
Net increase(decrease)in cash and cash equivalents (3,945,402) 175,022 (3,770,380) (31,059)
Cash and cash equivalents,beginning of year 19,157,147 374,952 19,532,099 56,814
Cash and cash equivalents,end of year $ 15,211,745 $ 549,974 $ 15,761,719 $ 25,755
Reconciliation of Operating Income to
Net Cash Provided by(Used for)Operating Activities
Operating income $ 4,990,855 $ 117,027 $ 5,107,882 $
Adjustments to reconcile operating income
to net cash provided by(used for)operating activities:
Depreciation and amortization 2,909,579 96,890 3,006,469
Change in assets and liabilities:
Increase in accounts receivable (212,328) (16,190) (228,518)
Decrease in accounts payable (110,912) (117,910) (228,822) (25,788)
Increase(decrease)in accrued payroll and employee benefits 6,111 3,246 9,357 (5,271)
Increase in compensated absences payable 52,550 16,566 69,116
Increase in deposits held for others 15,878 15,878
Total adjustments 2,660,878 (17,398) 2,643,480 (31,059)
Net cash provided by(used for)operating activities $ 7,651,733 $ 99,629 $ 7,751,362 $ (31,059)
Non-cash capital and financing activities
Contribution of assets from developers $ 205,284 $ 40,323
Page 36 The notes to the financial statements are an integral part of this statement.
TOWN OF ORO VALLEY,ARIZONA
NOTES TO FINANCIAL STATEMENTS
JUNE 30,2012
NOTE 1 —SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the Town of Oro Valley, Arizona have been prepared in
conformity with accounting principles generally accepted in the United States of America as
applied to government units. The Governmental Accounting Standards Board (GASB) is the
accepted standard-setting body for establishing governmental accounting and financial
reporting principles.
The more significant of the Town's accounting policies are described below.
A. Reporting Entity
The Town is a municipal entity governed by an elected mayor and council. As required by
accounting principles generally accepted in the United States of America, these financial
statements present the Town and its component units, entities for which the Town is
considered to be financially accountable. Blended component units, although legally separate
entities, are, in substance, part of the Town's operations and so data from these units are
combined with data of the Town, the primary government. The blended component units
presented have a June 30 year end.
The financial reporting entity consists of a primary government and its component units. A
component unit is a legally separate entity that must be included in the reporting entity in
conformity with generally accepted accounting principles. The Town is a primary
government that has a separately elected governing body, is legally separate, and is fiscally
independent of other state or local governments. Furthermore, component units combined
with the Town for financial statement presentation purposes, and the Town, are not included
in any other governmental reporting entity. Consequently, the Town's financial statements
include the funds of those organizational entities for which its elected governing body is
financially accountable.
Blended Component Unit — The financial reporting entity presented in these financial
statements consists of the Town and one blended component unit. This component unit,
discussed below, is included in the Town's reporting entity because of the significance of its
operational relationship or financial relationship with the Town. The component unit is
governed by a board, substantially or wholly, comprised of the Town's elected council.
Separate financial statements are not prepared for the component unit on a stand-alone basis.
Page 37
TOWN OF ORO VALLEY,ARIZONA
NOTES TO FINANCIAL STATEMENTS
JUNE 30,2012
NOTE 1 —SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
The Town of Oro Valley Municipal Property Corporation's (MPC) Board of Directors
consists of the three members which are appointed by the Town of Oro Valley Town Council.
The MPC, a non-profit corporation incorporated under the laws of the State of Arizona, was
originally formed for the purpose of assisting the Town in obtaining financing for acquiring
the Canada Hills and Rancho Vistoso water companies. The Town has a contractual
obligation for the repayment of the MPC's Municipal Facilities Revenue Bonds, Series 2003,
2005, and 2007. The activity of the 2003 MPC is reported in the applicable water enterprise
fund and the activity of the Series 2005 and 2007 MPC is reported in the applicable water
enterprise and governmental funds. All related receivables and payables between the Town
and the MPC have been eliminated.
B. Government-Wide and Fund Financial Statements
The government-wide financial statements (i.e., the statement of net assets and the statement
of activities) present financial information about the Town as a whole. The reported
information includes all of the nonfiduciary activities of the Town and its component units.
For the most part, the effect of internal activity has been removed from these statements.
These statements are to distinguish between the governmental and business-type activities of
the Town. Governmental activities normally are supported by sales taxes and
intergovernmental revenues, and are reported separately from business-type activities, which
rely to a significant extent on fees and charges for support.
The statement of activities demonstrates the degree to which the direct expenses of a given
function or segment are offset by program revenues. Direct expenses are those that are
clearly identifiable with a specific function or segment. Program revenues include 1) charges
to customers or applicants who purchase, use, or directly benefit from goods, services, or
privileges provided by a given function or segment and 2) grants and contributions that are
restricted to meeting the operational or capital requirements of a particular function or
segment. Sales taxes, unrestricted state shared revenues, investment income and other items
not included among program revenues are reported instead as general revenues.
Separate financial statements are provided for governmental funds and proprietary funds.
Major individual governmental funds and the major individual enterprise fund are reported as
separate columns in the fund financial statements.
Page 38
TOWN OF ORO VALLEY,ARIZONA
NOTES TO FINANCIAL STATEMENTS
JUNE 30,2012
NOTE 1 —SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
C. Measurement Focus,Basis of Accounting, and Financial Statement Presentation
Government-wide Financial Statements — The government-wide financial statements are
reported using the economic resources measurement focus and the accrual basis of
accounting. Revenues are recorded when earned and expenses are recorded when a liability is
incurred, regardless of the timing of related cash flows. Grants and similar items are
recognized as revenue as soon as all eligibility requirements imposed by the grantor or
provider have been met. As a general rule, the effect of internal activity has been eliminated
from the government-wide financial statements; however, the effects of interfund services
provided and used between functions are reported as expenses and program revenues at
amounts approximating their external exchange value.
Fund Financial Statements — Governmental fund financial statements are reported using the
current financial resources measurement focus and the modified accrual basis of accounting.
Revenues are recognized as soon as they are both measurable and available. Revenues are
considered to be available when they are collectible within the current period or soon enough
thereafter to pay liabilities of the current period. For this purpose, the Town considers
revenues to be available if they are collected within 60 days of the end of the current fiscal
period. Expenditures generally are recorded when a liability is incurred, as under accrual
accounting. However, debt service expenditures, as well as expenditures related to
compensated absences and claims and judgments, are recorded only when payment is due.
Sales taxes, franchise taxes, licenses and permits, charges for services, special assessments
and investment income associated with the current fiscal period are all considered to be
susceptible to accrual and have been recognized as revenues of the current fiscal period.
Grants and similar awards are recognized as revenue as soon as all eligibility requirements
imposed by the grantor or provider have been met. Miscellaneous revenue is not susceptible
to accrual because generally they are not measurable until received in cash. Grants and
similar awards are recognized as revenue as soon as all eligibility requirements imposed by
the grantor or provider have been met. Deferred revenue arises when resources are received
by the Town before it has legal claim to them, as when grant monies are received prior to
meeting all eligibility requirements imposed by the provider.
The Council adopts the budget at the fund level as a total amount of expenditures. Financial
control is administered by fund, with budgetary control for operating performance regulated at
the departmental level, e.g., finance, economic development,police, and parks and recreation.
The focus of governmental fund financial statements is on major funds rather than reporting
funds by type. Each major fund is presented in a separate column. Non-major funds are
aggregated and presented in a single column.
Page 39
TOWN OF ORO VALLEY,ARIZONA
NOTES TO FINANCIAL STATEMENTS
JUNE 30,2012
NOTE 1 —SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
The Town reports the following major governmental funds.
General Fund — This fund accounts for all financial resources of the Town, except those
required to be accounted for in other funds.
Highway User Revenue Fund — This fund is used to account for the Town's share of
motor fuel tax revenues.
Oracle Road Debt Service Fund — This fund accounts for the special assessment
collections and payment of the outstanding Oracle Road bond issue.
Townwide Roadway Development Impact Fees Fund — This fund accounts for the
collection and capital expenditures of the Townwide Roadway Development Impact
Fees.
The Town reports the following major proprietary funds.
Water Fund — This fund accounts for the costs to operate, construct and finance the
Town's water system.
Private-sector standards of accounting and financial reporting issued prior to
December 1, 1989, generally are followed in both the government-wide and proprietary fund
financial statements to the extent that those standards do not conflict with or contradict
guidance of the Governmental Accounting Standards Board. Governments also have the
option of following subsequent private-sector guidance for their business-type activities and
enterprise funds, subject to this same limitation. The Town has elected not to follow
subsequent private-sector guidance.
Proprietary funds distinguish operating revenues and expenses from nonoperating items.
Operating revenues and expenses generally result from providing services and producing and
delivering goods in connection with a proprietary fund's principal ongoing operations. The
principal operating revenues of the Town's internal service fund are charges to user
departments for fleet maintenance services. The principal operating revenues of the Town's
enterprise fund are charges to customers for water and stormwater drainage services.
Operating expenses for these funds include the cost of sales and services, depreciation, and
amortization. All revenues and expenses not meeting this definition are reported as
nonoperating revenues and expenses.
Page 40
TOWN OF ORO VALLEY,ARIZONA
NOTES TO FINANCIAL STATEMENTS
JUNE 30,2012
NOTE 1 —SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
D. Cash and Investments
For purposes of the Statement of Cash Flows, the Town considers all highly liquid
investments with a maturity of three months or less when purchased to be cash equivalents.
Cash and cash equivalents at June 30, 2012 were cash in bank and investments held by the
County and State Treasurers.
Nonparticipating interest-earning investment contracts are stated at cost. Money market
investments and participating interest investment contracts with a remaining maturity of one
year or less at time of purchase are stated at amortized cost. All other investments are stated
at fair value.
E. Investment Income
Investment income is composed of interest, dividends, and net changes in the fair value of
applicable investments.
F. Receivables and Payables
Activity between funds that is representative of lending/borrowing arrangements outstanding
at the end of the fiscal year is referred to as either "due to/from other funds" (i.e., the current
portion of interfund loans) or "advances to/from other funds" (i.e., the non-current portion of
interfund loans). All other outstanding balances between funds are reported as "due to/from
other funds."
All trade receivables are shown net of an allowance for uncollectibles.
G. Prepaid Items
Certain payments to vendors reflect costs applicable to future accounting periods and are
recorded as prepaid items in the government-wide and fund financial statements.
H. Capital Assets
Capital assets, which include property, plant, and equipment, are reported in the applicable
governmental or business-type activities columns in the government-wide financial
statements. Capital assets are defined by the Town as assets with an initial, individual cost of
$5,000 or more and an estimated useful life of more than one year. Such assets are recorded
at historical cost or estimated historical cost if actual historical cost is not available. Donated
capital assets are recorded at estimated fair market value at the date of donation.
Page 41
TOWN OF ORO VALLEY,ARIZONA
NOTES TO FINANCIAL STATEMENTS
JUNE 30,2012
NOTE 1 —SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
The costs of normal maintenance and repairs that do not add to the value of the asset or
materially extend the life of the asset are not capitalized.
Major outlays for capital assets and improvements are capitalized as projects are constructed.
Interest incurred during the construction phase of capital assets of business-type activities is
included as part of the capitalized value of the assets constructed.
Certain capital assets of the Town are depreciated using the straight line method over the
following estimated useful lives:
Assets Years
Buildings 50
Improvements other than buildings 20-30
Infrastructure 20-50
Vehicles 4-6
Machinery and equipment 7-20
I. Compensated Absences
The Town's employee annual and sick leave policies generally provide for granting annual
and sick leave with pay. Full-time employees accrue annual leave based on the number of
years employed. Employees who terminate employment shall be paid in a lump sum. Full-
time employees accumulate sick leave at the rate of one work day per month. Part-time
employees whose normal week is twenty hours or more receive sick leave at half the rate of
full-time employees. Once an employee has exceeded 480 hours of accrued sick leave, one
half of the sick leave balance in excess of the 480 hours shall be paid to the employee upon
separation from employment. The current and long-term liabilities, including related benefits,
for accumulated vacation and sick leave are reported on the government-wide financial
statements. A liability for these amounts, including related benefits, is reported in
governmental funds only if they have matured, for example, as a result of employee leave,
resignations and retirements. Generally, resources from the General Fund are used to pay for
compensated absences.
J. Long-term Obligations
In the government-wide financial statements and proprietary fund financial statements, long-
term debt and other long-term obligations are reported as liabilities in the applicable business-
type activities and proprietary fund type statement of net assets.
Page 42
TOWN OF ORO VALLEY,ARIZONA
NOTES TO FINANCIAL STATEMENTS
JUNE 30,2012
NOTE 1 —SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Concl'd)
In the fund financial statements, governmental fund types recognize bond premiums and
discounts, as well as bond issuance costs, during the current period. The face amount of debt
issued is reported as other financing sources. Premiums received on debt issuances are
reported as other financing sources while discounts on debt issuances are reported as other
financing uses. Issuance costs, whether or not withheld from the actual debt proceeds
received, are reported as debt service expenditures.
K. Interfund Activity
Flows of cash from one fund to another without a requirement for repayment are reported as
interfund transfers. Interfund transfers between governmental funds are eliminated in the
Statement of Activities. Interfund transfers in the fund statements are reported as other
financing sources/uses in governmental funds and after nonoperating revenues/expenses in
proprietary funds.
L. Estimates
The preparation of the financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and accompanying
notes. Actual results may differ from those estimates.
NOTE 2—FUND BALANCE CLASSIFICATIONS
Fund balances of the governmental funds are reported separately within classifications based
on a hierarchy of the constraints placed on the use of those resources. The classifications are
based on the relative strength of the constraints that control how the specific amounts can be
spent. The classifications are nonspendable, restricted, and unrestricted, which includes
committed, assigned, and unassigned fund balance classifications.
Nonspendable. The nonspendable fund balance classification includes amounts that cannot
be spent because they are not in spendable form, or legally or contractually required to be
maintained intact.
Restricted. Fund balance is reported as restricted when constraints placed on the use of
resources are either externally imposed by creditors (such as through debt covenants),
grantors, contributors, or laws or regulations of other governments or is imposed by law
through constitutional provisions or enabling legislation.
Page 43
TOWN OF ORO VALLEY,ARIZONA
NOTES TO FINANCIAL STATEMENTS
JUNE 30,2012
NOTE 2—FUND BALANCE CLASSIFICATIONS (Cont'd)
Committed. The committed fund balance classification includes amounts that can be used
only for the specific purposes imposed by formal action of the Town Council. Those
committed amounts cannot be used for any other purpose unless the Town Council removes
or changes the specified use by taking the same type of action it employed to previously
commit those amounts.
Assigned. Amounts in the assigned fund balance classification are intended to be used by the
Town for specific purposes but do not meet the criteria to be classified as restricted or
committed. In governmental funds other than the General Fund, assigned fund balance
represents the remaining amount that is not restricted or committed. In the General Fund,
assigned amounts represent intended uses established by the Town Council or a management
official delegated that authority by the formal Town Council action.
Unassigned. Unassigned fund balance is the residual classification for the General Fund and
includes all spendable amounts not contained in the other classifications. In other
governmental funds, the unassigned classification is used only to report a deficit balance
resulting from overspending for specific purposes for which amounts had be restricted,
committed, or assigned.
The Town applies restricted resources first when expenditures are incurred for purposes for
which either restricted or unrestricted (committed, assigned, and unassigned) amounts are
available. Similarly, within unrestricted fund balance, committed amounts are reduced first
followed by assigned, and then unassigned amounts when expenditures are incurred for
purposes for which amounts in any of the unrestricted fund balance classifications could be
used.
The table below provides detail of the major components of the Town's fund balance
classifications at year end.
Highway Oracle Townwide
User Road Debt Roadway Non-Major
General Revenue Service Development Governmental
Fund Fund Fund Impact Fees Funds
Fund Balances:
Restricted:
Highways and streets $ $ 3,017,431 $ $ $
Debt service 3,592 1,164,733
Capital projects 2,228,996 3,981,550
Public safety 1,058,088
Committed 622,919
Assigned 1,608,035
Unassigned 9,793,614
Total fund balances $11,401,649 $ 3,017,431 $ 3,592 $ 2,228,996 $ 6,827,290
Page 44
TOWN OF ORO VALLEY,ARIZONA
NOTES TO FINANCIAL STATEMENTS
JUNE 30,2012
NOTE 3—CASH AND INVESTMENTS
A.R.S. authorize the Town to invest public monies in obligations of the U.S. Government
and its agencies, obligations of the State and certain local government subdivisions, interest-
bearing savings accounts and certificates of deposit, collateralized repurchase agreements,
certain obligations of U.S. corporations, and certain other securities. The statutes do not
include any requirements for credit risk, custodial credit risk, concentration of credit risk,
interest rate risk, or foreign currency risk for the Town's investments.
The State Treasurer's pools are external investment pools, the Local Government Investment
Pool (Pool 5) and Local Government Investment Pool-Government (Pool 7), with no
regulatory oversight. The pools are not required to register (and are not registered) with the
Securities and Exchange Commission. The activity and performance of the pools are
reviewed monthly by the State Board of Investment. The fair value of each participant's
position in the State Treasurer investment pools approximates the value of the participant's
shares in the pool and the participants' shares are not identified with specific investments.
No regulatory oversight is provided for the County Treasurer's investment pool and that
pool's structure does not provide for shares.
Custodial Credit Risk— Deposits. Custodial Credit risk is the risk that in the event of bank
failure the Town's deposits may not be returned to the Town. The Town does not have a
deposit policy for custodial credit risk. At year end, the carrying value of the Town's
deposits was $603,681 and the bank balance was $1,960,491.
At year end, the Town's investments consisted of the following.
Investments Maturities
(in Years)
Investment Type Fair Value Less than 1 1-5
Money Market- U.S. Treasuries $ 6,586,522 $6,586,522 $
Municipal Bonds/Notes 412,828 412,828
U.S Treasury Bonds/Notes 5,764,981 5,764,981
U.S. Agencies Bonds/Notes 19,038,405 1,999,055 17,039,350
$8,585,577 $ 23,217,159
County Treasurer's investment pool 1,169,176 332 days average maturities
State Treasurer's investment pool 5 4,662,235 26 days average maturities
Total $37,634,147
Page 45
TOWN OF ORO VALLEY,ARIZONA
NOTES TO FINANCIAL STATEMENTS
JUNE 30,2012
NOTE 3—CASH AND INVESTMENTS (Concl'd)
Interest Rate Risk. The Town has implemented an investment policy that will minimize
interest rate risk, which is the risk that the market value of securities in the portfolio will fall
due to changes in market interest rates by the following.
1. Structuring the investment portfolio so that securities mature to meet cash
requirements for ongoing operations, thereby avoiding the need to sell securities on
the open market prior to maturity; and
2. Investing operating funds primarily in shorter-term securities, money market mutual
funds, or similar investment pools limiting the average maturity in the portfolio in
accordance with this policy.
Credit Risk. The Town has implemented an investment policy that will minimize credit risk,
which is the risk of loss due to the failure of the security or backer by the following:
1. Limiting investments to the types of securities listed in Section 6 if this investment
policy;
2. Pre-qualifying financial institutions, broker/dealers, intermediaries, and advisers with
which the Town will do business in accordance with Section 5; and
3. Diversifying the investment portfolio so that the impact of potential losses from any
one type of security or from any one individual issuer will be minimized.
As of year end, the Town's investment in the State and County Treasurers' investment pools
did not receive a credit quality rating from a national rating agency. The State Treasurer's
investment pool 5 was rated AAAF/S1+ by Standard and Poor's at year end. The Town's
investments in U.S. agencies and municipal bonds were rated AA+ and AA, respectively, by
Standard and Poor's.
Custodial Credit Risk — Investments. The Town's investment in the State and County
Treasurer's investment pools represents a proportionate interest in the pool's portfolio;
however, the Town's portion is not identified with specific investments and is not subject to
custodial credit risk.
Concentration of Credit Risk. The Town places no limit on the amount the Town may invest
in any one issuer. More than 5 percent of the Town's investments are in FHLMC and FNMA
notes. These investments are 16% and 24% of the Town's total investments, respectively.
Page 46
TOWN OF ORO VALLEY,ARIZONA
NOTES TO FINANCIAL STATEMENTS
JUNE 30,2012
NOTE 4—RECEIVABLES
Receivable balances, net of allowance for uncollectibles, have been disaggregated by type and
presented separately in the financial statements with the exception of intergovernmental
receivables. Intergovernmental receivables, net of allowance for uncollectibles, as of year end
for the Town's individual major funds in the aggregate, were as follows.
Townwide
Roadway
General HURF Development
Fund Fund Impact Fees
Intergovernmental receivables:
Due from Federal government $ 131,455 $ $
Due from State government 328,006 242,798
Due from other districts 1,868,489
Net intergovernmental receivables $ 459,461 $ 242,798 $ 1,868,489
Governmental funds report deferred revenue in connection with receivables for revenues that
are not considered to be available to liquidate liabilities of the current period. Governmental
funds also defer revenue recognition in connection with resources that have been received, but
not yet earned. At the end of the current fiscal year, the various components of deferred
revenue reported in the governmental funds were as follows.
Unavailable Unearned
Prepaid developer fees (General Fund) $ $ 182,486
Special assessments (Oracle Road Debt Service Fund) 2,685,000
Total deferred revenue for governmental funds $ 2,685,000 $ 182,486
Page 47
TOWN OF ORO VALLEY,ARIZONA
NOTES TO FINANCIAL STATEMENTS
JUNE 30,2012
NOTE 5—CAPITAL ASSETS
A summary of capital asset activity for the current fiscal year follows.
Beginning
Governmental Activities Balance Increase Decrease Ending Balance
Capital assets,not being depreciated:
Land $ 18,878,468 $ $ $ 18,878,468
Construction in progress 1,778,211 4,800,564 495,744 6,083,031
Total capital assets,not being depreciated 20,656,679 4,800,564 495,744 24,961,499
Capital assets,being depreciated:
Infrastructure 151,204,783 1,529,701 152,734,484
Buildings and improvements 24,218,778 111,440 24,330,218
Machinery,equipment,and vehicles 10,654,213 777,269 102,816 11,328,666
Total capital assets being depreciated 186,077,774 2,418,410 102,816 188,393,368
Less accumulated depreciation for:
Infrastructure (49,394,389) (5,843,852) (55,238,241)
Buildings and improvements (5,019,643) (546,690) (5,566,333)
Machinery,equipment,and vehicles (6,781,352) (973,647) (102,816) (7,652,183)
Total accumulated depreciation (61,195,384) (7,364,189) (102,816) (68,456,757)
Total capital assets,being depreciated,net 124,882,390 (4,945,779) 119,936,611
Governmental activities capital assets,net $ 145,539,069 $ (145,215) $ 495,744 144,898,110
Beginning
Business-Type Activities Balance Increase Decrease Ending Balance
Capital assets,not being depreciated:
Land $ 2,410,660 $ $ $ 2,410,660
Water rights 8,534,490 8,534,490
Construction in progress 4,397,627 1,965,766 3,791,120 2,572,273
Total 15,342,777 1,965,766 3,791,120 13,517,423
Capital assets,being depreciated:
Water system 100,847,841 6,567,574 107,415,415
Stormwater system 2,474,862 304,641 2,779,503
Equipment and vehicles 3,835,184 59,746 3,894,930
Total capital assets being depreciated 107,157,887 6,931,961 114,089,848
Less accumulated depreciation for:
Water system (24,914,997) (2,512,167) (27,427,164)
Stormwater system (76,436) (56,209) (132,645)
Equipment and vehicles (2,226,597) (269,924) (2,496,521)
Total accumulated depreciation (27,218,030) (2,838,300) (30,056,330)
Total capital assets,being depreciated,net 79,939,857 4,093,661 84,033,518
Business-type activities capital assets,net $ 95,282,634 $ 6,059,427 $ 3,791,120 $ 97,550,941
Page 48
TOWN OF ORO VALLEY,ARIZONA
NOTES TO FINANCIAL STATEMENTS
JUNE 30,2012
NOTE 5—CAPITAL ASSETS (Concl'd)
Depreciation expense was charged to functions/programs as follows:
Governmental activities:
General government $ 654,140
Public Safety 416,756
Highways and streets 5,946,029
Culture and recreation 347,264
Total depreciation expense—governmental activities $7,364,189
Business-type activities:
Water $2,741,410
Stormwater 96,890
Total depreciation expense—business-type activities $2,838,300
Construction Commitments — As of year end, the Town was involved in several
construction projects. The estimated cost to complete the construction projects is $12.0
million.
NOTE 6—LOANS PAYABLE
The Town received two loans from the Water Infrastructure Finance Authority of Arizona for
water system projects. The loans payable at current fiscal year end are presented below.
Interest Rate Outstanding Due
(Including Remaining Principal Within
Business-type activities: Fees) Maturities June 30, 2012 One Year
WIFA Loan, 2007 2.04% 7/1/12-27 $ 3,802,002 $ 179,266
WIFA Loan, 2009 2.75% 7/1/12-18 2,091,120 132,476
Total $ 5,893,122 $ 311,742
Page 49
TOWN OF ORO VALLEY,ARIZONA
NOTES TO FINANCIAL STATEMENTS
JUNE 30,2012
NOTE 6—LOANS PAYABLE (Concl'd)
Principal and interest payments on the business-type activities loans payable at June 30, 2012
are summarized as follows.
Business-type Activities
Year ending June 30: Principal Interest
2013 $ 311,742 $ 185,498
2014 281,954 185,162
2015 290,521 175,372
2016 300,461 165,264
2017 310,740 154,808
2018-22 1,720,663 604,211
2023-27 2,042,352 283,454
2028 634,689 24,106
Total $ 5,893,122 $ 1,777,875
NOTE 7—BONDS PAYABLE
Bonds payable at year end, consisted of the following outstanding revenue and refunding
bonds. The bonds are both callable and noncallable with interest payable semiannually.
Taxes and Impact Fees are used to pay bonded debt.
Original Outstanding Due
Amount Interest Remaining Principal Within
Purpose Issued Rates Maturities June 30, 2012 One Year
Governmental activities:
Revenue Bonds, 2005 $ 4,164,050 3.50-4.75% 7/1/12-25 $ 3,246,150 $ 177,550
Refunding Revenue Bonds, 2007 1,389,180 4.25-5.00% 7/1/12-26 1,278,810 9,360
Excise Tax Revenue Obligations, 2010 2,445,000 2.00-6.59% 7/1/12-27 2,320,000 135,000
Revenue Bonds, 2012 2,580,000 2.00-4.00% 7/1/13-27 2,580,000
Total $ 9,424,960 $ 321,910
Page 50
TOWN OF ORO VALLEY,ARIZONA
NOTES TO FINANCIAL STATEMENTS
JUNE 30,2012
NOTE 7—BONDS PAYABLE (Cont'd)
Annual debt service requirements to maturity on revenue and refunding bonds for
governmental activities at year end are summarized as follows.
Governmental Activities
Year ending June 30: Principal Interest
2013 $ 321,910 $ 371,951
2014 444,000 382,639
2015 479,440 367,991
2016 530,920 350,711
2017 539,960 330,665
2018-22 3,15 8,410 1,271,322
2023-27 3,565,320 484,114
2028 385,000 9,562
Total $ 9,424,960 $ 3,568,955
Original Outstanding
Amount Interest Remaining Principal Due Within
Purpose Issued Rates Maturities June 30, 2012 One Year
Business-type activities:
Revenue Bonds, 2003 $ 31,750,000 3.25-5.00% 7/1/12-28 $ 2,425,000 $ 1,445,000
Refunding Revenue Bonds, 2003 10,225,080 3.50-5.00% 7/1/12-19 8,108,750 893,750
Revenue Bonds, 2005 2,050,950 3.13-4.75% 7/1/12-25 1,598,850 87,450
Refunding Revenue Bonds, 2007 16,420,820 4.25-5.00% 7/1/12-26 15,116,190 110,640
Refunding Revenue Bonds, 2012 16,595,000 2.00-5.00% 7/1/13-28 16,595,000
Total $ 43,843,790 $ 2,536,840
Annual debt service requirements to maturity revenue and refunding bonds for business-type
activities at year end are summarized as follows.
Business-type Activities
Year ending June 30: Principal Interest
2013 $ 2,536,840 $ 2,501,643
2014 2,408,500 2,637,450
2015 2,885,310 1,547,164
2016 3,106,080 1,442,110
2017 3,256,040 1,328,372
2018-22 17,006,340 4,638,892
2023-27 11,934,680 1,256,171
2028-29 710,000 24,084
Total $ 43,843,790 $ 15,375,886
Page 51
TOWN OF ORO VALLEY,ARIZONA
NOTES TO FINANCIAL STATEMENTS
JUNE 30,2012
NOTE 7—BONDS PAYABLE (Concl'd)
Issuance of refunding bonds — business-type activities. On May 24, 2012, the Town
issued $16,595,000 in refunding bonds, with an effective interest rate of 2.2 percent, to
advance refund $20,185,000 of outstanding Senior Lien Water Project Revenue Bonds,
Series 2003, with an average interest rate of 5.0 percent. The net proceeds of$18.3 million,
which includes $1.9 million of bond premium, (after payment of$315,950 in underwriting
fees, insurance, and other issuance costs) and an additional Town contribution of$3.5 million
were used to purchase U.S. government securities. Those securities were deposited in an
irrevocable trust with an escrow agent, to provide for all future debt service payments of the
refunded revenue bonds. As a result, the refunded revenue bonds are considered to be
defeased, and the liability for those bonds has been removed from both the government-wide
and proprietary funds financial statements. The advanced refunding was undertaken to
reduce total debt service payments over the next 17 years by $5.5 million and resulted in an
economic gain (difference between the present values of the old and new debt service
payments) of$3.4 million.
Pledged revenues — governmental activities. The Town has pledged future sales (excise)
tax revenues to repay outstanding revenue bonds and refunding revenue bonds of $9.4
million as of June 30, 2012. Proceeds from the original bond issuances, including those
subsequently refunded, provided financing for land acquisition and facility construction. The
bonds are paid solely from the Town's sales taxes and are payable through 2028. Total
annual principal and interest payments for all sales tax revenue bonds are expected to require
less than 7% of gross revenues. The total principal and interest to be paid on the bonds is
$13.0 million. The current total sales tax revenues were $12.5 million and the total principal
and interest paid on the bonds was $619,523, or 5%of gross revenues.
Pledged revenues — business-type activities. The Town has pledged future water revenues
to repay outstanding revenue bonds and refunding revenue bonds of $43.8 million as of
June 30, 2012. Proceeds from the original bond issuances, including those subsequently
refunded, provided financing for the construction and improvements to the Town's water
systems and infrastructure. The bonds are paid solely from water utility revenues and are
payable through 2029. Total annual principal and interest payments for all water revenue
bond issuances are expected to require approximately 25% of gross revenues. The total
principal and interest to be paid on the bonds is $59.2 million. The current total customer
gross revenues were $16.0 million and the total principal and interest paid on the bonds was
$4.6 million or 29% of gross revenues.
Page 52
TOWN OF ORO VALLEY,ARIZONA
NOTES TO FINANCIAL STATEMENTS
JUNE 30,2012
NOTE 8—SPECIAL ASSESSMENT BONDS
Special assessment bonds at year end consisted of the following outstanding bonds. The
bonds are both callable and noncallable with interest payable semiannually. Special
assessments from the Oracle Road Debt Service Fund are used to pay bonded debt.
Original Outstanding Due
Amount Interest Remaining Principal Within
Purpose Issued Rates Maturities June 30, 2012 One Year
Governmental activities:
Special assessments debt $3,945,000 4.20-5.00% 1/1/12-21 $ 2,685,000 $ 250,000
Total $ 2,685,000 $ 250,000
Annual debt service requirements to maturity on special assessment bonds at year end are
summarized as follows.
Governmental Activities
Year ending June 30: Principal Interest
2013 $ 250,000 $ 117,578
2014 260,000 105,867
2015 270,000 94,602
2016 280,000 82,637
2017 295,000 69,102
2018-21 1,330,000 128,019
Total $ 2,685,000 $ 597,805
NOTE 9—OBLIGATIONS UNDER CAPITAL LEASES
The business-type activities of the Town have acquired a street sweeper and dump truck
under the provisions of long-term lease agreements classified as a capital leases. The lease
agreements qualify as capital leases for accounting purposes and, therefore, have been
recorded at the present value of their future minimum lease payments as of the inception
date. Revenues from the Stormwater Fund are used to pay the capital lease obligations. As
of June 30, 2012,the obligations under capital leases were fully paid.
The assets capitalized and acquired through capital leases are as follows.
Business-type
Activities
Asset:
Vehicles $ 307,648
Less: Accumulated depreciation 84,545
Total $ 223,103
Page 53
TOWN OF ORO VALLEY,ARIZONA
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2012
NOTE 10—CHANGES IN LONG-TERM LIABILITIES
Long-term liability activity for the current fiscal year was as follows.
Beginning Ending Due Within
Balance Additions Reductions Balance One Year
Governmental activities:
Revenue bonds payable $ 7,149,780 $ 2,580,000 $ 304,820 $ 9,424,960 $ 321,910
Deferred bond premium 69,323 8,315 61,008
Special assessments payable 2,920,000 235,000 2,685,000 250,000
Loan payable 2,513,133 2,513,133
Compensated absences payable 1,582,757 1,599,051 1,530,661 1,651,147 1,287,895
Governmental activity long-term
liabilities $ 14,234,993 $ 4,179,051 $ 4,591,929 $ 13,822,115 $ 1,859,805
Business-type activities:
Revenue bonds payable $ 49,803,970 $ 16,595,000 $22,555,180 $ 43,843,790 $ 2,536,840
Deferred bond premium 933,870 1,866,841 656,170 2,144,541
Loan payable 5,473,096 727,696 307,670 5,893,122 311,742
Capital lease payable 3 5,3 92 3 5,3 92
Compensated absences payable 173,171 245,142 176,026 242,287 159,909
Business-type activities long-term
liabilities $ 56,419,499 $ 19,434,679 $23,730,438 $ 52,123,740 $ 3,008,491
NOTE 11—INTERFUND RECEIVABLES,PAYABLES,AND TRANSFERS
Interfund transfers:
Transfers in
Non-Major
General Governmental
Transfers out Fund Funds Total
General Fund $ $ 185,240 $ 185,240
Non-Major Governmental Funds 318,426 500,000 818,426
Total $ 318,426 $ 685,240 $1,003,666
Transfers were made from the General Fund to the Townwide Facilities Projects Fund to
separately account for the receipt and expenditure of Town Recreation in Lieu Fee revenue.
In addition, transfers were made from the Bed Tax Fund to the General and Aquatic Center
Project Funds to fund Transit service operations in the General Fund and to provide funding
for the construction of the Aquatic Center Facility at James D. Kriegh Park as approved by
the Town Council.
Page 54
TOWN OF ORO VALLEY,ARIZONA
NOTES TO FINANCIAL STATEMENTS
JUNE 30,2012
NOTE 12—CONTINGENT LIABILITIES
Compliance—Amounts received or receivable from grantor agencies are subject to audit and
adjustment by grantor agencies, principally the federal government. Any disallowed claims,
including amounts already collected, may constitute a liability of the applicable funds. The
amount, if any, of expenditures/expenses that may be disallowed by the grantor cannot be
determined at this time, although the Town expects such amounts, if any, to be immaterial.
NOTE 13 —RISK MANAGEMENT
The Town is exposed to various risks of loss related to torts; theft of, damage to, and
destruction of assets; errors and omissions; injuries to employees; and natural disasters.
The Town's insurance protection is provided by the Arizona Municipal Risk Retention Pool,
of which the Town is a participating member. The limit for basic coverage is for $2,000,000
per occurrence on a claims made basis. Excess coverage is for an additional $10,000,000 per
occurrence on a follow form, claims made basis. The aggregate limit is also $10,000,000. No
significant reduction in insurance coverage occurred during the year and no settlements
exceeded insurance coverage during any of the past three fiscal years.
The Arizona Municipal Risk Retention Pool is structured such that member premiums are
based on an actuarial review that will provide adequate reserves to allow the Pool to meet its
expected financial obligations. The Pool has the authority to assess its members' additional
premiums should reserves and annual premiums be insufficient to meet the Pool's obligations.
The Town is insured by Arizona Municipal Workers Compensation Pool for potential worker
related accidents.
NOTE 14—PENSIONS AND OTHER POSTEMPLOYMENT BENEFITS
Plan Descriptions — The Town contributes to the three plans described below. Benefits are
established by state statute and generally provide retirement, death, long-term disability,
survivor, and health insurance premium benefits.
The Arizona State Retirement System (ASRS) administers a cost-sharing multiple-employer
defined benefit pension plan; a cost-sharing multiple employer defined benefit health
insurance premium plan; and a cost-staring, multiple-employer defined benefit long-term
disability plan that covers employees of the State of Arizona and employees of participating
political subdivisions and school districts. The ASRS is governed by the Arizona State
Retirement System Board according to the provisions of A.R.S. Title 38, Chapter 5,Article 2.
Page 55
TOWN OF ORO VALLEY,ARIZONA
NOTES TO FINANCIAL STATEMENTS
JUNE 30,2012
NOTE 14—PENSIONS AND OTHER POSTEMPLOYMENT BENEFITS (Cont'd)
The Public Safety Personnel Retirement System (PSPRS) administers agent multiple-
employer defined benefit pension plan and an agent multiple-employer defined benefit health
insurance premium plan that covers public safety personnel who are regularly assigned
hazardous duty as employees of the State of Arizona or one of its political subdivisions. The
PSPRS, acting as a common investment and administrative agent, is governed by a five-
member board, known as The Fund Manager, and 162 local boards according to the
provisions of A.R.S. Title 38, Chapter 5, Article 4.
The Corrections Officer Retirement Plan (CORP) administers an agent multiple-employer
defined benefit pension plan and an agent multiple-employer defined benefit health insurance
premium plan that covers certain employees of the State of Arizona's Department of
Corrections and Department of Juvenile Corrections, and county employees whose primary
duties require direct inmate contact. The CORP is governed by The Fund Manager of PSPRS
and the participating local boards according to the provisions of A.R.S. Title 38, Chapter 5,
Article 6.
Each plan issues a publicly available financial report that includes its financial statements and
required supplementary information. A report may be obtained by writing or calling the
applicable plan. The reports are also available on their websites at www.azasrs.gov and
www.psprs.com.
ASRS PSPRS/CORP
P.O. Box 33910 3010 E. Camelback Road Suite 200
Phoenix, AZ 85012-0250 Phoenix,AZ 85016
(602) 240-2200 or(800) 621-3778 (602) 255-5575
Funding policy — The Arizona State Legislature establishes and may amend active plan
members' and the Town's contribution rates.
Cost-sharing plans — The Arizona State Legislature establishes and may amend active plan
members' and the Town's contribution rates. For the current fiscal year, active ASRS
members were required by statute to contribute at the actuarially determined rate of 10.74
percent (10.50 percent for retirement and 0.24 percent for long-term disability) of the
members' annual covered payroll and the Town was required by statute to contribute at the
actuarially determined rate of 10.74 percent (9.87 percent for retirement, 0.63 percent for
health insurance premium, and 0.24 percent for long-term disability) of the members' annual
covered payroll.
Page 56
TOWN OF ORO VALLEY,ARIZONA
NOTES TO FINANCIAL STATEMENTS
JUNE 30,2012
NOTE 14—PENSIONS AND OTHER POSTEMPLOYMENT BENEFITS (Cont'd)
The Town's contributions for the current and two preceding years, all of which were equal to
the required contributions, were as follows.
Health Benefit Long-Term
Retirement Supplement Disability
Fund Fund Fund
Year ending June 30:
2012 $ 924,771 $ 59,028 $ 22,487
2011 985,116 77,959 47,248
2010 949,928 75,174 45,560
Agent plan —For the current fiscal year, active PSPRS and CORP members were required by
statute to contribute 7.65 and 7.96 percent of the members' annual covered payroll, and the
Town was required to contribute at the actuarially determined rate of 16.31 and 9.13 percent.
The health insurance premium portion of the contribution rate was actuarially set at 0.69
percent of covered payroll for PSPRS and 0.44 percent for CORP.
Actuarial methods and assumptions — The contribution requirements for the year ended
June 30, 2012 were established by the June 30, 2010 actuarial valuations, and those actuarial
valuations were based on the following actuarial methods and assumptions. Actuarial
valuations involve estimates of the value of reported amounts and assumptions about the
probability of events in the future. The required schedule of funding programs which follows
provides multi-year trend information that shows whether the actuarial value of the plans'
assets are increasing or decreasing over time relative to the actuarial accrued liability for
benefits.
PSPRS CORP
Contribution rates:
Town 16.31% 9.13%
Plan members 7.65% 7.96%
Actuarial valuation date June 30, 2010 June 30, 2010
Actuarial cost method Projected unit credit Projected unit credit
Actuarial assumptions:
Investment rate of return 8.5% 8.5%
Projected salary increases 5.5% - 8.5% 5.5% - 8.5%
Amortization method Level percent closed for Level percent closed for
unfunded actuarial liability, unfunded actuarial liability,
open for excess open for excess
Remaining amortization 26 years for unfunded actuarial 26 years for unfunded actuarial
accrued liability, 20 years for accrued liability, 20 years for
excess excess
Asset valuation method 7-year smoothed market value 7-year smoothed market value
Page 57
TOWN OF ORO VALLEY,ARIZONA
NOTES TO FINANCIAL STATEMENTS
JUNE 30,2012
NOTE 14—PENSIONS AND OTHER POSTEMPLOYMENT BENEFITS (Cont'd)
Annual Pension/OPEB Cost — The Town's pension/OPEB cost for the agent plans for the
current fiscal year end and related information follows.
PSPRS CORP
Health Health
Pension Insurance Pension Insurance
Annual pension/OPEB cost $ 914,787 $ 40,410 $ 40,512 $ 2,051
Contributions made 914,787 40,410 40,512 2,051
Trend Information — Information for each of the agent plans as of most recent actuarial
valuations follows.
Oro Valley Police Plan (PSPRS):
Year Ended Annual Pension Percentage of APC Net Pension
June 30, Cost(APC) Contributed Obligation
Pension
2012 $ 914,787 100% -0-
2011 874,605 100% -0-
2010 891,682 100% -0-
Health Insurance
2012 40,410 100% -0-
2011 36,442 100% -0-
2010 88,075 100% -0-
Oro Valley Dispatchers Plan (CORP):
Year Ended Annual Pension Percentage of APC Net Pension
June 30, Cost(APC) Contributed Obligation
Pension
2012 $ 40,512 100% -0-
2011 47,611 100% -0-
2010 52,845 100% -0-
Health Insurance
2012 2,051 100% -0-
2011 1,925 100% -0-
2010 5,085 100% -0-
Page 58
TOWN OF ORO VALLEY,ARIZONA
NOTES TO FINANCIAL STATEMENTS
JUNE 30,2012
NOTE 14—PENSIONS AND OTHER POSTEMPLOYMENT BENEFITS (Concl'd)
Funding Progress — An analysis of funding progress for each of the agent plans as of the
most recent actuarial valuations follows.
Oro Valley Police Plan (PSPRS):
Pension
Unfunded
Liability as
Actuarial Actuarial Annual Percentage
Valuation Value of Accrued Funding Funded Covered of Covered
Date Plan Assets Liability Liability Ratio Payroll Payroll
June 30, (a) (b) (a-b) (a/b) (c) ([a-bJ/c)
2011 $19,281,518 $25,262,364 $(5,980,846) 76.3% $5,728,605 104.40%
2010 17,152,906 21,796,927 (4,644,021) 78.7% 5,994,879 77.47%
2009 15,727,624 20,322,658 (4,595,034) 77.4% 5,951,423 77.21%
Health Insurance
2011 $ -0- $ 942,374 $ (942,374) 0.0% $5,728,605 16.45%
2010 -0- 715,698 (715,698) 0.0% 5,994,879 11.94%
2009 -0- 628,965 (628,965) 0.0% 5,951,423 10.57%
Oro Valley Dispatchers Plan (CORP):
Pension
Unfunded
Liability as
Actuarial Actuarial Annual Percentage
Valuation Value of Accrued Funding Funded Covered of Covered
Date Plan Assets Liability Liability Ratio Payroll Payroll
June 30, (a) (b) (a-b) (a/b) (c) [a-b]/c)
2011 $1,160,778 $1,670,411 $ (509,633) 69.5% $477,701 106.68%
2010 1,057,358 1,349,198 (291,840) 78.4% 513,337 56.85%
2009 1,082,181 1,581,254 (499,073) 68.4% 604,184 82.60%
Health Insurance
2011 $ -0- $ 61,474 $ (61,474) 0.0% $477,701 12.87%
2010 -0- 45,521 (45,521) 0.0% 513,337 8.87%
2009 -0- 54,580 (54,580) 0.0% 604,184 9.03%
Page 59
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Page 60
SCHEDULE OF REVENUES,EXPENDITURES,AND CHANGES IN
FUND BALANCES—BUDGET AND ACTUAL
(REQUIRED SUPPLEMENTARY INFORMATION)
Page 61
TOWN OF ORO VALLEY,ARIZONA
SCHEDULE OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCES-BUDGET AND ACTUAL
GENERAL FUND
YEAR ENDED JUNE 30,2012
Budgeted Variance with
Amounts Final Budget
Positive
Original&Final Actual (Negative)
Revenues:
Sales taxes $ 11,901,316 $ 11,656,582 $ (244,734)
Franchise taxes 500,000 525,427 25,427
Intergovernmental 9,872,457 9,968,445 95,988
Licenses,fees&permits 1,126,894 1,138,348 11,454
Fines,forfeitures&penalties 190,000 212,922 22,922
Charges for services 1,237,851 1,209,814 (28,037)
Contributions and donations 995 995
Investment earnings 22,000 159,182 137,182
Other 157,500 214,052 56,552
Total revenues 25,008,018 25,085,767 77,749
Expenditures:
Current-
General government 11,117,377 8,974,197 2,143,180
Public safety 12,096,513 11,874,887 221,626
Highway and streets 572,827 (572,827)
Culture and recreation 2,876,702 2,954,549 (77,847)
Capital outlay 447,982 (447,982)
Total expenditures 26,090,592 24,824,442 1,266,150
Excess(deficiency)of revenues over expenditures (1,082,574) 261,325 1,343,899
Other financing sources(uses):
Transfers in 1,125,926 318,426 (807,500)
Transfers out (223,352) (185,240) 38,112
Total other financing sources(uses): 902,574 133,186 (769,388)
Changes in fund balances (180,000) 394,511 574,511
Fund balances,beginning of year 180,000 11,007,138 10,827,138
Fund balances,end of year $ $ 11,401,649 $ 11,401,649
See accompanying notes to this schedule.
Page 62
TOWN OF ORO VALLEY,ARIZONA
SCHEDULE OF REVENUES,EXPENDITURES AND
CHANGES IN FUND BALANCES-BUDGET AND ACTUAL
HURF
YEAR ENDED JUNE 30,2012
Budgeted Variance with
Amounts Final Budget
Positive
Original&Final Actual (Negative)
Revenues:
Sales taxes $ 367,400 $ 348,378 $ (19,022)
Intergovernmental 2,878,464 2,694,079 (184,385)
Licenses,fees&permits 42,000 47,514 5,514
Investment earnings 10,700 10,809 109
Other 10,000 25,173 15,173
Total revenues 3,308,564 3,125,953 (182,611)
Expenditures:
Current-
Highway and streets 4,093,277 2,618,827 1,474,450
Capital outlay 1,144,643 (1,144,643)
Total expenditures 4,093,277 3,763,470 329,807
Excess(deficiency)of revenues over expenditures (784,713) (637,517) 147,196
Other financing sources(uses):
Transfers out (400,000) 400,000
Total other financing sources(uses): (400,000) 400,000
Changes in fund balances (1,184,713) (637,517) 547,196
Fund balances,beginning of year 1,184,713 3,654,948 2,470,235
Fund balances,end of year $ $ 3,017,431 $ 3,017,431
See accompanying notes to this schedule.
Page 63
TOWN OF ORO VALLEY,ARIZONA
NOTE TO REQUIRED SUPPLEMENTARY INFORMATION
JUNE 30,2012
NOTE 1 —BUDGETARY BASIS OF ACCOUNTING
The adopted budget of the Town is prepared on the modified accrual basis of accounting.
Page 64
COMBINING AND INDIVIDUAL
FUND FINANCIAL STATEMENTS
AND SCHEDULES
Page 65
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Page 66
GOVERNMENTAL FUNDS
Page 67
TOWN OF ORO VALLEY,ARIZONA
COMBINING BALANCE SHEET-ALL NON-MAJOR GOVERNMENTAL FUNDS- BY FUND TYPE
JUNE 30,2012
Special Revenue Debt Service Capital Projects
ASSETS
Cash and cash equivalents $ 1,747,162 $ 1,164,733 $ 4,135,620
Total assets $ 1,747,162 $ 1,164,733 $ 4,135,620
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable $ 66,155 $ $ 154,070
Total liabilities 66,155 154,070
Fund balances:
Restricted 1,058,088 1,164,733 3,981,550
Committed 622,919
Total fund balances 1,681,007 1,164,733 3,981,550
Total liabilities and fund balances $ 1,747,162 $ 1,164,733 $ 4,135,620
Page 68
Total Non-
Maj or
Governmental
Fund
$ 7,047,515
$ 7,047,515
$ 220,225
220,225
6,204,371
622,919
6,827,290
$ 7,047,515
Page 69
TOWN OF ORO VALLEY,ARIZONA
COMBINING STATEMENT OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCES-
ALL NON-MAJOR GOVERNMENTAL FUNDS-BY FUND TYPE
YEAR ENDED JUNE 30,2012
Special Revenue Debt Service Capital Projects
Revenues:
Sales taxes $ 794,718 $ $
In lieu fees 834
Impact fees 178,175
Intergovernmental 84,527
Fines,forfeitures&penalties 682,898
Investment earnings 11,859 82 6,140
Other 203,287
Total revenues 1,489,475 287,896 185,149
Expenditures:
Current-
General government 238,669
Public safety 118,977
Capital outlay 99,198 351,626
Debt service-
Bond issuance costs 75,800
Principal retirement 304,820
Interest and fiscal charges 319,427 90
Total expenditures 456,844 624,247 427,516
Excess(deficiency)of revenues over expenditures 1,032,631 (336,351) (242,367)
Other financing sources(uses):
Issuance of revenue bonds 2,580,000
Premium on bonds issued 113,835
Transfers in 685,240
Transfers out (818,426)
Total other financing sources(uses): (818,426) 3,379,075
Changes in fund balances 214,205 (336,351) 3,136,708
Fund balances,beginning of year 1,466,802 1,501,084 844,842
Fund balances,end of year $ 1,681,007 $ 1,164,733 $ 3,981,550
Page 70
Total Non-
Maj or
Governmental
Funds
$ 794,718
834
178,175
84,527
682,898
18,081
203,287
1,962,520
238,669
118,977
450,824
75,800
304,820
319,517
1,508,607
453,913
2,580,000
113,835
685,240
(818,426)
2,560,649
3,014,562
3,812,728
$ 6,827,290
Page 71
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Page 72
SPECIAL REVENUE FUNDS
The Special Revenue Funds account for the proceeds of specific revenue sources, other than
major capital projects, that are legally restricted to expenditures for specified purposes.
State Seizures and Forfeitures — accounts for state police seizures and forfeitures received by
the Town.
Federal Seizures and Forfeitures—accounts for federal police seizures and forfeitures received
by the Town.
Bed Tax — accounts for the collection of the 6 percent bed tax revenues which funds economic
development and tourism initiatives.
Impound Fee — accounts for the collection of administrative fees for processing vehicles
impounded by the Oro Valley police department.
Page 73
TOWN OF ORO VALLEY,ARIZONA
COMBINING BALANCE SHEET-NON-MAJOR SPECIAL REVENUE FUNDS
JUNE 30,2012
State Seizures Federal Seizures
and Forfeitures and Forfeitures Bed Tax
ASSETS
Cash and cash equivalents $ 476,491 $ 613,629 $ 657,042
Total assets $ 476,491 $ 613,629 $ 657,042
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable $ 12,308 $ 19,724 $ 34,123
Total liabilities 12,308 19,724 34,123
Fund balances:
Restricted 464,183 593,905
Committed 622,919
Total fund balances 464,183 593,905 622,919
Total liabilities and fund balances $ 476,491 $ 613,629 $ 657,042
Page 74
Totals
$ 1,747,162
$ 1,747,162
$ 66,155
66,155
1,058,088
622,919
1,681,007
$ 1,747,162
Page 75
TOWN OF ORO VALLEY,ARIZONA
COMBINING STATEMENT OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCES-
NON-MAJOR SPECIAL REVENUE FUNDS
YEAR ENDED JUNE 30,2012
State Seizures Federal Seizures
and Forfeitures and Forfeitures Bed Tax
Revenues:
Sales taxes $ $ $ 794,718
Fines,forfeitures&penalties 339,650 306,208
Investment earnings 1,404 2,903 7,552
Total revenues 341,054 309,111 802,270
Expenditures:
Current-
General government 201,629
Public safety 39,647 79,330
Capital outlay 5,816 93,382
Total expenditures 45,463 172,712 201,629
Excess(deficiency)of revenues over expenditures 295,591 136,399 600,641
Other financing sources(uses):
Transfers out (818,426)
Total other financing sources(uses): (818,426)
Changes in fund balances 295,591 136,399 (217,785)
Fund balances,beginning of year 168,592 457,506 840,704
Fund balances,end of year $ 464,183 $ 593,905 $ 622,919
Page 76
Impound Fee Totals
$ $ 794,718
37,040 682,898
11,859
37,040 1,489,475
37,040 238,669
118,977
99,198
37,040 456,844
1,032,631
(818,426)
(818,426)
214,205
1,466,802
$ $ 1,681,007
Page 77
TOWN OF ORO VALLEY,ARIZONA
COMBINING SCHEDULE OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCES-
BUDGET AND ACTUAL
NON-MAJOR SPECIAL REVENUE FUNDS
YEAR ENDED JUNE 30,2012
State Seizures and Forfeitures
Variance-
Positive
Budget Actual (Negative)
Revenues:
Sales taxes $ $ $
Fines,forfeitures&penalties 102,500 339,650 237,150
Investment earnings 1,404 1,404
Total revenues 102,500 341,054 238,554
Expenditures:
Current-
General government
Public safety 344,420 39,647 304,773
Capital outlay 5,816 (5,816)
Total expenditures 344,420 45,463 298,957
Excess(deficiency)of revenues over expenditures (241,920) 295,591 537,511
Other financing sources(uses):
Transfers out
Total other financing sources(uses):
Changes in fund balances (241,920) 295,591 537,511
Fund balances,beginning of year 241,920 168,592 (73,328)
Fund balances,end of year $ $ 464,183 $ 464,183
Page 78
Federal Seizures and Forfeitures Bed Tax
Variance- Variance-
Positive Positive
Budget Actual (Negative) Budget Actual (Negative)
$ $ $ $ 899,626 $ 794,718 $ (104,908)
251,300 306,208 54,908
2,903 2,903 1,800 7,552 5,752
251,300 309,111 57,811 901,426 802,270 (99,156)
638,276 201,629 436,647
696,661 79,330 617,331
93,382 (93,382)
696,661 172,712 523,949 638,276 201,629 436,647
(445,361) 136,399 581,760 263,150 600,641 337,491
(1,125,926) (818,426) 307,500
(1,125,926) (818,426) 307,500
(445,361) 136,399 581,760 (862,776) (217,785) 644,991
445,361 457,506 12,145 862,776 840,704 (22,072)
$ $ 593,905 $ 593,905 $ $ 622,919 $ 622,919
(Continued)
Page 79
TOWN OF ORO VALLEY,ARIZONA
COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES-
BUDGET AND ACTUAL
NON-MAJOR SPECIAL REVENUE FUNDS
YEAR ENDED JUNE 30,2012
Impound Fee
Variance-
Positive
Budget Actual (Negative)
Revenues:
Sales taxes $ $ $
Fines,forfeitures&penalties 50,000 37,040 (12,960)
Investment earnings
Total revenues 50,000 37,040 (12,960)
Expenditures:
Current-
General government 52,283 37,040 15,243
Public safety
Capital outlay
Total expenditures 52,283 37,040 15,243
Excess(deficiency)of revenues over expenditures (2,283) 2,283
Other financing sources(uses):
Transfers out
Total other financing sources(uses):
Changes in fund balances (2,283) 2,283
Fund balances,beginning of year 2,283 (2,283)
Fund balances,end of year $ $ $
Page 80
Totals
Variance-
Positive
Budget Actual (Negative)
$ 899,626 $ 794,718 $ (104,908)
403,800 682,898 279,098
1,800 11,859 10,059
1,305,226 1,489,475 184,249
690,559 238,669 451,890
1,041,081 118,977 922,104
99,198 (99,198)
1,731,640 456,844 1,274,796
(426,414) 1,032,631 1,459,045
(1,125,926) (818,426) 307,500
(1,125,926) (818,426) 307,500
(1,552,340) 214,205 1,766,545
1,552,340 1,466,802 (85,538)
$ $ 1,681,007 $ 1,681,007
Page 81
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Page 82
MUNICIPAL DEBT SERVICE FUND
Municipal Debt Service -to account for the payments of debt service on the Municipal Property
Corporation Revenue Bonds of 2003 Refunding, 2005 and 2007 Refunding, and Series 2010
Excise Tax Revenue Obligations.
Page 83
TOWN OF ORO VALLEY,ARIZONA
COMBINING BALANCE SHEET-NON-MAJOR DEBT SERVICE FUNDS
JUNE 30,2012
Municipal Debt
Service Totals
ASSETS
Cash and cash equivalents $ 1,164,733 $ 1,164,733
Total assets $ 1,164,733 $ 1,164,733
Fund balances:
Restricted 1,164,733 1,164,733
Total fund balances 1,164,733 1,164,733
Total liabilities and fund balances $ 1,164,733 $ 1,164,733
Page 84
TOWN OF ORO VALLEY,ARIZONA
COMBINING STATEMENT OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCES-
NON-MAJOR DEBT SERVICE FUNDS
YEAR ENDED JUNE 30,2012
Municipal Debt
Service Totals
Revenues:
Intergovernmental $ 84,527 $ 84,527
Investment earnings 82 82
Other 203,287 203,287
Total revenues 287,896 287,896
Expenditures:
Debt service-
Principal retirement 304,820 304,820
Interest and fiscal charges 319,427 319,427
Total expenditures 624,247 624,247
Changes in fund balances (336,351) (336,351)
Fund balances,beginning of year 1,501,084 1,501,084
Fund balances,end of year $ 1,164,733 $ 1,164,733
Page 85
TOWN OF ORO VALLEY,ARIZONA
COMBINING SCHEDULE OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCES-
BUDGET AND ACTUAL
ALL DEBT SERVICE FUNDS
YEAR ENDED JUNE 30,2012
Municipal Debt Service
Variance-
Positive
Budget Actual (Negative)
Revenues:
Special assessments $ $ $
Intergovernmental 85,777 84,527 (1,250)
Investment earnings 82 82
Other 203,287 203,287
Total revenues 85,777 287,896 202,119
Expenditures:
Debt service-
Principal retirement 1,885,937 304,820 1,581,117
Interest and fiscal charges 319,427 (319,427)
Total expenditures 1,885,937 624,247 1,261,690
Excess(deficiency)of revenues over expenditures (1,800,160) (336,351) 1,463,809
Other financing sources(uses):
Transfers in 228,647 (228,647)
Total other financing sources(uses): 228,647 (228,647)
Changes in fund balances (1,571,513) (336,351) 1,235,162
Fund balances,beginning of year 1,571,513 1,501,084 (70,429)
Fund balances,end of year $ $ 1,164,733 $ 1,164,733
Page 86
Oracle Road Debt Service Totals
Variance- Variance-
Positive Positive
Budget Actual (Negative) Budget Actual (Negative)
$ 364,703 $ 366,028 $ 1,325 $ 364,703 $ 366,028 $ 1,325
85,777 84,527 (1,250)
82 82
203,287 203,287
364,703 366,028 1,325 450,480 653,924 203,444
370,332 235,000 135,332 2,256,269 539,820 1,716,449
132,423 (132,423) 451,850 (451,850)
370,332 367,423 2,909 2,256,269 991,670 1,264,599
(5,629) (1,395) 4,234 (1,805,789) (337,746) 1,468,043
228,647 (228,647)
228,647 (228,647)
(5,629) (1,395) 4,234 (1,577,142) (337,746) 1,239,396
5,629 4,987 (642) 1,577,142 1,506,071 (71,071)
$ $ 3,592 $ 3,592 $ $ 1,168,325 $ 1,168,325
Page 87
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Page 88
CAPITAL PROJECTS FUNDS
Capital Projects Funds are created to account for the purchase or construction of major capital
facilities which are not financed by the general, enterprise, or special revenue funds.
General Impact Fees — accounts for the collection of development impact fees charged for new
residential and nonresidential growth to be used for future general government facilities,
vehicles, equipment, and other necessary general government infrastructure needed as a result of
new growth.
Townwide Facilities Projects — accounts for revenues dedicated to constructing solar facilities,
improvements to Town parks, and historic properties.
Aquatic Center Project — accounts for construction of expanded Aquatic Center at James D.
Kriegh Park.
Page 89
TOWN OF ORO VALLEY,ARIZONA
COMBINING BALANCE SHEET-NON-MAJOR CAPITAL PROJECTS FUNDS
JUNE 30,2012
Townwide
General Impact Facilities Aquatic Center
Fees Projects Project
ASSETS
Cash and cash equivalents $ 598,287 $ 414,651 $ 3,122,682
Total assets $ 598,287 $ 414,651 $ 3,122,682
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable $ 153,720 $ $ 350
Total liabilities 153,720 350
Fund balances:
Restricted 444,567 414,651 3,122,332
Total fund balances 444,567 414,651 3,122,332
Total liabilities and fund balances $ 598,287 $ 414,651 $ 3,122,682
Page 90
Totals
$ 4,13 5,620
$ 4,13 5,620
$ 154,070
154,070
3,981,550
3,981,550
$ 4,135,620
Page 91
TOWN OF ORO VALLEY,ARIZONA
COMBINING STATEMENT OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCES-
NON-MAJOR CAPITAL PROJECTS FUNDS
YEAR ENDED JUNE 30,2012
Townwide
General Impact Facilities Aquatic Center
Fees Projects Project
Revenues:
In lieu fees $ $ 834 $
Impact fees 178,175
Investment earnings 591 5,549
Total revenues 178,766 834 5,549
Expenditures:
Current-
Capital outlay 320,219 30,245 1,162
Debt service-
Bond issuance costs 75,800
Interest and fiscal charges 90
Total expenditures 320,219 30,245 77,052
Excess(deficiency)of revenues over expenditures (141,453) (29,411) (71,503)
Other financing sources(uses):
Issuance of revenue bonds 2,580,000
Premium on bonds issued 113,835
Transfers in 185,240 500,000
Total other financing sources(uses): 185,240 3,193,835
Changes in fund balances (141,453) 155,829 3,122,332
Fund balances,beginning of year 586,020 258,822
Fund balances,end of year $ 444,567 $ 414,651 $ 3,122,332
Page 92
Totals
$ 834
178,175
6,140
185,149
351,626
75,800
90
427,516
(242,367)
2,580,000
113,835
685,240
3,379,075
3,136,708
844,842
$ 3,981,550
Page 93
TOWN OF ORO VALLEY,ARIZONA
COMBINING SCHEDULE OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCES-
BUDGET AND ACTUAL
NON-MAJOR CAPITAL PROJECTS FUNDS
YEAR ENDED JUNE 30,2012
General Impact Fees
Variance-
Positive
Budget Actual (Negative)
Revenues:
In lieu fees $ $ $
Impact fees 262,433 178,175 (84,258)
Investment earnings 591 591
Total revenues 262,433 178,766 (83,667)
Expenditures:
Current-
Capital outlay 777,455 320,219 457,236
Debt service-
Bond issuance costs
Interest and fiscal charges
Total expenditures 777,455 320,219 457,236
Excess(deficiency)of revenues over expenditures (515,022) (141,453) 373,569
Other financing sources(uses):
Issuance of revenue bonds
Premium on bonds issued
Transfers in
Total other financing sources(uses):
Changes in fund balances (515,022) (141,453) 373,569
Fund balances,beginning of year 515,022 586,020 70,998
Fund balances,end of year $ $ 444,567 $ 444,567
Page 94
Townwide Facilities Projects Aquatic Center Project
Variance- Variance-
Positive Positive
Budget Actual (Negative) Budget Actual (Negative)
$ $ 834 $ 834 $ $ $
5,549 5,549
834 834 5,549 5,549
258,821 30,245 228,576 1,162 (1,162)
75,800 (75,800)
90 (90)
258,821 30,245 228,576 77,052 (77,052)
(258,821) (29,411) 229,410 (71,503) (71,503)
2,580,000 2,580,000
113,835 113,835
185,240 185,240 500,000 500,000
185,240 185,240 3,193,835 3,193,835
(258,821) 155,829 414,650 3,122,332 3,122,332
258,821 258,822 1
$ $ 414,651 $ 414,651 $ $ 3,122,332 $ 3,122,332
(Continued)
Page 95
TOWN OF ORO VALLEY,ARIZONA
COMBINING SCHEDULE OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCES-
BUDGET AND ACTUAL
NON-MAJOR CAPITAL PROJECTS FUNDS
YEAR ENDED JUNE 30,2012
Totals
Variance-
Positive
Budget Actual (Negative)
Revenues:
In lieu fees $ $ 834 $ 834
Impact fees 262,433 178,175 (84,258)
Investment earnings 6,140 6,140
Total revenues 262,433 185,149 (77,284)
Expenditures:
Current-
Capital outlay 1,036,276 351,626 684,650
Debt service-
Bond issuance costs 75,800 (75,800)
Interest and fiscal charges 90 (90)
Total expenditures 1,036,276 427,516 608,760
Excess(deficiency)of revenues over expenditures (773,843) (242,367) 531,476
Other financing sources(uses):
Issuance of revenue bonds 2,580,000 2,580,000
Premium on bonds issued 113,835 113,835
Transfers in 685,240 685,240
Total other financing sources(uses): 3,379,075 3,379,075
Changes in fund balances (773,843) 3,136,708 3,910,551
Fund balances,beginning of year 773,843 844,842 70,999
Fund balances,end of year $ $ 3,981,550 $ 3,981,550
Page 96
STATISTICAL SECTION
The statistical section presents financial statement trends as well as detailed financial and
operational information not available elsewhere in the report. The statistical section is intended
to enhance the reader's understanding of the information presented in the financial statements,
notes to the financial statements, and other supplementary information presented in this report.
The statistical section is comprised of the five categories of statistical information presented
below.
Financial Trends
These schedules contain information on financial trends to help the reader understand how
the Town's financial position and financial activities have changed over time.
Revenue Capacity
These schedules contain information to help the reader assess the factors affecting the
Town's ability to generate property revenue.
Debt Capacity
These schedules present information to help the reader evaluate the Town's current levels
of outstanding debt as well as assess the Town's ability to make debt payments and/or issue
additional debt in the future.
Demographic and Economic Information
These schedules present various demographic and economic indicators to help the reader
understand the environment in which the Town's financial activities take place and to help
make comparisons with other municipalities.
Operating Information
These schedules contain information about the Town's operations and various resources to
help the reader draw conclusions as to how the Town's financial information relates to the
services provided by the Town.
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DIRECT AND OVERLAPPING SALES TAX RATES
LAST TEN FISCAL YEARS
(UNAUDITED)
Town of Oro
Town of Oro Town of Oro Valley Town of Oro
Fiscal Valley Valley Construction Valley
Year Sales Tax Bed Tax Sales Tax Utility Sales Tax Pima County
2003 2.00% 3.00% 2.00% 0.00% 5.60%
2004 2.00% 3.00% 4.00% 0.00% 5.60%
2005 2.00% 3.00% 4.00% 0.00% 5.60%
2006 2.00% 6.00% 4.00% 0.00% 6.10%
2007 2.00% 6.00% 4.00% 2.00% 6.10%
2008 2.00% 6.00% 4.00% 2.00% 6.10%
2009 2.00% 6.00% 4.00% 2.00% 6.10%
2010 2.00% 6.00% 4.00% 2.00% 7.10%
2011 2.00% 6.00% 4.00% 2.00% 7.10%
2012 2.00% 6.00% 4.00% 4.00% 7.10%
Source: Arizona Department of Revenue
Page 109
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TOWN OF ORO VALLEY, ARIZONA
DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT
JUNE 30, 2012
(UNAUDITED)
Estimated
Estimated Share of
Debt Percentage Overlapping
Governmental Unit Outstanding Applicable Debt
Pima County $ 455,856,000 7.42% $ 33,824,515
Pima County Community College District 6,645,000 7.42% 493,059
Amphitheater Unified School District No. 10 83,035,000 18.41% 15,286,744
Total Overlapping 49,604,318
Town of Oro Valley 12,109,960 100.00% 12,109,960
Total Direct 12,109,960
Total direct and overlapping debt $ 61,714,278
Source: Pima County, Pima County Community College District and Amphitheater Unified School District No. 10.
(1) Proportion applicable to the Town of Oro Valley, Arizona, is computed on the ratio of secondary
assessed valuation for 2011-12. Outstanding debt for Pima County not available for 2012.
Page 111
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TOWN OF ORO VALLEY
CALCULATION OF LEGAL DEBT MARGIN
JUNE 30, 2012
(UNAUDITED)
Net secondary assessed valuation $ 629,340,548
Water, Sewer, Light, Parks, Open Space and
Recreational Facility Bonds
Debt limit-20% of secondary net assessed valuation $ 125,868,110
Debt applicable to limit
General obligation bonds outstanding $ -
Less amount set aside for repayment of debt -
Net debt applicable to limit -
20% legal debt margin $ 125,868,110
All other general obligation bonds
Debt Limit-6% of secondary net assessed valuation 37,760,433
Debt applicable to limit
General obligation bonds outstanding $ -
Less amount set aside for repayment of debt -
Net debt applicable to limit -
All other general obligation bonds debt margin 37,760,433
Total legal debt margin $ 163,628,543
Source: Pima County Assessor's Office
Page 113
TOWN OF ORO VALLEY,ARIZONA
PLEDGED-REVENUE COVERAGE
LAST TEN FISCAL YEARS
(UNAUDITED)
Water Utility Revenue Bonds
Fiscal Gross Debt Service
Year Revenues Principal Interest Total Coverage
2003 10,380,720 1,578,040 2,395,359 3,973,399 2.61
2004 12,202,664 1,478,710 2,650,195 4,128,905 2.96
2005 12,544,928 1,473,710 2,949,409 4,423,119 2.84
2006 14,989,621 1,907,362 2,888,226 4,795,588 3.13
2007 14,810,173 2,336,330 2,552,081 4,888,411 3.03
2008 17,668,212 1,981,898 2,452,583 4,434,481 3.98
2009 16,223,544 2,011,100 2,784,444 4,795,544 3.38
2010 15,207,113 5,270,354 2,689,427 7,959,781 1.91
2011 15,359,681 2,501,530 2,505,960 5,007,490 3.07
2012 15,983,999 2,370,180 2,190,894 4,561,074 3.50
Governmental Revenue Bonds
Fiscal Gross Debt Service
Year Revenues Principal Interest Total Coverage
2003 16,435,018 346,960 320,599 667,559 24.62
2004 19,837,894 361,290 386,228 747,518 26.54
2005 21,011,720 456,290 433,108 889,398 23.62
2006 25,018,727 452,638 415,640 868,278 28.81
2007 29,200,152 788,670 642,711 1,431,381 20.40
2008 30,629,130 708,102 501,150 1,209,252 25.33
2009 28,084,482 733,900 486,372 1,220,272 23.01
2010 25,695,598 6,510,516 933,536 7,444,052 3.45
2011 23,921,715 234,970 253,984 488,954 48.92
2012 25,085,767 304,820 314,703 619,523 40.49
Certificates of Participation
Fiscal Gross Debt Service
Year Revenues Principal Interest Total Coverage
2003 16,435,018 170,000 237,994 407,994 40.28
2004 19,837,894 180,000 15,768 195,768 101.33
2005 21,011,720 190,000 26,690 216,690 96.97
2006 25,018,727 205,000 16,566 221,566 112.92
2007 29,200,152 - - - 0.00
2008 30,629,130 - - - 0.00
2009 28,084,482 - - - 0.00
2010 25,695,598 - - - 0.00
2011 23,921,715 - - - 0.00
2012 25,085,767 - - - 0.00
Special Assessment
Fiscal Gross Debt Service
Year Revenues Principal Interest Total Coverage
2003 - - - - 0.00
2004 - - - - 0.00
2005 - - - - 0.00
2006 - - 176,967 176,967 0.00
2007 379,840 185,000 186,828 371,828 0.00
2008 365,810 195,000 177,577 372,577 0.98
2009 367,539 205,000 248,429 453,429 0.81
2010 368,152 215,000 152,203 367,203 1.00
2011 365,811 225,000 147,548 372,548 0.98
2012 366,028 235,000 132,423 367,423 1.00
Source: Town of Oro Valley Finance Department
Page 114
TOWN OF ORO VALLEY, ARIZONA
DEMOGRAPHIC AND ECONOMIC STATISTICS
LAST TEN FISCAL YEARS
(UNAUDITED)
Personal Per
Income Capita
(thousands Personal Unemployment
Year Population of dollars) Income Rate
2003 37,260 1,305,649,691 35,042 2.9%
2004 37,700 1,360,700,031 36,093 2.6%
2005 39,310 1,461,373,787 37,176 2.5%
2006 40,215 1,539,868,259 38,291 3.0%
2007 42,551 1,678,195,258 39,440 2.6%
2008 43,651 1,773,226,205 40,623 3.0%
2009 43,694 1,828,222,176 41,841 5.1%
2010 43,521 1,875,613,105 43,097 6.2%
2011 41,011 1,820,460,164 44,390 6.0%
2012 41,335 1,661,839,665 40,204 6.4%
Source: US Census Bureau,Arizona Employment statistics and Pima Association of Governments
Page 115
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TOWN OF ORO VALLEY, ARIZONA
WATER RATES
LAST TEN FISCAL YEARS
(UNAUDITED)
Base Rate Tier 1 Tier 2 Tier 3 Tier 4 GPF
Year monthly per 1,000 per 1,000 per 1,000 per 1,000 per 1,000
2003 $ 12.00 $ 1.90 $ 2.35 $ 3.00 N/A N/A
2004 12.30 1.92 2.55 3.25 N/A $ 0.21
2005 12.65 1.98 2.68 3.58 N/A 0.21
2006 12.65 1.98 2.68 3.58 N/A 0.21
2007 13.25 2.08 2.81 3.76 N/A 0.25
2008 13.25 2.08 2.81 3.76 $ 5.00 0.40
2009 13.91 2.18 2.95 3.95 5.25 0.55
2010 14.19 2.20 2.99 4.03 5.38 0.75
2011 14.19 2.20 2.99 4.03 5.38 0.75
2012 14.19 2.20 2.99 4.03 5.38 0.95
Source: Town of Oro Valley Water Utility
Page 119
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