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HomeMy WebLinkAbout1995 Financial Statement June 30 8 8 8 1 3 1 1 1 • 1 TOWN OF MARANA Marana, Arizona FINANCIAL STATEMENTS June 33, 1995 1 1 1 1 1 li a 4 4 TABLE OF CONTENTS 4 4 4 PAGE INDEPENDENT AUDITOR'S REPORT 1 4 GENERAL PURPOSE FINANCIAL STATEMENTS EXHIBITS Exhibit 1 - Combined Balance Sheet -All Fund Types and Account Groups 2 2 - Combined Statement of Revenues, Expenditures and-Changes in Fund Balances -All Governmental Fund Types 3 3 - Combined Statement of Revenues, Expenditures and Changes in Fund Balances- Budget and Actual, All Governmental Fund Types 4 4 - Combined Statement of Revenues, Expenses and Changes 4 in Deficit -All Proprietary Fund Types 5 5 - Combined Statement of Cash Flows -All Proprietary Fund Types 6 Summary of Significant Accounting Policies 7 Notes to Combined Financial Statements 14 4 SUPPLEMENTAL INFORMATION 25 Exhibit A -1 - Combining Balance Sheet - Special Revenue Funds 26 Exhibit A -2 - Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Special Revenue Funds 28 1 Clifton, Gunderson & Co, Certified Public Accountants & Consultants Honorable Mayor and Town Council Town of Marana Marana, Arizona 4 Independent Auditor's Report 4 We have audited the accompanying general purpose financial statements of the Town of Marana, Arizona, as of and for the year ended June 30, 1995. These general purpose financial statements are the responsibility of the Town's management. Our responsibility is to express an opinion on these general purpose financial statements 4 based on our audit. We conducted our audit in accordance with generally accepted auditing standards, Government Auditing Standards, issued by the Comptroller General of the United States, and the provisions of Office of Management and Budget (OMB) Circular A -128, Audits of State and Local Governments. Those standards' and OMB 4 Circular A -128 require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the general purpose financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as 4 evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 4 4 In our opinion, the general purpose financial statements referred to above present fairly, in all material respects, the financial position of the Town of Marana, Arizona, as of June 30, 1995, and the results of its operations and 4 cash flows of its proprietary fund types for the year then ended in conformity with generally accepted accounting principles. 4 Our audit was made for the purpose of forming an opinion on the general purpose financial statements taken as a ' whole. The combining financial statements listed in the table of contents are presented for purposes of additional analysis and are not a required part of the general purpose financial statements. Such information has been subjected to the auditing procedures applied in the audit of the general purpose financial statements and, in our opinion, is presented fairly in all material respects, in relation to the general purpose financial statements taken as a whole. As discussed in Note 7 to the combined financial statements, in 1995 the Town changed its method of accounting 9 for taxpayer assessed tax revenues in governmental fund types to conform with Government Accounting Standards Board Statement No. 22. In accordance with Government Auditing Standards, we have also issued a report dated February 8, 1996, on our consideration of the Town of Marana, Arizona's internal control structure and a report dated February 8, 1996, on its compliance with laws and regulations. • ayin- se co. Tucson, Arizona February 8, 1996 Members Of 1 INTERNATIONAL i ._... AMERICAN Fn PIIRI ir aonnnla rni nnn 1 0 M 10 M N nun 0 0 V 0 03 cm 0) O O/00 0 O O 4 NN 01N NM 010 N n 0 U) M N? 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U — �¢ 0 0 0 Q Q LL g 5 QOOJU ZUO oCm O J J �l' 5 iii 4 TOWN OF MARANA, ARIZONA COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES 4 IN FUND BALANCES ALL GOVERNMENTAL FUND TYPES - EXHIBIT 2 Year Ended June 30, 1995 Totals 4 Special (Memorandum Only) General Revenue 1995 1994 4 REVENUES Taxes Sales - Marana $ 5,320,233 $ - $ 5,320,233 $ 2,562,918 9 Sales - Arizona 180,944 - 180,944 154,756 Urban sharing 166,700 - 166,700 142,567 4 Auto lieu 51,958 - 51,958 49,809 Licenses, fees and permits 632,447 - 632,447 917,090 4 Fines, forfeitures and penalties 95,614 - 95,614 75,284 Grants and contributions 4 Highway user fees - Arizona - 182,255 182,255 178,703 Public safety - Arizona - 61,773 61,773 21,514 • Public safety - Tucson - 68,985 68,985 61,769 Block grants - Pima County - 217,065 217,065 227,348 HOME grant - Pima County - 67,910 67,910 - 4 RICO funds - Pima County - 47,760 47,760 - LTAF funds - Arizona. - 21,495 21,495 20,540 4 Parks - Pima County. - - 74,087 Other grants -- 15,800 15,800 Interest 160,756 3,528 164,284 18,473 4 Other 53,528 926 54,454 137,420 4 Total revenues 6,662,180 687,497 7,349,677 4,642,278 4 EXPENDITURES Administration 614,640 23,960 638,600 362,399 4 Development and planning services 248,519 - 248,519 94,751 Town attorney 304,977 - 304,977 211,178 4 Public safety 1,379,120 140,074 1,519,194 992,708 Magistrate court 154,051 - 154,051 108,613 Public works 1,426,116 211,622 1,637,738 437,544 3 Community development - 101,577 101,577 240,268 Parks and recreation 94,864 58,860 153,724 83,110 4 Capital outlays 369,157 120,563 489,720 164,927 Debt service 4 Principal retirement 136,574 27,264 163,838 114,769 Interest 47,942 8,624 56,566 45,762 4 Total expenditures 4,775,960 692,544 5,468,504 2,856,029 4 OTHER FINANCIAL USES Contributed capital to water fund 83,661 - 83,661 46,191 0 Total expenditures and other financial uses 4,859,621 692,544 5,552,165 2,902,220 0 Excess (deficiency) of revenues and other financial sources over (under) 0 expenditures and other financial uses 1,802,559 (5,047) 1,797,512 1,740,058 FUND BALANCES, BEGINNING AS RESTATED 2,630,851 71,120 2,701,971 421,240 0 FUND BALANCES, ENDING $ 4,433,410 $ 66,073 $ 4,499,483 $ 2,161,298 4 4 These financial statements should be read only in connection with the accompanying summary of significant accounting policies and notes to combined financial statements. 3 9 TOWN OF MARANA, ARIZONA COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES 4 IN FUND BALANCES - BUDGET AND ACTUAL ALL GOVERNMENTAL FUND TYPES - EXHIBIT 3 Year Ended June 30, 1995 4 4 General Special Revenue Actual Budget (a) Variance Actual Budget (a) Variance 4 REVENUES Taxes 4 Sales - Marana $ 5,320,233 $ 3,900,000 $ 1,420,233 $ - $ - $ - Sales - Arizona 180,944 154,306 26,638 - - Urban sharing 166,700 157,843 8,857 4 Auto lieu 51,958 49,620 2,338 - - _ Licenses, fees and permits 632,447 762,500 (130,053) - - Fines, forfeitures and - 4 penalties 95,814 110,000 (14,386) - - Grants and contributions - Highway user fees - Arizona - - 4 Public safety - Arizona - - - 182,255 1 1 3,428 2,75 7 3,422 61,773 13,422 48,351 1 Public safety - Tucson - - - 68,985 58,077 10,908 4 Block grants - Pima County - - - 217,065 638,015 (420,950) HOME grant - Pima County - - - 67,910 - 67,910 4 RICO funds - Pima County - - - 47,760 5,000 42,760 LTAF funds - Arizona - - - 21,495 30,936 (9,441) Other grants - - - 15,800 5,000 10,800 Interest 160,756 35,000 125,75.6 3,528 3,528 4 Other 53,528 121,235 (67,707) _ 926- 25,000 (24,074) Total revenues 6,662,180 5,290,504 1,371,676 687,497 954,948 (267,451) • OTHER FINANCIAL SOURCES Proceeds from bond sales - 1,000,000 (1,000,000) - - - Total revenues and other financial sources 6,662,180 6,290,504 371,676 687,497 954,948 (267,451) 4 EXPENDITURES 4 Administration 614,640 688,809 (74,169) 23,960 - 23,960 Development and planning services 248,519 421,682 (173,163) - Town attorney 304,977 214,000 90,977 4 Public safety 1,379,120 1,365,586 13,534 140,074 71,499 68,575 Magistrate court 154,051 244,784 (90,733) - Public works 1,426,116 3,356,103 (1,929,987) 211,622 63,402 148,220 • , Community development - - 101,577 626,749 (525,172) Parks and recreation 94,864 137,871 (43,007) 58,860 - 58,860 4 Contingency - 200,000 (200,000) - 35,000 (35,000) Capital outlays 369,157 454,955 (85,798) 120,563 106,346 14,217 Debt service: 4 Principal retirement 136,574 298,846 (162,272) 27,264 51,952 (24,688) Interest 47,942 - 47,942 8,624 - 8,624 4 Total expenditures 4,775,960 7,382,636 (2,606,676) 692,544 954,948 (262,404) OTHER FINANCIAL USES 4 Contributed capital to water fund 83,661 - 83,661 - - - 4 Total expenditures and other financial uses 4,859,621 7,382,636 (2,523,015) 692,544 954,948 (262,404) 4 Excess (deficiency) of revenues and other financial sources over (under) expenditures and other financial uses 1,802,559 (1,092,132) 2,894,691 (5,047) - (5,047) FUND BALANCES, BEGINNING AS RESTATED 2,630,851 1,175,000 1,455,851 71,120 - 71,120 FUND BALANCES, ENDING $ 4,433,410 $ 82,868 $ 4,350,542 $ '66,073 $ - $ 66,073 4 (a) The Town's budget included an additional $906,000 for revenues and $988,868 for expenditures for water enterprise activities that are not included in this statement because these activities are proprietary in nature. 4 These financial statements should be read only in connection with the accompanying summary of significant accounting policies and notes to combined financial statements. 4 1 1 TOWN OF MARANA, ARIZONA COMBINED STATEMENT OF REVENUES, EXPENSES AND CHANGES IN DEFICIT — ALL PROPRIETARY FUND TYPES — EXHIBIT 4 Year Ended June 30, 1995 # Proprietary Totals Fund Types (Memorandum Only) Water 1995 1994 I' OPERATING REVENUES II Current use charges $ 71,440 $ 71,440 $ 71,285 Other 4,109 4,109 6,161 # Total operating revenues 75,549 75,549 77,446 D OPERATING EXPENSES Material, supplies, and 0 other expenses 57,833 57,833 50,968 Depreciation expense 12,853 12,853 12,853 • Total operating • i expenses 70,686 .70,686 63,821 0 OPERATING INCOME 4,863 . 4,863 13,625 • NONOPERATING REVENUES (EXPENSES) Interest income 501 501 408 Bond interest expense (22,858) (22,858) (22,858) • Bond fees (1,777) (1,777) (1,707) • Total nonoperating revenues (expenses) (24,134) (24,134) (24,157) NET LOSS (19,271) (19,271) (10,532) DEFICIT, BEGINNING (48,039) (48,039) (37,507) i DEFICIT, ENDING $ (67,310) $ (67,310) $ (48,039) 1 i 1 1 II R II These financial statements should be read only in connection with the accompanying 1 summary of significant accounting policies and notes to combined financial statements. 5 1 lik 4 TOWN OF MARANA, ARIZONA COMBINED STATEMENT OF CASH FLOWS ALL PROPRIETARY FUND TYPES — EXHIBIT 5 Year Ended June 30, 1995 9 Proprietary Totals Fund Types (Memorandum Only) 4 Water 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES V Net loss $ (19,271) $ (19,271) $ (10,532) Adjustments to reconcile net loss to net 4 cash provided by operating activities: Nonoperating expenses associated 4 with trustee /fiscal agents 24,254 24,254 24,379 Depreciation 12,853 12,853 12,853 Changes in operating assets and liabilities: 4 (Increase) decrease in accounts receivable 368 368 (310) Increase (decrease) in accounts payable (1,497) (1,497) 2,301 4 Net cash provided by operating activities 16,707 16,707 28,691 • CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Decrease in due to other funds — — (554) 4 Contributed capital from general fund 83,661 83,661 — Purchase of fixed assets (74,515) (74,515) — Payments to trustee /fiscal agents for debt service (34,425) , (34,425) (24,578) 0' Reimbursements from trustee /fiscal agents — — 3,374 4 Net cash used in capital and related financing activities (25,279) (25,279) (21,758) • NET INCREASE (DECREASE) IN CASH (8,572) (8,572) 6,933 CASH, BEGINNING OF YEAR 8,588 8,588 1,655 3 ' CASH, END OF YEAR (a) $ 16 $ 16 $ 8,588 4 Cash $ 16 $ 16 $ 8,588 Cash with trustee /fiscal agents 810 810 684 4 Total $ 826 $ 826 $ 9,272 (a) Cash On the balance sheet consists of cash the Town can access and cash on deposit with trustee /fiscal agents. Cash flows from cash with trustee /fiscal agents are not presented above because these activities represent noncash transactions. CASH FLOWS WITH TRUSTEE/FISCAL AGENTS FROM INVESTING AND OTHER ACTIVITIES Payments from water fund for debt service $ 34,425 $ 34,425 $ 24,578 Interest income 381 381 185 3 (Increase) decrease in investments (10,045) (10,045) 3,296 Reimbursements to water fund — — (3,374) • Net cash with trustee /fiscal agents provided by investing and other activities 24,761 24,761 24,685 4 CASH FLOWS WITH TRUSTEE /FISCAL AGENTS FROM CAPITAL AND RELATED FINANCING AND OTHER ACTIVITIES Interest and other obligations paid (24,635) (24,635) (24,564) NET INCREASE IN CASH WITH TRUSTEE /FISCAL AGENTS 126 126 121 • CASH WITH TRUSTEE /FISCAL AGENTS, BEGINNING OF YEAR 684 684 563 CASH WITH TRUSTEE /FISCAL AGENTS, END OF YEAR $ 810 $ 810 $ 684 These financial statements should be read only in connection with the accompanying 40 summary of significant accounting policies and notes to combined financial statements. 6 0 0 TOWN OF MARANA, ARIZONA SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES June 30, 1995 The Town of Marana (the Town) was incorporated on March 21, 1977, under the provisions of the 4 Constitution of Arizona and the Arizona Revised Statutes. The Town operates under a council -mayor form of government. All funds and entities related to the Town that are controlled by the Mayor and Council are included in this annual financial report. Control is determined on the basis of budget adoption, taxing authority and the ability to issue outstanding debt secured by revenues or which is a general obligation of the Town, as well as selection of governing authority, designation of • management, ability to significantly influence operations and accountability for fiscal matters. The Town provides a full range of services including general governmental administration, development and planning, legal, public safety, public works and parks services. The accounting policies of the Town conform to generally accepted accounting principles (GAAP) as applicable to governments. The Governmental Accounting Standards Board (GASB) is the accepted standard - setting body for establishing accounting and financial reporting principles. The following is a summary of the more significant policies: • REPORTING ENTITY 3 In evaluating how to define the Town of Marana, for financial reporting purposes, management has considered all potential component units. The decision to include a potential component unit in the reporting entity was made by applying the criteria set forth by GAAP. The basic, but not the only, criterion for including a potential component unit within the reporting entity is the Town's ability to exercise oversight responsibility. The most significant manifestation of this ability is financial inter- * dependency. Other manifestations of the ability to exercise oversight responsibility include, but are not limited to, the selection of governing authority, the designation of management, the ability to significantly influence operations and accountability for fiscal matters. A second criterion used in evaluating potential component units is the scope of public service. Application of this criterion involves considering whether the activity benefits the Town and/or its citizens, or whether the activity is conducted within the geographic boundaries of the Town and is generally available to its citizens. A third criterion used to evaluate potential component units for inclusion or exclusion from the reporting entity is the existence of special financial relationships, regardless of whether the Town is able to exercise oversight responsibilities. Based upon the application of this criteria, the following component unit is considered within the Town's reporting entity: Town of Marana Municipal Property Corporation 0 The Town of Marana Municipal Property Corporation governing board is appointed by the Town Council. The Town's general fund and water fund pay rent to the Municipal Property Corporation in order to fund the debt incurred to finance the purchase of the Town hall and fixed assets used by the water fund. The legal liability for the Municipal Property Corporation's debt remains with the Town. The financial activity of the Corporation is presented as a blended component unit in the accompanying financial statements. 0 0 0 7 0 b TOWN OF MARANA, ARIZONA SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES June 30, 1995 FUND ACCOUNTING • The accounts of the Town are organized on the basis of funds and account groups, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self - balancing accounts that comprise its assets, liabilities, fund equity, revenues and expenditures. Government resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. The various funds are grouped, in the financial statements in this report, into generic fund types and broad fund categories as follows: Governmental fund types These are the funds through which most governmental functions typically are financed. The funds 1 included in this category are as follows: General fund - This fund is the general operating fund of the Town. It is used to account for all 1 financial resources, except those required to be accounted for in another fund. Special revenue funds - These funds are used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes. Debt service fund - Although such a fund is normally used to account for the accumulation of • resources for the payment of general long -term debt principal, interest and related costs, the 1 Town has not yet established such a fund. Debt service activity and reserves are recorded in i the general fund as they are believed to be immaterial. Proprietary fund types These funds account for operations that are organized to be self - supporting through user charges. The fund included in this category is the enterprise/water fund as noted below: Enterprise /water fund - This fund is used to account for water utility operations that are financed and operated in a manner similar to private business enterprises. The intent of the governing body is that the costs (expenses, including depreciation) of providing water services to the general public on a continuing basis be financed or recovered primarily through user 1 charges. Fiduciary fund types 1 These funds account for assets held by the City as a trustee or agent for individuals, private 1 organizations, and other units of governments. This only fund in this category is as follows: 1 1 8 1 4 4 TOWN OF MARANA, ARIZONA 4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES June 30, 1995 4 FUND ACCOUNTING (CONTINUED) Agency fund - This fund is used to account for a deferred compensation plan offered by the Town to its employees. 4 MEASUREMENT FOCUS, FIXED ASSETS AND LONG-TERM LIABILITIES 4 The accounting and reporting treatment applied to the fixed assets and long -term liabilities associated 4 with a fund are determined by its measurement focus. All governmental funds are accounted for on a 4 spending or "financial flow" measurement focus. This means that only current assets and current liabilities are generally included on their balance sheets. Their reported fund balance (net current assets) 4 is considered a measure of "available spendable resources." Governmental fund operating statements present increases (revenues and other financial sources) and decreases (expenditures and other financial 4 uses) in net current assets, as appropriate. Accordingly, they are said to present a summary of sources 4 and uses of "available spendable resources" during a period. Fixed assets used in governmental fund type operations (general fixed assets) are accounted for in the general fixed assets group of accounts, rather than in governmental funds. 4 4 Public domain ( "infrastructure ") general fixed assets consisting of certain improvements other than buildings, including roads, curbs and gutters, streets and sidewalks, bridges and lighting systems, are not capitalized. No depreciation is being provided on general fixed assets. All general fixed assets are valued at historical cost. Donated general fixed assets are valued at their estimated fair values on the dates of donation. Long -term liabilities expected to be financed from governmental funds are accounted for in the general long -term debt group of accounts, not in the governmental funds. 4 Because of their spending measurement focus, expenditure recognition of governmental fund types is limited to exclude amounts represented by noncurrent liabilities. Since they do not affect net current assets, such long -term amounts are not recognized as governmental fund type expenditures or fund liabilities. They are instead reported as liabilities in the general long -term debt group of accounts. The aforementioned two account groups are not funds. They are concerned only with the measurement of financial position. They are not involved with measurement of results of operations. 0 0 9 4 TOWN OF MARANA, ARIZONA 4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 4 June 30, 1995 4 MEASUREMENT FOCUS, FIXED ASSETS AND LONG -TERM LIABILITIES 4 (CONTINUED) 4 The proprietary fund is accounted for in a cost of services or "capital maintenance" measurement focus. 4 This means that all assets and all liabilities, whether current or noncurrent, associated with its activity are included on its balance sheet. Its reported fund equity, net total assets, is segregated into 4 contributed capital and retained earnings components. Proprietary fund operating statements present increases (revenues) and decreases (expenses) in net total assets. 4 Water operations property is stated at cost or fair values on the dates of donation. Depreciation (amortization) of all exhaustible fixed assets used by water operations is charged as an expense against 4 its operations. Accumulated depreciation is reported on the water operations balance sheet. 4 Depreciation is provided over the estimated useful lives of such assets,using the straight -line method. These estimated useful lives are as follows: Estimated Useful Lives (Years) 9 Pump stations, distribution system, equipment and improvements 20 Organization costs 40 1 Expenditures for water repairs and maintenance are charged to income.. Additions, major renewals and replacements that increase the water properties' useful lives are capitalized. The cost of property sold or retired, together with the related accumulated depreciation, is removed from the appropriate accounts and resulting gain or loss is included in net income of the utility. The Town no longer carries any inventory Supplies needed for operations are now being purchased on an as- needed basis. BASIS OF ACCOUNTING Basis of accounting refers to when revenues and expenditures are recognized in the accounts and 4 reported in the financial statements. Basis of accounting relates to the timing of the measurements made, regardless of the measurement focus applied. 10 9 ) TOWN OF MARANA, ARIZONA SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES June 30, 1995 ) BASIS OF ACCOUNTING (CONTINUED) The proprietary fund is maintained on an accrual basis of accounting. The governmental funds and fiduciary fund are maintained on a modified accrual basis. The modified accrual basis of accounting recognizes expenditures on an accrual basis, but revenues are recognized when received, except for material revenues determined to be both measurable and "available." "Available" means collectible ) within the current period or soon enough thereafter to be used to pay liabilities of the current period. Deferred revenue in the governmental funds arises when grant monies are received prior to the incurrence of qualifying expenditures. BUDGETS AND BUDGETARY ACCOUNTING The budgets formally adopted by the Mayor and Council are prepared on an object basis. All appropriations lapse at year end, and the budgetary information reflected on the financial statements represents the original adopted budget for fiscal 1995 with no augmentations. ENCUMBRANCES Encumbrance accounting, under which purchase orders, contracts and other commitments for the expenditure of monies are recorded in order to reserve that portion of the applicable appropriation, is not employed as an extension of formal budgetary integration in the general fund and special revenue funds. 1 RESERVES 1 No reservations of fund balances have been established by the Mayor and Council at the end of fiscal 1995, except amounts reserved for restricted assets. BOND ISSUANCE COSTS For the water fund, bond issuance costs are capitalized in the period in which the bonds are issued and are amortized on a straight line basis over 20 years. For all other funds, bond issuance costs are recognized as expenditures in the period in which the bonds are issued. 11 4 TOWN OF MARANA, ARIZONA SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES June 30, 1995 4 INVESTMENTS 4 Investments consist of deposits in the Arizona State Treasurer's Local Government Investment Pool, a 4 category 1 investment. Pursuant to Arizona Revised Statutes, the Pool is not allowed to enter into reverse purchase agreements or to leverage the portfolio it maintains. Restricted investments consist of U.S. Government fund obligations, a category 1 investment. Category 1 investments are investments 4 that are insured, registered or held by the Town's agent in the Town's name, or by the Town itself. All restricted investments are made through the Town's trustee/fiscal agents for the bond issues. 4 Investments are stated at cost, which approximates market. 4 RESTRICTED ASSETS 4 The trust indentures executed for all of the bond series issued require all cash and investments for each bond series to beheld on deposit by the trustee/fiscal agents. These assets are restricted for payment of 4 interest and trustee fees associated with the bond issues, retirement of principal balances and purchasing the Town hall, the Honea Water Company and improvements to water fund fixed assets. 4 In addition, during fiscal 1995, the State of Arizona required that assets obtained at the completion of 4 criminal proceedings by the Town's Public Safety Department be given to Pima County for custodial 4 purposes. These assets are restricted for expenditures that will enhance the Town's ability to conduct public safety investigations. 4 COMPENSATED ABSENCES 4 4 In the general long -term debt group of accounts, essentially the entire accumulated liability for compensated absences is reflected, since the liability at June 30, 1995, will most likely not be paid 4 within the current accounting cycle. Rather, in fiscal 1996 the Town will probably pay that year's accrual without utilizing amounts accrued from prior years. 4 3 COMPARATIVE DATA 4 Comparative total data for the prior year is presented in the accompanying general purpose financial statements in order to provide an understanding of changes in the Town's financial position and 4 operations. However, presentation of prior year totals by fund type have not been presented in the statements, since their inclusion would make the statements unduly complex and difficult to read. 4 Accordingly, such information should be read in conjunction with the Town's June 30, 1994, audited 4 financial statements from which this summarized information was derived. 4 0 4 4 12 4 TOWN OF MARANA, ARIZONA 4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES June 30, 1995 TOTAL COLUMNS ON THE COMBINED FINANCIAL STATEMENTS 4 Total columns on the combined financial statements are captioned "Memorandum Only" to indicate that they are presented only to facilitate financial analysis. Data in these columns does not present 4 financial position or results of operations in conformity with generally accepted accounting principles. Neither is such data comparable to a consolidation. Interfund eliminations have not been made in the 4 aggregation of this data. Certain amounts for 1994 have been reclassified to conform to the 1995 presentation. 4 4 SEIZED PROPERTY 4 The Town Police have in their custody certain assets seized in criminal proceedings. Until formal procedures have been finalized, the ownership of this property is not determinable. In addition, legal 4 requirements dictate that such assets not be reflected on the Town's financial records in an agency capacity. until Town ownership has been determined. Consequently, no such assets are recorded on these financial statements. 4 4 4 4 0 • 0 4 4 9 9 9 4 4 4 This information is an integral part of the accompanying combined financial statements. 4 13 4 1 TOWN OF MARANA, ARIZONA NOTES TO COMBINED FINANCIAL STATEMENTS June 30, 1995 4 NOTE 1 CASH 4 The carrying amount of the Town's deposits with financial institutions was $175,150, and the bank 4 balances were $542,548 at June 30, 1995. The bank balances are categorized as follows: Amount insured by the FDIC $ 126,515 4 Uninsured and uncollateralized 416,033 4 Total bank balances 1_541543 The uninsured and uncollateralized balances are the result of Town management believing that accounts maintained with a financial institution are insured individually, rather than combined as one amount for insurance purposes with that financial 'institution. The uninsured balance is considered a 4 Category 3 deposit in accordance with GASB Statement No. 3. 4 NOTE 2 - FIXED ASSETS, NET OF ACCUMULATED DEPRECIATION 4 The following is a summary of the changes in general fixed assets for fiscal 1995: Balance Balance July 1, June 30, 1994 Additions Deletions • 1995 4 Land $ 58,284 $ 15,026 $ - $ 73,310 4 Buildings 248,079 60,104 - 308,183 4 Assets under capital lease 447,631 360,683 (48,735) 759,579 Machinery, equipment and other assets 497,293 273,251 (99,445) 671,099 Marana Park 150,000 - - 150,000 Leasehold improvements 9,303 190,074 - 199,377 Total $ 1.410,590 $ 899.138 1_1148,180) $ 2,161,548 4 4 4 4 4 4 14 4 TOWN OF MARANA, ARIZONA NOTES TO COMBINED FLNANCIAL STATEMENTS June 30, 1995 NOTE 2 - FIXED ASSETS, NET OF ACCUMULATED DEPRECIATION (CONTINUED) A summary of water fund property, plant and equipment at June 30, 1995, is as follows: Land $ 9,720 Water rights 50,000 Pump stations 125,351 Distribution system 89,000 • Equipment and improvements 66,211 Bond issuance costs 27,268 Organization costs 47,523 • Construction work -in- progress 20,272 Total 435,345 Less accumulated depreciation and amortization (62,869) 4 Fixed assets, net $ 372, 4 NOTE 3 - LONG-TERM DEBT 4 During 1990, the water fund issued revenue bonds through the Town of Marana Municipal Property Corporation for the purpose of purchasing the Honea Water Company and making improvements to 4 the assets purchased. These 1990 bonds, secured by all general fund revenues, consist of a series of issues with fixed interest rates ranging from 7.55% to 8.30 %, depending upon the maturity dates of the 4 various issues. Periodic principal payments are due July .1, 1995, through July 1, 2009, in amounts ranging from $10,000 to $30,000 annually. The 1990 series revenue bonds are callable on or after July 4 1, 1999, at 100% of the principal. 4 0 4 4 4 4 4 4 4 4 15 4 TOWN OF MARANA, ARIZONA °► NOTES TO COMBLNED FINANCIAL STATEMENTS June 30, 1995 NOTE 3 - LONG-TERM DEBT (CONTINUED) 4 The following is a schedule by years of the debt service requirements for these revenue bonds as of June 30, 1995: Years Ending 1990 Series 4 June 30, Bonds 1996 $ 32,858 4 1997 32,103 1998 31,338 1999 35,563 4 2000 34,385 Thereafter 331,875- 4 Total p a Ym ents 498,122 4 Less amount representing interest (218,122) 4 Principal $ 280.000 4 The following is a summary of general long -term debt activity for fiscal 1995: 4 Balances Balances at 4 at July 1, June 30, 1994 Additions Reductions 1995 4 Revenue Bonds(a) $ 315,000 $ - $ (5,000) $ 310,000 4 Capital leases(b) 366,876 310,405 (141,475) 535,806 Notes payable 17,363 - (17,363) - Compensated absences(c) 71,290 21,089 - 92,379 0 Total $ 770529 $ 331,494 ,x(163 838) $ 938,185 (a) In July, 1992, the Town issued revenue bonds through the Town of Marana Municipal Property Corporation for the purpose of exercising an option to purchase the Town hall. These 4 bonds, secured by all general fund revenues and the Town hall, carry interest rates ranging from 6% to 8 %, depending upon the maturity dates of the various issues. The principal 4 payments are due July 1, 1994, through July 1, 2018, in amounts ranging from $5,000 to $25,000 annually. µ 4 F l: 16 mask TOWN OF MARANA, ARIZONA NO 1'ES TO COMBINED FINANCIAL STATEMENTS June 30, 1995 NOTE 3 - LONG-TERM DEBT (CONTINUED) The 1992 Series Revenue Bonds are callable as follows: Redemption Price (As Redemption Dates a Percent of Principal) 7 -1 -2001 and 1 -1 -2002 101.0% 7 -1 -2002 and 1 -1 -2003 100.5 7 -1 -2003 and thereafter 100.0 Annual debt service requirements to maturity for these revenue bonds are as follows: +� Years Ending 1992 Series June 30, Bonds 1996 29,203 1997 28,890 1998 28,565 4 1999 28,227 2000 27,877 4 Thereafter 555,696 Total payments 698,458 Less amount representing interest (388,458) 4 Principal • $ 310,000 (b) The following is a schedule by years of the future minimum lease payments under capital leases as of June 30, 1995: 4 Years Ending 4 June 30 1996 $ 214,110 1997 199,645 1998 110,722 1999 56,892 4 2000 23,768 Total net minimum lease payments 605,137 Less amount representing interest (69,331) Present value of net minimum lease payments $ 535,806 4 4 3 17 3 9 TOWN OF MARANA, ARIZONA NOTES TO COMBINED FINANCIAL STATEMENTS June 30, 1995 4 NOTE 3 - LONG -TERM DEBT (CONTINUED) 4 (c) This consists of the long -term portion of accrued vacation and compensatory time, with an increase of $21,089 for fiscal 1995. 4 NOTE 4 - DEFERRED COMPENSATION PLAN 4 The Town offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan, available to all Town employees, permits them to defer a 4 portion of their salary until future years. Participation in the plan is optional. The deferred compensation is not available to employees until termination, retirement, death, or unforeseeable 4 emergency. All amounts of compensation deferred under the plan, all property and rights purchased with those amounts, and all income attributable to those amounts, property, or rights are (until paid or 0 made available to the employee or beneficiary) solely the property and rights of the Town, subject only 4 to the claims of the Town's general creditors. Participants' rights under the plan are equal to those of general creditors of the town in an amount equal to the fair market value of the deferred account for 4 each participant. 4 The Town believes that it is unlikely that it will use the assets to satisfy the claims of general creditors in the future. • 4 NOTE 5 - PUBLIC SAFETY PENSION PLAN 4 All of the Town's full -time police officers are covered by the Marana Marshal's Arizona Public Safety Personnel Retirement System, which is an agent/multiple- employer, defined benefit public employee retirement system (PERS). 4 The pension plan provides pension benefits, deferred allowances, death and disability benefits and limited health insurance benefits. A member is eligible if he is employed in a covered position prior to attaining age 50 years, for at least 20 hours a week for more than 6 months a year. A member may retire after reaching the age of 62 and completion of 15 years service, or completion of 20 years service with the Town. Benefits vest after 10 years of credited service. Police officers who retire with 25 or more years of credited service are entitled to monthly pension payments for the remainder of their lives equal to 50% of average monthly compensation for the first 20 years of credited service with the Town, plus 2 1/2% of average monthly compensation for each year of credited service above 20 years 4 with the Town. Police officers who retire with 20 years of credited service, but less than 25 years of credited service, are entitled to monthly pension payments for the remainder of their lives equal to 50% of average monthly compensation for the first 20 years of credited service with the Town, plus 2% of ,jtij average monthly compensation for each year of credited service between 20 and 25 years with the Town. Police officers who retire with less than 20 years of credited service with the Town are entitled 4 3 18 3 TOWN OF MARANA, ARIZONA NOTES TO COMBINED FINANCIAL STATEMENTS June 30, 1995 NOTE 5 - PUBLIC SAFETY PENSION PLAN (CONTINUED) to monthly pension payments for the remainder of their lives equal to at least 30% of the average monthly compensation for the entire service period increased at a rate of 4% a year for each service year above the minimum 15 years of service. The maximum monthly pension payment cannot exceed 80% of the average monthly compensation. Pension provisions include deferred allowances whereby a police officer may terminate his employment with the Town after accumulating 10 or more years credited service. Pension benefits are then equal to twice the amount of pension benefits based on the police officer's accumulated contributions. If the police officer does not withdraw his accumulated contributions, the police officer is entitled to these pension benefits upon reaching the age of 62. i Pension provisions include disability and death benefits. Disabled officers are entitled to monthly i payments for life of 50% of their average monthly compensation or normal pension amount, whichever is greater, if their disability is service connected, regardless of years of credited service. Average monthly compensation (AMC) is one -thirty -sixth of total compensation paid a member during the 3 years, out of the last 10 years of credited service, in which the amount paid was highest. If the police officer's disability was not service connected, the disabled officer is entitled to monthly payments for life of 25% of AMC, if the credited service is less than 7 years, 50% of AMC, if the credited service is 7 through 13 years, or 75% of AMC, if the credited service is 14 through 19 years. If the police officer is 1 only temporarily disabled, he is entitled to monthly payments equal to one - twelfth of 50% of com- pensation paid during the year preceding the date the disability was incurred. The payments terminate after 12 months or prior recovery. Surviving spouses are entitled to two - thirds of the monthly payments, or 100% if duty related, the deceased active police officer would have been paid for disability or, in the case of a retired police officer, two- thirds of the retired officer's monthly pension payments. To qualify as a surviving spouse, the spouse must have been married to the deceased for at least 2 years. The spouse's benefits terminate upon her death. Each dependent child of a deceased 1 police officer is entitled to one -ninth of the monthly payments the deceased active police officer would have been paid for disability or, in the case of a retired police officer, one -ninth of the retired officer's 1 monthly pension payments. When the dependent child reaches the age of 18 or 23, if the dependent is a full -time student, the monthly payments will terminate. Pension provisions include health insurance benefits, whereby the retired police officer or his surviving spouse can elect to be covered by a health insurance plan provided by the Town or State of Arizona. The retired police officer or his surviving spouse pay for this coverage. However, they cannot be charged more than $60 per month plus an amount up to $25 per month for dependent coverage, if any. 19 9 TOWN OF MARANA, ARIZONA NOTES TO COMBINED FINANCIAL STATEMENTS June 30, 1995 NOTE 5 - PUBLIC SAFETY PENSION PLAN (CONTINUED) 4 The Town's current year payroll for eligible police officers amounted to approximately $817,000. Police officers of the Town are required to pay 7.65% of their gross earnings to the pension plan. The 4 Town makes periodic contributions to the pension plan at actuarially determined rates that, expressed as percentages of annual covered payroll, are designed to accumulate sufficient assets to pay benefits when due. The normal cost and actuarial accrued liability are determined using an entry age actuarial 4 funding method. Unfunded actuarial accrued liabilities are being amortized as a level percent of payroll over a period of 40 years (from July 1, 1978). During 1995, the Town was required to contribute 4 6.24% of its police officers' covered payroll to the plan. Total contributions made during fiscal 1995 were approximately $113,500, of which approximately 4 $51,000 was made by the Town and approximately $62,500 was made by police officers. The contributed amounts were actuarially determined as described above and were based on an actuarial 4 valuation as of June 30, 1993. The pension contributions represent funding for normal cost and the 4 amortization of the unfunded actuarial accrued liability. 4 Significant actuarial assumptions used to compute pension contribution requirements are the same as those used to determine the standardized measure of the pension obligation. 4 The computation of the pension contribution requirements for fiscal 1995 was based on the same actuarial assumptions, benefit provisions, actuarial funding method and other significant factors as used to determine pension contribution requirements in the previous years. 4 Presented below is the total pension benefit obligation of the Town's PERS as of June 30, 1994, the date of the last available report. The amount of the total pension benefit obligation is based on a standardized measurement established by GASB Statement No. 5 that, with some exceptions, must be used by a PERS. The standardized measurement is the actuarial present value of credited projected benefits. This pension valuation method reflects the present value of estimated pension benefits that will be paid in future years as a result of police officer services performed to date and is adjusted for the effects of projected salary increases. A standardized measure of the pension benefit obligation was adopted by the GASB to enable readers of PERS financial statements to assess the Town's PERS funding status on a going- concern basis, assess progress made in accumulating sufficient assets to pay benefits when due and make comparisons among such plans. 4 4 4 4 20 4 TOWN OF MARANA, ARIZONA NOTES TO COMBINED FINANCIAL STATEMENTS June 30, 1995 NOTE 5 - PUBLIC SAFETY PENSION PLAN (CONTINUED) Because the standardized measure as of June 30, 1994, is used only for disclosure purposes by the Town's PERS, the measurement is independent of the actuarial computation made to determine contributions to the PERS, as previously explained. 4 A variety of significant actuarial assumptions are used as of June 30, 1994, to determine the 4 standardized measure of the pension benefit obligation and these assumptions are summarized below: • The present value of future pension payments is computed by using a discount rate of 9 %. The discount rate is equal to the estimated long -term rate of return on current and future investments of the pension plan. • Future pension payments reflect an assumption of 6 :5% (compounded annually) salary increases as a result of inflation. 4 • Future pension payments reflect an assumption of additional projected salary increases ranging from 0.0% to 3.0% per year, depending on age, attributable to seniority /merit. 4 The standardized measure of the assets in excess of the pension benefit obligation as of June 30, 1994, 4 is as follows: Retirees and beneficiaries currently receiving benefits and terminated employees not yet receiving benefits $ - Current employees: Accumulated employee contributions including allocated investment income 180,913 Employer- financed vested 149,997 Employer- financed nonvested 86,405 3 Health insurance 16,879 0 Total pension benefit obligation 434,194 Net assets available for benefits (540,226) 4 Assets in excess of the pension benefit obligation $ _ (106.032) 4 4 .4 4 21 4 TOWN OF MARANA, ARIZONA NOTES TO COMBINED FINANCIAL STATEMENTS June 30, 1995 NOTE 5 - PUBLIC SAFETY PENSION PLAN (CONTINUED) 4 No changes in actuarial assumptions or benefit provisions that would significantly affect the valuation of the pension benefit obligation occurred during fiscal 1994. During fiscal 1995 and as of June 30, 1995, the Marana Marshal's Arizona PERS held no securities issued by the Town or other related parties. 4 Historical trend information as of June 30, 1994, for the Town's PERS is presented below: 1994 1993 1992 4 • Net assets available for benefits as 4 a percentage of the pension benefit obligation applicable to the Town's police officers • 124.40% 116.30% 114.40% 4 • Unfunded pension benefit obligation 4 as a percentage of the Town's annual covered payroll for police officers. 00.00% 00.00% 00.00% 4 • Town's contributions to the pension plan as a percentage of annual cov- ered payroll for police officers. • 6.52% 5.87% 6.28% Historical trend information is presented in order for a reader to assess the progress made in accumulating sufficient assets to pay pension benefits as they become payable. Ten year historical trend information showing funding progress is presented in the System's separately issued financial report. 4 NOTE 6 - COMMITMENTS AND CONTINGENCIES The Town is continuously liable with respect to other claims incidental to the ordinary course of its operations. At June 30, 1995, it is the opinion of Town management, based on the advice of the Town Attorney and outside counsel, that any such claims would not have a material effect on the Town's financial position. The Town manages risk by participating in the Arizona Municipal Risk Retention Pool, whereby they obtain insurance coverage for substantially all major risks. The Town leases a truck under a noncancelable operating lease expiring in fiscal 1998. Future 4 minimum lease payments under this lease are as follows: 9 4 22 4 TOWN OF MARANA, ARIZONA NOTES TO COMBINED FINANCIAL STATEMENTS June 30, 1995 NOTE 6 - COMMITMENTS AND CONTINGENCIES (CONTINUED) Years Ending June 30 1996 $ 3,388 1997 3,388 1998 1,129 Total The Town is also obligated under the terms of this lease to compensate the lessor for any mileage driven on the truck which is above the monthly intended mileage. - Such a guarantee is in essence contingent rentals that are not determinable at year end. The Town leases office space for its planning and public safety departments under noncancelable, long- - term operating leases with expirations of November 1997 and November 1999. One of these leases O requires the Town to pay its share of real estate taxes, common area charges and management fees. This same lease requires annual adjustments for increases in the Town's share of real estate taxes, O - common area charges and management fees. However, the increase related to controllable common O area charges and management fees by the landlord cannot increase more than 4.5% over the prior year. One lease contains two five -year renewal options at a monthly base rent of either the then escalated 0 rental rate or 90% of the prevailing market rental rate at the time of renewal, and the other lease • contains two three -year renewal options at a monthly base rent of $2,600, plus an adjustment for the • 0 increase in the Consumer Price Index (CPI) for the previous three years at the time of renewal. These leases provide for payments of minimum annual rentals as follows, excluding real estate taxes, common area charges, management fees and sales taxes: 4 Years Ending June 30 1996 $ 48,578 0 1997 49,617 3 1998 32,702 1999 20,202 r� 2000 5,051 Total $_151,15D Minimum annual rentals above exclude rentals under renewal options as of June 30, 1995. Rent 3 expense under the above leases for fiscal 1995 aggregated $38,799. 4 4 4 23 3 TOWN OF MARANA, ARIZONA NOTES TO COMBINED FINANCIAL STATEMENTS June 30, 1995 4 NOTE 7 - ACCOUNTING CHANGE 4 In fiscal 1995, the Town implemented GASB Statement No. 22, Accounting for Taxpayer - Assessed Tax Revenues in Governmental Funds. This statement requires the Town to recognize revenues from 4 taxpayer- assessed taxes in the accounting period in which they become both measurable and available. The cumulative effect of this change on the June 30, 1994 balance sheet of the General Fund results in 4 an increase in taxes receivable and unreserved fund balance of $540,673. 4 Fund balance, June 30, 1994 - as previously reported $ 2,090,178 4 Cumulative effect of change in accounting principle 540,673 Fund balance, June 30, 1994 - as restated $ 2 0 4 0 • 4 4 4 4 9 9 9 9 9 This information is an integral part of the accompanying combined financial statements. 24 0 0 4 4 0 SUPPLEMENTAL INFORMATION 4 4 4 0 4 4 0 3 4 4 4 4 4 4 4 4 4 4 0 0 25 9 II 4 up r rn 0 rnI 0 rn 0) rn J O ° v ° v ° v ° v ° v U_ 1 1 1 1 I I Q 4 o to . 0 I C 1n 1n O O 1A 1n 1n E m e- -1 to iii v v O O C E -- (O (0 r- 1n 1A (1 7 c N N N N N E 0.6 .. c I 1 1 1 I E > 0 0 p y 0m� (A (s (a (n v v vi - v cu cv ▪ c 81 O 1 1 1 M 1 M M 11 1 0 E N p > o O Q QtCO " m e N M 11U vO t 10 Z W = M E 's of O of of of O N o O j E O v N 1 1 N N N I I I N 4 Y Q W 1 1n 0 a vco 0 U 4 Z5Z ut u� (A (fl Q O N M _ U. .-= C E E to to N. 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