4 minute read
Management’s Discussion and Analysis
MANAGEMENT’S DISCUSSION AND ANALYSIS
This section of the Town of Prescott Valley’s (Town) Annual Comprehensive Financial Report (ACFR) presents a narrative overview and analysis of the financial activities of the Town for the fiscal year ended June 30, 2022. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal.
FINANCIAL HIGHLIGHTS
The assets and deferred outflows of resources of the Town exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $344,523,220 (net position). Of this amount, $86,986,865 (unrestricted net position) may be used to meet the government’s ongoing obligations to citizens and creditors.
The government’s total net position increased by $28,491,053. Most of this increase can be attributed to tax revenue, intergovernmental revenue, and grant funding; with approximately $4.9 million of the increase being attributed to proprietary funds.
As of June 30, 2022, the Town’s governmental funds reported combined ending fund balances of $82,614,137, a net increase of $15,442,462 over the prior year. The increase can primarily be attributed mostly to increased tax collections in all categories. Approximately 56% of this total amount, $46,322,514, is unassigned fund balance available for spending at the government’s discretion.
OVERVIEW OF THE 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.
Government‐Wide Financial Statements
The government‐wide financial statements are designed to provide readers with a broad overview of the Town’s finances in a manner similar to a private‐sector business.
The statement of net position presents information on all the Town’s assets and liabilities, including deferred inflows/outflows of resources, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial condition of the Town is improving or deteriorating.
The statement of activities presents information showing how the Town’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes).
Both government‐wide financial statements distinguish functions of the Town that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business‐type activities). The governmental activities of the Town
include general government, public safety, culture and recreation, highways and streets, and public works. The business‐type activities of the Town include water and sewer utilities.
Included within the governmental activities of the government‐wide financial statements are the operations of the Town of Prescott Valley Municipal Property Corporation, StoneRidge Community Facilities District, Pronghorn Ranch Community Facilities District, Raven Ridge Community Facilities District, Quailwood Meadows Community Facilities District, Parkway Community Facilities District No. 1, Entertainment Center Community Facilities District, and Southside Community Facilities District No. 1. Although legally separate from the Town, these component units are blended with the primary government because of their governance or financial relationships to the Town. For additional information related to component units, please refer to the separately issued financial statements.
The government‐wide financial statements can be found on pages 27‐29 of this report.
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, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance‐related legal requirements. All the funds of the Town can be divided into the following two categories: governmental funds and proprietary funds.
Governmental Funds
Governmental funds are used to account for essentially the same functions reported as governmental activities in the government‐wide financial statements. However, unlike the government‐wide financial statements, governmental fund financial statements focus on near‐term inflows (revenues) and outflows (expenditures) of spendable resources as well as balances of spendable resources available at the end of the fiscal year. Such information may be useful in determining what financial resources are available in the near future to finance the Town’s programs.
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 government’s near‐term financing decisions. 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.
The Town maintains several individual governmental funds organized according to their type (special revenue, debt service, and capital projects). 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 Fund, Highway User Revenue Fund (HURF), Development Impact Fees Fund, Grant Fund, Streets Capital Improvement Fund, and Southside Community Facilities District No. 1, which are considered to be major funds. Data from the remaining governmental funds is combined into a single, aggregated presentation. Individual fund data for each of the non‐major governmental funds is provided in the form of combining statements elsewhere in this report.
A budgetary comparison statement has been provided for all governmental funds that adopt an annual appropriated budget to demonstrate budgetary compliance.
The basic governmental fund financial statements can be found on pages 30‐41 of this report.
Proprietary Funds
Town. All the enterprise funds are considered to be major funds of the Town.
The basic proprietary fund financial statements can be found on pages 42‐46 of this report.
Notes to the Financial Statements
The notes to the financial statements provide additional information that is essential to a full understanding of the data provided in the government‐wide and fund financial statements. The notes can be found beginning on page 47 of this report.
Other Information
Required Supplementary Information
In addition to the basic financial statements and accompanying notes, this report presents certain required supplementary information concerning the Town’s progress in funding its obligation to provide pension benefits to its employees. Required supplementary information can be found on pages 76‐81 of this report with notes on page 82.
Combining Statements
The combining statements referred to earlier in connection with non‐major governmental funds are presented following the required supplementary information on pensions. Combining and individual fund statements and schedules can be found on pages 83‐97 of this report.
GOVERNMENT‐WIDE FINANCIAL ANALYSIS
While this document contains information about the funds used by the Town to provide services to its citizens, the statement of net position and statement of activities serve to provide an answer to the question of how the Town performed financially throughout the year. These statements include all assets and liabilities using the accrual basis of accounting similar to the accounting used by the private sector. The basis for this accounting considers all the current year’s revenues and expenses regardless of when the cash is received or paid.
These two statements report the Town’s net position and the changes in that position. The change in net position is important because it tells the reader whether the financial condition of the Town has improved or diminished. In evaluating the overall position of the Town, non‐financial information such as changes in the Town’s tax base, the impact of development agreements on future revenues and the condition of the Town’s capital assets will also need to be evaluated.
Analysis of Net Position
As noted earlier, net position may serve as a useful indicator of a government’s financial condition. For the Town, assets, and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $344,523,220 at the close of the current fiscal year. Net position consists of three components: 1) Net investment in capital assets, 2) Restricted, and 3) Unrestricted.
A portion of the Town’s net position reflects its investment of $242,062,510, or 70%, in capital assets (e.g., land, buildings and equipment) less any related outstanding debt used to acquire those assets. The Town uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending, and it is not the Town’s intention to sell these assets. 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 liquidated for these liabilities.
An additional portion of the Town’s net position, $15,473,845, or 5%, represents resources that are subject to external restrictions (e.g., capital projects, debt service obligations, grantor and contributor purposes and street improvements) on how they may be used.
The remaining balance is unrestricted net position, $86,986,865, or 25%, and may be used to meet the government’s ongoing obligations to citizens and creditors. At the end of the current fiscal year, the Town reports positive balances in all three categories of net position for the government as a whole, as well as for the business‐type activities.
Statement of Net Position
June 30, 2021 and 2022
Governmental Activities Business‐Type Activities
Total 2022 2021 2022 2021 2022 2021
Assets
Current and other assets 98,048,472$ 75,730,550$ 29,055,523$ 19,243,275$ 127,103,995$ 94,973,825 $
Capital assets 189,087,591 187,120,936 109,055,257 112,591,677 298,142,848 299,712,613 Total assets 287,136,063 262,851,486 138,110,780 131,834,952 425,246,843 394,686,438
Deferred Outflows of Resources
Deferred outflows related to pensions
Deferred charges on refunding Total deferred outflows of resources 6,070,988 6,393,971 796,764 892,632 6,867,752 7,286,603
Total assets, deferred outflows of resources 294,003,815 $ 270,138,089$ 138,110,780$ ‐ 6,070,988 6,393,971 ‐ 796,764 892,632 ‐ 6,867,752 7,286,603
131,834,952$ 432,114,595$ 401,973,041$
Liabilities
Long‐term liabilities outstanding
Other liabilities Total liabilities 53,838,010$ 65,096,921$ 3,133,845$ 3,449,949$ 56,$ 971,855
68,546,870$ 18,039,596 13,853,793 3,520,682 3,399,609 21,560,278 17,253,402 71,877,606 78,950,714 6,654,527 6,849,558 78,532,133 85,800,272
Deferred Inflows of Resources
Leases
Deferred inflows related to pensions Total deferred inflows of resources 3,890,844
‐ 1,558,497 3,609,901 140,602 ‐7,500,745 140,602 1,558,497 ‐ 5,449,341
‐‐ 3,609,901 140,602 ‐ 9,059,242 140,602
Net Position
Net investment in capital assets
Restricted
Unrestricted Total net position Total liabilities, deferred inflows of resources and net position 137,196,695 131,166,088 104,865,815 108,269,565 242,062,510 239,435,653 15,473,845 10,541,003 ‐ ‐ 15,473,845 10,541,003 61,954,924 49,339,682 25,031,941 16,715,829 86,986,865 66,055,511 214,625,464 191,046,773 129,897,756 124,985,394 344,523,220 316,032,167
294,003,815$ 270,138,089$ 138,110,780$ 131,834,952$ 432,114,595$ 401,973,041$
Analysis of Changes in Net Position
For the current fiscal year, the Town’s net position increased by $28,491,053.
Changes in Net Position June 30, 2021 and 2022
Governmental Activities Business‐Type Activities
Total 2022 2021 2022 2021 2022 2021
Revenues
Program revenues:
Charges for services 6,232,482$ 5,126,801$ 15,865,943$ 16,229,996$ 22,098,425$ 21,356,797 $
Operating grants and contributions 1,189,641 4,416,308 ‐ ‐ 1,189,641 4,416,308
Capital grants and contributions 8,879,460 8,232,982 5,620,904 6,704,850 14,500,364 14,937,832
General revenues:
Taxes and franchise fees 38,643,793 33,678,545 ‐ ‐ 38,643,793 33,678,545
Intergovernmental 23,026,202 22,033,886 ‐ ‐ 23,026,202 22,033,886
Interest and investment income (268,335) (46,187) 196,916 155,846 (71,419) 109,659
Proceeds from sale of effluent water ‐ ‐ 1,672,629 ‐ 1,672,629 ‐
Other 597,468 6,677,389 2,355,499 11,673 2,952,967 6,689,062 Total revenues 78,300,711 80,119,724 25,711,891 23,102,365 104,012,602 103,222,089
Expenses
General government
Public safety
Culture and recreation
Public works
Highways and streets
Interest on long‐term debt
Wastewater utility
Prescott Valley water system Total expenses Increase (decrease) in net position before special items
Property owner assessment adjustment 12,487,378 12,128,632 15,625,064 16,225,329 10,842,623 9,672,141 3,540,657 3,645,389 9,981,662 9,632,912 ‐ ‐ 12,487,378 12,128,632 ‐ ‐ 15,625,064 16,225,329 ‐ ‐ 10,842,623 9,672,141 ‐ ‐ 3,540,657 3,645,389 ‐ ‐ 9,981,662 9,632,912
2,244,636 2,960,863 ‐ ‐ 2,244,636 2,960,863
‐ ‐
7,247,353 7,391,686 7,247,353 7,391,686 ‐ ‐ 13,552,176 8,647,085 13,552,176 8,647,085 54,722,020 54,265,266 20,799,529 16,038,771 75,521,549 70,304,037
23,578,691 25,854,458 4,912,362 7,063,594 28,491,053 32,918,052 ‐ (402) ‐ ‐ ‐ (402)
Increase (decrease) in net position Net position ‐ beginning Net position ‐ ending 23,578,691 25,854,056
4,912,362 7,063,594 28,491,053 32,917,650 191,046,773 165,192,717 124,985,394 117,921,800 316,032,167 283,114,517 214,625,464$ 191,046,773$ 129,897,756$ 124,985,394$ 344,523,220$ 316,032,167$
Governmental activities. Governmental activities increased the Town’s net position by $23,578,691. Key factors include:
Charges for services increased by $1,105,681 over the prior fiscal year. For the fiscal year 2021‐22, 632 permits for new construction were issued compared to 774 the previous year, a decrease of 18%. There was an increase in building and related permit revenues of $5,060 due to an increase in new commercial construction permit revenue offset by a decrease in new residential permit revenue. Business and liquor licenses revenue decrease by $36,211 over the prior fiscal year due to business license fee policy update.
Property rentals increased by $187,466 primarily due to an increase in apartment rental surcharge revenues.
Recreation fees increased by $1,025,846 primarily due to Entertainment Center CFD revenue increase associated with post‐pandemic increase in number of events. Building and related charges for services decreased by $17,877. Court fines decreased by $106,178. Other revenues increased by $47,575 due to an increase in refunds and reimbursements and in revenues from sale of Town’s non‐capital assets through Public
decreased by $3,010,741 primarily due to the AZ Cares grant received and expended as part of federal financial assistance from the U.S. Department of the Treasury’s Coronavirus Relief Fund in fiscal year 2020‐21. Capital grants and contributions increased by $646,478. Capital contributions decreased by $716,023 which was primarily due to a decrease of donated assets received from developers. Capital grants increased by $1,410,282 due to higher than prior year Community Development Block Grant activity and funding received from the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) program. Capital assessments decreased by $13,505. Impact fee capital contributions decreased by $34,276. The Town’s tax and franchise revenues increased in fiscal year 2021‐22 by $4,965,248. Sales and use tax collections increased by $4,844,653, with retail sales taxes increasing by 10%, construction increasing by 38%, and restaurant sales taxes increasing by 18% over the prior year. CFD property tax revenues increased by $66,687. Franchise taxes increased by $54,908. Intergovernmental revenues increased by $992,316 in fiscal year 2021‐22. State‐shared sales tax increased by $1,094,223, or 20%, state revenue sharing decreased by $494,322, or 7%, highway user revenue increased by $268,771, or 6%, and auto lieu tax decreased by $124,700, or 3%, over the previous year. Other intergovernmental revenues increased by $248,344 primarily due to receiving higher than prior year revenues from Yavapai County Flood Control and from Smart and Safe Arizona. Interest and investment earnings decreased by $222,148 over the previous year primarily due to the change of fair market value of the investment portfolio. The average yield on investments on June 30, 2022, was 1.97% compared to 0.54% on June 30, 2021. Other revenues decreased by $6,079,921 in fiscal year 2021‐22 primarily due to library litigation proceeds received in fiscal year 2020‐21.
General Government increased by $358,746 over the previous year. Public Safety decreased by $600,265 over the previous year due to decrease in Public Safety Retirement contributions. Culture and Recreation increased by $1,170,482 mainly due to Entertainment Center returning to pre‐pandemic level of operations. Public Works decreased by $104,732 over the previous year mostly due to an increase in operating expenses. Highways and Streets increased by $348,750 from the previous year mostly due to an increase in capital outlay expenses. Interest on Long‐Term Debt decreased by $716,227 from the previous year due to decrease of outstanding debt and the advance refunding of outstanding debt in fiscal year 2020‐21.
The chart below illustrates the Town’s governmental expenses and revenues by function.
As shown, Public Safety (Building Safety and Police) and General Government (Town Council, Executive Management, Town Clerk, Finance, Human Resources, Information Technology, Legal, Magistrate Court, Facilities and Fleet Maintenance and Other‐Unclassified departments) are the largest functions in expenses at 30% and 24% respectively, followed by Culture and Recreation at 20%, Highways and Streets at 19%, and Public Works at 7%.
General revenues such as sales and use taxes (e.g., transaction privilege taxes), franchise taxes, and intergovernmental are not shown by program, but are effectively used to support program activities of the Town. Taxes and franchise fees account for 49% of the total. Intergovernmental revenues (e.g., state‐shared sales tax, state revenue sharing and auto lieu) account for 29% of the total.
Business‐type activities. Business‐type activities increased the Town’s net position by $4,912,362.
The number of Water System customers increased by 734 and consumption increased by approximately 34.2 million gallons. The number of Wastewater System customers increased by 872 and consumption increased by approximately 13.5 million gallons. Water System user charges decreased by $580,732, and Wastewater System user charges increased by $281,719. Capital grants and contributions decreased by $1,083,946. Connection fee revenue (e.g., water resource and capacity fees) related to new housing permits issued decreased by $508,830 over the previous year. Infrastructure contributions from developers decreased by $910,864 compared to fiscal year 2020‐21. Grant revenue increased by $335,748 due to funding received from SLFRF program.
Administration and professional services increased by $600,811 Utilities decreased by $155,090 Supplies increased by $142,960 Depreciation and amortization expenses increased by $305,493 Capital outlay increased by $3,983,698 Repairs and maintenance increased by $231,085 Interest expense decreased by $42,131 Other expenses decreased by $152,246
As shown in the chart below, the Prescott Valley Water System had expenses of approximately $13.6 million, and Wastewater expenses totaling approximately $7.2 million. For the fiscal year, the Prescott Valley Water System program expenses exceeded program revenues by $227,919, and the Wastewater program revenues exceeded program expenses by $915,237.
Charges for services (e.g., usage fees) are the largest single source of funds representing 62% of the total. Water resource fees, water capacity fees and capital contributions, which are fees paid by or assets donated by developers or individuals on new construction, provide 22% of the revenues. Other revenue (e.g., interest, investment and rental income, proceeds from sale of effluent water) provides 16% of total revenues.
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 (e.g., revenues), outflows (e.g., expenditures), and balances of resources that are available for spending. Such information is useful in assessing the Town’s financing requirements. Unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. Types of governmental funds reported by the Town include the General Fund, special revenue funds, debt service funds, and capital project funds.
At of the end of the current fiscal year, the Town’s governmental funds reported combined ending fund balances of $82,614,137. Approximately $46.3 million of this total constitutes unassigned fund balance, which is available for spending at the Town’s discretion. The remainder of the fund balance is: 1) non‐spendable ($16.3 million) for inventory, prepaid items, and advances to other funds, 2) restricted ($14.2 million) for special revenue funds, capital improvement funds, community facilities districts, and debt service, and 3) committed ($5.8 million) for capital project growth savings and asset replacement.
Revenues for governmental functions overall totaled $76,185,893 in the fiscal year ended June 30, 2022, which represents a decrease of $734,093 from the fiscal year ended June 30, 2021. Expenditures for governmental functions totaled $63,837,863, an increase of $5,210,717, or about 9%, from the fiscal year ended June 30, 2021. This increase is primarily due to the increase in capital outlay expenditures in fiscal year 2021‐22. In the fiscal year ended June 30, 2022, revenues exceeded expenditures for governmental functions by $12,348,030.
The General Fund is the chief operating fund of the Town. At the end of the current fiscal year, the unassigned fund balance of the general fund was $46,720,462. As a measure of the General Fund’s liquidity, it may be useful to compare total unassigned and total fund balance to total fund expenditures. The unassigned fund balance represents 113% of total General Fund expenditures of $41,501,736. The total fund balance represents 166% of total General Fund expenditures.
According to the Town’s financial policy, the Town’s General Fund will maintain an unassigned fund balance with a target of a minimum of 25% of General Fund revenues, excluding transfers. The intention of the unassigned fund balance is to provide additional stability to the General Fund recognizing the cyclical nature of the economy and the volatility of the major revenue sources of the Town. Funds in excess of the minimum targets will be retained in the unassigned General Fund balance. As of June 30, 2022, the Town had set aside 85% of General Fund revenues.
The fund balance of the Town’s General Fund increased by $10,346,648 during the current fiscal year. This increase can be mostly attributed to higher than budgeted sales tax revenues, intergovernmental revenues, and property rental revenues due to growing population and flourishing construction industry.
The HURF has a total fund balance of $6,126,481. The net increase in fund balance during the current year was $2,135,160. This increase is primarily due to a positive variance to budget in highway user tax, operating expenditures, and capital outlay expenditures.
The Development Impact Fees Fund had a total fund balance of $794,348 for the current year. The net increase in fund balance was $674,590. Total revenues (including transfers in) were $3,629,702 offset by expenditures of $1,124,266 and transfers out of $1,830,846 for required debt service payments.
Total fund balance for Streets Capital Improvement Fund was $4,290,699 for the current year. The net increase in fund balance during the current year was $1,922,929. This increase is primarily due to a positive variance to budget in sales tax revenues and capital outlay expenditures.
The Southside District No. 1 Community Facilities District Fund had a total negative fund balance of $366,594 for the current year.
Proprietary Funds
The Town’s proprietary funds provide the same type of information found in the government‐wide financial statements, but in more detail.
The total net position for business‐type activities (enterprise funds) was $129,897,756, an increase of $4,912,362. At the end of the fiscal year, unrestricted net position for the Prescott Valley Water System and Wastewater System was $25,031,941, an increase of $8,316,112 as compared to the prior fiscal year.
According to the Town’s financial policy, contingency and reserve funds in the Water and Wastewater utility operating funds should be equal to a minimum of ninety (90) days operating expenses. As of June 30, 2022, all utility funds had cash reserves equivalent to at least ninety (90) days.
Utility rates will be set at a minimum to ensure the ratio of revenue to debt meets bond indenture requirements of 1.25:1 ratio. The Town’s goal will be to maintain a minimum ratio of utility revenue to debt service of 1.6:1 to ensure debt coverage in times of revenue fluctuations attributable to weather or other causes, and to ensure a balanced pay‐as‐you‐go capital improvement plan. As of June 30, 2022, both utility systems have met the minimum net revenues to debt ratio. Additional information is available in Table 14 in the Statistical Section. No utility rate increases were proposed for Prescott Valley Water System or Wastewater System for the fiscal year 2021‐22.
Other factors concerning the finances of these funds have been addressed previously in the Town’s business‐type activities.
General Fund Budgetary Highlights
Budgetary transfers between departments, funds, capital outlay, personnel services, and contingency must have the approval of Town Council before the transfer can be made.
As a result of the budget process (as approved by Council), the General Fund’s fund balance was anticipated to decrease by $16,950,834. Actual results in the General Fund’s performance resulted in revenues over expenditures and transfers out in the fiscal year ended June 30, 2022, of $10,346,648, a net difference of $27,297,482. The difference was primarily attributable to the following reasons:
Revenue results were over budget by $9,758,348. Sales tax revenues were above estimates by $7,209,071; licenses and permit revenues for building and related permits were $556,235 over budget; intergovernmental revenues combined were over budget by $1,089,802. Other revenue categories combined were $903,240 above budget estimates. Capital outlay had a positive variance to budget of $5,442,900 due to less than budgeted expenditures for the library building project and engineering projects. Net budgeted transfers out to other funds are below estimates by $912,375.
Capital Assets
The Town’s capital assets for its governmental and business‐type activities as of June 30, 2022, amount to $298,142,878 (net of accumulated depreciation). Capital assets include land, buildings, improvements other than buildings, machinery and equipment, infrastructure (including roads, water and sewer systems), and construction in progress. The total decrease in the Town’s capital assets (net of accumulated depreciation) for the current fiscal year was 1% for governmental and business‐type activities.
Total capital assets for the Town are shown in the following table:
Major capital asset events during the current fiscal year included the following:
Governmental activities:
Jenkins Obelisk, the completion of Boys & Girls Club parking lot improvements, the completion of Antelope Park
Splash Pad, and other various park improvements offset by depreciation. Machinery and equipment increased by $240,367 due to the purchase of vehicles and equipment for various departments and Entertainment Center offset by depreciation. Infrastructure decreased by $3,290,786 due to depreciation offset by the completion of Antelope Meadow Free
Flow and Park View Drive Connector, and developer contributions of drainage and roadways. Construction in progress increased by $797,463. This increase is due to current year additions to governmental activities including Antelope Park Improvements, Santa Fe Park Improvements, Library Building Remodel project, various street improvement projects offset by the completion of Antelope Meadow Free Flow, Park View
Business‐type activities:
Land increased by $768,936 due to the acquisition of Summit 2 Water Tank Right‐of‐Way and a land parcel with additional water rights. Buildings increased by $50,450 due to Well Site building upgrades offset by depreciation. Improvements other than buildings decreased by $821,386 due to depreciation. Machinery and equipment increased by $131,643, primarily due to the purchase of equipment for Prescott Valley
Tank Right‐of‐Way and reclassification of Tri‐City Pipeline and Tanks project to capital outlay expenses (the impairment loss is due to outdated design) offset by current year additions to business‐type activities including
Governmental Business‐Type
Activities Activities Total
Capital Assets
Land 12,779,844$ 2,537,746$ 15,317,590 $
Buildings 47,766,023 411,639 48,177,662
Improvements other than buildings 8,629,147 14,220,256 22,849,403
Machinery and equipment 2,913,507 1,939,498 4,853,005
Infrastructure 115,043,218 86,163,743 201,206,961
Construction in progress 1,911,160 3,045,637 4,956,797 Right‐to‐use Assets
Land 13,870 736,738 750,608
Buildings 8,948 ‐ 8,948
Machinery and equipment 21,874 ‐ 21,874 Total 189,087,591$ 109,055,257$ 298,142,848 $
For government‐wide financial statement presentation, all depreciable capital assets were depreciated from the acquisition date to the end of the current fiscal year. Fund financial statements record capital asset purchases as expenditures. See Section III.C in the Notes to the Financial Statements for further information.
Debt Administration
On June 30, 2022, the Town (including component units) had total long‐term obligations outstanding of $65.63 million, a decrease of $10.44 million over the previous year.
Governmental Activities
In the governmental activities, revenue bonds backed by the full faith and credit of the Town (payable with excise taxes and impact fees) total $16.59 million.
Total outstanding ad valorem bonds issued for community facilities districts equaled approximately $14.83 million. Although legally separate from the Town, the debt associated with the component units is blended with the primary government because of their governance or financial relationships to the Town. At the end of the year, total outstanding general obligation bonds were: $5.24 million for StoneRidge, $3.69 million for Pronghorn Ranch, $3.87 million for Quailwood Meadows, and $2.03 million for Parkway No. 1. The bonds issued for StoneRidge, Pronghorn Ranch, Quailwood Meadows, and Parkway No. 1 are primarily payable from revenues generated through an ad valorem tax assessed against the properties located within the boundaries of the district. StoneRidge, Pronghorn Ranch, and Quailwood Meadows were all refinanced. Remaining deposit amounts were used to pay down the existing debt. Parkway No. 1 is the only ad valorem district that still has a reserve account.
The outstanding bonds issued for Southside No. 1 ($1.41 million) are payable from assessments collected from the property owners and Town’s contributions. The outstanding Water Infrastructure Financing Authority (WIFA) loan for the Raven Ridge project ($1,012) will be repaid from assessments collected from the property owners within the district. No Town revenues are pledged toward these bonds/loan, and the developers and property owners are solely responsible for contributing any differences between the property taxes collected and the annual debt service payment.
The outstanding bonds issued for Entertainment Center CFD ($15.12 million) are payable from the Entertainment Center operating revenues and are guaranteed by the Town’s privilege tax revenues.
The outstanding leases ($44,355) and financed purchase payable ($2.43 million) are both payable from General Fund revenues.
The Town’s net pension and OPEB liability for the Public Safety Personnel Retirement System (PSPRS) is $7,204,201. Additional information regarding this liability is in Section IV.F of the Notes to the Financial Statements.
Business‐Type Activities
Outstanding debt associated with business‐type activities totaled approximately $4.19 million. This represents $3.45 million in WIFA loans for the Town’s wastewater utility and $739,493 in outstanding leases payable from Prescott Valley Water System revenues.
Outstanding Debt
June 30, 2022
Governmental Business‐Type Activities Activities Total Revenue bonds 16,585,000$ ‐$ 16,585,000 $ Community facilities district general obligation bonds 14,830,000 ‐ 14,830,000 Community facilities district revenue bonds 15,120,000 ‐ 15,120,000 Community facilities district special assessment bonds 1,405,000 ‐ 1,405,000 Community facilities district long‐term loan payable 1,012 ‐ 1,012 Premium 2,275,893 ‐ 2,275,893 Leases 44,355 739,493 783,848 Net pension liability 7,204,201 ‐ 7,204,201 Financed purchase payable 2,426,400 ‐ 2,426,400 Compensated absences 1,546,379 ‐ 1,546,379 Long‐term loan payable ‐ 3,449,949 3,449,949 Total long‐term liabilities 61,438,240$ 4,189,442$ 65,627,682 $
Debt Limitations
The State Constitution imposes certain debt limitations on the Town of 6% of secondary assessed valuation of the taxable property for general municipal purposes and 20% of the outstanding assessed valuation of the Town for water, light, sewer, open space, and park purposes. The Town’s available debt margin on June 30, 2022, is $34.7 million in the 6% capacity and $115.7 million in the 20% capacity. Additional information on the debt limitations and capacities may be found in Section III.G of the Notes to the Financial Statements and in Table 13 in the Statistical Section of this report.
The Town’s bonded debt ratings as of June 30, 2022, were:
Entertainment Center CFD Revenue Bonds (Series 2017) Revenue Refunding Bonds (Series 2020)
Moody's Standard and Poor's Fitch Investors Investors Services Rating Group Service, Inc. ‐‐‐ ‐‐‐ AA+
‐‐‐ AA ‐‐‐
Economic Factors and Next Year’s Budget and Rates
Ranch Stores, Amazon Distribution, Grumpy Sicilian, Rosa’s Pizzeria, By the Bucket, Wheelhouse Sports Complex,
Crumbl Cookies, and Lindo Mexico Restaurante Mexicano. Future businesses planned are Church’s Chicken and
Credit Union West.
The above factors were considered in preparing the Town’s budget for fiscal year 2022‐23 and due to economic uncertainties, the following strategies were employed:
Sustained funding of general fund and economic investment reserves to ensure the Town can provide basic services during economic downturns or major emergencies, while making strategic investments in the Town’s economic base.
REQUESTS FOR INFORMATION
This financial report is designed to provide a general overview of the Town’s finances for all of those with an interest in the government’s finances. If you have questions about this report or need additional financial information, contact the Town of Prescott Valley, Finance Department, 7501 East Skoog Boulevard, Prescott Valley, AZ 86314.
