Notice of a Regular Meeting of the League of Arizona Cities & Towns Executive Committee

NOTICE OF A REGULAR MEETING OF THE LEAGUE OF ARIZONA CITIES & TOWNS EXECUTIVE COMMITTEE

Friday, November 22, 2013 at 9:30 a.m. League Office Building 1820 West Washington, Phoenix

Notice is hereby given to the members of the Executive Committee and to the general public that the Executive Committee will hold a meeting open to the public on November 22, 2013 at 9:30 a.m. Members of the Executive Committee will attend either in person or by telephone conference call. The Executive Committee may vote to recess the meeting and move into Executive Session on any item on this agenda. Upon completion of Executive Session, the Executive Committee may resume the meeting, open to the public, to address the remaining items on the agenda. A copy of the agenda is available at the League office building in Suite 200 or on the League website at www.azleague.org.

Agenda

All items on this agenda are scheduled for discussion and possible action, unless otherwise noted.

1. Review and Adoption of Minutes 2. TPT Implementation Work Group Report 3. Legislative Policy Discussion • Income Tax Study Committee • HURF Restoration/Transportation Funding • ASRS-PSPRS • Energy Deregulation 4. 2-1-1 Services Proposal 5. Mayors-Business Roundtable Update 6. Nominating Committee Report and Recommendation 7. League Annual Survey Results 8. Report of AZ Cities @ Work Campaign 9. Recap of 2013 Annual Conference; Future Conference Locations 10. 2012-2013 Audit Report 11. Report from NLC and UCM

Additional informational materials are included in the agenda packet but are not part of the agenda.

EXECUTIVE COMMITTEE MEETING Friday, November 22, 2013 at 9:30 a.m.

Agenda Item #1 Review and Adoption of Minutes

Summary: Minutes of the previous meeting and minutes from the annual business meeting are enclosed for your review and approval.

Responsible Person: Vice President Mark Mitchell

Attachments: August 28, 2013 Executive Committee Minutes August 29, 2013 Annual Business Meeting Minutes

Action Requested: Approval MINUTES

LEAGUE OF ARIZONA CITIES AND TOWNS

EXECUTIVE COMMITTEE MEETING

Wednesday, August 28, 2013 at 11:45 a.m. Hilton El Conquistador Resort, Catalina Room 10000 North Oracle Road Oro Valley, Arizona

MEMBERS

President Mark Nexsen, Mayor, Lake Havasu City Doug Von Gausig, Mayor, Clarkdale Thomas L. Schoaf, Mayor, Litchfield Park Ed Honea, Mayor, Marana Vice President Scott Smith, Mayor, Mesa Mark Mitchell, Mayor, Tempe Kenny Evans, Mayor, Payson Bob Barrett, Mayor, Peoria Treasurer Greg Stanton, Mayor, Phoenix* Jay Tibshraeny, Mayor, Chandler Harvey Skoog, Mayor, Prescott Valley Lynne Skelton, Vice Mayor, Sahuarita W.J. "Jim" Lane, Mayor, Scottsdale Marie Lopez Rogers, Mayor, Avondale Rob Adams, Mayor, Sedona Gilbert Lopez, Councilmember, Coolidge Rick Mueller, Mayor, Sierra Vista Lana Mook, Mayor, El Mirage Sharon Wolcott, Mayor, Surprise John Lewis, Mayor, Gilbert Bob Rivera, Mayor, Thatcher Jerry Weiers, Mayor, Glendale Jonathan Rothschild, Mayor, Tucson John Salem, Mayor, Kingman Alan Krieger, Mayor, Yuma

*Not in attendance

The meeting began with Agenda Item 4, a report from the League Communications Subcommittee.

REPORT FROM LEAGUE COMMUNICATIONS SUBCOMMITTEE

President Doug Von Gausig recognized League Communication and Education Director Matt Lore and League Legislative Director Renè Guillen, to report on the Communications Subcommittee. Mr. Lore reviewed the intent of the League’s Arizona Cities @ Work Campaign and updated the Executive Committee on the progress of the campaign since May. Mr. Lore and Mr. Guillen informed the committee that Arizona Cities @ Work Campaign presentations were given during the League’s annual summer legislative tours. Over the course of the summer, League staff traveled to various communities to give updates on the legislative session and introduce communities to the AZ Cities @ Work Campaign. Mr. Lore also discussed upcoming events for the campaign, including Cities and Towns Week, which will take place October 20 – 26.

1 League President Doug Von Gausig called the meeting to order at 12:15 p.m. He drew attention to the positive focus of the Arizona Cities @ Work Campaign and thanked League Staff, Communications Subcommittee and Ideas Collide for their continued efforts on the campaign.

1. REVIEW AND ADOPTION OF MINUTES

Move to approve minutes of May 10, 2013 Executive Committee meeting and June 13, 2013 Special Executive Committee Meeting as presented: Mayor Bob Rivera; second: Mayor Scott Smith. Vote: unanimous.

2. REPORT ON LEGISLATIVE TOUR/ LEAGUE OUTREACH; LEGISLATIVE ISSUES

League President Von Gausig recognized League Legislative Director Renè Guillen, to report on the legislative tour and outreach. Mr. Guillen reported that the League had visited 14 cities and towns during the annual legislative recap tour. He noted that although there were 14 specific stops on the tour, a number of additional municipalities attended the presentations, including the Greater Arizona Mayor’s Association and the Tri-City Council. Mr. Guillen remarked that there were two specific issues from the legislative session that were prevalently discussed during the tours: transaction privilege tax and Public Safety Personnel Retirement System.

Mr. Guillen noted that in the upcoming legislative session, possible issues that could be facing cities and towns are the Marketplace Fairness Act and budget transparency.

3. MAYORS – BUSINESS ROUNDTABLE

League President Von Gausig recognized League Vice President Mayor Mark Mitchell, to report on the business roundtable. He noted that Mayor Mitchell had been working closely with business leaders throughout Arizona. Mayor Mitchell said that CEOs of businesses are often disconnected from government relations. The idea was to create a roundtable to communicate with CEOs directly and create a partnership between businesses and local governments.

Mayor Mitchell stated that the purpose of the roundtable was to create dialogue with CEOs on upcoming legislative issues and work together. This group will be comprised of mayors and business leaders meeting twice a year. Other mayors commended the idea, citing the importance of being proactive by creating a presentation for those CEOs, which will showcase all the successes of Arizona cities and towns. Mayor Mitchell then asked the members of the Executive Committee to send in any recommendations for other businesses not already listed or for ideas on the business roundtable.

4. REPORT FROM LEAGUE COMMUNICATIONS SUBCOMMITTEE

(see above)

2 5. RECOGNITION OF OUTGOING EXECUTIVE COMMITTEE MEMBER

President Von Gausig read the Resolution of Appreciation to John Salem, former mayor of Kingman. He recognized him for his work as a mayor and member of the Executive Committee and Communications Subcommittee. A motion was made by Mayor Marie Lopez Rogers and was seconded by Mayor Tom Schoaf. The resolution of appreciation passed unanimously.

6. EXECUTIVE SESSION: EXECUTIVE DIRECTOR EVALUATION

The committee moved to convene in executive session to conduct the annual evaluation of Executive Director Ken Strobeck: Mayor Tom Schoaf; second: Mayor Rick Mueller.

Seeing no further business, President Von Gausig adjourned the meeting at 2:30 p.m.

3 MINUTES OF THE ANNUAL BUSINESS MEETING of the LEAGUE OF ARIZONA CITIES AND TOWNS

Thursday, August 29, 2013 Hilton El Conquistador Oro Valley, Arizona

IN ATTENDANCE

Voting Delegates from Member Cities and Towns as follows:

MEMBERS

Marie Lopez Rogers, Mayor, Avondale Ed Honea, Mayor, Marana Charles German, Mayor, Camp Verde Christian Price, Mayor, Maricopa Doug Von Gausig, Mayor, Clarkdale Scott Smith, Mayor, Mesa Gilbert Lopez, Vice Mayor, Coolidge Bill Diak, Mayor, Page Diane Joens, Mayor, Cottonwood Kenny Evans, Mayor, Payson Lana Mook, Mayor, El Mirage Bob Barrett, Mayor, Peoria Jerry Nabours, Mayor, Flagstaff Daryl Seymore, Mayor, Show Low John Lewis, Mayor, Gilbert Rick Mueller, Mayor, Sierra Vista Jerry Weiers, Mayor, Glendale Sharon Wolcott, Mayor, Surprise Georgia Lord, Mayor, Goodyear Mark Mitchell, Mayor, Tempe Rebecca Jimenez, Mayor, Guadalupe Bob Rivera, Mayor, Thatcher Nikki Check, Mayor, Jerome Greg Bryan, Mayor, Tusayan Sam Hosler, Mayor, Kearny John Moore, Mayor, Williams Janet Watson, Mayor, Kingman Mike Levault, Mayor, Youngtown Don Callahan, Councilmember, Lake Havasu City Alan Krieger, Mayor, Yuma Thomas Schoaf, Mayor, Litchfield Park

I. CALL TO ORDER

President Doug Von Gausig, Mayor of Clarkdale, called the meeting to order at 4:03 p.m.

II. INTRODUCTORY REMARKS

President Von Gausig welcomed the delegates to the meeting and reminded everyone that each city and town has one vote.

III. REPORT OF RESOLUTIONS COMMITTEE AND ADOPTION OF 2014 MUNICIPAL POLICY STATEMENT

Mayor Von Gausig gave the Resolutions Committee report on behalf of Chairman Mayor Greg Stanton. He reported that the resolutions adopted by the Resolutions Committee were before them and asked if there were any objections. Hearing none, he then moved to adopt the Resolutions as adopted by the Resolutions Committee. Mayor Kenny Evans of Payson seconded and the motion carried unanimously. The Resolutions are attached and made a part of these minutes.

IV. REPORT OF NOMINATING COMMITTEE AND ELECTION OF EXECUTIVE COMMITTEE MEMBERS

Mayor Rob Adams of Sedona, Chairman of the Nominating Committee, was recognized by President Von Gausig to give the Nominating Committee's report.

Mayor Adams thanked the Nominating Committee members for their participation and announced that since there were no openings on the Executive Committee six weeks prior to the conference, according to Nominating Committee procedures, no general notice was sent out soliciting applications. Therefore, the slate of nominees is made up of current Executive Committee members whose terms expire in 2013, and who requested re-appointment for two-year terms.

Mayor Adams also announced that the committee will be requesting an agenda item at the November meeting of the Executive Committee. Because of a recent vacancy caused by the resignation of Kingman Mayor John Salem and a vacancy at the end of the year due to Yuma Mayor Alan Krieger leaving office, the committee will ask that a letter to be sent to all mayors notifying them of two openings on the Executive Committee and soliciting applications. The Nominating Committee proposes to interview the applicants and make recommendations to the Executive Committee to fill the vacancies at its February meeting.

Mayor Adams then made a motion to adopt the report of the Nominating Committee. President Von Gausig asked if there were any nominations from the floor. There were none. Mayor Bob Rivera of Thatcher seconded the motion and those nominated were elected without objection. The report of the Nominating Committee is attached and made a part of these minutes.

V. OTHER BUSINESS

President Von Gausig asked if there was any other business to bring before the body. There was none.

VI. ADJOURNMENT

The meeting was adjourned at 4:09 p.m.

PRESIDENT

Executive Director

League of Arizona Cities & Towns 2014 Resolution Recommendations

Full Committee No. Summary Sponsor Co-Sponsor Recommendation DEVELOP AND PASS LEGISLATION TO MAKE THE RFA w/ Amend. REQUIREMENTS FOR ANNEXATION A MORE SIMPLE AND Oro Valley Bullhead City, Marana, (Merged with 1 FLEXIBLE PROCESS. Yuma Wickenburg original number 2) Prohibit fire districts from annexing areas inside a municipal planning RFA w/Amend. area in counties of more than 500,000 persons without the consent of 3 Peoria Surprise the municipality, unless the municipality does not operate a municipal fire department. Establish a mechanism enabling local government to create renewable SMI 4 Flagstaff Tucson, Payson energy and conservation financing districts. Promote state legislation that grants legislative authority to cities and Pulled from towns to freeze property tax levels on commercial and industrial zoned Bullhead Consideration 5 Lake Havasu City, Kingman parcels that support speculative development at pre-improvement levels City until such time as the developed property is FULLY LEASED. Authorize street light improvement districts (SLIDs) to levy and expend Apache Junction, Casa Grande RFA 6 Scottsdale money to repair, maintain and replace lighting facilities. Change A.R.S. 34-603, which deals with alternative project delivery SMI Cottonwood, Flagstaff, 7 methods (APDM), to allow the use of “the final list in the procurement” Sedona Kingman, Camp Verde, Jerome until a contract for construction is entered into. Place reasonable limits on the frequency of requests for public records NRP 8 Yuma Apache Junction and on requests that are overbroad or abusive. Amend A.R.S. Title 13 (Criminal Code) to include criminal damage by RFA w/ Amend. Wickenburg, Apache Junction, 9 graffiti and ensure that restitution for graffiti includes all costs of a Yuma Flagstaff victim associated with graffiti abatement. Support implementing a pilot program to restrict trucks to the two right- NRP Apache Douglas, Bullhead City, Sedona, 10 most lanes when traveling on Arizona highways in urban areas with Junction Sierra Vista three or more lanes in each direction. Wickenburg, Sedona, Kingman, RFA Stop future sweeps of Highway User Revenue Funds (HURF) allocated Lake Havasu City, Apache 11 to Arizona cities and towns and restore HURF funding to FY2008 Yuma Junction, Fountain Hills, levels. Flagstaff, Sierra Vista

1 League of Arizona Cities & Towns 2014 Resolution Recommendations DEVELOP AND PASS LEGISLATION TO ENSURE THE RFA w/ Amend. Kingman, Lake Havasu City, VIABILITY OF ARIZONA STATE PARKS, INCLUDING BUT (Merged with Sierra Vista, Camp Verde, NOT LIMITED TO ALLOWING MUNICIPALITIES TO ENTER Yuma original number 12 Jerome, Somerton, Oro Valley, INTO LONG-TERM LEASES OF STATE PARKS AND THE Sedona 13) Cottonwood, Flagstaff, RESTORATION OF AND TO RESTORE THE ARIZONA STATE Clarkdale PARK HERITAGE FUND. Pass legislation that supports efforts to reduce the shortage of health SMI 14 Sierra Vista Wickenburg, Bisbee, Yuma care professionals in the state of Arizona. Grant municipalities the option of providing workers’ compensation SMI benefits to employees of another agency when working under the 15 municipality’s control or in its jurisdiction through an Wickenburg Sierra Vista, Paradise Valley intergovernmental agreement or contract, especially as it relates to public safety personnel. Include one representative from a large city along with one RFA w/Amend. representative from a small non-metropolitan city on the Public Safety 16 Sierra Vista Wickenburg, Bisbee Personnel Retirement System Board of Trustees as well as the Arizona State Retirement Board. Request that the Public Safety Personnel Retirement System review SMI 17 their actuarial assumptions with regard to salary increases and base Sierra Vista Wickenburg, Bisbee assumptions on current historical actual. Equalize the maximum tax credit and the timeframe allowed for NRP 18 collection of funds for qualified charitable organizations, private Eagar Springerville schools and public schools to qualify as a tax credit in any given year. Pass legislation or engage in other activities that support and advocate RFA 19 for resources to improve Arizona’s ports of entry with Mexico and Sierra Vista Yuma, Bisbee related infrastructure. 20 Support the long-term retention of Arizona’s military installations. Sierra Vista Yuma, Bisbee RFA

2 League of Arizona Cities & Towns 2014 Resolution Recommendations

League Staff Resolutions

No. Summary Full Committee Recommendation 1 Preserve the tax exempt status of municipal bonds. RFA 2 Pass the Marketplace Fairness Act. RFA

Key to Committee Recommendations

Recommend for Adoption (RFA) – Becomes a part of the Municipal Policy Statement and helps guide legislative activity in the coming session.

Recommend with Amendments (RFA w/Amend.) – Will become a part of the Municipal Policy Statement and help guide legislative activity in the coming session but needs amending for either content or technical reasons.

Significant Municipal Issue (SMI) – Although an important concept to cities and towns, does not quite rise to the level of legislative activity. League staff may address the issue with state agencies or other stakeholders.

Not Recommended for Passage (NRP) – The resolution may be too confined to one community, be on its face contrary to core principles, or be out of line with current agreements with other stakeholders.

Staff Recommendations – Resolutions submitted by League staff.

3 N O M I N A T I N G C O M M I T T E E R E P O R T

OFFICERS AND EXECUTIVE COMMITTEE OF THE LEAGUE OF ARIZONA CITIES AND TOWNS

Officers and members of the Executive Committee are elected for two year overlapping terms. The following officials are currently serving terms on the Executive Committee which expire in August 2014:

President: Doug Von Gausig, Mayor, Clarkdale Vice President: Mark Mitchell, Mayor, Tempe Treasurer: Jay Tibshraeny, Mayor, Chandler

Marie Lopez Rogers, Mayor, Avondale John Lewis, Mayor, Gilbert Jerry Weiers, Mayor, Glendale Mark Nexsen, Mayor, Lake Havasu City Scott Smith, Mayor, Mesa Lynne Skelton, Councilmember, Sahuarita W. J. “Jim” Lane, Mayor, Scottsdale Rob Adams, Mayor Sedona Sharon Wolcott, Mayor, Surprise Jonathan Rothschild, Mayor, Tucson Alan Krieger, Mayor, Yuma

NOMINATING COMMITTEE RECOMMENDATIONS FOR OFFICERS AND EXECUTIVE COMMITTEE MEMBERS

Gilbert Lopez, Vice Mayor, Coolidge TWO YEAR TERM Lana Mook, Mayor, El Mirage TWO YEAR TERM Thomas L. Schoaf, Mayor, Litchfield Park TWO YEAR TERM Ed Honea, Mayor, Marana TWO YEAR TERM Kenny Evans, Mayor, Payson TWO YEAR TERM Bob Barrett, Mayor, Peoria TWO YEAR TERM Greg Stanton, Mayor, Phoenix TWO YEAR TERM Harvey Skoog, Mayor, Prescott Valley TWO YEAR TERM Rick Mueller, Mayor, Sierra Vista TWO YEAR TERM Bob Rivera, Mayor, Thatcher TWO YEAR TERM Vacant TWO YEAR TERM

EXECUTIVE COMMITTEE MEETING Friday, November 22, 2013 at 9:30 a.m.

Agenda Item #2 TPT Implementation Work Group Report

Summary: With the passage of HB 2111; TPT Changes in the 2013 legislative session, work is underway to implement the legislation. Four work groups have been created and are meeting under the leadership of the Arizona Department of Revenue. The work groups are: Audit; Administration; Portal and Construction. The League and city and town representatives are participating members in each of the work groups.

Responsible Person: Ken Strobeck, Tom Belshe, Rene Guillen

EXECUTIVE COMMITTEE MEETING Friday, November 22, 2013 at 9:30 a.m.

Agenda Item #3 Legislative Policy Discussion

Summary: There are significant four policy matters we expect to emerge in the 2014 session that may have an impact on cities and towns. They are: • Income Tax Study Committee • HURF Restoration/Transportation Funding • ASRS-PSPRS • Energy Deregulation The specific issues in these topic areas are outlined in the attached Briefing Papers. The committee may wish to discuss pros and cons of various policy alternatives and give direction to League staff regarding legislative activity.

Responsible Person: Ken Strobeck & League Staff

Attachments: 2014 Municipal Policy Statement 2014 League Resolutions Chart Briefing papers on the four policy issues

MUNICIPAL POLICY 2014 STATEMENT OVERVIEW FISCAL RESPONSIBILITY The League of Arizona Cities and Towns, a voluntary association Cities and towns provide public safety and other high-quality services of the 91 incorporated municipalities in Arizona, is governed by for their residents. In order to accomplish this there needs to be fiscal two core principles: to protect shared revenues and promote local certainty in funding sources from the state level. The League calls upon decision-making authority. the Legislature to: PRESERVE LOCAL CONTROL • Stop future sweeps of Highway User Revenue Funds (HURF) Decentralized government at the local level represents a fundamental allocated to Arizona cities and towns and follow statutory principle of American democracy, recognizing that when it comes formulas for the distribution of HURF monies; to community governance, one size does not fit all. • Develop and pass legislation to ensure the viability of Arizona The League calls upon the Legislature to respect the authority of cities state parks and to restore the Arizona State Parks Heritage Fund; and towns to govern their communities in the best interests of their and residents. The League will endorse legislation that supports and • Include one representative from a large city along with one sustains the principle of local control and oppose legislation that representative from a small non-metropolitan city on the Public Safety conflicts with the autonomy of cities and towns. Personnel Retirement System Board of Trustees. PROTECT STATE SHARED REVENUE FEDERAL ISSUES The League is determined to safeguard the economic resources cities The League recognizes that all levels of government must work and towns require to ensure safety and provide high-quality services cooperatively in order for local communities to be successful. for their residents. To that end, the League calls upon the Legislature Therefore, the League will: to enact a budget that maintains existing historical formulas for the distribution of state-collected shared revenue to local governments. • Support the passage of legislation or engage in other activities that support and advocate for resources to improve Arizona’s GOVERNMENT SERVICES ports of entry with Mexico and related infrastructure; From roads to public safety, cities and towns are service providers. • Support the long-term retention of Arizona’s military installations; Our residents look to their local government to provide key services critical to creating welcoming, healthy communities. Therefore, the • Encourage Congress to preserve the tax exempt status of League urges the passage of legislation to: municipal bonds; and • Make the requirements for annexation a more simple and • Push Congress to pass the Marketplace Fairness Act. flexible process; • Prohibit fire districts from annexing areas inside a municipal planning area without the consent of the municipality, provided the municipality operates a municipal fire department; • Authorize street light improvement districts to levy and expend money to repair, maintain and replace lighting facilities; and • Amend statute to ensure that restitution for graffiti offenses includes all abatement costs associated with a victim of graffiti.

FOR MORE INFORMATION: CALL 602-258-5786 VISIT: WWW.AZLEAGUE.ORG • TWITTER: @AZCITIES 83% of Arizona’s workforce resides within a city or town

of Arizonans live in one of the 91 incorporated cities and towns in Arizona.

rd LOWEST IN THE TOTAL ECONOMIC IMPACT OF 3 ARIZONA STATE PARKS ON THE THE NATION STATE WAS IN STATE & LOCAL GOVERNMENT $266,436,582 EMPLOYEES PER 100 RESIDENTS

HURF Transfers from Cities and Towns 96,328 jobs in Arizona are associated with the to DPS (2000 - Present) U.S. Military; 45,568 direct, 39,942 indirect,

$35.0 11,269 induced $30.0 Induced Jobs $25.0

$20.0

$15.0 $(millions) $10.0 Direct Jobs $5.0

$0.0 Indirect Jobs ‘00‘01 ‘02 ‘03 ‘04‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14 Fiscal Year

FOR MORE INFORMATION: CALL 602-258-5786 VISIT: WWW.AZLEAGUE.ORG • TWITTER: @AZCITIES S Steve Pierce(R) S Al Melvin(R) S Rick Murphy(R) R Karen Fann(R), Andy Tobin(R) R Adam Kwasman(R), Steve Smith(R) R Rick Gray(R), Debbie Lesko(R) Carefree, Cave Creek, Chino Valley, Casa Grande, Eloy, Marana, Maricopa, El Mirage, Peoria, Surprise, Youngtown 1 Dewey-Humboldt, Peoria, Phoenix, 11 Oro Valley, Tucson 21 Prescott, Prescott Valley, Wickenburg

S Linda Lopez(D) S Andy Biggs(R) S Judy Burges(R) R Andrea Dalessandro(D), Rosanna Gabaldon(D) R Eddie Farnsworth(R), Warren Petersen(R) R David Livingston(R), Phil Lovas(R) Nogales, Patagonia, Sahuarita, Chandler, Gilbert, Queen Creek Glendale, Peoria, Surprise 2 South Tucson, Tucson 12 22

S Olivia Cajero Bedford(D) S Don Shooter(R) S Michele Reagan(R) R Sally Ann Gonzales(D), Macario Saldate(D) R Darin Mitchell(R), Steve Montenegro(R) R John Kavanagh(R), Michelle Ugenti(R) Tucson Buckeye, El Mirage, Glendale, Goodyear, Fountain Hills, Paradise Valley, Scottsdale 3 13 Litchﬁeld Park, Surprise, Wellton, 23 Wickenburg, Yuma

S Lynne Pancrazi(D) S Gail Grifﬁn(R) S Katie Hobbs(D) R Juan Carlos Escamilla(D), Lisa Otondo(D) R David Gowan(R), David Stevens(R) R Lela Alston(D), Chad Campbell(D) Buckeye, Gila Bend, Goodyear, San Luis, Benson, Bisbee, Clifton, Douglas, Duncan, Phoenix, Scottsdale, Tempe 4 Somerton, Tucson, Yuma 14 Huachuca City, Pima, Safford, Sierra Vista, 24 Thatcher, Tombstone, Tucson, Willcox

S Kelli Ward(R) S Nancy Barto(R) S Bob Worsley(R) R Sonny Borrelli(R), Doris Goodale(R) R John Allen(R), Heather Carter(R) R Justin Olson(R), Justin Pierce(R) Bullhead City, Colorado City, Kingman, Cave Creek, Phoenix Mesa 5 Lake Havasu City, Parker, Quartzsite 15 25

S Chester Crandell(R) S David Farnsworth(R) S Ed Ableser(D) R Brenda Barton(R), Robert Thorpe(R) R Doug Coleman(R), Kelly Townsend (R) R Juan Mendez(D), Andrew Sherwood(D) Camp Verde, Clarkdale, Cottonwood, Flagstaff, Apache Junction, Mesa, Queen Creek Mesa, Phoenix, Tempe 6 Holbrook, Jerome, Payson, Sedona, Snowﬂake, 16 26 Star Valley, Taylor, Tusayan, Williams

S Carlyle Begay(D) S Steve Yarbrough(R) S Leah Landrum Taylor(D) R Albert Hale(D), Jamescita Peshlakai(D) R Tom Forese(R), J.D. Mesnard(R) R Ruben Gallego(D), Catherine Miranda(D) Eagar, Fredonia, Page, Pinetop-Lakeside, Chandler, Gilbert Guadalupe, Phoenix, Tempe 7 Show Low, Springerville, St. Johns, Winslow 17 27

S Barbara McGuire(D) S John McComish(R) S Adam Driggs(R) R Frank Pratt(R), T.J. Shope(R) R Jeff Dial(R), Bob Robson(R) R Kate Brophy McGee(R), Eric Meyer(D) Casa Grande, Coolidge, Eloy, Florence, Globe, Chandler, Guadalupe, Mesa, Paradise Valley, Phoenix, Scottsdale 8 Hayden, Kearny, Mammoth, Miami, 18 Phoenix, Tempe 28 Superior, Winkelman

S Steve Farley(D) S Anna Tovar(D) S Steve Gallardo(D) R Ethan Orr(R), Victoria Steele(D) R Mark Cardenas(D), Lupe Chavira Contreras(D) R Lydia Hernandez(D), Martin Quezada(D) 9 Marana, Tucson 19 Avondale, Phoenix, Tolleson 29 El Mirage, Glendale, Phoenix

S David Bradley(D) S Kimberly Yee(R) S Robert Meza(D) R Stefanie Mach(D), Bruce Wheeler(D) R Paul Boyer(R), Carl Seel(R) R Jonathan Larkin(D), Debbie McCune Davis(D) 10 Tucson 20 Glendale, Phoenix 30 Glendale, Phoenix

FOR MORE INFORMATION: CALL 602-258-5786 VISIT: WWW.AZLEAGUE.ORG • TWITTER: @AZCITIES League of Arizona Cities & Towns 2014 Resolution Recommendations

2 League of Arizona Cities & Towns 2014 Resolution Recommendations

League Staff Resolutions

No. Summary Full Committee Recommendation 1 Preserve the tax exempt status of municipal bonds. RFA 2 Pass the Marketplace Fairness Act. RFA

Key to Committee Recommendations

Recommend for Adoption (RFA) – Becomes a part of the Municipal Policy Statement and helps guide legislative activity in the coming session.

Staff Recommendations – Resolutions submitted by League staff.

3 Legislative Update:

Briefing on the State Legislature’s Task Force on Income Tax Reform

Overview The President of the Senate and Speaker of the House of Representatives have established the Joint Task Force on Income Tax Reform (Task Force). The Task Force has been asked to identify ways to enhance Arizona's business friendly profile and to make the state’s tax system fairer for the average taxpayer. The Task Force is exploring ways of reforming Arizona's existing personal income tax system in order to create a simple, predictable and transparent system for all Arizona taxpayers. The Task Force must submit a report of its findings to the President of the Senate and Speaker of the House of Representatives on or before December 31, 2013.

Background • Income Tax was the source of $3.4 billion to and made up 35% of the base revenue for the state’s general fund. • Cities and towns receive 15% of that base as part of the state shared revenue system. • First established in 1933, the State’s system was tied to federal income tax in 1954. Taxable income is determined through a formula using Federal Adjusted Gross Income. • Arizona’s system has five tiers (starting with $0-$10,000 and ending with over $150,000) • There have been 7 income tax rate decreases and no increases since 1990. • Rates for the various tiers range from 2.59% – 4.54% (41st of the 43 states). • 35 of the 43 states that have income tax, have adopted tiered rates like Arizona. • 8 of the 43 states have adopted single rates (including NV, TX, WA, WY). Only 3 of the 8 have been adopted in the last 30 years, with Utah being the most recent.

Task Force Focus • Focus of task force and the task force chairman has been on developing s single rate or “flat” income tax for the sole purpose of creating fairness and simplicity in the tax code. • Other technical simplifications have been discussed, mostly by aligning the state more with the federal income tax. • Task Force expressed numerous times that it intended for the results of any change in structure to be revenue-neutral.

Identified Issues • Adopting a single rate will raise the income tax of lower and middle income classes. • Rates are already very low for individual and corporate income tax. • Single state rate structure does nothing to change the complication of the federal income tax on which the state tax structure is based. • A single rate structure will lower revenue to the state general fund and cities without a compensating revenue source. • Task Force had explored the notion of using proceeds from the Marketplace Fairness Act (MFA) to offset the losses to the tax base. However, JLBC staff informed the task force that MFA will not produce nearly the revenue that some of the early national studies predicted it would.

It is unclear at best as to whether the task force will recommend anything other than small technical changes to the tax code as a result of the task force meetings. Legislative Update:

Briefing for discussion of HURF restoration/Transportation Funding

Overview Established in 1974, the Arizona Highway User Revenue Fund (HURF) administered by the Arizona Department of Transportation is the primary source of funding available for state and local highway construction in Arizona. HURF revenue sources include gasoline and use fuel taxes, motor carrier fees, vehicle license tax (VLT), vehicle registration fees, and other miscellaneous fees. These collections totaled $1.21 billion in FY 2012. With the exception of VLT, the Arizona Constitution (Article IX, Section 14) prohibits the use of this money on anything other than highway and street purposes. State statute directs 27.5% of HURF revenues to cities and towns. This totaled approximately $304 million in FY 2012.

Background State law allows for a $10 million distribution from HURF to the Arizona Department of Public Safety (DPS) for highway patrol purposes. When the state’s economy is in recession, lawmakers opt to increase HURF support for DPS beyond $10 million to supplant state general fund support for the department. HURF support for DPS has varied over the years, but the most recent shifts of approximately $125 million transferred to DPS (FYs 2012, 2013, 2014) are the highest in the last decade. These recent shifts amount to annual losses to cities and towns of approximately $36.6 million in each of the last 3 years. This revenue loss is having a significant impact on municipal ability to not only build needed new roads, but also maintain what is already in place. Many cities and towns report that this issue is among their highest priority.

Various legislators have voiced concerns about these continual HURF shifts and would like to see DPS supported by general fund revenues. However, any effort to achieve this goal has been unsuccessful. Recent increases in general fund revenues offer an opportunity for these legislators to move closer to restoration.

Further contributing to the transportation infrastructure problem is the overall trend of declining revenues due to more fuel efficient vehicles and reduced driving habits. Some state and local leaders would like to find alternatives to support the growing infrastructure deficit. Some of the ideas that have surfaced include toll roads, vehicle millage tax, and raising the gas tax. The viability of each of these ideas is unknown.

Identified Issues • Political feasibility of obtaining HURF restoration. • Political capital necessary to restore HURF. • Competing ideas/proposals. Legislative Update:

Briefing for discussion on ASRS-PSPRS

Overview Many cities and towns in Arizona belong to any one of three state retirement plans: the Arizona State Retirement System (ASRS), the Elected Officials Retirement Plan (EORP) or the Public Safety Personnel Retirement System (PSPRS). As pension costs continue to rise as a percentage of municipal budgets and with EORP’s recent transition to a defined contribution plan, ASRS and PSPRS will be placed under greater scrutiny.

Background: ASRS There are currently 78 municipalities that belong to ASRS. ASRS is a defined benefit plan where employers and employees pay an equal percentage into the plan. In FY 2013, that rate was 11.14% of payroll. For FY 2014, the rate is 11.54%.

Most recently, municipalities have disagreed with ASRS regarding the eligibility of some employees based on their (and ostensibly the Social Security Administration’s) interpretation of the Section 218 Agreements that employers have with the Social Security Administration. Under state law, these agreements also serve to establish eligibility to participate in ASRS. The ASRS board has tentatively approved a proposal to eliminate the statutes dictating that these Section 218 Agreements govern ASRS membership, but no official language of such a proposal has been reviewed. Estimates of the number of employees at-risk vary greatly from over 1200 to perhaps less than one hundred, demonstrating both the great uncertainty on this issue as well as the potential litigation costs if a viable solution is not reached.

Background: PSPRS There are currently 78 municipal police departments and 40 municipal fire departments that belong to PSRPS. Unlike ASRS, each employer has their own account and therefore their own unique contribution rate. Additionally, employee contribution rates are currently statutorily set at currently 10.35%, meaning that all costs increases are paid solely by the employer. Bisbee currently pays 59.88% of payroll for its fire department. By contrast, Winslow pays 10.14% of payroll for its fire department. If taken as aggregate, the current PSPRS contribution rate is 30.44%, compared to just ten years ago, when it was 7.66%.

In 2011, a number of reforms intended to mitigate the increasing pension costs were passed by the Legislature; however, a series of lawsuits has prevented the full application of those reforms.

Identified Issues: ASRS • The proposal is contingent upon Internal Revenue Service approval to “grandfather” existing “misenrolled” employees. • Elimination of the Section 218 Agreement guidance for ASRS membership will give the state greater control over the plan, but may lead to increased participation, and therefore increased costs for employers.

Identified Issues: PSPRS • Unknown parameters due to pending litigation. • Potential ballot initiatives aimed at addressing the issue. • Possibility of transitioning PSPRS into a single-account plan. Legislative Update:

Briefing for discussion on energy deregulation

Overview In a regulated utility market, local and regional utilities provide electricity and natural gas through both the power generation and distribution channels for delivery. In a deregulated utility market, customers choose who provides their power. The local utility still delivers the power, for a price, but customers can choose to buy the actual power from someone other than the local utility.

Sixteen states have some competition in their electricity markets, but only a few allow residential customers to select their electricity provider, with most programs focused on businesses that consume large amounts of power.

Background Arizona previously began planning electric deregulation in the 1990s, at the same time many other states were attempting to open their markets. The California energy crisis related to that state’s deregulation in the early 2000s caused many states to back off their own efforts.

In 2004, an Arizona Appeals Court judge decided portions of deregulation as it had been drafted were unconstitutional. This essentially ended the program in the state.

The judge in that case cited that allowing the market, not regulators, to set the fair price for electricity, and requiring utilities to divest their power plants were problematic provisions of the proposal.

Deregulation supporters said it would foster competition and lower prices, while opponents said an unregulated marketplace would create uncertainty and has failed in other states. Established utilities also cite that they have invested heavily in infrastructure and should be able to recoup their investment.

Corporation Commission Focus Through the spring and summer of 2013 there was growing interest in deregulation. However in September of this year, the Arizona Corporation Commission (ACC) decided to not take up the issue of deregulation. The Commission also voted to consider innovative rate-making structures that would address evolving customer needs, but did not stipulate a timetable.

The commission’s legal staff cited the state Court of Appeals’ 2004 ruling that overturned commission rules to govern a deregulated electricity market. The ruling was based on the Arizona Constitution’s mandate for the commission to set “just and reasonable” utility rates.

Identified Issues • In the past, legislators have questioned the line between the ACC and their ratemaking authority versus the Legislature and its policymaking authority, which may cause the issue to move the legislature for further debate. • Potential for either an initiative or referendum movement to modify the Arizona Constitution to address the concerns of the ACC. • Impact of deregulation on municipal power providers. • Impact of deregulation on rural municipalities.

EXECUTIVE COMMITTEE MEETING Friday, November 22, 2013 at 9:30 a.m.

Agenda Item #4 2-1-1 Services Proposal

Summary: 2-1-1 Arizona is a program of Community Information and Referral Services (CIR) a nonprofit that was designated in 2010 by the Arizona Corporation Commission to provide 2-1-1 dialing access in the state of Arizona on a 24/7 free to caller basis for health, human, community and government service information and referral. This agenda item includes a report on the service and a possible means of funding ongoing operations.

Responsible Person: Mayor Greg Stanton; Catherine Rea (2-1-1 Arizona) and Penny Allee Taylor (United Way)

Attachment: Concept paper/draft resolution

Resolution # _____ Urges the Arizona Legislature and Governor to support amending Title 42, Chapter 5, Article 6 sections 42-5251-5253 of the Arizona Revised Statutes to include a one-cent telecommunications surcharge, or identify another viable sustainable funding method, to support 2-1-1 Arizona services in the State of Arizona. Submitted by: ______

A. Purpose and Effect of Resolution 2-1-1 Arizona is a program of Community Information and Referral Services (CIR) a nonprofit that was designated in 2010 by the Arizona Corporation Commission to provide 2-1-1 dialing access in the state of Arizona on a 24/7 free to caller basis for health, human, community and government service information and referral. Since activating 2-1-1 services in 2011, 2-1-1 Arizona has experienced over a 100% increase in service requests statewide, over 1.34 million in FY 2013, and a current 38 % abandonment rate, all without statewide support.

Prior to activation of 2-1-1, in 2007 the Arizona State Legislature passed legislation in support of a twenty-cent tax per month on every supplier of telephone, telecommunications and wireless services to fund emergency telecommunications services in the State of Arizona, defined as “9-1-1 or a similarly designated telephone number for emergency calls”. It has been demonstrated nationally that 2-1-1 services relieve 9-1-1 emergency operatives of 20-25% of their non-life threatening calls and serves as a back-up in disaster relief efforts. Inclusion of 2-1-1 services into ARS Sections 42-5251-5253 would provide sustainable funding for 2-1-1 statewide services.

B. Relevance to Municipal Policy All municipalities and constituents in Arizona have 24/7 free access to 2-1-1 Arizona for health, human, community and government information and referrals.

C. Fiscal Impact to Cities and Towns All cities and towns in Arizona have 24/7 free access to 2-1-1 Arizona services, but with great disparity in financial support. Providing a sustainable statewide funding source would level the playing field across municipalities and complete a public-private funding partnership with state United Ways.

D. Fiscal Impact to State Inclusion of 2-1-1 Arizona services to ARS 42-5251-5253 would have a positive fiscal impact to the state, as each telephone/telecommunication provider invoices customers on a separate line – item monthly per phone line. As of December 2011, there were in excess of 3 million access lines and 4.5 million wireless subscribers in the State of Arizona, yielding approximately $18 million annually. A one-cent/month telephone surcharge is estimated to yield an estimated $900,000 annually for 2-1-1 Arizona services, and would eliminate the current 38% abandonment rate to allow for state-wide service capacity

E. Contact Information Name: Catherine Rea Title: CEO

Phone: 602.263.8845 Email: [email protected]

EXECUTIVE COMMITTEE MEETING Friday, November 22, 2013 at 9:30 a.m.

Agenda Item #5 Mayors-Business Roundtable Update

Summary: A meeting was scheduled earlier this week, November 20th, to introduce the concept of the Mayors-Business Roundtable to the Intergovernmental Representatives of selected major businesses and cities and towns. Mayor Mitchell, Vice President of the League, is leading the effort to establish a rapid response means of communication with the CEOs of leading Arizona businesses. The goal is to be able to reach them quickly and directly when significant legislation is under discussion that impacts cities and towns.

Responsible Person: Mayor Mark Mitchell

Attachment: Invitation letter to corporate intergovs List of invitees

October 14, 2013

Ms. Ann Seiden Southwest Gas PO Box 52075 Phoenix, AZ 85072

Dear Ms. Seiden:

The experience of the TPT bill during the 2013 legislative session revealed a difficulty in the ability of Arizona’s municipal leaders to connect with business leaders about important public policy issues prior to positions being taken. As Vice President of the League of Arizona Cities and Towns, I believe we are in a better place this year to address and remedy this issue.

To help facilitate productive discussion of legislative matters that are critical to both of our interests, I would like to create a forum where a limited number of mayors and business executives could meet in a collaborative setting and get a better understanding of our respective positions. The goal would be to achieve a communication network so that we are able to approach the legislature with a more unified voice. After all, businesses need to have quality municipal services to be successful, and cities and towns need to have a healthy business atmosphere for jobs and economic prosperity.

I am requesting that the Government Relations representatives of major state corporations join me for a planning meeting where we can discuss some of the goals and logistics of this program before inviting your CEOs to attend.

Our initial meeting is scheduled for Wednesday, November 20th at 10:00 a.m. at the League of Arizona Cities and Towns, 1820 West Washington Street, Phoenix. Please RSVP to Sandy Morari at [email protected] or 602-258-5786 by November 1. I look forward to meeting with you so that we can all work together to advance our communities and our state in a mutually-beneficial collaboration.

Sincerely,

Mark Mitchell Mayor of Tempe Vice President, League of Arizona Cities and Towns

Business Roundtable ‐ November 20, 2013, 10:00 a.m. Organization First Name Last Name Title Apollo Group Joe D'Amico Executive Vice President and Advisor to the CEO APS Jessica Pacheco Director of Governmental Affairs CenturyLink Michael DiMaria Director of Legislative Affairs Chandler Patrice Kraus Intergov Affairs Coordinator Clarkdale Gayle Mabery Town Manager Cox Communications Michelle Bolton Director of Public Affairs DMB Associates, Inc. Karrin Taylor Executive Vice President Freeport McMoran Lyn White Director of Government Relations Gilbert Leah Hubbard Intergov Relations Manager Glendale Brent Stoddard Director of Intergovernmental Programs Goodyear Romina Khananisho Government Relations Manager Mesa Scott Butler Assistant to the City Manager‐Government Relations Phoenix Tom Remes Intergov Raytheon Kay McLoughlin Director, Government Relations SCF Arizona Rick DeGraw Executive VP, Chief Administrative Officer Southwest Gas Ann Seiden SRP Gretchen Kitchel Government Relations Executive Analyst Tempe Marge Zylla Government Relations Officer Tucson Adriana Mariñez Intergovernmental Relations Coordinator US Airways Joe Hughes Director of Government Affairs

EXECUTIVE COMMITTEE MEETING Friday, November 22, 2013 at 9:30 a.m.

Agenda Item #6 Nominating Committee Resport and Recommendation

Summary: At its meeting in August, the League Nominating Committee discussed various alternatives regarding the filling of vacancies on the Executive Committee. The attached letter summarizes the committee’s recommendation.

Responsible Person: Mayor Rob Adams, Nominating Committee Chairman

Attachment: Letter to the Executive Committee

November 8, 2013

Dear President Von Gausig and members of the Executive Committee,

The League Nominating Committee met at the Annual Conference on August 28th and created a recommended slate of candidates for the Executive Committee in 2013-14. That slate was approved by the voting delegates at the Business Meeting on August 29th.

The Committee chose to not fill the vacancy created by the resignation of former Kingman Mayor John Salem and the upcoming vacancy created by Yuma Mayor Alan Krieger leaving office at the end of the year. The Committee felt that the opportunity to fill those vacancies should be available to all qualified city and town officials and be done in an open solicitation.

To that end, we decided to recommend that the full Executive Committee, at its next meeting, authorize a notice to go to all cities and towns in the state announcing the vacancies and soliciting applications. The Nominating Committee members would then go through our normal screening process and recommend candidates for appointment by the Executive Committee.

Now, given the fact that the Governance Committee of the League will be reviewing the makeup and selection process for members of the Executive Committee, it may be wise to postpone that announcement for a few months until we have seen the draft proposal. The Nominating Committee will be ready to take whatever action is appropriate based on your decision.

Sincerely,

Rob Adams, Mayor of Sedona Chairman, 2013 Nominating Committee

EXECUTIVE COMMITTEE MEETING Friday, November 22, 2013 at 9:30 a.m.

Agenda Item #7 League Annual Survey Results

Summary: The twelfth annual survey of the League was e-mailed to mayors, council members, managers, clerks, attorneys, finance directors, public information officers and intergovernmental coordinators. Staff will present the 2013 League Annual Survey and answer any questions the Executive Committee has concerning the methods and results of the survey.

Responsible Person: Matt Lore, Communication & Education Director

Attachment: 2013 League Annual Survey

2013 League of Arizona Cities and Towns Annual Survey of Services

General Demographics

Three questions were asked in General Demographics: what the respondents’ role is in the city or town, how many years the respondent had served or worked for the city or town and the population category of the city or town they serve.

The highest numbers of respondents were city and town elected officials (37%) followed by city and town clerks (24%).

The majority of respondents have served in their city or town 5 years or less (32%) with 28% of the respondents serving 10 years or less in their community.

Respondents from cities and towns in the 10,000 to 100,000 population category had the largest participation (51%) with the smallest number of respondents coming from those serving in cities under 4,999 in population (31%).

Overall Performance and Value 97% of the respondents rated the overall performance and value of the League as excellent or good. This compares to a 91% excellent or good rating last year, 96% excellent or good rating in 2011, 94% excellent or good rating in 2010 and a 98% excellent or good rating in 2009.

Cross Year Comparison of “Excellent/Good” Rating on Overall Performance and Value

Percent of Respondents that Rated the League's Overall Performance "Excellent/Good"

2013 97%

2012 91%

2011 96%

2010 94%

2009 98%

86% 88% 90% 92% 94% 96% 98% 100%

Comments on League's overall performance in serving cities and towns

• The League is invaluable to smaller Cities and Towns, in providing services that are not normally available to us.

• Very active and forwarding thinking on our behalf.

• League staff is always helpful and pleasant.

• excellent

• fab

• The League keeps good tabs on key legislation, no question. Excellent conference, and good opportunities for on-going training, especially new elected official.

• Always receptive to my inquiries.

• Need to focus on more than 1 issue at a time during the legislative sessions. At least the members are only aware of one issue at a time.

• Very Important Service for cities & towns, small and large

• The cities and towns I work with rely on the League to assist with finance, election, annexation, budget and open meeting law issues. The League has never let them down.

• The League never fails to assist, no matter what it is.

• The past few years I think the League has spent more effort & time on big cities - the smaller more rural ones need the assistance & guidance.

• you are responsive and valuable

• I know I can contact the League at any time and my questions(s) will be timely answered. For a small town, this is a very valuable resource.

• The League provides much needed services especially in the area of legislative services and keeping cities and town equally trained and operating on items of common ground.

• 110%

• Good ... But the League must understand that what is good for Phoenix/Tucson doesn't always work for the smaller communities.

• Representation at the Legislature is very good. Results speak.

• We need more money for schools. We need comprehensive immigration reform.

• Overall communication with information of new legislative news is excellent.

• So grateful that we have you looking out for Cities best interest as represented in the government on all levels.

• The League does a very good job of responding to actual threats to the well-being of Arizona Cities and Towns. However, the League does not do a good job at fostering consideration of statewide issues which impact the Cities now or which will impact the Cities in the future before the issue becomes a specific legislative issue.

• Sometimes the needs of the small cities are at odds with the bigger cities. There are times when you favor what's best for the larger ones. I know it's hard to satisfy the needs of everyone.

• The League has been a valuable asset on a daily basis with the position I am in.

• small cities are over looked too often.

• Great asset for AZ municipalities. We consider the League to be a partner with us.

• very responsive to questions; offers multiple solutions; very inclusive of League members

• Need proactive legislative language, seems we are always reacting to legislation

• Very much value the League's services and in particular would like to recognize Tom Belshe for his excellent work.

Legislative Program 95% of the respondents rated the Legislative Program as excellent or good. This compares to a 90% excellent or good rating last year, 93% excellent or good rating in 2011, a 95% excellent or good rating in 2010, and a 94% excellent or good rating in 2009.

Cross Year Comparison of “Excellent/Good” Rating on Legislative Program

Percent of Respondents that Rated the League's Legislative Program "Excellent/Good"

2013 95%

2012 90%

2011 93%

2010 95%

2009 94%

87% 88% 89% 90% 91% 92% 93% 94% 95% 96%

Comments on Legislative Program

• The League was able to successfully defeat some very unfriendly legislation and amend others so they were supportive of Cities.

• The weekly calls were very much appreciated and helpful.

• League legislative staff is remarkably approachable even during crunch times.

• excellent

• tolerant of backwards legislators but not cowed by them

• Although there is certainly a different tenor in the legislature from the past, the League seems to gradually be losing ground with regard to influence in legislation. It may be time to reevaluate strategy and demeanor of those who are the key representatives/lobbyists at the legislature. In a few instances this past session, were it not for private lobbying firms who were still ingratiated with legislators, cities and towns may not have been as successful. That warrants some look by the board at the leadership style and approach of the director and legislative staff.

• Some of the conference calls (intergovs) seem a little less than professional, but overall contain a lot of information, but would benefit from being shortened, i.e. they tend to run very long, and it can be a challenge to devote two-plus hours to those calls.

• See above. Also need to be more aware of what is being said at the Intergov lunch meetings - you don't know who is on the phone and the derogatory comments about specific people need to stop

• The League has helped both the small cities/towns I work with and the Risk Pool

• You do a great job at keeping us up-to-date.

• in a difficult time you have done the best you are able

• Keeps us informed in a timely manner.

• I understand its already challenging enough deriving a legislative agenda from an executive board or a group of Mayors, but would prefer a more flexible process with greater inclusion of staff.

• Information passed along is in a timely manner.

• very important as small towns do not have the ability or always the experience day to day to monitor

• We are well informed and thank you for this.

• We appreciate the conference calls and direction on how we might help in the interest of all.

• Enjoy the weekly calls and special alerts. The News Laws Report is helpful as well.

• keep it

• see comments above - the League has been forced to spend too much time playing defense

• Very good up-to-date coverage and relaying that information to the cities in a very timely manner.

• the real rural areas are over looked too much.

• The League keeps us informed of legislative time bombs.

• thank god you do the job you do

• For municipalities not located in the Phoenix-Metropolitan area, we are forced to do call-ins on the legislative meetings which is fine. However, sometimes it is difficult to follow along the on conversations, especially when we are not frequently involved with legislators outside of our districts.

• I like the fact that information is distributed in a timely manner

• same as above

Conference and Training 96% rated the Conference and Training Program as excellent or good. This compares to a 94% excellent or good rating last year, a 97% excellent or good rating in 2011, a 91% excellent or good rating in 2010, and a 97% excellent or good rating in 2009.

Cross Year Comparison of “Excellent/Good” Rating on Conference and Training Program

Percent of Respondents that Rated the League's Conference and Training Program "Excellent/Good"

2013 96%

2012 94%

2011 97%

2010 91%

2009 97%

88% 89% 90% 91% 92% 93% 94% 95% 96% 97% 98%

Comments on Conferences and Trainings

• It’s the best event to learn from experts, one another, and form partnerships. It also a great time to get to know the state legislatures that champion Cities and Towns!

• I liked the economic development sessions.

• The League puts on excellent programs and is always receptive to new ideas and programs.

• GFOAz topics are relevant and of value

• excellent

• Too bad you have to fill in for what Board training via the AZ Dept of Commerce used to provide, good job

• I have not been to any of the training sessions so I cannot rate on those, but I did enjoy the conference and thought it was well done.

• Would like to see more sessions involving participant dialog about an issue, rather than just a recital of how one municipality did something

• Excellent conference! Need to repeat some sessions as some of the most needed ones overlap!

• Can tell a lot of work and planning goes into the events to make them worthwhile.

• I use the League's handouts whenever I work with city and town councils

• Very helpful.

• I would like more variety at the Annual League Conference but still enjoy it very much. And it is a different group every year.

• always informative

• Kill the parade of Flags and shorten the opening ceremony. Understand you need to recognize sponsors but then let's get on to the keynote.

• ACMA - usually same items with new twists, League always tries to provide the most complete information of new legislation.

• excellent

• My rating is based on other official’s attendance. I have never attended the conference and/or training programs,

• I am very pleased with all the League training session I have attended.

• League of Cities and Town's Annual meeting seems at least a half day too long.

• Always in a hurry never enough rooms for conference in one hotel some stay and shuttle to the Conference

• Our Council has taken advantage of the Newly Elected Officials Training and our clerk’s office the Elections Training. Finance would like to get involved with GFOAz more this next year.

• These League programs provide a great resource for and value to the smaller communities

• Great conference and seminars this year.

• I have gained valuable knowledge at all of the League's trainings and conferences I have attended.

• I appreciate the League assistance with AMCA and the various trainings - I feel they keep with our standards and set the bar where the Clerk's aspire to be. • Great training opportunity and the interaction with other towns/cities is priceless.

• have not used

• information is presented in a timely manner; sample ordinances and resolutions are always helpful

• Needs some pzazz! Especially honoring the years of service and past presidents. Friday's speaker should have been the luncheon speaker. Lunch is always so political

Technical Assistance 94% of the respondents rated the Technical Assistance Program as excellent or good. This compares with 91% excellent or good rating last year, 93% excellent or good rating in 2011, a 90% excellent or good rating in 2010, and a 92% excellent or good rating in 2009.

Cross Year Comparison of “Excellent/Good” Rating on Technical Assistance Program

Percent of Respondents that Rated the League's Technical Assistance Program "Excellent/Good"

2013 94%

2012 91%

2011 93%

2010 90%

2009 92%

88% 89% 90% 91% 92% 93% 94% 95%

Comments on the Technical Assistance Program

• The league has been able to provide high quality technical assistance in many areas.

• It would be a huge job for our staff without the League's assistance.

• The Leagues' technical publications and resources are huge time savers.

• excellent

• Please keep on especially small towns like us need you.

• Tom Belshe's knowledge regarding retirement issues and other things related to financing is especially noteworthy.

• You could educate us a little more on what services are available.

• Many of the white papers that the League has produced have been taken nearly verbatim and used.

• available when needed

• I don't use them.

• Have always had my questions answered.

• great i put in several inquiry’s and they were all answered promptly and professionally

• Haven't use this service so I can't comment

• League staff has always been ready help me and are well informed on my questions.

• I do not personally use this.

• Tom Belshe is AWESOME...thanks Tom for all your all hard work.

• I appreciate that I was notified when an inquiry was made relating to my certification.

• The League always makes us feel as if our inquiries were the most important call of the day.

• when I call I always get an answer almost immediately

Communication and Outreach 95% of the respondents rated the Communication and Outreach Program as excellent or good. This compares to a 91% excellent or good rating last year, a 92% in 2011, a 91% excellent or good rating in 2010, and a 90% excellent or good rating in 2009.

Cross Year Comparison of “Excellent/Good” Rating on Communication and Outreach Program

Percent of Respondents that Rated the League's Communication and Outreach Program "Excellent/Good"

2013 95%

2012 91%

2011 92%

2010 91%

2009 90%

87% 88% 89% 90% 91% 92% 93% 94% 95% 96%

Comments on Communication and Outreach Program

• The League has really stepped up its communication and outreach efforts. They are professional and trendy.

• The League's publications and website provide an easy way to keep up on issues of interest to Arizona municipalities.

• Your communication with the cities is outstanding

• Summaries of pending legislation is helpful during the session

• excellent

• I need an option on e-mails to receive on my dial-up to omit pictures.

• Matt Lore's work on AZ Cities @ Work has been outstanding. The program is a model for not only other states, but frankly, other organizations. Great job!

• I really don't use these materials very much

• Can almost always find what I am looking for.

• I like the web page gives me a lot of different information

• Great job with emails on current topics of concern.

• keep up the great work

• The cities @ work website is outstanding.

• Very informative.

League Services Respondents were asked to rank the five most valuable services the League provides to our members. Below is a chart with each of our services in order of respondent rank.

Cross Year Comparison of Most Valuable Services League Provides To Members

Services that are most valuable to our members (Respondents were asked to make 5 choices)

2009 2010 2011 2012 2013

Legislative Legislative Legislative Lobbying Training Seminars Legislative Lobbying 1 Lobbying Lobbying

2 Legislative Legislative Bulletin Training Seminars Legislative Legislative Bulletin Bulletin Lobbying

3 Annual Annual Conference Legislative Bulletin Legislative Bulletin Annual Conference Conference 4 Budget and Newly Elected Annual Conference/ Budget and Training/ Finance Officials Training Model City Tax Code Finance Seminars Information Admin Information

Awareness of League Services

General Questions

How can the League improve our overall service to your city or town?

• Continue to do as they have done!

• Just keep doing what you are doing.

• Hard to imagine. Just keep up the good work.

• Excellent resource, Tom is a gem.

• Keep doing what you are doing and keep us informed

• no comment

• Be armed when you talk to State Legislature to get them to listen, oops can't do that.

• The service is very good.

• Keep doing what you do!

• Help educate new elected officials because there is always a turn-over. Some don't make the trek to Phoenix for newly elected training and outreach introductory (overview) mailing directly to a newly elected may help.

• If the League had greater resources, there are more legislative efforts that could be undertaken on behalf of smaller jurisdictions.

• Not sure how it could get better.

• more training

• keep up the great effort.

• The League has a unique opportunity through the Executive Committee meetings and at the Annual Meeting to foster discussion of policy issues impacting Cities and Towns statewide. These discussions need to include forward looking issues which may not be impacting the Cities today but are things Cities need to be working on together for the future.

• More surveys to the cities asking their opinions on upcoming legislative issues.

• The League is doing an excellent job.

• REPRESENT the REAL RURAL AREAS BETTER.

• None I can think of.

• The League does well in working with us, specifically regarding legislative issues. We do take notice of this effort and feel that our membership fee is appropriate for the services we receive.

• Improvement on governance, timing on bill language, @conference, time for best practices of cities

What additional services would you like the League to offer?

• You have been a great supporter of the AMCA. thanks.

• Programs like the Arizona Cities at Work really help rural Arizona in outreach and tourism. Maybe links to services and contracts that save members time and money.

• More localized training

• More attentions to small (under 25,000 population) Towns

• Build a conference center big enough in northern AZ to host a League conference sometimes, or finance distant small town attendance

• Just keep up the level of work currently being performed.

• Perhaps more informational sessions on budget and planning.

• Additional mini-trainings (1/2 day) from the league throughout the year would be beneficial on selected topics of interest. The idea of district representation on the executive board is not a bad idea.

• Just maintain the high level of service that the League has continued to provide.

• Provide an avenue or training on how to keep informed on late breaking court cases, decisions, AG opinions, injunctions, etc..

• training for planning and zoning boards

• We need more money for education and we need comprehensive immigration reform.

• Offer general on-line trainings on various topics.

• None I can think of.

END OF SURVEY

EXECUTIVE COMMITTEE MEETING Friday, November 22, 2013 at 9:30 a.m.

Agenda Item #8 Report of AZ Cities @ Work Campaign

Summary: Update on latest activities of AZ Cities @ Work and Cities and Towns Week

Responsible Person: Matt Lore, Communication & Education Director

Attachments: Pictorial Summary

AZ Cities @ Work Update

from Clarkdale from

Buckeye, Mayor Doug Von Gausig Gausig Von Doug Mayor Buckeye,

Councilmember Michelle Hess from from Hess Michelle Councilmember

Karla Avalos-Soto from Tucson, Tucson, from Avalos-Soto Karla

Glendale, Mike Phillips from Scottsdale, Scottsdale, from Phillips Mike Glendale,

Jeanine Jerkovic from from Jerkovic Jeanine Left to right: to Left

projects in AZ cities and towns. towns. and cities AZ in projects

Panel discusses SciTech events and STEM STEM and events SciTech discusses Panel

Amy working the AZ Cities @ Work booth Work @ Cities AZ the working Amy

attendees

@ Work to SciTech conference conference SciTech to Work @

Samantha explaining AZ Cities Cities AZ explaining Samantha

the town of Queen Creek’s booth Creek’s Queen of town the

AZ Cities @ Work booth next to to next booth Work @ Cities AZ

crowds at Avondale G.A.I.N event G.A.I.N Avondale at crowds Matt and Samantha get ready for the the for ready get Samantha and Matt

booth

Buckeye at the AZ Cities @ Work Work @ Cities AZ the at Buckeye

Councilmember Michelle Hess of of Hess Michelle Councilmember Samantha, Mayor Von Gausig and and Gausig Von Mayor Samantha,

Queen Creek Trunk or Treat Queen Creek Trunk Saturday, October 26 Saturday, Avondale G.A.I.N. (Getting Arizona G.A.I.N. (Getting Arizona Avondale Involved in Neighborhoods) Night 11 October Friday,

Events: Kickoff Conference SciTech Arizona 4 September Wednesday, AZ Cities @ Work Update Work @ Cities AZ AZ Cities @ Work Update AZ Cities @ Work Update Outreach and Marketing:

City and Town Week posters

Posters commemorating the 2013 Arizona Cities and Towns Week we sent to all cities and towns

Billboards on Freeways

Arizona Cities @ Work images were displayed on electronic billboards throughout the Phoenix Metropolitan area AZ Cities @ Work Update AZ Cities @ Work Update Outreach and Marketing:

Harkins ad

Ads promoting Arizona Cities @ Work were shown in selected Harkins theaters throughout the state during the pre-movie ads Television:

Sonoran Living - ABC15 - KNXV-TV October 17

AZ Cities @ Work honors municipal heroes Kerrie Hawthorne of Cottonwood and Eddie Baldenegro of Chandler.

Arizona Midday – Channel 12 News KPNX Phoenix October 24

Mayor Lopez Rogers and Matt discuss AZ Cities @ Work, the City of Avondale and upcoming events around the state. AZ Cities @ Work Update AZ Cities @ Work Update Recognizing Exemplary Municipal JO VAN LOO: PHOENIX SKY HARBOR Ofﬁ cials: INTERNATIONAL AIRPORT NAVIGATOR Jo Van Loo and her 400 fellow volunteers at Sky Harbor International Airport welcome 100,000 passengers each day to Arizona. Established during Cities and Towns week, AZ Cities @ Work is honoring exemplary municipal elected officials, staff and volunteers. Individuals selected are featured on AZ Cities @ Work Facebook & Twitter, in the AZCities@Work Connection Blog and in online banners at www.AZCitiesWork.com.

azcitieswork.com

ARIZONA CITIES WORK. To learn more about city services visit www.azcitieswork.com.

THE CITY OF PRESCOTT’S UTILITY BILLING CREW: SERVING RESIDENTS ALL DAY EVERY DAY Kind, patient and compassionate voices are what Prescott residents encounter every day when they call the Utility Billing Department to inquire about bills or utility questions. A smile can be heard in their voices as they serve the resident’s needs. Janne, Kim, Patty, Becky and Denise are part of what make AZ Cities Work! BRIAN J. DALKE: CITY MANAGER OF GOODYEAR ARIZONA Leadership to ensure Goodyear continues to prosper, today and into the future.

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ARIZONA CITIES WORK. To learn more about city services visit www.azcitieswork.com.

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EXECUTIVE COMMITTEE MEETING Friday, November 22, 2013 at 9:30 a.m.

Agenda Item #9 Recap of 2013 Annual Conference; Future Conference Suggestions

Summary: Staff will give a brief overview of the 2013 Annual Conference Survey and Financial Report.

Responsible Person: Matt Lore, Communication & Education Director

Attachments: Attendance Report Financial Report Survey results

2013 LEAGUE ANNUAL CONFERENCE ATTENDANCE REPORT

Date: August 27-30, 2013

Location: Hilton El Conquistador Oro Valley, Arizona

1,115 persons attended the conference. 83 of the 91 cities and towns (91%) were representated at the event. The following is a summary of those who attended.

Total Position Registrants Mayors 72 Vice Mayors 42 Councilmembers 237 Manager/Assistant Manager 67 Clerk/Deputy Clerk 13 Attorney/Assistant Attorney 29 Magistrate/Assistant Magistrate 0 Police Chief/Public Safety Director 2 Finance Director 3 Fire Chief 2 Parks & Recreation Director 0 Librarian 1 Public Works 1 Intergov 18 Other City/Town 31 Spouse (Includes 74 "Badge Only"; 11 Comps) 141 Complimentary 37 Life Member 5 COG Director 4 State Department 27 State Representatives 9 State Senators 7 Speakers 105 Sponsors 136 Other 26 Youth 100 TOTAL 1,115 2013 Annual Conference Hilton El Conquistador, Oro Valley I N C O M E SPONSORS Level Contribution Additional Totals APS Platinum $10,000 Arizona Pipe Trades 469 Platinum $10,000 $1,500 Arizona State University Office of Public Affairs Platinum $10,000 Arizona Lottery Platinum $9,000 $40,500.00 American Legal Publishing Endorsed Partner COMP Arizona Municipal Risk Retention Pool Endorsed Partner COMP CivicPlus Endorsed Partner COMP H-PACT Endorsed Partner COMP Humana Gold $8,000 McCarthy Building Companies Gold $8,000 Republic Services Gold $8,000 Ritchie Bros. Auctioneers Gold $8,000 Waste Management Gold $8,000 $40,000.00 Arizona Food Marketing Alliance Silver $5,000 Brown & Associates Silver $5,000 CenturyLink Silver $5,000 EPCOR Silver $5,000 $800 Union Pacific Silver $5,000 Visit Tucson Silver $5,000 $30,800.00 American Fidelity Assurance Company Bronze $2,500 Arizona Public Employers Health Pool (APEHP) Bronze $2,500 $800 Arizona Transit Association Bronze $2,500 Central Arizona Project Bronze $2,500 $800 Charles Abbott Associates Bronze $2,500 $800 Comcast Bronze $2,500 $800 CORE Construction, Inc. Bronze $2,500 Cox Business Bronze $2,500 Curtis, Goodwin, Sullivan, Udall & Schwab, P.L.C. Bronze $2,500 Gammage & Burnham Bronze $2,500 HDR Engineering, Inc. Bronze $2,500 HighGround, Inc. Bronze $2,500 Mountain States Employers Council, Inc. Bronze $2,500 Resolution Copper Mining Bronze $2,500 RBC Capital Markets, LLC Bronze $2,500 Rural/Metro Bronze $2,500 Severn Trent Services Bronze $2,500 smartworksplus, inc. Bronze $2,500 Southwest Gas Corporation Bronze $2,500 SRP Bronze $2,500 Stifel Bronze $2,500 Total Transit Bronze $2,500 UNS Energy Bronze $2,500 Water Infrastructure Finance Authority of Arizona Bronze $2,500 W.C. Scoutten, Inc. Bronze $2,500 $65,700.00 SPONSORS $177,000.00

REGISTRATION FEES # of Registrants Fee Total Member (Early) 457 $290 $132,530 Member Cancellation Fees 42 $25 $1,050 Member 25 $310 $7,750 Non-Member (Early) 49 $340 $16,660 Non-Member 22 $390 $8,580 Sponsor (NBO) 15 $25 $375 Miscellaneous (Single Day) 8 $175 $1,400 Miscellaneous (NBO; Lunch & Dinner) 1 $125 $125 Miscellaneous (NBO) 9 $25 $225 Miscellaneous (NBO & Session) 1 $50 $50 Miscellaneous (Sessions Only) 8 $25 $200 Miscellaneous (Two-Day) 1 $310 $310 Miscellaneous (General Lunch) 1 $35 $35 Miscellaneous (Dinner) 2 $65 $130 Golf (paid only) 26 $105 $2,730 Spouse (Name Badge Only) 74 $25 $1,850 Additional General Lunch Tickets Purchased 13 $35 $455 Additional Dinner Tickets Purchased 29 $65 $1,885 Spouse (Full Program Registration) 56 $130 $7,280 Showcase Booths (includes Cities with extra booth) 46 $195 $8,970 Showcase Booths (with electricity) 21 $65 $1,365 Showcase Booth (add extra table) 9 $75 $675 Pre-Conference Workshop - Grantwriting 33 $55 $1,815 Mobile Workshop - Sports Tourism 15 $10 $150 Mobile Workshop - Spouse Public Art Tour 3 $50 $150 Youth Program 101 $60 $6,060 $202,805.00

Total Revenue $379,805.00 E X P E N D I T U R E S BANQUET / HOTEL CHARGES Hilton El Conquistador Guest Rooms $12,058.80 Guest Rooms (1 thru 40) -$3,274.38 Food & Beverage $149,495.14 Audio Visual / Engineering $15,922.44 Wi-Fi $2,500.00 Reibursement (HPACT reception) -$9,487.48 Fairfield Inn & Suites (2 rooms for comp guests) $189.32 $167,403.84 GOLF Golf Course (included in hotel bill) $1,852.41 Marco (plastic drawstring bags for gold handouts) 60 @ 1.65 $99.00 Best Buy (prizes - $50 for 1st place foursome; $25 for 2nd place foursome; 4 idividual $25 prizes) $400.00 $2,351.41 SPOUSE PROGRAM Tohono Chul Bistro ($18 pp, plus service charge & tax) 35 @ 23.42 $819.63 $819.63 SHOWCASE Boards N More (AZ Cities @ Work booth game) $170.00 US Expo $2,846.01 $3,016.01 TRANSPORTATION Shuttle buses and limos (included in hotel bill) $2,839.96 U-Haul + fuel $513.12 Catalina Transportation Services (bus for Aquatic Center tour 8/28) $356.40 Catalina Transportation Services (bus for Spouse Tour 8/29) $1,112.50 Staff mileage reimbursements $915.50 $5,737.48 SPEAKER FEES/EXPENSES, ENTERTAINMENT Aaron Cooper travel reimbursement $154.53 Bev Browning - Grant Writing Training (speaker fee - $1500, plus books) $1,778.60 Lance Decker $1,000.00 Mark Towers (Friday closing session) $3,138.71 Rancho Deluxe Band (Thursday dinner entertainment) $2,000.00 $8,071.84 AWARDS Award Mart - Service Award & Legislator plaques (22 plaques) $1,723.77 Marco (wood frames) - Legis Friend Award (30); 12-year Service Award (10) 40 @ 11.49 $459.60 MTM Recognition - 8 year Service Award covers (28) 28 @ 10.66 $298.48 Fusion Frames - Sponsor Awards (44) 44 @ 18.90 $831.60 Walgreens - photo printing for Legislators, Governor & Sponsors $53.78 $3,367.23 PRINTING / Banners, Posters, Brochures, Flyers, etc. Alphagraphics (banners) $1,112.98 Gordon Graphics (program - 900) $1,490.21 Marco (800 printed canvas bags) $3,748.00 PLI (1000 custom printed hotel key cards) $1,185.77 Office Max (Annual Business Meeting materials) $118.89 Black copy charges - resolutions, attendee list for bags, etc. 5,187 @ .06 $311.22 Color copy charges 2,727 @ .12 $327.24 Postage $190.68 Marco (ribbons) 686 @ .27 $185.22 Marco (black wallet badge holders) 831 @ 1.01 $839.31 Marco (clear plastic badge holders) 284 @ .35 $99.40 $9,608.92 MISCELLANEOUS Cvent registration fees (2.65 per registrant/per event) - Regular Registration 948 @ 2.65 $2,512.20 Cvent registration fees (2.65 per registrant/per event) - Golf 41 @ 2.65 $108.65 Cvent registration fees (2.65 per registrant/per event) - Tours 51 @ 2.65 $135.15 Cvent registration fees (2.65 per registrant/per event) - Parade & Festival 80@ 2.65 $212.00 Planning Committee Meeting (Duck & Decanter) $207.16 Mobile App $69.00 Youth Program supplies $68.57 Resolutions Subcommittee (Duck & Decanter) $416.41 Miscellaneous supplies, tips $282.29 Miscellaneous meals, snacks $384.06 Steve Lambesis Photography $1,200.00 League pins for bags 800 @ 1.35 $1,080.00 Boy Scouts donation for stuffing canvas bags $900.00 $7,575.49 Total Expenses $207,951.85 Excess Revenue Over Expenditures $171,853.15 2013 League Annual Conference Survey Hilton El Conquistador Resort Oro Valley, Arizzona August 27‐30, 2013

Survey Results for Conference Sessions:

Comments:

. Would love to have attended‐but couldn't take aanother day out of the office or had the town pay another night for a room the drive was too long to make the same day for that early a session.

Comments for Opening General Session:

. Some speeches were a little too long. . speakers/topics had little value . Dr. Crow was awesome . Loved hearing from Mayor Rogers! She was inspiring. Mayor Smith was great too! . did not attend . Let’s update the parade of flags, while I understand tradition, there must be a better way. Couple speakers ran long in my opinion. Keynote was excellent. . I thought Michael Crow's remarks were excellent . No changes necessary . Well done. Really appreciated the keynote speaker. Well done!! . Two political speeches were of little value. . Keynote speaker should be earlier. He was good, but others were not inspiring. . My only comment would be that there were at least 91 delegates/elected officials out in the hallway waiting for the parade of flags. Inside Senator Jeff Flake was giving a speech that none of us heard. Something should have been done to allow us to hear his speech. I am very disappointed that we did not hear his speech.

Comments for Wildfire Management: A Rural Perspectiive:

. Some presenters did not present well . Event was partisan and one‐sided, inappropriate for a League of Cities and Towns Conference. Lacked empirical support for junk science behind theories that were presented as fact. . Kind of one sided, but to be expected . Many of the comments/presenters in this case appeared more political than problem solving or informational . Very biased presentation. No one gave any counter arguments to the presenters or the moderator. 2

Comments for Development Trends to Build Community:

. Needed a little more concrete advice, not just anecdotes. . Interesting but didn’t really apply to our community. . Good information . Very experienced panel with great insight . It was great to have a private sector perspective at the conference.

Comments for Utilizing Incubators to Fuel Economic Grrowth:

. Just three agencies complimenting each other on what they do . It focused too much on Tucson area only . Handouts would have been appreciated for future reference 3

. Actually learned what an incubator is and is not!! Well done! . Presenters were vendors with one model to present. Presentation was informative. Would like to have heard from small cities that have incubators up and running. . Wish I could have attended‐ah so much information too many concurrent choices

Comments for Ideas that Work: Rapid Fire Innovation:

. Interesting and provocative. Moved along well . Heard great comments on this session‐wish I could have been there.

Comments for Fundamentals of Local Government Budgets:

. Presenter was knowledgeable and easy to listen to. Answered questions with a clear understanding of the subject. 4

Comments for Transportation Options and Needs:

. Too regional in scope

Comments for Realities of Life, Governance and Business on the Border:

. It was a great idea to have the border mayors be the presenters.

No comments

Comments for Affordable Health Care Act:

. Presenter was extremely well versed on the topic . Too much information‐too little time . This is still confusing and needs to be simplified . Most knowledgeable person about Act that I have heard . Very important to provide these type of information forums

Comments for Fundamental of Local Government Bonding:

. Too rapid and not enough detail on each. Assummed most people knew about each topic but we wouldn’t have been there if we did. . It was a lecture, not a discussion

Comments for Who Does the City/Town Attorney Reprresent?

. This is usually only discussed among attorneys. It was great to have this discussion with ‘electeds’ in the room . Topic was not well covered due to questions . Again on all‐wish I could have attended but needed to make another choice

No comments

Comments for Civil Discourse and Conflict Resolution:

. Good tactics provided for resolving conflict . Not enough time allowed for questions . So tired of hearing this same discussion . Very basic. Faulty premise that conflict is intellectual and can be “managed”. Reality is that conflict is driven by emotion, not intellect annd cannot be managed with intellectual tools. Behavioral tools are required which require use of outsider resources by cities and towns. Totally academic approach presented, ought to have been deeper presentation on the underlying issues that drive conflict and need to be addressed. . Spent a lot of time pushing his books

Comments for League 2013 Legislative Report:

. Good summary. I liked how it was grouped. Knowledgeable panel. . Always a highlight of the conference . Hated to miss this

Comments for Destination Marketing and Branding:

. I went to this to discover that the format and presenters have been changed from the agenda guidelines that were provided to attendees. I did not stay.

Comments for Effective Mayor, Council and Manager Relationships:

. Not enough time for questions . Simulating. Good speakers. . Needed our whole team to be here and none of them were‐again concurrence.

Comments for Reading the Tea Leaves: Pundit Discuss Legislation:

. I didn’t’ give this excellent because they were there to predict but when it came time for predictions… they didn’t. But it was a good panel and interesting. . Richard Travis was spectacular, candid and a musst hear. . Please get some pundits. Two of the four were the same as last year. Do you really need the league lobbyist? I want to hear from those outside of the League? Also, a new facilitator would be great. My 12 year old could have asked smarter questions. . Love the banter between presents.

Comments for Valuing Arizona’s Water: The True Cost

. Wish there were more water topics . Major questions could not be answered at this coonference

Comments for Fundamentals: Ethics and Open Government:

. Presenter/material were excellent . Sims is always great . Need to separate the two classes not enough time

Comments for International Trade Corridors:

. Very important information . Very well moderated/facilitated by Scott Smith . The state needs to better understand the competition from TX.

No comments

Comments for The Energy Efficiency Roadmap for Cities and Towns:

. Good handout

Comments for Things Your Defense Attorney Wishes You Knew:

. This was very well done . Again, not enough time for questions

No comments

Comments for AZCities@ Work Breakfast:

. Great presentation on the website. This could be a seminar nnext time. . Breakfast was awful but the presentation was good. . Matt deserves a medal for all he does. . This session gave me great ideas to being home to our staff! . Informative and entertaining . If you are going to call it breakfast… provide breakfast.

Comments for Closing Session:

. Unfortunately, not many attended as most had already checked out‐possibly due to Labor Day Weekend. . What a great session, my personal highlight, too bad many went home too early they missed the greatest session . The comedian/motivation speaker was boring. I would have rather seen more of the website . Great speaker, made session fun . Probably the best session for the entire conference. Too many local elected officials assume they are effective and fail to connect. It’s a shame this valuable speaker was so poorly attended, due to so many conference attendees already departed. . Very inspirational . This should have been for the Opening Session. I was disappointed in the poor attendance One of the best presentations of the whole conference! . Every city and town should have session with Mr. Towns

Please provide comments and suggestions on General Sessions and Concurrent Workshops

. All in all the site selection and the conference went very welll. . I thought all the sessions this year were excellent and could be applied to our town/community. This conference was one of my favorites so far as far as the topics offered, the food & the entertainment. . Please encourage the moderators to invite presenters who are willing to discuss both sides of an issue objectively. . Suggestion for seminar: Emergency preparedness for cities for natural disasters or terrorism. . need to find workshops that are more relevant to city/town public servants day to day operations . The coffee table format with the audience looking at the panels' crotches was not good.

. I would like to have more time for questions and answers that are relevant to specific situations. Also, many of the workshops I would like to have attended met at the same time. This is the first year in many that it was really a problem. . Over grade for the session was a C ‐ not at all impressed this year. . The Showcase of Cities and Towns was a definite highlight. Great opportunity to connect with all the communities. . For those of us not staying at the host hotel sessions starting before nine were hard to get to especially if carpooling. . Would it be possible to have some of the break out groups repeated? I would have loved to attend Update from Supreme Court, Things your Defense Attorney wishes you knew, and ASRS/PSPRS sessions, but they were all scheduled at the same time. . I believe the golf tournament needs to be started earlier and/or the resolutions committee meeting is started later because there is no time in between!! . Very disappointed in the Wildfire Management presentation. Talked more about wolves than fire suppression. . Please add 30 more minutes between the end of the golf tournament and the start of the resolutions meeting . Overall the conference was excellent. Good content and good presenters. . Overall, this appeared this year's conference appeared to be more active and well received than the last couple of years. . Why have you not asked about the conference accommodations? The sessions overall were average. The conference hotel was average. The parking was awful the conference hotel was old and musty... If a facility can't accommodate the conference, don't schedule it there‐‐duh. . The best LACT Conference I have attended. Staff helpful and friendly. So many excellent sessions it was really tough choosing. I hope to catch up on the ones I had to miss on the website. Great job!!! . I accomplished 4 objectives at the conference. Well worth the trip and cost. Trade show was excellent, really good energy. Keynote speaker was excellent. Overall tone of meeting was very positive. . Structure of workshops and role of hosts need to be worked on. . The meetings were good that were presented this year . I wish I could have attended more sessions, but concurrent work sessions prevented this. . I would like the table back in the workshops. Easier to write or the work off laptop. Also more water stations hard to find water coolers. . In general, I thought the workshops were less informative than last year. Last year was my first year, however, so maybe that made a difference. I really liked the two speakers ‐‐ Mayor of Mesa and head off National League. Did NOT like ASU President Crowe's presentation. . The overarching challenge most of us had was great sessions and not enough time to take them in although the PowerPoint’s on line are helpful in seeing some of what we missed‐this is a frequent challenge at conferences and one difficult to avoid‐but great job on selecting your sessions League. We needed a bit more time to meet in regions, groups, and interact other than normal meetings or meals yet with some structure. The Rural meeting was a great start‐more "affinity" meetings, ED, water etc. could be helpful

bus transportation was very poorly planned and created some serious challenges for many of the attendees . In general, I found enthusiasm missing from the sessions I attended. The presenters didn't seem too enthusiastic themselves. The logistics were sseamless, the meals amazingly good, and the meal service very smooth. The Showcase was enjoyable, as always. Overall, I believe the event was a successful one. . keep transportation as a topic for a workshop . This was my first time at this Conference and I thoroughly enjoyed it. I learned a lot that will carry me forward in my position as Council Member. My only negative comment had to do with the opening ceremony. Those of uus that were flag bearers should have been allowed to hear Senator Jeff Flake's speech.

Comments on Extra Activities:

. Did not participate in extra activitties . APS sponsored dinner was great . Didn’t participate in any mobile tours‐seemed a little weak . Ah‐sadly had no extra time for extra stuff and came alone

Comments on the Receptions, Lunch and Dinners, including food and service:

. Tough Chicken . Food was generally very good. . Band and entertainment was great . For the size of the crowd ‐ I thought it was fine. . The receptions, lunch and dinners were all done well. Food and service was good. . The location of the welcome reception was horrible. It was so loud and crowded. Much preferred it when held outside at same location. . Welcome reception was too crowded in the space it was held. Could not get around well and the food buffets were blocked by large groups of people. . Thursday evening dinner music was too loud for dinner music, but probably OK for dancing after. Would have preferred something quieter, soft jazz or light classical for dining. . The general luncheon on Thursday was too long and completely boring ‐ don't need to stroke elected officials in front of everyone ‐ speakers were boring. . music too loud to allow polite conversation . Great location. First class . I thought the food this year was the worst in the past 5 years. Paying $35 for the lunch or $65 for the dinner for the food provided was too much. . The food was almost the same at every meal...very disappointed. Tom Horne's speech was disappointing as well. . Great staff for meal service. Friendly . The League should seriously ask for a partial refund for the horrible food at ‐ every meal. Such a disappointment. For this level of a resort ‐ the food was awful. The League MUST look at getting better speakers for the Lunch. You should have had the Friday closing speaker speak at Thursday lunch. He was engaging, inspirational and funny! Horne was a disaster. . meals were well planned, service exceptional . Service was great food was not . Good . The process of recognizing individual years of service was very poor ‐ the presentations coupled with the disinterest of the attendees was disrespectful to the individuals being recognized. This entire process needs to be rethought and changed into something which properly recognizes individual's years of service or it should be eliminated entirely. This was the worst part of the convention ‐ I was embarrassed for the league during this portion of the evening. . Need to provide afternoon snacks/coffee/soda and MORE coffee/muffins in the mornings . Good dance band entertainment. Better speaker system needed though to help get crowd more involved and less noisy during awards. . All very good. I missed the Governor's usual speech to cities and towns. . AG Horne bragging about having sued the government more than any other person made me leave the luncheon. Please try and get some non‐republicans involved to show some balance.

. Excellent . Food was average, at best . It was so noisy for the Thursday Evening Dinner that you couldn't hear the presentations. . Food and service poor. . Evening dinner was good control was lost the awards we were very noisy and very disrespectful . Servers were in too much of a hurry to clean off tables. . Lunch was good but service was very slow. . There was no pre‐conference dietary restriction questions hence if you were vegan, gluten‐free or even vegetarian there was a wait of 1/2 and longer to be served an entree that could be potentially eaten. This was a challenge for many of us with food allergies or health issues. . Food was of medium to poor quality.

Comments on Resort Accommodations:

. very good . I was at Fairfield and enjoyed it. . No room at Resort!! . There are never enough hotel rooms to accommmodate all guests. 2 weeks into registration, there were already overflow properties listed (something that should be on the website from day 1 of registration so people know). I tried to register people at overflow properties and they were sold out of rooms. Very disappointing. It seems like this is an issue every time. Another issue is parking. There are never enough parking spaces to accommodate all attendees, plus regullar hotel guests. Most of the attendees of the conference are older and I don't think they appreciate walking a long distance to and from their cars.

. thought everything was excellent this year = the service, the food quality & the entertainment . It was great that most of the attendees were all in the same hotel so we could meet up in the evenings for networking. A large hotel is a must. The lobby area near the bar was a nice setting for gathering. The rooms were very clean. . I think we have outgrown this hotel. . Having to climb the steep, poorly maintained trail from the casitas to the hotel was not in the best interest of aging mayors and staff with hip or knee issues. . Spouse would have liked list of resort restaurants and their hours open for business. She didn't want to take in all of the dinners and/or lunches and preferred to eat at the resort at different times during the day and evening.... thanks.... . Excellent . The resort and grounds were beautiful . The room was good but none were very convenient to the sessions . great when not raining . Please do not ever hold this conference at this hotel again. Such a long list of why it is bad ‐ I don't know where to begin. . Was not able to stay at the hotel b/c it was sold out :( . did not stay at resort, however facilities were great . Need to block out a larger number of rooms. I had to stay at the Holiday Inn . Room needed updating (especially the bathroom) and thermostat was broken. Restaurant seemed overpriced (even for a nice hotel). . Awful. The hotel is old and musty. The parking problem is evident and appalling. If a facility can't accommodate the conference, don't schedule it there‐‐DUH. . Excellent room. Enjoyed my stay. . Excellent accommodations at Holiday Inn Express. . Property is somewhat dated, but service and staff were excellent. . No water for a shower one morning . Good but something's were a little costly . Parking was an issue. . Lunch took an hour in the cafe. Could not get a room, even though I booked early. Had to stay 4 miles away. . Registration desk and valet's were great. Other service was poor. . A little bit too spread out of rooms and conference center, especially with hot & humid weather . Bad: parking, location, slow customer service Pro: while slow was respectful I have stayed at that resort several times for conferences and would not rate it highly. They can be difficult to work with and get things done correctly. . sadly we could only look at them in envy as they were full and we stayed at a less than desirable location with horrible transportation issues . Very nice facility ‐ wishing more rooms would have been available. . Great place, but limited parking . The rooms and resort are very nice. I was not fond of the fact that the A/C thermostat in my room did not work and the room was like a meat locker. Other than that I was very satisfied with the accommodations

Comments for Please let us know what worked well and what we can do to improve the League Annual Conference for next year:

. parking is a problem . Get a facility where everyone can be under the same roof. . Find a hotel that can accommodate all attendees (or a majority) and one that has better parking. . this conference was one of the best conferences overall I've attended ‐ the sessions were excellent topics, very interesting, the food was excellent & the entertainment was excellent. . I thought this year was better than last year. The seminars were more interesting and well organized. I felt I got a lot out of the seminars and the networking with other officials, legislators, and lobbyists. . Thank you. . The vendor area should only be all day Wednesday and Thursday. It seems to be a waste to be set‐up on Friday, and even on Tuesday afternoon. . We should have had a better way of getting all the boxes of product, literature, items that cities needed to get to the showcase of cities & towns area. No help from hotel staff, very hard to get rolling carts to move the items from the cars to the showcase, plus we had to go through the main lobby area as well as go thru the main hallway door to get everything set up. Should have had a back door access to avoid dealing with so many people. Also people were allowed in to the showcase at 5:00, many cities were not ready and then ran out of give‐a‐ways very shortly after 6:00. The doors should not have been open for visiting the booths before 6:00. No one was "guarding" the entrance so that only those really working to get set up were let in. . make workshops more relevant ‐ dinners and luncheons less political. . Would like to see sessions on General Plan Reviews, State Land Use Goal...different types. Use of special districts, including "character areas" etc. . Great networking opportunities ‐ lots of legislators hung around, great breakout sessions and "flow" to the entire event! . Hold the conference in northern Arizona . Time to freshen it up. Getting a little predictable. Great job, though!! Thank you! . PLEASE, again I ask that you have the Conference on a different week‐end. Everyone I talked to feels the same. . Smaller towns and cities do not have the same needs or interests and having many concurrent sessions that would apply to them makes it difficult to attend. I do appreciate the ability to get the notes ahead of time but could to print them out from my ipad. I would like to have had a way to print them at home and bring them with me so I could have made additional notes. . Might want to consider ending conference on Thursday after the dinner. Placing Friday activities on previous days. . I recommend putting together a real planning committee to overhaul this conference. I appreciate tradition but we have to change it up and ‐ get some new ideas! . other than what has been noted all was good . Include a debrief on the results of the resolution session . I like the last day Friday events getting over at least by 11:30. . Fewer blowhard republicans... More independents and democrats...please. 24

. Experiment with round table discussions about basic problems. For instance, offloading maintenance or IT functions. or, work/motion efforts that work . Networking . Get a hotel that can handle a group of our size, . Maybe more days so we can attend other sessions. . Keep it in the Phoenix area. It is a more central location, . What worked: great sessions and great speakers not one complaint from anyone on our team other than too many choices and not enough time What didn't: transportation, food, overcrowding and noise at some activities were extreme.... not enough interactive breakouts in interest groups or regional . Include City Attorney's meeting on the survey. . I felt the Conference went very well. I had nothing to compare it to as this was my first time but next year I will have some comments.

END OF SURVEY

EXECUTIVE COMMITTEE MEETING Friday, November 22, 2013 at 9:30 a.m.

Agenda Item #10 2012-2013 Audit Report; Audit Firm Contract

Summary: The report from the annual audit of the League of Arizona Cities and Towns is presented for your review and approval.

The Property Corporation of Cities and Towns is a separate nonprofit organization which owns and operates the League building. However, rather than prepare a separate audit for the Property Corporation, our auditors have recommended that it be included in the League=s financial statement. The audit report you have implements that recommendation.

Responsible Person: Ken Strobeck

Attachments: Audit Report for FY ended June 30, 2013

Action Requested: Approval of Audit Report

Board of Directors League of Arizona Cities and Towns Phoenix, Arizona

We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of League of Arizona Cities and Towns for the year ended June 30, 2013, and have issued our report thereon dated October 3, 2013. We have previously communicated to you information about our responsibilities under auditing standards generally accepted in the United States of America and Government Auditing Standards, as well as certain information related to the planned scope and timing of our audit. Professional standards also require that we communicate to you the following information related to our audit.

Significant audit findings Qualitative aspects of accounting practices Accounting policies Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by League of Arizona Cities and Towns are described in Note 1 to the financial statements.

As described in Note 1, the League changed accounting policies by adopting Governmental Accounting Standards (GASB Statement) No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position and GASB Statement No. 65, Items Previously Reported as Assets and Liabilities ,during the current fiscal year. Implementation of GASB Statement No’s. 63 and 65 had no material effect either individually or cumulatively on the financial statements.

We noted no transactions entered into by the League during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period.

Accounting estimates Accounting estimates are an integral part of the financial statements prepared by management and are based on management’s knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the financial statements were:

 Management’s estimate of the useful lives and remaining useful lives of capital assets is based on the League’s previous experience and current condition of capital assets. We evaluated the key factors and assumptions used to develop the useful lives and remaining useful lives in determining that it is reasonable in relation to the financial statements taken as a whole.

An independent member of Nexia International

Board of Directors League of Arizona Cities and Towns Page 2

 Management’s estimate of compensated absences is based on employees who have currently vested and those who are expected to vest. We evaluated the key factors and assumptions used to develop compensated absences balance in determining that it is reasonable in relation to the financial statements taken as a whole.

Financial statement disclosures Certain financial statement disclosures are particularly sensitive because of their significance to financial statement users. There were no particularly sensitive financial statement disclosures.

The financial statement disclosures are neutral, consistent, and clear.

Difficulties encountered in performing the audit We encountered no significant difficulties in dealing with management in performing and completing our audit.

Uncorrected misstatements Professional standards require us to accumulate all misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. Management did not identify and we did not notify them of any uncorrected financial statement misstatements.

Corrected misstatements None of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to the financial statements taken as a whole.

Disagreements with management For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditors’ report. No such disagreements arose during our audit.

Management representations We have requested certain representations from management that are included in the management representation letter dated October 3, 2013.

Management consultations with other independent accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a “second opinion” on certain situations. If a consultation involves application of an accounting principle to the League’s financial statements or a determination of the type of auditors’ opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants.

Significant issues discussed with management prior to engagement We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to engagement as the League’s auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our engagement. Board of Directors League of Arizona Cities and Towns Page 3

Other information in documents containing audited financial statements With respect to the required supplementary information (RSI) accompanying the financial statements, we made certain inquiries of management about the methods of preparing the RSI, including whether the RSI has been measured and presented in accordance with prescribed guidelines, whether the methods of measurement and preparation have been changed from the prior period and the reasons for any such changes, and whether there were any significant assumptions or interpretations underlying the measurement or presentation of the RSI. We compared the RSI for consistency with management’s responses to the foregoing inquiries, the basic financial statements, and other knowledge obtained during the audit of the basic financial statements. Because these limited procedures do not provide sufficient evidence, we did not express an opinion or provide any assurance on the RSI.

Our auditors’ opinion, the audited financial statements, and the notes to financial statements should only be used in their entirety. Inclusion of the audited financial statements in a document you prepare, such as an annual report, should be done only with our prior approval and review of the document.

* * *

This communication is intended solely for the information and use of the board of directors and management of the League of Arizona Cities and Towns and is not intended to be and should not be used by anyone other than these specified parties.

Phoenix, Arizona October 3, 2013 LEAGUE OF ARIZONA CITIES AND TOWNS

FINANCIAL STATEMENTS AND SUPPLEMENTAL INFORMATION

YEAR ENDED JUNE 30, 2013

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LEAGUE OF ARIZONA CITIES AND TOWNS TABLE OF CONTENTS YEAR ENDED JUNE 30, 2013

FINANCIAL SECTION INDEPENDENT AUDITORS’ REPORT 1 REQUIRED SUPPLEMENTARY INFORMATION MANAGEMENT’S DISCUSSION AND ANALYSIS 3 BASIC FINANCIAL STATEMENTS STATEMENT OF NET POSITION 10 STATEMENT OF ACTIVITIES 11 BALANCE SHEET – GOVERNMENTAL FUNDS 12 RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION 13 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES – GOVERNMENTAL FUNDS 14 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES 15 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL – GENERAL FUND 16 STATEMENT OF NET POSITION – PROPRIETARY FUNDS 17 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION – PROPRIETARY FUNDS 18 STATEMENT OF CASH FLOWS – PROPRIETARY FUNDS 19 STATEMENT OF ASSETS AND LIABILITIES – FIDUCIARY FUND 20 NOTES TO BASIC FINANCIAL STATEMENTS 21 GOVERNMENT AUDITING STANDARDS REPORT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS 31

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FINANCIAL SECTION

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INDEPENDENT AUDITORS’ REPORT

Board of Directors League of Arizona Cities and Towns Phoenix, Arizona

Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the major fund, and the aggregate remaining fund information of the League of Arizona Cities and Towns (League), as of and for the year ended June 30, 2013, and the related notes to the financial statements, which collectively comprise the League’s basic financial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility 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 from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the League’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the League’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

An independent member of Nexia International (1) Board of Directors League of Arizona Cities and Towns

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 major fund, the aggregate remaining fund information, and the General Fund Statement of Revenues, Expenditures and Changes in Fund Balance – Budget and Actual of the League of Arizona Cities and Towns as of June 30, 2013, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 3 – 9 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the 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.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 3, 2013, on our consideration of the League of Arizona Cities and Towns' 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 result of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering League of Arizona Cities and Towns’ internal control over financial reporting and compliance.

Phoenix, Arizona October 3, 2013

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REQUIRED SUPPLEMENTARY INFORMATION

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LEAGUE OF ARIZONA CITIES AND TOWNS MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2013

We, the League of Arizona Cities and Towns (the League), are pleased to provide an overview of our financial activities for the fiscal year ended June 30, 2013. The intended purpose of the Management Discussion and Analysis (MD&A) is to provide an introduction to the basic financial statements and notes, that provides an objective and easy to read analysis of our financial activities based on currently known facts, decisions, and conditions, by providing an easily readable summary of operating results and reasons for changes, which will help to determine if our financial position improved or deteriorated over the past year. This report addresses current operational activities, the sources, uses, and changes in resources, adherence to budget, service levels, limitations, and significant economic factors.

FINANCIAL HIGHLIGHTS  While the League is not a unit of government, it is governed by a board of city and town officials and its membership is made up of all the incorporated communities in Arizona and is an instrumentality of city and town government in Arizona. Therefore, the League reports under Government Accounting Standards based on the composition of the board.  The assets of the League of Arizona Cities and Towns exceeded its liabilities at the close of the most recent fiscal year by $1,943,339 (net position). Of this amount $1,623,351 (unrestricted net position) may be used to meet the League’s ongoing obligations to citizens and creditors.  As of the close of the current fiscal year, the League of Arizona Cities and Towns’ governmental funds reported combined ending fund balances of $1,624,059, an increase of $165,383 in comparison with the prior year.  At the end of the current fiscal year, unassigned fund balance for the General Fund was $1,592,820 or 65 percent of total General Fund expenditures.  General Fund revenues exceeded budgeted revenues by $87,132 for fiscal year 2013. Additionally, expenditures fell below the budget by $72,878 in the General Fund.  General Fund revenues were more than expenditures by $165,383; a positive variance of $160,010 from the budget.  The League includes one separate legal entity in its report - The Property Corporation of Arizona Cities and Towns. Although legally separate, the “component unit” is important because the League is financially accountable. A description of the component unit is available in Note 1 on page 21. Separate Financial Statements are not available for this entity.

OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the League’s basic financial statements. The League’s financial statements are comprised of three components: 1) government- wide financial statements, 2) fund financial statements, and 3) notes to the basic financial statements. In addition to the basic financial statements, this report also includes a Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit Performed in Accordance with Government Auditing Standards.

Government-Wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the League of Arizona Cities and Towns’ finances, in a manner similar to private-sector business.

(3) LEAGUE OF ARIZONA CITIES AND TOWNS MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2013

The statement of net position presents information on all of the League of Arizona Cities and Towns’ assets and liabilities, 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 position of the League of Arizona Cities and Towns is improving or deteriorating.

The statement of activities presents information showing how the League’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 dues or fees and earned but unused vacation leave).

The governmental activities of the League of Arizona Cities and Towns include general government expenses provided to support Arizona governments. The government-wide financial statements also include the activity of the Property Corporation, reported as an internal service fund and included as a blended component unit. The government-wide financial statements can be found on pages 10 - 11 of this report.

Fund Financial Statements Also presented are the traditional fund financial statements for governmental funds. The fund financial statements focus on major funds of the League, rather than fund type. 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 League of Arizona Cities and Towns, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the League of Arizona Cities and Towns can be divided into 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 and outflows of spendable resources, as well as balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements. Since the governmental fund financial statements focus on near-term spendable resources, while the governmental activities on the government-wide financial statements have a longer term focus, a reconciliation of the differences between the two is provided with the fund financial statements. The basic governmental fund financial statements can be found on pages 12 - 16 of this report.

Proprietary Funds – The League of Arizona Cities and Towns maintains one type of proprietary fund. The internal service fund is an accounting device used to account for the activity of the Property Corporation that owns and operates the League’s office space. Because these services predominantly benefit governmental rather than business-type functions, they have been included within governmental activities in the government-wide financial statements. The basic proprietary fund financial statements can be found on pages 17 - 19 of this report.

Fiduciary Funds – The League of Arizona Cities and Towns utilizes the fiduciary fund to account for monies held in an agency capacity for other local governments. The fiduciary fund financial statements can be found on page 20 of this report.

(4) LEAGUE OF ARIZONA CITIES AND TOWNS MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2013

Notes to Basic Financial Statements The notes to the basic financial statements (pages 21 - 30) provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements and should be read with the financial statements.

Required Supplementary Information Other Than MD&A Governments have an option of including the budgetary comparison statements for the General Fund and major special revenue funds as either part of the fund financial statements within the basic financial statements, or as required supplementary information after the footnotes. The League has chosen to present these budgetary statements as part of the basic financial statements.

Government-Wide Financial Analysis Net Position Net position may serve over time as a useful indicator of a government’s financial position. Table A-1 reflects the condensed Statement of Net Position of the League at June 30, 2013 showing that assets exceeded liabilities by $1,943,339. The League does not currently have any enterprise funds that would otherwise be classified as business-type activities; all funds are considered governmental activities.

Table A-1 Net Position

Governmental Activities Percent 2013 2012 Change Assets Current and Other Assets$ 2,148,738 $ 1,994,272 7.7 % Capital Assets Non-Depreciable 51,611 51,611 - Depreciable (Net) 269,217 251,429 7.1 Total Assets 2,469,566 2,297,312 7.5

Liabilities Other Liabilities 452,727 451,296 0.3 Non-Current Liabilities Due Within One Year 73,500 71,136 3.3 Due in More Than One Year - 840 (100.0) Total Liabilities 526,227 523,272 0.6

Net Position Net Investment in Capital Assets 319,988 300,694 6.4 Unrestricted 1,623,351 1,473,346 10.2 Total Net Position$ 1,943,339 $ 1,774,040 9.5

Net position consists of two components. The League of Arizona Cities and Towns’ net investment in capital assets (e.g., land, buildings, furniture, fixtures and equipment), less any related debt used to acquire those assets that is still outstanding reflects 20% of the League’s total net position. The League of Arizona Cities and Towns uses these capital assets to provide services to Arizona governments and its members; consequently, these assets are not available for future spending. Net investment in capital assets increased as a result of the net effect of current year depreciation expense, current year additions and a reduction in capital lease obligations.

(5) LEAGUE OF ARIZONA CITIES AND TOWNS MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2013

The League does not have any restricted net position, other than those invested in capital assets. The remaining balance, unrestricted net position ($1,623,351) may be used to meet the League’s ongoing obligations to Arizona governments and its members.

At the end of the current fiscal year, the League of Arizona Cities and Towns is able to report positive balances in both categories of net position for the League as a whole.

Changes in Net Position Governmental Activities. Table A-2 compares the revenue and expenses for the current and previous fiscal year.

The program revenues include charges for services and intergovernmental revenues that are clearly identifiable to an operating function of governmental activities. The League’s revenues are not identified with any operating function and are therefore reported as general revenues.

Table A-2 Changes in Net Position Governmental Activities Percent 2013 2012 Change REVENUES General Revenues: Affiliate Group Contributions $ 136,200 $ 130,250 4.6 % Annual Conference 396,978 418,343 (5.1) Membership Dues 1,818,420 1,817,053 0.1 Local Government Directory 1,365 1,825 (25.2) Risk Management 135,366 131,923 2.6 Rental Revenue 22,469 20,415 10.1 Seminars and Meetings 39,150 67,371 (41.9) Miscellaneous 94,364 64,987 45.2 Investment Income 4,960 4,200 18.1 Total Revenues 2,649,272 2,656,367 (0.3) EXPENSES Salaries and Employee Benefits 1,625,765 1,600,734 1.6 Annual Conference, Seminars and Travel 287,216 362,348 (20.7) Consultant and Professional Services 242,102 184,236 31.4 Executive Committee 11,680 25,574 (54.3) Insurance 12,374 12,181 1.6 Membership Dues and Subscriptions 54,061 50,238 7.6 Office Supplies, Printing and Rentals 71,294 72,797 (2.1) Postage and Shipping 3,644 5,567 (34.5) Rent, Utilities and Communication 73,693 68,856 7.0 Maintenance Services and Agreements 68,762 50,852 35.2 Interest 251 455 (44.8) Depreciation 29,131 33,690 (13.5) Total Expenses 2,479,973 2,467,528 0.5 CHANGE IN NET Position 169,299 188,839 (10.3)

Net Position - Beginning of Year 1,774,040 1,585,201 11.9 NET Position - END OF YEAR $ 1,943,339 $ 1,774,040 9.5

(6) LEAGUE OF ARIZONA CITIES AND TOWNS MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2013

Revenues decreased $7,095. The major increases and decrease in revenues included a $21,365 decrease in annual conference revenue, $28,221 decrease in seminars and meetings revenue, and a $29,377 increase in miscellaneous revenues.

The decrease in annual conference revenues is attributed to a decrease in sponsorships.

The decrease in revenues from seminars and meetings was primarily due to a decrease in workshop attendance.

The increase in miscellaneous revenue was due to distributions received from the Lehman Brothers and NCFE bankruptcy cases.

Expenses increased $12,455. The major increases and decreases in expenses included a $25,031 increase in salaries and employee benefits, a $75,132 decrease in annual conferences, seminars and travel, and a $57,886 increase in consultants and professional services.

The 1.6% increase in salaries and employee benefit expenses is attributed to conservative salary increases and increases to health insurance premiums and ASRS contributions.

The decrease in annual conference expenses is attributed to the difference in facility costs at the Hyatt Gainey Ranch, Scottsdale in comparison to the costs of the previous year’s host hotel, Starr Pass Resort in Tucson.

The increase in consultants and professional services is due to charges for public relations and communications having an increase over the prior year.

FINANCIAL ANALYSIS OF THE LEAGUE’S FUNDS The focus of the League’s governmental funds is to provide information on near-term inflows, outflows, and balances of resources that are available for spending. Such information is useful in assessing the League’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of the League’s net resources available for spending at the end of the fiscal year. The League only reports one governmental fund - the General Fund. The General Fund is the chief operating fund of the League of Arizona Cities and Towns.

As of the end of the current fiscal year, the League’s General Fund reported an ending fund balance of $1,624,059, an increase of $165,383 in comparison with the prior year. As a measure of the General Fund’s liquidity, it may be useful to compare the General Fund fund balance and total fund expenditures. The General Fund unassigned fund balance represents 65 percent of total General Fund expenditures.

(7) LEAGUE OF ARIZONA CITIES AND TOWNS MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2013

During the current fiscal year, major variances in revenue from the previous fiscal year included a $21,365 decrease in annual conference revenues, a $28,221 decrease in seminars and meetings and a $23,621 increase in miscellaneous revenues. The increases and decreases in revenues were due to a decrease in sponsorships; a decrease in workshop attendance; and distributions received from the Lehman Brothers and NCFE bankruptcy cases.

In addition to the increases and decreases in revenues, the League reported an increase in General Fund expenditures of $20,633. The increase in expenditures was the result of salary increases and increases to health insurance premiums and ASRS contributions (1.6%); the difference in facility costs at the Hyatt Gainey Ranch, Scottsdale in comparison to the costs of the previous year’s host hotel, Starr Pass Resort in Tucson; but offsetting those increases was a substantial decrease in consultants and professional services due to not having to retain any outside legal services this year.

BUDGETARY HIGHLIGHTS The League’s annual budget is the legally adopted expenditure control document of the League. Budgetary comparison statements are required for the General Fund and all major special revenue funds and may be found on page 16. This statement compares the original adopted budget, the budget if amended throughout the fiscal year, and the actual expenditures prepared on a budgetary basis. The League did not amend its budget during the fiscal year.

General Fund revenues of $2,618,605 exceeded budgeted revenues of $2,531,473 by $87,132 and expenditures of $2,453,222 fell below budgeted expenditures by $72,878.

The excess of revenues over budget was largely due to $46,978 excess revenues over budget for annual conference fees and $34,262 excess revenues over budget for miscellaneous revenues. The excess of revenues over budget was due to the inability to predict sponsorship participation and attendance at the annual conferences from year to year and the unanticipated distributions from the bankruptcy cases.

Major budget variances during the current fiscal year included salaries and benefits falling below budget by $68,265, consultant and professional services exceeding budget by $18,902, and office supplies, printing and publications falling below budget by $13,706. Salaries and benefits fell below budget due to filling vacant positions at a lower salary and one new hire opting out of medical insurance coverage. Consultant and professional services exceeded budget largely due to an increase in expenditures related to executive recruitment over the prior year; the budget was prepared largely based on prior year actual, plus anticipated activity for 2013. Office supplies, printing and publications fell below budget due to a decrease in Local Government Directory sales.

CAPITAL ASSET AND DEBT ADMINISTRATION The League’s capital assets for its governmental activities as of June 30, 2013 amount to $320,828 (net of accumulated depreciation), an increase of 6%. For government-wide financial statement presentation, all depreciable capital assets were depreciated from acquisition date to the end of the current fiscal year. Governmental fund financial statements record capital asset purchases as expenditures, whereas the proprietary fund financial statements record capital asset purchases as assets. See Note 3.A. in the Notes to the Financial Statements for further information regarding capital assets.

(8) LEAGUE OF ARIZONA CITIES AND TOWNS MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2013

Major capital asset events during the current fiscal year included the following:

 Fiber optic cabling totaling $12,013, a new roof totaling $8,600, and a file server for $6,915.

The following table provides a breakdown of the capital assets of the League at June 30, 2013 and 2012. Table A-3 Capital Assets (Net)

Governmental Activities 2013 2012 Land$ 51,611 $ 51,611 Buildings and Building Improvements 245,489 218,653 Equipment and Furniture 23,728 32,776 Total Capital Assets$ 320,828 $ 303,040

The League did not have any outstanding bonded indebtedness, and has one lease-purchase agreement for the acquisition of a copier.

ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES The 2014 budget was constructed with minimal increases to overall expected revenues and expenses. Spending will remain conservative, however there will be continued focus on Public Relations and Communications due to the current AZ Cities @ Work campaign.

REQUESTS FOR INFORMATION This financial report is designed to provide a general overview of the League’s finances for all of those with an interest in the League’s finances and to demonstrate accountability for the use of those funds. Questions about any of the information provided in this report, or requests for additional financial information should be addressed to:

League of Arizona Cities and Towns 1820 West Washington Street Phoenix, AZ 85007

Or visit our website at:

http://www.azleague.org

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BASIC FINANCIAL STATEMENTS

LEAGUE OF ARIZONA CITIES AND TOWNS STATEMENT OF NET POSITION JUNE 30, 2013

Governmental Activities ASSETS Cash and Investments $ 2,085,189 Receivables: Accounts Receivable, Net 28,068 Prepaid Items 35,481 Capital Assets: Non-depreciable 51,611 Depreciable Assets 269,217 Total Assets 2,469,566

LIABILITIES Accounts Payable 35,793 Unearned Revenue 416,934 Long-Term Liabilities: Due Within One Year 73,500 Total Liabilities 526,227

NET POSITION Net Investment in Capital Assets 319,988 Unrestricted 1,623,351 Total Net Position $ 1,943,339

See accompanying Notes to Basic Financial Statements. (10) LEAGUE OF ARIZONA CITIES AND TOWNS STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2013

Functions/Programs Governmental Activities: General Government: Expenses: Salaries and Employee Benefits$ 1,625,765 Annual Conference, Seminars and Travel 287,216 Consultant and Professional Services 242,102 Executive Committee 11,680 Insurance 12,374 Membership Dues and Subscriptions 54,061 Office Supplies, Printing and Rentals 71,294 Postage and Shipping 3,644 Rent, Utilities and Communication 73,693 Maintenance Services and Agreements 68,762 Interest 251 Depreciation 29,131 Total Expenses 2,479,973

General Revenues: Affiliate Group Contributions 136,200 Annual Conference 396,978 Membership Dues 1,818,420 Local Government Directory 1,365 Risk Management 135,366 Rental Revenue 22,469 Seminars and Meetings 39,150 Miscellaneous 94,364 Investment Income 4,960 Total General Revenues 2,649,272

Change in Net Position 169,299

Net Position Beginning of Year 1,774,040

Net Position End of Year $ 1,943,339

See accompanying Notes to Basic Financial Statements. (11) LEAGUE OF ARIZONA CITIES AND TOWNS BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2013

General Fund ASSETS Cash and Investments $ 2,010,808 Receivables: Accounts Receivable 25,376 Prepaid Items 31,239 Total Assets $ 2,067,423

LIABILITIES AND FUND BALANCE Liabilities: Accounts Payable $ 30,124 Unearned Revenue 413,240 Total Liabilities 443,364

Fund Balances: Nonspendable for Prepaid Items 31,239 Unassigned 1,592,820 Total Fund Balance 1,624,059 Total Liabilities and Balance$ 2,067,423

See accompanying Notes to Basic Financial Statements. (12) LEAGUE OF ARIZONA CITIES AND TOWNS RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION JUNE 30, 2013

Total Fund Balances for Governmental Funds$ 1,624,059

Total net assets reported for governmental activities in the statement of net assets is different because:

Capital assets used in governmental funds are not financial resources and, therefore, are not reported in the governmental funds. Those assets consist of:

Governmental Capital Assets$ 140,170 Less: Accumulated Depreciation (117,126) Capital Assets used in Governmental Activities 23,044

Long-term liabilities, including compensated absences, are not due and payable in the current period and therefore are not reported in the governmental funds.

Capital Lease Payable (840) Compensated Absence Payable (72,660) Total Long-Term Liabilities (73,500)

Internal service funds are used by management to charge the costs of certain activities to individual funds. The assets and liabilities of the internal service fund are included in governmental activities in the Statement of Net Assets. 369,736

Total Net Assets of Governmental Activities$ 1,943,339

See accompanying Notes to Basic Financial Statements. (13) LEAGUE OF ARIZONA CITIES AND TOWNS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2013

General Fund Revenues: Affiliate Group Contributions $ 136,200 Annual Conference 396,978 Membership Dues 1,818,420 Local Government Directory 1,365 Risk Management 135,366 Seminars and Meetings 39,150 Miscellaneous 86,262 Investment Income 4,864 Total Revenues 2,618,605

Expenditures: Current: Salaries and Employee Benefits 1,622,735 Annual Conference, Seminars and Travel 287,216 Consultant and Professional Services 235,902 Executive Committee 11,680 Insurance 7,487 Membership Dues and Subscriptions 54,061 Office Supplies, Printing and Rentals 71,294 Postage and Shipping 3,644 Rent, Utilities and Communication 135,741 Debt Service: Principal 1,506 Interest 251 Capital Outlay 21,705 Total Expenditures 2,453,222

Excess of Revenues Over/(Under) Expenditures 165,383

Fund Balance, Beginning of Year 1,458,676 Fund Balance, End of Year $ 1,624,059

See accompanying Notes to Basic Financial Statements. (14) LEAGUE OF ARIZONA CITIES AND TOWNS RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2013

Net Change in Fund Balances-Total Governmental Funds$ 165,383

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, assets are capitalized and the cost is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which depreciation exceeded capital outlays in the current period.

Capital Outlays - Improvement Costs$ 6,915 Depreciation Expense (13,997) Net Change in Capital Assets (7,082)

The governmental funds report the issuance of long-term debt as financing sources, while repayment of long-term debt is reported as an expenditure. In the governmental funds; however, issuing debt increases long-term liabilities and does not affect the statement of activities and repayment of principal reduces the liability. The net effect of these differences in the treatment of capital leases is as

Payment of Capital Lease Principal 1,506

Compensated absences do not require the use of current financial resources in the governmental funds and are therefore not reported as expenditures in the governmental funds; however, the net change in compensated absences is reported as a net increase or decrease in the government-wide financial statements. (3,030)

Internal service funds are used by management to charge the costs of insurance to individual funds. The net revenue of the Internal Service Funds is reported with governmental activities. 12,522 Change in Net Assets of Governmental Activities$ 169,299

See accompanying Notes to Basic Financial Statements. (15) LEAGUE OF ARIZONA CITIES AND TOWNS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL GENERAL FUND YEAR ENDED JUNE 30, 2013

Original and Final Budget Actual Variance Revenues: Affiliate Group Contributions$ 133,000 $ 136,200 $ 3,200 Annual Conference 350,000 396,978 46,978 Membership Dues 1,818,423 1,818,420 (3) Local Government Directory 4,000 1,365 (2,635) Risk Management 130,050 135,366 5,316 Seminars and Meetings 40,000 39,150 (850) Miscellaneous 52,000 86,262 34,262 Investment Income 4,000 4,864 864 Total Revenues 2,531,473 2,618,605 87,132

Expenditures: Current: Salaries and Employee Benefits 1,691,000 1,622,735 68,265 Annual Conference, Seminars and Travel 295,000 287,216 7,784 Consultant and Professional Services 217,000 235,902 (18,902) Executive Committee 12,000 11,680 320 Insurance 7,600 7,487 113 Membership Dues and Subscriptions 50,000 54,061 (4,061) Office Supplies, Printing and Rentals 85,000 71,294 13,706 Postage and Shipping 6,500 3,644 2,856 Rent, Utilities and Communication 132,000 135,741 (3,741) Contingency 10,000 - 10,000 Debt Service: Principal - 1,506 (1,506) Interest - 251 (251) Capital Outlay 20,000 21,705 (1,705) Total Expenditures 2,526,100 2,453,222 72,878

Excess of Revenues Over/(Under) Expenditures 5,373 165,383 160,010

Fund Balance, Beginning of Year 1,418,272 1,458,676 40,404 Fund Balance, End of Year$ 1,423,645 $ 1,624,059 $ 54,658

See accompanying Notes to Basic Financial Statements. (16) LEAGUE OF ARIZONA CITIES AND TOWNS STATEMENT OF NET POSITION PROPRIETARY FUNDS JUNE 30, 2013

Governmental Activities - Internal Service Fund ASSETS Current Assets: Cash and Cash Equivalents $ 74,381 Receivables, Net: Accounts Receivable 2,692 Prepaid Items 4,242 Total Current Assets 81,315

Noncurrent Assets: Capital Assets: Non-Depreciable 51,611 Depreciable (Net) 246,173 Total Assets 379,099

LIABILITIES Current Liabilities: Accounts Payable 5,669 Unearned Revenue 3,694 Total Liabilities 9,363

NET POSITION Investment in Capital Assets 297,784 Unrestricted 71,952 Total Net Position $ 369,736

See accompanying Notes to Basic Financial Statements. (17) LEAGUE OF ARIZONA CITIES AND TOWNS STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION PROPRIETARY FUNDS YEAR ENDED JUNE 30, 2013

Governmental Activities - Internal Service Fund Operating Revenues: Rental Revenue $ 127,469 Miscellaneous 8,102 Total Operating Revenues 135,571

Operating Expenses: Utilities 42,952 Repairs and Maintenance Services and Agreements 53,972 Accounting and Auditing 6,200 Insurance 4,887 Depreciation 15,134 Total Operating Expenses 123,145

Operating Income 12,426

Nonoperating Revenues: Investment Income 96

Change in Net Position 12,522

Net Position Beginning of Year 357,214 Net Position End of Year $ 369,736

See accompanying Notes to Basic Financial Statements. (18) LEAGUE OF ARIZONA CITIES AND TOWNS STATEMENT OF CASH FLOWS PROPRIETARY FUNDS YEAR ENDED JUNE 30, 2013

Governmental Activities - Internal Service Funds CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Receipts from Customers $ 137,072 Payments to Suppliers (109,789) Net Cash Flows from Operating Activities 27,283

CASH FLOWS FROM CAPITAL AND FINANCING ACTIVITIES Purchases of Capital Assets (40,004)

CASH FLOWS FROM INVESTING ACTIVITIES Investment Income 96

NET CHANGE IN CASH AND CASH EQUIVALENTS (12,625)

Cash and Cash Equivalents - Beginning of Year 87,006

CASH AND CASH EQUIVALENTS - END OF YEAR $ 74,381

RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY OPERATING ACTIVITIES Operating Income $ 12,426

ADJUSTMENTS TO RECONCILE OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY OPERATING ACTIVITIES Depreciation Expense 15,134 Change in Assets/Liabilities: Receivables (346) Prepaid Items (270) Accounts Payable (1,508) Unearned Revenue 1,847 Net Cash Provided For Operating Activities $ 27,283

See accompanying Notes to Basic Financial Statements. (19) LEAGUE OF ARIZONA CITIES AND TOWNS FIDUCIARY FUND – AGENCY FUND STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2013

Agency Funds ASSETS Current Assets: Cash and Cash Equivalents $ 78,558

LIABILITIES Current Liabilities: Due to Other Governments $ 78,558

See accompanying Notes to Basic Financial Statements. (20)

NOTES TO BASIC FINANCIAL STATEMENTS

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LEAGUE OF ARIZONA CITIES AND TOWNS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2013

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying financial statements of the League of Arizona Cities and Towns (the League) have been prepared in conformity with accounting principles generally accepted in the United States of America applicable to governmental units adopted by the Governmental Accounting Standards Board (GASB). A summary of the League’s more significant accounting policies follows.

A. Reporting Entity

The League of Arizona Cities and Towns was established in 1937, and is a voluntary association of all the incorporated cities and towns in Arizona. The League is comprised of 90 members and provides legislative framework for municipal needs and concerns and is a technical assistance resource for all of the incorporated communities in Arizona. League policy is established by all members at the annual meeting and policy direction is provided during the year by a 25 member Executive Committee composed of elected officials from cities and towns around the state.

The accompanying financial statements present the League and its component unit, entity for which the League is considered to be financially accountable. Blended component units, although legally separate entities, are, in substance, part of the League’s operations.

Included within the reporting entity:

The Property Corporation of Arizona Cities and Towns is a not-for-profit corporation which was incorporated in 1970 as a 501(c)(4) by the incorporated cities and towns in the State of Arizona to construct and operate the office space for the League and other governmental units. The Corporation’s officers and board of directors consist of officers and members of the Executive Committee for the League. The operations of the Property Corporation of Arizona Cities and Towns are reported as an internal service fund because the Property Corporation largely charges rent to the League and other governmental entities. The activity is included in the governmental activities on the League’s financial statements. Separate financial statements are not prepared for the Property Corporation of Arizona Cities and Towns.

B. Government-Wide and Fund Financial Statements

The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the primary government and its component units. The effect of interfund activity has been removed from these statements. Governmental activities, which are normally supported by intergovernmental revenues are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The League did not have any business-type activities.

(21) LEAGUE OF ARIZONA CITIES AND TOWNS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2013

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

B. Government-Wide and Fund Financial Statements (Continued)

The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is 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. Internally dedicated resources such as intergovernmental, membership dues, fees and other items are reported as general revenues rather than as program revenues. All revenues of the League are considered to be general revenues.

Separate financial statements are provided for governmental funds and proprietary funds. Major individual governmental funds are reported as separate columns in the fund financial statements.

C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation

The government-wide and proprietary fund 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. Significant revenues susceptible to accrual include dues, seminars and meetings, risk management, annual conference and investment income and so have been recognized as revenues of the current fiscal period. Monies received in advance of the revenue recognition criteria are reported as deferred revenues. All other revenue items are considered to be measurable and available only when cash is received by the League.

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 League 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, except expenditures related to compensated absences which are recorded only when payment is due.

The League reports the following major governmental funds:

Major Governmental Funds

General Fund – the General Fund is the League’s primary operating fund. It accounts for all financial resources of the League, except those required to be accounted for in another fund.

(22) LEAGUE OF ARIZONA CITIES AND TOWNS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2013

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued)

Additionally, the League reports the following fund type:

Internal Service Fund – the Internal Service Fund accounts for the Property Corporation’s financing of operating and maintaining office space provided to the League and other governmental entities.

Fiduciary Fund – the Fiduciary Fund is used to account for funds held by League in a fiduciary capacity. The League reports two agency funds to account for conference fees received on-behalf of other governments.

As a general rule the effect of interfund activity has been eliminated from the government-wide financial statements.

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 internal service fund are rental income charged to the League and other governmental entities. Operating expenses for the internal service fund include the cost of maintaining the facilities and utilities. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses.

When restricted, committed, assigned or unassigned resources are available for use, for governmental activities it is the League’s policy to use restricted resources first, then committed, assigned and unassigned resources as they are needed.

D. Assets, Liabilities, and Net Position or Equity

1. Deposits and Investments

The League’s cash and cash equivalents are considered to be cash on hand, demand deposits, cash and investments held by the State Treasurer, and highly liquid investments with maturities of three months or less from the date of acquisition.

State statutes authorize the League to invest in obligations of the U.S. Treasury and U.S. agencies, certificates of deposit in eligible depositories, repurchase agreements, obligations of the State of Arizona or any of its counties or incorporated cities, towns or duly organized school districts, improvement districts in this state and the State Treasurer’s Local Government Investment Pool. Investments are stated at fair value.

(23) LEAGUE OF ARIZONA CITIES AND TOWNS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2013

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

D. Assets, Liabilities, and Net Position or Equity (Continued)

2. Receivables

All receivables are shown net of an allowance for uncollectibles.

3. Prepaid Items

Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements.

4. Capital Assets

Capital assets, which include land, buildings and improvements, and furniture, fixtures and equipment are reported in the governmental activities column in the government-wide financial statements. Capital assets are defined by the League as assets with an initial, individual cost of more than $750 and an estimated useful life in excess of one year.

Capital assets purchased or acquired are carried at historical cost or estimated historical cost. Contributed assets are recorded at fair market value as of the date received. Additions, improvements and other capital outlays that significantly extend the useful life of an asset are capitalized. Other costs incurred for repairs and maintenance are expensed as incurred.

Depreciation on all assets is provided on a straight-line basis over the following estimated useful lives:

Buildings and Improvements 10-40 Years Furniture, Fixtures and Equipment 3-10 Years

5. Compensated Absences

The liability for compensated absences reported in the government-wide statements consists of unpaid, accumulated leave balances. The liability has been calculated using the vesting method, in which leave amounts for both employees who currently are eligible to receive termination payments and other employees who are expected to become eligible in the future to receive such payments upon termination are included.

(24) LEAGUE OF ARIZONA CITIES AND TOWNS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2013

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

D. Assets, Liabilities, and Net Position or Equity (Continued)

6. Net Position

In the government-wide financial statements, net position are reported in three categories: net investment in capital assets; restricted net position; and unrestricted net position. Net investment capital assets is separately reported because the League reports all of the League assets which make up a significant portion of total net position. Restricted net position account for the portion of net position restricted by parties outside the League. Unrestricted net position is the remaining net position not included in the previous two categories. The League reported no restricted net position.

7. Fund Equity

In the fund financial statements, governmental funds report non-spendable fund balance for amounts that are not available for appropriation. The League has not adopted a fund balance policy defining restricted, committed, assigned and unassigned fund balances. The League therefore, does not define the terms under which committed fund balances become committed or are released from such a commitment. In addition, the Board has not designated an individual or group of individuals the authority to assign fund balances. The League did not report any restricted, committed or assigned fund balances.

NOTE 2 STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY

A. Budgetary Information

The League’s budget policy provides that the Executive Committee adopt and approve an annual budget. The budget for the General Fund is prepared on the modified accrual basis of accounting.

(25) LEAGUE OF ARIZONA CITIES AND TOWNS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2013

NOTE 3 DETAILED NOTES ON ALL FUNDS

A. Assets

1. Deposits and Investments

Deposits and investments at June 30, 2013 consist of the following:

Deposits: Cash on Hand$ 100 Cash in Bank 234,398 Investments: State Treasurer's Investment Pool 1,929,249 Total Cash and Investments 2,163,747 Less: Fiduciary Fund (78,558) Total Cash and Cash Equivalents$ 2,085,189

Deposits At June 30, 2013, the carrying amount of the League’s deposits was $234,398 and the bank balance was $302,142. Of the bank balance, $250,000 was insured by federal depository insurance and $52,142 was uninsured and uncollateralized.

Investments The League’s investments consist of only funds invested with the Local Government Investment Pool.

Interest Rate Risk – The League does not have an investment policy that addresses interest rate risk; however, the League manages its exposure to declines in fair values by limiting its investments to the Local Government Investment Pool which has a weighted average maturity of 24 days.

Credit Risk – The State Board of Deposit provides oversight for the State Treasurer’s pools, and the Local Government Investment Pool Advisory Committee provides consultation and advice to the Treasurer. The fair value of a participant’s position in the pool approximates the value of that participant’s pool shares. The shares are not identified with specific investments and are not subject to custodial credit risk. The LGIP maintains a rating of AAAF/SI+.

Custodial Credit Risk – For an investment, this is the risk that, in the event of the failure of the counterparty, the League will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The League currently does not have a policy with regard to custodial credit risk. However, the League’s investments consist only of funds deposited with the Local Government Investment Pool which is overseen by the State Board of Deposits.

(26) LEAGUE OF ARIZONA CITIES AND TOWNS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2013

NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED)

A. Assets (Continued)

2. Capital Assets

Capital asset activity for the year ended June 30, 2013 was as follows:

Beginning Ending Balance Increases Decreases Balance Governmental Activities: Capital Assets, Not Being Depreciated: Land$ 51,611 $ - $ - $ 51,611

Capital Assets, Being Depreciated: Buildings and Building Improvements 664,476 40,004 - 704,480 Equipment and Furniture 169,495 6,915 - 176,410 Total Capital Assets, Being Depreciated 833,971 46,919 - 880,890

Accumulated Depreciation for: Buildings and Building Improvements (445,823) (13,168) - (458,991) Equipment and Furniture (136,719) (15,963) - (152,682) Total Accumulated Depreciation (582,542) (29,131) - (611,673) Total Capital Assets, Being Depreciated, Net 251,429 17,788 - 269,217 Governmental Activities Capital Assets, Net $ 303,040 $ 17,788 $ - $ 320,828

Depreciation expense was charged to functions/programs as follows:

Governmental Activities: General Government$ 13,997 Internal Service Fund 15,134 Total Depreciation Expense, Governmental Activities $ 29,131

B. Unearned Revenue

Resources received are recognized as unearned revenue to the extent that the earnings process has not been completed. These resources are recorded as revenue when the related obligations have been satisfied. As of June 30, 2013, The League reported $413,240 of unearned revenue in the governmental funds and $416,934 of unearned revenues in the governmental activities.

(27) LEAGUE OF ARIZONA CITIES AND TOWNS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2013

NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED)

C. Obligations under Leases

Operating Lease The League leases copiers and other equipment under the provisions of long-term lease agreements classified as operating leases. Rental expenditures under the terms of the operating leases totaled $7,923 for the year ended June 30, 2013.

The future minimum lease payments for these leases are as follows:

Year Ending June 30, 2014$ 7,923 2015 7,923 2016 6,583 Total$ 22,429

Capital Lease The Organization has acquired a copier under the provisions of a long-term lease agreement classified as a capital lease for accounting purposes because the lease provides for a bargain purchase option or a transfer of ownership by the end of the lease term. Accordingly, the asset totaling $6,169, at June 30, 2013, is capitalized.

The following table summarizes the asset and the accumulated depreciation:

Equipment$ 6,169 Accumulated Depreciation (5,655) Total$ 514

The future minimum lease payments under the capital lease, together with the present value of the net minimum lease payments as of June 30, 2013, were as follows:

Year Ending June 30, 2014$ 877 Less: Amount Representing Interest (37) Present Value of Net Minimum Capital Lease Payments$ 840

(28) LEAGUE OF ARIZONA CITIES AND TOWNS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2013

NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED)

D. Long-term Debt

The capital lease and compensated absences are paid entirely by the General Fund of the League. Changes in long-term debt for the year ended June 30, 2013 are as follows:

Beginning End of Due within of Year Additions Retirements Year One Year Governmental Activities: Capital Leases$ 2,346 $ - $ (1,506) $ 840 $ 840 Compensated Absences 69,630 90,739 (87,709) 72,660 72,660 Total Governmental Activities $ 71,976 $ 90,739 $ (89,215) $ 73,500 $ 73,500

NOTE 4 OTHER INFORMATION

A. Risk management

The League of Arizona Cities and Towns is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; and natural disasters.

The League carries commercial insurance for all risks of loss, including workers’ compensation and employee health and accident insurance. Settled claims resulting from these risks have not exceeded commercial insurance coverage during any of the past three fiscal years and no significant reduction in insurance coverage during the last fiscal year.

B. Commitments

On June 29, 2010, the League signed a commitment with a hotel for the 2013 Annual Conference. At June 30, 2013, the League is liable for $93,373 if the League cancels the agreement.

On December 31, 2012, the League signed a commitment with a hotel for the 2014 Annual Conference. At June 30, 2013, the League is liable for $30,000 if the League cancels the agreement.

C. Economic Dependence

The League receives 69% of its revenues from membership dues and 15% from its annual conference. The League’s operations depend on continued support from these funding sources.

(29) LEAGUE OF ARIZONA CITIES AND TOWNS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2013

NOTE 4 OTHER INFORMATION (CONTINUED)

D. Retirement plans

Arizona State Retirement System

Plan Description The League contributes to a cost-sharing multiple employer defined benefit pension plan administered by the Arizona State Retirement System. Benefits are established by state statute and generally provide retirement, death, long-term disability, survivor, and health insurance premium benefits. The System is governed by the Arizona State Retirement System Board according to the provisions of A.R.S. Title 38, Chapter 5, Article 2.

The System issues a comprehensive annual financial report that includes financial statements and required supplementary information. The most recent report may be obtained by writing the System, 3300 North Central Avenue, P.O. Box 33910, Phoenix, AZ 85067-3910 or by calling (602) 240-2001 or (800) 621-3778.

Funding Policy The Arizona State Legislature establishes and may amend active plan members’ and the League’s contribution rate. For the year ended June 30, 2013, active plan members and the League were each required by statute to contribute at the actuarially determined rate of 11.14 percent (10.25 percent retirement, 0.65 percent for health insurance premium, and 0.24 percent long-term disability) of the members’ annual covered payroll. The League’s contributions to the System for the years ended June 30, 2013 and prior two fiscal years are as follows:

Health Benefit Long-Term Retirement Supplement Disability Year Ended June 30, Fund Fund Fund 2013$ 112,165 $ 7,113 $ 2,626 2012 110,982 7,084 2,699 2011 91,047 5,962 2,526

(30)

GOVERNMENT AUDITING STANDARDS REPORT

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REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

Board of Directors League of Arizona Cities and Towns Phoenix, Arizona

We have audited, in accordance with the 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, the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the League of Arizona Cities and Towns, as of and for the year ended June 30, 2013, and the related notes to the financial statements, which collectively comprise the League’s basic financial statements, and have issued our report thereon dated October 3, 2013.

Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the League of Arizona Cities and Towns' internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the League’s internal control. Accordingly, we do not express an opinion on the effectiveness of the League’s internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the League’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

An independent member of Nexia International (31) Board of Directors League of Arizona Cities and Towns

Compliance and Other Matters As part of obtaining reasonable assurance about whether the League of Arizona Cities and Towns' financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the result of that testing, and not to provide an opinion on the effectiveness of the League’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the League’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

Phoenix, Arizona October 3, 2013

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EXECUTIVE COMMITTEE MEETING Friday, November 22, 2013 at 9:30 a.m.

Agenda Item #11 Report from NLC and USCM

Summary: Reports from the Presidents of NLC and USCM

Responsible Person: Mayor Marie Lopez Rogers, NLC President Mayor Scott Smith, USCM President

Additional Informational Materials Not Part of the Agenda:

League Budget Report Article: Arizona in 2020? State leaders share their vision Article: Meyer receives League award at Paradise Valley meeting Article: Challenges abound as cities climb out of financial holes Photos - Staff Activities Ken – Photos from Japan Fellowship

League of Arizona Cities & Towns FY 2013-2014 Budget vs. Actual July through October 2013

Jul - Oct 13 Budget $ Over Budget % of Budget Ordinary Income/Expense Income 4057 · Valley Schools Health Pool 0.00 25,000.00 -25,000.00 0.0% 4000 · Affiliate Group Contribution 34,049.96 131,200.00 -97,150.04 26.0% 4005 · Annual Conference 385,064.78 350,000.00 35,064.78 110.0% 4010 · Dues 1,676,440.00 1,818,423.00 -141,983.00 92.2% 4012 · Executive Recruitment Income 0.00 3,000.00 -3,000.00 0.0% 4020 · Miscellaneous 3,747.17 13,500.00 -9,752.83 27.8% 4030 · Risk Pool 69,449.48 135,400.00 -65,950.52 51.3% 4035 · Seminars & Meetings 150.00 50,000.00 -49,850.00 0.3% 4040 · Interest Income 1,023.35 5,000.00 -3,976.65 20.5% 4055 · US Communities Purchasing ... 0.00 13,000.00 -13,000.00 0.0% Total Income 2,169,924.74 2,544,523.00 -374,598.26 85.3% Expense 5005 · Annual Conference (Expense) 205,587.95 220,000.00 -14,412.05 93.4% 5010 · Benefits 157,604.10 510,000.00 -352,395.90 30.9% 5015 · Capital Outlay 0.00 20,000.00 -20,000.00 0.0% 5025 · Contingency 0.00 10,000.00 -10,000.00 0.0% 5030 · Equipment Rental & Mainten... 5,631.07 25,000.00 -19,368.93 22.5% 5035 · Executive Committee 495.54 12,000.00 -11,504.46 4.1% 5043 · Executive Recruitment 1,291.65 2,000.00 -708.35 64.6% 5050 · Insurance 2,537.75 7,600.00 -5,062.25 33.4% 5055 · Postage & Shipping 2,448.61 4,000.00 -1,551.39 61.2% 5057 · PR & Communications 0.00 110,000.00 -110,000.00 0.0% 5060 · Printing 3,068.76 12,000.00 -8,931.24 25.6% 5065 · Professional Services 5065-1 · Accounting Services 16,615.65 42,000.00 -25,384.35 39.6% 5065-3 · Legal Services 813.95 80,000.00 -79,186.05 1.0% 5065-2 · Contract Lobbying & Con... 5,066.64 40,000.00 -34,933.36 12.7% Total 5065 · Professional Services 22,496.24 162,000.00 -139,503.76 13.9% 5070 · Rent 35,000.00 105,000.00 -70,000.00 33.3% 5071 · Salaries 386,385.30 1,190,000.00 -803,614.70 32.5% 5075 · Seminars and Meetings 1,191.96 50,000.00 -48,808.04 2.4% 5085 · Subscriptions & Dues 35,830.14 52,000.00 -16,169.86 68.9% 5090 · Supplies 11,156.77 35,000.00 -23,843.23 31.9% 5095 · Telecommunications 7,976.06 32,000.00 -24,023.94 24.9% 5100 · Travel 9,753.09 25,000.00 -15,246.91 39.0% Total Expense 888,454.99 2,583,600.00 -1,695,145.01 34.4%

Net Ordinary Income 1,281,469.75 -39,077.00 1,320,546.75 -3,279.3%

Net Income 1,281,469.75 -39,077.00 1,320,546.75 -3,279.3%

10/30/13 Meyer receives League award at Paradise Valley meeting Meyer receives League award at Paradise Valley meeting

From left are Paradise Valley Mayor Scott LeMarr; Rep. Eric Meyer and Dale Wiebusch, League of Arizona Cities and Towns legislative associate. (Independent Newsmedia/Terrance Thornton)

Staff reports Independent Newsmedia

Updated October 25, 2013

The League of Arizona Cities and Towns named Rep. Eric Meyer, D-Paradise Valley, a Champion of Cities and Towns for his support of municipalities during the legislative session.

“City and town officials appreciate the support from these outstanding legislators and their recognition that local decisions should be made at the local level,” Executive Director Ken Strobeck said in a news release. “We are successful when we are all working together for the benefit of our citizens and Arizona.”

Rep. Meyer accepted his award during the Oct. 24 Paradise Valley Town Council meeting. He was one of 12 Arizona House Democrats recognized by the League of Arizona Cities and Towns earlier this year.

“We work for the people of Arizona in partnership with cities and towns,” Rep. Meyer said in the release. “We’ll continue to collaborate to move our state forward and ensure our communities stay safe and strong.”

For more information about the League of Arizona Cities and Towns, visit www.azleague.org.

arizona.newszap.com/northvalley/126784-114/meyer-receives-league-award-at-paradise-valley-meeting 1/1 11/1/13 Challenges abound as cities climb out of financial holes

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By Parker Leavitt The Republic | azcentral.com RELATED INFO Thu Oct 31, 2013 10:32 PM Debt payments increase Almost every Valley city is using a Valley cities are emerging from the Great Recession in generally stable greater percentage of its financial health, but they still face significant challenges as they trudge municipal budget to pay down through a long and slow recovery. debt than when the Great Municipal operations are leaner, cash reserves are smaller and debt Recession started in 2007, payments are higher as many Valley cities work to keep up with financial data show. demands for service. Debt up, cash reserves down In most Valley cities, municipal But an analysis of five years of city financial data by The Arizona debt increased while general-fund Republic shows that many of the underlying issues that led Valley cities reserves shrank during the Great to the brink of economic crisis during the recession remain, including Recession. Outstanding debt and sensitive revenue streams, legislative mandates and rising benefit cash-reserve levels are key factors costs. analysts use to evaluate a city’s For now, cities are starting to increase spending by boosting programs fiscal health. and employee salaries that largely remained stagnant through troubled By Fiscal year times. Phoenix is restoring after-school programs, hiring firefighters and RELATED NEWS expanding library services after years of cutbacks. Peoria is adding about 10 full-time positions, about 1 percent of its workforce, and Phoenix's after-school programs Gilbert officials now have funding for long-deferred park maintenance rebound on a recreation center’s leaky roof. New Gilbert parks director General-fund spending among the Valley’s 10 largest municipalities — tackles a 10-year plan Phoenix, Mesa, Glendale, Scottsdale, Chandler, Gilbert, Tempe, Most Popular Top Videos Peoria, Surprise and Avondale — is set to increase by about 2 percent in the current fiscal year, according to city budget documents. The Passengers board new flight as Sky Harbor threat modest increase comes after years of cutbacks that led to pay freezes passes and layoffs. Phoenix takes modest steps to fix pension ‘spiking’ Cities are seeing stronger revenue from sales and income taxes, and rules property-tax collections are expected to climb in fiscal 2015 for the first Who's buried in Phoenix? time in several years, data show. Challenges abound as cities climb out of financial holes “It’s coming back, but it’s not coming back gangbusters,” said Ken Strobeck, executive director for the League of Arizona Cities and Phoenix man arrested in dumping body along roadside Towns. “Things are better, but it’s certainly not a heyday situation again.” Phoenix cold cases Phoenix Sky Harbor Airport Terminal 3 to expand; Without significant and steady job growth, Mesa Mayor Scott Smith Terminal 2 will close said, it’s difficult to see the economic recovery solidifying. Phoenix police release details on pursuit that led to 2 arrests www.azcentral.com/community/phoenix/articles/20131021challenges-abound-cities-climb-out-financial-holes.html?nclick_check=1#protected 1/5 11/1/13 Challenges abound as cities climb out of financial holes “We can’t ever feel comfortable that this recovery is anything more Serious-injury crash shuts Indian School at 81st than two steps forward and one step back,” Smith said. Avenue Phoenix police: Teen girl, boyfriend shot to death in Even though most Valley cities are seen as financially sound, analysts guest house with major credit-rating agencies include a word of caution when gazing into the future. Several threats create a financial minefield for city budgets: A high debt burden is straining Glendale’s budget, and twice in the past year financial analysts downgraded the city’s credit rating to reflect a “deterioration of the city’s financial position.” Many Valley cities remain heavily reliant upon sales taxes and are therefore more sensitive to fluctuations in the economy. About 40 percent of Scottsdale’s fiscal 2012 revenue came from local and state sales tax. Annual pension costs for general Phoenix employees have jumped 83 percent in five years, and some say benefits constitute a “ticking time bomb” for city budgets. Cash reserves in Surprise fell to about $5 million in fiscal 2012 from nearly $32 million in 2007. Nearly every Valley city has seen its reserves drop since the start of the recession. Moody’s hit Chandler with a credit-rating downgrade for highway bonds in 2012 after the Arizona Legislature swept money intended for cities. The Legislature still has not restored cities’ portion of the “highway- user revenue fund.” Risky revenue Although Valley cities benefit from a large tax base, they face significant risks with a heavy reliance on sales tax, leaving them more susceptible to fluctuations in the economy, analysts say. In many communities, sales taxes account for the largest single source of operating revenue. When consumers stop spending, city coffers take an immediate hit. In Phoenix, for example, sales-tax collections fell nearly 16 percent from 2007 to 2010. Retail-based revenue dropped by about $50 million per year, or 18 percent, during that period. GET AZCENTRAL ANYWHERE

The city cut library hours and slashed funding for after-school care and summer recreation. Vacant Fire azcentral.com Department positions were eliminated. mobile editions In Scottsdale, taxable sales dropped 30 percent from 2007 to 2010, and auto sales fell almost by half. Get azcentral.com on Meanwhile, the city reduced bus service and cut hours at community centers. your phones and tablets for the latest Most Valley cities experienced similar declines, forcing them to cut budgets or tap rainy-day funds as a news, sports, video, stopgap measure. photos and much more from azcentral, The Arizona has one of the nation’s highest sales-tax rates but ranks in the bottom half among states for Arizona Republic and property-tax and income-tax levels, according to the Arizona Tax Research Association. 12 News. » Get azcentral.com Conflicting mandates mobile! » Android | iPad | iPhone The Legislature can be a frequent source of heartburn for city officials as they grapple with ongoing | iPhone Sports | AZ

funding sweeps and legal reform that can strip municipal budgets of millions of dollars with little warning. From our sponsor Banner Children's Total Kid for iPad “Sometimes, the state kind of takes care of their issues and might not understand or care what impact that Download your free copy of has for the cities,” Mesa Mayor Smith said. “The cities usually end up on the short end of the stick.” Total Kid, an interactive digital parenting magazine The state in recent years has reduced distributions from the highway-user revenue fund, which is filled with trending health composed primarily of revenue from the gasoline and vehicle-license taxes. topics, videos, tips and activities. Sponsored by Cities use the money to pay for road construction, but the Legislature is diverting $120 million a year to the Banner Health. Department of Public Safety to offset Arizona’s budget deficit. “That’s a lot of roadwork that could be done, but we’re using it again for operations,” League Deputy Director Tom Belshe said. “That should be changed.” In recent years, the Legislature also has passed bills with major ramifications for city budgets, like the developer impact-fee reform in 2011 and a major sales-tax overhaul this year. “If you are going to enact something, engage us early on and treat us as partners, not as adversaries,” Smith said. “Partners don’t always agree, but at least you work through things.” Impact-fee reform restricts how much cities can charge developers for infrastructure costs. It also precludes cities from using impact fees for projects beyond “necessary public services,” putting large-scale projects like parks and libraries in jeopardy. This year’s sales-tax overhaul could have cost some communities millions of dollars in construction taxes, but municipal lobbyists were successful in helping mitigate that impact. Smith said his next concern is with Internet-based sales taxes that could be assessed if Congress passes the Marketplace Fairness Act. He fears the state might keep that money for itself rather than distribute it to www.azcentral.com/community/phoenix/articles/20131021challenges-abound-cities-climb-out-financial-holes.html?nclick_check=1#protected 2/5 11/1/13 Challenges abound as cities climb out of financial holes Arizona cities. Shrinking savings Many Valley cities are emerging from the Great Recession with smaller cash reserves in their general funds, which support day-to-day operations, including public safety. Reserves in Phoenix, Mesa, Scottsdale, Tempe and Peoria dropped more than 30 percent from 2007 to 2012, according to annual financial reports. Chandler’s general-fund balance fell 14 percent, while Gilbert’s increased 11 percent. Glendale’s general-fund reserves fell 143 percent over five years, ending fiscal 2012 with a $26.5 million negative balance, according to financial reports. Payments to the National Hockey League for Phoenix Coyotes operating losses led to significant declines in Glendale’s reserve funds in 2011 and 2012, according to a Moody’s credit report. Jeffrey Chapman, an Arizona State University professor emeritus who taught urban economics and public finance, said it is important that cities maintain a healthy rainy-day fund. “We really don’t have much of a clue how to forecast revenues or expenditures more than maybe a year or so in advance,” Chapman said. “You need this fund to cover contingencies ... when the economy goes south.” The Government Finance Officers Association recommends that cities maintain a fund balance to “mitigate risks and provide a backup for revenue shortfalls.” Precisely how much cash a city should keep on hand can vary widely depending on risk factors, such as natural disasters, revenue volatility and infrastructure needs, according to a study from municipal officials in Colorado Springs, Colo. The average level of unrestricted reserve funds for cities included in the study fell between 20 percent and 25 percent, a threshold most Valley cities still meet. Rising debt Bond debt plays a vital role in how cities finance large-scale infrastructure projects, but a careless debt strategy can strangle a budget and jeopardize day-to-day operations, experts say. A municipality’s “debt profile,” including outstanding obligations and bond structure, is among four key areas credit agencies examine when issuing a new rating, according to Moody’s. Since the start of the recession in 2007, Valley cities collectively have added more than $2 billion in debt to pay for new infrastructure — fire stations, roads, even a new Cactus League spring-training baseball stadium. As a result, communities are diverting more of their annual budgets toward principal and interest, in some cases leaving less funding available for day-to-day operations and services. Glendale, for example, laid off workers, reduced library services and cut youth sports while the city’s debt payments climbed 38 percent from 2007 to 2012, according to financial reports. The increase in borrowing comes amid steep declines in property-tax revenue, an important source of funding to help repay bonds. From 2009 to 2013, the full cash value of property in major Valley cities dropped by about 30 percent, according to Maricopa County data. Property values in Gilbert, for example, plummeted 34 percent in four years, leaving the town less money for capital projects like wider roads and new parks. In some Valley communities, annual debt payments account for more than 20 percent of the operating budget, according to financial reports. As a rule of thumb, that figure should be closer to 10 percent, Chapman said. “If debt service is really high, they (cities) might not be providing some very important other services,” Chapman said. Benefit costs Escalating employee-benefits costs, including pensions and health-care for retirees, drain millions of dollars each year and constitute a “ticking time bomb” for city budgets, Strobeck said. Police and fire pensions pose a particular challenge because of the higher contribution levels cities are required to maintain, he said. “That is a huge concern,” Strobeck said. “We’re seeing cities now that are really getting greater portions of their budget having to go to retirement and those payments, and that is a troubling thought.” Legislative efforts to reform post-employment benefits could bring relief, but legal challenges by members of the state retirement system have bogged down the reforms in court, Phoenix economist Alan Maguire said. Maguire, a past director of the Arizona State Retirement System, said the current structure is unsustainable because it allocates too much investment earnings toward cost-of-living adjustments and requires too-large contributions from employers. “It’s putting pressure on all city budgets,” Maguire said. A new normal Valley cities managed to stay solvent through the recession, but their survival came at the expense of cuts www.azcentral.com/community/phoenix/articles/20131021challenges-abound-cities-climb-out-financial-holes.html?nclick_check=1#protected 3/5 11/1/13 Challenges abound as cities climb out of financial holes in jobs and government services. City officials are adjusting and operating based on a new baseline as they proceed with caution during the recovery, Strobeck said. “For elected officials, as well as city managers, the whole layoff process was very stressful,” Strobeck said. “There’s a very conservative approach to spending, I think, because of what we’ve been through.” Several municipalities, including Mesa, Gilbert, Peoria, Surprise and Avondale, have switched to four-day workweeks, eliminating many services on Fridays. Often, small cuts in city services go undetected by residents, but the impact is real for individuals who rely on public programs, Chapman said. “Nobody even notices them because they’re not dramatic,” Chapman said. “It’s almost never noticeable.” Cities have “a ways to go,” according to Maguire, in recovering from the negative impact of the financial crisis, but a whole generation of city administrators have learned a host of lessons that will be remembered for a long time.

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www.azcentral.com/community/phoenix/articles/20131021challenges-abound-cities-climb-out-financial-holes.html?nclick_check=1#protected 4/5 Staff Activities Staff

Staff Activities Wednesday, September 4 Mayor Von Gausig, Councilmember Michelle Hess from Buckeye and Samantha at the Arizona Sci Tech kick off Conference. Matt moderated a panel that featured Mayor Von Gausig and Councilmember Hess as well as representatives from Glendale, Scottsdale and Tucson. Thursday, September 12th René Guillen attended the United Peoria Founda- tion’s Second Annual “Evening of Economic Partners Dinner” where former Mexican President Vicente Fox (pictured) spoke to the importance for increased partnerships with Mexican companies for Arizona’s economic benefit. The attendees include numerous state and local elected officials, business leaders and other guests.

Thursday, October 3 Representative Andrea Dalessandro, LD 2, receives her Legislative Friend award with Ken Strobeck and Dale Wiebusch at the League building.

Friday, October 11 Samantha and Matt at Avondale’s Gain Night supporting AZ Cities @ Work program

Tuesday, October 15 On Tuesday, October 15, the City of Maricopa hosted more than 150 guests for a special ribbon cutting and dedication ceremony. Joining the City Council were former mayors and council members, as well as many representatives from state, county and sister municipal governments. (Tom attended this ceremony.) Staff Activities

Thursday, October 17 October 17 Thursday, municipal service talking about AZ Cities @ Work on from Cottonwood and Chandler worker “heroes” ABC Sonoran Living Saturday, October 26 October 26 Saturday, event or Treat Trunk Amy Price at Queen Creek’s program. promoting AZ Cities @ Work Thursday, October 24 October 24 Thursday, Thursday, October 24 Thursday, and Dale Valley Mayor Scott LeMarr of Paradise Eric of the League present Representative Wiebusch LD28, with his League Champion award at a Meyer, recent town council meeting. Matt discussing AZ Mayor Marie Lopez Rogers and role in the NASCAR Avondale’s and Cities @ Work success on AZ Midday Tuesday, October 15 October Tuesday, City the to present Mirage visit El and Amy Rene Matt, Governmentwith the of Association Finance Officers Certificate and Canada United States of Achievement Reporting in Financial for Excellence and to award League activities. an update on provide Ken’s Fellowship to Japan

Ken’s Fellowship to Japan Local government delegation meeting with Vice Governor of Tukoshima Prefecture

Presenting Arizona gifts to Vice Governor

Discussion with government ofﬁ cials

Learning the process for indigo dyeing

Awa Odori dancers Ken’s Fellowship to Japan Traditional Japanese meal Japanese Traditional Final debrief with local government ofﬁ cials Final debrief with local government ofﬁ visit to Newspaper article about delegation’s Prefecture Tokushima Boat ride in Oboke Gorge Crossing the Kazura Vine Suspension Bridge Vine Suspension Bridge Crossing the Kazura