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Comprehensive Annual Financial Report

For the Fiscal Year Ended June 30, 2012

S R O G

(an Arizona Joint Venture) Multi-City Subregional Operating Group

MULTI-CITY SUBREGIONAL OPERATING GROUP (SROG)

(An Arizona Joint Venture)

Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2012

Prepared By: City of Phoenix

Finance Department Financial Accounting and Reporting Division

Jeff DeWitt, Finance Director

I

Multi-City Subregional Operating Group (SROG)


Table of Contents

Page No.

Introductory Section Letter of Transmittal II Certificate of Achievement for Excellence in Financial Reporting VII Committee Members VIII Organizational Chart IX

Financial Section

Independent Auditor's Report 1 Management's Discussion and Analysis 3 Basic Financial Statements Statements of Net Assets 9 Statements of Revenues, Expenses and Changes in Net Assets 10 Statements of Cash Flows 11 Notes to the Financial Statements 13 Supplementary Information Net Operating and Maintenance Expenditures 27 Members' CIP Account Activity 30 Operating Deposits Activity 31 Equipment Replacement Deposits Activity 32

Statistical Section

Statements of Net Assets - Last Ten Fiscal Years 34 Statements of Revenues and Expenses - Last Ten Fiscal Years 34 Members' Charges - Last Ten Fiscal Years 35 Area Map 36 SROG Cities' Population Growth - Last Ten Fiscal Years 37 Demographic and Economic Statistics - Last Ten Years 38 Major Employers Metropolitan Phoenix - Current Year and Nine Years Ago 39 SROG Cities' Area Growth - Last Ten Fiscal Years 40 Measured Sewage Flows and Strengths and Rates - Last Ten Fiscal Years 41 Measured Sewage Flows by City - Last Ten Fiscal Years 41 Measured Sewage Strengths - Last Ten Fiscal Years 42 Full-Time Equivalent Employees - Last Ten Fiscal Years 43 Operating and Capital Indicators - Last Ten Fiscal Years 43

II

TO THE MEMBERS OF THE MULTI-CITY SUBREGIONAL OPERATING GROUP

December 12, 2012

In accordance with the requirements of the Multi-City Subregional Operating Group (SROG), I am pleased to submit the SROG Comprehensive Annual Financial Report for the fiscal year ended June 30, 2012. Responsibility for the accuracy of the data, and the completeness and fairness of the presentation, including all disclosures, rests with the management of SROG. To the best of our knowledge and belief, this report is accurate in all material respects and is reported in a manner designed to present fairly the financial position, results of operations and cash flows of SROG. All disclosures necessary to enable the reader to gain an understanding of SROG’s financial position and results of operation have been included. CliftonLarsonAllen LLP has issued an unqualified (“clean”) opinion on the SROG financial statements for the year ended June 30, 2012. The independent auditor’s report is located at the front of the financial section of this report. Management’s discussion and analysis (MD&A) immediately follows the independent auditor’s report and provides a narrative introduction, overview, and analysis of the basic financial statements. The MD&A complements this letter of transmittal and should be read in conjunction with it. PROFILE OF THE OPERATING GROUP This report summarizes the activities of SROG. SROG operates the 91st Avenue Wastewater Treatment Plant (Plant), the Salt River Outfall Sewer (SRO), the Southern Avenue Interceptor (SAI), and related wastewater transportation facilities. SROG was formed in 1979 pursuant to a Joint Exercise of Powers Agreement (JEPA) between the Cities of Glendale, Mesa, Phoenix, Scottsdale, and Tempe, and the Towns of Gilbert and Youngtown (the Cities) to jointly own and operate the Plant and associated transportation facilities. The Town of Gilbert sold its system capacity to the City of Mesa in 1981 and the Town of Youngtown sold its capacity to the City of Phoenix in 1995. The configuration of the physical treatment system has changed over the years. The Plant was initially 5 million gallons per day (MGD) cooperative venture between the Cities of Glendale and Phoenix in 1958. The Plant was later abandoned and replaced with a 45 MGD facility. The Plant was expanded in 1969, 1976, 1984, 1987, 1989, 1997, 2002 and 2009. The most recent expansion totaled 25.25 MGD, which brought the liquid treatment capacity at the facility to 204.5 MGD. The Plant consists of seven separate plants hydraulically connected, and ranges in age up to 42 years. LOCAL ECONOMY The Phoenix Metropolitan Statistical Area (MSA) economy was relatively strong during the period of 2002 into 2007. The robust economy during the period of 2002 to 2007 reflected the impact of strong population and employment growth, loose credit conditions, and the expansive housing market. This led to significant gains in retail sales and per capita personal income. The economy was strong across a range of sectors including; professional and business services, trade, transportation, utilities, leisure and hospitality, and government. Population growth equaled an estimated 2.4% in 2006, and 2.4% in 2007.

III

LOCAL ECONOMY (CONTINUED) Then, starting in 2007 and to a significant extent into 2010, the poor housing market combined with the financial crisis led to significant weakness in the economy. Then, due to the rapid correction in the housing market and related business sectors, and the crisis in the financial markets in 2008, the MSA economy went into a deep recession. Data provided by the State of Arizona and the U.S. Department of Labor, Bureau of Labor Statistics indicates that total employment decreased in all sectors of the economy. Reflecting the weak economy, the population in the MSA showed only marginally amounts of growth during the period of 2009 to 2010. Employment growth started to build in 2011, with some increasing momentum evident starting during the second half of calendar year 2011. The level of economic activity during the balance of 2012 and 2013, both nationally and in the MSA, will be affected by the following issues; the level of stability in the financial markets, the recovery of the housing market, the strength of the labor market, the reemergence of the consumer, and the impact of public policy on the economy. Forecasts provided by the University of Arizona’s Eller College of Management indicate relatively low levels of population growth in Maricopa County; 1.0% in 2012 and then 1.0% in 2013. Employment is expected to increase 2.0% in 2012 and then another 2.0% in 2013. Stronger employment growth is expected in 2014 and 2015 with gains equal to 3.0% during both years. The housing market is slowly recovering as the number of foreclosures, while still at elevated levels, is declining and home prices have been increasing since the second half of 2011. LONG TERM FINANCIAL PLANNING Flow and Loading projections, future regulatory compliance, and replacement and rehabilitation requirements are used in the development of a five year Construction Improvement Program (CIP). Flow and Loading projections are from SROG engineering master planning reports as well as annually monitoring and updated Flow and Loading projections based on historical data and anticipated growth patterns. The amount of wastewater sent to the SROG facilities by each SROG member varies depending on flow generated in each community. The five year CIP currently consists of 23 projects with an estimated cost of over $180 million. MAJOR INITIATIVES SROG has a number of significant projects underway or recently completed as described below. These projects will allow SROG to continue to meet demand requirements and to meet Federal, State and County Regulations. SMIS Website Hosting and Upgrades This project provides a budget vehicle to hire a consultant and purchase required hardware/software to share the recurring costs associated with hosting the SROG Management Information System (SMIS), previously referred to as the SROG Website, with the SROG Cities. The project includes expenses related to: updating and replacing outdated software, replacing aging equipment, modifying programming to accommodate these updates and replacements, and developing the program for new auditing and reporting modules to increase the transparency of data used for billing the SROG Cities.

IV

MAJOR INITIATIVES (CONTINUED) Instrumentation and Control Inspection The Electrical, Instrumentation and Control Systems Testing and Inspection Services program is to attain or maintain adequate electrical and control systems. The Water Services Department developed electrical, instrumentation and control standards for all facilities. This program is to ensure proper emphasis in the electrical, instrumentation and controls systems for design and construction projects during upgrades or expansions. The selected consultant enforces these standards on behalf of the City of Phoenix Water Services Department for all projects. The current contract to perform these services was executed in July 2010 for the amount of $1.2 million over a two year period. Process Control Optimization The purpose of the Process Control Optimization program is to provide opportunities for the Wastewater Treatment Operations and Wastewater Engineering staff to collaborate on projects that will improve process control, enhance process operations, and/or improve safety conditions. It is understood that these types of improvements will ultimately provide a savings to operation and maintenance costs since control instrumentation typically saves operator time in process monitoring and manual set point changes. Automatic feedback data allows staff to manage systems pro-actively rather than reactively and process enhancements generally reduce chemical and/or electrical use. Each optimization is intended to streamline work processes or reduce operating risk. This is an annual program where optimization projects are identified, evaluated and if warranted, implemented with budgeted funds. Current funding is approximately $1.3 million over the next two years. RELEVANT FINANCIAL POLICIES Budgeting Systems and Controls SROG also maintains budgetary controls, which are designed to ensure compliance with appropriate provisions of the annual budget adopted by the SROG members. The SROG budget process provides for input from administrators, management, the SROG committees, and the member cities in developing revenue and expenditure projections and determining the SROG programs and services for the coming year. After tentative adoption of the budget, the SROG Committee may make changes, in accordance with the applicable JEPA and Arizona State budget law. Transfers between appropriations for areas not exempted by State budget law are permissible as long as the overall budget is not increased. After final adoption, transfers between budget appropriations for areas not exempt may not be made. State law requires SROG to re-budget (re-appropriate) funds for the completion of contracts that were originally budgeted for and encumbered in a previous fiscal year. This law necessitates an additional appropriation approval to re-budget funds for contracts not completed by June 30. Accounting and Administrative Controls Internal controls are procedures that are designed to protect assets from loss, theft or misuse; check the accuracy and reliability of accounting data; promote operational efficiency; and encourage compliance with managerial policies. The management of SROG is responsible for

V

RELEVANT FINANCIAL POLICIES (CONTINUED) Accounting and Administrative Controls (Continued) establishing a system of internal controls designed to provide reasonable assurance that these objectives are met. Federal and State financial assistance programs require recipients to comply with many laws and regulations. Administrative controls are procedures designed to ensure compliance with these requirements. SROG has established a system of administrative controls to ensure compliance with the requirements of the programs under which it receives financial assistance. As with other internal controls, this system is subject to periodic review and evaluation by management. As part of the annual audit process, internal controls are considered in order to determine the nature, timing, and extent of auditing procedures. AWARDS AND ACKNOWLEDGEMENTS The Government Finance Officers Association of the United States and Canada (“GFOA”) awarded a Certificate of Achievement for Excellence in Financial Reporting to SROG for its comprehensive annual financial report for the fiscal year ended June 30, 2011. The Certificate of Achievement is a prestigious national award recognizing conformance with the highest standards for preparation of state and local government financial reports. In order to be awarded a Certificate of Achievement, SROG published an easily readable and efficiently organized comprehensive annual financial report. This report satisfied both generally accepted accounting principles and the applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. SROG has received a Certificate of Achievement for the last sixteen consecutive years (fiscal years ended 1995 through 2011). We believe that our current comprehensive annual financial report continues to meet the Certificate of Achievement Program’s requirements, and we are submitting it to the GFOA to determine its eligibility for another certificate. The National Association of Clean Water Agencies presented the Plant with a Silver Peak Performance Award during 2011. Silver awards are issued to member agency facilities that have not more than five exceedances in discharge limitations as stated in the National Pollutant Discharge Elimination System permit. During 2011, SROG had only one exceedance. This award provides recognition to individual agencies for outstanding compliance with the National Pollutant Discharge Elimination System permit discharge limitations. The U.S. Army Corps of Engineers presented SROG with the 2012 Chief of Engineers Award of Excellence in recognition of the Tres Rios Environmental Habitat Restoration project. This award program recognizes some of the most innovative projects accomplished by U.S. Army Corps of Engineers teammates and private sector design and construction community around the world. This award went to the entry that exceeded all major professional design disciplines, including sustainability.

VI

AWARDS AND ACKNOWLEGEMENTS (CONTINUED) I want to thank all of the SROG members, Arizona Municipal Water Users Association (AMWUA) staff, City of Phoenix departments for their cooperation and assistance throughout the past year and the Financial Accounting and Reporting Division for their efforts in the preparation of this comprehensive annual financial report. I also appreciate the guidance and support extended by the SROG Committee. Respectfully submitted,

Jeff DeWitt Finance Director

VII

VIII



SROG COMMITTEE

Mr. Chris Brady, Chairman City Manager City of Mesa

Mr. Marshall Brown, Vice Chairman Mr. Ed Beasley Executive Director of Water Resources City Manager City of Scottsdale City of Glendale Mr. Jeff Kulaga Mr. David Cavazos Assistant City Manager City Manager City of Tempe City of Phoenix

SROG ADVISORY COMMITTEE

Mr. Brian Draper, Chairman SROG Programs Coordinator

City of Mesa Mr. Chris Hassert, Vice Chairman Mr. Larry Brotman Planning & Engineering Director Superintendent of Treatment Plants City of Scottsdale City of Glendale Mr. David McNeil Mr. Ron Serio Environmental Program Administrator Assistant Water Services Director City of Tempe City of Phoenix

CITY OF PHOENIX, FINANCE DEPARTMENT

Mr. Jeff DeWitt Finance Director City of Phoenix

IX


Organizational Chart

* See Note 1 (k) on page 16

SROG Committee

SROG Advisory

Committee

Arizona Municipal

Water Users Association

SROG Technical

Committee

(This page intentionally left blank)

FINANCIAL SECTION

The Financial Section includes the independent auditors’ report, Management’s Discussion and Analysis, the basic financial statements, and supplementary information.

1

Independent Auditor’s Report

The Multi-City Subregional Operating Group CommitteeArizona Municipal Water Users Association

We have audited the accompanying statements of net assets of Multi-City Subregional Operating Group (SROG) as of June 30, 2012 and 2011, and the related statements of revenues, expenses and changes in net assets, and cash flows for the years then ended. These financial statements are the responsibility of SROG’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Multi-City Subregional Operating Group as of June 30, 2012 and 2011, and the changes in its financial position and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 3 through 8 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 inquires, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. However, we did not audit the information and express no opinion on it..

CliftonLarsonAllen LLPwww.cliftonlarsonallen.com

2

Our audits were made for the purpose of forming an opinion on the basic financial statements of the Multi-City Subregional Operating Group taken as a whole. The accompanying introductory section, supplementary information, and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The supplementary information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.

The introductory section and statistical section have not been subjected to the auditing procedures applied in the audits of the basic financial statements and, accordingly, we express no opinion on them.

!Phoenix, Arizona December 12, 2012

FINANCIAL SECTION – MANAGEMENT’S DISCUSSION AND ANALYSIS

3

MANAGEMENT’S DISCUSSION AND ANALYSIS

The following Management Discussion and Analysis (MD&A) of the Multi-City Subregional Operating Group’s (SROG) activities and financial performance provides an introduction to SROG’s financial statements as of and for fiscal years ended June 30, 2012 and 2011. The information contained in this MD&A should be considered in conjunction with the information contained in the Letter of Transmittal included in the Introductory Section of this report. All amounts, unless otherwise indicated, are expressed in thousands of dollars. FINANCIAL AND OPERATIONAL HIGHLIGHTS (in thousands) • Total net assets for the SROG joint venture were $877,882 at June 30, 2012 and $904,421 at June 30,

2011. Net assets for fiscal year 2012 decreased by $26,539 as compared to fiscal year 2011. In fiscal year 2011, net assets decreased by $28,406. The decreases in net assets for fiscal years 2012 and 2011 are primarily due to decreased construction activity at the Plant and an increase in accumulated depreciation.

• Operating revenue was $51,133 for fiscal year 2012 and $55,565 for fiscal year 2011. Operating

revenues decreased by $4,432 in the current year and decreased by $52,981 in 2011. The decrease in 2012 is due to a decrease in Members’ contributions for construction projects as compared to 2011. Revenue contributions from SROG members for the construction of capital assets were $5,990 or 11.7 % of total operating revenues in 2012 and $10,402 or 18.7% in 2011.

• Total operating expenses increased by $18,654 to $102,532 and decreased $3,299 to $83,878 during fiscal

years 2012 and 2011, respectively. In 2012, this increase was related to a $5,578 increase in depreciation expense, a $12,975 increase in operation and maintenance expense primarily due to expensed CIP projects, and an increase of $101 in administration expense. In 2011, this decrease was related to a $1,549 increase in depreciation expense, a $3,785 decrease in operation and maintenance expense primarily due to a decline in expensed CIP projects in 2011 than in 2010, and a decrease of $1,063 in administration expense.

OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to SROG’s basic financial statements. SROG’s basic financial statements include statements of net assets; statements of revenues, expenses and changes in net assets; statements of cash flows; and the notes to the financial statements. SROG’s financial statements are prepared on an accrual basis in accordance with generally accepted accounting principles. Enterprise Operations SROG is structured as a joint venture, which was formed pursuant to the Joint Exercise of Powers Agreement (JEPA) to govern the construction, operation, and maintenance of the jointly utilized sewage treatment and transportation facilities. The City of Phoenix is the lead agency for SROG and is responsible for the planning, budgeting, construction, operation, and maintenance of the 91st Avenue Wastewater Treatment Plant (Plant). The other participants pay for purchased capacity in plant and related transportation facilities based on approved engineering billings. See the notes to the financial statements for a summary of SROG’s significant accounting policies.

4

SROG’S FINANCIAL ANALYSIS Net assets may serve over time as a useful indicator of the joint venture’s financial position. SROG’s net assets decreased by $26,539 for the year ended June 30, 2012 as compared to June 30, 2011 and decreased by $28,406 in 2011 as compared to June 30, 2010.

SROG’s Net Assets (in thousands)

June 30,

2012

2011

2010

Current Assets $ 44,912 $ 50,111 $ 52,376 Net Capital Assets 868,922 896,596 923,885

Total Assets 913,834 946,707 976,261

Current Liabilities Payable from Unrestricted Assets 12,564 14,648 19,551 Current Liabilities Payable from Restricted Assets 23,388 27,638 23,883

Total Current Liabilities 35,952 42,286 43,434

Invested in Capital Assets 868,922 896,596 923,885 Unrestricted 8,960 7,825 8,942

Total Net Assets $ 877,882 $ 904,421 $ 932,827

• During fiscal year 2012, current assets decreased by $5,199 compared to a decrease of $2,265 in 2011.

The decrease in 2012 was related to a decrease in unrestricted and restricted pooled investments and a decrease in restricted members’ receivable. The decrease in 2011 as compared to 2010 was due to a decrease in unrestricted pooled investments as well as a decrease in restricted members’ receivables. The decreases in restricted members’ receivable for fiscal years 2012 and 2011 are related to the decreases in accounts payable to contractors.

• Net capital assets decreased by $27,674 and $27,289 during fiscal years 2012 and 2011, respectively. The

decreases in 2012 and 2011 resulted from a decline in construction activity at the Plant and annual depreciation expense.

• Liabilities payable from restricted assets decreased by $4,250 in 2012 and increased by $3,755 in 2011.

In fiscal year 2012, the decrease was due to a decline in members’ payable due a slow down in construction activity at the Plant and a decline in accounts payable to contractors. During fiscal year 2011, the increase was related to an increase in members’ payable due to a decline in construction activity at the Plant. Liabilities payable from unrestricted assets decreased by $2,084 in 2012 and decreased $4,903 in 2011. For 2012 and 2011, a significant portion of the decrease is due a decline in operation and maintenance settlement that is payable to each member city.

• Total net assets decreased by $26,539 to $877,882 for fiscal year 2012 and decreased by $28,406 to

$904,421 for fiscal year 2011. For 2012, $868,922 was invested in capital assets and $8,960 was unrestricted and available for short-term operations and ongoing obligations compared to $896,596 and $7,825, respectively, for 2011 and $923,885 and $8,942, respectively, for 2010.

5

SROG’S FINANCIAL ANALYSIS (CONTINUED)

SROG’s Changes in Net Assets (in thousands)

Years Ended June 30,

2012

2011

2010

Operating Revenues – Primarily Members’ Charges $ 51,133 $ 55,565 $ 108,546 Non-Operating Revenues, net – Investment Income 874 896 1,179

Total Revenues 52,007 56,461 109,725 Operating Expenses

Administration 4,130 4,030 5,093 Operation and Maintenance 53,699 40,723 44,508 Depreciation 44,703 39,125 37,576 Total Operating Expenses 102,532 83,878 87,177

Non-Operating Expenses, net 913 991 917 Total Expenses 103,445 84,869 88,094 Net Income (Loss) before Capital Contributions (51,438) (28,408) 21,631

Capital Contributions 24,899 2 - Increase in Net Assets (26,539) (28,406) 21,631

Net Assets, July 1 904,421 932,827 911,196

Net Assets, June 30 $ 877,882 $ 904,421 $ 932,827 • Operating revenues decreased by $4,432 during 2012 and $52,981 during 2011. In 2012 and 2011,

members’ charges for construction (CIP) decreased due to a decrease in overall construction activity at the Plant.

• Capital contributions increased by $24,897 in 2012 due to the capitalization of the Tres Rios Environmental Habitat Restoration project. The United States Army Corps of Engineers (Corps) and the SROG members jointly funded the project. Costs associated with the project were shared 65 percent by the Corps and 35 percent by SROG and other local sponsors.

• Operating expenses increased by $18,654, and decreased by $3,299 in 2012 and 2011, respectively. The

increase in operating expense in 2012 was due to a $12,975 increase in operation and maintenance expense, a $5,578 increase in depreciation expense, and a $101 increase in administration expense. Operation and maintenance expense in 2012 increased primarily due to an increase in expensed CIP projects as compared to fiscal year 2011. The fiscal year 2012 increase in depreciation expense was due to an increase in the capitalization of CIP projects, specifically the Tres Rios Environmental Habitat Restoration project. The decrease in operating expenses in 2011 was related to a $3,785 decrease in operations and maintenance expense, a $1,063 decrease in administration expense, and a $1,549 increase in depreciation expense. Operation and maintenance expense in 2011 decreased due to a decline of expensed CIP projects in 2011 as compared to 2010. Depreciation expense increased in fiscal year 2011 primarily due to the capitalization of the UP05 Expansion project.

6

OPERATING REVENUES SROG’s revenue is primarily generated by charges to the joint venture members for construction and operating costs. For fiscal year 2012, of the $46,090 in revenue from members’ charges, $5,990 is charges for scheduled construction projects (CIP), with the remaining charges of $40,100 received for operations. The following chart shows the sources and the percentage of operating revenue by category for the fiscal year ended June 30, 2012.

OPERATING EXPENSES The following chart shows SROG’s operating expenses by category for the year ended June 30, 2012.

Operating Revenuesfor Fiscal Year Ended June 30, 2012

Total = $51,133(in thousands)

Sales of By-Products9.9%

Members Charges - Operating

78.4%

Members Charges - CIP

11.7%

Operating Expensesfor Fiscal Year Ended June 30, 2012

Total = $102,532(in thousands)

Depreciation43.6%

Administration4.0%

Operations & Maintenance

52.4%

7

CAPITAL ASSETS SROG’s investment in capital assets as of June 30, 2012, amounts to $868,922 (net of accumulated depreciation), $896,596 as of June 30, 2011 and $923,885 as of June 30, 2010 as shown below. Net capital assets decreased by $27,674 and $27,289 during fiscal years 2012 and 2011, respectively.

SROG’s Capital Assets (in thousands)

June 30,

2012

2011

2010

Land $ 52,470 $ 52,470 $ 52,470 Buildings 140,109 139,444 125,750 Improvements other than Buildings 897,859 877,143 713,409 Equipment 107,126 102,021 97,683 Intangibles 58,542 57,279 57,020 Construction in Progress 24,425 35,129 205,349

Less: Accumulated Depreciation (411,609) (366,890) (327,796) Net Capital Assets $ 868,922 $ 896,596 $ 923,885

Capital Acquisitions and Construction Activities Members contributed $5,990 for ongoing construction projects during 2012 compared to $10,402 during 2011. Provided below is a summary of the major projects and their associated costs for fiscal year 2012 and 2011 (in thousands):

2012 Tres Rios Environmental Habitat Restoration $ 2,207 Process Control & Optimization 1,020 Instrumentation and Control Inspection 736 2011 UP05 Design, Expansion and Inspection $ 4,864 91st Ave – 500 KV Power Line 1,171 Instrumentation and Control Inspection 787

During fiscal year 2012, major portions of the Tres Rios Environmental Habitat Restoration project were completed and recorded to the respective capital accounts and as contributed capital. The total project cost of the completed portion of the Tres Rios Environmental Habitat Restoration project in fiscal year 2012 was $24,882. Additionally, there was significant construction occurring on the Process Control and Optimization project and the Instrumentation and Control Inspection project.

8

CAPITAL ASSETS (CONTINUED) Capital asset acquisitions are recorded at cost plus capitalized interest and are funded by members’ charges for construction projects. Additional information on SROG’s capital assets can be found in the notes to the financial statements, Note 1 (f) on page 15 and Note 3 on pages 19-20 of this report. ECONOMIC FACTORS AND NEXT YEAR’S BUDGET Population for SROG’s member cities decreased by 1.2% in 2012 compared to a decrease of 3.3% in 2011 and an increase of 1.5% in 2010. In December 2011, a budget presentation was made to the SROG Joint Venture members for fiscal year 2012-13. Information provided included changes in costs and the anticipated sewage treatment needs for the member cities. Upon review by the joint venture members, the proposed budget and the forecasted sewage flows for fiscal year 2012-13 were approved. REQUESTS FOR FINANCIAL INFORMATION This financial report is designed to provide a general overview of SROG’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Finance Department, City of Phoenix, Calvin C. Goode Building, Ninth Floor, 251 West Washington Street, Phoenix, Arizona 85003.

FINANCIAL SECTION – BASIC FINANCIAL STATEMENTS

The accompanying notes are an integral part of these financial statements.

9

Multi-City Subregional Operating Group (SROG) Statements of Net Assets June 30, 2012 and 2011

(in thousands)

ASSETS 2012 2011

Current Assets Unrestricted Assets Cash $ 1 $ 1 Pooled Investments 13,879 14,731 Receivables Accounts Receivable 1,155 1,028 Members’ Receivable 8,768 8,879 Inventories 512 547 Total Unrestricted Assets 24,315 25,186 Restricted Assets Pooled Investments 19,845 22,663 Members’ Receivable 752 2,262 Total Restricted Assets 20,597 24,925 Total Current Assets 44,912 50,111 Noncurrent Assets Capital Assets Land 52,470 52,470 Buildings 140,109 139,444 Improvements Other Than Buildings 897,859 877,143 Equipment 107,126 102,021 Intangibles 58,542 57,279 Construction in Progress 24,425 35,129 Less: Accumulated Depreciation (411,609) (366,890) Net Capital Assets 868,922 896,596 Total Assets 913,834 946,707

LIABILITIES Current Liabilities Payable from Unrestricted Assets Accounts Payable – Vendors 2,705 2,343 Accounts Payable – Members 9,859 12,305 Total Payable from Unrestricted Assets 12,564 14,648 Payable from Restricted Assets Capital Projects Accounts Payable 793 2,396 Members’ Payable 21,186 23,846 Other Trust Liabilities 1,409 1,396 Total Payable from Restricted Assets 23,388 27,638 Total Current Liabilities 35,952 42,286

NET ASSETS Invested in Capital Assets 868,922 896,596 Unrestricted 8,960 7,825 Total Net Assets $ 877,882 $ 904,421


10

Multi-City Subregional Operating Group (SROG) Statements of Revenues, Expenses

and Changes in Net Assets For the Fiscal Years Ended June 30, 2012 and 2011

(in thousands) 2012 2011 Operating Revenues Members’ Charges $ 46,090 $ 50,719 Sales of By-Products 5,043 4,708 Other - 138 Total Operating Revenues 51,133 55,565 Operating Expenses Administration 4,130 4,030 Operation and Maintenance 53,699 40,723 Depreciation 44,703 39,125 Total Operating Expenses 102,532 83,878 Operating Loss (51,399) (28,313) Non-Operating Revenues (Expenses) Investment Income Decrease in Fair Value of Investments (598) (544) Interest on Investments 882 895 Interest Credited to Members, net (315) (447) Gain (Loss) on Disposal of Capital Assets (8) 1 Total Non-Operating Revenues (Expenses) (39) (95) Net Loss Before Capital Contributions (51,438) (28,408) Capital Contributions 24,899 2 Decrease in Net Assets (26,539) (28,406) Net Assets, July 1 904,421 932,827

Net Assets, June 30 $ 877,882 $ 904,421


11

Multi-City Subregional Operating Group (SROG) Statements of Cash Flows

For the Fiscal Years Ended June 30, 2012 and 2011 (in thousands)

2012 2011 Cash Flows from Operating Activities Cash Received from Members and Customers $ 49,967 $ 62,200 Cash Paid to Suppliers (33,339) (38,471) Cash Paid to Employees (9,951) (10,200) Payment of Staff and Administrative Expenses (1,093) (987) Net Cash Provided by Operating Activities 5,584 12,542

Cash Flows from Noncapital Financing Activities Interest Credited to Members (315) (447) Net Cash Used in Noncapital Financing Activities (315) (447)

Cash Flows from Capital and Related Financing Activities Acquisition and Construction of Capital Assets (9,226) (14,221) Proceeds from Sales of Capital Assets 3 1 Net Cash Used in Capital and Related Financing Activities (9,223) (14,220) Cash Flows from Investing Activities Investment Income 284 351 Net Activity for Pooled Investments 3,670

1,774

Net Cash Provided by Investing Activities 3,954 2,125 Net Increase in Cash and Cash Equivalents - - Cash, July 1 1 1 Cash, June 30 $ 1 $ 1

Reconciliation of Operating Income to Net Cash Provided by Operating Activities

Operating Loss $ (51,399) $ (28,313) Adjustments Depreciation 44,703 39,125 Reversal of CIP Items 15,482 - Increase (Decrease) in Members’ Payable (2,660) 6,124 Increase (Decrease) in Assets Receivables 1,494 511 Inventories 35 (20) Increase (Decrease) in Liabilities Accounts Payable – Vendors 362 (628) Accounts Payable – Members (2,446) (4,275) Other Trust Liabilities 13 18 Net Cash Provided by Operating Activities $ 5,584 $ 12,542 Noncash Transactions Affecting Financial Position Contributions of Capital Assets $ 24,899 $ 2

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FINANCIAL SECTION – NOTES TO THE FINANCIAL STATEMENTS

The Notes to the Financial Statements include a summary of significant accounting policies and other disclosures necessary for a clear understanding of the accompanying financial statements.

An index to the notes follows:

NOTE DESCRIPTION PAGE

1 Organization and Summary of Significant Accounting Policies 13 2 Cash and Investments 17 3 Capital Assets 19 4 Risk Management 21 5 Members’ Equity 21 6 Related Party Transactions 22 7 Construction and Other Grants 23 8 Commitments and Contingencies 23 9 Pension Plan 23

10 11

Other Post-Employment Benefits Subsequent Events

24 26

Multi-City Subregional Operating Group (SROG) Notes to the Financial Statements

For the Fiscal Years Ended June 30, 2012 and 2011

13

The Multi-City Subregional Operating Group (SROG) was formed pursuant to the Joint Exercise of Powers Agreement (JEPA) to govern the construction, operation, and maintenance of the jointly utilized sewage treatment and transportation facilities. These jointly utilized sewage and transportation facilities consist of the 91st Avenue Wastewater Treatment Plant (Plant), the Salt River Outfall Sewer (SRO), the Southern Avenue Interceptor (SAI), and various transportation facilities. The Cities of Glendale, Mesa, Phoenix, Scottsdale, and Tempe are the members of SROG. The City of Phoenix, Arizona (City) acts as the lead agency for SROG. As such, it operates and maintains the Plant and transportation facilities; generates the accounting information, including the development of the sewer user charge rate which is utilized in billing the members; supervises the construction of improvements and expansion of the Plant and transportation facilities; and provides other services as necessary. 1. Organization and Summary of Significant Accounting Policies

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. GASB Statement No. 20 Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting, requires that government’s proprietary activities apply all applicable GASB pronouncements as well as the following pronouncements issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements: Financial Accounting Standards Board (FASB) Statements and Interpretations, Accounting Principles Board (APB) Opinions, and Accounting Research Bulletins. Governmental entities are given the option whether or not to apply all FASB pronouncements issued after November 30, 1989, except for those that conflict with or contradict GASB pronouncements. SROG has elected not to implement FASB Statements and Interpretations issued after November 30, 1989. SROG is a special purpose governmental entity, engaged only in business-type activities. It is required to present the financial statements required for enterprise funds, which include a statement of net assets, a statement of revenues, expenses and changes in net assets, and a statement of cash flows. It also requires a Management’s Discussion and Analysis as required supplementary information.

SROG’s significant accounting and financial policies are described below.

(a) Reporting Entity

SROG is structured and reported as a joint venture between the member Cities. Each member city includes their equity in the joint venture in their respective city-wide basic financial statements. The accompanying financial statements present the financial position of SROG only. SROG does not have any component units.

Multi-City Subregional Operating Group (SROG) Notes to the Financial Statements (Continued)


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1. Organization and Summary of Significant Accounting Policies (Continued)

(b) Basis of Accounting

SROG is accounted for using the flow of economic resources measurement focus and the accrual basis of accounting. All assets, liabilities, net assets, revenues, and expenses are accounted for through an enterprise fund. Revenues are recorded when earned and expenses recorded at the time the liabilities are incurred. Operating revenues are members’ charges, sales of effluent, and other miscellaneous revenues that are received based on the ongoing activities of SROG. Operating expenses are those incurred for Plant operations, maintenance, administration, and depreciation of capital assets. Non-operating revenues and expenses are items that are not a result of the direct operations of the Plant, including interest and gain or loss on disposal of capital assets.

(c) Cash and Pooled Investments

Cash consists only of petty cash. Pooled investments are maintained in the cash and investment pool of the City. The City’s cash resources are combined to form a cash and investment pool managed by the City Treasurer. Interest earned by the pool is distributed monthly to SROG based on daily equity in the pool. SROG’s pooled investments are stated at fair value, except for repurchase agreements with original maturities of one year or less which are valued at cost that approximates fair value. Fair value is based on quoted market prices as of the valuation date.

(d) Receivables

Management analyzes receivables periodically to determine whether an allowance for doubtful accounts should be recorded. There is no current provision required for possible bad debts.

(e) Inventories

Inventories consist of expendable supplies held for consumption. Inventories are stated at the lower of average cost or market and are accounted for on the consumption method.



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(f) Capital Assets

Capital assets are recorded at historical cost plus capitalized interest on assets constructed. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets as follows:

Land Not depreciated Construction in Progress Not depreciated Buildings 10 – 40 years Improvements other than Buildings 10 – 50 years Equipment 5 – 30 years Intangibles 5 – 40 years

A gain or loss on disposal of capital assets is recognized when assets are retired from service or are otherwise sold or removed. The minimum capitalization policy is $5,000 or more with an estimated useful life exceeding two years.

(g) Other Trust Liabilities

Neighborhood Committee Trust

SROG maintains a Neighborhood Committee Trust asset and offsetting liability account for the Neighborhood Committee. The monies are expended in accordance with the authorization of the Neighborhood Committee for evaluation and improvement projects related to the Plant. The trust balance at June 30, 2012 and 2011 was $1,408,987 and $1,396,496, respectively, and is included in other trust liabilities.

(h) Operating Revenues Operating revenues include members’ charges, sales of by-products and other revenues. Members’ charges are contributions received from the members for costs of operation and maintenance, administration, and the construction of capital assets. All operating revenues are recognized when earned. Members’ charges for construction projects and operating costs are earned ratably throughout the year.

(i) Operating Expenses Operating expenses include operation and maintenance expenses, depreciation, and administrative expenses. Administration expenses include direct administrative costs to manage the Plant and indirect costs allocated to SROG by the City. Operating, maintenance, and administration costs are allocated to the members based upon their respective sewage strengths and flows measured in million gallons per day (MGD) at the metering stations prior to entering the Plant for processing, or as estimated by the Plant personnel in the event of a meter breakdown. City of Phoenix flows and strengths are not metered as they are calculated by deducting the other members’ metered flows and strengths from the total flows and strengths processed by the Plant.



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(i) Operating Expenses (Continued) Meters measuring sewage flows are calibrated jointly by a SROG meter calibration team on an annual basis. The SROG meter calibration team consists of representatives of the members owning the station, the City of Phoenix, and a SROG member with no ownership in the station. Sewage strengths are measured monthly. A representative from the SROG city, for which the sample is taken, is present along with City of Phoenix staff on the first day of the sampling process. The SROG city representative signs a form indicating that he or she was present and that the sampling approach and procedures were satisfactory. The operating and maintenance costs allocated to the members in the financial statements reflect only the members’ portion of SROG costs. Such costs do not reflect all costs incurred by the members in connection with servicing their wastewater customers, since certain costs, such as billings and collections, are incurred independent of SROG operations.

(j) Budget

The SROG Committee reviews and approves the operating and capital budgets submitted by the City for the planning, designing, construction, operation, and maintenance of the jointly used sewage facilities. Each SROG member is responsible to take the appropriate steps in conformity with Arizona State budget law to ensure that the appropriations are sufficient to cover the members’ obligations under the JEPA. The budget is prepared in sufficient detail to facilitate its use by management in monitoring operations.

(k) Arizona Municipal Water Users Association (AMWUA)

AMWUA is a nonprofit corporation established and funded by cities in Maricopa County for the development of an urban water policy and represents the cities’ interests before the Arizona legislature. In addition, AMWUA contracts with SROG to perform certain accounting, administrative, and support services.

(l) Estimates The preparation of financial statements in conformity with GAAP requires management to make a number of estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.



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2. Cash and Investments

Cash consists only of petty cash. Pooled investments are maintained in the cash and investment pool of the City. SROG’s cash at June 30, 2012 and June 30, 2011 is as follows (in thousands): June 30, 2012 2011

Cash on Hand $ 1 $ 1

Pooled Investments

SROG investments are included in the City’s pooled investments. The City Charter and ordinances authorize the City to invest in obligations of the United States Treasury, its agencies and instrumentalities, repurchase agreements, money market accounts, certificates of deposit, the State Treasurer’s investment pool, highly rated obligations issued or guaranteed by any state or political subdivision thereof rated in the highest short-term or second highest long-term category, and investment grade corporate bonds, debentures, notes and other evidences of indebtedness issued or guaranteed by a solvent U.S. corporation which is not in default as to principal or interest. SROG’s pooled investments are carried at fair value, which is the same as the fair value of the City’s pool shares. It is the City’s policy generally to hold investments until maturity. SROG’s pooled investments at June 30, 2012 and 2011 are summarized below (in thousands):

Fiscal Year

Ended Credit Quality

Rating

Fair Value Weighted Average

Maturity (Years)

June 30, 2012 Not Rated $ 33,724 1.61 June 30, 2011 Not Rated 37,394 1.30



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2. Cash and Investments (Continued) Interest Rate Risk

In order to limit interest rate risk, the City’s investment policy limits maturities as follows:

U.S. Treasury Securities 5 year final maturity Securities guaranteed, insured, or backed by the full faith and credit of the U.S. Government U.S. Government Agency Securities

5 year final maturity 5 year final maturity

Repurchase Agreements 60 days Municipal Obligations 5 years for long-term issues Money Market Mutual Funds 90 days Commercial Paper 270 days

For Mortgage Backed Securities (MBS) and Collateralized Mortgage Obligations (CMO), the maximum weighted average life using current Public Securities Association (PSA) prepayment assumptions shall be 12 years at the time of purchase for MBS and 5 years at the time of purchase for CMO. Credit Risk The City’s investment policy limits its investments to the top ratings issued by nationally recognized statistical rating organizations such as Standard & Poor’s “S&P” and Moody’s Investors Service “Moody’s”. The portfolio is primarily invested in securities issued by the U.S. Treasury or by U.S. Government Agency Securities which are rated Aaa by Moody’s and AA+ by S&P. Repurchase agreements are generally collateralized by U.S. Treasuries and U.S. Government Agency Securities at 102%. In addition, the portfolio is invested in pre-funded municipal securities for which the payment of interest, and ultimately the repayment of the principal, is backed by U.S. Government Securities. Municipal securities must have a short-term minimum rating of A1 by S&P and P1 by Moody’s and a long-term uninsured rating of A+ by S&P and A1 by Moody’s. The rating requirements do not apply to obligations issued by the City of Phoenix. Money market mutual funds must have a current minimum money market rating of AAAm by S&P and Aaa by Moody’s. For commercial paper, an Issuer’s program must have a minimum rating of A1 by S&P and P1 by Moody’s. The issuing corporation must be organized and operating in the United States and have a minimum long-term debt rating of A+ by S&P and A1 by Moody’s. Programs rated by only one of the agencies are ineligible. The City has invested in commercial paper and corporate notes issued by various financial institutions. These investments are insured by the Federal Deposit Insurance Corporation (FDIC) via the Temporary Liquidity Guarantee Program (TLGP). The FDIC has created this program to strengthen confidence and encourage liquidity in the banking system by guaranteeing newly issued senior unsecured debt of banks, thrifts, and certain holding companies, and by providing full coverage of non-interest bearing deposit transaction accounts, regardless of dollar amount.



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2. Cash and Investments (Continued) Concentration of Credit Risk Investments in any one issuer that represent 5% or more of total City investments as of June 30, 2012 are as follows (in thousands):

Issuer Fair Value FNMA $ 168,477 FHLMC 109,095 FHLB 386,772

3. Capital Assets Capital asset activity for the fiscal years ended June 30, 2012 and 2011 were as follows (in thousands):

Balance,

July 1, 2011

Additions

Deletions Balance,

June 30, 2012

Non-Depreciable Assets Land $ 52,470 $ - $ - $ 52,470

Construction in Progress 35,129 4,286 (14,990) 24,425

Total Non-Depreciable Assets 87,599 4,286 (14,990) 76,895

Depreciable Assets

Buildings 139,444 665 - 140,109

Improvements other than Buildings 877,143 20,716 - 897,859

Equipment 102,021 5,125 (20) 107,126

Intangibles 57,279 1,263

- 58,542

Total Depreciable Assets 1,175,887 27,769 (20) 1,203,636

Less Accumulated Depreciation

Buildings (20,672) (3,814) - (24,486)

Improvements other than Buildings (271,522) (29,919) - (301,441)

Equipment (40,483) (5,921) (16) (46,420)

Intangibles (34,213) (5,049) - (39,262)

Total Accumulated Depreciation (366,890) (44,703) (16) (411,609)

Total Depreciable Assets, net 808,997 (16,934) (36) 792,027

Total Capital Assets, net $ 896,596 $ (12,648) $ (15,026) $ 868,922



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3. Capital Assets (Continued)

Balance, July 1, 2010

Additions

Deletions

Balance, June 30, 2011

Non-Depreciable Assets Land $ 52,470 $ - $ - $ 52,470

Construction in Progress 205,349 8,566 (178,786) 35,129

Total Non-Depreciable Assets 257,819 8,566 (178,786) 87,599

Depreciable Assets

Buildings 125,750 13,694 - 139,444

Improvements other than Buildings 713,409 163,734 - 877,143

Equipment 7,683 4,394 (56) 102,021

Intangibles 57,020 259

- 57,279

Total Depreciable Assets 993,862 182,081 (56) 1,175,887

Less Accumulated Depreciation

Buildings (17,116) (3,556) - (20,672)

Improvements other than Buildings (247,043) (24,479) - (271,522)

Equipment (34,660) (5,854) 31 (40,483)

Intangibles (28,977) (5,236) - (34,213)

Total Accumulated Depreciation (327,796) (39,125) 31 (366,890)

Total Depreciable Assets, net 666,066 142,956 (25) 808,997

Total Capital Assets, net $ 923,885 $ 151,522 $ (178,811) $ 896,596



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4. Risk Management

The Plant’s insurance program is administered by the City of Phoenix Risk Management Division of the Finance Department. SROG is charged quarterly for its share of self-insurance coverage. For fiscal years 2012 and 2011, SROG was charged $142,203 and $139,908, respectively, for self-insurance premiums. The members proportionately share the costs of the insurance program according to the provisions of the intergovernmental agreement. The City of Phoenix maintains a $7.5 million self-insured retention for third-party liability claims. Losses which exceed the retention levels are covered by commercial insurance purchased through the City. Workers’ compensation, unemployment and long-term disability are self-insured. Employee healthcare benefits are self-insured through the City of Phoenix Health Care Benefits Trust. Self-insured claims are reported as liabilities in the City of Phoenix’s basic financial statements when it is probable that a loss has occurred and the amount of that loss can be reasonably estimated. This determination is based on an independent actuarial analysis of reported claims and estimated claims incurred but not reported. For the year ended June 30, 2012, there were no reductions in insurance coverage from the prior year and settled claims have not exceeded insurance coverage for the past five years. In the opinion of management, no provision for claims is required in the accompanying financial statements. Long-term disability benefits were self-insured through the City of Phoenix Long-term Disability Trust Fiduciary Fund. As a partially funded other post-employment benefit, no liability is reflected. Claims that are expected to be paid with expendable available financial resources are accounted for in the City’s General Fund. All other claims are accounted for in the City’s government-wide statement of net assets.

5. Members’ Equity

A summary of the joint venture members’ equity follows (in thousands):

June 30,

2012 2011

City of Glendale $ 60,389 $ 62,466 City of Mesa 104,148 106,714 City of Phoenix 461,107 473,581 City of Scottsdale 116,127 120,029 City of Tempe 138,535 143,970

880,306 906,760 Unallocated unrealized loss related to GASB Statement No. 31 reporting (2,424) (2,339)

Total $ 877,882 $ 904,421



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6. Related Party Transactions

The nature of the relationship of the joint venture’s related parties (members) is described in Note 1 on page 13. The following transactions occurred between the joint venture and its members (in thousands): A. The members contributed 90% and 91% of the joint venture’s revenue in 2012 and 2011, respectively.

June 30,

2012 2011 B. Members’ receivables were as follows: Unrestricted Members’ Receivables $ 8,768 $ 8,879 Restricted Members’ Receivables 752 2,262 Total $ 9,520 $ 11,141 June 30,

2012 2011

C. Members’ payables were as follows: Unrestricted Members’ Payables $ 9,859 $ 12,305 Restricted Members’ Payables 21,186 23,846

Total $ 31,045 $ 36,151

D. Administration Costs SROG administration costs on the statements of revenues, expenses and changes in net assets include direct administrative costs to manage the Plant; indirect costs allocated to SROG from the City of Phoenix Water Services Department; and staff and administrative costs. The indirect costs from the Water Services Department include: administration, personnel, budget, accounting, management support, training, and other overhead costs. Indirect administration costs allocated to SROG were $3,825,187 and $3,633,556 for the years ended June 30, 2012 and 2011, respectively. Staff and administrative costs are City central services costs allocated to SROG. These costs include: building maintenance, custodial services, electrical maintenance, accounting, insurance, payroll, money management, accounts payable, various financial services, real estate, materials management, personnel, safety, fringe benefit administration, labor relations and training, switchboard, internal and external auditing, general management services, and legal services. Staff and administrative costs allocated to SROG were $1,093,496 and $992,021 for the years ended June 30, 2012 and 2011, respectively.



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7. Construction and Other Grants

Grant receipts are disbursed to the SROG members based on their purchased capacity at the Plant. The members recognize grant proceeds as income during the period in which reimbursable costs are expensed and recorded. The amounts are not reflected in SROG's financial statements. SROG did not receive any grant receipts for the fiscal years ended June 30, 2012 and 2011.

8. Commitments and Contingencies

In the normal course of expanding the jointly used wastewater treatment plant and transportation facilities, SROG enters into contractual agreements to purchase material, equipment, and services. At June 30, 2012, SROG had outstanding purchase commitments for capital improvements aggregating approximately $1 million. SROG is involved in litigation and claims arising in the normal course of operations. In the opinion of management based on consultation with legal counsel, losses, if any, from pending litigation and claims are covered by insurance or are immaterial; therefore, no provision has been made in the accompanying financial statements for losses, if any, that might arise from the ultimate outcome of these matters.

9. Pension Plan (a) Plan Description

SROG’s full-time employees are employed by the City are covered by the City of Phoenix Employees’ Retirement Plan (COPERS). In addition to normal retirement benefits, COPERS also provides for disability and survivor benefits, as well as deferred pensions for former employees. Pension benefits vest after five years for general City employees.

COPERS is a single-employer defined benefit pension plan for all full-time classified civil service general City employees. Members are eligible for retirement benefits upon meeting one of the following age and service requirements:

1. Age 60 years, with ten or more years of credited service. 2. Age 62 years, with five or more years of credited service. 3. Any age, which added to years of credited service equals 80.



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9. Pension Plan (Continued) (a) Plan Description (Continued)

COPERS is authorized by and administered in accordance with Chapter XXIV of the Charter of the City. Authority to make amendments to the plan rests with City voters. It is administered by a nine-member Retirement Board. COPERS has been included as part of the City’s reporting entity as a pension trust fund. Copies of the separately issued COPERS financial report, which includes financial statements and required supplemental information, may be obtained from COPERS, 200 West Washington, 10th Floor, Phoenix, Arizona 85003.

(b) Funding Policy

The employee contribution rate is 5% of compensation. The City contributes an actuarially determined amount to COPERS to fully fund benefits for active members and to amortize any unfunded actuarial liability as a level percent of projected member payroll over an open period of 20 years from July 1, 2011. SROG’s contributions to COPERS equaled the annual required contributions and were as follows (in actual dollars).

Fiscal Year Ended

Required Contributions

Percentage of Covered Payroll

June 30, 2012 $ 1,366,756 18.18% June 30, 2011 1,192,755 16.04 June 30, 2010 1,044,251 14.35

10. Other Post-Employment Benefits

Post-Employment Healthcare and Long-Term Disability Program The City provides certain post-employment health care benefits for its retirees. Retirees meeting certain qualifications are eligible to participate in the City’s health insurance program along with the City’s active employees. As of August 1, 2007, separate rates have been established for active and retiree health insurance. Medical Expense Reimbursement Plan Employees eligible to retire in 15 years or less from August 1, 2007, will receive a monthly subsidy from the City’s Medical Expense Reimbursement Plan (MERP) when they retire, as current retirees do. The MERP is a single-employer, defined benefit plan. Contributions by the City (plus earnings thereon) are the sole source of funding for the MERP.



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10. Other Post-Employment Benefits (Continued)

Post-Employment Healthcare and Long-Term Disability Program (Continued)

The City has established the City of Phoenix MERP Trust and the City of Phoenix Long-Term Disability (LTD) Trust to fund all or a portion of the City’s share of liabilities incurred in providing the benefits as reflected in the Administrative Regulation 2.42 Medical Expense Reimbursement Plan for Retirees and Eligible Surviving Spouses or Qualified Domestic Partners and in Administrative Regulation 2.323 City of Phoenix Long-Term Disability Program. A five-member Board of Trustees has been delegated responsibility for fiduciary oversight of the MERP Trust and LTD Trust, subject to oversight of the City Council. The LTD Trust issues a separate report that can be obtained from the City’s Finance Department, through the Financial Accounting and Reporting Division on the 9th Floor of 251 W. Washington Street, Phoenix, Arizona, 85003. The City’s annual other post-employment benefit (OPEB) expense is calculated based on the annual required contribution (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities over a period not to exceed 30 years. Post-Employment Health Plan Employees eligible to retire in more than 15 years from August 1, 2007 who have payroll deductions for City medical insurance coverage are entitled to a $150 monthly contribution to a Post Employment Health Plan (PEHP) account in lieu of MERP subsidies. PEHP is a 100% employer-paid defined contribution. Funds accumulated in the account can be used upon termination of employment for qualified medical expenses. The current administrator of the plan is Nationwide Retirement Solutions. Actuarial Valuations In the July 1, 2011, actuarial valuation, the projected unit credit method was used. The actuarial assumptions included a 7.0 percent investment rate of return (net of administrative expenses), which is the expected long-term investment returns on plan assets. The actuarial value of assets was equal to fair value. The AAL, or in this case surplus, is amortized over a period such that the normal cost plus the amortization payment equals the budgeted contribution amount. The amortization will not exceed 30 years. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include



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10. Other Post-Employment Benefits (Continued)

Actuarial Valuations (Continued) assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the City are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the City and plan members) and include the types of benefits provided at the time of each valuation. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. SROG has no assets or liabilities reflected on its statements of net assets related to GASB No. 45 as of June 30, 2012 and 2011.

11. Subsequent Events

Management evaluated subsequent events through December 12, 2012, the date the financial statements were available to be issued.

FINANCIAL SECTION - SUPPLEMENTARY INFORMATION

27

Multi-City Subregional Operating Group (SROG) Net Operating and Maintenance Expenditures

(Non-GAAP JEPA basis) For the Fiscal Years Ended June 30, 2012 and 2011

Years Ended June 30, 2012 2011 Operating & Maintenance Expenditures Operating & Maintenance $ 24,913,779 $ 27,156,243 Power 5,197,276 5,350,192 Chemicals 5,308,145 4,963,331 Replacement 3,500,179 4,551,131 Water Services Department Administration 3,825,187 3,633,556 City of Phoenix Administration 1,093,496 992,021

Operating & Maintenance Expenditures 43,838,062 46,646,474 Less Income: Sale of Effluent 5,043,101 4,708,198 Miscellaneous 11,018 140,022 Interest 9,860 76,849

Total Income 5,063,979 4,925,069

Net Operating & Maintenance Expenditures $ 38,774,083 $ 41,721,405 Non-GAAP JEPA Basis The supplementary information is prepared based on the Joint Exercise of Power Agreement (JEPA). The JEPA allows for the distribution of operation, maintenance, administration, and replacement costs to the members. The supplementary information does not include certain GAAP expenses such as depreciation, compensated absences, and gains and losses on disposal of capital assets. Sale of Effluent SROG receives revenue from the sale of effluent to the Arizona Nuclear Power Project (ANPP) for use at Units 1, 2, and 3, and the Buckeye Irrigation Company (BIC) for agricultural irrigation. The revenue received is allocated to members based on their respective sewage flows. Interest Income Interest is earned on the average daily balance in the SROG operating deposits at the rate earned by the City of Phoenix Treasurer’s pooled cash account. The interest earned is used to offset the costs of operating and maintaining the Plant and is allocated to the members based on their respective sewage flows and strengths. Interest is charged to the SROG members for late payments of capital improvement projects, and operating and maintenance. Interest on late payments is used to offset operating and maintenance costs.

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Multi-City Subregional Operating Group (SROG) Net Operating and Maintenance Expenditures (Continued)


Measured sewage flows and strengths used to allocate net operating and maintenance expenditures to individual members were as follows: Sewage Flows (Thousand Gallons): Years Ended June 30,

Member 2012 2011 City of Glendale 2,756,886 2,969,833 City of Mesa 6,486,240 6,287,770 City of Phoenix 30,631,880 30,515,904 City of Scottsdale 5,283,779 4,691,043 City of Tempe 6,377,543 6,881,129 Total 51,536,328 51,345,679 Sewage Strengths (Milligrams Per Liter): Years Ended June 30,

2012 2011(1) Chemical (COD) City of Glendale 792 833 City of Mesa 709 865 City of Phoenix 756 743 City of Scottsdale 660 843 City of Tempe 629 583 Years Ended June 30,

2012 2011 Suspended Solids (SS): City of Glendale 383 407 City of Mesa 351 457 City of Phoenix 333 314 City of Scottsdale 316 458 City of Tempe 178 179

(1) Beginning in fiscal year 2005-06, the SROG member Cities agreed to use Chemical Oxygen Demand (COD) rather than Biochemical Oxygen Demand (BOD) as a basis for calculating sewage strengths used to allocate net operating and maintenance expenditures to individual members.

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Multi-City Subregional Operating Group (SROG) Net Operating and Maintenance Expenditures (Continued)


2012 Charge (Credit) Replacement Per User Charges Over Net Operating Amount Charge (Under) Actual Expenditures

Member Billed Settlement (1) Expenditures (2) (see page 29) City of Glendale $ 2,922,875 $ (490,430) $ (86,575) $ 2,345,870 City of Mesa 6,348,537 (998,859) (192,077) 5,157,601 City of Phoenix 27,187,934 (2,799,636) (914,095) 23,474,203 City of Scottsdale 5,813,584 (1,880,831) (148,937) 3,783,816 City of Tempe 4,610,456 (439,726) (158,137) 4,012,593 Total $ 46,883,386 $ (6,609,482) $ (1,499,821) $ 38,774,083

2011 Charge (Credit) Replacement Per User Charges Over Net Operating Amount Charge (Under) Actual Expenditures

Member Billed Settlement (1) Expenditures (2) (see page 29) City of Glendale $ 3,332,156 $ (713,388) $ 34,665 $ 2,653,433 City of Mesa 5,996,836 127,192 76,669 6,200,697 City of Phoenix 26,284,059 (2,496,461) 322,409 24,110,007 City of Scottsdale 4,841,674 (505,639) 56,753 4,392,788 City of Tempe 5,079,513 (775,668) 60,635 4,364,480

Total $ 45,534,238 $ (4,363,964) $ 551,131 $ 41,721,405

(1)

(2)

These amounts represent the settlement of operating and maintenance expenditures. SROG members were billed $5,000,000 and $4,000,000 for replacement charges during the years ended June 30, 2012 and 2011, but incurred $3,500,179 and $4,551,131, respectively, in actual replacement expenditures.

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Multi-City Subregional Operating Group (SROG) Members’ CIP Account Activity


2012 Beginning Ending Balance Balance

Member July 2011 Contributions Interest Expenditures June 2012

City of Glendale $ 3,780,059 $ 51,233 $ 32,130 $ (569,083) $ 3,294,339

City of Mesa 4,052,325 - 31,881 (1,261,571) 2,822,635

City of Scottsdale 5,695,648 - 48,767 (639,180) 5,105,235

City of Tempe 10,318,108 473,100 90,436 (918,004) 9,963,640

Total $ 23,846,140 $ 524,333 $ 203,214 $ (3,387,838) $ 21,185,849



City of Glendale $ 2,252,570 $ 2,168,780 $ 40,871 $ (682,162) $ 3,780,059

City of Mesa 5,011,375 - 58,998

(1,018,048) 4,052,325

City of Scottsdale 4,605,004 1,939,511 71,910

(920,777) 5,695,648

City of Tempe 5,852,855 6,019,697 108,100

(1,662,544) 10,318,108

Total $ 17,721,804 $ 10,127,988 $ 279,879 $ (4,283,531) $ 23,846,140

The SROG members, excluding the City of Phoenix, make advance payments to the City of Phoenix for budgeted capital improvement project expenditures based on SROG capital improvement projects cash flow estimate reports prepared by the City of Phoenix and approved by SROG. Based on these approved estimates, SROG members are billed monthly for one-sixth of their share of the six-month estimates (July through December and January through June). In addition, the members maintain a deposit amount equal to one-sixth of the total six-month estimates.

All members’ payments are maintained in a trust deposit account, with monies being transferred monthly in sufficient amounts to cover each member’s share of approved capital expenditures. Interest is applied to each member’s average daily balance at the rate earned by the City of Phoenix Treasurer’s pooled cash account.

31

Multi-City Subregional Operating Group (SROG) Operating Deposits Activity


2012

Beginning Ending Balance Balance

Member July 2011 Contributions Withdrawals June 2012 City of Glendale $ 384,643 $ - $ (19,658) $ 364,985 City of Mesa 855,627 - (48,285) 807,342 City of Phoenix 3,308,483 - (141,073) 3,167,410 City of Scottsdale 591,544 - (31,829) 559,715 City of Tempe 826,657 - (38,880) 787,777 Total $ 5,966,954 $ - $ (279,725) $ 5,687,229


Member July 2010 Contributions Withdrawals June 2011 City of Glendale $ 410,905 $ 3,275 $ (29,537) $ 384,643 City of Mesa 918,535 2,477 (65,385) 855,627 City of Phoenix 3,557,897 2,993 (252,407) 3,308,483 City of Scottsdale 631,545 5,311 (45,312) 591,544 City of Tempe 887,584 4,032 (64,959) 826,657 Total $ 6,406,466 $ 18,088 $ (457,600) $ 5,966,954 SROG members maintain an operating deposit equal to 12.5 percent of the total operating and maintenance budget excluding equipment replacement charges. The operating deposits may be increased or decreased by formal action of the SROG committee. Each member’s proportionate share of the deposit is based on their percentage of purchased capacity in the Plant. In 1998, the SROG members increased this deposit by the establishment of an inventory reserve. Each member’s proportionate share of the inventory is based on their actual flows and strengths for the year. The operating deposits were established to: (a) cover actual cash needed for a portion of SROG operations and maintenance, (b) cover decreases in revenue, (c) cover unforeseen increases in expenditures, and (d) meet recommended deposit balances to maintain a good bond rating. This deposit balance includes cash and members’ receivables.

32

Multi-City Subregional Operating Group (SROG) Equipment Replacement Deposits Activity


2012

Beginning Ending Balance Balance


City of Glendale $ 375,302 $ 288,623 $ 3,545 $ (202,048) $ 465,422

City of Mesa 813,609 640,334 7,062 (448,257) 1,012,748

City of Phoenix 2,085,146 3,047,335 17,690 (2,133,240) 3,016,931

City of Scottsdale 278,440 496,519 2,272 (347,582) 42,649

City of Tempe 657,784 527,189 5,695 (369,052) 821,616

Total $ 4,210,281 $ 5,000,000 $ 36,264 $ (3,500,179) $ 5,746,366



City of Glendale $ 405,130 $ 251,574 $ 4,837 $ (286,239) $ 375,302

City of Mesa 880,731 556,452 9,547 (633,121) 813,609

City of Phoenix 2,382,855 2,339,999 24,700 (2,662,408) 2,085,146

City of Scottsdale 332,021 411,904 3,172 (468,657) 278,440

City of Tempe 710,506 440,071 7,913 (500,706) 657,784

Total $ 4,711,243 $ 4,000,000 $ 50,169 $ (4,551,131) $ 4,210,281

An annual user replacement charge is established through the annual budgetary process. This charge is adjusted to the actual replacement cost through the annual user charge settlement. Each member’s equity in the equipment replacement deposit is determined by tracking each member’s contributions. Actual expenditures and interest are allocated and applied to each member’s cash balance. Interest earned on these deposits is credited and compounded monthly based on the earnings rate in the City of Phoenix Treasurer’s pooled cash account applied to the average daily cash balance during the month. This deposit balance includes cash and members’ receivables.

STATISTICAL SECTION

STATISTICAL SECTION – TABLE OF CONTENTS

Financial Trends - These schedules contain trend information to show how SROG’s financial performance and position have changed over time.

Page Statements of Net Assets 34 Statements of Revenues and Expenses and Changes in Net Assets 34 Member Charges by Type 35 Member Charges by City 35

Economic and Demographic Information - These schedules offer economic and demographic indicators to show the environment within which SROG’s financial activities take place. Page Area Map 36 SROG Cities' Population Growth 37 Demographic and Economic Statistics 38 Major Employers Metropolitan Phoenix 39 SROG Cities' Area Growth (Square Miles) 40

Operating Information – These schedules contain service and infrastructure data to show how SROG’s financial information relates to the services SROG provides and the activity it performs. Page Measured Sewage Flows and Strengths and Rates 41 Measured Sewage Flows by City (in thousand gallons) 41 Measured Sewage Strengths (Milligrams per Liter) 42 Full-Time Equivalent Employees 43 Operating and Capital Indicators 43

34

Multi-City Subregional Operating Group (SROG) Statements of Net Assets

Last Ten Fiscal Years (in thousands)

Statements of Revenues and Expenses and Changes in Net Assets


2011-12 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03

Operating Revenues

Members’ Charges $ 46,090 $ 50,719 $ 104,237 $ 167,613 $ 166,126 $ 156,869 $ 57,400 $ 95,374 $ 132,619 $ 98,720

Sales of By-Products 5,043 4,708 3,632 3,689 2,251 1,973 1,654 1,831 1,739 1,777

Other - 138 677 457 49 43 41 6,570 43 70

Total Operating Revenues 51,133 55,565 108,546 171,759 168,426 158,885 59,095 103,775 134,401 100,567

Operating Expenses

Administration 4,130 4,030 5,093 5,278 4,455 4,533 4,117 3,798 4,604 4,298

Operation and Maintenance 53,699 40,723 44,508 34,034 35,085 28,898 30,381 25,542 22,815 21,758

Depreciation 44,703 39,125 37,576 27,225 26,473 26,108 25,803 22,718 20,144 18,299

Total Operating Expenses 102,532 83,878 87,177 66,537 66,013 59,539 60,301 52,058 47,563 44,355

Operating Income (Loss) (51,399) (28,313) 21,369 105,222 102,413 99,346 (1,206) 51,717 86,838 56,212

Non-Operating Revenues (Expenses)

Investment Income

Net Increase (Decrease)

in Fair Value of Investments (598) (544) (394) 90 664 422 (416) 77 (1,711) 99

Interest on Investments 882 895 1,166 1,568 1,772 2,105 1,458 1,087 1,354 1,340

Interest Credited to Members (315) (447) (523) (1,267) (1,855) (2,733) (2,007) (1,076) (1,140) (1,050)

Gain (Loss) on Disposal

of Capital Assets (8) 1 13 (74) (19) (661) 1 (86) (36) (44) Total Non-Operating Revenues (Expenses) (39) (95) 262 317 562 (867) (964) 2 (1,533) 345

Net Income (Loss) before Capital

Contributions (51,438) (28,408) 21,631 105,539 102,975 98,479 (2,170) 51,719 85,305 56,557

Capital Contributions 24,899 2 - - 28 33 - 1,014 431 130

Increase (Decrease) in Net Assets $ (26,539) $ (28,406) $ 21,631 $ 105,539 $ 103,003 $ 98,512 $ (2,170) $ 52,733 $ 85,736 $ 56,687

2011-12 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 Invested in Capital Assets

$868,922

$896,596

$923,885

$900,813

$796,149

$694,205

$596,544

$589,140

$455,450

$398,881

Unrestricted 8,960

7,825

8,942

10,383

9,508

8,449

7,598

17,172

12,393

12,275

Total Net Assets

$877,882

$904,421

$932,827

$911,196

$805,657

$702,654

$604,142

$606,312

$467,843

$411,156

35

Multi-City Subregional Operating Group (SROG) Member Charges by Type


Fiscal Year

Operating

Construction

Total Member Charges

2011-12 $ 40,100 $ 5,990 $ 46,090 2010-11 40,317 10,402 50,719 2009-10 40,329 63,908 104,237 2008-09 38,615 128,998 167,613 2007-08 37,940 128,186 166,126 2006-07 34,688 122,181 156,869 2005-06 32,100 25,300 57,400 2004-05 28,551 66,823 95,374 2003-04 28,069 104,550 132,619 2002-03 24,549 74,171 98,720

Member Charges by City Last Ten Fiscal Years

(in thousands)

Fiscal Year Glendale Mesa Phoenix Scottsdale Tempe Total

2011-12 $ 2,849 $ 6,297 $ 27,637 $ 4,426 $ 4,881 $ 46,090 2010-11 3,263 7,210 29,507 5,107 5,632 50,719 2009-10 6,064 11,349 64,369 9,110 13,345 104,237 2008-09 10,246 15,315 104,476 14,710 22,866 167,613 2007-08 15,079 16,440 82,778 23,456 28,373 166,126 2006-07 16,032 15,990 69,220 26,387 29,240 156,869 2005-06 4,625 9,196 28,089 8,079 7,411 57,400 2004-05 5,993 15,912 40,613 17,726 15,130 95,374 2003-04 9,179 18,988 65,684 19,688 19,080 132,619 2002-03 5,983 16,543 50,335 13,825 12,034 98,720

36

Multi-City Subregional Operating Group (SROG) Area Map

37

Multi-City Subregional Operating Group (SROG) SROG Cities’ Population Growth

Last Ten Fiscal Years Year Glendale Mesa Phoenix Scottsdale Tempe Total 2012 231,000 441,160 1,464,405 217,965 163,989 2,518,519 2011 227,217 440,677 1,451,966 217,385 161,719 2,498,964 2010 250,173 467,355 1,445,632 244,250 174,833 2,582,243 2009 249,811 465,272 1,665,320 242,337 172,641 2,795,381 2008 248,731 463,397 1,630,340 244,090 167,458 2,754,016 2007 246,382 460,155 1,595,260 238,270 166,625 2,706,692

2006 243,881 455,151 1,560,380 226,390 165,796 2,651,598 2005 235,987 451,223 1,525,400 221,130 160,820 2,594,560 2004 233,000 445,354 1,490,420 222,600 159,615 2,550,989 2003 231,288 434,585 1,455,440 218,940 159,426 2,499,679

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

Popu

latio

n

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

SROG Member Cities’ Population Growth

Glendale Mesa Phoenix Scottsdale Tempe

Source: AMWUA City of Phoenix Finance Department Note: Beginning in fiscal year 2010, population numbers were revised based on 2010 U.S. Census.

For the Years 2003 through 2012

38

Multi-City Subregional Operating Group (SROG) Demographic and Economic Statistics (1)

Last Ten Years

Year

Population (2)

Personal Income

(in thousands) (2)

Per Capita Income (2)

Unemployment

Rate (4) 2011 (3) 4,227,601 $ 160,306,364 $ 37,919 8.6%

2010 4,297,580 157,197,497 36,578 9.2 2009 4,332,238 151,151,439 34,890 8.5 2008 4,238,980 145,477,805 34,319 4.9 2007 4,188,715 148,295,418 35,404 3.3 2006 4,047,068 139,244,524 34,406 3.6 2005 3,850,683 126,470,957 32,844 4.1 2004 3,713,291 115,604,165 31,133 4.4 2003 3,592,979 106,385,325 29,609 5.3 2002 3,488,124 100,805,099 28,900 5.7 2001 3,382,588 97,138,599 28,717 4.2

(1) The SROG Cities of Glendale, Mesa, Phoenix, Scottsdale and Tempe are part of the Phoenix-Mesa-Scottsdale Metropolitan Statistical Area (MSA). The numbers presented for population, personal income, per capita income, and unemployment rate on this schedule are for the Phoenix-Mesa-Scottsdale MSA. The population for the individual SROG Cities is presented in the SROG Cities’ Population Growth schedule on page 39.

(2) Amounts for population, personal income and per capita income were obtained from the Eller College of

Management, University of Arizona. (3) Amounts for calendar year 2011 for population, personal income and per capita income are estimates and

are based on the Estimated Annual Percent Changes for the Phoenix-Mesa-Scottsdale MSA, which was obtained from Eller College of Management, University of Arizona.

(4) The unemployment rate was obtained from the Arizona Department of Commerce, Research

Administration, in cooperation with the U.S. Department of Labor, Bureau of Labor Statistics.

39

Major Employers Metropolitan Phoenix Current Year and Nine Years Ago

Source: Phoenix Business Journal Book of Lists Note: Top employers in Maricopa County. Employee count is total Arizona employees.

2012 2003

Employer Employees Rank

Percentage of Total City Employment Employees Rank

Percentage of Total City Employment

State of Arizona 49,800 1 2.91% 49,849 1 3.07% Wal-Mart 30,634 2 1.79% 15,895 2 0.98% Banner Health Systems 24,825 3 1.45% 15,521 4 0.96% City of Phoenix 15,100 4 0.88% 13,156 7 0.81% Wells Fargo 13,308 5 0.78% Bank of America 13,300 6 0.78% Maricopa County 12,792 7 0.75% 15,523 3 0.96% Arizona State University 11,185 8 0.65% Apollo Group 11,000 9 0.64% JPMorgan/Chase 10,600 10 0.62% Honeywell International 15,000 5 0.93% Kroger Company 13,500 6 0.83% US Postal Service 11,406 8 0.70% Motorola 10,600 9 0.65% Intel Corporation 10,000 10 0.62% Phillips Petroleum 10,000 10 0.62%

40

Multi-City Subregional Operating Group (SROG) SROG Cities’ Area Growth (Square Miles)

Last Ten Fiscal Years

Year Glendale Mesa Phoenix Scottsdale Tempe 2012 58.2 137.1 519.2 184.0 40.1 2011 58.2 137.0 519.1 184.0 40.1 2010 59.0 137.0 519.1 184.2 40.1 2009 58.2 136.9 519.1 184.2 40.1 2008 58.2 133.1 517.9 184.2 40.1 2007 57.9 133.1 516.6 184.2 40.1 2006 57.9 132.0 515.9 185.2 40.1 2005 57.0 131.9 515.0 185.2 40.0 2004 56.7 129.3 514.8 184.6 40.0 2003 56.4 128.8 511.9 184.6 40.0

0

100

200

300

400

500

600

Are

a (in

squa

re m

iles)

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

SROG Member Cities’ Area Growth

Glendale Mesa Phoenix Scottsdale Tempe

Source: AMWUA City of Phoenix Finance Department

For the Years 2003 through 2012

41

Multi-City Subregional Operating Group (SROG) Measured Sewage Flows and Strengths and Rates


Fiscal Year

Sewage Flows

(thousand gallons)

Chemical/ Biochemical

Demand (COD/BOD)

(thousand pounds) (1)

Suspended Solids (SS) (thousand pounds)

Sewage Flows (per

thousand gallons)

COD/BOD (1) (per

thousand pounds)

SS (per thousand pounds)

2011-12 51,536,328 312,307 136,239 $ 0.1302 $ 66.83 $ 82.33 2010-11 51,345,679 321,504 142,241 0.1569 64.82 78.93 2009-10 49,714,010 324,979 148,971 0.1617 60.47 73.56 2008-09 49,643,998 303,703 140,232 0.1368 65.24 77.67 2007-08 47,657,871 280,544 134,929 0.1287 67.81 84.34 2006-07 49,924,014 279,411 132,184 0.0997 66.47 82.70 2005-06 51,049,735 287,069 122,966 0.1036 58.59 78.30 2004-05 53,384,312 280,848 133,639 0.0864 51.54 59.88 2003-04 52,737,080 116,446 137,192 0.0828 126.51 61.52 2002-03 48,347,750 112,987 119,716 0.0810 114.81 61.09

Measured Sewage Flows by City (in thousand gallons) Last Ten Fiscal Years

Fiscal Year

Glendale

Mesa

Phoenix

Scottsdale

Tempe

Total

2011-12 2,756,886 6,486,240 30,631,880 5,283,779 6,377,543 51,536,328 2010-11 2,969,833 6,287,770 30,515,904 4,691,043 6,881,129 51,345,679 2009-10 2,464,567 6,922,940 29,944,530 3,884,213 6,497,760 49,714,010 2008-09 2,633,684 7,171,175 29,387,795 3,988,140 6,463,204 49,643,998 2007-08 2,880,239 7,599,634 27,203,826 3,458,977 6,515,195 47,657,871 2006-07 2,971,393 8,587,785 26,667,385 4,752,932 6,944,519 49,924,014 2005-06 2,904,321 8,859,936 26,967,310 4,480,992 7,837,176 51,049,735 2004-05 2,957,923 8,592,535 29,143,386 5,046,650 7,643,818 53,384,312 2003-04 3,866,153 9,477,398 27,428,104 4,599,370 7,366,055 52,737,080 2002-03 3,513,465 9,089,093 25,038,583 3,621,775 7,084,834 48,347,750


42

Multi-City Subregional Operating Group (SROG) Measured Sewage Strengths

(Milligrams per Liter) Last Ten Fiscal Years

Chemical (COD)/Biochemical Oxygen Demand (BOD)

Fiscal Year Glendale Mesa Phoenix Scottsdale Tempe Average

2011-12 792 709 756 660 629 727 2010-11 833 865 743 843 583 751 2009-10 931 798 787 995 572 784 2008-09 936 754 760 770 486 734 2007-08 972 829 630 919 648 706 2006-07 939 789 580 883 616 671 2005-06 886 808 631 813 515 674

2004-05 (1) 821 798 518 837 662 631 2003-04 416 368 184 445 267 268 2002-03 437 335 222 595 176 280

Suspended Solids (SS)

Fiscal Year Glendale Mesa Phoenix Scottsdale Tempe Average

2011-12 383 351 333 316 178 317 2010-11 407 457 314 458 179 332 2009-10 519 402 345 543 210 359 2008-09 482 372 344 407 179 339 2007-08 483 453 285 541 264 339 2006-07 494 436 242 474 277 317 2005-06 443 420 219 469 220 289 2004-05 415 420 209 507 332 300 2003-04 395 414 232 533 325 316 2002-03 410 376 206 656 275 297


43

Multi-City Subregional Operating Group (SROG) Full-Time Equivalent Employees (1)


Full-time Equivalent Employees as of June 30, 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003

Administration - - - 5 5 5 5 5 3 3 Operation and Maintenance 106 110 100 94 97 90 73 65 61 62

Total 106 110 100 99 102 95 78 70 64 65

(1) An FTE is a position converted to the decimal equivalent of a full-time position based on 2,080 hours per year.

Multi-City Subregional Operating Group (SROG) Operating and Capital Indicators


Fiscal Year

2012 2011 2010 2009 2008 2007 2006 2005 2004 2003

Miles of Sewers 59.4 59.4 59.4 59.4 59.4 59.4 59.4 59.4 59.4 59.4

Treatment Capacity (MGD) (1) 204.5 204.5 204.5 204.5 179.25 179.25 179.25 179.25 179.25 179.25

Peak Day Influent Flow (MGD) 148.90 161.43 156.50 157.04 169.13 174.20 206.61 188.16 164.91 182.77

(1) Millions of gallons per day (MGD) Source: FTE obtained from Human Resources Information Systems, City of Phoenix, Personnel Department. Operating and Capital Indicators obtained from City of Phoenix, Wastewater System Benchmarks.

Documents

(an Arizona Joint Venture) Multi-City Subregional ...gfoa.net/cafr/COA2012/MultiCitySubregionalOperatingGroupAZ.pdf · fairness of the presentation, including all disclosures, rests