MARICOPA COUNTY
CITIZENS FINANCIAL CONDITION REPORT
FISCAL YEAR ENDED JUNE 30, 2013

Maricopa County Shows Consistent
Strength in Fiscal Year 2013
Financial Highlights
Our Fiscal Year (FY) 2013 Citizens Financial Condition
Report highlights the financial strength of the
County’s General Fund and other key financial
indicators.
Maricopa County . . .
 Is the fourth largest county in the U.S.
 Has generally used “pay–as-you-go” financing for

capital expenditures instead of incurring new
debt.

In This Issue

 Has low long-term debt and liabilities.

Message from the County Auditor

3

Maricopa County Profile

4

General Fund Balance

6

Cash and Investments

7

Liquidity and Long-Term Debt

8

Revenues and Expenditures

9

Retirement Plans

12

Methodology and Sources

13

 Has received strong long-term bond credit ratings

from Standard & Poor’s and Fitch.
 Compares favorably with other large western

U.S. counties for key financial ratios.
 Has had smaller property tax revenues in recent

years.
 Contributes to four employee retirement plans.

Total plan funding levels range from 57% to 76%.

About the Financial Condition Report
This edition of the Maricopa County Citizens Financial
Condition Report provides information, trends, and
comparisons on County financial topics including:
 General Fund Balance
 Cash and Investments
 Liquidity and Long-Term Debt

Maricopa County Internal Audit
301 W. Jefferson, Suite 660
Phoenix, AZ 85003
(602) 506-1585
www.maricopa.gov/internalaudit

 Revenues and Expenditures
 Retirement Plans

The information contained in the report is based
primarily on the County’s FY 2013 Comprehensive
Annual Financial Report issued in December 2013 by
the Department of Finance.

OUTSTANDING ACHIEVEMENT AWARD
The Government Finance Officers Association of the United States and Canada (GFOA) has given the
Award for Outstanding Achievement in Popular Annual Financial Reporting to Maricopa County for its
Popular Annual Financial Report (PAFR) for the fiscal year ended June 30, 2012.
The Award for Outstanding Achievement in Popular Annual Financial Reporting is a prestigious national
award recognizing conformance with the highest standards for preparation of state and local
government popular reports.

Maricopa County Internal Audit Department
The County Auditor reports directly to the Maricopa County Board of Supervisors, with an advisory
reporting relationship to the Maricopa County Citizen’s Audit Advisory Committee.
The Mission of the Internal Audit Department is to provide objective information on the County’s
system of internal controls to the Board of Supervisors so they can make informed decisions and
protect the interests of County citizens.

Project Team Members
Eve Murillo, CPA, MBA, CFE, ITIL, Deputy County Auditor
Stella Fusaro, CIA, CGAP, CFE, CRMA, Audit Supervisor
Richard Chard, CPA

Maricopa County Internal Audit

2

FY 2013 Citizens Financial Condition Report

MESSAGE FROM THE COUNTY AUDITOR

March 25, 2014
Denny Barney, Chairman, Board of Supervisors
Steve Chucri, Supervisor, District II
Andrew Kunasek, Supervisor, District III
Clint Hickman, Supervisor, District IV
Mary Rose Wilcox, Supervisor, District V
We have completed the FY 2013 edition of the Maricopa County Citizens Financial
Condition Report, which is part of our Board-approved audit plan. The information
contained in this report is based primarily on the County’s FY 2013 Comprehensive Annual
Financial Report issued in December 2013.
For FY 2013, we again highlight the financial strength of the County’s General Fund and
other key financial indicators through graphic displays of trends and comparisons. In spite
of national and local economic challenges in recent years, the County has been able to
pay for significant building projects without incurring debt. Key financial indicators are
strong and compare favorably with other large western U.S. counties.
In addition, we provide updated information on the state pension plans covering County
employees. Public pension funds are experiencing fiscal challenges due to recent
investment losses, high benefit payments, actuarial methods used in longevity
projections, and insufficient employee and employer contribution rates.
We would like to commend the Board of Supervisors and County leadership for the
conservative fiscal policies that have led to the County’s strong financial condition
highlighted throughout this report.
Sincerely,

Ross L. Tate
County Auditor

Maricopa County Internal Audit

3

FY 2013 Citizens Financial Condition Report

MARICOPA COUNTY PROFILE
Maricopa County
District 2

Maricopa County is located in the south-central
area of the State of Arizona. Approximately
60% of the state’s total population resides
within the County, which includes the cities of
Phoenix, Mesa, Tempe, Glendale, and
Scottsdale.

District 4
District 3

District 1

Maricopa County operates under an elected
Board of Supervisors, representing five districts
divided geographically and by population to
include a mix of urban and rural constituencies.

District 5

Maricopa
County

Board of Supervisors

Denny Barney
District 1

Steve Chucri
District 2

Andrew Kunasek
District 3

Clint Hickman
District 4

Mary Rose Wilcox
District 5

History

Population

Established in 1871, Maricopa was the fifth county
to be formed in what was then the Arizona
Territory.

Maricopa County is home to 3.9 million people,
the 4th largest population in the nation after
Los Angeles County (CA), Cook County (Chicago,
IL), and Harris County (Houston, TX).

Size

Although Maricopa County experienced rapid
growth for many years, more recently, the
estimated population has declined from its peak
of 4.1 million in 2009.

At 9,225 square miles, Maricopa County is larger
than several states, including Connecticut,
Delaware, Hawaii, Massachusetts, New Hampshire,
New Jersey, and Rhode Island.

The following page includes more information
about population, staffing, and unemployment.

Maricopa County Internal Audit

4

FY 2013 Citizens Financial Condition Report

POPULATION AND EMPLOYMENT
Population Rank
Maricopa County is the fourth
most populous in the nation.
By FY 2009, Maricopa County
reached a population of 4.1
million. During the recent
recession, the County’s
population dropped to 3.8
million. The most recent
estimates show a total
population of 3.9 million.

Largest U.S. Counties 2013
(millions)

12.0

10.0

10.0
8.0

5.2

6.0

4.1

0.0

Los Angeles,
California

3.8

3.8

Cook,
Illinois

16.0

3.9

3.9

14.8

15.0

3.6

13.6

13.7

13.9

13.7

14.0

3.4
13.0

3.2
3.0

12.0
FY09

FY10

FY11

County Population (millions)

FY12

FY13

Maricopa County Internal Audit

Harris,
Texas

Maricopa,
Arizona

San Diego,
California

The County implemented hiring
freezes for non-critical positions
during the recent recession.
Although economic indicators
are improving and the hiring
freeze has been lifted, the
County has continued its
conservative approach to
staffing. Total staffing has
decreased 6% since FY 2009.

Staffing (thousands)

Unemployment
Maricopa County’s
unemployment rate has
consistently remained below
national and Arizona rates.
Starting in 2009,
unemployment increased
significantly. By 2013,
Maricopa County’s
unemployment rate was 7.1%,
continuing a gradual reversal
from its high rate of 9.6% in
2010.

3.2

Staffing

4.0

4.0

3.9

2.0

Budgeted Staffing Remains Flat
4.2

4.3

4.0

Maricopa's Unemployment Rate
Below Arizona and U.S. Rates
12.0%
10.0%
8.0%

7.1%

6.0%
4.0%
2.0%
0.0%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Arizona (FY13 - 8.0%)

U.S. (FY13 - 7.6%)

Maricop a (FY13 - 7.1%)

5

FY 2013 Citizens Financial Condition Report

GENERAL FUND KEY INDICATORS
General Fund Spendable Fund Balance Decreased
General Fund

Non-Spendable and Spendable Amounts

The General Fund is the primary operating fund used for all
amounts not required to be accounted for in other funds.

The General Fund balance is classified as
spendable or non-spendable.

Over the years, Maricopa County has used the spendable
balance for “pay-as-you-go” financing of capital assets.

The non-spendable fund balance is
comprised of non-cash assets, such as
inventories or amounts that must remain
legally intact.

General Fund Spendable Balance
(millions)

$600
$500

$489
$410

$409

$400
$300

$283

$259

FY12

FY13

$200
$100
$-

FY09

FY10

FY11

The spendable fund balance is generally
available for use. However, certain laws
and contracts may impose restrictions on
how the funds are used. In addition, the
Board of Supervisors may commit
portions of the fund for specific purposes
such as capital projects. County
management reports that $230 million of
the FY 2013 spendable balance has been
assigned and budgeted in FY 2014,
leaving $29 million unassigned.

General Fund Spendable Fund Balance as a Percent of Revenues
The County’s General Fund has maintained a strong spendable fund balance in relation to revenues, as
compared to national benchmark averages (see page 13 for a list of benchmark counties). The FY 2013
spendable fund balance is shown below (total of restricted, committed, assigned, and unassigned
amounts).
Fund Balance Compares Favorably with
Benchmarks

General Fund Spendable Balance
as a Percent of Revenues
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%

45.2%
37.8%

37.3%
25.7%

14.4%

14.3%

14.3%

16.2%

FY09

FY10

FY11

FY12

Maricopa County

Maricopa County Internal Audit

24.2%
21.2%

FY13

Avg of Benchmark Counties

6

Prior to FY 2012, Maricopa’s spendable
fund balance as a percent of revenues
was significantly larger than benchmark
averages. These balances reflect
amounts Maricopa saved for capital
projects such as the new Superior Court
building, Sheriff’s Office headquarters,
information technology infrastructure,
and energy conservation. Even with
such projects, Maricopa County still
surpasses the benchmark average.

FY 2013 Citizens Financial Condition Report

CASH AND INVESTMENTS
Cash and Investments are Stable
The County Treasurer pools deposits for
the County, school districts, community
colleges, and special districts. Total cash
and investments held by the Treasurer
has had little fluctuation over recent
years.

Maricopa County Treasurer
Cash and Investments (billions)
$4.0

$3.6

$3.7

FY09

FY10

$3.9

$3.6

$3.6

FY12

FY13

$3.0
$2.0
$1.0
$-

8%

Investment Strategy and Returns

Maricopa County Treasurer
Investment Returns Remain Low

Cash investment strategy gives highest
priority to:

6%

 Safety of principal

4.5%
4%

4.1%
3.1%

2%

2.4%
1.7%

 Liquidity sufficient to meet obligations
3.0%

 Return on investment
1.2% 1.0%
0.6%

0.4%

0%
FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY 12 FY13

Investment returns fell to 0.4% in FY 2013
due to historically low interest yields. U.S.
Government Agency securities are the
County’s primary investments.

Most Cash is Non-County
Arizona statutes require the County,
community colleges, school districts, and
other local governments to deposit certain
public monies with the County Treasurer.

County Treasurer Investment Pool
The Treasurer invests all idle monies not
specifically invested for a fund or program
into an investment pool.

Maricopa County Internal Audit

FY11

Maricopa County Treasurer
Investment Pool
Other
County
Funds $1.2
billion (32%)
County
General
Fund $0.17
billion (5%)

7

Non-County
Funds $2.3
billion (63%)

FY 2013 Citizens Financial Condition Report

LIQUIDITY AND LONG-TERM DEBT
Liquidity Decreased in Accordance with Planned Expenditures
General Fund Liquidity Ratio

General Fund Liquidity Ratio
19.3

20.0
16.1

14.8

15.0
10.0

6.7
3.6

5.0
0.0

1.7

2.1

FY10

FY11

2.0
FY09

Maricopa

2.2

1.8

FY12

FY13

Avg of Benchmark Counties

The liquidity ratio compares
current assets and liabilities. It is
a measure of the County’s ability
to pay current obligations.
Maricopa County continues to
maintain a healthy liquidity ratio
of almost 7 to 1. This means that
$6.70 is available in cash for every
$1 in current liabilities.
Long-term capital expenditures
were paid in FY 2012 without
incurring long-term debt.
Liquidity improved in FY 2013.

Long-Term Debt Per Person is Low Compared with Other Counties
Maricopa County has low debt when compared with benchmark counties. The low debt is the result of
a conservative “pay-as-you-go” financing policy. The FY 2013 County long-term debt was $64 per
person. Bond rating firms Standard & Poor’s and Fitch have rated general obligation bonds as
“AAA” (implied) and revenue bonds as “AA+”. The general obligation “AAA” rating is the highest
possible. The rating is “implied” since no general obligation bonds are outstanding.
Counties with higher debt may provide services such as airports and utilities that Maricopa County
does not provide. Some of these counties may provide municipal service levels that in Maricopa
County are offered by incorporated cities. These differences may impact comparative debt levels.

Long-Term Debt

Long-Term Debt Per Person
$1,600
$1,400
$1,200
$1,000
$800
$600
$400
$200
$-

$1,422
$1,233
$1,201

$554

$734
$643 $680

$792

$796

$340
$64

Maricopa County Internal Audit

8

Long-term debt includes
liabilities and obligations
expected to be paid in future
years. These include revenue
bonds, housing authority loans,
special assessment debt with
government commitment, claims
and judgments, incurred but not
reported liabilities, and landfill
closure and post-closure
liabilities.

FY 2013 Citizens Financial Condition Report

REVENUES AND EXPENDITURES
Expenditures Exceed Revenues as Planned
Maricopa County’s conservative
fiscal policies include pay-as-you-go
financing for capital projects.

Governmental Revenues & Expenditures
(billions )
$1.82 $1.82

$1.81 $1.84 $1.82

$1.78

$1.75

$1.88

$1.80 $1.83

$1.69

$1.50
$1.25
$1.00

FY09

FY10

FY11

Governmental Revenues

FY12

FY13

Governmental Expenditures

Sources of County Funds

Intergovernmental
$870 million (48%)

Most of the County’s Governmental Fund revenues
come from intergovernmental sources and taxes.
Intergovernmental revenues, such as federal
grants and state-shared revenues, accounted for
48% of revenues. County-generated tax revenues
such as property, jail excise, and other small tax
sources, accounted for 36% of governmental
revenue.

Charges for Services
$171 million (10%)
Licenses and Permits
$44 million (2%)
Fines, Forfeits, and
Miscellaneous Revenues
$71 million (4%)
Taxes
$642 million (36%)

In FY 2013, Maricopa’s three taxrelated revenue sources increased
over the prior year. However, the
revenues are still substantially less
than FY 2008.

Tax Related Revenues are Improving

$900

Sales, Vehicle License, and Jail Taxes
(millions)
$138

$600

$149
$461

$300

$107

$112

$118

$125

$135

$125

$122

$122

$127

$395

$366

$385

$400

$419

$117

$FY08

FY09

The excess of expenditures over
revenues from FY 2011 through
FY 2013 reflect building construction
costs and other capital expenditures
that were paid from revenues in
prior years that had been held for
future capital projects.

FY10

FY11

FY12

FY13

FY 2008 to FY 2013 Decline
Jail Excise

$13 million ( 9%)

Vehicle License

22 million (14%)

State-Shared Sales

42 million ( 9%)

Total Decline

$77 million

Note: Tax related revenues are distributed to the General Fund and various Special Revenue Funds.
Maricopa County Internal Audit

9

FY 2013 Citizens Financial Condition Report

Assessed value in billions

$2.00

PROPERTY TAX REVENUES
Property taxes are a major source of revenue for Maricopa County local governments. Property taxes
from many jurisdictions are combined into an annual bill that is payable in two installments. The
Maricopa County Assessor determines the assessed value of property. Each unit of local government
then applies a rate to assessed values in its jurisdictions to calculate revenues.
FY 2013 property taxes totaling $4.0 billion were distributed to Maricopa County, schools, cities,
towns, and special districts. The following chart shows that Maricopa County received 12.6% of each
property tax dollar. Schools and Education received 70.9%, and Cities, Towns and Special Districts
received 16.5%.

Most Property Tax Dollars Go to Schools
All Property Taxes
(millions)

Cities,
Towns,
Special
Districts
$651

16%

Distribution of the County’s
Property Tax for FY 2013 (millions)
County Operating
Maricopa
County
$497

13%

71%

$425

Flood Control District

55

County Library District

17

Total

Schools &
Education
$2,803

$497

Assessed Property Values and Taxes Have Decreased
Maricopa County controls tax rates for its general operating, flood control, and library funds. Over
the past five years, assessed valuations have declined due to market conditions. During that period,
total direct property tax rates ranged from 1.16% in FY 2010 to 1.47% in FY 2012 and FY 2013
(rounded). Although rates increased from FY 2010, tax revenues decreased with lower assessed
values. In FY 2013, property tax rates were held at the FY 2012 rate.
The following charts show that assessed values declined $24 billion from FY 2009 to FY 2013 and that
general operating property taxes billed were $67 million less in FY 2013 than in FY 2010 and FY 2011.

$70

Maricopa County
General Operating Property Taxes
Billed (millions)

Maricopa County
Total Assessed Property Valuations
(billions)

$60
$50

$500
$58

$58

$480
$50

$40

$460
$39

$30

$440

$34

$20

$420

$10

$400

$492

$492
$478

$463
$4 25

$380

$FY09

FY10

FY11

Maricopa County Internal Audit

FY12

FY09

FY13

10

FY10

FY11

FY12

FY13

FY 2013 Citizens Financial Condition Report

EXPENDITURES
Expenditures Per Person Remain Low Compared with Benchmark Counties
$465 Total Expenditures Per Person

Expenditures Per Person

Maricopa County has practiced conservative
fiscal policies. Total FY 2013 expenditures for
all governmental funds was $465 per person.
The per person average for 10 benchmark
counties was $1,055.

$1,187

$1,147

$1,053

$1,044

$1,055

$1,000

$600

$478

$491

$482

$449

$465

$200

Spending by Category

FY09

Public Safety received the largest share of
appropriations. This category includes law
enforcement, courts, probation services,
criminal prosecutions, and defense.

FY10

FY11

Maricopa Co unty

FY12

FY13

Benchmark Average

Expenditures Per Person by
Spending Category - $465

Health, Welfare, and Sanitation received the
next largest share of appropriations. Examples
of this category include public health clinics,
human services, air quality regulation, and
restaurant health inspections.

General
Government
$39
Debt Service
$7

General Government received the third largest
share of appropriations. Examples of agencies
in this category include Elections, Treasurer,
Finance, Assessor, and Recorder.

Publ ic Safety
$222

Ca pi tal Outlay
$64

Educa tion $5

Cul ture a nd
Recreation
$8

Hi ghways
a nd Streets
$12
Hea lth,
Wel fare, and
Sa nitation
$108

Changes in Expenditures by Category
$900

$873 $872

(millions)

$830

$600
$384

$435 $426
$320

$300

$279 $251

$193 $169
$152
$53

$49

$48

$63

$70

$79

$0
Public Safety

Health, Welfare, and
Sanitation

FY11
Maricopa County Internal Audit

Capital Outlay

FY12
11

General
Government

Highway and Streets

Other

FY13
FY 2013 Citizens Financial Condition Report

RETIREMENT PLANS
Retirement Plans Remain Underfunded
The County contributes to four retirement plans: (1) the Arizona State Retirement System, (2) the
Public Safety Personnel Retirement System, (3) the Corrections Officer Retirement Plan, and (4) the
Elected Officials Retirement Plan. The plans provide retirement, long-term disability, and health
insurance premium benefits as established by state statute. Each is a multi-employer plan
administered independently of Maricopa County. Maricopa County and its employees contribute to the
plans in accordance with plan requirements. The following table summarizes each plan.

Retirement Plans Comparison FY 2013
Funding
Status

Statewide
Unfunded
Liability

County
Employees

Arizona State Retirement System

75.9%

$10.0 Billion

8,749

11.14%

11.14%

Public Safety Personnel Retirement System

58.7%

$4.4 Billion

612

9.55%

30.43%

Corrections Officer Retirement Plan

69.7%

$677 Million

3,099

8.41%

10.84%

Elected Officials Retirement Plan

56.5%

$270 Million

216

Retirement Plan

Contribution Rates
Employee
Employer

11.5%

20.87%

A key measure of a retirement plan’s health is its funding ratio, derived by comparing assets to
liabilities. A pension plan whose assets equal its liabilities is 100% funded, or fully funded. A plan with
assets that are less than its liabilities is considered to be underfunded, or in a deficit position. Although
Maricopa County is not directly liable for funding deficits, the County and its employees are affected by
contribution rates that may adjust periodically to compensate for investment returns and operating cash
flows. The following graph summarizes funding level trends of each plan over the past 10 years.

Retirement Plans Funded Status
FY 2004 - FY 2013

120%
100%

100%
75.9%

80%

69.7%
58.7%

60%

56.5%

40%
20%
0%
Arizona State

Maricopa County Internal Audit

Public Safety

Corrections Officer

12

Elected Officials

FY 2013 Citizens Financial Condition Report

METHODOLOGY AND SOURCES
Definition
Financial condition is defined as a local government’s ability to finance services on a continuing basis. A
county in good financial condition can sustain existing services to the public, withstand economic downturns,
and meet the demands of changing service needs.

Objective, Scope, and Methodology
The objective of this report is to evaluate Maricopa County’s financial condition using key financial
indicators. The indicators included trends and ratios commonly used by financial analysts.
Our primary information sources were the audited Comprehensive Annual Financial Reports (CAFR) issued by
10 national benchmark counties and Maricopa County. Our analysis did not include the non-major
governmental funds. Below are the benchmark counties that were used in this report.

Benchmarks

Est. 2012
Population Major Metro Area

Clark

2,008,654

Las Vegas

Harris

4,253,700

Houston

King

2,007,440

Seattle

Los Angeles

9,964,000

Los Angeles

Multnomah

748,445

Orange
Pima

3,081,804
996,670

Portland
Santa Ana/Anaheim
Tucson

Salt Lake

1,063,842

Salt Lake City

San Diego

3,150,178

San Diego

Santa Clara

1,842,254

San Jose

Other sources include: the Arizona State Retirement System, the Public Safety Personnel Retirement System,
the Corrections Officer Retirement Plan, and the Elected Officials Retirement Plan CAFRs and actuarial
reports, U.S. Census Bureau, Governmental Accounting Standards Board, International City/County Managers
Association, Government Finance Officers Association, Maricopa County’s Strategic Plans (budgetary
documents), and correspondence with internal and external staff.

Maricopa County CAFR
Maricopa County’s FY 2013 CAFR and prior year CAFRs are available by visiting the Maricopa County
Department of Finance website at: http://www.maricopa.gov/Finance/CAFR.aspx. These CAFRs will provide
additional detail on the content presented in this report.

Maricopa County Internal Audit

13

FY 2013 Citizens Financial Condition Report