ARIZONA HIGHWAY USER REVENUE FUND Forecasting Process & Results FY 2016-2025 Financial Management Services September 2015 TABLE OF CONTENTS Introduction 1 Background 1 Risk Analysis Panel 2 Model Results 2 Summary 3 Supplementary Information 1. HURF Official Revenue Forecast 2. HURF Revenue Risk Analysis Results by Probability 3. HURF Official Revenue Forecast Distribution 4. Panel Data Values 5. Panel Members Inputs by Independent Variable 6. Independent Variable Historical Values 4 5 6 7-10 11-15 16-20 ARIZONA HIGHWAY USER REVENUE FUND OFFICIAL FORECAST UPDATE RISK ANALYSIS OF EXPECTED VALUES Introduction This document presents the forecast of expected values for the Arizona Highway User Revenue Fund for the period FY 2016-2025, as prepared by the Arizona Department of Transportation. Background The State of Arizona taxes motor fuels and collects a variety of fees relating to the registration and operation of motor vehicles in the state. These collections include gasoline and use fuel taxes, motor carrier fees, vehicle license taxes, motor vehicle registration fees and other miscellaneous fees. These revenues are deposited in the Arizona Highway User Revenue Fund (HURF) and are then distributed to the cities, towns and counties of the State and to the State Highway Fund, which is administered by the Department. These taxes and fees represent a source of revenues available to the state for highway related expenses. Since 1986, the Department has estimated highway user revenues using a comprehensive regressionbased econometric model. In 1989, the model was updated by Dr. Alberta Charney of the University of Arizona. The model relied on the estimates of certain “independent variables” to predict future tax revenues. Any variability between estimated and actual values could lead to variances in the tax forecast. In order to deal with this variability, the Department introduced the Risk Analysis Process (RAP) in 1992. The RAP relies upon probability analysis and the independent evaluation of the model’s variables by an expert panel of economists. This results in a series of forecasts with specified probabilities of occurrence, rather than a single or “best guess” estimate. In 1997, Hickling Lewis Brod Inc. (HLB), working in conjunction with Dr. Dennis Hoffman of Arizona State University, developed a new forecasting model to incorporate certain economic data generated over the past ten years and evaluate the inclusion of independent variables absent from the 1989 model, to enhance the model’s forecasting accuracy. The new model also took into consideration 1997 legislation which eliminated the weight distance tax on motor carriers, increased weight and use fees for use class vehicles, and changed the point of taxation on fuel. In September 2000 and 2003, HLB reviewed the model and updated the equations. The independent variables contained in the model in 2003 included Arizona Real Income Growth Per Capita, Population Growth, Wage & Salary Employment Growth and Fleet Fuel Efficiency. In 2005, HDR\HLB developed a new forecasting model to incorporate additional economic data that would enhance the model’s forecasting accuracy. The Arizona Real Gross Domestic Product Growth independent variable was added to the model to incorporate the impact of the Arizona economy on the commercial registration activities. In September 2008, HDR\HLB reviewed the forecasting model and added the Arizona Real Gas Price Growth independent variable to improve the model’s forecasting accuracy for changes in Arizona gasoline consumption. In September 2009, HDR\HLB reviewed the forecasting model and added September 2015 1 the West Coast No. 2 Real Diesel Price Growth independent variable to improve the model’s forecasting accuracy for changes in Arizona use fuel (diesel) consumption. In September 2011, the income, gross domestic product, gas price and diesel price variables were converted to nominal dollars at the request of the panel members from the August 2010 RAP panel meeting. The September 2011 RAP panel recommended the Arizona nominal Gross Domestic Product independent variable be eliminated from the model. The current model includes: 1. 2. 3. 4. 5. 6. Arizona nominal personal income Arizona population Arizona non-farm employment Arizona fleet fuel efficiency (Not part of RAP Process) Arizona nominal gas price West Coast No. 2 nominal diesel price Risk Analysis Panel The Risk Analysis Process relies heavily on the judgments of an expert panel of economic and financial participants to provide information critical to the forecasting process. In August 2015, a panel of ten economic and finance experts representing public, private, and academic sectors submitted their individual estimates of the model’s independent variables and comments on the future economic outlook. The information gathered from the panelists was input into the model to produce a series of forecasts with associated probabilities of occurrence. The panelists’ inputs are reflected in the attached tables at the back of this report. Model Results This year’s panel inputs produced a mean forecast of $16,065.0 million for the period FY 2016-2025 with a compound growth rate of 3.8 percent. The Department’s Official Forecast for FY 2016-2025 amounts to $15,605.3 million with a compound growth rate of 3.5 percent. The Official Forecast incorporates the 50 percent confidence interval for all revenue categories. The FY 2016 forecast of $1,331.0 million was developed in July 2015 by ADOT staff using time-series techniques, historical and projected growth rates and recent legislative changes. FY 2016 Official Forecast (Dollars in Millions) Fiscal Year 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Total Ave. CGR September 2015 Mean Forecast $1,347.1 1,406.3 1,461.5 1,516.1 1,572.7 1,630.7 1,690.0 1,750.7 1,813.0 1,876.9 $16,065.0 3.8% Official Forecast $1,331.0 1,378.5 1,426.6 1,474.7 1,526.2 1,580.9 1,635.6 1,691.6 1,750.2 1,810.0 $15,605.3 3.5% Confidence Level 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 2 For comparison purposes, the September 2014 Official Forecast and the September 2015 Official Forecast are shown below: FY 2016-2025 Comparative Forecast (Dollars in Millions) Fiscal Year 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Total Ave. CGR Sep. 14 Official Forecast $1,316.8 1,363.2 1,411.0 1,459.4 1,510.4 1,557.1 1,607.7 1,659.2 1,711.0 1,762.1 $15,357.9 3.3% Sep. 15 Official Forecast $1,331.0 1,378.5 1,426.6 1,474.7 1,526.2 1,580.9 1,635.6 1,691.6 1,750.2 1,810.0 $15,605.3 3.5% Difference $14.2 15.3 15.6 15.3 15.8 23.8 27.9 32.4 39.2 47.9 $247.4 Summary The Department’s Official Forecast for FY 2016-2025 totals $15,605.3 million, an increase of $247.4 million from the September 2014 Official Forecast. The Risk Analysis Process panel members were pessimistic about the Arizona economy with only modest growth expected going forward. The panel was more conservative with their growth estimates for personal income and employment growth and expect higher fuel prices in FY 2017 and beyond when compared to last year’s panel inputs. The main reason for the increase in the September 2015 revenue forecast over the September 2014 revenue forecast is stronger than expected FY 2015 revenues which set a higher revenue base for the FY 2016 forecast and beyond. Supplementary Information The remaining pages of this report present supplementary information on the detailed results of the Risk Analysis Process, the Department’s model and the values of the independent variables forecast by the expert panel. While the Official Forecast period is FY 2016-2025 panel inputs were requested for FY 2016-2020, 2025, 2030 and 2035. Data displayed for other than the requested years has been extrapolated. September 2015 3 56.5 $1,290.4 Total 168.6 Registration Other 369.7 Vehicle License Tax 184.5 Use Fuel Tax 40.2 $470.9 Gasoline Tax Motor Carrier Fee 2015 Actual Fiscal Year Percentile $1,331.0 56.7 173.6 390.1 41.4 191.0 $478.2 2016 N/A $1,378.5 59.9 175.7 412.0 41.5 198.6 $490.8 2017 50% $1,426.6 61.7 180.2 436.6 42.8 205.7 $499.6 2018 50% $1,474.7 63.5 185.1 462.4 44.2 212.3 $507.2 2019 50% $1,526.2 65.5 190.2 491.3 45.7 218.8 $514.7 2020 50% $1,580.9 67.5 195.7 522.8 47.4 225.1 $522.4 2021 50% $1,635.6 69.3 200.8 555.4 49.0 231.3 $529.8 2022 50% HURF OFFICIAL REVENUE FORECAST With Category Detail and Confidence Interval By Fiscal Year (Current Dollars in Millions) $1,691.6 71.4 206.2 589.0 50.7 237.3 $537.0 2023 50% $1,750.2 73.3 211.4 624.9 52.3 243.7 $544.6 2024 50% $1,810.0 75.2 216.9 661.4 54.0 250.1 $552.4 2025 50% 1,406.3 1,461.5 1,516.1 1,572.7 1,630.7 1,690.0 1,750.7 1,813.0 1,876.9 2017 2018 2019 2020 2021 2022 2023 2024 2025 2,485.2 2,388.3 2,296.2 2,205.6 2,114.2 2,022.4 1,930.4 1,833.0 1,722.6 $1,569.4 10% $16,065.0 $20,567.3 $1,347.1 2016 Total Mean Fiscal Year 2,052.2 1,979.9 1,910.6 1,840.9 1,773.6 1,707.8 1,641.6 1,576.9 1,506.1 $1,421.3 30% 1,920.7 1,855.8 1,793.5 1,731.1 1,669.7 1,611.2 1,552.9 1,496.2 1,437.9 $1,373.3 40% $18,653.7 $17,410.9 $16,442.3 2,223.4 2,139.7 2,059.8 1,982.5 1,906.5 1,832.3 1,756.6 1,678.8 1,592.5 $1,481.7 20% 1,704.8 1,651.4 1,599.1 1,549.2 1,498.7 1,450.4 1,404.3 1,360.9 1,322.0 $1,290.3 60% 1,603.3 1,553.3 1,505.6 1,457.4 1,413.0 1,371.0 1,331.1 1,295.4 1,265.4 $1,249.3 70% $15,605.3 $14,830.9 $14,044.8 1,810.0 1,750.2 1,691.6 1,635.6 1,580.9 1,526.2 1,474.7 1,426.6 1,378.5 $1,331.0 50% HURF TOTAL TAX REVENUE RISK ANALYSIS RESULTS (Current Dollars in Millions) 1,362.7 1,324.0 1,289.3 1,253.5 1,220.3 1,190.2 1,162.0 1,139.9 1,130.2 $1,148.1 90% $13,220.3 $12,220.1 1,492.5 1,449.3 1,406.3 1,365.5 1,325.9 1,288.5 1,255.3 1,226.1 1,206.1 $1,205.0 80% HURF $1,331.0 1,378.5 1,426.6 1,474.7 1,526.2 1,580.9 1,635.6 1,691.6 1,750.2 1,810.0 $15,605.3 DPS/ ESP /1 $128.1 41.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0 $257.1 Net HURF $1,202.9 1,337.5 1,415.6 1,463.7 1,515.2 1,569.9 1,624.6 1,680.6 1,739.2 1,799.0 $15,348.2 DPS Parity Comp. Fund /2 ($3.0) (3.1) (3.3) (3.5) (3.7) (4.0) (4.2) (4.5) (4.8) (5.0) ($39.2) ADOT 50.5% /1,3 $603.2 671.0 706.2 730.3 756.1 783.5 810.9 838.9 868.2 898.2 $7,666.7 Cities/Towns 27.5% /1 $345.2 382.2 389.3 402.5 416.7 431.7 446.8 462.2 478.3 494.7 $4,249.6 Cities +300K 3% /1 $37.7 41.7 42.5 43.9 45.5 47.1 48.7 50.4 52.2 54.0 $463.6 Counties 19% /1 $238.5 264.1 269.0 278.1 287.9 298.3 308.7 319.3 330.4 341.8 $2,936.1 NOTES: FY 2016 HURF estimate based on July 2015 Forecast. FY 2017-2025 HURF estimate based on September 2015 Official Forecast. /1. The DPS/ESP includes $1 million for Economic Strength Project (ESP) each year. The DPS transfer in FY 2016 is $96.410 million per Laws 2015, 1st Regular Session, Chapter 8, (SB 1469) and $10 million each year thereafter, which is subject to change. In addition, Laws 2014, 2nd Regular Session, Chapter 9 (SB 1487) appropriated $30 million in FY 2015 and FY 2016 and $60 million in FY 2017 to cities, towns and counties. A portion of these monies are distributed to the state highway fund for projects in Maricopa and Pima counties (Counties over 800,000). The distribution of SB 1487 appropriations are included in the columns ADOT 50.5%, Cities/Towns 27.5%, Cities over 300,000 3% and Counties 19%. Per Laws 2015, 1st Regular Session, Chapter 10 (SB 1471) the $60 million appropriation for FY 2017 in Laws 2014, 2nd Regular Session, Chapter 9, (SB 1487) is reduced to $30 million. FY 2016 also includes a $652,700 appropriation to MVD for the registration compliance program/3rd Party programs. /2. Per Laws 2005, Chapter 306 (SB 1119), 1.51 percent of the state highway fund share of HURF VLT is transferred to the DPS Parity Compensation Fund. /3 Net of the DPS Parity Compensation Fund transfer and includes transfers per Laws 2011. 1st Regular Session, Chapter 28 (SB 1616) which transfers the state highway fund share of HURF VLT difference between the two-year registration and the five-year registration to the state general fund. Laws 2010, 7th Special Session, Chapter 12, (HB 2012) an amount equal to 90 percent of the fees collected under 28-4802 (A) and 60 percent of the fees collected under 28-4802 (B) shall be transferred from the state highway fund share of HURF VLT to the state general fund. Fiscal Year 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Total HURF OFFICIAL REVENUE FORECAST DISTRIBUTION (Current Dollars in Millions) PANELIST DATA VALUES AZ Nominal Income Growth Arizona Population Growth Arizona Non-Farm Employ. Growth AZ Nominal Gas Price Growth West Coast Nominal Diesel Price Growth 4.48% 3.31% 6.13% 1.84% 1.38% 2.28% 2.21% 1.02% 3.48% -8.74% -18.48% 4.20% -7.13% -16.37% 5.53% 4.91% 3.11% 6.65% 1.93% 1.44% 2.36% 2.40% 0.93% 3.88% 3.27% -5.87% 14.15% 3.44% -6.98% 15.43% 5.05% 2.72% 6.97% 1.95% 1.47% 2.38% 2.53% 0.45% 4.18% 4.77% -4.60% 13.71% 5.11% -4.49% 15.21% 5.00% 2.32% 6.97% 1.92% 1.42% 2.34% 2.56% 0.24% 4.49% 4.23% -5.17% 14.74% 4.56% -4.47% 14.61% 4.88% 2.47% 6.98% 1.86% 1.35% 2.29% 2.48% 0.44% 4.61% 5.26% -5.07% 16.20% 5.53% -4.08% 15.63% 4.44% 1.33% 7.41% 1.63% 1.08% 2.21% 2.26% -0.18% 4.77% 3.77% -8.09% 16.24% 4.16% -7.42% 16.24% 4.36% 0.50% 7.70% 1.53% 0.92% 2.20% 2.13% -0.81% 4.99% 2.47% -11.58% 16.81% 2.86% -10.43% 16.65% 4.31% -0.05% 8.16% 1.42% 0.61% 2.26% 2.01% -1.32% 5.12% 2.65% -12.12% 17.17% 3.04% -11.34% 17.39% FY 2016 Median Lower 10% Upper 10% FY 2017 Median Lower 10% Upper 10% FY 2018 Median Lower 10% Upper 10% FY 2019 Median Lower 10% Upper 10% FY 2020 Median Lower 10% Upper 10% FY 2025 Median Lower 10% Upper 10% FY 2030 Median Lower 10% Upper 10% FY 2035 Median Lower 10% Upper 10% All data in the above table are percentage growth rates. September 2015 7 Arizona Nominal Personal Income Growth 10.0% 8.0% Growth Rate 6.0% 4.0% 2.0% 0.0% -2.0% 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Fiscal Year Median Lower 10% Upper 10% Arizona Population Growth 6.0% 5.0% Growth Rate 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Fiscal Year Median September 2015 Lower 10% Upper 10% 8 Arizona Non-Farm Employment Growth 8.0% 6.0% Growth Rate 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% -8.0% 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2024 2025 Fiscal Year Median Lower 10% Upper 10% Arizona Nominal Gas Price Growth 30.0% 20.0% Growth Rate 10.0% 0.0% -10.0% -20.0% -30.0% 2016 2017 2018 2019 2020 2021 2022 2023 Fiscal Year Median September 2015 Lower 10% Upper 10% 9 West Coast No. 2 Nominal Diesel Price Growth 30.0% 20.0% Growth Rate 10.0% 0.0% -10.0% -20.0% -30.0% 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Fiscal Year Median September 2015 Lower 10% Upper 10% 10 Arizona Nominal Personal Income Growth 2016 2017 2018 2019 2020 2025 2030 2035 Panelist 1 Median 5.0% 5.5% 5.5% 5.6% 5.4% 4.6% 4.6% 4.6% Lower 10% 4.0% 4.3% 4.3% 4.0% 3.8% 2.7% 2.9% 2.1% Upper 10% 6.8% 7.1% 7.1% 6.5% 6.8% 6.2% 6.7% 7.0% Panelist 2 Median 4.7% 4.9% 5.1% 5.2% 5.0% 4.8% 4.5% 4.2% Lower 10% 3.8% 4.0% 4.0% 4.0% 3.8% 3.5% 3.0% 3.0% Upper 10% 5.3% 5.5% 5.6% 5.5% 5.4% 5.2% 5.0% 4.8% Panelist 3 Median 4.8% 6.0% 6.0% 5.7% 5.6% 4.8% 4.8% 4.8% Lower 10% 4.0% 4.0% 4.4% 4.1% 4.1% 1.3% 1.3% 1.3% Upper 10% 7.2% 8.0% 7.6% 7.3% 7.3% 8.3% 8.3% 8.3% Panelist 4 Median 4.6% 5.9% 6.1% 6.1% 6.0% 5.5% 5.3% 5.3% Lower 10% 3.7% 5.0% 5.0% 4.9% 4.8% 4.0% 3.0% 2.4% Upper 10% 5.5% 6.8% 7.4% 7.3% 7.2% 7.0% 7.6% 8.2% Panelist 5 Median 3.6% 3.7% 3.7% 3.8% 3.8% 3.8% 3.7% 3.5% Lower 10% 3.2% 1.0% -1.0% -2.0% 2.0% 3.3% 2.5% 1.8% Upper 10% 5.2% 5.5% 6.5% 7.0% 6.5% 6.3% 5.5% 7.5% Panelist 6 Median 5.0% 5.5% 6.0% 6.0% 5.7% 4.5% 4.5% 4.5% Lower 10% 4.0% 4.3% 4.0% 3.8% 3.6% 2.8% 0.8% Upper 10% 5.9% 6.5% 7.0% 7.2% 7.3% 7.5% 7.7% 8.0% Panelist 7 Median 5.0% 5.5% 5.5% 5.0% 5.0% 5.0% 5.0% 5.0% Lower 10% 4.8% 5.3% 5.3% 4.8% 4.8% 4.8% 4.8% 4.8% Upper 10% 5.5% 6.0% 6.0% 5.5% 5.5% 5.5% 5.5% 5.5% Panelist 8 Median 5.0% 5.4% 5.8% 5.8% 5.7% 4.8% 4.6% 4.6% Lower 10% 4.5% 4.6% 4.6% 4.6% 4.5% 3.0% 2.0% 1.5% Upper 10% 6.0% 6.5% 6.8% 6.8% 6.5% 6.5% 6.5% 6.5% Panelist 9 Median 3.0% 2.6% 2.7% 2.7% 2.5% 2.5% 2.5% 2.5% Lower 10% 2.0% 1.6% 1.6% 1.7% 1.5% 1.5% 1.5% 1.5% Upper 10% 7.0% 6.3% 6.1% 5.8% 5.3% 5.0% 4.7% 4.4% Panelist 10 Median 4.1% 4.1% 4.1% 4.1% 4.1% 4.1% 4.1% 4.1% Lower 10% -0.9% -3.0% -4.9% -6.7% -8.2% -13.6% -16.8% -18.9% Upper 10% 6.9% 8.3% 9.6% 10.8% 12.0% 16.6% 19.5% 21.4% All data in the above table are percentage growth rates. September 2015 11 Arizona Population Growth 2016 2017 2018 2019 2020 2025 Panelist 1 Median 1.6% 1.7% 1.9% 1.9% 1.9% 1.7% Lower 10% 1.1% 1.0% 1.2% 1.3% 1.3% 0.8% Upper 10% 2.1% 2.1% 2.2% 2.2% 2.4% 2.6% Panelist 2 Median 2.0% 2.1% 2.2% 2.3% 2.1% 1.9% Lower 10% 1.7% 1.8% 1.9% 1.9% 1.8% 1.6% Upper 10% 2.2% 2.3% 2.4% 2.5% 2.3% 2.2% Panelist 3 Median 1.9% 2.0% 1.9% 1.9% 1.8% 1.7% Lower 10% 1.0% 1.0% 1.0% 1.0% 1.0% 0.5% Upper 10% 2.8% 3.0% 2.9% 2.7% 2.7% 2.9% Panelist 4 Median 1.9% 1.9% 1.9% 1.9% 1.8% 1.7% Lower 10% 1.7% 1.8% 1.7% 1.6% 1.6% 1.3% Upper 10% 2.0% 2.1% 2.1% 2.1% 2.1% 2.1% Panelist 5 Median 1.6% 1.8% 1.8% 1.8% 1.9% 1.7% Lower 10% 1.2% 1.4% 1.3% 1.3% 1.2% 1.1% Upper 10% 2.1% 2.2% 2.1% 2.2% 2.1% 2.1% Panelist 6 Median 1.9% 2.0% 2.0% 2.0% 2.0% 1.7% Lower 10% 1.5% 1.6% 1.7% 1.6% 1.5% 1.0% Upper 10% 2.4% 2.4% 2.6% 2.6% 2.7% 2.5% Panelist 7 Median 1.8% 1.9% 1.9% 1.7% 1.5% 1.5% Lower 10% 1.7% 1.8% 1.8% 1.6% 1.4% 1.4% Upper 10% 2.0% 2.1% 2.1% 1.9% 1.7% 1.7% Panelist 8 Median 2.0% 2.0% 2.0% 2.0% 1.9% 1.7% Lower 10% 1.8% 1.9% 1.9% 1.8% 1.7% 1.3% Upper 10% 2.2% 2.3% 2.3% 2.2% 2.1% 2.1% Panelist 9 Median 1.8% 1.8% 1.8% 1.8% 1.8% 1.0% Lower 10% 0.6% 0.6% 0.6% 0.6% 0.6% 0.6% Upper 10% 2.6% 2.6% 2.6% 2.6% 2.6% 1.8% Panelist 10 Median 2.0% 2.1% 2.1% 2.0% 1.9% 1.7% Lower 10% 1.5% 1.6% 1.5% 1.5% 1.4% 1.2% Upper 10% 2.4% 2.6% 2.5% 2.4% 2.3% 2.0% All data in the above table are percentage growth rates. September 2015 2030 2035 1.6% 1.5% 0.6% 0.3% 2.7% 2.8% 1.8% 1.7% 1.5% 1.4% 2.2% 2.1% 1.6% 1.5% 0.4% 0.3% 2.8% 2.7% 1.6% 1.5% 0.9% 0.4% 2.2% 2.5% 1.6% 1.5% 1.0% 0.4% 2.2% 2.6% 1.5% 1.5% 0.8% 0.2% 2.6% 2.9% 1.5% 1.5% 1.4% 1.4% 1.7% 1.7% 1.7% 1.5% 1.0% 0.5% 2.1% 2.1% 0.8% 0.6% 0.4% 0.2% 1.6% 1.4% 1.6% 1.5% 1.1% 1.0% 1.9% 1.8% 12 Arizona Non-Farm Employment Growth 2016 2017 2018 2019 2020 2025 2030 2035 Panelist 1 Median 2.0% 2.2% 2.3% Lower 10% 1.6% 1.2% 1.3% Upper 10% 2.9% 3.2% 3.3% Panelist 2 Median 2.2% 2.4% 2.6% Lower 10% 1.8% 1.9% 2.0% Upper 10% 2.6% 2.7% 2.9% Panelist 3 Median 2.4% 2.9% 2.9% Lower 10% 0.9% 1.4% 1.4% Upper 10% 4.0% 4.5% 4.5% Panelist 4 Median 2.4% 2.6% 2.8% Lower 10% 1.8% 2.0% 2.2% Upper 10% 3.0% 3.2% 3.4% Panelist 5 Median 2.3% 2.6% 2.9% Lower 10% 1.7% 2.0% -2.0% Upper 10% 2.9% 3.2% 3.5% Panelist 6 Median 2.3% 2.5% 2.8% Lower 10% 1.7% 1.6% 1.5% Upper 10% 3.0% 3.2% 3.8% Panelist 7 Median 2.6% 3.1% 3.0% Lower 10% 2.4% 2.9% 2.8% Upper 10% 2.9% 3.4% 3.3% Panelist 8 Median 2.2% 2.5% 2.7% Lower 10% 1.7% 1.9% 2.0% Upper 10% 2.9% 3.1% 3.3% Panelist 9 Median 1.3% 1.0% 1.1% Lower 10% -0.2% -0.5% -0.4% Upper 10% 4.6% 4.3% 4.4% Panelist 10 Median 2.4% 2.2% 2.2% Lower 10% -3.2% -5.1% -6.3% Upper 10% 6.0% 8.0% 9.4% 2.6% 1.4% 3.5% 2.5% 1.3% 3.6% 2.5% 2.2% 2.0% 0.6% -0.1% -0.6% 3.6% 3.5% 3.8% 2.6% 1.9% 2.9% 2.5% 1.8% 2.9% 2.2% 1.6% 2.8% 2.0% 1.6% 2.7% 1.8% 1.4% 2.5% 2.5% 1.0% 4.1% 2.4% 1.0% 4.1% 2.3% 0.8% 3.9% 2.2% 0.7% 3.8% 2.1% 0.6% 3.7% 2.9% 1.6% 4.2% 2.8% 1.5% 4.1% 2.0% 1.7% 1.5% 0.5% -0.6% -1.2% 3.5% 4.0% 4.2% 2.9% -2.0% 4.2% 2.8% 1.5% 4.1% 2.4% 2.2% 1.9% 0.9% -0.1% -0.8% 3.9% 4.5% 4.6% 3.0% 1.3% 4.5% 3.0% 2.5% 2.5% 2.5% 1.0% -0.5% -2.0% 5.0% 5.3% 5.5% 5.7% 2.8% 2.6% 3.1% 2.5% 2.3% 2.8% 2.5% 2.3% 2.8% 2.7% 1.8% 3.5% 2.5% 1.5% 3.8% 2.3% 2.1% 1.9% 1.0% -0.5% -1.0% 3.8% 3.8% 3.8% 1.4% -0.1% 4.7% 1.6% 0.1% 4.9% 2.0% 0.5% 5.3% 2.5% 2.3% 2.8% 2.0% 0.5% 5.3% 2.5% 2.3% 2.8% 2.0% 0.5% 5.3% 2.2% 2.2% 1.9% 1.9% 1.9% -7.1% -7.6% -9.9% -11.4% -12.4% 10.2% 10.8% 12.7% 14.0% 14.9% All data in the above table are percentage growth rates. September 2015 13 Arizona Nominal Gas Price Growth 2016 2017 2018 2019 2020 2025 2030 2035 -10.0% -10.0% -17.0% -17.0% 3.0% 5.0% 3.0% -6.8% 10.0% 2.5% -6.2% 10.8% 2.5% 2.5% 2.5% 2.5% -6.6% -10.2% -11.7% -14.4% 13.2% 13.8% 16.7% 18.2% -15.0% -5.0% -20.0% -15.0% 5.0% 10.0% 10.0% 0.0% 20.0% 10.0% 0.0% 20.0% 8.6% 2.0% 20.0% Panelist 1 Median Lower 10% Upper 10% Panelist 2 Median Lower 10% Upper 10% Panelist 3 Median Lower 10% Upper 10% Panelist 4 Median Lower 10% Upper 10% Panelist 5 Median Lower 10% Upper 10% Panelist 6 Median Lower 10% Upper 10% Panelist 7 Median Lower 10% Upper 10% Panelist 8 Median Lower 10% Upper 10% Panelist 9 Median Lower 10% Upper 10% Panelist 10 Median Lower 10% Upper 10% 6.0% 2.0% 18.0% 4.0% 1.5% 15.0% 3.0% 1.0% 10.0% 0.0% -7.0% 7.0% 1.0% -6.0% 8.0% 2.6% -6.5% 11.7% 2.6% -6.5% 11.7% 2.5% 2.0% 1.5% 1.7% -6.5% -11.5% -14.0% -16.0% 11.7% 15.5% 17.0% 19.4% 1.2% -8.3% 10.7% 1.3% -8.1% 10.8% 1.5% -8.0% 10.9% 1.8% -9.9% 13.4% 2.5% 3.0% 0.8% 2.1% -11.1% -13.5% -18.7% -17.3% 16.1% 19.5% 20.2% 21.6% -15.0% -20.2% 15.0% 15.0% 7.7% 30.0% 7.0% -5.0% 23.4% 2.0% -1.6% 21.6% 8.6% 4.6% 1.0% 2.2% -5.0% -11.9% -18.4% -17.2% 22.2% 21.1% 20.4% 21.6% -6.0% -20.0% 1.0% 2.5% -5.0% 15.0% 3.0% 0.0% 7.5% 3.0% -5.0% 15.0% 4.0% 2.5% 2.5% 2.5% -6.0% -10.0% -20.0% -22.0% 20.0% 16.0% 20.0% 22.0% -30.0% -40.0% -25.0% 4.0% 0.0% 8.0% 6.0% 0.0% 10.0% 6.0% 0.0% 10.0% 6.0% 0.0% 10.0% 6.0% 0.0% 10.0% -10.0% -25.0% 5.0% 15.0% 0.0% 25.0% 15.0% 5.0% 25.0% 15.0% 2.5% 25.0% 10.0% 0.0% 20.0% 5.0% 2.0% 2.0% -5.0% -10.0% -10.0% 20.0% 20.0% 20.0% 6.1% -8.9% 16.1% 5.6% -5.1% -4.8% -9.4% -20.1% -19.8% 15.6% 4.9% 5.2% - - - - 6.0% 0.0% 10.0% 6.0% 0.0% 10.0% 2.6% 2.3% 2.0% 1.8% -12.4% -12.7% -13.0% -13.2% 12.6% 12.3% 12.0% 11.8% - - - - All data in the above table are percentage growth rates. September 2015 14 West Coast No. 2 Nominal Gas Price Growth 2016 2017 2018 2019 2020 2025 2030 2035 -9.0% -9.0% -16.0% -18.0% -2.0% -1.5% 3.0% -6.8% 10.0% 2.5% -6.2% 10.8% 2.5% 2.5% 2.5% 2.5% -6.4% -10.2% -11.7% -14.4% 11.7% 13.8% 16.7% 18.2% -15.0% -5.0% -20.0% -15.0% 5.0% 10.0% 10.0% 0.0% 20.0% 10.0% 0.0% 20.0% 8.6% 2.0% 20.0% Panelist 1 Median Lower 10% Upper 10% Panelist 2 Median Lower 10% Upper 10% Panelist 3 Median Lower 10% Upper 10% Panelist 4 Median Lower 10% Upper 10% Panelist 5 Median Lower 10% Upper 10% Panelist 6 Median Lower 10% Upper 10% Panelist 7 Median Lower 10% Upper 10% Panelist 8 Median Lower 10% Upper 10% Panelist 9 Median Lower 10% Upper 10% Panelist 10 Median Lower 10% Upper 10% 6.0% 2.0% 18.0% 4.0% 1.5% 15.0% 3.0% 1.0% 10.0% 0.0% -7.0% 7.0% 1.0% -6.0% 8.0% 2.6% -6.5% 11.7% 2.6% -6.5% 11.7% 2.5% 2.0% 1.5% 1.7% -6.5% -11.5% -14.0% -16.0% 11.7% 15.5% 17.0% 19.4% 1.2% -7.2% 9.6% 1.3% -7.1% 9.7% 1.5% -7.0% 9.9% 1.8% -6.7% 10.2% 2.5% 3.0% 0.8% 2.1% -8.5% -10.5% -15.2% -17.2% 13.5% 16.5% 16.8% 21.5% -15.0% -20.2% 15.0% 15.0% 7.7% 30.0% 7.0% -5.0% 23.4% 2.0% -1.6% 21.6% 8.6% 4.6% 1.0% 2.2% -5.0% -11.9% -18.4% -17.2% 22.2% 21.1% 20.4% 21.6% -4.5% 5.0% -18.0% -10.0% 2.0% 20.0% 4.0% -5.0% 20.0% 4.0% -7.0% 15.0% 4.5% 4.0% 4.0% 4.0% -5.0% -12.0% -18.0% -20.0% 17.0% 17.0% 20.0% 22.0% -20.0% 0.0% -30.0% -10.0% -10.0% 20.0% 6.0% 0.0% 10.0% 6.0% 0.0% 10.0% 6.0% 0.0% 10.0% 6.0% 0.0% 10.0% -10.0% -25.0% 5.0% 15.0% 0.0% 25.0% 15.0% 5.0% 25.0% 15.0% 2.5% 25.0% 10.0% 0.0% 20.0% 5.0% 2.0% 2.0% -5.0% -10.0% -10.0% 20.0% 20.0% 20.0% 8.1% -3.9% 18.1% 7.6% -3.1% -2.8% -4.4% -15.1% -14.8% 17.6% 6.9% 7.2% 4.6% -7.4% 14.6% 4.3% -7.7% 14.3% - - - - - - 6.0% 0.0% 10.0% 4.0% -8.0% 14.0% - 6.0% 0.0% 10.0% 3.8% -8.2% 13.8% - All data in the above table are percentage growth rates. September 2015 15 HISTORICAL DATA ARIZONA NOMINAL PERSONAL INCOME GROWTH (Annual Percent Change) HISTORICAL DATA BY FISCAL YEAR (July 1 through June 30) 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 15.1% 14.0% 10.0% 9.5% 11.9% 15.3% 17.8% 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 16.4% 16.7% 9.6% 6.2% 11.7% 12.1% 10.3% 8.9% 7.9% 7.6% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 6.1% 4.9% 5.9% 7.2% 8.7% 9.2% 8.6% 8.5% 9.2% 8.0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 7.8% 6.9% 4.2% 4.5% 7.2% 9.9% 10.8% 8.0% 3.4% -1.2% 2010 2011 2012 2013 2014 2015 * 2016 2017 2018 2019 -1.5% 3.2% 4.9% 3.3% 3.1% 4.5% BEA for FY 1973-2014, Western Blue Chip, June 2015 for FY 2015* and FY 2016, and ADOT staff for FY 2017-35. Percent Change HISTORICAL DATA - GRAPHED 22.0% 22% 22.0% 0.22 20.0% 20% 20.0% 0.2 18.0% 18% 18.0% 0.18 16.0% 16% 16.0% 0.16 14.0% 14% 14.0% 0.14 12.0% 0.12 12.0% 12% 10.0% 0.1 10.0% 10% 8.0% 0.08 8.0% 8% 6.0% 0.06 6.0% 6% 4.0% 0.04 4.0% 4% 2.0% 0.02 2.0% 2% 0.0% 0 0.0% 0% -2.0% -0.02 -2.0% -2% -4.0% -0.04 -4.0% -4% -6.0% -0.06 -6.0% -6% 74 75 77 78 79 82 83 84 85 86 87 88 89 92 93 9494 9595 96 97 98 99 00 01 0200 0301 0404 0505 06 07 08 09 10 1108 1209 13 10 14 14 15 73 74 75 7677 77 78 79 80 8283 83 84 85 86 8787 8990 90 91 92 93 96 97 98 99 00 01 02 03 09 10 11 12 13 73 7374 7475 7576 7676 77 7878 7979 8080 8181 81 82 83 84 84 85 85 86 86 87 8888 89 9091 90 91 91 92 92 93 93 94 94 95 95 96 96 97 97 98 98 99 99 00 01 02 02 03 03 0406 04 0507 05 0608 06 07 07 08 09 10 11 11 12 Fiscal Year HISTORICAL DATA - ANALYSIS Period 5 Years 10 Years Full Period September 2015 Historical Min. Max. 3.1% 4.9% -1.5% 10.8% -1.5% 17.8% Mean 3.8% 3.9% 8.3% Std. 80% Range Dev. Lower Upper 0.8% 3.2% 4.8% 3.7% -1.3% 8.3% 4.3% 3.3% 14.9% 16 HISTORICAL DATA ARIZONA POPULATION GROWTH (Annual Percent Change) HISTORICAL DATA BY FISCAL YEAR (July 1 through June 30) 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 3.3% 5.6% 5.9% 5.8% 4.6% 2.8% 2.7% 3.4% 3.7% 4.8% 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 3.9% 2.6% 2.8% 2.7% 3.3% 3.8% 3.9% 3.9% 2.9% 2.5% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 1.7% 2.8% 3.4% 3.8% 4.4% 4.4% 3.5% 3.3% 3.1% 2.9% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 3.0% 2.2% 2.3% 2.6% 3.1% 3.5% 3.2% 2.6% 1.5% 0.3% 2010 2011 2012 2013 2014 2015 * 2016 2017 2018 2019 0.2% 0.6% 0.9% 1.3% 1.3% 1.7% Census Bureau FY 1970-2000. FY 2001-2035 from ADOA Office of Employment and Population Statistics. * FY 2015 Estimated. HISTORICAL DATA - GRAPHED 7.0% 0.07 7.0% 7% Percent Change 6.0% 0.06 6.0% 6% 5.0% 0.05 5.0% 5% 4.0% 4% 4.0% 0.04 3.0% 3% 3.0% 0.03 2.0% 2% 2.0% 0.02 1.0% 1% 1.0% 0.01 0.0% 0% 0.0% 0 7069 7271 74 73 76 75 78 77 80 79 82 81 84 83 86 85 88 87 90 89 92 91 94 93 96 95 98 97 00 99 02 01 04 03 06 05 08 07 10 09 11 12 70 71 72 73 74 74 75 76 76 77 78 78 79 80 80 81 82 82 83 848485 868687 888889 909091 929293 949495 969697 989899 000001 02 02 03 04 04 05 06 06 07 08 08 09 10 10 11 12 12 13 14 15 14 Fiscal Year HISTORICAL DATA - ANALYSIS Period 5 Years 10 Years Full Period September 2015 Historical Min. Max. 0.6% 1.7% 0.2% 3.2% 0.2% 5.9% Mean 1.1% 1.4% 3.0% Std. Dev. 0.4% 1.0% 1.3% 80% Range Lower Upper 0.7% 1.5% 0.3% 2.7% 1.3% 4.5% 17 HISTORICAL DATA ARIZONA TOTAL NON-FARM EMPLOYMENT GROWTH (Annual Percent Change) HISTORICAL DATA BY FISCAL YEAR (July 1 through June 30) 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 4.0% 9.6% 10.9% 8.6% -0.5% 1.4% 4.8% 9.0% 10.9% 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 6.6% 2.3% 1.1% 0.0% 9.0% 8.9% 6.4% 3.7% 3.3% 2.2% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2.3% 1.1% 1.1% 3.1% 5.7% 6.4% 5.7% 5.2% 4.7% 4.4% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 4.0% 2.3% 0.5% 0.7% 2.6% 4.6% 5.2% 3.2% -0.3% -4.7% 2010 2011 2012 2013 2014 2015 * 2016 2017 2018 2019 -4.7% -0.4% 1.6% 2.2% 2.1% 2.1% Bureau of Labor Statistics for FY 1971-2014, ADOA, Office of Employment & Population Statistics, Employment Forecast Report, on February 26, 2015 for estimates in FY 2015*-2016 and ADOT staff estimates for FY 2017-2035. HISTORICAL DATA - GRAPHED 14.0% 14% 0.14 12.0% 12% 0.12 Percent Change 10.0% 10% 0.1 8.0% 0.08 8% 6.0% 0.06 6% 4.0% 0.04 4% 2.0% 0.02 2% 0.0% 0% 0 -2.0% -0.02 -2% -4.0% -0.04 -4% -6.0% -0.06 -6% -8.0% -0.08 -8% 71 72 72 73 73 74 74 7475 75 7576 76 7677 77 7778 78 7879 79 79 80 80 80 81 8181 82 8282 83 8383 84 8484 85 8586 85 8687 86 8788 87 8889 88 8990 89 9091 90 919291 929393 929494 93 9595 94 9696 95 9797 96 9898 97 9999 98 0000 01 9901 02 0002 03 0103 04 0204 05 03 05 06 04 06 0705 07 0806 08 0907 09 1008 10 1109 11 12 10 12 13 11 13 14 15 12 14 Fiscal Year HISTORICAL DATA - ANALYSIS Period 5 Years 10 Years Full Period September 2015 Historical Min. Max. -0.4% 2.2% -4.7% 5.2% -4.7% 10.9% Mean 1.5% 0.6% 3.6% Std. 80% Range Dev. Lower Upper 1.1% 0.4% 2.2% 3.2% -4.7% 3.4% 3.6% -0.2% 9.0% 18 HISTORICAL DATA ARIZONA NOMINAL GAS PRICE GROWTH (Annual Percent Change) HISTORICAL DATA BY FISCAL YEAR (July 1 through June 30) 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 -0.3% -9.2% -25.2% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 13.8% -16.0% 14.2% -3.3% -0.5% 7.2% 9.0% -10.3% -16.8% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 37.2% 20.2% -21.9% 25.4% 21.6% 17.4% 32.1% 0.5% 20.2% -19.3% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 4.7% 20.1% 16.1% -0.5% -3.9% -20.9% U.S. Department of Energy (EIA Administration) for FY 1985-2011, AAA Arizona for FY 2012-2015 and Global Insight, 1st Quarter 2015, Trend Forecast report for FY 2016-35 HISTORICAL DATA - GRAPHED 50.0% 50% 0.5 40.0% 40% 0.4 Percent Change 30.0% 30% 0.3 20.0% 20% 0.2 10.0% 10% 0.1 0.0% 0% 0 -10.0% -10% -0.1 -20.0% -20% -0.2 -30.0% -30% -0.3 -40.0% -40% -0.4 -50.0% -50% -0.5 91 92 92 93 93 93 94 9494 95 959596 9696 97 97 97 9898 99 9899 00 99 00 01 00 01 0201 020303 0204 04 03 05 05 04 06 0607 05 0708 06 08 09 0709 100810 11 09 11 12 10 12 13 11 13 14 Fiscal Year HISTORICAL DATA - ANALYSIS Period 5 Years 10 Years Full Period September 2015 Historical Min. Max. -20.9% 20.1% -20.9% 32.1% -21.9% 37.2% Mean 2.2% 4.9% 5.9% Std. Dev. 16.5% 17.3% 17.0% 80% Range Lower Upper -14.1% 18.5% -19.4% 21.4% -18.3% 23.8% 19 12 14 15 HISTORICAL DATA WEST COAST NO. 2 NOMINAL DIESEL PRICE GROWTH (Annual Percent Change) HISTORICAL DATA BY FISCAL YEAR (July 1 through June 30) 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 2.7% 6.4% 43.3% 31.4% 5.8% 10.0% 9.1% 22.4% 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 48.1% 30.2% 4.3% -8.0% -6.8% 0.1% -4.0% 2.1% 2.3% 1.2% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 14.2% 4.6% -3.2% 3.1% 2.7% -3.4% 4.9% 5.8% -11.8% -5.9% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 25.0% 16.4% -16.4% 12.4% 13.6% 27.8% 25.5% 2.7% 25.8% -17.2% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 -3.4% 23.5% 14.2% 0.0% -2.0% -14.1% U.S. Department of Energy (EIA Administration) for FY 1972-2015 and Global Insight, 1st Quarter 2015, Trend Forecast report for FY 2016-35 HISTORICAL DATA - GRAPHED 50.0% 50% 0.5 40.0% 40% 0.4 Percent Change 30.0% 30% 0.3 20.0% 20% 0.2 10.0% 10% 0.1 0.0% 0% 0 -10.0% -10% -0.1 -20.0% -20% -0.2 -30.0% -30% -0.3 -40.0% -40% -0.4 -50.0% -50% -0.5 72 73 73 74 8181 8282 8383 8484 85 85 86 86 87 88 9695 9796 9897 99 98 00 99 01 00 02 03 1008 1109 1210 13 11 14 12 15 72737475767778798081828384858687888990919293949596979899000102030405060708091011121314 72 7475 7576 7677 7778 7879798080 87 89 8890 8991 9092 91939294939594 0104 0205 0306 0407 0508060907 Fiscal Year HISTORICAL DATA - ANALYSIS Period 5 Years 10 Years Full Period September 2015 Historical Min. Max. -14.1% 23.5% -17.2% 25.8% -17.2% 48.1% Mean 4.3% 5.5% 7.9% Std. 80% Range Dev. Lower Upper 14.7% -9.3% 19.8% 15.9% -14.4% 25.5% 15.0% -7.7% 27.2% 20