December 15, 2000 The Honorable Jane D. Hull, Governor of the State of Arizona, Members of the Legislature, and Citizens of the State of Arizona: The Arizona Department of Transportation (Department) is pleased to submit the comprehensive annual financial report of the Arizona Department of Transportation, for the Fiscal Year ended June 30, 2000. Responsibility for both the accuracy of the data and the completeness and fairness of the presentation, including all disclosures, rests with the Department. To the best of our knowledge and belief, the enclosed data is accurate in all material respects and is reported in a manner designed to present fairly the financial position and results of operations of the various funds and account groups. All disclosures necessary to enable the reader to gain an understanding of the Department’s financial activities have been included. The Department was established by the State Legislature in July 1974 by combining the former Arizona Highway Department (originally established in 1927) and the State Department of Aeronautics (originally established in 1962). The Department is not legally separate from the State of Arizona’s primary government. The Department’s mission is to provide a transportation system, together with the means of revenue collection, licensing and safety programs, which meets the needs of the citizens of Arizona. It serves as the State’s public agency to plan, develop, maintain and operate facilities for the efficient movement of people and goods by surface and air throughout the State. The Department has statutory responsibility for carrying out its programs under Arizona Revised Statutes, Titles 28, 35 and 41. The Department receives guidance in capital planning and program development from a seven-member Transportation Board of the State of Arizona Department of Transportation (Transportation Board) appointed by the Governor. The Transportation Board is responsible for the annual update of the fiveyear highway and airport construction program and awards contracts each month for highway projects. The Transportation Board also has authority for the issuance of highway revenue and transportation excise tax bonds, grant anticipation notes, board funding obligations and approval of privatization agreements for toll facilities. The Department is structured into five major divisions: Intermodal Transportation, Motor Vehicle, Aeronautics, Transportation Planning and Administration, also called Transportation Services Group (TSG). The Department employs approximately 4,700 persons. The Department’s customers include: w w w key responsibilities to its Planning, designing, constructing, and maintaining a statewide transportation system. Providing title, registration, and licensing services. Providing revenue collection and distribution for both highway user and aviation-related taxes and fees. To meet the needs of its customers, the Department’s responsibilities are carried out at locations throughout the State. Most administrative activities are headquartered in or near the Capitol Complex in Phoenix. TSG includes a range of support services for the Department’s core business functions. Field activities for the Motor Vehicle Division are carried out statewide including 22 Ports-of-Entry around the State’s borders, and 65 Driver’s License/Title and Registration Offices. The Intermodal Transportation Division services its customers through 10 District Offices located throughout the State. These District Offices are responsible for all construction and maintenance activities for the State highway system. The comprehensive annual financial report is presented in three sections: Introductory, Financial, and Statistical. The Introductory Section includes this letter of transmittal, a list of principal officials and the Department’s organizational chart. The Financial Section includes the report of the independent auditors, general purpose financial statements, notes, required supplementary information and the combining and individual fund and account group financial statements. The Statistical Section includes additional financial information and transportation data presented on a multi-year comparative basis. prices. The Vehicle License Tax (VLT) collections continued to benefit from population growth and strong new car sales. The Registration revenues benefited from the receipt of late motor carrier fees from states that were slow to implement the higher fees imposed under the 1997 legislative changes (Senate Bill 1144). Arizona’s population has grown at an average annual rate of 3.1 percent since 1990, reaching an estimated 4.9 million by July 2000. Arizona continues to rank as one of the fastest growing states in the nation. The economic wealth of Arizona has also increased with personal income growing at an annual average rate of 8.2 percent since 1991 compared to 5.4 percent for the United States. Arizona wage and salary employment has grown by 4.5 percent creating an average of 70,000 jobs each year for the same time period. The objectives of this comprehensive annual financial report are to provide data relative to the financial position of the Department in conformity with generally accepted accounting principles and to include the required financial audits of the State Highway Fund and the remaining funds. The Maricopa County Transportation Excise Tax funds the Maricopa County Regional Freeway System. This tax, with receipts deposited into the Maricopa County Regional Area Road Fund (RARF), is applied to business activity in Maricopa County, including retail sales, contracting, utilities, rental of real and personal property, restaurant and bar receipts, and other smaller activities. This report includes all funds and account groups used to record the financial activity of the Department. The activities of the State Highway Fund (construction and debt service), the Maricopa Regional Area Road Fund, Bond Funds, and other funds that show the “pass-through” of state and Federal monies are reflected in this report. ECONOMIC CONDITIONS AND OUTLOOK Maricopa County Transportation Excise Tax collections totaled $249 million during Fiscal Year 2000, an increase of 8.5 percent over Fiscal Year 1999 and 0.8 percent above the forecast. Since 1991, the Maricopa County Transportation Excise Tax collections have grown by an average annual growth rate of 9.1 percent. For the Year Ended For Fiscal Year 2000, the Department’s two main funding sources, the Highway User Revenue Fund (HURF) and the Maricopa County Transportation Excise Tax posted mixed growth. For the Future Fiscal Year 2000 HURF collections surpassed one billion dollars for the first time, reaching $1.02 billion, an increase of 3.8 percent over Fiscal Year 1999. Collections were 0.3 percent below the estimate. All the major revenue categories exceeded the estimate except Gas Tax and Use Fuel Tax . With slower growth expected and higher fuel prices, the Department’s forecast for Fiscal Year 2001 HURF collections totals $1.043 billion. This represents a 2.3 percent increase over Fiscal Year 2000. The HURF average annual compound growth rate for Fiscal Years 1991 through 2000 has been 4.6 percent. The Arizona economy continued to be strong in Fiscal Year 2000, with continued high rankings in population, personal income and employment growth when compared to the rest of the nation. The unemployment rate for Arizona alone has remained at or near the lowest levels in more than 30 years. The slower growth in HURF revenues during Fiscal Year 2000 was due mainly to non-economic factors. The decrease in the Gas Tax and Use Fuel Tax collections was a result of unusual refund activity and higher fuel The distribution of HURF collections in Fiscal Year 2001 is estimated to be as follows: State Highway Fund $517 million; Arizona cities and towns $312 million; Arizona counties $194 million; Department of Public Safety $13 million; Prescott Regional Transportation Center $6 million, and Economic Strength Project Fund $1 million. ii In addition, the Department’s share of the non-HURF portion of the vehicle license tax is estimated at $7 million along with a State General Fund appropriation of $17 million. With the recent legislation to reduce the vehicle license tax rate, the State Highway Fund share has decreased and is projected to be eliminated on December 1, 2000. However, Laws 1999, Chapter 5 specifies that replacement funding in the form of a State General Fund appropriation be made to hold the State Highway Fund revenue neutral. the planning process, further ensuring that programs remain in fiscal balance. Through strategic planning, the Department integrates the needs of projected budgets for operations, the Five-Year Highway and Aviation Construction Programs, and Land, Building and Improvements (Facilities) into a composite plan for operating within the constraints of a dedicated, but limited, revenue stream. This planning process involves the evaluation of alternatives to ensure the efficient and effective use of limited resources. The product of this process is a deliverable plan of transportation improvements that is fiscally conservative. The Fiscal Year 2001 Transportation Excise Tax collections are projected to be $264 million, an increase of 6.2 percent over Fiscal Year 2000 The Maricopa County economic indicators for Fiscal Year 2001 remain strong but with some moderation. The Transportation Excise Tax average annual compound growth rate for Fiscal Years 1991 through 2000 has been 9.1 percent. MAJOR INITIATIVES For the Year Ended Landmark Federal transportation legislation was enacted into law on June 9, 1998, providing Arizona funding through Fiscal Year 2003 under a multi-year authorization bill. This measure, the Transportation Equity Act for the 21st Century (TEA-21), provides a record level of investment for transportation infrastructure. Under TEA-21, Arizona is expected to receive $2.7 billion over the Fiscal Year 1998-2003 period. On an annual basis, the Department expects to receive an average of $341 million per year in Federal highway apportionments with an additional $106 million allocated to local governments. The TEA-21 funding level for Arizona is estimated to be approximately 76 percent higher than the average Arizona received under the previous Federal Transportation Act (ISTEA). During Fiscal Year 2000, the Department continued to make significant progress in delivering quality products and services to Arizona residents and visitors. Highlighted below are the Department’s most notable achievements. During Fiscal Year 2000, a total of $746 million was obligated for highway construction. This total included $238 million for Maricopa Regional Freeway System projects, $41 million for other projects in Maricopa County, and $467 million for work statewide. At the end of Fiscal Year 2000, the Department had $820 million in highway construction work underway. The Regional Freeway Program in Maricopa County that was redefined in 1995 to complete 107 miles of freeways by 2006 has been advanced and expanded to include 37 additional miles on the Santan and Red Mountain freeways, previously shown in the Long Range Plan. Under the “2007 Acceleration Plan,” 147 miles of new freeways are planned to be opened by the end of 2007. Currently 58 miles have been opened to traffic and 30 more miles are under construction. The acceleration is being accomplished through the use of two new financing techniques, Grant Anticipation Notes and Board Funding Obligations. The Department’s Freeway Management System has added eight miles to State Route (SR) 51 during Fiscal Year 2000. The network of traffic sensors, electronic signs, computers, communications equipment, cameras and people monitor traffic conditions and notify response teams of crashes. The system now covers 50 miles of Valley freeways. Construction of an In developing the State’s transportation plans and budgets, the goal is to produce a balanced program that maximizes the investment of transportation dollars, while meeting priority needs, both in the construction and operations area. The Department has developed and implemented a strategic approach to transportation financial planning which is linked to the budget to ensure that the resources necessary to implement the plan are allocated in accordance with priorities reflected in the plan. The framework for strategic financial planning encompasses the use of enhanced tools, models and techniques, including cash flow models, statistical and econometric models, and bond optimization modeling. Life cycle management and risk analysis are enhancements that have significantly strengthened iii additional 16 miles on Interstate 17, Red Mountain Freeway (Loop 202) and Price Freeway (Loop 101) is underway and will be completed in Fiscal Year 2001. A freeway management system on 11 miles of Interstate 10 and Interstate 19 in Tucson is under construction. When the Tucson system comes online in mid-2001, it will be linked to the Valley’s system. The Department’s freeway management system also is expanding to rural areas with the design and installation of 17 variable message signs on rural highways underway. The message signs will join an existing network of seven signs installed on rural highways to warn drivers of road conditions and incidents. The Department’s web site is accessed an average of 500,000 times a week by customers and business partners seeking current transportation information. In addition to the online services offered by MVD, meeting agendas of the Governor's Transportation Vision 21 Task Force and the Transportation Board are available. Visitors will also find Geographic Information System (GIS) maps, news releases and legislative summaries. Cameras showing freeway conditions have proven to be a viewing favorite. ADOTNet, the Department's Intranet site, has enabled employees to improve and expand their internal exchange of information for almost two years. By providing virus alerts, training schedules, forms, documents and information regarding current events, individuals within our organization are better informed and are enjoying a more collaborative work environment. As we progress into the future, projects underway include a Policy & Procedure database and an online bidding program for contractors. In June 2000, the Transportation Board approved a $4.3 billion Five-Year Highway Construction Program for Fiscal Years 2001 through 2005, which provides funding for highway facilities throughout the State. The Five-Year program includes approximately: $1.592 billion for freeway and expressway construction in Maricopa County funded in large part from the Maricopa County Regional Area Road Fund; $1.768 billion for system improvements; $722 million for system preservation, and $258 million for system management on both the National Highway System and statewide system. The Motor Vehicle Division’s Third Party Program continues to expand in line with the strategic direction to focus on customer service and promote competitive government by partnering with public and private sector contractors to provide certain MVD services. By the end of Fiscal Year 2000 there were 58 third party companies providing title and registration services at a rate of approximately 90,000 transactions per month. Other third parties are performing inspections on out-of-state vehicles transferring titles to Arizona, administering driver license exams , processing driver license applications and providing motor vehicle records. Overall, third parties were performing 36 percent of MVD’s business by the end of the Fiscal Year. The Transportation Board also adopted a Five-Year $259 million Statewide Airport Development Program that includes 606 projects at general aviation and air carrier airports located throughout the state. For the Fiscal Year 2000, state-owned Grand Canyon National Park Airport remained the third busiest air carrier airport in the State with 159,681 takeoffs and landings and with 1,207,817 passengers enplaning and deplaning. The airport has been owned by the State since its construction in 1965. Grand Canyon Airport revenue for Fiscal Year 2000 amounted to $1.2 million. On May 12, 1999, Governor Hull signed House Bill 2374, which created an Airport Authority (a State entity) for the Grand Canyon National Park Airport. The Airport Authority assumed operational control on October 1, 1999. ADOT officially completed its Year 2000 (Y2K) effort in January of 2000 with no major problems or issues. All of the Department’s mission critical systems, applications and networks were functioning properly on January 1, 2000, and are officially Y2K compliant. To date, there have been no system or application failures as a result of Y2K. In addition, nearly 35,000 vehicle owners per month are renewing their vehicle registration on the Internet or by interactive voice response (IVR) on the telephone with the Division’s electronic service delivery system, ServiceArizona. New services added to ServiceArizona during Fiscal Year 2000 were special license plate orders, duplicate driver license orders and driver license address changes. This system has won industry awards and national recognition for its innovative use of technology to improve customer service. MVD is working to encourage even more customers to renew by mail, Internet, and IVR thereby avoiding a trip to a MVD office. For the Future iv Looking ahead, it is anticipated that increasing demands will be placed on the State’s transportation infrastructure and support services, in response to an expanding population base. The Department will be challenged to maintain existing facilities, meet the demand for new or upgraded roadways, and provide needed services for its citizens. Given increasing requirements in an environment of constrained revenues, one of the Department’s key strategies will focus on optimizing resources through process improvements, encouraging more competitive business practices, and leveraging existing revenues. Innovative financing and public-private partnerships will continue to play a key role in maximizing resources to better meet transportation needs. Another key strategy will be workforce development to ensure that the Department retains a high performing workforce with the skill sets to meet the changing needs of the Department. Between 2001 and 2007, the Department will spend an additional $1.6 billion to build new freeways in the Phoenix area. Planned construction is highlighted below: Pima Freeway (Loop 101) Pima Freeway from Loop 202 to Shea Boulevard is open and construction is underway on the freeway north to Princess Drive. Interim access at Princess Drive is now available, with a final opening scheduled in the Spring of 2001. Projects totaling $85 million are currently underway which extend the Pima Freeway across the northern edge of the Valley, linking it with Interstate 17 and the Agua Fria Freeway. Opening of the freeway between Interstate 17 and Scottsdale Road is anticipated in the Spring of 2001. The remaining section between Scottsdale Road and Princess Drive is scheduled to be completed in 2003. Innovative Financing Investment in transportation infrastructure will continue to play an important role in the strengthening of the Arizona economy in the 21st Century. In order to optimize dollars for construction, the Department has implemented several innovative financial mechanisms. These mechanisms include additional funding of the Highway Expansion and Extension Loan Program (HELP) and Grant Anticipation Notes. HELP is Arizona’s state infrastructure bank and is a loan fund that is capitalized with federal and state dollars as well as Board Funding Obligations issued by the Department to the State Treasurer. Grant Anticipation Notes are a financing mechanism that leverages future receipt of Federal highway aid. Price Freeway (Loop 101) This north-south route will be the city of Chandler’s first freeway, giving this growing community direct access to the Regional Freeway System. Two projects between Guadalupe and Frye Roads are now under construction with completion estimated in early 2001. The Price Freeway interchange with the Santan Freeway (Loop 101) is expected to be completed by the end of 2004. Red Mountain Freeway (Loop 202) The Red Mountain Freeway continues to reach farther into the East Valley. Also known as the Loop 202, this freeway is a popular alternative to the Superstition Freeway (US 60). In August 1998, the Red Mountain Freeway opened to Country Club Drive (SR 87), making it easier for motorists to reach the State’s rim country. Over the next six years, the Department will spend more than $550 million to complete the Red Mountain Freeway to the Superstition Freeway (US 60), which will serve the rapidly growing communities of the East Valley. Maricopa County Regional Freeway System Transportation serves a vital strategic role in regional development. A safe and efficient transportation system can further economic growth, enhance competitiveness in the global marketplace, and provide a better quality of life for the citizens of the region. Improved or new transportation facilities often serve as a catalyst in business location decisions. Over the fifteen-year period from Fiscal Year 1986 to 2000, the Department has spent $3.7 billion on new regional freeway projects in the Phoenix area, financed largely with the 1985 voter approved transportation excise tax. This investment has been a powerful engine for economic growth in the region. Squaw Peak Freeway (SR 51) The Squaw Peak Freeway has been opened to Bell Road, bringing the total number of open miles on this facility to eight. The remaining two v miles, which connect the Squaw Peak Freeway with the Pima Freeway (Loop 101), are scheduled for completion by the end of 2003. Intelligent Transportation Systems (ITS) allows Department technicians in the Department’s Traffic Operations Center in Phoenix to monitor traffic conditions and alert drivers to delays. Drivers can log on to Department’s main web site at www.dot.state.az.us or go directly to Department’s freeway management system at www.azfms.com for traffic information. Agua Fria Freeway (Loop 101) The northwest Valley has seen major strides toward the completion of the Agua Fria Freeway. Currently, 16 miles are open between Northern Avenue and Interstate 17. The residents of the growing West Valley suburbs now have direct freeway access to downtown Phoenix. The final section of the Agua Fria freeway, which completes a connection with Interstate 10 is scheduled to be opened to traffic in October. The Department, Maricopa County, Valley cities and private industry launched the AZTech initiative to install technologies to detail current traffic conditions, ease congestion, alert drivers to delays and improve public transit operations. AZTech received a $7.5 million federal grant to help fund the $15 million project. In the fall of 1998, AZTech launched its first phase of deployment with the development of a regional traffic management system that coordinates traffic management and incident management activities among traffic, police and emergency services across the Valley of the Sun. In the fall of 1999, AZTech completed its second phase of technology deployment by expanding its regional traffic management and traveler information systems. Valley cities are installing cameras, traffic signs and message signs on key surface street routes to monitor traffic conditions and make drivers aware of conditions ahead. New traveler information providers are developing services through the Internet, in-car devices, pagers and e-mail to provide up-to-theminute traffic information. South Mountain Freeway (Loop 202) The acceleration of the Regional Freeway System includes an early connection of the Interstate 10 / Santan / South Mountain interchange to the west that will connect to existing Pecos Road at 40th Street. ADOT continues developing the South Mountain corridor by initiating an Environmental Impact Statement and Design Concept Study. The proposed interim South Mountain Freeway connection between Pecos Road at 19th Avenue to Baseline Road near 59th Avenue , which will provide access to the Ahwatukee community, to and from the west will be evaluated as part of the study. FINANCIAL INFORMATION Department management is responsible for establishing and maintaining internal control designed to help ensure that the assets of the Department are protected from loss, theft, or misuse, and to ensure that adequate accounting data are compiled to allow for the preparation of financial statements in conformity with generally accepted accounting principles (GAAP) as applied to governmental units. The internal control is designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that: 1) the cost of a control should not exceed the benefits likely to be derived; and 2) the valuation of costs and benefits requires estimates and judgments by Department management. Santan Freeway (Loop 202) Project development on the Santan Freeway, which is projected to cost approximately $780 million, is starting with the first project scheduled to begin construction in 2001 near Interstate 10. Completion of the Santan Freeway is targeted for 2007. The Santan Freeway will provide improved mobility to the rapidly growing southeast valley. Technology The Department is considered a leader in the use of technology to improve traffic flow and keep drivers informed about freeway and highway conditions. Less congestion leads to safer freeways. As the Valley’s freeway system grows, so does the Department’s network of computer driven message boards and traffic flow detectors. The application of The Department’s internal control includes both automated controls, which are an integral component of the financial accounting system, and vi comprehensive policies and procedures. In addition, the Department’s Office of Audit and Analysis is an independent unit that reviews accounting controls and performs operational audits of the various divisions and units of the Department. General Government Functions The following two schedules present a summary of All Governmental Fund Types, which includes the Special Revenue Funds, Debt Service Funds, and Capital Projects Funds, revenues and expenditures, respectively, for Fiscal Year 2000, and the amount and percent of increases or decreases in relation to the prior year’s amounts. Operating revenues from all governmental funds totaled $1,272.6 million during the Fiscal Year 2000, an increase of 1.2 percent from the preceding year. The increase in revenues can be attributed to increase in the following major sources: vehicle registration, title, license and related fees, intergovernmental revenues (primarily Federal) and transportation excise taxes. The following is a summary of the Department’s governmental fund revenues. vii Schedule 1 Summary Statement of Revenues All Governmental Fund Types Fiscal years ended June 30, 2000 and 1999 (Expressed in Millions) Percent 2000 Amount Revenues Fuel and Motor Carrier Taxes $ Percent of Total 1999 Amount 276.2 21.7% $ Percent of Total 298.4 23.7% Increase Increase from Prior Year from Prior Year $ <22.2> <7.4%> Vehicle Registration, Title, 255.1 20.0% 250.1 19.9% 5.0 2.0% Intergovernmental Revenue License and Related Fees 414.0 32.5% 401.4 31.9% 12.6 3.1% Transportation Excise Tax 248.6 19.5% 229.5 18.2% 19.1 8.3% Interest 41.5 3.3% 34.4 2.7% 7.1 20.6% Other 18.0 1.4% 28.0 2.2% <10.0> <35.7%> Transfers from Other State Funds 19.2 1.5% 15.8 1.3% 3.4 21.5% 1,272.6 100.0% 1,257.6 100.0% 15.0 1.2% Total Revenues $ $ $ Summary Statement of Revenues $450 $400 Millions of Dollars $350 $300 $250 $200 $150 $100 $50 $0 Fuel and Motor Carrier Taxes Vehicle Registration Fees and Permits Intergovernmental Revenue 1999 2000 *Other revenues includes interest, transfers from other State funds and other. viii Transportation Excise Tax Other * Governmental expenditures totaled $1,509.3 million during Fiscal Year 2000, a $106.2 million increase from the previous year. The largest increase in expenditures was $89.9 million for capital outlay. This increase is attributable to the Department’s acceleration of the completion of the freeway program by the year 2007. The total fund balance for governmental funds increased by $17.4 million or 3.3 percent to $545.6 million. The following is a summary of Governmental Fund expenditures. Schedule 2 Summary Statement of Expenditures All Governmental Fund Types Fiscal years ended June 30, 2000 and 1999 (Expressed in Millions) Expenditures Appropriated by Legislature (Operating) Administration Highway Highway Maintenance Motor Vehicle Division Aeronautics Division Other Total Appropriated Reimbursements & Other Debt service Capital Outlay Not Appropriated by Legislature Total Expenditures 2000 Amount $ Percent of Total 47.8 42.3 83.4 74.5 1.8 0.7 3.2% 2.8% 5.5% 4.9% 0.1% - 250.5 42.8 253.8 955.4 6.8 16.6% 2.8% 16.8% 63.3% 0.5% $ 1,509.3 100.0% 1999 Amount $ $ Percent of Total 44.7 42.0 79.3 70.4 2.2 1.4 3.9% 3.7% 6.8% 5.6% 0.9% 0.1% 240.0 52.0 226.9 865.5 18.7 21.0% 5.4% 17.8% 54.8% 1.0% 1,403.1 100.0% Increase from Prior Year $ $ Percent Increase from Prior Year 3.1 0.3 4.1 4.1 <0.4> <0.7> 6.9% 0.7% 5.2% 5.8% <18.2%> <50.0%> 10.5 <9.2> 26.9 89.9 <11.9> <17.7%> 11.9% 10.4% <63.6%> 106.2 7.6% Summary Statement of Expenditures $1,200 Millions of Dollars $1,000 $800 $600 $400 $200 $0 Total Appropriated Remibursements & Other 1999 ix Debt Service 2000 Capital Outlay Budgetary Controls The Department employs a significant number of tools and techniques in its budgetary control process. Arizona Revised Statutes, Title 35, Section 113 outlines the Department’s basic budgetary responsibilities. During the 1998 legislative session, the legislature changed the budget process to require a biennial submittal every even-numbered year. The first two-year budget was submitted in 1998 for Fiscal Years 2000 and 2001. During the 1999 session, the Legislature appropriated and the Governor approved $278 million for the Department’s Operating Budget for Fiscal Year 2000 and $294 million for Fiscal Year 2001. The annual capital improvement plan, which contains proposals for State spending on land acquisition, capital projects, energy systems, energy management systems and building renewal for the building system, was also changed to a two-year budget submitted each even-numbered year. detailed operating budget which guides the divisions and programs in their financial operation. The Five-Year Highway and Aviation Construction Programs are included in the Capital Improvements Appropriations bill, as a lump-sum budget without identifying individual projects. In the Land, Building and Improvements portion of that bill, each separate building project is often identified for control purposes. The budgets are prepared on a cash basis except that liabilities (encumbrances) incurred before the end of the fiscal year and paid within the next calendar month are charged against that prior fiscal year’s budget. With a few exceptions, such as the capital budgets and highway maintenance, State appropriations typically lapse at year-end. The Department relies on the Arizona Financial Information System (AFIS) to control total expenditures by appropriation. In addition, the Department utilizes several control features in its internal accounting system (ADVANTAGE) to ensure budgetary compliance and management control. These features include: encumbrance and preencumbrance capabilities, monthly or quarterly allotment controls, appropriation allocation and control capabilities to the expense budget and organization level, and management control reports from the expense budget/organizational unit level, with summary reporting capabilities by program, division, or appropriation. When the Legislature convenes in “non-budget” years, the Governor may, nonetheless, submit to the Legislature any proposed revisions to the enacted operating budgets for the current and ensuing fiscal years. The revisions must include an estimate of all available monies and revenues and an explanation for any proposed changes. The Director of the Department is also responsible for developing a Strategic Plan for the Department and for developing a Master List of programs within the Department. The Plan shall extend to the current fiscal year and the two ensuing fiscal years and shall contain a mission statement, goals, objectives and performance measures for the Department as a whole. Each program included on the Master List shall similarly include its mission statement, goals, performance measures that emphasize results and budgetary data for the current and prior fiscal years. The budgetary data shall include funding amounts, regardless of source. As noted above, a Strategic Plan (as well as a Master List) complying with these requirements was completed September 1, 1999. A legal limitation is adopted for capital outlay including land, building and improvements for the State Highway Fund, Aviation Fund, and Safety Enforcement and Transportation Infrastructure Fund. Any balances and collections in these three funds in excess of the specific amounts appropriated in the General Appropriations Act are appropriated to the Department. The Department monitors expenditures through an internal budgetary process and the fiveyear construction program approved by the Transportation Board. A legal limitation is not adopted for the other special revenue funds, the debt service funds, capital projects funds, proprietary funds and fiduciary funds. Budgets are submitted to the Governor in accordance with State law. The appropriations are legally enacted after approval by the Governor and the Legislature. After passage by the Legislature, the appropriation bills are sent to the Governor for approval and signature. Upon receipt of the operating budget appropriations bill, allocations are made to organizational levels within each division, including changes such as for pay adjustments. The result is a In addition, the Department’s Office of Strategic Planning and Budgeting staff perform expenditure projection analyses of all appropriated and nonappropriated funds on a monthly basis. These x analyses utilize financial and management reports from both AFIS and ADVANTAGE to project total year-end expenditures by organizational unit and highlight potential problem areas. The Office also reviews progress in meeting the Department’s Key Objectives and Performance measurements monthly and makes recommendations for remedial changes as necessary. The Arizona State Retirement System Board administers the Arizona State Retirement Plan (Plan), a cost sharing multi-employer public employee retirement system, for the benefit of Arizona employees and employees of certain other governmental entities. Plan provisions, including death, disability, and retirement benefits, are established by State statute. Substantially all employees of the Department are covered by the Plan. The Department’s total payroll for Fiscal Year 2000 was $148 million. The Plan is funded through payroll deductions from employees’ gross earnings and amounts contributed by the Department. Retirement benefits are obligations of the Plan and not of the Department. The Arizona Revised Statutes provide statutory authority for employee and employer contributions. The employee and employer contribution rate for the year ended June 30, 2000, was actuarially computed to be 2.66 percent of covered payroll by an actuarial valuation performed at June 30, 1998. The contribution requirement for Fiscal Year 2000 was $3.9 million by both the employees and the Department. Proprietary Operations Proprietary funds are used to account for the Department’s on-going organizations and activities that are similar to those often found in the private sector. All assets, liabilities, equities, revenues, expenses, and transfers relating to the Department’s business and quasi business activities where net income and capital maintenance are measured - are accounted for through proprietary funds. The measurement focus is on determination of net income, financial position, and cash flows. An enterprise fund is used to account for operations that are financed and operated in a manner similar to private business enterprises — where the intent of the Department is that the costs (including depreciation) of providing goods or services to the general public on a continuing basis be financed from sales or other revenues. The only enterprise fund of the Department is the Arizona Highways Magazine Fund. Debt Administration As of June 30, 2000, the Department had $1.35 billion in outstanding bonds payable. This total included $274.8 million in Highway Revenue Bonds “HURF bonds” secured by a first lien pledge against the Department’s share of highway user revenues and $333.9 million in subordinated bonds. In addition, the Department has $350.1 million in Transportation Excise Tax Bonds “RARF bonds” outstanding, which are secured by a first lien pledge against the sales tax revenues flowing into the Maricopa Regional Area Road Fund, and $393.4 million in subordinate Transportation Excise Tax Bonds secured by a second-lien pledge against those revenues flowing into the Maricopa Regional Area Road Fund. Internal service funds are used to account for the financing of goods or services provided by one department or agency to other departments or agencies, or to other governments, on a costreimbursement basis. Internal service funds of the Department include the Equipment Revolving Fund and the Warehouse Revolving Fund. Fiduciary Funds Fiduciary funds are used to account for assets held by the Department in a trustee capacity or as an agent for individuals, private organizations, other governmental units, and/or other funds. The bonds have been sold in 18 separate issues between 1986 and 1999. All bonds issued as of June 30, 2000, are scheduled to mature not later than July 1, 2019. The bonds are obligations of the Transportation Board and are not obligations of the State of Arizona. Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. The agency funds of the Department include the Local Agency Deposits Fund, Motor Vehicle Division Clearing Fund, Highway User Revenue Fund, Underground Storage Tank Fund, Highway Property Rentals - 24 Percent Fund, and Economic Strength Project. Of the $3.32 billion total in bonds issued between 1986 and 1999, $1.12 billion, or approximately 34 percent, have been refunding issues to lower debt service costs. These efforts have resulted in cumulative savings of $57 million in current dollars and $39 million on a present value basis. xi The senior lien HURF bonds have been rated AAA/Aa1 by Standard & Poor’s Ratings Services (S&P) and Moody’s Investors Service, respectively. The Department’s subordinate lien HURF Bonds are rated AA/Aa2. The RARF senior lien bonds are rated AA/Aa2, while the RARF subordinate bonds are rated A/Aa3. control exposure and losses. The Office of Risk Management is responsible for the coordination of all activities necessary within the Department, and, in conjunction with the State’s Risk Management Division and Attorney General’s Office, to investigate and defend the Department from all losses arising from tort liability claims. Cash Management During Fiscal Year 2000, the Department earned over $39 million in interest from its investment program. The interest was earned from investing on average 99.8 percent of the Department’s $675 million average cash balance during the year. An average yield of 5.7 percent was received on the Department’s investments during Fiscal Year 2000. The State has a self-insured retention workers’ compensation program. The Department’s Safety Office has increased its emphasis on training, accident investigation, and the handling of hazardous materials to minimize exposure and injury to employees. The Department has first dollar replacement value on real property coverage for all losses exceeding $100. The Cash Management Unit has responsibility for the Department’s investment program in cooperation with the State Treasurer’s Office. The Cash Management Unit processes investment transactions through the State Treasurer’s Office by informing the Treasurer of the amount available to invest and the desired maturity date. The State Treasurer is responsible for purchasing and selling investment securities in the market and administering the collateral for the Department’s investments. The Department prepares cash flow forecasts, develops cash strategies, forecasts interest rates and market conditions, and conducts cash management studies to improve collection, deposit, disbursement, and fund transfer procedures. OTHER INFORMATION Independent Audit Arizona Revised Statutes, Title 41-1279.03, requires the State Auditor General to “conduct or cause to be conducted at least biennial financial and compliance audits of financial transactions and accounts kept by or for all state agencies subject to the Single Audit Act Amendments of 1996 (P.L. 104-156). The audits shall be conducted in accordance with generally accepted accounting principles and Government Auditing Standards and, accordingly, shall include tests of the accounting records and other auditing procedures as may be considered necessary in the circumstances. The audits shall include the issuance of suitable reports required by the Single Audit Act Amendments of 1996 (P.L. 98-502).” It is the policy of the Department, in cooperation with the State Treasurer’s Office, to invest public funds for maximum return, while maintaining the safety of investment principal and adequate liquidity to meet cash flow requirements in conformity with State statutes governing investment of the Department’s funds. This investment policy applies to all financial assets administered by the Department under statutory authority. In fulfillment of this requirement, the Department contracts with an independent public accounting firm to perform an annual audit of the Department and submit a “comprehensive financial report of all funds for the preceding year including a report by the independent public accounting firm attesting that the financial statements present fairly the financial position of the Department in conformity with generally accepted accounting principles.” Independent audits have been conducted on an annual basis since the Department’s formation in 1974. The investment program has grown from a total of six funds in 1980 to 30 funds currently invested. The system has been computerized and several daily and monthly monitoring reports have been developed. An annual Investment Planning and Monitoring Report has been developed, including annual objectives and strategies for key performance areas. The emphasis of the Investment Program has focused on maintaining 99.5 percent of cash invested and maximizing the investment yield. For Fiscal Year 2000, the accounting firm of Ernst & Young LLP conducted the Department’s financial audit and Single Audit as required by the Arizona Revised Statutes, Title 41-1279.03. Risk Management The Department continues to place emphasis in the area of risk management in order to xii Ernst & Young LLP considered internal control in order to determine auditing procedures for the purpose of expressing an opinion on the general purpose financial statements and not to provide assurance on internal control. The consideration of internal control would not necessarily disclose all matters in internal control that might be material weaknesses under standards established by the American Institute of Certified Public Accountants. However, Ernst & Young LLP noted no matters involving internal control and its operation that they consider to be material weaknesses. Awards The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the Arizona Department of Transportation for its comprehensive annual financial report for the Fiscal Year ended June 30, 1999. This was the tenth consecutive year that the Department has achieved this prestigious award. In order to be awarded a Certificate of Achievement, a government unit must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. Single Audit The Department is required to undergo an annual Single Audit in accordance with the provisions of the Single Audit Act Amendments of 1996 and the U.S. Office of Management and Budget Circular A-133, “Audits of States, Local Governments, and Non-Profit Organizations.” The Department’s Single Audit information is included in the Single Audit of the State for the Fiscal Year ended June 30, 2000. A Certificate of Achievement is valid for a period of one year only. We believe 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. Acknowledgments We wish to express our sincere appreciation to the many individuals whose dedicated efforts have made this report possible. A special note of thanks is extended to the staff of Fiscal Operations and Resource Management whose commitment, professionalism, and dedicated efforts contributed to the timely preparation of the Fiscal Year 2000 comprehensive annual financial report. A requirement of the Single Audit is to ensure that adequate internal control is in place and that the Department is in compliance with applicable Federal laws and regulations. The internal control has been reviewed by the United States Department of Transportation’s (U.S. DOT) Inspector General on several occasions in the past. The U.S. DOT auditors typically rely on the Department’s internal audit staff in determining the scope of their review. These reviews are in addition to the comprehensive review of the Department’s internal control previously mentioned. Sincerely, Mary E. Peters, Director Arizona Department of Transportation John E. McGee, Chief Financial Officer Financial Management Services xiii Arizona Department of Transportation List of Principal Officials Mary E. Peters Director Victor M. Mendez Deputy Director John A. Bogert Chief of Staff Edward D. Wright State Engineer Intermodal Transportation Division Stacey K. Stanton Assistant Director Motor Vehicle Division Mary Lynn Tischer, PhD Assistant Director Transportation Planning Division Gary Adams Assistant Director Aeronautics Division John E. McGee Chief Financial Officer Arizona State Transportation Board Jerry C. Williams, Chairperson F. Rockne Arnett, Vice Chairperson Katie Dusenberry Ingo Radicke Bill Jeffers Richard Hileman Dallas Gant xiv District Three District One District Two District Four District Five District Six District One xiv Dallas Gant District One xiv Arizona Department of Transportation Combined Balance Sheet - All Fund Types and Account Groups June 30, 2000 (With comparative totals at June 30, 1999) Proprietary Fund Type Governmental Fund Types Special Revenue Debt Service Capital Projects Enterprise Assets and other debits Assets: Cash and cash equivalents on deposit with the State Treasurer Receivables (net of allowance for uncollectibles): Subscriptions Notes and loans (Note 5) Accrued interest Taxes and fees Other Due from U.S. Government for reimbursable construction costs Due from other Arizona Department of Transportation funds (Note 6) Due from Arizona counties, cities and other state agencies Inventories Prepaid items Advances to other Arizona Department of Transportation funds (Note 6) Fixed assets - net of accumulated depreciation (Note 7) $ 475,362,370 $ 17,061,567 $ 50,410,037 $ 3,308,989 71,475,088 5,411,832 11,765,465 2,283,842 - 559,451 - 358,776 28,205 53,435 36,544,410 - - - 93,371,232 - - - 21,308,563 3,961,476 - - - 2,786,130 668,778 20,000,000 - - - - - - 2,065,088 - - - - - - - - Other debits: Amount available in debt service funds for retirement of general long-term debt Amount to be provided for retirement of general long-term debt Total assets and other debits $ 739,200,436 The notes to the financial statements are an integral part of this statement. 2 $ 19,345,409 $ 50,969,488 $ 9,269,401 Exhibit 1 Proprietary Fund Type Fiduciary Fund Types Internal Service $ $ $ General Long-Term Debt General Fixed Assets Agency 5,092,780 Totals (Memorandum Only) Account Groups 89,734,280 $ - $ 2000 - $ 640,970,023 1999 $ 550,320,476 34,825 256,936 426,241 149,085,188 481,996 - - 358,776 71,475,088 8,744,396 149,085,188 12,557,832 463,554 19,872,561 6,803,352 165,884,710 10,264,242 - 3,072,925 - - 39,617,335 45,975,805 68,116 36,160,854 - - 129,600,202 159,781,268 2,334,406 - 108,184 - - - 21,416,747 9,082,012 668,778 19,907,131 9,157,424 606,291 - - - - 20,000,000 - 45,686,282 - 194,956,023 - 242,707,393 229,252,802 - - - 19,345,409 19,345,409 34,736,737 - - - 1,328,453,809 1,328,453,809 1,231,428,357 53,473,345 $ 279,069,668 $ 194,956,023 $ 1,347,799,218 $ 2,694,082,988 $ 2,484,454,710 (Continued) 3 Arizona Department of Transportation Combined Balance Sheet - All Fund Types and Account Groups June 30, 2000 (With comparative totals at June 30, 1999) Proprietary Fund Type Governmental Fund Types Special Revenue Debt Service Capital Projects Enterprise Liabilities, equity and other credits Liabilities: Construction contracts payable Accounts payable Accrued payroll and other accrued expenditures/expenses Due to other Arizona Department of Transportation funds (Note 6) Due to Department of Public Safety Due to Arizona counties, cities and other state agencies Deferred revenue Surety and rental deposits Federal arbitrage rebate Advances from other Arizona Department of Transportation funds (Note 6) Notes and interest payable (Notes 1 and 9) Bonds payable (Note 9) Contracts and capital leases payable (Note 9) Long-term accrued vacation leave (Notes 1 and 9) Total liabilities $ Equity and other credits: State Highway Fund contribution Investment in general fixed assets Retained earnings: Reserved for replacement of equipment Unreserved Fund balances: Reserved for: Highway construction Inventories Loans and other financial assistance Unreserved, undesignated Total equity and other credits Total liabilities, equity and other credits $ 40,246,394 28,432,643 $ - $ 113,965 1,020,788 $ 163,656 5,723,563 - - 181,267 4,230,093 - - 1,841,782 - - 101,995,724 1,512,260 - - 4,484,216 - 20,000,000 58,832,686 260,973,363 - 2,976,535 4,829,139 - - - 1,538,698 - - - - 2,901,564 244,961,822 3,961,476 55,508,591 173,795,184 478,227,073 19,345,409 19,345,409 47,992,953 47,992,953 4,440,262 739,200,436 The notes to the financial statements are an integral part of this statement. 4 $ 19,345,409 $ 50,969,488 $ 9,269,401 Exhibit 1 Proprietary Fund Type Fiduciary Fund Types Internal Service $ $ $ General Long-Term Debt General Fixed Assets Agency - Totals (Memorandum Only) Account Groups 8,245,055 $ - $ 2000 - $ 40,360,359 37,862,142 1999 $ 74,595,290 30,587,378 727,092 - - - 6,631,922 9,676,170 - 123,528,327 2,685,000 - - 129,600,202 2,685,000 159,781,268 1,692,500 - 142,554,569 2,056,717 - - - 244,550,293 4,484,216 2,056,717 1,512,260 157,678,379 4,257,611 2,109,581 1,356,397 9,530,079 10,257,171 279,069,668 - 1,337,108,423 2,065,773 8,625,022 1,347,799,218 20,000,000 68,362,765 1,337,108,423 2,065,773 8,625,022 1,905,905,094 7,785,561 1,257,491,710 443,175 8,230,209 1,715,685,229 5,793,237 - - 194,956,023 - 7,331,935 194,956,023 7,645,338 191,511,390 9,985,210 27,437,727 - - - 9,985,210 30,339,291 9,985,210 30,981,361 43,216,174 - 194,956,023 - 312,300,184 3,961,476 55,508,591 173,795,184 788,177,894 266,455,523 3,781,392 46,316,591 212,092,676 768,769,481 53,473,345 $ 279,069,668 $ 194,956,023 $ 1,347,799,218 5 $ 2,694,082,988 $ 2,484,454,710 Exhibit 2 Arizona Department of Transportation Combined Statement of Revenues, Expenditures and Changes in Fund Balances All Governmental Fund Types For the fiscal year ended June 30, 2000 (With comparative totals for the fiscal year ended June 30, 1999) Special Revenue Revenues: Transportation excise tax Vehicle registration, title, license and related fees Fuel and motor carrier taxes and fees Reimbursements of construction expenditures Federal aid Other Federal grants and reimbursements State match Reimbursements from Arizona counties, cities and other state agencies State appropriations Interest on loans receivable Interest Other Total revenues $ Expenditures: Current: Transportation - appropriated by State legislature Transportation - not appropriated by State legislature Capital outlay: Highway construction Land, buildings and improvements appropriated by State legislature Contracts and capital leases payable Arizona Department of Public Safety distributions appropriated by State legislature Year 2000 computer projects Debt service: Principal Interest Bond issuance cost Federal arbitrage rebate Distributions to Arizona counties, cities and other state agencies Interest on loan payable Other Total expenditures Excess of revenues over expenditures Other financing sources : Proceeds from sale of bonds Proceeds from refunding bonds Payment to refunded bond escrow agent Proceeds from contracts and capital leases payable Operating transfers in Operating transfers out: Debt service Other Total other financing sources Excess of revenues and other financing sources over expenditures and other financing uses Fund balances, July 1 Residual equity transfer out Fund balances, June 30 248,595,990 255,087,892 276,188,840 $ - Capital Projects $ 2000 - $ 248,595,990 255,087,892 276,188,840 1999 $ 229,470,201 250,120,838 298,393,657 372,411,938 41,602,960 396,600 - - 372,411,938 41,602,960 396,600 354,209,698 47,254,925 24,794 18,608,709 179,690 1,591,725 24,715,652 18,011,517 1,257,391,513 8,592,130 8,592,130 6,634,413 60 6,634,473 18,608,709 179,690 1,591,725 39,942,195 18,011,577 1,272,618,116 14,879,540 868,443 28,798 34,363,516 27,985,390 1,257,599,800 250,508,766 6,820,619 - - 250,508,766 6,820,619 240,049,735 9,847,965 772,989,156 - 168,924,342 941,913,498 862,546,466 10,956,144 2,577,187 - - 10,956,144 2,577,187 11,488,854 282,248 12,500,000 - - - 12,500,000 - 12,500,000 6,527,900 155,863 175,075,000 76,603,575 308,200 - - 175,075,000 76,603,575 308,200 155,863 150,570,000 74,341,597 659,778 1,356,397 30,070,861 1,679,790 1,088,258,386 172,834 252,159,609 168,924,342 30,070,861 1,679,790 172,834 1,509,342,337 32,854,388 116,215 1,403,141,543 169,133,127 <243,567,479> <162,289,869> <236,724,221> <145,541,743> 2,577,187 67,507,352 26,172,174 <25,115,000> 227,118,977 250,499,349 - 250,499,349 26,172,174 <25,115,000> 2,577,187 294,626,329 152,572,363 28,825,844 <27,390,000> 282,248 270,272,566 <227,118,977> <19,001,167> <176,035,605> 228,176,151 <48,506,185> 201,993,164 <227,118,977> <67,507,352> 254,133,710 <226,501,081> <43,742,764> 154,319,176 <15,391,328> 39,703,295 17,409,489 34,736,737 19,345,409 8,289,658 47,992,953 <6,902,478> $ Totals (Memorandum Only) Governmental Fund Types Debt Service 485,879,551 <750,000> 478,227,073 $ The notes to the financial statements are an integral part of this statement. 6 $ $ 528,905,946 <750,000> 545,565,435 $ 8,777,433 520,128,513 528,905,946 Exhibit 3 Arizona Department of Transportation Combined Statement of Revenues and Expenditures - Budget and Actual (Budget Basis) Budgeted Special Revenue Funds For the fiscal year ended June 30, 2000 Special Revenue Funds Budget Revenues: Vehicle registration, title, license and related fees Fuel and motor carrier taxes and fees Interest Flight property tax Grand Canyon Airport Other Total revenues $ 251,653,200 282,814,300 1,612,000 8,188,000 84,000 32,000 544,383,500 Expenditures appropriated by State legislature in 2000 budget: Transportation: Administration Highway Highway Maintenance Motor Vehicle Division Aeronautics Division Air Quality Program General Fund Program Total transportation Capital outlay - land, buildings and improvements: Highway Arizona Department of Public Safety transfers Expenditures appropriated by State legislature by carryover of previous years' unexpended budgets Total expenditures Excess of revenues over expenditures $ $ 255,486,184 288,412,244 1,771,690 6,709,385 341,110 62,434 552,783,047 $ 3,832,984 5,597,944 159,690 <1,478,615> 257,110 30,434 8,399,547 47,628,800 42,745,800 85,213,978 71,784,153 1,293,200 45,200 97,582 47,029,711 42,376,704 82,627,322 71,205,181 1,108,867 45,200 94,070 599,089 369,096 2,586,656 578,972 184,333 3,512 248,808,713 244,487,055 4,321,658 14,141,246 10,956,144 3,185,102 12,500,000 12,500,000 - 1,055,409 276,505,368 505,991 268,449,190 549,418 8,056,178 267,878,132 The notes to the financial statements are an integral part of this statement. 7 Variance Favorable Actual Non-GAAP $ 284,333,857 $ 16,455,725 Exhibit 4 Arizona Department of Transportation Combined Statement of Revenues, Expenses and Changes in Retained Earnings All Proprietary Fund Types For the fiscal year ended June 30, 2000 (With comparative totals for the fiscal year ended June 30, 1999) Totals (Memorandum Only) 2000 1999 Proprietary Fund Types Enterprise Internal Service Operating revenues: Equipment rentals Equipment sales Magazine sales Sales of related products Other Total operating revenues $ Operating expenses: Equipment operations Cost of sales General and administrative Depreciation Total operating expenses 6,223,932 4,489,024 475,953 11,188,909 $ 10,177,574 1,253,531 366,702 11,797,807 Operating 26,104,085 504,746 3,624,687 30,233,518 $ 22,548,005 8,099,211 30,647,216 26,104,085 504,746 6,223,932 4,489,024 4,100,640 41,422,427 $ 22,548,005 10,177,574 1,253,531 8,465,913 42,445,023 24,289,009 165,711 6,039,340 4,269,466 4,002,742 38,766,268 20,469,378 10,133,092 1,225,226 7,022,003 38,849,699 <608,898> <413,698> 172,456 223,384 395,840 382,502 <68,953> 103,503 223,384 <68,953> 326,887 <373,735> 8,767 before Legislative transfer Legislative transfer out <505,395> - <190,314> - <695,709> - <74,664> <500,000> Net <505,395> <190,314> <695,709> <574,664> Non-operating revenues : Interest Loss on sale/disposal of fixed assets Total non-operating revenues Retained earnings, July 1 Retained earnings, June 30 $ 3,406,959 2,901,564 The notes to the financial statements are an integral part of this statement. 8 $ 37,613,251 37,422,937 <1,022,596> $ 41,020,210 40,324,501 <83,431> $ 41,594,874 41,020,210 Exhibit 5 Arizona Department of Transportation Combined Statement of Cash Flows All Proprietary Fund Types For the fiscal year ended June 30, 2000 (With comparative totals for the fiscal year ended June 30, 1999) Totals (Memorandum Only) 2000 1999 Proprietary Fund Types Enterprise Internal Service Cash flows from operating activities: Operating Adjustments to reconcile operating to net cash provided by operating activities: Depreciation Changes in assets and liabilities: Due from other Arizona Department of Transportation funds Due from other state agencies Other receivables Inventories Prepaid expenses Accounts payable Accrued payroll and other accrued expenses Due to other Arizona Department of Transportation funds Deferred revenue Net cash provided by operating activities $ <608,898> $ Cash flows from capital and related financing activities: Acquisition of fixed assets Proceeds from sale of fixed assets Reduction of contributed capital Legislative transfer out Net cash used for capital and related financing activities Cash flows from investing activities: Interest Net cash provided by investing activities Net increase in cash and cash equivalents Cash and cash equivalents, July 1 Cash and cash equivalents, June 30 8,099,211 8,465,913 7,022,003 174,862 29,064 <62,487> <82,585> 1,707,231 20,254 <169,433> 226,432 <557,157> 1,707,231 20,254 5,429 255,496 <62,487> <639,742> 187,662 93,910 48,849 <235,069> <285,063> <155,177> <56,578> <181,804> <238,382> 83,459 <1,808> 226,605 <503> <109,266> <1,808> 226,605 - <15,123> 8,731,036 8,715,913 6,567,374 <80,349> - <9,970,100> 1,035,668 - <10,050,449> 1,035,668 - <5,750,167> 448,628 <500,000> <500,000> <80,349> <8,934,432> <9,014,781> <6,301,539> 182,909 182,909 230,384 230,384 413,293 413,293 444,432 444,432 87,437 26,988 114,425 710,267 The notes to the financial statements are an integral part of this statement. 9 <83,431> 366,702 3,221,552 3,308,989 $ <413,698> $ <1,022,596> $ $ 5,065,792 5,092,780 $ 8,287,344 8,401,769 $ 7,577,077 8,287,344 Arizona Department of Transportation Notes to Financial Statements June 30, 2000 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Reporting entity The accounts of the Department are organized on the basis of funds and account groups, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures or expenses, as appropriate. Government resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. The various funds of the Department are grouped, in the financial statements, into six fund types and two account groups within four categories as follows: The Arizona Department of Transportation (Department) is a department of the State of Arizona and is not legally separate. The Department has no component units. The Director of the Department serves as the Chief Administrative Officer and is directly responsible to the Governor. The Governor appoints a seven-member Transportation Board of the State of Arizona Department of Transportation (Transportation Board) which has responsibility for establishing a complete system of State highway routes and distributing monies for local airport facilities’ projects through a grant program. The Department is responsible for the construction and maintenance of all State highways. The Department cooperates with the various cities and counties within the State in the construction and maintenance of State roads and with the Federal Highway Administration in the construction and maintenance of interstate highways. Assistance in the development of local airports, registering motor vehicles and aircraft, licensing drivers and the publishing of the Arizona Highways Magazine are also responsibilities of the Department. GOVERNMENTAL FUNDS Governmental funds are those through which most governmental functions typically are financed. The acquisition, use, and balances of the Department’s expendable financial resources and the related current liabilities, except those accounted for in proprietary funds, are accounted for through governmental funds (special revenue, debt service, and capital projects). All governmental funds are accounted for using a current financial resources measurement focus. The Financial Services Division of the Arizona Department of Administration controls expenditures and adherence to annual budgets . The State Treasurer invests the cash balances of the Department. Governmental funds are, in essence, accounting segregations of financial resources. Expendable assets are assigned to the various governmental funds according to the purposes for which they may or must be used; current liabilities are assigned to the fund from which they are to be paid; and the difference between governmental fund assets and liabilities, the fund equity, is referred to as “Fund Balance.” The general purpose financial statements of the Department have been prepared in conformity with generally accepted accounting principles (GAAP) as applicable to governmental units. The more significant of the Department’s accounting policies are described below. Fund accounting 10 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2000 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Special Revenue Funds - Special revenue funds, excluding the State Highway Fund, are used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes. The State Highway Fund is used to account for all financial transactions applicable to the general operations of the Department, including road and bridge repairs, maintenance and construction, planning and development, engineering, and administration. Revenues are received from the following primary sources: fuel and motor carrier taxes and fees; vehicle registration, title, licenses and related fees; and Federal grants. Other special revenue funds of the Department include the State Aviation Fund, Safety Enforcement and Transportation Infrastructure Fund, Highway Expansion and Extension Loan Program Fund, Maricopa Regional Area Road Construction Fund, Motor Carrier Safety Revolving Fund, Motor Vehicle Liability Insurance Enforcement Fund, and Vehicle Inspection and Title Enforcement Fund. Highway Revenue Bond Proceeds Fund, which accounts for transactions related to the issuance and use of the proceeds from Arizona Transportation Board Highway Revenue Bonds, and the Maricopa Regional Area Road Bond Proceeds Fund, which accounts for the issuance and use of the proceeds from the State of Arizona Transportation Excise Tax Revenue Bonds. PROPRIETARY FUNDS Proprietary funds are used to account for the Department’s on-going organizations and activities that are similar to those often found in the private sector. All assets, liabilities, equities, revenues, expenses, and transfers relating to the Department’s business and quasi-business activities, where net income and capital maintenance are measured, are accounted for through proprietary funds. The measurement focus is on determination of net income, financial position and cash flows. Enterprise Fund - An enterprise fund is used to account for operations that are financed and operated in a manner similar to private business enterprises, where the intent of the Department is that the costs (including depreciation) of providing goods and/or services to the general public on a continuing basis be financed from sales or other revenues. The only enterprise fund of the Department is the Arizona Highways Magazine Fund. The fund publishes a monthly magazine, Arizona Highways Magazine, as well as a number of books and sells several related products. Debt Service Funds - Debt service funds are used to account for the accumulation of resources for, and the payment of, general long-term debt principal, interest, and related costs. Debt service funds include the Highway Revenue Bond Principal Redemption and Interest Fund which accounts for the State of Arizona highway improvement bonds and revenue bonds, and the Maricopa Regional Area Road Bond Fund which accounts for the State of Arizona transportation excise tax revenue bonds. Capital Projects Funds – The capital projects funds are used to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by proprietary funds and trust funds). The capital projects funds of the Department are the Internal Service Fund – An internal service fund is used to account for the financing of goods or services provided by one department or agency to other departments or agencies of the Department, or to other governments, on a cost11 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2000 reimbursement basis. The internal service fund of the Department is the Equipment Fund. 12 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2000 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) FIDUCIARY FUNDS Basis of accounting Fiduciary funds are used to account for assets held by the Department in a trustee capacity or as an agent for individuals, private organizations, other governmental units, and/or other funds. The modified accrual basis of accounting is used for all governmental fund types, expendable trust funds and agency funds. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual (i.e., when they become both measurable and available). “Measurable” means the amount of the transaction can be determined and “available” means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. Agency Funds Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. The agency funds of the Department include the Local Agency Deposits Fund, Motor Vehicle Division Clearing Fund, Highway User Revenue Fund, Underground Storage Tank Fund, Highway Property Rentals 24 Percent Fund, and Economic Strength Project Fund. Expenditures are recorded when the related fund liability is incurred. Principal and interest on general long-term debt are recorded as fund liabilities when due. Reimbursements of construction expenditures, due primarily from the Federal government on a percentage of costs incurred basis, are recognized when the related obligation is incurred. ACCOUNT GROUPS Account groups are used to establish accounting control and accountability for the Department’s general fixed assets and unmatured principal of its general long-term debt. Those revenues susceptible to accrual are Federal grants, reimbursable county, city and other state agency construction costs incurred by the Department. Federal grant monies are received after the incurrence of qualifying expenditures. As a result, the Federal share of all qualifying goods or services received or performed prior to year end has been accrued. General Fixed Assets - Fixed assets used in governmental fund type operations are accounted for in the General Fixed Assets Account Group rather than in governmental funds. All proprietary funds are accounted for using the accrual basis of accounting. Under this basis, revenues are recorded when they are earned and expenses are recorded when incurred. General Long-Term Debt - Long-term liabilities expected to be financed from governmental funds are accounted for in the General Long-Term Debt Account Group. 13 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2000 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Budgets and budgetary accounting Budgets are prepared on the cash basis except that liabilities incurred before the end of the fiscal year and paid within the next calendar month are charged against the prior fiscal year’s budget. Most State appropriations lapse at year end. Biennial budgets for the operating expenditures and capital outlay including land, building and improvements for the State Highway Fund, Aviation Fund, Safety Enforcement and Transportation Infrastructure Fund, Air Quality and General Fund are submitted to the Governor in accordance with State law. The budgets are legally enacted as appropriations after approval by the Legislature and signature by the Governor. The legal level of control is at the program level and expenditure budgets are appropriated using a lump sum format with special line items . Expenditure details for personal services, employee related expenditures and all other operating expenditures are specifically budgeted within most divisions. In certain divisions, other specific programs are budgeted in addition to these categories. Revenue budgets are developed internally by the Department and are not a part of the appropriation process For financial reporting purposes, the accompanying financial statements present the legally adopted budget for those operations subject to legislative appropriation. A legal limitation is adopted for capital outlay including land, building and improvements for the State Highway Fund, Aviation Fund, and Safety Enforcement and Transportation Infrastructure Fund. Any balances and collections in these three funds in excess of the specific amounts appropriated in the general appropriations act are appropriated to the Department. The Department monitors expenditures through an internal budgetary process and the fiveyear construction program approved by the Transportation Board. A legal limitation is not adopted for the other special revenue funds, the debt service funds, capital projects funds, proprietary funds and fiduciary funds. Amendments to the approved appropriations require Legislative approval. However, since the Agency's appropriation is a lump sum appropriation by program, the allocation of funds between personal services, employee-related expenses, and other operating expenses is an internal decision for the program manager. Accordingly, transfers between line items such as personal services and other operating expenses within a particular program may be done by the program manager. Transfers of funds between programs require the approval of the Joint Legislative Budget Committee. Absent an amendment to the Agency's appropriated amount by the full legislature, expenditures may not exceed appropriations. Encumbrance accounting Encumbrance accounting, under which purchase orders, contracts, and other commitments for the expenditure of monies are recorded in order to reserve that portion of the applicable fund balance, is used by the Department as a budgetary control mechanism. However, outstanding encumbrances lapse at yearend. Accordingly, no reserve for encumbrances is reflected in the accompanying financial statements. All transfers of funds are reported to the Department’s Office of Strategic Planning and Budgeting for monitoring purposes. 14 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2000 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Application of FASB pronouncements to proprietary activities Financial Reporting for Certain Investments and for External Investment Pools. Inventories The Department has elected, in accordance with Governmental Accounting Standards Board (GASB) Statement No. 20, not to apply Financial Accounting Standards Board (FASB) Statements and Interpretations issued after November 30, 1989. The State Highway Fund inventory is valued at cost, which approximates market, using the first-in, first-out (FIFO) method. This inventory is accounted for using the consumption method. Under this method, inventories are recorded as expenditures as they are used. Cash and cash equivalents The Department’s cash and cash equivalents balance is on deposit with the State Treasurer for pooled investment purposes and is not evidenced by securities that exist in physical or book entry form in the Department’s name. All investments are carried in the name of the State of Arizona. State statutes require the State Treasurer to invest these pooled funds in collateralized time certificates of deposit, repurchase agreements or obligations of the U.S. Government. All investments are carried at cost, which approximates fair value. Proprietary fund inventories are stated at the lower of cost or market. Cost of enterprise fund inventories consisting of resale products and supplies are generally determined by moving average cost and specific identification methods, respectively. Costs of internal service funds’ inventories (consisting of vehicle parts and supplies, fuels and lubricants, and other supplies) are determined by moving average cost methods. State statutes require the State Treasurer to maintain separate investment accounts for the portions of the highway bond proceeds fund relating to the highway revenue bond issues and the Maricopa Regional Area Road Bond Fund relating to the transportation excise tax revenue bond issues. These funds may be invested by the Treasurer in the State’s investment pool. General fixed assets purchased are recorded as expenditures in the governmental funds and capitalized at cost in the General Fixed Assets Account Group. Land is recorded primarily at cost. If cost is not determinable based on previously acquired property, estimated cost is used. Other general fixed assets are stated at either actual or estimated costs. Contributed fixed assets are recorded in the General Fixed Assets Account Group at estimated fair value on the date received. Public domain (infrastructure) general fixed assets consisting of roads and bridges are not capitalized, as these assets are immovable and of value only to the government. No depreciation is provided on general fixed assets. Fixed assets For purposes of the statement of cash flows, cash equivalents are defined as short-term, highly liquid investments (investments with original maturities of three months or less). The Department’s investments are included in the State investment pool and these investments are not shown in the Department’s name. Therefore, the Department presents its equity in the internal pool as required in GASB Statement No. 31, Accounting and Property and equipment of the proprietary funds are stated at cost, or estimated historical cost if original cost is not available; and, if donated, are stated at estimated fair value on the date received. Depreciation 15 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2000 is provided using the straight-line method based on estimated useful life as follows: 16 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2000 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Long-term obligations Buildings 40 years Buildings improvements 20 years Furniture and fixtures Mobile equipment Long-term debt is recognized as a liability of a governmental fund when due. For other long-term obligations, only that portion expected to be financed from expendable available financial resources is reported as a liability of a governmental fund. The remaining portion of such obligations is reported in the General Long-Term Debt Account Group. 5 years 3-15 years Shop tool, office and computer equipment and software 5 years The cost of additions, improvements, and renewals which substantially extend the useful life of a particular asset are capitalized in the property accounts . Repairs and maintenance expenditures are charged to operations as incurred. The cost and related accumulated depreciation of assets sold or otherwise disposed of are eliminated from the property accounts and any resultant gain or loss is recognized as revenue or loss. Compensated absences Effective July 1, 1998, State employees are eligible to receive payment for an accumulated sick leave balance of 500 hours or more with a maximum of 1,500 hours, upon retirement directly from State service. The benefit value is calculated by taking the State hourly rate of pay at the retirement date, multiplied by the number of sick hours at the retirement date times the eligibility percentage. The eligibility percentage varies based upon the number of accumulated sick hours from 25 percent for 500 hours to a maximum of 50 percent for 1,500 hours. The maximum benefit value is $30,000. The benefit is paid out in annual installments over three years. The Retiree Accumulated Sick Leave Fund is accounted for on the State’s financial statements as an Expendable Trust Fund. As of June 30, 2000, employees had accumulated $27,506,438 of nonvested unpaid sick leave. Bond premiums, discounts and issuance costs Premiums or discounts on bond issuances are netted against the bond proceeds in the capital projects fund. The bonds are recorded at their face value in the General Long-Term Debt Account Group, except in the case of Capital Appreciation bonds. These bonds are initially recorded net of their discount. The discount is amortized over the life of the issue using the effective interest method. All costs related to bond issuance are recorded as debt service expenditures in the appropriate fund as incurred. Employees are allowed to accumulate up to 240 hours of vacation leave (320 hours for exempt employees) which is paid when vacation is taken or upon termination of employment at the individual’s current rate of pay. An accrual for vacation leave has been made and the current portion is included under the caption “Accrued payroll and other accrued expenditures/expenses.” For governmental funds, the portion of the vacation normally taken in the first Deferred revenue Deferred revenue relates to unearned subscription income associated with the enterprise fund. Unearned subscription income is recorded when subscription orders are received and is amortized into income over the terms of the related subscriptions. Costs associated with the procurement of subscriptions are expensed in the year incurred. 17 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2000 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Transactions between funds sixty days of the next fiscal year is recorded as a current liability. The amount of long-term accrued vested vacation leave recorded in the General LongTerm Debt Account Group represents that portion which is not expected to be liquidated with expendable available financial resources. For proprietary funds, all of the outstanding vacation accrual is recorded as a current liability. Transactions that would be treated as revenue, expenditures, or expenses if they involved organizations external to the governmental unit are accounted for as revenue, expenditures, or expenses in the funds involved. Transactions which constitute reimbursements to a fund for expenditures or expenses initially made from that fund which are applicable to another fund are recorded as expenditures or expenses in the reimbursing fund and as reductions of expenditures or expenses in the fund that is reimbursed. Fund equity Reserves represent those portions of fund equity not appropriated for expenditure or legally segregated for a specific future use. Designated fund balances represent tentative plans for future use of financial resources. There were no designated fund balances at June 30, 2000. Nonrecurring or nonroutine transfers of equity between funds are treated as residual equity transfers and are reported as additions to or deductions from the fund balance of governmental funds. Residual equity transfers to proprietary funds are treated as contributed capital, and such transfers from proprietary funds are reported as reductions of retained earnings or contributed capital as is appropriate in the circumstances. All other transactions are treated as operating transfers and are included in the results of operations of both governmental and proprietary funds. The Department has reserved $9,985,210 of the Equipment Revolving Fund retained earnings. This reserve is comprised of $7,829,167 for replacement of fleet equipment and $2,156,043 for replacement of two airplanes. Administrative expenditures The Department renders certain services (primarily administrative services as trustee or agent) to counties and cities of Arizona as well as to other agencies of the State of Arizona, the costs of which are accounted for in the State Highway Fund, a special revenue fund. No charges are made for these services. The Department receives certain services (primarily claims processing and treasury services) without cost from other Arizona state agencies. Certain services, including accounting and investment services and claims, are furnished to certain funds by various other funds of the Department without charge. Operations of the internal service fund are conducted in facilities recorded in the General Fixed Assets Account Group, the costs of which are accounted for in the State Highway Fund, a special revenue fund of the Department. The internal service fund pays the costs of repairs and maintenance of those facilities, but no rental charges are made to the funds for the use thereof. The Arizona Highways Magazine Fund provides promotional magazines to other Arizona state agencies without charge. 18 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2000 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Loan losses and revenue financial position, results of operations or cash flows of its proprietary fund types in conformity with GAAP. This information is not comparable to a consolidation and interfund eliminations have not been made in the aggregation of the information. Each mortgage loan is analyzed on an individual basis to determine a reserve for loan losses based on delinquency. Interest revenue is recognized when received and is included under the caption “Interest revenue.” Reclassifications Use of estimates Certain 1999 amounts have been reclassified to conform to the 2000 presentation. Adjustments were made for Warehouse Revolving Fund, Local Agency Deposits Fund and Privilege Tax Fund. The Warehouse Revolving Fund was shown as an Internal Service Fund in fiscal year 1999 and has been reclassified as a Special Revenue Fund in fiscal year 2000. The Local Agency Deposits Fund was shown as an Expendable Trust Fund in fiscal year 1999 and has been reclassified as an Agency Fund in fiscal year 2000. The Privilege Tax Fund was shown as an Agency Fund in fiscal year 1999 and has been reclassified as a Special Revenue Fund in fiscal year 2000. The Warehouse Revolving Fund and Privilege Tax Fund are now included in the State Highway Fund, a Special Revenue Fund. The preparation of these financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Memorandum and comparative totals Total columns for 2000 and 1999 included in the accompanying combined financial statements are captioned memorandum only to indicate they are presented only to facilitate financial analysis. The information in the columns is not intended to present NOTE 2. BUDGET BASIS OF ACCOUNTING The Department prepares its annual budget on a basis that differs from GAAP. The budget and the actual results of transactions are presented in accordance with the Department’s method (budget basis) in the Combined Statement of Revenues and Expenditures Budget and Actual (Budget Basis) - Budgeted Special Revenue Funds in order to provide a meaningful comparison of actual results with the budget. The adjustments required to convert the revenues and expenditures for the budgeted special revenue funds from the GAAP basis to the budgetary basis consist of accrual to cash basis adjustments and the exclusion of funds not budgeted through legislative appropriation. 19 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2000 NOTE 2. BUDGET BASIS OF ACCOUNTING (Continued) Adjustments necessary to convert the excess of revenues and other financing sources over expenditures and other financing uses for the year ended June 30, 2000, on a GAAP basis to budget basis is as follows: Special Revenue Funds Excess of revenues and other financing sources over expenditures and other financing uses — GAAP basis $ Basis differences Net increase in accounts payable, accrued payroll and other accruals not recognized as expenditures on budget basis Net increase in receivables related to fuel and motor carrier taxes and fees, vehicle registration, title, license, and related fees not recognized as revenue on budget basis Total basis differences 3,271,336 15,680,887 18,952,223 Perspective differences Revenues and other financing sources not recognized on budget basis: Reimbursements of construction expenditures - Federal aid Other Federal grants and reimbursements Reimbursements from Arizona counties, cities, and other state agencies State appropriations Interest Other Proceeds from contracts and capital leases payable Operating transfers in Expenditures and other financing uses not recognized on budget basis: Transportation - not appropriated by State legislature Capital outlay - highway construction Capital outlay - contracts and capital leases payable Distributions to Arizona counties, cities and other state agencies Other Debt service transfer out Other operating transfers out Total perspective differences Entity differences Less excess of revenues over expenditures for funds for which no annual budgets are prepared Excess of revenues over expenditures — budget basis 20 <6,902,478> <372,411,938> <11,748,706> <3,111,760> <179,690> <16,064,947> <10,361,880> <2,577,187> <67,422,402> 6,820,619 682,094,083 2,577,187 19,844,994 1,679,790 76,483,277 1,812,966 307,434,406 <35,150,294> $ 284,333,857 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2000 NOTE 2. BUDGET BASIS OF ACCOUNTING (Continued) Throughout the fiscal year, the Legislature may revise the budget. The following schedule reflects the original budgeted expenditures, subject to legislative limitations and cumulative revisions during the current fiscal year: Special Revenue Funds Original Budget Cumulative Revisions $ 273,995,555 2,509,813 Revised Budget $ 276,505,368 NOTE 3. SECURITIES HELD IN LIEU OF RETENTION In accordance with Arizona law, a contractor may assign to the Department, in lieu of contract retention, time certificates of deposit in federally insured banks licensed by the State of Arizona or securities of the United States of America, the State of Arizona, its counties, municipalities and school districts or deposits in savings and loan institutions authorized to transact business in the State of Arizona. At June 30, 2000, the Trustee held assignment on securities aggregating $35,287,992, $861,718 and $38,466 in lieu of contractor retentions for construction in the special revenue funds, capital projects fund, and agency fund, respectively. Additional securities aggregating $346,960 were on deposit but not assigned to a specific project. These additional securities are not reflected in the accompanying financial statements. NOTE 4. RESTRICTION OF USE OF THE STATE HIGHWAY FUND CASH Effective July 1, 1981, State law required accumulation of at least 15 percent, which in fiscal year 1996 was modified to 12.6 percent, of the revenues allocated each year to the State Highway Fund (special revenue fund) from the Highway User Revenue Fund (agency fund) for the design, purchase of right-of-way or construction of controlled-access highways which are included in the regional transportation plan of counties with populations in excess of 400,000 (Maricopa and Pima counties). At June 30, 2000, approximately $95,000,000 including interest, of the fund balance was reserved, representing such unspent monies. NOTE 5. NOTES AND LOANS RECEIVABLES Notes receivable represent real estate mortgage loans made to individuals purchasing homes previously owned by the Department for highway construction purposes . The loans were made at a fixed rate and mature ten years from the date of origination. Loans receivable represent loans made pursuant to Loan Repayment Agreements in the Highway Expansion and Extension Loan Program Fund. Eight loans have been authorized and four loans 21 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2000 NOTE 5. NOTES AND LOANS RECEIVABLE (Continued) were outstanding as of June 30, 2000, to ADOT and the cities of Chino Valley and Tucson. NOTE 6. INTERFUND RECEIVABLES AND PAYABLES A summary of interfund receivables and payables at June 30, 2000, follows: Interfund Receivables Special Revenue Funds: State Highway Fund: Due from Highway User Revenue Fund for taxes and fees Due from Highway Expansion & Extension Loan Program Fund Other Total State Highway Fund $ Interfund Payables 83,824,001 1,389,051 7,305,131 $ 9,119 308,950 92,518,183 318,069 120,287 77,042 9,119 368,312 167,669 110,620 93,371,232 1,389,051 2,521,773 1,200 4,230,093 - 1,841,782 68,116 - Agency Funds: Motor Vehicle Division Clearing Fund Rental Tax & Bond Fund Highway User Revenue Fund Underground Storage Tank Fund 654,106 32,120,113 3,386,635 39,655,730 162 83,872,435 - Total Agency Funds 36,160,854 123,528,327 Total All Funds $ 129,600,202 $ 129,600,202 State Aviation Fund Safety Enforcement and Transportation Infrastructure Fund Highway Expansion & Extension Loan Program Fund Maricopa Regional Area Road Construction Fund Motor Vehicle Liability Insurance Enforcement Fund Vehicle Inspection and Title Enforcement Fund Total Special Revenue Funds Capital Projects Fund: Highway Revenue Bonds Proceeds Fund Internal Service Funds: Equipment Revolving Fund Advances Senate bill 1201 authorized the transfer of $20,000,000 from the State Highway Fund in fiscal year 2000. This amount is shown as Advances to other Arizona Department of Transportation funds in the State Highway Fund and Advances from other Arizona Department of Transportation funds in Highway Expansion and Extension Loan Program Fund. The advance is due no later than December 31, 2008. 22 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2000 NOTE 7. FIXED ASSETS A summary of changes in general fixed assets follows: Balance July 1, 1999 Land Building and improvements Improvements other than buildings Machinery and equipment Total General Fixed Assets $ $ Additions 10,863,072 110,107,920 31,086,260 39,454,138 191,511,390 $ $ Balance June 30, 2000 Disposals (1) 2,635,972 23,090,804 749,627 4,864,417 31,340,820 $ $ - $ <22,432,360> <5,463,827> <27,896,187> $ 13,499,044 133,198,724 9,403,527 38,854,728 194,956,023 Summary of proprietary fund type fixed assets at June 30, 2000: Enterprise Fund Land Buildings Furniture and fixtures Shop tools, office and computer equipment, and software Mobile equipment $ Less accumulated depreciation Total proprietary fund fixed assets $ 7,900 981,156 Internal Service Fund $ 2,421,779 10,059 3,420,894 <1,355,806> 2,065,088 $ 2,444,191 108,402,954 110,847,145 <65,160,863> 45,686,282 (1) The disposal of assets includes the transfer of $19,569,077 in facilities located at the Grand Canyon Airport to the Grand Canyon Airport Authority in fiscal year 2000. These facilities have been transferred back to ADOT in fiscal year 2001. NOTE 8. FUND EQUITY Fund equity for the proprietary funds consists of the following: Enterprise Fund: Arizona Highways Magazine Fund Contributed Retained Totals Capital Earnings 2000 1999 Balance, July 1, 1999 Reduction of contributed capital Net income $ 1,538,698 - $ 3,406,959 $ 4,945,657 $ 6,297,820 <500,000> <505,395> <505,395> <852,163> Balance, June 30, 2000 $ 1,538,698 $ 2,901,564 23 $ 4,440,262 $ 4,945,657 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2000 NOTE 8. FUND EQUITY (Continued) Internal Service Fund: Equipment Fund Unreserved Retained Contributed Reserved Retained Capital Earnings Balance, July 1, 1999 Net income $ 5,793,237 - $ 9,985,210 - $ 27,628,041 $ 43,406,488 $ 43,128,989 <190,314> <190,314> 277,499 Balance, June 30, 2000 $ 5,793,237 $ 9,985,210 $ 27,437,727 Arizona Revised Statutes, Section 28-7315, established an Arizona Highways Magazine Fund. The Fund consists of monies appropriated by the Legislature from the State Highway Fund, a special revenue fund, not to exceed $500,000 annually, in addition to all Arizona Highways Magazine revenues received less expenses. The balance of contributed Earnings Totals 2000 $ 43,216,174 1999 $ 43,406,488 capital represents contributions from the State Highway Fund of $38,698 and $2,000,000 during 1991 and 1990, respectively less a reduction of $500,000 in fiscal year 1999. Balances remaining in the Fund at the end of the fiscal year do not revert to the State of Arizona General Fund or the State Highway Fund. 24 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2000 NOTE 9. GENERAL LONG-TERM DEBT AND OTHER OBLIGATIONS The following is a summary of changes in general long-term debt for the fiscal year ended June 30, 2000: Balance July 1, 1999 Bonds: Highway Revenue Bonds: 1990 $ 17,560,000 1991 Series A, Subordinated 21,905,000 1992 Series A, Subordinated, Refunding 48,965,000 1992 Series B, Subordinated 36,560,000 1993 Series, Refunding 135,810,000 1993 Series A, Subordinated, Refunding 228,545,000 1993 Series B, Subordinated, Refunding 35,000,000 1999 Series Transportation Excise Tax Revenue Bonds: 1988 Series A, Capital Appreciation 53,886,710 1989 Series A, Subordinated 25,620,000 1991 Series A 9,000,000 1992 Series A, Refunding 165,185,000 1992 Series B 16,335,000 1993 Series, Subordinated Refunding 130,595,000 1995 Series A, Subordinated 90,640,000 1995 Series B, Subordinated, Refunding 86,440,000 1998 Series A 155,445,000 1999 Series, Subordinated Total Bonds Payable Other long-term liabilities: Contracts and capital leases payable Long-term accrued vacation leave Total General Long-Term Debt Retirements /Refundings Additions $ - $ Amortization of Discount 17,560,000 11,410,000 $ - Balance June 30, 2000 $ 10,495,000 - 23,760,000 11,550,000 - 25,205,000 36,560,000 124,260,000 - 1,925,000 - 226,620,000 151,080,000 540,000 - 35,000,000 150,540,000 - - 4,031,713 57,918,423 - 25,620,000 9,000,000 38,165,000 2,380,000 - 127,020,000 13,955,000 - 8,530,000 13,200,000 - 122,065,000 77,440,000 124,695,000 245,000 19,310,000 16,995,000 - 86,195,000 136,135,000 107,700,000 1,257,491,710 275,775,000 200,190,000 4,031,713 1,337,108,423 443,175 2,577,187 954,589 - 2,065,773 8,230,209 $ 1,266,165,094 394,813 $ 278,747,000 $ 201,144,589 $ 4,031,713 8,625,022 $ 1,347,799,218 25 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2000 NOTE 9. GENERAL LONG-TERM DEBT AND OTHER OBLIGATIONS (Continued) Bonds payable Bonds payable are due in varying annual principal amounts plus varying semiannual interest amounts, except for the 1988 Series A Capital Appreciation Bonds which are due in annual installments of $21,500,000 in 2002 through 2004 with the balance of $8,500,000 due in 2005. Bonds payable at June 30, 2000, are comprised of the following individual issues: Interest Rates Issue State of Arizona Highway Revenue Bonds: 1991 Series A, Subordinated 1992 Series A, Subordinated, Refunding 1992 Series B, Subordinated 1993 Series, Refunding 1993 Series A, Subordinated, Refunding 1993 Series B, Subordinated, Refunding 1999 Series 8.8% 6.1% 6.1% - 8.0% 4.7% - 5.3% 4.3% - 6.0% 5.1% - 6.0% 4.5% - 6.3% Final Maturity Date 07/01/2004 07/01/2001 07/01/2006 07/01/2009 07/01/2011 07/01/2011 07/01/2019 Total Highway Revenue Bonds Balance at June 30, 2000 $ 10,495,000 25,205,000 36,560,000 124,260,000 226,620,000 35,000,000 150,540,000 608,680,000 State of Arizona Transportation Excise Tax Revenue Bonds: 1988 Series A Capital Appreciation Bonds (maturity value of $73,000,000) 1992 Series A, Refunding 1992 Series B 1993 Series, Subordinated, Refunding 1995 Series A, Subordinated 1995 Series B, Subordinated, Refunding 1998 Series A 1999 Series, Subordinated Total Transportation Excise Tax Revenue Bonds 7.3% - 7.5% 5.4% - 5.8% 5.4% - 5.8% 4.4% - 5.6% 4.5% - 6.5% 4.5% - 6.5% 4.0% - 5.0% 4.8% - 5.3% 07/01/2005 07/01/2005 07/01/2005 07/01/2005 07/01/2005 07/01/2005 07/01/2005 07/01/2005 57,918,423 127,020,000 13,955,000 122,065,000 77,440,000 86,195,000 136,135,000 107,700,000 728,428,423 Total Bonds Payable $ 1,337,108,423 The Highway Revenue Bonds are secured by a prior lien on and a pledge of motor vehicle and related fuel fees and taxes of the State Highway Fund, a special revenue fund. Arizona Revised Statutes prohibit the total principal amount of Arizona Highway Revenue Bonds, excluding refunded bonds, from exceeding $800,000,000. 26 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2000 NOTE 9. GENERAL LONG-TERM DEBT AND OTHER OBLIGATIONS (Continued) The Transportation Excise Tax Revenue Bonds are secured by transportation excise taxes collected by the Arizona Department of Revenue on behalf of Maricopa County. policies shall terminate on the earlier of July 1, 2005, or the date when no respective bonds are outstanding under the bond resolution. The premiums on these insurance policies are recorded as expenditures in the year of payment. Bonds aggregating $426,710,000 ($304,645,000 of Highway Revenue Bonds and $122,065,000 of Transportation Excise Tax Revenue Bonds, respectively) are subject to redemption prior to their maturity dates, at the option of the Transportation Board, in whole at any time, or in part at various interest payment dates. These bonds may be redeemed at various redemption prices ranging from 100 percent to 102 percent of principal, plus accrued interest to the date fixed for redemption. Bonds aggregating $925,480,000 are not subject to redemption prior to maturity. The carrying basis of the 1988 Series A Capital Appreciation Bonds increases as a result of accretion of the original issuance discount. At June 30, 2000, the carrying basis was $57,918,423. At maturity on July 1, 2005, the carrying basis will equal the maturity amount of $73,000,000. On July 21, 1999, the Department issued $124,695,000 in Subordinated Transportation Excise Tax Revenue Bonds (1999 Series) to (i) advance refund portions of the Transportation Board’s outstanding Senior Bonds, (ii) finance the acquisition of land and the design and construction of certain controlled access highways within Maricopa County, Arizona and (iii) pay costs of issuing the 1999 Series Bonds. The 1999 Series Bonds are due July 1, 2000 through 2005. The Bond Resolution adopted by the Transportation Board on July 25, 1986, established a debt service reserve requirement equal to the maximum annual interest due in the current year or future years on any series of outstanding Transportation Excise Tax Revenue Bonds. The Second Supplemental Transportation Excise Tax Revenue Bond Resolution adopted by the Transportation Board on September 22, 1988, gives the Transportation Board the option, which it has elected, of acquiring debt service reserve insurance policies in lieu of the debt service reserve requirement. Accordingly, no debt service reserve is reflected in the accompanying financial statements. The policies (aggregating $70,063,698 at June 30, 2000) were issued by Financial Guaranty Insurance Company, except for the 1993 Series Subordinated Bonds policies, which were issued by MBIA Insurance Corporation, and the 1995 Series A and Series B Subordinated Bonds policies which were issued by AMBAC Assurance Corporation. These policies are noncancelable and insure payment, up to the policy amount, of the bond interest on their respective payment dates. The Net proceeds totaled $126,690,457 (after receipt of $2,112,418 of reoffering premium and payment of $116,961 in underwriting fees). Net proceeds of $4,711,545 were used to advance refund $4,640,000 of the 1991 Series A, Senior Transportation Excise Tax Revenue Bonds (Refunded Bonds). State and Local Government securities were purchased with these proceeds and were deposited in an irrevocable trust with an escrow agent to provide for the partial future debt service payments on the above-referenced bonds. As a result, the Refunded Bonds will be considered defeased and the liability for these bonds will be removed from the General Long-Term Debt Account Group. The Department advance refunded the Refunded Bonds to reduce its total debt service payments over the next two years by $57,463 and to obtain an economic gain (difference between the 27 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2000 present values of the debt service payments on the old and new debt) of $55,927. NOTE 9. GENERAL LONG-TERM DEBT AND OTHER OBLIGATIONS (Continued) On November 16, 1999, the Department issued $151,080,000 in Highway Revenue Bonds (Series 1999) to (i) finance portions of the Transportation Board’s five year capital program, (ii) advance refund portions of the Transportation Board’s outstanding Senior Bonds and Subordinated Bonds and (iii) pay costs of issuing the 1999 Series Bonds. The 1999 Series Bonds are due July 1, 2001 through 2019. Government securities were purchased with these proceeds and were deposited in an irrevocable trust with an escrow agent to provide for the partial future debt service payments on the above-referenced bonds. As a result, the Refunded Bonds will be considered defeased and the liability for these bonds will be removed from the General Long-Term Debt Account Group. The Department advance refunded the Refunded Bonds to reduce its total debt service payments over the next 3 years by $491,359 and to obtain an economic gain (difference between the present values of the debt service payments on the old and new debt) of $407,420. Net proceeds totaled $151,926,437 (after receipt of $1,781,810 of reoffering premium and payment of $935,373 in underwriting fees). Net proceeds of $21,408,821 were used to advance refund $9,065,000 of the Senior Series 1990 Bonds and $11,410,000 of the Subordinated Series 1991A Bonds. State and Local Future debt service requirements of bonds outstanding at June 30, 2000, are as follows: Fiscal Year 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Highway Revenue Bonds Principal Interest $ 52,055,000 37,790,000 39,595,000 41,465,000 44,315,000 46,760,000 49,355,000 51,825,000 54,780,000 58,105,000 61,310,000 7,195,000 7,625,000 8,080,000 8,575,000 9,110,000 9,680,000 10,235,000 10,825,000 $ 608,680,000 $ Transportation Excise Tax Revenue Bonds Principal Interest 33,102,540 30,275,485 28,457,374 26,107,772 23,743,076 21,298,257 18,705,278 16,233,809 13,283,226 10,488,813 7,280,597 4,252,638 3,825,262 3,367,763 2,872,862 2,336,925 1,767,550 1,210,950 622,438 $ 135,370,000 142,085,000 148,690,000 155,095,000 162,270,000 $ 249,232,615 - - - - - - - - - - - - - - - - - - - - - - - - - - 187,425,000 179,875,000 188,285,000 196,560,000 206,585,000 46,760,000 49,355,000 51,825,000 54,780,000 58,105,000 61,310,000 7,195,000 7,625,000 8,080,000 8,575,000 9,110,000 9,680,000 10,235,000 10,825,000 $ 743,510,000 $ 110,215,799 $ 1,352,190,000 28 $ Total Principal 35,406,817 28,690,991 22,076,380 15,606,647 8,434,964 $ Interest $ 68,509,357 58,966,476 50,533,754 41,714,419 32,178,040 21,298,257 18,705,278 16,233,809 13,283,226 10,488,813 7,280,597 4,252,638 3,825,262 3,367,763 2,872,862 2,336,925 1,767,550 1,210,950 622,438 $ 359,448,414 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2000 NOTE 9. GENERAL LONG-TERM DEBT AND OTHER OBLIGATIONS (Continued) Refunded bonds In prior years, the Transportation Board refinanced various bond issues through advance refunding arrangements. Under the terms of the refunding bond issues, sufficient assets to pay all principal and interest on the refunded bond issues have been placed in irrevocable trust accounts at commercial banks and invested in U.S. Government securities which, together with interest earned thereon, will provide amounts sufficient for future payment of principal and interest of the issues refunded. The assets, liabilities, and financial transactions of these trust accounts and the liability for the defeased bonds are not reflected in the financial statements of the Department. Refunded bonds of the Department outstanding at June 30, 2000, are as follows: Original Issue Date 1990 1991 Series A, Subordinated 1992 Series B, Subordinated 1988 Series A Type Highway Revenue Bonds Highway Revenue Bonds Highway Revenue Bonds Transportation Excise Tax Revenue Bonds Capital Appreciaiton Bonds Total refunded bonds outstanding Escrow Balance Maturity Date Outstanding July 1, 2000 $ 150,325,000 July 1, 2001 160,645,000 July 1, 2002 52,350,000 July 1, 2005 8,996,156 $ 372,316,156 Contracts and capital leases payable Modular buildings and other equipment totaling $3,139,484 acquired through purchase contracts are recorded in the General Fixed Assets Account Group. Payments are due in monthly installments through June 2005 with interest rates ranging from 4.71 percent to 12.40 percent. At June 30, 2000, remaining annual principal payments under purchase contracts were as follows: 2001 $ 766,971 2002 684,122 2003 282,101 2004 221,893 2005 110,686 Total Outstanding $ 2,065,773 Notes Payable $9,530,079 in the Equipment Fund for heavy equipment purchases with third party financing. The HELP loan principal and interest payments are due monthly. The interest rates vary from 3.588 percent to Notes payable represent $58,832,686 in the State Highway Fund for the Highway Expansion and Extension Loan Program (HELP) Fund loan and 29 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2000 4.50 percent with the final payments due in 2005. The heavy equipment loan payments are due in NOTE 9. GENERAL LONG-TERM DEBT AND OTHER OBLIGATIONS (Continued) monthly installments through January 2005 with interest rates ranging from 4.71 percent to 5.41 percent. NOTE 10. OPERATING LEASES The Department leases data processing and other equipment and certain facilities from various lessors. The majority of the leases are for a one-year term, renewable annually. Total rental expenditures (excluding interfund transactions) for the year ended June 30, 2000, approximated $2,996,000. In Fiscal Year 2000, the Department has entered into a long term lease for a facility located on Washington Street in Phoenix. The future operating lease commitments are as follows: 2001 2002 2003 2004 2005 Thereafter Future operating leasing commitments $ 981,780 1,206,772 1,247,679 1,288,586 1,329,494 2,781,710 $ 8,836,021 Various funds also rent mobile equipment from the Equipment Revolving Fund on an as-needed basis . Rental income for mobile equipment for the year ended June 30, 2000, is as follows: State Highway Fund Arizona Highways Magazine Fund Other Total operating leases $ $ 24,951,428 34,033 1,118,624 26,104,085 NOTE 11. RETIREMENT PLANS The Arizona State Retirement System Board administers the Arizona State Retirement Plan (Plan), a cost sharing multi-employer defined benefit pension plan, for the benefit of Arizona employees and employees of certain other governmental entities. Plan provisions, including death, disability, and retirement benefits, are established by State statute. Substantially all employees of the Department are covered by the Plan. The Arizona State Retirement System (System) issues a Comprehensive Annual Financial Report that includes financial statements and required supplementary information. The most recent report may be obtained by writing the System, 3300 North Central Avenue, P. O. Box 33910, Phoenix, Arizona 85067-3910 or by calling (602) 240-2000 or (800) 6213778. 30 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2000 NOTE 11. RETIREMENT PLANS (Continued) Arizona Revised Statues provide statutory authority for employee and employer contributions. The employee and employer contribution rate for the year ended June 30, 2000, was computed to be 2.66 percent of covered payroll by an actuarial valuation performed at June 30, 1998. Contributions for the years ended June 30, 1998, 1999 and 2000 were $4,668,911, $4,705,156 and $3,877,921, respectively for both the employees and the Department, which were equal to the required contributions for each year. NOTE 12. CONTINGENT LIABILITIES Risk management insurance losses Claims The Department is exposed to various risks of loss related to torts; thefts of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The Department is a participant in the State’s self-insurance program, and, in the opinion of the Department’s management, any unfavorable outcomes from these claims and actions would be covered by the self-insurance program. Accordingly, the Department has no risk of loss beyond adjustments to future years’ premium payments to the State’s self-insurance program. All estimated losses for unsettled claims and actions of the State are determined on an actuarial basis and are included in the State of Arizona’s Comprehensive Annual Report. The Department has a variety of claims pending against it that arose during the normal course of its activities. Management of the Department believes, based on the advice of legal counsel, that losses, if any, resulting from settlement of these claims will not have a material effect on the financial position of the Department’s fund types. On August 5, 1999, in Hurley Trucking Co., Inc. v. State, the Tax Court of the State ruled in favor of a refund claim for motor vehicle use fuel (diesel) taxes and motor carrier taxes (based on vehicle weight and mileage) paid to the State (the “Disputed Revenues”). Several trucking companies have additionally filed refund claims. The claimants assert that the applicable statutes at the time did not permit the State to collect Disputed Revenues for certain tax years prior to 1997 relating to travel on state maintained roads crossing Federal lands. The Arizona Legislature subsequently clarified the statutes in 1997. The State filed its notice of appeal to the Arizona Court of Appeals on September 3, 1999. Oral argument was held May 23, 2000. The Department disputes the claimants’ interpretation of the applicable statutes and intends to assert a vigorous defense. However, if the plaintiff in the Hurley case were to prevail, the maximum potential amount of the claim is difficult to predict with certainty because the amount of each claim would vary based on the nature of the actual roads used and mileage of each claimant. If the Grants Amounts received or receivable from grant agencies are subject to audit and adjustment by grantor agencies, principally the Federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures which may be disallowed by the grantor cannot be determined at this time although the Department expects such amounts, if any, to be immaterial. 31 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2000 NOTE 12. CONTINGENT LIABILITIES (Continued) plaintiff were to prevail on both counts and all existing claimants were to receive a lump sum payment in a single fiscal year, the Department does not believe that the maximum potential payment from the Arizona Highway User Revenue Fund would reduce the amount of State Highway Fund revenues by more than ten percent (10%) for the single fiscal year in which such payment were made. Commitments under construction contracts The Department’s outstanding commitments under construction contracts were approximately $687,565,000 at June 30, 2000. . NOTE 13. SUBSEQUENT EVENTS On July 11, 2000, the Department issued $39,405,000 in Grant Anticipation Notes (Series 2000A) to (i) pay a portion of the costs of acquiring right-of-way for, design and construction of certain controlled-access highways in the City of Phoenix, Arizona, and (ii) a portion of the costs of issuing the Series 2000A Notes. The Series 2000A Notes are due January 1, 2003 and January 1, 2004. Net proceeds totaled $39,200,196 (after payment of $34,804 original issue discount and $170,000 underwriting fees). On September 15, 2000, the Department issued $113,690,000 in Transportation Excise Tax Revenue Bonds (2000 Series) to (i) finance the acquisition of land and the design and construction of certain controlled access highway within Maricopa County, Arizona and (ii) pay cost of issuing the 2000 Series Bonds. The 2000 Series Bonds are due July 1, 2001 through 2005. Net proceeds totaled $115,001,157 (after receipt of $1,960,638 of reoffering premium and payment of $649,481in underwriting fees). 32 Arizona Department of Transportation Special Revenue Funds Combining Balance Sheet June 30, 2000 (With comparative totals at June 30, 1999) Budgeted State Highway Fund Assets Cash and cash equivalents on deposit with the State Treasurer Receivables: Notes and loans Accrued interest Other Due from U.S. Government for reimbursable construction costs Due from other Arizona Department of Transportation funds Due from Arizona counties, cities and other state agencies Inventories Advances to other Arizona Department of Transportation funds Total assets Liabilities and fund balances Liabilities: Construction contracts payable Accounts payable Accrued payroll and other accrued expenditures Due to other Arizona Department of Transportation funds Due to Arizona counties, cities and other state agencies Federal arbitrage rebate Advances from other Arizona Department of Transportation funds Notes and interest payable Total liabilities Fund balances: Reserved for highway construction Reserved for inventories Reserved for loans and other financial assistance Unreserved, undesignated Total fund balances Total liabilities and fund balances $ $ $ $ 202,584,064 $ State Aviation Fund Safety Enforcement and Transportation Infrastructure Fund Highway Expansion and Extension Loan Program Fund 16,504,653 $ $ 5,009,835 116,479,199 Maricopa Regional Area Road Construction Fund $ 133,281,122 1,852,881 4,685,421 6,766,575 263,504 76,335 50,220 - 60,022,019 2,050,507 - 4,686,494 1,194,720 7,003,709 36,220,374 - - - 324,036 92,518,183 120,287 77,042 9,119 368,312 3,961,476 - - 16,588 - 21,291,975 - 20,000,000 361,822,399 29,085,269 25,236,497 $ $ 23,731,354 79,225 $ $ 5,137,097 8,751 $ $ 178,577,432 - $ $ 168,150,368 11,161,125 3,011,246 5,664,102 15,198 10,889 - 2,912 318,069 - - 1,389,051 2,521,773 315,934 - - - 101,679,790 - 1,512,260 58,832,686 119,452,557 94,423 19,640 20,000,000 123,068,841 18,209,316 95,020,770 3,961,476 143,387,596 242,369,842 361,822,399 23,636,931 23,636,931 23,731,354 5,117,457 5,117,457 5,137,097 55,508,591 55,508,591 178,577,432 149,941,052 149,941,052 168,150,368 $ 31 $ $ $ Exhibit A-1 Motor Carrier Safety Revolving Fund Motor Vehicle Vehicle Liability Inspection Insurance and Title Enforcement Enforcement Fund Fund $ $ $ $ $ 57,293 Totals 2000 712,523 $ 733,681 - - - 71,475,088 5,411,832 11,765,465 19,872,561 3,500,232 9,498,053 - - - 36,544,410 44,110,269 - 167,669 110,620 93,371,232 106,459,635 - - - 21,308,563 3,961,476 19,510,343 3,781,392 880,192 $ 844,301 $ $ $ 57,293 - $ $ 50,000 46,924 $ 475,362,370 1999 20,000,000 739,200,436 40,246,394 28,432,643 $ $ $ 388,421,719 595,154,204 64,170,642 16,863,188 - 7,768 22,694 5,723,563 8,529,429 - - 1,200 4,230,093 10,241,346 - - - 101,995,724 1,512,260 328,090 1,356,397 - 57,768 70,818 20,000,000 58,832,686 260,973,363 7,785,561 109,274,653 57,293 57,293 57,293 822,424 822,424 880,192 773,483 773,483 $ 844,301 244,961,822 3,961,476 55,508,591 173,795,184 478,227,073 739,200,436 223,429,128 3,781,392 46,316,591 212,352,440 485,879,551 595,154,204 $ $ $ 32 Arizona Department of Transportation Special Revenue Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances For the fiscal year ended June 30, 2000 (With comparative totals for the fiscal year ended June 30, 1999) Budgeted State Highway Fund Revenues: Transportation excise tax Vehicle registration, title, license and related fees Fuel and motor carrier taxes and fees Reimbursement of construction expenditures - Federal aid Other Federal grants and reimbursements State match Reimbursements from Arizona counties, cities and other state agencies State appropriations Interest on loans receivable Interest Flight property tax Grand Canyon Airport Other Total revenues Expenditures: Current: Transportation - appropriated by State legislature: Administration Highway Highway Maintenance Motor Vehicle Division Aeronautics Division Other Total Transportation - appropriated by State legislature Transportation - not appropriated by State legislature Capital outlay: Highway construction Land, buildings and improvements - appropriated by State legislature Contracts and capital leases payable Federal arbitrage rebate $ Safety Enforcement and Transportation Infrastructure Fund State Aviation Fund - $ - $ - Highway Expansion and Extension Loan Program Fund $ Maricopa Regional Area Road Construction Fund - $ 248,595,990 245,943,047 275,661,282 2,957,310 527,558 3,239,688 - - - 372,411,938 5,180,895 - 6,500 - - 6,561,311 396,600 29,854,254 - 3,111,760 179,690 12,284,145 8,373,555 923,146,312 1,430,221 6,709,385 346,040 56,742 12,033,756 230,887 3,470,575 1,591,725 3,780,802 12,330,438 15,496,949 6,989,597 2,525,795 303,462,585 47,847,296 42,302,275 83,397,548 71,345,034 654,856 1,814,658 - 902,715 - - - 245,547,009 1,814,658 902,715 - - 6,751,022 - - 69,597 - 682,094,083 - - - 90,895,073 10,956,144 - - - - 2,577,187 - - - - 155,863 33 Exhibit A-2 Motor Vehicle Liability Insurance Enforcement Fund Motor Carrier Safety Revolving Fund $ - $ - Vehicle Inspection and Title Enforcement Fund $ - Totals 2000 $ 1999 248,595,990 $ 229,470,201 4,800 - 1,714,378 - 1,228,669 - 255,087,892 276,188,840 250,120,838 298,393,657 - - - 372,411,938 41,602,960 396,600 354,209,698 47,254,925 24,794 4,800 1,714,378 1,228,669 18,608,709 179,690 1,591,725 24,715,652 6,709,385 346,040 10,956,092 1,257,391,513 14,879,540 868,443 28,798 22,274,747 7,489,832 1,052,578 19,371,455 1,245,439,506 22,020 - 1,399,069 - 823,295 - 47,847,296 42,302,275 83,397,548 74,492,133 1,814,658 654,856 44,648,035 42,034,947 79,304,434 70,438,046 2,235,913 1,388,563 22,020 1,399,069 823,295 250,508,766 240,049,938 - - - 6,820,619 9,847,965 - - - 772,989,156 714,305,201 - - - 10,956,144 11,488,854 - - - 2,577,187 155,863 282,248 1,356,397 (continued) 34 Arizona Department of Transportation Special Revenue Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances For the fiscal year ended June 30, 2000 (With comparative totals for the fiscal year ended June 30, 1999) Budgeted State Highway Fund Arizona Department of Public Safety distributions - appropriated by State legislature Year 2000 computer projects Distributions to Arizona counties, cities and other state agencies Interest expense Total expenditures Excess of revenues over expenditures Safety Enforcement and Transportation Infrastructure Fund State Aviation Fund Maricopa Regional Area Road Construction Fund 12,500,000 - - - - - 19,756 960,445,201 19,825,238 21,639,896 902,715 1,679,790 1,749,387 10,117,567 101,168,503 <37,298,889> <9,606,140> 2,567,860 10,581,051 202,294,082 - - 84,950 Other financing sources : Proceeds from contracts and capital leases payable Operating transfers in Operating transfers out: Debt service Other Total other financing sources 2,577,187 67,255,008 167,394 <76,483,277> <61,195> <6,712,277> <167,394> - Excess of revenues and other financing sources over expenditures and other financing uses <44,011,166> <9,606,140> Fund balances, July 1 Residual equity transfer out Fund balances, June 30 286,381,008 242,369,842 $ Highway Expansion and Extension Loan Program Fund 33,243,071 $ 23,636,931 35 <195,326> <195,326> 2,372,534 $ 3,494,923 <750,000> 5,117,457 $ <1,389,051> <1,389,051> <150,635,700> <17,188,201> <167,738,951> 9,192,000 34,555,131 46,316,591 55,508,591 115,385,921 149,941,052 $ Exhibit A-2 Motor Vehicle Liability Insurance Enforcement Fund Vehicle Inspection and Title Enforcement Fund - - 600 22,620 Motor Carrier Safety Revolving Fund 1999 - 12,500,000 - 12,500,000 6,527,900 1,399,069 107,700 930,995 30,070,861 1,679,790 1,088,258,386 32,854,388 1,029,212,891 315,309 297,674 169,133,127 216,226,615 - - - 2,577,187 67,507,352 282,248 43,771,485 - - - <227,118,977> <19,001,167> <176,035,605> <226,501,081> <40,062,960> <222,510,308> <17,820> 315,309 297,674 <6,902,478> <6,283,693> 75,113 57,293 507,115 822,424 475,809 773,483 <17,820> $ Totals 2000 $ $ $ 485,879,551 <750,000> 478,227,073 $ 36 492,163,244 485,879,551 Arizona Department of Transportation Special Revenue Funds Combining Schedule of Revenues and Expenditures - Budget and Actual (Budget Basis) For the fiscal year ended June 30, 2000 State Highway Fund Budget Revenues: Vehicle registration, title, license and related fees Fuel and motor carrier taxes and fees Interest Flight property tax Grand Canyon Airport Other Total revenues Expenditures appropriated by State legislature in 1999 budget: Administration: Personal services Employee related expenditures Other operating expenditures Risk management premiums Total Administration Highway: Personal services Employee related expenditures Other operating expenditures Radio communication Total Highway $ State Aviation Fund Variance Favorable Actual Non-GAAP $ 3,231,327 5,662,350 8,893,677 $ Budget Actual Non-GAAP 2,175,000 546,000 1,587,000 8,188,000 84,000 32,000 12,612,000 $ 3,102,292 481,594 1,560,208 6,709,385 341,110 62,434 12,257,023 Variance Favorable 245,889,200 282,268,300 528,157,500 $ 249,120,527 287,930,650 537,051,177 $ 927,292 <64,406> <26,792> <1,478,615> 257,110 30,434 <354,977> 17,070,580 3,622,755 26,935,465 47,628,800 17,069,666 3,622,603 26,337,442 47,029,711 914 152 598,023 599,089 - - - 28,604,000 6,066,800 7,669,100 405,900 42,745,800 28,571,952 6,034,907 7,363,877 405,968 42,376,704 32,048 31,893 305,223 <68> 369,096 - - - - - Highway Maintenance: Personal services Employee related expenditures Other operating expenditures Highway Maintenance (nonreverting balance forward) Total Highway Maintenance 27,040,500 6,847,800 50,046,500 26,432,441 6,531,996 48,383,707 608,059 315,804 1,662,793 1,279,178 85,213,978 1,279,178 82,627,322 2,586,656 - Motor Vehicle Division: Personal services Employee related expenditures Other operating expenditures License plates and tabs Medical advisory board Abandoned Vehicle Attorney General Legal Special Projects Desktop Computer Replacement Total Motor Vehicle Division 40,447,300 10,164,000 15,475,400 2,295,300 200,000 422,700 125,800 1,633,053 70,763,553 40,442,711 10,163,600 15,086,110 2,295,297 200,000 413,642 124,117 1,602,185 70,327,662 4,589 400 389,290 3 9,058 1,683 30,868 435,891 - - - Air Quality Program: Personal services Employee related expenditures Other operating expenditures Total Air Quality Program 35,600 9,400 200 45,200 35,600 9,400 200 45,200 - - - - 37 Exhibit A-3 Safety Enforcement and Transportation Infrastructure Fund Variance Actual Favorable Budget Non-GAAP $ 3,589,000 25,000 3,614,000 $ 3,263,365 211,482 3,474,847 $ <325,635> $ 186,482 <139,153> Totals Variance Favorable Actual Non-GAAP Budget 251,653,200 282,814,300 1,612,000 8,188,000 84,000 32,000 544,383,500 $ 255,486,184 288,412,244 1,771,690 6,709,385 341,110 62,434 552,783,047 $ 3,832,984 5,597,944 159,690 <1,478,615> 257,110 30,434 8,399,547 - - - 17,070,580 3,622,755 26,935,465 47,628,800 17,069,666 3,622,603 26,337,442 47,029,711 914 152 598,023 599,089 - - - 28,604,000 6,066,800 7,669,100 405,900 42,745,800 28,571,952 6,034,907 7,363,877 405,968 42,376,704 32,048 31,893 305,223 <68> 369,096 - - - 27,040,500 6,847,800 50,046,500 26,432,441 6,531,996 48,383,707 608,059 315,804 1,662,793 - - - 1,279,178 85,213,978 1,279,178 82,627,322 2,586,656 519,900 126,200 374,500 1,020,600 482,742 111,854 282,923 877,519 37,158 14,346 91,577 143,081 40,967,200 10,290,200 15,849,900 2,295,300 200,000 422,700 125,800 1,633,053 71,784,153 40,925,453 10,275,454 15,369,033 2,295,297 200,000 413,642 124,117 1,602,185 71,205,181 41,747 14,746 480,867 3 9,058 1,683 30,868 578,972 - - - 35,600 9,400 200 45,200 35,600 9,400 200 45,200 (Continued) 38 Arizona Department of Transportation Special Revenue Funds Combining Schedule of Revenues and Expenditures - Budget and Actual (Budget Basis) For the fiscal year ended June 30, 2000 State Highway Fund Actual Non-GAAP Budget State General Fund Program: Public transit: Personal services Employee related expenditures Other operating expenditures Other transit planning Total State General Fund Program Aeronautics Division: Personal services Employee related expenditures Other operating expenditures Reimbursement to State Highway Fund Total Aeronautics Division Capital outlay - land, buildings and improvements Arizona Department of Public Safety transfers Expenditures appropriated by State legislature by carryover of previous years' unexpended budgets Total expenditures Excess of revenues over expenditures $ State Aviation Fund Variance Favorable Variance Favorable Actual Non-GAAP Budget 54,600 19,000 8,900 15,082 97,582 54,346 16,067 8,575 15,082 94,070 254 2,933 325 3,512 - - - - - - 566,800 126,000 600,400 535,225 105,173 468,469 31,575 20,827 131,931 - - - 1,293,200 1,108,867 184,333 14,141,246 10,956,144 3,185,102 - - - 12,500,000 12,500,000 - - - - 1,055,409 274,191,568 505,991 266,462,804 549,418 7,728,764 1,293,200 1,108,867 184,333 253,965,932 $ 270,588,373 16,622,441 $ 11,318,800 $ 11,148,156 39 $ $ <170,644> Exhibit A-3 Safety Enforcement and Transportation Infrastructure Fund Variance Actual Favorable Budget Non-GAAP $ Totals Variance Favorable Actual Non-GAAP Budget - - - 54,600 19,000 8,900 15,082 97,582 54,346 16,067 8,575 15,082 94,070 254 2,933 325 3,512 - - - 566,800 126,000 600,400 535,225 105,173 468,469 31,575 20,827 131,931 - - - 1,293,200 1,108,867 184,333 14,141,246 10,956,144 3,185,102 - - - 12,500,000 12,500,000 - 1,020,600 877,519 143,081 1,055,409 276,505,368 505,991 268,449,190 549,418 8,056,178 2,593,400 $ 2,597,328 $ 3,928 $ 267,878,132 40 $ 284,333,857 $ 16,455,725 Exhibit B-1 Arizona Department of Transportation Debt Service Funds Combining Balance Sheet June 30, 2000 (With comparative totals at June 30, 1999) Maricopa Regional Area Road Bond Fund Highway Revenue Bond Fund Assets Cash and cash equivalents on deposit with the State Treasurer Accrued interest receivable Total assets Fund balances Reserved for highway construction Total fund balances $ $ $ 896,498 669,683 1,566,181 $ $ 1,566,181 1,566,181 41 Totals 2000 $ $ 16,165,069 1,614,159 17,779,228 $ $ 17,779,228 17,779,228 1999 $ $ 17,061,567 2,283,842 19,345,409 $ 32,541,511 2,195,226 34,736,737 $ $ 19,345,409 19,345,409 $ $ 34,736,737 34,736,737 Exhibit B-2 Arizona Department of Transportation Debt Service Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances For the fiscal year ended June 30, 2000 (With comparative totals for the fiscal year ended June 30, 1999) Maricopa Regional Area Road Bond Fund Highway Revenue Bond Fund Revenues: Interest $ Expenditures: Debt service: Principal Interest Bond issuance cost Other Total expenditures 2,575,194 $ 6,016,936 Totals 2000 $ 8,592,130 1999 $ 7,648,833 46,270,000 33,994,369 261,800 95,111 80,621,280 128,805,000 42,609,206 46,400 77,723 171,538,329 175,075,000 76,603,575 308,200 172,834 252,159,609 150,570,000 74,341,597 659,778 114,023 225,685,398 Deficiency of revenues under expenditures <78,046,086> <165,521,393> <243,567,479> <218,036,565> Other financing sources : Operating transfers in Proceeds from refunding bonds Payment to refunded bond escrow agent Operating transfers out Total other financing sources 76,483,277 21,469,488 <20,475,000> 77,477,765 150,635,700 4,702,686 <4,640,000> 150,698,386 227,118,977 26,172,174 <25,115,000> 228,176,151 226,501,081 28,825,844 <27,390,000> <3,128,892> 224,808,033 <568,321> <14,823,007> <15,391,328> 6,771,468 Excess of revenues and other financing sources over expenditures and other financing uses Fund balances, July 1 Fund balances, June 30 $ 2,134,502 1,566,181 $ 42 32,602,235 17,779,228 $ 34,736,737 19,345,409 27,965,269 $ 34,736,737 Exhibit C-1 Arizona Department of Transportation Capital Projects Funds Combining Balance Sheet June 30, 2000 (With comparative totals at June 30,1999) Highway Revenue Bond Proceeds Fund Assets Cash and cash equivalents on deposit with the State Treasurer Accrued interest receivable Due from other Arizona Department of Transportation Funds Total assets Liabilities and fund balances Liabilities: Construction contracts payable Accounts payable Due to other Arizona Department of Transportation Funds Total liabilities Fund balances - reserved for highway construction Total liabilities and fund balances $ $ $ $ 50,410,037 559,451 50,969,488 113,965 1,020,788 Maricopa Regional Area Road Bond Proceeds Fund $ $ $ Totals 2000 50,410,037 559,451 1999 - $ - $ 50,969,488 $ - $ $ 113,965 1,020,788 $ 18,770,317 554,801 5,875,596 25,200,714 8,463,402 6,772,019 1,841,782 2,976,535 - 1,841,782 2,976,535 1,675,635 16,911,056 47,992,953 50,969,488 - 47,992,953 $ 50,969,488 8,289,658 25,200,714 43 $ $ Exhibit C-2 Arizona Department of Transportation Capital Projects Funds Combining Statement of Revenues, Expenditures and Changes in Fund Balances For the fiscal year ended June 30, 2000 (With comparative totals for the fiscal year ended June 30, 1999) Revenues: Interest Other Total revenues Expenditures: Capital outlay - highway construction Other Total expenditures Deficiency of revenues under expenditures Other financing sources : Proceeds from sale of bonds Operating transfers out Total other financing sources Excess of revenues and other financing sources over expenditures and other financing uses Fund balances, July 1 Fund balances, June 30 Highway Revenue Bond Proceeds Fund Maricopa Regional Area Road Bond Proceeds Fund $ $ 3,674,294 3,674,294 2,960,119 60 2,960,179 Totals 2000 $ 6,634,413 60 6,634,473 1999 $ 4,439,936 71,525 4,511,461 45,920,445 45,920,445 123,003,897 123,003,897 168,924,342 168,924,342 148,241,265 1,989 148,243,254 <42,246,151> <120,043,718> <162,289,869> <143,731,793> 131,392,321 <41,153,217> 90,239,104 119,107,028 <7,352,968> 111,754,060 250,499,349 <48,506,185> 201,993,164 152,572,363 <550,912> 152,021,451 47,992,953 <8,289,658> 39,703,295 8,289,658 $ 47,992,953 44 $ 8,289,658 - $ 8,289,658 47,992,953 $ 8,289,658 Exhibit D-1 Arizona Department of Transportation Arizona Highways Magazine Fund Comparative Balance Sheets June 30, 2000 and 1999 1999 2000 Assets Current assets: Cash and cash equivalents on deposit with the State Treasurer Subscriptions receivable, less allowance for doubtful accounts of $7,300 in 2000 and 1999 Accrued interest receivable Accounts receivable - retail/commercial, less allowance for returns of $10,000 in 2000 and 1999 Inventories Prepaid expenses Total current assets $ Fixed assets, net of accumulated depreciation Total assets Liabilities and fund equity Current liabilities: Accounts payable Accrued payroll and other accrued expenses Due to other Arizona Department of Transportation funds Deferred revenue - unearned subscription revenue Total current liabilities 3,308,989 $ 358,776 28,205 463,554 38,658 53,435 2,786,130 668,778 7,204,313 123,519 2,815,194 606,291 7,268,768 2,065,088 2,420,394 9,689,162 $ 9,269,401 $ $ 163,656 181,267 4,484,216 4,829,139 $ Fund equity: Contributed capital Retained earnings Total fund equity $ 45 9,269,401 246,241 237,845 1,808 4,257,611 4,743,505 1,538,698 2,901,564 4,440,262 Total liabilities and fund equity 3,221,552 1,538,698 3,406,959 4,945,657 $ 9,689,162 Exhibit D-2 Arizona Department of Transportation Arizona Highways Magazine Fund Comparative Statements of Revenues, Expenses and Changes in Retained Earnings For the fiscal years ended June 30, 2000 and 1999 2000 Operating revenues: Magazine sales Sales of related products Other Total operating revenues $ Operating expenses: Publication and promotional costs Salaries and wages Employee benefits Shipping and postage Supplies Equipment rental Temporary help, professional and outside services Repairs and maintenance Travel Write-off of uncollectible accounts Other Depreciation Total operating expenses Operating loss Non-operating revenues : Interest Loss on disposal of fixed assets Total non-operating revenues Net Retained earnings, July 1 Retained earnings, June 30 $ 46 1999 6,223,932 4,489,024 475,953 11,188,909 $ 6,039,340 4,269,466 607,749 10,916,555 5,644,967 2,122,261 466,296 1,944,050 112,112 90,776 541,960 83,058 26,397 91,127 308,101 366,702 11,797,807 5,685,205 2,011,090 466,812 1,969,985 107,401 79,249 513,544 63,800 23,951 68,521 368,760 358,265 11,716,583 <608,898> <800,028> 172,456 <68,953> 103,503 227,854 <279,989> <52,135> <505,395> <852,163> 3,406,959 2,901,564 4,259,122 $ 3,406,959 Exhibit D-3 Arizona Department of Transportation Arizona Highways Magazine Fund Comparative Statements of Cash Flows For the fiscal years ended June 30, 2000 and 1999 1999 2000 Cash flows from operating activities: Operating loss Adjustments to reconcile operating loss to net cash used for operating activities: Depreciation Changes in current assets and liabilities: Accounts receivable Inventories Prepaid expenses Accounts payable Accrued payroll and other accrued expenses Due to other Arizona Department of Transportation funds Deferred revenue Total adjustments $ <608,898> $ <800,028> 366,702 358,265 174,862 29,064 <62,487> <82,585> <56,578> <1,808> 226,605 593,775 9,330 <43,299> <285,063> 58,554 2,464 <503> <109,266> <9,518> <15,123> <809,546> Cash flows from capital and related financing activities: Acquisition of fixed assets Reduction of contributed capital Net cash used for capital and related financing activities <80,349> <80,349> <224,214> <500,000> <724,214> Cash flows from investing activities: Interest 182,909 275,238 275,238 Net cash used for operating activities Net cash provided by investing activities 182,909 Net increase in cash and cash equivalents 87,437 Cash and cash equivalents, July 1 Cash and cash equivalents, June 30 $ 47 3,221,552 3,308,989 <1,258,522> $ 4,480,074 3,221,552 Exhibit E-1 Arizona Department of Transportation Equipment Fund Comparative Balance Sheets June 30, 2000 and 1999 2000 Assets Current assets: Cash and cash equivalents on deposit with the State Treasurer Receivables: Accrued interest Other Due from other Arizona Department of Transportation funds Due from other state agencies Inventories Total current assets Fixed assets, net of accumulated depreciation Total assets $ Liabilities and fund equity Liabilities: Accounts payable Accrued payroll and other accrued expenses Notes payable Total liabilities Fund equity: Contributed capital Retained earnings : Reserved for replacement of equipment Unreserved Total fund equity Total liabilities and fund equity 5,092,780 $ 5,065,792 34,825 256,936 41,789 87,503 68,116 2,334,406 7,787,063 1,775,347 20,254 2,560,838 9,551,523 $ 45,686,282 53,473,345 $ 35,321,018 44,872,541 $ - $ 557,157 $ 48 1999 727,092 9,530,079 10,257,171 908,896 1,466,053 5,793,237 5,793,237 9,985,210 27,437,727 43,216,174 53,473,345 9,985,210 27,628,041 43,406,488 44,872,541 $ Exhibit E-2 Arizona Department of Transportation Equipment Fund Comparative Statements of Revenues, Expenses and Changes in Retained Earnings For the fiscal years ended June 30, 2000 and 1999 2000 1999 $ 26,104,085 504,746 3,624,687 $ 24,289,009 165,711 3,394,993 Total operating revenues 30,233,518 27,849,713 Operating expenses: Equipment maintenance Fuel and lubricants Salaries and related benefits Supplies Professional and outside services Insurance Travel Other Depreciation 5,712,905 4,871,554 8,933,988 368,417 505,538 605,300 106,650 1,443,653 8,099,211 Total operating expenses 30,647,216 5,813,831 3,162,837 8,826,969 224,049 460,658 855,600 116,161 1,009,273 6,663,738 27,133,116 Operating revenues: Equipment rentals Equipment sales Other Operating income Non-operating revenues : Interest Loss on disposal of fixed assets Legislative transfer out Total non-operating revenues Net income Retained earnings, July 1 Retained earnings, June 30 <413,698> 716,597 223,384 - 154,648 <93,746> <500,000> 223,384 <439,098> <190,314> 277,499 37,613,251 $ 37,422,937 49 37,335,752 $ 37,613,251 Exhibit E-3 Arizona Department of Transportation Equipment Fund Comparative Statements of Cash Flows For the fiscal years ended June 30, 2000 and 1999 2000 Cash flows from operating activities: Operating income Adjustments to reconcile operating income to net cash provided by operating activities Depreciation Changes in assets and liabilities: Due from other Arizona Department of Transportation funds Due from other state agencies Other receivables Inventories Accounts payable Accrued payroll and other accrued expenses Total adjustments $ <413,698> 1999 $ 716,597 8,099,211 6,663,738 1,707,231 20,254 <169,433> 226,432 <557,157> <181,804> 9,144,734 187,662 93,910 39,519 <191,770> <213,731> 80,995 6,660,323 8,731,036 7,376,920 Cash flows from capital and related financing activities: Acquisition of fixed assets Proceeds from sale of fixed assets Legislative transfer out <9,970,100> 1,035,668 - <5,525,953> 448,628 <500,000> Net cash used for capital and related financing activities <8,934,432> <5,577,325> Net cash provided by operating activities Cash flows from investing activities: Interest Net cash provided by investing activities Net increase in cash and cash equivalents Cash and cash equivalents, July 1 Cash and cash equivalents, June 30 $ 50 230,384 230,384 169,194 169,194 26,988 1,968,789 5,065,792 5,092,780 3,097,003 $ 5,065,792 Arizona Department of Transportation Agency Funds Combining Balance Sheet June 30, 2000 (With comparative totals at June 30, 1999) Motor Vehicle Division Clearing Local Agency Deposits Assets Cash and cash equivalents on deposit with the State Treasurer: Restricted Unrestricted Receivables: Accrued interest Taxes and fees Other Due from U.S. Government for reimbursable construction costs Due from other Arizona Department of Transportation funds Due from Arizona counties, cities and other state agencies Total assets Liabilities Liabilities: Construction contracts payable Accounts payable Due to other Arizona Department of Transportation funds Due to Arizona Department of Public Safety Due to Arizona counties, cities and other state agencies Surety and rental deposits Total liabilities $ $ $ $ 5,480,688 - $ 17,809,183 Highway User Revenue $ 61,382,787 Underground Storage Tank Highway Property Rentals - 24% $ $ 425,834 - 2,480,185 443,863 72,677,349 - 391,910 76,407,839 - 14,745 - 38,133 3,072,925 - - - - - 654,106 32,120,113 3,386,635 - 62,895 170,365,544 $ 3,827,214 $ $ $ 40,552 9,038,028 2,177,071 4,737 91,145,375 $ $ 5,946,241 $ $ - 121,743 2,518,318 - - 39,655,730 83,872,435 - 162 - - 2,685,000 - - 6,860,957 9,038,028 43,486,687 2,056,717 91,145,375 83,808,109 170,365,544 3,705,471 $ 3,827,214 2,518,156 2,518,318 $ 51 $ $ Exhibit F-1 Economic Strength Project Totals 2000 $ 2,155,603 - $ 8,062,125 81,672,155 1999 $ 7,299,447 95,000,138 19,586 - 426,241 149,085,188 481,996 472,646 165,884,710 555,167 - 3,072,925 1,865,536 - 36,160,854 45,670,690 $ 2,175,189 $ $ $ - 108,184 279,069,668 8,245,055 $ $ 376,534 317,124,868 1,961,246 6,148,773 - 123,528,327 147,862,479 - 2,685,000 1,692,500 2,175,189 $ 2,175,189 142,554,569 2,056,717 279,069,668 157,350,289 2,109,581 317,124,868 $ $ 52 Exhibit F-2 Arizona Department of Transportation Agency Funds Combining Statement of Changes in Assets and Liabilities For the fiscal year ended June 30, 2000 Balance July 1, 1999 Local Agency Deposits Fund Assets: Cash and cash equivalents on deposit with the State Treasurer, restricted Accounts receivable Due from U.S. Government for reimbursable construction costs Due from Arizona counties, cities and other state agencies Total assets Liabilities: Accounts payable Construction contracts payable Due to Arizona counties, cities and other state agencies Total liabilities Motor Vehicle Division Clearing Fund Assets: Cash and cash equivalents on deposit with the State Treasurer, unrestricted Taxes and fees receivable Due from other Arizona Department of Transportation funds Due from Arizona counties, cities and other state agencies Total assets Liabilities: Accounts payable Due to other Arizona Department of Transportation funds Due to Arizona counties, cities and other state agencies Surety and rental deposits Total liabilities $ Additions 4,969,692 530,223 $ 1,865,536 16,452,346 61,501 $ 15,541,128 376,534 Balance June 30, 2000 Deletions 15,941,350 147,861 $ 14,333,739 1,634,764 5,480,688 443,863 3,072,925 1,970,746 40,552 $ 7,741,985 $ 33,689,739 $ 32,393,696 $ 9,038,028 $ 126,567 1,961,246 $ 2,050,504 13,980,104 $ 15,941,350 $ 2,177,071 - $ $ 5,654,172 7,741,985 $ 24,363,176 79,348,245 $ 27,420 1,206,785 17,237,393 876,342,989 869,677,816 $ $ 626,686 15,941,350 882,896,982 876,348,712 $ $ - 6,860,957 9,038,028 17,809,183 72,677,349 654,106 $ 103,738,841 $ 18,545 1,746,666,036 $ 13,808 1,759,259,502 $ 4,737 91,145,375 $ 5,935,001 $ 75,582,560 $ 75,571,320 $ 5,946,241 $ 50,217,237 457,054,323 467,615,830 39,655,730 45,477,022 2,109,581 103,738,841 337,661,078 5,556 870,303,517 339,651,413 58,420 882,896,983 43,486,687 2,056,717 91,145,375 $ $ $ (Continued) 53 Exhibit F-2 Arizona Department of Transportation Agency Funds Combining Statement of Changes in Assets and Liabilities For the fiscal year ended June 30, 2000 Balance July 1, 1999 Highway User Revenue Fund Assets: Cash and cash equivalents on deposit with the State Treasurer, unrestricted Accrued interest receivable Taxes and fees receivable Due from other Arizona Department of Transportation funds Due from Arizona counties, cities and other state agencies Total assets Liabilities: Due to other Arizona Department of Transportation funds Due to Arizona Department of Public Safety Due to Arizona counties, cities and other state agencies Total liabilities Underground Storage Tank Fund Assets: Cash and cash equivalents on deposit with the State Treasurer, restricted Accrued interest receivable Due from other Arizona Department of Transportation funds Total assets Liabilities: Accounts payable Due to Arizona counties, cities and other state agencies Total liabilities Highway Property Rentals - 24% Fund Assets: Cash and cash equivalents on deposit with the State Treasurer, unrestricted Accounts receivable Total assets Liabilities: Accounts payable Due to other Arizona Department of Transportation funds Due to Arizona counties, cities and other state agencies Total liabilities $ Additions 68,104,498 455,506 86,536,465 $ 42,288,533 197,385,002 $ $ 97,645,242 1,692,500 $ $ $ 1,018,458,167 2,023,541 605,183,251 $ 390,950,918 $ 98,047,260 197,385,002 $ 339,667 2,868 $ Balance June 30, 2000 Deletions 62,895 2,016,678,772 494,697,463 13,622,500 489,840,456 998,160,419 28,829,762 15,836 1,025,179,878 2,087,137 615,311,877 $ 401,119,338 $ $ $ $ 28,857,701 2,043,698,230 508,470,270 12,630,000 504,079,607 1,025,179,877 28,743,595 3,959 61,382,787 391,910 76,407,839 32,120,113 $ $ $ $ 28,825,803 62,895 170,365,544 83,872,435 2,685,000 83,808,109 170,365,544 425,834 14,745 3,386,635 $ 3,354,737 3,697,272 $ 57,703,299 $ 57,573,357 $ 3,827,214 $ 87,205 $ 1,413,101 $ 1,378,563 $ 121,743 $ 3,610,067 3,697,272 $ 27,460,436 28,873,537 $ 27,365,032 28,743,595 $ 3,705,471 3,827,214 $ $ $ 2,532,464 24,944 2,557,408 $ $ 400,443 413,633 814,076 $ - $ 203 - $ $ $ 452,722 400,444 853,166 $ 2,480,185 38,133 2,518,318 $ 203 $ - 162 2,557,408 2,557,408 $ 54 413,429 413,794 - $ 452,681 452,884 162 $ 2,518,156 2,518,318 (Continued) Exhibit F-2 Arizona Department of Transportation Agency Funds Combining Statement of Changes in Assets and Liabilities For the fiscal year ended June 30, 2000 Balance July 1, 1999 Economic Strength Project Fund Assets: Cash and cash equivalents on deposit with the State Treasurer, restricted Accrued interest receivable Due from other Arizona Department of Transportation funds Total assets Liabilities: Due to Arizona counties, cities and other state agencies Total liabilities Total - All Agency Funds Assets: Cash and cash equivalents on deposit with the State Treasurer: Restricted Unrestricted Receivables: Accrued interest Taxes and fees Other Due from U.S. Government for reimbursable construction costs Due from other Arizona Department of Transportation funds Due from Arizona counties, cities and other state agencies Total assets Liabilities: Accounts payable Construction contracts payable Due to other Arizona Department of Transportation funds Due to Arizona Department of Public Safety Due to Arizona counties, cities and other state agencies Surety and rental deposits Total liabilities Additions $ 1,990,088 14,272 $ 1,110,051 115,365 $ 2,004,360 $ $ $ 2,004,360 2,004,360 $ 7,299,447 95,000,138 $ 944,536 110,051 2,225,416 $ $ 1,115,365 $ $ - $ $ $ Deletions Balance June 30, 2000 $ 2,155,603 19,586 2,054,587 $ 2,175,189 $ 944,536 $ 2,175,189 1,115,365 $ 944,536 $ 2,175,189 46,392,159 1,895,201,599 $ 45,629,481 1,908,529,582 $ 8,062,125 81,672,155 1,000,000 1,000,000 - 472,646 165,884,710 555,167 2,154,742 1,474,861,067 475,134 2,201,147 1,491,660,589 548,305 426,241 149,085,188 481,996 1,865,536 15,541,128 14,333,739 3,072,925 45,670,690 421,435,305 430,945,141 36,160,854 1,716,204 376,534 317,124,868 6,148,773 1,961,246 1,984,554 108,184 $ 3,857,777,338 $ 3,895,832,538 $ 279,069,668 $ 79,046,368 13,980,104 $ 76,950,086 15,941,350 $ 8,245,055 - 147,862,479 1,692,500 951,751,948 13,622,500 976,086,100 12,630,000 123,528,327 2,685,000 157,350,289 2,109,581 317,124,868 857,697,549 5,556 1,916,104,025 872,493,269 58,420 1,954,159,225 142,554,569 2,056,717 279,069,668 $ 55 $ $ Exhibit G-1 Arizona Department of Transportation Comparative Schedules of General Fixed Assets By Source June 30, 2000 and 1999 2000 General fixed assets Land Buildings and improvements Improvements other than buildings Machinery and equipment Total general fixed assets $ $ Investment in general fixed assets by source Special revenue funds Proprietary funds Third-party financing Total investment in general fixed assets $ $ 56 1999 13,499,044 133,198,724 9,403,527 38,854,728 194,956,023 $ 10,863,072 110,107,920 31,086,260 39,454,138 $ 191,511,390 187,863,944 1,498,913 5,593,166 194,956,023 $ 187,273,491 1,221,920 3,015,979 191,511,390 $ Exhibit G-2 Arizona Department of Transportation Schedule of General Fixed Assets - By Function and Activity June 30, 2000 Function and Activity Administration Aeronautics Division Motor Vehicle Division Highway: Highway development Highway construction Transportation planning and research Materials engineering Traffic engineering Administrative and other services Highway Maintenance Total general fixed assets Land $ 879,016 8,915,069 Buildings and Improvements $ 141,465 936,421 2,627,073 $ 13,499,044 $ 13,801,569 21,604 41,635,645 4,568,931 4,809,846 74,428 30,106,088 38,180,613 133,198,724 57 Improvements Other Than Buildings Machinery and Equipment $ $ $ 732,130 4,254 2,101,382 253,581 121,106 17,942 825,126 5,348,006 9,403,527 $ 14,095,642 176,771 6,967,826 3,341,178 2,388,650 594,380 2,836,279 897,647 3,676,012 3,880,343 38,854,728 Total $ $ 29,508,357 202,629 59,619,922 3,341,178 7,352,627 715,486 7,646,125 990,017 35,543,647 50,036,035 194,956,023 Exhibit G-3 Arizona Department of Transportation Schedule of Changes in General Fixed Assets - By Function and Activity For the fiscal year ended June 30, 2000 General Fixed Assets July 1, 1999 Function and Activity Administration Aeronautics Division Motor Vehicle Division Highway: Highway development Highway construction Transportation planning and research Materials engineering Traffic engineering Administrative and other services Highway Maintenance Total general fixed assets $ $ Additions 28,864,758 19,749,262 56,706,152 3,436,622 9,144,834 1,500,178 7,033,604 3,688,266 22,550,087 38,837,627 191,511,390 58 $ 1,431,864 22,444 3,456,917 Deductions $ 236,099 1,172,293 2,927 644,522 35,679 13,129,434 11,208,641 $ 31,340,820 General Fixed Assets June 30, 2000 <788,265> $ <19,569,077> <543,147> <331,543> <2,964,500> <787,619> <32,001> <2,733,928> <135,874> <10,233> $ <27,896,187> $ 29,508,357 202,629 59,619,922 3,341,178 7,352,627 715,486 7,646,125 990,017 35,543,647 50,036,035 194,956,023 Exhibit H Arizona Department of Transportation Schedule of Debt Service Requirements June 30, 2000 Subordinated Highway Revenue Bonds Fiscal 1991 Series A Bonds Year 2001 2002 2003 2004 2005 2006 Principal $ $ 10,495,000 10,495,000 1992 Series A Refunding Bonds Interest $ $ 918,313 918,312 918,312 2,754,937 Principal $ $ 25,205,000 25,205,000 1992 Series B Bonds Interest $ $ 1,537,506 1,537,506 Principal $ $ 5,990,000 6,870,000 7,300,000 7,885,000 8,515,000 36,560,000 Interest $ 2,687,330 2,687,330 2,321,940 1,896,000 1,312,000 681,200 11,585,800 $ Highway Revenue Bonds Fiscal 1993 Series Refunding Bonds Year 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Principal $ $ 11,385,000 13,380,000 1,000,000 16,760,000 17,600,000 14,820,000 15,605,000 16,425,000 17,285,000 124,260,000 1993 Series A and B Subordinated, Refunding Bonds Interest $ 6,356,422 5,821,328 5,179,088 5,129,088 4,291,088 3,367,088 2,589,038 1,769,776 907,464 $ 35,410,380 Principal $ $ 2,010,000 13,970,000 16,585,000 1,620,000 13,820,000 18,170,000 28,235,000 29,610,000 31,395,000 51,685,000 54,520,000 261,620,000 1999 Series Interest $ 13,225,412 13,138,982 12,524,302 11,777,976 11,703,456 11,053,916 10,181,758 8,805,300 7,028,700 5,458,950 2,624,700 $ 107,523,452 Principal $ $ 13,455,000 4,450,000 4,645,000 15,785,000 5,010,000 5,255,000 5,515,000 5,790,000 6,100,000 6,420,000 6,790,000 7,195,000 7,625,000 8,080,000 8,575,000 9,110,000 9,680,000 10,235,000 10,825,000 150,540,000 Interest $ $ 8,377,557 7,709,533 7,513,732 7,304,708 6,436,532 6,196,053 5,934,482 5,658,733 5,347,062 5,029,863 4,655,897 4,252,638 3,825,262 3,367,763 2,872,862 2,336,925 1,767,550 1,210,950 622,438 90,420,540 (Continued) 59 Exhibit H Arizona Department of Transportation Schedule of Debt Service Requirements June 30, 2000 Fiscal Highway Revenue Bonds Year Total Principal 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 $ $ 52,055,000 37,790,000 39,595,000 41,465,000 44,315,000 46,760,000 49,355,000 51,825,000 54,780,000 58,105,000 61,310,000 7,195,000 7,625,000 8,080,000 8,575,000 9,110,000 9,680,000 10,235,000 10,825,000 608,680,000 Interest $ 33,102,540 30,275,485 28,457,374 26,107,772 23,743,076 21,298,257 18,705,278 16,233,809 13,283,226 10,488,813 7,280,597 4,252,638 3,825,262 3,367,763 2,872,862 2,336,925 1,767,550 1,210,950 622,438 $ 249,232,615 (Continued) 60 Exhibit H Arizona Department of Transportation Schedule of Debt Service Requirements June 30, 2000 Transportation Excise Tax Revenue Bonds 1988 Series A Capital Appreciation Bonds Fiscal Year 2001 2002 2003 2004 2005 Principal $ $ 21,500,000 21,500,000 21,500,000 8,500,000 73,000,000 1992 Series A Refunding Bonds Interest $ Principal - $ $ $ 40,170,000 110,000 23,240,000 24,545,000 38,955,000 127,020,000 1992 Series B Bonds Interest 7,127,920 4,958,740 4,952,690 3,651,250 2,239,913 $ 22,930,513 Principal $ $ Interest 2,500,000 2,635,000 2,780,000 2,935,000 3,105,000 13,955,000 $ $ 782,905 647,905 502,980 347,300 178,538 2,459,628 Transportation Excise Tax Revenue Bonds 1995 Series B Subordinated, 1993 Series Subordinated, Refunding Bonds Fiscal Year 2001 2002 2003 2004 2005 Principal $ $ 8,890,000 30,835,000 31,180,000 32,335,000 18,825,000 122,065,000 Refunding Bonds 1995 Series A Subordinated Bonds Interest Principal $ 5,893,205 5,502,045 3,775,285 2,372,185 884,775 $ 18,427,495 $ $ 13,925,000 14,555,000 15,355,000 16,275,000 17,330,000 77,440,000 Interest $ 4,446,125 3,819,500 3,018,975 2,097,675 1,039,800 $ 14,422,075 Principal $ $ Interest 255,000 33,185,000 10,215,000 12,470,000 30,070,000 86,195,000 $ $ 5,102,537 5,091,063 3,099,963 2,614,750 1,804,200 17,712,513 Transportation Excise Tax Revenue Bonds Fiscal 1998 Series A Bonds Year 2001 2002 2003 2004 2005 Principal $ $ 37,985,000 21,580,000 25,865,000 25,615,000 25,090,000 136,135,000 1999 Series Subordinated Bonds Interest $ 6,697,250 4,818,000 3,757,000 2,481,750 1,217,000 $ 18,971,000 Principal $ $ 31,645,000 17,685,000 18,555,000 19,420,000 20,395,000 107,700,000 Total Interest $ 5,356,875 3,853,738 2,969,487 2,041,737 1,070,738 $ 15,292,575 Principal $ $ 135,370,000 142,085,000 148,690,000 155,095,000 162,270,000 743,510,000 Interest $ 35,406,817 28,690,991 22,076,380 15,606,647 8,434,964 $ 110,215,799 (Continued) 61 Exhibit H Arizona Department of Transportation Schedule of Debt Service Requirements June 30, 2000 Fiscal Total Bonds Year 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Principal Interest 187,425,000 179,875,000 188,285,000 196,560,000 206,585,000 46,760,000 49,355,000 51,825,000 54,780,000 58,105,000 61,310,000 7,195,000 7,625,000 8,080,000 8,575,000 9,110,000 9,680,000 10,235,000 10,825,000 $ 1,352,190,000 $ 68,509,357 58,966,476 50,533,754 41,714,419 32,178,040 21,298,257 18,705,278 16,233,809 13,283,226 10,488,813 7,280,597 4,252,638 3,825,262 3,367,763 2,872,862 2,336,925 1,767,550 1,210,950 622,438 $ 359,448,414 $ Total $ 255,934,357 238,841,476 238,818,754 238,274,419 238,763,040 68,058,257 68,060,278 68,058,809 68,063,226 68,593,813 68,590,597 11,447,638 11,450,262 11,447,763 11,447,862 11,446,925 11,447,550 11,445,950 11,447,438 $ 1,711,638,414 62 Table I Arizona Department of Transportation Governmental Fund Expenditures For the fiscal year ended June 30 (Thousands of Dollars) Fiscal Year 2000 1999 1998 1997 Administration /1 $ 47,847 44,648 43,914 43,981 Administrative Services /5 $ 36,406 36,933 45,363 38,473 34,620 32,685 $ 42,302 42,035 41,381 40,230 Highway Division /6 $ 108,670 108,495 104,288 111,188 105,725 107,434 $ 74,492 67,144 63,056 30,147 Motor Vehicle Division $ 33,486 35,221 27,992 30,776 29,588 29,312 Highway Maintenance $ 83,398 79,304 76,597 70,336 Transportation Planning $ 3,214 3,381 3,468 3,589 4,047 3,717 Highway Construction /3 $ 941,913 853,695 602,955 540,203 $ Highway Construction $ 555,087 418,601 481,538 446,676 450,793 569,343 Debt Service Aviation 21,640 26,787 30,734 18,975 $ $ Debt Service Aviation $ 253,823 226,928 199,948 210,446 Other /4 11,107 9,239 13,579 17,279 17,406 12,046 $ 200,364 182,554 181,519 168,684 159,096 149,049 43,927 62,600 65,625 84,433 Total $ Other /7 $ 87,960 57,757 78,254 66,274 65,679 66,778 1,509,342 1,403,141 1,124,210 1,038,751 Total $ 1,036,294 852,181 936,001 882,939 866,954 970,364 SOURCE: General Purpose Financial Statements - fiscal years 1991 through 2000 NOTES: /1 Includes the Director's Office, Financial Management (formerly Administrative) Services, Transportation Support Services and the Department's Risk Management Premium. /2 Includes Transportation Planning. /3 For years prior to 2000, includes Expendable Trust Fund. /4 Includes Transportation not appropriated, Land, Building & Improvements, Leases Payable and Transfers /5 Includes the Department's Risk Management Premium. /6 Includes Highway Maintenance. /7 Includes Reimbursements, Transfers, Director's Office, Highway Safety Office, and Land, Buildings & Improvements. Total Expenditures $1,600,000 $1,400,000 $1,200,000 Thousands of Dollars 1996 1995 1994 1993 1992 1991 Highway /2 Motor Vehicle Division $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 1991 1992 1993 1994 1995 1996 Fiscal Year 63 1997 1998 1999 2000 Table II Arizona Department of Transportation Governmental Fund Revenues For the fiscal year ended June 30 (Thousands of Dollars) Fiscal Year Motor Fuel Tax 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 $ 276,189 298,394 273,806 288,878 291,000 293,870 280,394 264,307 261,678 256,521 Reg., Fees, Permits, Expenditures Service of Federal Investment Charges Awards /1 Earnings $ 255,088 250,121 210,370 198,002 171,823 133,689 117,412 102,524 89,261 99,389 $ 414,015 401,464 283,982 305,438 268,605 225,607 261,000 183,407 174,683 191,899 $ 41,534 34,377 34,382 33,238 29,603 22,340 14,229 18,560 22,422 31,799 Other /1 Reimbursements Total /2 $ 267,004 257,479 223,486 231,792 228,698 190,498 177,561 153,333 138,097 132,707 $ 18,788 15,748 8,505 15,083 32,711 17,808 13,130 22,604 18,513 12,632 $ 1,272,618 1,257,583 1,034,531 1,072,431 1,022,440 883,812 863,726 744,735 704,654 724,947 SOURCE: General Purpose Financial Statements - Fiscal Years 1991 through 2000 NOTE: /1 For years prior to 1999, includes Expendable Trust Fund. /2 Method of accounting for taxpayer assessed revenues has been changed due to the adoption of GASB Statement No. 22 during fiscal year 1995. Total Revenues $1,400,000 $1,200,000 Thousands of Dollars $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 1991 1992 1993 1994 1995 1996 Fiscal Year 64 1997 1998 1999 2000 Table III Arizona Department of Transportation Expenditures of Federal Awards /1 For the fiscal year ended June 30 (Thousands of Dollars) Fiscal Year 2000 1999 FAA FRA 6 6,278 $ $ 1998 1997 1996 1995 1994 1993 1992 1991 2,379 91 506 849 129 3,208 4,369 1,642 SOURCE: FTA 2 69 $ 3,717 5,107 14 130 499 475 437 441 12 - 3,392 2,508 3,552 1,687 3,448 1,715 1,097 559 NHTSA $ FHWA BLM BIA Sub-total FHWA /2 65 275 $ 409,177 388,761 $ - $ 1,048 974 $ 414,015 401,464 $ 15,219 17,748 $ $ Total 429,234 419,212 49 55 54 - 278,148 302,633 261,820 221,818 256,986 177,968 169,151 189,698 28 20 - 76 2,228 750 - 283,982 305,438 268,605 225,607 261,000 183,407 174,683 191,899 - $ $ $ $ $ $ $ $ 283,982 305,438 268,605 225,607 261,000 183,407 174,683 191,899 Single Audit Reports - fiscal years 1991 through 2000 NOTES: /1 Federal Aviation Administration (FAA); Federal Railroad Administration (FRA); Federal Transit Administration (FTA) - previously Urban Mass Transit Administration (UMTA); National Highway Transportation Safety Administration (NHTSA); Federal Highway Administration (FHWA); Bureau of Land Management (BLM); Bureau of Indian Affairs (BIA); and Department of Agriculture (DOA). /2 Prior to 1999, the Local Agency Deposits Fund was an Expendable Trust Fund. It is now an Agency Fund. Total Expenditures of Federal Awards $500,000 $450,000 Thousand of Dollars $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 1991 1992 1993 1994 1995 1996 Fiscal Year 65 1997 1998 1999 2000 Table IV Arizona Department of Transportation Fuel Tax Rates For the fiscal year ended June 30 (Cents per Gallon) Fiscal Year Effective Date Gasoline Tax Use Fuel Tax /1 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 12/31/1997 10/01/1990 18 18 18 18 18 18 18 18 18 18 27 27 27 18 18 18 18 18 18 18 SOURCE: Arizona Revised Statutes 28-5606, 28-5708 NOTE: Gasohol is currently taxed at the same rate as gasoline and use fuel. Use fuel is primarily diesel fuel. /1 Scheduled to be 26 cents per gallon on 7/1/2000. 66 Table V Arizona Department of Transportation Highway User Revenue Fund Collections For the fiscal year ended June 30 (Thousands of Dollars) Fiscal Year Motor Veh. Fuel Tax Revenue Motor Veh. Reg. Fee Revenues Motor Carrier Tax Revenues Motor Veh. Operators' License Fees and Other Fees 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 $ 545,901 636,117 508,544 488,701 473,741 451,089 422,556 387,235 369,789 362,018 $ 158,424 145,340 109,445 101,528 97,601 86,159 83,826 80,717 74,180 75,657 $ $ 15,040 14,409 56,123 90,186 85,433 92,103 118,530 120,303 109,573 108,655 43,508 15,939 36,426 41,294 42,654 39,238 37,161 24,161 25,507 24,033 Motor Veh. License (In Lieu) Tax Revenues $ 235,287 217,905 176,950 175,253 160,145 131,562 113,990 105,027 96,146 92,826 Excess License and Sales Tax Revenues Total Deposited To Arizona Hwy. User Rev. Fund $ $ 16,632 998,160 1,029,710 887,488 896,962 859,574 800,151 776,063 717,443 675,195 679,821 SOURCES: General Purpose Financial Statement - Fiscal Years 1999 through 2000. Arizona Highway User Revenue Fund Revenue Collections by Category Fiscal Years 1991 through 1998. Highway User Revenue Fund Collections $1,050,000 $900,000 Thousands of Dollars $750,000 $600,000 $450,000 $300,000 $150,000 $0 1991 1992 1993 1994 1995 1996 Fiscal Year 67 1997 1998 1999 2000 Table VI Arizona Department of Transportation Highway User Revenue Fund Distributions For the fiscal year ended June 30 (Thousands of Dollars) Fiscal Year State Highway Fund /1 Cities and Towns Counties 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 $ 493,697 512,149 435,882 444,927 429,171 412,206 406,376 355,304 339,807 346,867 $ 323,798 295,879 263,220 268,696 256,901 244,512 205,479 210,531 201,394 208,708 $ 157,594 199,591 163,973 167,350 152,571 145,349 134,511 124,468 119,068 123,746 Department of Public Safety /2 Economic Strength Project Fund $ $ 13,622 12,630 14,688 17,188 19,688 20,000 24,925 24,928 12,453 - 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 500 Other /3 $ 8,449 8,461 8,519 9,289 9,304 9,084 532 1,212 1,473 - Total $ 998,160 1,029,710 887,282 908,450 868,635 832,151 772,823 717,443 675,195 679,821 The Highway User Revenue Fund receives certain Motor Vehicle Division revenues from the Motor Vehicle Division Clearing Fund. These monies are distributed to the State Highway Fund and various counties and cities, based on statutory formulas. SOURCES: General Purpose Financial Statement - Fiscal Years 1994 through 2000. Highway User Revenue Fund Schedule 1 Summary for Revenue Collected Fiscal Years 1991through 1993. Monthly Reports MV675580-01 fiscal years 1993 through 2000 (adjusted for accrual basis in years 1994 through 2000); Highway User Revenue Fund Report (Budgetary Basis) - fiscal years 1991 through 1992. NOTES: /1 In fiscal year 1995, HB 2431 authorized the transfer of $1 million for border transportation projects. The revenues beginning in fiscal year 1994 are presented on an accrual basis and are not the same as Table VII. /2 DPS did not receive funding from HURF in fiscal year 1991 in accordance with ARS 28-6537. /3 Appropriation to the Motor Vehicle Division for funding of mandatory insurance enforcement administration for fiscal years 1992 through 1994. In fiscal years 1995 through 2000, an appropriation for Arizona State Parks is included. 68 Table VII Arizona Department of Transportation Bond Coverage Highway User Revenue Fund Series For the fiscal year ended June 30 (Thousands of Dollars) Fiscal Year Principal Interest Total Pledged Revenues /1 Coverage 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 $ 46,270 43,805 43,405 40,970 38,430 36,330 33,425 27,865 26,185 24,690 $ 33,994 31,090 33,266 36,148 38,770 40,974 44,037 48,289 39,957 36,743 $ 80,264 74,895 76,671 77,118 77,200 77,304 77,462 76,154 66,142 61,433 $ 528,721 509,935 468,240 468,542 429,825 399,605 385,844 355,304 339,807 346,867 6.6 6.8 6.1 6.1 5.6 5.2 5.0 4.7 5.1 5.6 SOURCES: Highway User Revenue Fund Schedule 1 Summary For Revenue Collected Monthly Reports MV675577-1 fiscal years 1993 through 2000; Highway User Revenue Fund Report (Budgetary Basis) - fiscal years 1991 through 1992; Debt Service Funds - fiscal years 1991 through 2000. /1 For fiscal years 1991 through 1996, net of 7% distributed to cities with a population greater than 300,000 persons. For fiscal years 1997 and after, includes vehicle license tax revenues distributed directly to the State Highway Fund. Highway User Revenue Fund Series Bond Coverage $550,000 $500,000 $450,000 Thousands of Dollars $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 1991 1992 1993 1994 1995 1996 1997 Fiscal Year REVENUE DEBT SERVICE 69 1998 1999 2000 Table VIII Arizona Department of Transportation Bond Coverage Regional Area Road Fund Series For the fiscal year ended June 30 (Thousands of Dollars) Fiscal Year Principal 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 $ 128,805 106,765 82,765 78,015 76,955 57,930 54,710 45,650 38,410 34,480 Interest $ 42,609 43,251 40,512 45,248 46,209 47,320 49,347 46,880 54,544 53,136 Total Revenues Coverage $ 171,414 150,016 123,277 123,263 123,164 105,250 104,057 92,530 92,954 87,616 $ 248,596 229,470 209,263 192,257 178,413 160,319 142,846 127,273 116,497 113,335 1.5 1.5 1.7 1.6 1.4 1.5 1.4 1.4 1.3 1.3 SOURCE: Maricopa County Regional Area Road Fund Report. NOTE: Bond coverage ratio is based upon total Maricopa Transportation Excise Tax collections. Regional Area Road Fund Series Bond Coverage $250,000 Thousands of Dollars $200,000 $150,000 $100,000 $50,000 $0 1991 1992 1993 1994 1995 1996 1997 Fiscal Year REVENUE DEBT SERVICE 70 1998 1999 2000 Table IX Arizona Department of Transportation Total Public Road Mileage By Highway Class and Governmental Ownership For the calendar year ended December 31, 1999 (With comparative totals for the calendar year ended December 31, 1998) (In Miles) TOTAL FUNCTIONAL CLASSIFICATION RURAL: Interstate Freeway Principal Arterial Minor Arterial Major Collector Minor Collector Local TOTAL RURAL URBAN: Interstate Freeway Urban Expressway Principal Arterial Minor Arterial Urban Collector Local TOTAL URBAN STATEWIDE COMPOSITE: Freeways and Expressways Arterials Collectors Locals TOTAL STATEWIDE STATE COUNTY MUNICIPAL FEDERAL 996 1,118 1,133 1,860 375 361 45 101 1,587 1,118 14,245 14 23 216 51 1,517 5,843 17,096 172 98 271 129 5 102 1998 842 756 10,814 996 1,186 1,257 4,505 2,300 26,937 996 1,186 1,257 4,505 2,301 26,407 1,821 12,421 37,181 36,652 1 105 275 508 865 9 652 866 1,220 11,947 5 16 30 172 108 1,028 1,275 1,749 12,944 172 100 1,028 1,274 1,749 12,995 777 1,754 14,694 51 17,276 17,318 1,266 2,651 2,240 463 1 526 3,213 15,110 9 1,555 1,487 13,464 14 1,614 10,844 1,276 4,746 8,554 39,881 1,268 4,745 8,555 39,402 6,620 18,850 16,515 12,472 54,457 53,970 Source: Arizona's Highway Performance Monitoring System (HPMS); 1999 & 1998 Data 71 9 1999 ACKNOWLEDGMENTS The Comprehensive Annual Financial Report was prepared by Financial Management Services, Fiscal Operations: Craig Rudolphy, MBA, CGFM, CPA Theresa Simms, MBA, CGFM, CPA Lawrence H. Ehrke, Jr., MBA Stanley Brown, MS Richard Gromoll, MBA Elaine Buenvich Special acknowledgment goes to: All Financial Management Services staff whose cooperation and hard work contributed to the compilation of financial information that appears in this report. A special thank you to Dave McDarby of the Transportation Planning Division for his graphic design and photography. 72