COMPREHENSIVE ANNUAL FINANCIAL REPORT Arizona Department of Transportation For the fiscal year ended June 30, 2013 Comprehensive Annual Financial Report For the fiscal year ended June 30, 2013 Prepared by Financial Management Services State of Arizona Department of Transportation 206 S. 17th Avenue Phoenix, Arizona 85007 azdot.gov Arizona Department of Transportation Comprehensive Annual Financial Report for the fiscal year ended June 30, 2013 TABLE OF CONTENTS Page INTRODUCTORY SECTION Letter of Transmittal .............................................................................................................................................. i-v Certificate of Achievement for Excellence in Financial Reporting .......................................................................... vi List of Principal Officials ......................................................................................................................................... vii Organization Chart ................................................................................................................................................ viii FINANCIAL SECTION Independent Auditors’ Report ..............................................................................................................................1-2 Management’s Discussion and Analysis ..............................................................................................................3-13 Basic Financial Statements Government-wide Financial Statements: Statement of Net Position (Exhibit 1)........................................................................................................... 14 Statement of Activities (Exhibit 2)................................................................................................................ 15 Governmental Funds Financial Statements: Balance Sheet - Governmental Funds (Exhibit 3) ....................................................................................16-17 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position (Exhibit 3.1) ......................................................................................... 18 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds (Exhibit 4) ........................................................................................19-22 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities (Exhibit 4.1) ........................... 23 Proprietary Funds Financial Statements: Statement of Net Position – Proprietary Funds (Exhibit 5) .......................................................................... 24 Statement of Revenues, Expenses, and Changes in Fund Net Position – Proprietary Funds (Exhibit 6) ..... 25 Statement of Cash Flows – Proprietary Funds (Exhibit 7) ............................................................................ 26 Fiduciary Funds Financial Statement Statement of Net Position – Agency Fund (Exhibit 8) .................................................................................. 27 Index of Notes to the Financial Statements...................................................................................................... 28 Notes to the Financial Statements...............................................................................................................29-52 Required Supplementary Information (Other than MD&A) Budgetary Comparison Schedule – General Fund (State Highway Fund) ......................................................... 53 2013 Comprehensive Annual Financial Report Arizona Department of Transportation Comprehensive Annual Financial Report for the fiscal year ended June 30, 2013 TABLE OF CONTENTS (continued) Page Note to Required Supplementary Information................................................................................................. 54 Information About Infrastructure Assets Reported Using the Modified Approach ....................................55-59 Supplementary Information Non-Major Governmental Funds Financial Statements: Combining Balance Sheet (Exhibit 9) ......................................................................................................60-61 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances (Exhibit 10) ...........62-63 Fiduciary Funds Financial Statements: Combining Statement of Net Position – Agency Fund (Exhibit 11) .............................................................. 64 Statement of Changes in Assets and Liabilities – Agency Fund (Exhibit 12) ................................................ 65 STATISTICAL SECTION Overview ................................................................................................................................................................ 66 Index of Statistical Section ..................................................................................................................................... 67 Financial Trends: Change in Net Position (Table A-1) ..............................................................................................................68-71 Statement of Revenues, Expenditures, and Changes in Fund Balances (Table A-2) ....................................72-75 Fund Balances of Governmental Funds (Table A-3) .....................................................................................76-77 Expenditures of Federal Awards (Table A-4) .................................................................................................... 78 Government-wide Expenses by Function (Table A-5) ..................................................................................79-80 Government-wide Revenues (Table A-6) .....................................................................................................81-82 Net Position by Component (Table A-7) ......................................................................................................83-84 Revenue Capacity: Highway User Revenue Fund Collections (Table B-1) ....................................................................................... 85 Highway User Revenue Fund Distributions (Table B-2) .................................................................................... 86 Fuel Tax Rates (Table B-3) ................................................................................................................................. 87 Motor Vehicle Fuel Tax – Top Ten Suppliers (Table B-4) .................................................................................. 88 Gasoline Volume Sold – Top Twenty-Five Suppliers (Table B-5)..................................................................89-90 2013 Comprehensive Annual Financial Report Arizona Department of Transportation Comprehensive Annual Financial Report for the fiscal year ended June 30, 2013 TABLE OF CONTENTS (continued) Page Debt Capacity: Highway User Revenue Fund – Legal Debt Margin (Table C-1) ........................................................................ 91 Highway Revenue Bonds – Bond Coverage (Table C-2) ......................................................................................... 92 Transportation Excise Tax Revenue Bonds – Bond Coverage (Table C-3) ......................................................... 93 Transportation Excise Tax Revenue Bonds – Debt Service Revenue and Cost Per Capita (Table C-4).............. 94 Ratios of Outstanding Debt by Type (Table C-5) ..........................................................................................95-96 Demographic and Economic Information: Number of Vehicle Registrations Per Year (Table D-1) ..................................................................................... 97 Vehicle Registrations Per Year Compared to Fuel Sales (Table D-2) ................................................................. 98 Demographic and Economic Statistics (Table D-3) ........................................................................................... 99 Principal Employers (Table D-4) ...................................................................................................................... 100 Operating Information: Full-Time Equivalents (FTEs) (Table E-1) ......................................................................................................... 101 Capital Assets – Schedule by Function and Activity (Table E-2) ...................................................................... 102 Capital Assets – Schedule of Changes by Function and Activity (Table E-3) ................................................... 103 Total Public Road Mileage by Highway Class and Governmental Ownership (Table E-4) .............................. 104 Daily Vehicle Miles Traveled with Population Data (Table E-5) ...................................................................... 105 Acknowledgments ..................................................................................................................................................... 106 2013 Comprehensive Annual Financial Report INTRODUCTORY SECTION 2013 Comprehensive Annual Financial Report 206 South 17th Avenue | Phoenix, Arizona | 85007 Janice K. Brewer, Governor John S. Halikowski, Director Kristine Ward, Chief Financial Officer Office of the Director November 12, 2013 The Honorable Janice K. Brewer 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 (CAFR) for the fiscal year ended June 30, 2013. The CAFR 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 Organization Chart. The Financial Section includes the Independent Auditors' Report, Management’s Discussion and Analysis, Basic Financial Statements, Notes to the Financial Statements, Required Supplementary Information, as well as Other Supplementary Information. The Statistical Section includes additional financial information and transportation data presented on a multi-year comparative basis. Arizona Revised Statutes, §41-1279.03, require 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 of 1984 (P.L. 98-502)." In fulfillment of this requirement, the Department prepared this CAFR, for the fiscal year ended June 30, 2013, and contracted with the independent auditing firm of CliftonLarsonAllen LLP to audit the financial statements. The objective of the independent audit is to provide a reasonable assurance that the financial statements are free from material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unmodified opinion that the Department's financial statements for the fiscal year ended June 30, 2013, are fairly presented in conformity with accounting principles generally accepted in the United States of America (GAAP). The independent auditors’ report is presented as the first component of the Financial Section of this report. GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management's Discussion and Analysis (MD&A). This Letter of Transmittal is designed to complement MD&A and should be read in conjunction with it. The Department's MD&A can be found immediately following the report of the independent auditors. The CAFR includes all funds used to record the financial activity of the Department. Responsibility for both the accuracy of the data and the completeness and fairness of the presentation, including all disclosures, rests with the Department. To provide a reasonable basis for making these representations, the Department has established a comprehensive internal control framework that is designed both to protect the Department's assets from loss, theft, or misuse and to compile sufficiently reliable information for the preparation of the financial statements in conformity with GAAP. The Department's internal control includes both automated controls, which are an integral component of the financial accounting system, and 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 2013 Comprehensive Annual Financial Report i the various divisions and units of the Department. Because the cost of internal controls should not outweigh their benefits, the Department's comprehensive framework of internal control has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatements. To the best of our knowledge and belief, this financial report is complete and reliable 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. All disclosures necessary to enable the reader to gain an understanding of the Department's financial activities have been included. Profile of the Department The Department was established by the state legislature in July 1974 by combining the former Arizona Highway Department (originally established in 1927) and the 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 safe, efficient, cost-effective transportation system. The vision is the standard of excellence for transportation systems and services. The Department’s statutory authority for carrying out its programs is found in 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 and confirmed by the state senate. The Transportation Board is responsible for the annual update of the Five-Year Transportation Facilities 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 (GARVEE bonds), and board funding obligations. As of June 30, 2013, the Department was organized into five operating divisions supported by the Support Services Group. The five operating divisions include: Intermodal Transportation Division, Motor Vehicle Division, Enforcement and Compliance Division, Administrative Services Division, and Multimodal Planning Division. The Intermodal Transportation Division is responsible for the management and maintenance of the existing state highway system and related facilities as well as the location, design, and construction of new highways and facilities that are a part of the state highway system. The Motor Vehicle Division regulates motor vehicles in the state and collects motor vehicle registration fees, motor carrier fees, motor vehicle operators’ license fees, and miscellaneous fees and revenues. The Motor Vehicle Division annually processes motor vehicle registrations and records, issues certificates of title for motor vehicles, and processes drivers’ license applications. The Enforcement and Compliance Division conducts criminal and administrative investigations related to all facets of agency operations, e.g., titling, registration, and licensing; as well as providing services to the local and national law enforcement communities while enforcing transportation related laws and regulations. The Administrative Services Division provides a wide variety of services for ADOT business areas and employees. The Administrative Services Division’s work units include Equipment Services, Facilities Maintenance & Support, Office of Environmental Services, Procurement, Safety & Health, and Audit & Analysis. The Administrative Services Division also oversees operations of the Grand Canyon National Park Airport. The Multimodal Planning Division is responsible for the planning of the statewide transportation system, including highways and airports, in coordination with local and regional planning agencies. The Division produces the Five-Year Transportation Facilities Construction Program through which the Transportation 2013 Comprehensive Annual Financial Report ii Board establishes the priorities for highways and airports. The Division also supports statewide public transit planning, administers federal grants for transit planning in rural and metropolitan areas, and performs state regulatory safety oversight for the light rail system in Maricopa County. The Support Services Group provides support to the Department's operating divisions, and contains work units for Financial Management, Budget and Strategic Planning, Information Technology, Human Resources, Government Relations, Community Partnerships, and Arizona Highways Magazine. Overall, the Department employs approximately 4,200 persons. Budgetary Controls Upon the effective date of the appropriations bill, allocations are made to organizational levels within each division. The allocations result in a detailed operating budget that guides the divisions and programs in their financial operation. State funding for the Five-Year Transportation Facilities Construction Program is included in the capital outlay appropriations bill as a lump-sum budget without identifying individual projects. In the land, building, and improvements portion of that bill, each separate capital project is identified for control purposes. This bill also provides funding for building renewal 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, highway maintenance, and special line items, state appropriations typically lapse at the end of the fiscal year. 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 pre-encumbrance capabilities, appropriation allocation and control capabilities to the expense budget/organization unit level, and management control reports from the expense budget/organizational unit level, with summary reporting capabilities by program, division, or appropriation. Factors Affecting Financial Condition Arizona Economy In fiscal year 2013, Arizona saw economic activity improve with slow growth in employment, personal income and population. However, market uncertainty caused by the Fiscal Cliff in late 2012 along with the social security tax hike in January 2013 and gasoline price spike during the spring of 2013 all weighed on consumer driving habits and commercial truck activity in Arizona and the nation. According to the July 18, 2013 Arizona Department of Administration’s employment report, the Arizona unemployment rate decreased from 8.4 percent in June 2012 to 8.0 percent in June 2013. During this period, the private sector created 54,300 jobs while the government sector lost 4,900 jobs for a net gain of 49,400. Total job growth in FY 2013 closely approximated the FY 2012 job growth. The Department’s two main funding sources, the Highway User Revenue Fund (HURF) and Maricopa County Transportation Excise Tax posted mixed results in fiscal year 2013. In fiscal year 2013, the HURF revenue collections were $1,210.0 million, even with fiscal year 2012 but 0.7 percent below the forecast. The Maricopa County Transportation Excise Tax revenues totaled $341.6 million, an increase of 5.4 percent over fiscal year 2012 and 0.3 percent above the estimate. HURF and RARF revenue sources remain at fiscal year 2005 revenue levels. Arizona’s economy is expected to grow over the next couple of years but at a slower rate than the historical growth prior to the economic boom in 2005 to 2007 and Great Recession in 2008 to 2010. On May 9, 2013, the Arizona Department of Administration estimated Arizona non-farm employment will grow by 1.9 and 2.1 percent in calendar years 2013 and 2014, respectively. According to the June 1, 2013 Western Blue Chip report, the Arizona personal income is expected to increase by 5.0 percent in calendar year 2013 and 5.8 percent in calendar year 2014. Arizona population is forecast to grow by 1.4 percent in calendar year 2013 and 1.6 percent in calendar year 2014. 2013 Comprehensive Annual Financial Report iii The Department’s fiscal year 2014 HURF revenue estimate amounts to $1,224.3 million, an increase of 1.2 percent over fiscal year 2013. The HURF average compound growth rate for fiscal years 2004 through 2013 was 0.3 percent. The distribution of HURF revenues in fiscal year 2014 is estimated to be as follows: State Highway Fund $557.7 million; Arizona cities and towns $336.9 million; Arizona counties $209.8 million; Department of Public Safety $118.3 million; Economic Strength Project Fund $1.0 million; and the Motor Vehicle Division for the registration compliance/third party program $0.6 million. An estimated $27.0 million will be re-allocated from the State Highway Fund share of HURF vehicle license tax revenues to the State General Fund ($4.2 million), the Department of Public Safety ($2.6 million) and the Motor Vehicle Division third parties ($20.2 million). The Maricopa County Transportation Excise Tax revenue forecast for fiscal year 2014 totals $362.0 million, an increase of 6.0 percent over fiscal year 2013. The Maricopa County Transportation Excise Tax average compound growth rate for fiscal years 2004 through 2013 was 1.9 percent. The distribution of the Maricopa County Transportation Excise Tax revenue in fiscal year 2014 is estimated to be as follows: Maricopa County Regional Area Road Fund $203.4 million for highways, $38.0 million for arterial streets, and the Public Transportation Fund $120.6 million. Long-term Financial Planning The Department has developed a long-range forecasting model for revenues to be deposited in the Highway User Revenue Fund and the Maricopa County Regional Area Road Fund. This econometric modeling approach provides a framework that allows for the complex interaction of economic, demographic, and technological factors which influence revenue collections over the long term. Using this process, the Department updates and publishes its official forecast on an annual basis, after the close of the fiscal year, and uses this data in developing cash-flow projections for the statewide Highway Construction Program and the Regional Transportation Plan (RTP) Freeway Program, two components of the Five-Year Transportation Facilities Construction Program (the third component being the Airport Program). These cash-flow projections incorporate estimates of all funding sources available to the capital program and estimates of project-related and other expenditures. Planned Construction Activity In June 2013, the Transportation Board approved a $4.5 billion statewide Highway Construction Program as part of the Five-Year Transportation Facilities Construction Program for fiscal years 2014 through 2018. This program provides funding for highway facilities on the National Highway System and the statewide system, as well as the Maricopa County Regional Transportation Plan. Altogether (including Maricopa County), the program includes $2.8 billion for system improvements, $.4 billion for system management, and $1.3 billion for system preservation. The Five-Year Transportation Facilities Construction Program includes approximately $2.2 billion for the RTP of freeway and expressway construction in Maricopa County, funded in large part from the Maricopa County Regional Area Road Fund. Obligations for the Regional Transportation Plan Freeway Program to date total $4.0 billion. The Department currently has 14 major RTP Freeway Program projects under design and 7 major projects under construction. The Department acquired 4,185 acres of land for the RTP Freeway Program. As part of the Five-Year Transportation Facilities Construction Program, the Transportation Board also adopted a $122.6 million (state share) Five-Year Airport Development Program that includes 822 projects at general aviation and air carrier airports located throughout the state. Other Information 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 of Arizona for the fiscal year ended June 30, 2013. 2013 Comprehensive Annual Financial Report iv Arizona Department of Transportation List of Principal Officials John S. Halikowski Director John H. Nichols Deputy Director for Business Operations Floyd P. Roehrich, Jr. Deputy Director for Policy Jennifer A. Toth Deputy Director for Transportation Stacey K. Stanton Assistant Director Motor Vehicle Division Terry W. Conner Assistant Director Enforcement and Compliance Division Scott Omer Assistant Director Multimodal Planning Division Sonya E. Herrera Assistant Director Administrative Services Division Kristine Ward Assistant Director for Finance and Accounting Arizona State Transportation Board Member Victor Flores, Chairman Stephen W. Christy, Vice Chairman Kelly O. Anderson Hank Rogers Joseph E. La Rue Deanna L. Beaver William R. Cuthbertson Counties District 1 (Maricopa County) District 2 (Pima County) District 4 (Gila, Graham, and Pinal Counties) District 5 (Apache, Coconino, and Navajo Counties) District 1 (Maricopa County) District 6 (Yavapai, Yuma, Mohave, and LaPaz Counties) District 3 (Cochise, Greenlee, and Santa Cruz Counties) 2013 Comprehensive Annual Financial Report vii Term Expires 2014 2015 2016 2017 2018 2018 2019 FINANCIAL SECTION 2013 Comprehensive Annual Financial Report Arizona Department of Transportation Management’s Discussion and Analysis June 30, 2013 As management of the Arizona Department of Transportation (Department), we offer readers of the Department’s financial statements this narrative overview and analysis of the financial activities of the Department for the fiscal year ended June 30, 2013. We encourage readers to consider the information presented here in conjunction with the Letter of Transmittal, which can be found on pages i-v, and the Department’s basic financial statements, which begin on page 14, with the accompanying notes and Required Supplementary Information (RSI). Financial Highlights Government-wide: The net position of the Department at the close of the fiscal year is $17.3 billion, compared to $16.7 billion for fiscal year 2012, an increase of 3.7 percent. Of this amount, $152.1 million represents the unrestricted component and may be used to meet the Department’s ongoing obligations to citizens and creditors as compared to $107.8 million at the end of 2012. The Department’s capital assets are $19.3 billion, compared to $18.6 billion for fiscal year 2012, an increase of 3.5 percent. This increase is attributable to the results of highway construction activity. The Department’s net investment in capital assets, is $16.3 billion, compared to $15.8 billion for fiscal year 2012, an increase of 3.1 percent. The Department’s non-current liabilities are $3.5 billion, compared to $3.3 billion in 2012. The Department had $18.5 million more in bonds outstanding in 2013 than in 2012. During fiscal year 2013, there were $715.4 million in bonds issued, $155.4 million in bonds repaid, and $541.6 million in bonds refunded. Fund Level: As of the close of the fiscal year, the governmental funds of the Department reported combined ending fund balances of approximately $1.3 billion, as compared to approximately $1.2 billion in 2012. The total restricted fund balance is $1.2 billion; the majority of this amount is restricted for capital projects. Inventories of $7.2 million represent the nonspendable portion of fund balance while $164.2 million represents the committed fund balance portion. The proprietary funds reported net position at year-end of $79.0 million, as compared to $77.7 million in 2012. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction of the Department’s basic financial statements. The Department’s basic financial statements consist of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other Required Supplementary Information in addition to the basic financial statements. Government-wide Financial Statements (Reporting the Department as a Whole) The government-wide financial statements are designed to present an overall picture of the financial position of the Department. These statements consist of the Statement of Net Position and the Statement of Activities, and are prepared using the accrual basis of accounting, which is similar to the accounting used by most private-sector companies. All of the current year’s revenues and expenses are taken into account regardless of when cash is received or paid. 2013 Comprehensive Annual Financial Report 3 Arizona Department of Transportation Management’s Discussion and Analysis (continued) June 30, 2013 The Statement of Net Position combines and consolidates the Department’s current financial resources with capital assets and long-term obligations. This statement includes all of the Department’s non-fiduciary assets and liabilities. Net position is the difference between the Department’s assets and liabilities, and represent one measure of the Department’s financial health. An increase or decrease in the Department’s net position from one year to the next is an indicator of whether its financial health is improving or declining. Other indicators of the Department’s financial health include the condition of its roads and bridges (infrastructure) and economic trends affecting the Department’s future tax revenues. The Statement of Activities focuses on both the gross and net cost of various activities (governmental and businesstype); these costs are paid by the Department’s general tax and other revenues. This statement summarizes the cost of providing specific Department services and includes all current year revenues and expenses. The Statement of Net Position and the Statement of Activities divide the Department’s activities into two types: Governmental Activities The Department’s basic services are reported here, including administration, highway, highway maintenance, and motor vehicle. Taxes, fees, and federal grants finance most of these activities. Business-type Activities Activities for which the Department charges a fee to customers to pay for most or all of the costs of the services it provides are reported as business-type activities. The Department’s Arizona Highways Magazine and Highway Expansion and Extension Loan Program (HELP) are reported here. The government-wide financial statements can be found on pages 14-15 of this report. This report includes two schedules (Exhibit 3.1 and Exhibit 4.1) that reconcile the amounts reported on the governmental fund financial statements (prepared using the modified accrual basis of accounting and current financial resources measurement focus) with governmental activities (prepared using the accrual basis of accounting and economic resources measurement focus) on the appropriate government-wide statements. The following summarizes the impact of utilizing Governmental Accounting Standards Board Statement 34 (GASB 34), as amended, reporting: Capital assets used in governmental activities are not reported on governmental fund statements. Long-term assets that are not available to pay for current period expenditures are not reported on governmental fund statements. Internal service fund activities are reported as governmental activities, but reported as proprietary funds in the fund financial statements. Bond issuance costs are capitalized and amortized to expense as governmental activities, but reported as expenditures in the governmental fund statements. Unless currently due and payable, long-term liabilities, such as capital lease obligations, compensated absences, bonds, notes payable, and others only appear as liabilities on the government-wide statements. 2013 Comprehensive Annual Financial Report 4 Arizona Department of Transportation Management’s Discussion and Analysis (continued) June 30, 2013 Capital outlay spending results in capital assets on the government-wide statements, but is reported as expenditures on the governmental fund statements. Bond and note proceeds result in liabilities on the government-wide statements, but are recorded as other financing sources on the governmental fund statements. Certain other outflows represent either increases or decreases in liabilities on the government-wide statements, but are reported as expenditures on the governmental fund statements. Fund Financial Statements (Reporting the Department’s Major Funds) The fund financial statements begin on page 16 and provide detailed information about the major individual funds. A fund is an accounting entity with a self-balancing set of accounts that the Department uses to keep track of specific sources of funding and spending for a particular purpose. The Department, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the Department can be divided into three categories: governmental, proprietary, and fiduciary. Governmental Funds A majority of the Department’s activities are reported in governmental funds. Reporting of these funds focuses on how financial resources flow in and out of the funds, and amounts remaining at year-end for future spending. Governmental funds are accounted for using the modified accrual basis of accounting, which measures cash and other assets that can be readily converted to cash. The governmental fund statements provide a detailed short-term view of the Department’s general governmental operations and the basic services it provides. This information should help determine whether there are more or less current financial resources available for the Department’s programs. The reconciliations following the fund financial statements explain the differences between the government’s activities, reported in the government-wide statement of activities, and the governmental funds. The Department maintains fifteen individual governmental funds. Information is presented separately in the governmental funds Balance Sheet and the governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balances for the General Fund (State Highway Fund), Maricopa Regional Area Road Construction Fund, Motor Vehicle Division Clearing Fund, Highway User Revenue Fund, Debt Service Fund, and Capital Projects Fund, which are considered to be major funds. Data from the other nine governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds are provided in the form of combining statements elsewhere in this report. The legislature appropriates an annual budget for the Department’s General Fund (State Highway Fund). The Budgetary Comparison Schedule – General Fund (State Highway Fund) has been provided to demonstrate compliance with this budget and is presented as Required Supplementary Information. The governmental funds financial statements can be found on pages 16-23 of this report. Proprietary Funds When the Department charges customers for the services it provides, these services are generally reported in proprietary funds. Proprietary funds (enterprise and internal service) utilize full accrual accounting, the same method used by private sector businesses. Enterprise funds report activities that provide goods and services to outside customers, to other agencies, or to other divisions of the Department. The Department’s enterprise funds are the Arizona Highways Magazine Fund and the Highway Expansion and Extension Loan Program Fund. The internal service fund reports activities that provide supplies and services for the Department’s other programs and activities and other state agencies. The Equipment Revolving Fund is the Department’s only internal service fund. Internal service fund activities are reported as governmental activities on the government-wide statements. 2013 Comprehensive Annual Financial Report 5 Arizona Department of Transportation Management’s Discussion and Analysis (continued) June 30, 2013 The proprietary funds financial statements can be found on pages 24-26 of this report. Fiduciary Funds Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the Department’s own programs. The fiduciary fund financial statement can be found on page 27. Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 29-52 of this report. Required Supplementary Information In addition to the basic financial statements, including accompanying notes, this section presents certain Required Supplementary Information including the Department’s Budgetary Comparison Schedule – General Fund (State Highway Fund) and the modified approach to reporting infrastructure assets. Required Supplementary Information can be found on pages 53-59 of this report. Supplementary Information Other Supplementary Information includes the combining statements for the non-major governmental funds and agency funds, and is presented immediately following the Required Supplementary Information on budget and infrastructure assets. Combining and individual fund statements and schedules can be found on pages 60-65 of this report. Government-wide Financial Analysis As noted earlier, net position may serve over time as a useful indicator of the Department’s financial health. The following tables, graphs, and analyses address the net position and changes to net position for the Department as a whole as of and for the fiscal years ended June 30, 2013 and 2012. The Department’s combined net position increased by $609.6 million over the course of this fiscal year’s operations, an increase of 3.7 percent. The net position of the governmental activities increased by $608.3 million, or 3.7 percent, and business-type activities increased by $1.3 million, an increase of 1.6 percent over the previous year. The overall increase in the Department’s net position was due primarily to an increase in the Department’s infrastructure. The following table reflects the condensed Statement of Net Position as of June 30, 2013 and 2012: Governmental Activities 2013 Business-type Activities 2012 2013 2012 Total 2013 2012 Assets Current and other assets Capital assets $ 1,651,917,165 19,263,771,231 $ 1,514,737,093 18,607,570,621 20,915,688,396 20,122,307,714 Other liabilities Non-current liabilities 284,448,317 3,450,945,741 Total liabilities Total assets $ 81,327,320 30,227 $ 80,112,945 43,102 $ 1,733,244,485 19,263,801,458 $ 1,594,850,038 18,607,613,723 81,357,547 80,156,047 20,997,045,943 20,202,463,761 283,094,516 3,267,217,325 2,188,646 161,024 2,258,198 147,402 286,636,963 3,451,106,765 285,352,714 3,267,364,727 3,735,394,058 3,550,311,841 2,349,670 2,405,600 3,737,743,728 3,552,717,441 16,290,604,770 15,796,384,864 30,227 43,102 16,290,634,997 15,796,427,966 738,968,893 150,720,675 668,679,292 106,931,717 77,564,143 1,413,507 76,882,306 825,039 816,533,036 152,134,182 745,561,598 107,756,756 $ 17,180,294,338 $ 16,571,995,873 77,750,447 $ 17,259,302,215 $ 16,649,746,320 Liabilities Net position Net investment in capital assets Restricted Unrestricted Total net position $ 79,007,877 $ 2013 Comprehensive Annual Financial Report 6 Arizona Department of Transportation Management’s Discussion and Analysis (continued) June 30, 2013 The total assets of the Department were $21.0 billion, while total liabilities were $3.8 billion, resulting in a net position balance of $17.3 billion. The majority of the Department’s net position, $16.3 billion (94.4 percent), was invested in capital assets (e.g., land, infrastructure, buildings, machinery, and equipment), net of any related debt used to acquire those assets. The Department uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the Department’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other resources, since the capital assets themselves cannot be used to liquidate these liabilities. The governmental activities reported an increase in capital assets with the largest increase being in the area of construction in progress. The Department issued one new bond in fiscal year 2013, which caused the non-current liabilities to increase for the governmental activities. The following condensed financial information was derived from the government-wide Statement of Activities and reflects how the Department’s net position changed during the year, compared to the prior year: Governmental Activities 2013 2012 Business-type Activities 2013 2012 Total 2013 2012 Revenues Program revenues: Charges for services Operating grants and contributions Capital grants and contributions General revenues: Transportation excise taxes Vehicle registration, title, license and related taxes and fees Fuel and motor carrier taxes and fees Flight property taxes Income from investments Gain on sale of capital assets Other Total revenues $ 227,800,355 913,326,182 708,062,017 8,084,374 11,781,298 120,706 13,290,109 2,837,414,878 Expenses Administration Highway Highway maintenance Motor vehicle Non-capital, including asset preservation Distributions to other state agencies Distributions to Arizona counties and cities Local governmental assistance Interest on long-term debt Arizona Highways Magazine Highway Expansion and Extension Loan Program Total expenses Change in net position Net position - July 1 Net position - June 30 134,715,560 168,435,801 651,798,476 $ $ 127,347,062 161,992,343 776,813,570 216,280,983 899,344,827 700,619,599 10,735,000 11,387,628 <895,030> 10,498,827 2,914,124,809 $ 5,193,954 - $ 5,582,832 - $ 139,909,514 168,435,801 651,798,476 - - 227,800,355 746,935 5,940,889 783,353 6,366,185 913,326,182 708,062,017 8,084,374 12,528,233 120,706 13,290,109 2,843,355,767 $ 132,929,894 161,992,343 776,813,570 216,280,983 899,344,827 700,619,599 10,735,000 12,170,981 <895,030> 10,498,827 2,920,490,994 101,369,817 46,076,242 139,761,650 107,654,532 257,126,025 213,394,662 94,074,541 39,631,797 125,330,823 116,095,447 351,115,581 307,885,178 - - 101,369,817 46,076,242 139,761,650 107,654,532 257,126,025 213,394,662 94,074,541 39,631,797 125,330,823 116,095,447 351,115,581 307,885,178 1,074,085,950 102,332,256 187,315,278 - 1,005,113,813 93,557,474 164,081,060 - 4,637,319 4,978,502 1,074,085,950 102,332,256 187,315,278 4,637,319 1,005,113,813 93,557,474 164,081,060 4,978,502 2,229,116,412 2,296,885,714 46,140 4,683,459 74,922 5,053,424 46,140 2,233,799,871 74,922 2,301,939,138 608,298,466 16,571,995,872 17,180,294,338 617,239,095 15,954,756,778 $ 16,571,995,873 1,257,430 77,750,447 $ 79,007,877 1,312,761 76,437,686 $ 77,750,447 609,555,896 16,649,746,319 $ 17,259,302,215 618,551,856 16,031,194,464 $ 16,649,746,320 2013 Comprehensive Annual Financial Report 7 Arizona Department of Transportation Management’s Discussion and Analysis (continued) June 30, 2013 Governmental Activities The following chart depicts revenues of the governmental activities for the fiscal year ended June 30, 2013: $2.3 billion (or 80.2 percent) of the Department’s revenues are from the following three revenue sources: Vehicle registration, title, license, and related taxes and fees comprise the Department’s largest revenue source of $913.3 million (32.2 percent). Fuel and motor carrier taxes and fees represent the Department’s second largest revenue source of $708.1 million (25.0 percent). Capital grants and contributions represent the Department’s third largest revenue source of $651.8 million (23.0 percent). The Department’s two main funding sources, the Highway User Revenue Fund (HURF) and the Maricopa County Transportation Excise Tax, posted positive year-over-year growth in fiscal year 2013. HURF collections totaled approximately $1.2 billion, even with fiscal year 2012 but 0.7 percent below the forecast. Maricopa County Transportation Excise Tax collections totaled $341.6 million, an increase of 5.4 percent over fiscal year 2012, and 0.3 percent above the Department’s estimate. The Transportation Excise Tax distribution to the Department was $227.8 million compared to $216.3 million for fiscal year 2012. 2013 Comprehensive Annual Financial Report 8 Arizona Department of Transportation Management’s Discussion and Analysis (continued) June 30, 2013 The following chart depicts expenses of the governmental activities for the fiscal year ended June 30, 2013: $1.5 billion (or 69.3 percent) of the Department’s expenses were for the following: Distributions to Arizona counties and cities comprise the Department’s largest expense of $1.1 billion (48.2 percent). Non-capital, including asset preservation, represents the Department’s second largest expense of $257.1 million (11.5 percent). Distributions to other state agencies represent the Department’s third largest expense of $213.4 million (9.6 percent). Distributions to Arizona counties and cities increased in fiscal year 2013 as compared to fiscal year 2012 due to an increase in fuel tax and vehicle license tax collections. Distributions to other government entities equals 62.5%; making up more than half of the expenditures for fiscal year 2013. 2013 Comprehensive Annual Financial Report 9 Arizona Department of Transportation Management’s Discussion and Analysis (continued) June 30, 2013 Business-type Activities Net position for business-type activities increased by $1.3 million in fiscal year 2013. Total revenues were $5.9 million, with charges for services representing 87.4 percent and income from investments 12.6 percent. The total expenses for business-type activities were $4.7 million. The Highway Expansion and Extension Loan Program did not loan money because the return on investment was not sufficient to merit the risk. Interest revenue increased this fiscal year due to the fund not issuing any new loans and receiving loan repayments, which increased average cash balances during the year. The Arizona Highways Magazine had a decrease in operating revenues of $393 thousand primarily due to a reduction in the number of subscribers for the monthly publication; and a reduction in the purchases of related products such as calendars, books, and holiday gift catalog items. Typically magazine subscribers also purchase these related products. This decline in demand is consistent with industry trends for many other consumer periodicals with revenues based predominantly on annual subscriptions, as well as an overall weak economy, especially in Arizona where the majority of subscribers are located. Financial Analysis of the Department’s Funds As previously mentioned, the Department uses fund accounting to ensure and demonstrate compliance with budgetary and legal requirements. The following is a brief discussion of financial highlights from the fund financial statements. Governmental Funds The focus of the Department’s governmental funds financial statements (pages 16-23) is to provide information on near-term inflows, outflows, and balances of spendable resources. All major governmental funds are discretely presented on these financial statements, while the non-major governmental funds are combined into a single column. Combining statements for the non-major governmental funds may be found on pages 60-63. As of the end of the fiscal year, the fund balances of the governmental funds totaled $1.3 billion, an increase of $134.6 million over the previous fiscal year. Of the $1.3 billion balance, $1.1 billion represents those funds that are restricted and used to pay for capital projects while $1.7 million represents those funds that are restricted and used to pay for debt service; $164.2 million represents that portion of the fund balance that is committed; and $7.2 million for inventories represents that portion of the fund balance that is nonspendable. The General Fund (State Highway Fund) is the primary operating fund of the Department. At the end of the current fiscal year, the nonspendable fund balance was $7.2 million; the restricted fund balance was $267.4 million; and the committed fund balance was $123.7 million. The Maricopa Regional Area Road Construction Fund is a major special revenue fund that receives a portion of Maricopa County Transportation Excise Tax monies that are used to provide a funding source for the construction of new freeways and other routes, improvements to existing freeways and other routes, and improvements to the arterial street system within Maricopa County. Total revenues collected in the fund in fiscal year 2013 were $439.9 million; Transportation Excise Tax revenue of $227.8 million (or 51.8 percent) was the bulk of the revenue. The remaining revenue was mainly federal revenue and income from investments. The Debt Service Fund is used for the accumulation of resources for, and the payment of, general long-term debt principal and interest of the governmental funds. The other financing sources of $283.1 million were transferred in from the General Fund (State Highway Fund) ($124.8 million), Maricopa Regional Area Road Construction Fund ($103.2 million), and Grant Anticipation Notes Fund ($55.1 million), and were used to pay the debt service. 2013 Comprehensive Annual Financial Report 10 Arizona Department of Transportation Management’s Discussion and Analysis (continued) June 30, 2013 The Capital Projects Fund is used to account for financial resources used for the acquisition or construction of major capital facilities in the governmental funds. During the fiscal year, the Capital Projects Fund’s expenditures were $200.9 million. Capital outlay expenditures of $182.8 million (91 percent) accounted for the majority of the expenditures in the Capital Projects Fund. This expenditure for the acquisition and construction of new highways was converted to capital assets on the government-wide statements. Budget Variances As a consequence of lower revenue collections, the Department reduced its fiscal year 2013 operating spending levels in order to ensure that there would be sufficient cash in the General Fund (State Highway Fund) to cover debt service, contractor payments, fund transfers, and daily operational expenses. Accordingly, actual expenditures for fiscal year 2013 were less than the Department’s appropriated budget. Reference the budgetary comparison schedule on page 53. Capital Assets and Debt Administration Capital Assets (See Note 5A to the financial statements for additional information) The Department’s investment in capital assets for its governmental and business-type activities as of June 30, 2013, amounts to $19.3 billion (net of accumulated depreciation), a $656.2 million increase over the previous fiscal year. Governmental Activities 2013 Land $ Business-type Activities 2012 2013 $ 2,828,039,198 $ 2,747,315,649 2012 12,951,193,039 12,207,437,415 - - 12,951,193,039 12,207,437,415 3,285,416,977 3,459,047,385 - - 3,285,416,977 3,459,047,385 105,853,869 108,712,313 14,347 23,678 105,868,216 108,735,991 Improvements other than buildings 23,394,787 24,475,649 - - 23,394,787 24,475,649 Machinery and equipment Mobile fleet and aircraft 12,200,738 57,680,523 13,332,478 47,257,632 7,980 - 11,524 - 12,208,718 57,680,523 13,344,002 47,257,632 $ 19,263,771,231 $18,607,570,621 43,102 $19,263,801,458 $ 18,607,613,723 Buildings and improvements Total $ 30,227 $ 7,900 $ 2,747,307,749 Construction in progress 7,900 2013 2,828,031,298 Infrastructure $ Total 2012 $ As provided by accounting principles generally accepted in the United States (GAAP), the Department has elected to record its infrastructure assets using the modified approach, as defined in GASB Statement 34. Assets accounted for under the modified approach include 6,751 center lane miles of roads (21,213 travel lane miles) and 4,754 bridges that the Department is responsible for maintaining. The Five-Year Transportation Facilities Construction Program (Program) is a dynamic program and adjustments are made to the annual plans based on the needs of the Department to maintain the condition level of the roads and bridges at a level equal to, or greater than, the goals established by the Department. The Program is updated annually and adjustments are made monthly during the fiscal year, as circumstances may require. The Department manages its roads using the Present Serviceability Rating (PSR), which measures the condition of the pavement and its ability to serve the traveling public. The PSR uses a five-point scale (5 excellent, 0 impassable) to characterize the condition of the roadway. The Department’s serviceability rating goal is 3.23 for the overall system. The Department’s most recent assessment indicated that an overall rating of 3.67 was achieved for fiscal year 2013. The Department manages its bridges using the Arizona Bridge Information and Storage System (ABISS). The Department determines the condition rating based on standards developed by the Federal Highway Administration and additional internal criteria. It is the policy of the Department to maintain a Condition Rating Index (CRI) of 92.5 percent or better. In fiscal year 2013, a CRI of 93.2 percent was achieved. 2013 Comprehensive Annual Financial Report 11 Arizona Department of Transportation Management’s Discussion and Analysis (continued) June 30, 2013 In addition to many smaller projects, the following major highway construction contracts in excess of $10 million were started during fiscal year 2013: Fiscal Year 2013 Construction Contract Start Date Contract Amount Description System preservation and reconstruction on Naha 'Ta' Dzill road to Sanders traffic interchange in Apache County 11/16/2012 $ System enhancement and traffic management at Copper Canyon Phase I in Yavapai County 10/19/2012 Capacity additions and major widening on US 60, 71st Avenue - McDowell Road in Maricopa 11/16/2012 County System preservation-reconstruction at Cienega creek - Marsh station, Phase III in Pima County 9/21/2012 Capacity additions-major widening on SR303L: Camelback Road to Glendale Avenue in Maricopa 2/8/2013 County System preservation-restoration/rehab/resurface on East Ash Fork traffic interchange to West Williams traffic interchange in Coconino County 6/14/2013 New facilities-construction of new road on US 89 to State route 98 in Coconino County 5/6/2013 13,645,437 $ 11,875,000 Expenditures 4,977,268 4,463,063 12,741,490 17,207,162 3,110,303 6,686,994 34,871,752 5,424,383 10,486,585 32,035,666 3,078,948 Furthermore, the following major highway construction projects had expenditures in excess of $15 million in fiscal year 2013. These project expenditures include payments made to construction contractors (as shown above) as well as utility, design, right-of-way, and landscaping costs: 2013 Project Expenditures Location Description State Route 303L from Peoria Avenue to Mountain View Boulevard in Maricopa County State Route 303L/Interstate 10 Traffic Interchange in Maricopa County State Route 303L from Glendale Avenue to Peoria Avenue in Maricopa County State Route 24 at State Route 202L (Santan) to Ellsworth Road Phase I in Maricopa County Interstate 10 Ruthrauff Road to Prince Road in Pima County Interstate 10 from Salt River to Baseline Road in Maricopa County US 60 to Loop 303 on Northern Avenue Interstate 17 Cordes Junction Traffic Interchange in Yavapai County State Route 303L from Thomas Road to Camelback Road 2013 Comprehensive Annual Financial Report 12 $ 72,659,329 63,256,628 51,644,626 50,316,974 35,844,633 34,928,659 34,726,774 26,825,406 22,817,690 Arizona Department of Transportation Management’s Discussion and Analysis (continued) June 30, 2013 Non-Current Liabilities (See Note 5F to the financial statements for additional information) The Department’s non-current liabilities for its governmental and business-type activities as of June 30, 2013, amount to $3.5 billion, an increase of $183.7 million from the previous fiscal year. Governmental Activities 2013 Highway revenue bonds Transportation excise tax revenue bonds Grant anticipation notes (GARVEE bonds) Premium on bonds Capital leases Compensated absences Advances and notes payable Total governmental activities 2012 $ 1,733,285,000 925,975,000 296,240,000 350,739,402 22,271,210 16,618,748 105,816,381 $ 1,619,965,000 981,845,000 335,230,000 248,891,687 10,728,825 14,890,371 55,666,442 3,450,945,741 3,267,217,325 161,024 147,402 161,024 147,402 $ 3,451,106,765 $ 3,267,364,727 Business-type Activities Compensated absences Total business-type activities Total non-current liabilities The Department has issued revenue bonds in 56 separate issues between 1980 and 2013. All bonds outstanding as of June 30, 2013, are scheduled to mature on various dates, but none later than July 1, 2038. The bonds are obligations of the Transportation Board of the State of Arizona Department of Transportation (Transportation Board) and are not obligations of the State of Arizona. This data was gathered from the various bond records on file from the 1980s to the present. The senior lien Highway Revenue Bonds have been rated AAA/Aa1 by Standard & Poor’s Ratings Services and Moody’s Investors Service, respectively. The Department’s subordinate lien Highway Revenue Bonds are rated AA+/Aa2. The Department’s Transportation Excise Tax Revenue Bonds are rated AA+/Aa1. The Department’s Grant Anticipation Notes (“GARVEE bonds”) are rated AA/Aa2/AA with the additional rating provided by Fitch Ratings. Requests for Information This financial report is designed to provide our citizens, taxpayers, customers, investors, and creditors with an overview of the Department’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Controller, Arizona Department of Transportation, 206 S. 17th Avenue, Phoenix, Arizona, 85007, or by visiting our website at http://www.azdot.gov/Inside_ADOT/fms/PDF/CAFR13.pdf. 2013 Comprehensive Annual Financial Report 13 BASIC FINANCIAL STATEMENTS Government-wide Financial Statements – include the Statement of Net Position and the Statement of Activities and use the accrual basis of accounting for financial reporting. Governmental Funds Financial Statements – include the Balance Sheet and Statement of Revenues, Expenditures, and Changes in Fund Balances for the major governmental funds and use the modified accrual basis of accounting for financial reporting. Also include the reconciliations to the governmentwide financial statements. Proprietary Funds Financial Statements – include the Statement of Net Position, the Statement of Revenues, Expenses, and Changes in Fund Net Position and the Statement of Cash Flows for the businesstype activities and use the accrual basis of accounting for financial reporting. Statement of Fiduciary Net Position – includes the Statement of Net Position for assets being held for parties outside of the Department. Notes to the Financial Statements 2013 Comprehensive Annual Financial Report Exhibit 1 Arizona Department of Transportation Statement of Net Position June 30, 2013 Governmental Activities Business-type Activities Total Assets Unrestricted cash on deposit with the State Treasurer $ 52,879,718 $ 2,857,670 $ 55,737,388 Receivables: Subscriptions, net of allowance for doubtful accounts Taxes and fees Notes and loans Other, net of allowance for doubtful accounts Due from U.S. Government for reimbursable costs Internal balances - 87,874 87,874 72,898,745 - 72,898,745 5,043,871 - 5,043,871 13,841,274 93,944 13,935,218 110,291,707 - 110,291,707 31,746 - <31,746> Inventories 10,896,056 347,570 11,243,626 Other assets/prepaid items 19,058,878 344,373 19,403,251 Deferred charges 15,084,498 - 15,084,498 Restricted cash on deposit with the State Treasurer 1,351,954,164 77,564,143 1,429,518,307 Capital assets not subject to depreciation (Note 5A) 19,064,641,314 7,900 19,064,649,214 199,129,917 22,327 199,152,244 20,915,688,396 81,357,547 20,997,045,943 Accounts payable and other current liabilities 4,214,249 76,143 4,290,392 Accrued payroll and other accrued expenses 5,482,626 29,310 5,511,936 145,287,455 - 145,287,455 Capital assets subject to depreciation, net of accumulated depreciation (Note 5A) Total assets Liabilities Contracts and retainage payable Due to other state agencies Due to Arizona counties and cities Unearned revenues (Note 5C) 8,745,688 - 8,745,688 120,718,299 - 120,718,299 - 2,083,193 2,083,193 210,737,398 3,240,208,343 20,750 140,274 210,758,148 3,240,348,617 3,735,394,058 2,349,670 3,737,743,728 16,290,604,770 30,227 16,290,634,997 - 77,564,143 77,564,143 3,892,317 - 3,892,317 735,076,576 150,720,675 1,413,507 735,076,576 152,134,182 Non-current liabilities (Note 5F): Due within one year Due in more than one year Total liabilities Net position Net investment in capital assets Restricted: Loans and other financial assistance Debt service Capital projects Unrestricted Total net position $ 17,180,294,338 The notes to the financial statements are an integral part of this statement. 2013 Comprehensive Annual Financial Report 14 $ 79,007,877 $ 17,259,302,215 Exhibit 2 Arizona Department of Transportation Statement of Activities for the fiscal year ended June 30, 2013 Program Revenues Operating Grants and Capital Grants and Expenses Functions/Programs Contributions Charges for Services Net Contributions Revenues Governmental Activities Administration $ Highway 101,369,817 $ 46,076,242 12,253,840 $ - $ 1,365,868 841,686 64,990,180 650,432,608 $ <87,750,109> 670,188,232 Highway maintenance 139,761,650 1,887,173 - - Motor vehicle 107,654,532 119,732,861 - - 12,078,329 Non-capital, including asset preservation 257,126,025 - - - <257,126,025> Distributions to other state agencies 213,394,662 - - - <213,394,662> 1,074,085,950 - - - <1,074,085,950> 102,332,256 187,315,278 - 103,445,621 - - 1,113,365 <187,315,278> 2,229,116,412 134,715,560 168,435,801 651,798,476 <1,274,166,575> 4,637,319 5,188,348 - - 46,140 5,606 - - <40,534> 4,683,459 5,193,954 - - 510,495 168,435,801 $ 651,798,476 Distributions to Arizona counties and cities Local governmental assistance Interest on long-term debt Total governmental activities <137,874,477> Business-type Activities Arizona Highways Magazine Highway Expansion and Extension Loan Program Total business-type activities Total $ 2,233,799,871 $ 139,909,514 $ Governmental Activities Net revenues $ 551,029 $ Business-type Activities <1,274,166,575> $ <1,273,656,080> Total 510,495 $ <1,273,656,080> General revenues: Transportation excise taxes 227,800,355 - 227,800,355 Vehicle registration, title, license, and related taxes and fees 913,326,182 - 913,326,182 Fuel and motor carrier taxes and fees 708,062,017 - 708,062,017 8,084,374 - 8,084,374 Income from investments 11,781,298 746,935 12,528,233 Gain on sale of capital assets Other 120,706 13,290,109 - 120,706 13,290,109 Total general revenues 1,882,465,041 746,935 1,883,211,976 608,298,466 16,571,995,872 1,257,430 77,750,447 609,555,896 16,649,746,319 Flight property taxes Change in net position Net position - July 1 Net position - June 30 $ 17,180,294,338 The notes to the financial statements are an integral part of this statement. 2013 Comprehensive Annual Financial Report 15 $ 79,007,877 $ 17,259,302,215 GOVERNMENTAL FUNDS FINANCIAL STATEMENTS MAJOR FUNDS General Fund (State Highway Fund) This fund is used to account for all financial transactions applicable to the general operations of the Department. The fund receives money from the Highway User Revenue Fund including vehicle registration, title, license, and related fees and fuel and motor carrier taxes. Reimbursements for certain construction expenditures are received from the federal government, Arizona cities and counties, and other state agencies. The fund also receives interest and other revenues. The fund disburses money primarily for the design, construction, and maintenance of state highways, parts of highways forming state routes, and highways under cooperative agreements with the United States and day-to-day operating expenses. Maricopa Regional Area Road Construction Fund This fund receives certain Maricopa County transportation excise tax monies collected by the Department of Revenue. These monies are used for the construction of new freeways and other routes, improvements to existing freeways and other routes, and improvements to the arterial streets within Maricopa County. Motor Vehicle Division Clearing Fund This fund accounts for the collection and disbursement of Motor Vehicle Division revenues. Highway User Revenue Fund This fund receives all revenues collected by the Department and its agents that are not designated for other purposes. The revenues include: motor fuel taxes, a portion of vehicle license tax, vehicle registration fees, driver license fees, dealer fees, permits, and other miscellaneous fees. These monies are distributed to the General Fund (State Highway Fund), the Department of Public Safety, the Economic Strength Project Fund, incorporated cities, counties, and other legislatively appropriated entities. Debt Service Fund This fund is used to administer all payments of principal and interest on bonds and notes issued by the Arizona Transportation Board for Highway Revenue Bonds, Transportation Excise Tax Revenue Bonds, and Grant Anticipation Notes (GARVEE bonds). Capital Projects Fund This fund is used to administer bond proceeds for Arizona Transportation Board Highway Revenue Bonds, Arizona Transportation Board Transportation Excise Tax Revenue Bonds, Grant Anticipation Notes (GARVEE bonds). These monies are expended for the construction of projects in the Five-Year Transportation Facilities Construction Program. NON-MAJOR FUNDS Other Governmental Funds are the non-major funds and are all special revenue funds. These funds can be found on Exhibit 9 and Exhibit 10. 2013 Comprehensive Annual Financial Report Arizona Department of Transportation Balance Sheet Governmental Funds June 30, 2013 Special Revenue Funds General Maricopa Motor Regional Vehicle Highway Fund Area Road Division User (State Highway Fund) Construction Fund Clearing Fund Revenue Fund Assets Unrestricted cash on deposit with the State Treasurer $ 19,036,482 $ - $ - $ - Receivables: Interfund (Note 5D) 101,543,263 - - 36,126,277 - - 17,114,103 55,784,642 1,293,051 - - - Taxes and fees Notes and loans Other (net) Amounts due from U.S. Government Inventories Land held for resale Restricted cash on deposit with the State Treasurer 7,496,554 495,216 - - 67,361,428 26,260,050 - - 7,206,835 - - - 19,058,878 - - - 267,413,539 Total assets $ 460,498,542 490,410,030 $ 2,185,066 $ 42,343,407 101,839,996 487,253,808 $ 59,457,510 $ - $ 1,262,289 $ 193,750,915 Liabilities and fund balances Liabilities: Accounts payable $ Accrued payroll and other accrued expenditures Contracts and retainage payable Interfund payables (Note 5D) - - 5,105,278 47,986 - 80,041,820 46,493,992 - - 1,279,132 - 37,960,013 97,571,665 Amounts due to: Other state agencies - - 6,034,045 - Arizona counties and cities - - 22,030,786 96,179,250 Surety and rental deposits Deferred revenue (Note 5C) 400,282 3,115,585 - 298,800 - - Total liabilities 92,127,163 46,541,978 67,585,933 193,750,915 Fund balances : (Note 5G) Unassigned Nonspendable Restricted Committed Total fund balances - - 7,206,835 - - - 267,413,539 123,662,493 434,011,830 6,700,000 - - 398,282,867 Total liabilities and fund balances $ 490,410,030 440,711,830 $ 487,253,808 The notes to the financial statements are an integral part of this statement. 2013 Comprehensive Annual Financial Report 16 <8,128,423> - <8,128,423> $ 59,457,510 $ 193,750,915 Exhibit 3 Total Non-Major $ Debt Capital Governmental Total Service Fund Projects Fund Funds (See Exhibit 9) Governmental Funds - $ $ 33,843,236 $ 52,879,718 - - 2,914,325 140,583,865 - - - 72,898,745 - - 3,750,820 5,043,871 - - 5,829,162 13,820,932 - - 16,670,229 110,291,707 - - - 7,206,835 - - - 19,058,878 1,700,824 463,272,780 $ 1,700,824 $ $ 300 $ - 14,472,406 463,272,780 $ - $ 1,351,541,494 77,480,178 $ 72,554 $ 1,773,326,045 3,520,209 10,483 75,992 - - 18,751,643 145,287,455 - 3,802,589 - 140,613,399 - - 2,711,643 8,745,688 - - 2,508,263 120,718,299 - - 3,750,820 699,082 6,866,405 300 3,813,072 27,870,915 431,690,276 - - - <8,128,423> - - - 7,206,835 1,700,524 - 459,459,708 - 15,759,326 33,849,937 1,178,344,927 164,212,430 1,700,524 $ - 1,700,824 459,459,708 $ 463,272,780 5,239,739 49,609,263 $ 77,480,178 1,341,635,769 $ 1,773,326,045 2013 Comprehensive Annual Financial Report 17 Exhibit 3.1 Arizona Department of Transportation Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Posistion June 30, 2013 Total fund balances - governmental funds (Exhibit 3) $ 1,341,635,769 Amounts reported for governmental activities in the Statement of Net Position (Exhibit 1) are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds (Note 4 B1). 19,205,428,859 Internal service funds are used by management to charge the costs of equipment rentals to individual funds. The assets and liabilities of the internal service funds are included in governmental activities in the Statement of Net Position (Exhibit 5). 61,487,920 Other long-term assets are not available to pay for current-period expenditures and, therefore, are deferred in the funds (Note 4 B2). 6,866,405 Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in the funds (Note 4 B3). Net position of governmental activities (Exhibit 1) <3,435,124,615> $ The notes to the financial statements are an integral part of this statement. 2013 Comprehensive Annual Financial Report 18 17,180,294,338 Arizona Department of Transportation Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds for the fiscal year ended June 30, 2013 Special Revenue Funds Maricopa Motor General Regional Vehicle Highway Fund Area Road Division User (State Highway Fund) Construction Fund Clearing Fund Revenue Fund Revenues Transportation excise taxes $ - $ 227,800,355 $ - $ - Vehicle registration, title, license, and related taxes and fees Fuel and motor carrier taxes and fees 262,562,175 - 435,334,300 323,544,081 304,339,990 - 17,943,418 352,380,619 - - - - 387,725,671 210,036,386 - - Flight property taxes Reimbursement of construction expenditures - federal aid Other federal grants and reimbursements 64,990,180 Reimbursements from Arizona counties and cities Distributions from other state agencies Interest on loans receivable Income from investments 1,213,763 989,297 Total revenues - - - - - - - 92,828 - - - 2,711,038 3,399,558 - 378,977 - - - - 4,154,705 4,621,131 1,089,604 1,179,283 - 1,978,987 1,033,400,778 439,911,457 453,277,718 678,282,664 79,284,588 247,442 - - Grand Canyon National Park Airport Rental income Other <3,593,729> Expenditures Current: Administration Highway Highway maintenance Motor vehicle Total current expenditures 41,520,880 1,474,813 - - 143,972,473 95,380,525 - 1,381,383 4,233,105 360,158,466 1,722,255 1,381,383 4,233,105 The notes to the financial statements are an integral part of this statement. 2013 Comprehensive Annual Financial Report 19 Exhibit 4 Total Non-Major $ Debt Capital Governmental Total Service Fund Projects Fund Funds (See Exhibit 10) Governmental Funds - $ - $ - $ 227,800,355 - - 11,405,328 1,032,845,884 - - 33,397,990 708,062,017 - - 8,084,374 8,084,374 - - 55,474,157 653,236,214 - - 100,948,366 165,938,546 - - 3,459,283 1,079,317 - - - 989,297 - - 205,236 298,064 976,906 3,815,090 294,404 11,575,973 - - 1,044,326 1,044,326 - - 207,505 5,244,309 7,986,906 976,906 3,815,090 214,520,969 2,824,185,582 65,217 740,245 110,268,456 190,605,948 - - - 42,995,693 - - 4,466,581 143,972,473 105,461,594 65,217 740,245 114,735,037 483,035,708 (continued) 2013 Comprehensive Annual Financial Report 20 Arizona Department of Transportation Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds for the fiscal year ended June 30, 2013 Special Revenue Funds Maricopa Motor General Regional Vehicle Highway Fund Area Road Division User (State Highway Fund) Construction Fund Clearing Fund Revenue Fund Expenditures (continued) Intergovernmental: Distributions to other state agencies $ Distributions to Arizona counties and cities 6,915,696 $ - $ 49,528,071 $ 127,089,932 42,495,962 71,927,448 402,368,264 546,959,627 5,015,344 - - - 340,013 - - - - - - - 180,421,144 263,476,152 3,568,231 269,014,988 - - 858,822,777 346,232,922 453,277,718 678,282,664 174,578,001 93,678,535 - - - - - - - - - - Debt service: Principal Interest Bond issuance costs Non-capital, including asset preservation Capital outlay Total expenditures Excess of revenues over expenditures Other financing sources Transfers in Transfers out for debt service <124,776,920> Sale of capital assets <103,218,632> 1,635,730 Insurance recovery - 1,678,631 - - - 15,157,729 51,549,938 - - Refunding debt issuance - - - - Premium from debt issuance Payment to refunded bond escrow agent - - - - - - Debt and capital lease issuance costs Total other financing sources Net change in fund balances Fund balances - July 1 Fund balances - June 30 $ <106,304,830> <51,668,694> 68,273,171 330,009,696 42,009,841 398,701,989 398,282,867 $ 440,711,830 The notes to the financial statements are an integral part of this statement. 2013 Comprehensive Annual Financial Report 21 $ <8,128,423> - <8,128,423> $ - Exhibit 4 Total Non-Major $ Debt Capital Governmental Total Service Fund Projects Fund Funds (See Exhibit 10) Governmental Funds - $ $ 29,860,963 $ 213,394,662 - - 10,124,562 1,073,875,863 155,400,000 - - 160,415,344 142,184,419 - - 142,524,432 1,775,124 680,202 - 2,455,326 - 16,648,171 182,803,520 419,357 200,637,546 715,714,017 299,424,760 200,872,138 155,139,919 2,992,052,898 <298,447,854> <197,057,048> 59,381,050 283,065,758 - - - - - - <167,867,316> - 283,065,758 <55,070,206> <283,065,758> - 1,635,730 - - 1,678,631 194,295,000 - 261,002,667 - - 521,175,000 92,477,310 <611,874,333> 36,385,202 - - 128,862,512 <611,874,333> 284,843,735 230,680,202 <55,070,206> <13,604,119> 15,304,643 33,623,154 425,836,554 4,310,844 45,298,419 521,175,000 $ - 1,700,524 $ 459,459,708 $ 49,609,263 302,480,207 134,612,891 1,207,022,878 $ 1,341,635,769 2013 Comprehensive Annual Financial Report 22 Exhibit 4.1 Arizona Department of Transportation Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities for the fiscal year ended June 30, 2013 Net change in fund balances - total governmental funds (Exhibit 4) $ 134,612,891 Amounts reported for governmental activities in the Statement of Activities (Exhibit 2) are different because: Capital outlays are reported as expenditures in governmental funds (Note 4 C1). Bond proceeds provide current financial resources to governmental funds. However, issuing debt increases long-term liabilities in the statement of net position. Governmental funds report the effect of issuance costs, 645,652,200 premiums, discounts, and similar items when the debt is first issued, whereas these amounts are deferred and amortized in the statement of activities (Note 4 C2). Repayment of long-term debt is reported as an expenditure in governmental funds, but the repayment reduces long-term liabilities in the statement of net position (Note 4 C2). Internal service funds are used by management to charge the cost of equipment <894,107,326> 727,498,831 rentals to individual funds. The net loss of the internal service funds is reported with governmental activities (Note 4 C3). Some items reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds (Note 4 C4). Change in net position of governmental activities (Exhibit 2) The notes to the financial statements are an integral part of this statement. 2013 Comprehensive Annual Financial Report 23 10,428,149 <15,786,279> $ 608,298,466 PROPRIETARY FUNDS FINANCIAL STATEMENTS MAJOR FUNDS Arizona Highways Magazine Fund The fund consists of receipts generated from the sale of the Arizona Highways Magazine and other branded products. The fund provides for the production and sale of the Magazine and related products that promote the State of Arizona. Highway Expansion and Extension Loan Program Fund This fund is an innovative financing mechanism to administer monies designated to provide loans and credit enhancement assistance to the Department and to sponsors of local transportation projects. NON-MAJOR FUND Internal Service Fund The Equipment Revolving Fund is primarily funded by the charges it collects from the Department of Transportation, other state agencies, and local organizations to support the repair and maintenance of vehicles and equipment. 2013 Comprehensive Annual Financial Report Exhibit 5 Arizona Department of Transportation Statement of Net Position Proprietary Funds June 30, 2013 Business-type Activities - Enterprise Funds Highway Arizona Governmental Expansion and Highways Activities - Extension Loan Program Fund Magazine Fund Internal Service Fund Total Assets Current assets: Unrestricted cash on deposit with the State Treasurer $ - $ 2,857,670 $ 2,857,670 $ - Receivables: Interfund - 29,534 29,534 Subscriptions, net of allowance for doubtful accounts - 87,874 87,874 - Other, net allowance for doubtful accounts - 93,944 93,944 20,342 Inventories - - 347,570 347,570 3,689,221 77,564,143 344,373 - 344,373 77,564,143 412,670 77,564,143 3,760,965 81,325,108 4,122,233 Capital assets not subject to depreciation - 7,900 7,900 - Capital assets subject to depreciation, net of accumulated depreciation - 22,327 22,327 58,342,372 Prepaid items Restricted cash on deposit with the State Treasurer Total current assets Non-current assets: Total non-current assets Total assets - 30,227 30,227 58,342,372 77,564,143 3,791,192 81,355,335 62,464,605 Liabilities Current liabilities: Accounts payable - 76,143 76,143 Accrued payroll and other accrued expenses - 29,310 29,310 242,887 Unearned revenues (Note 5C) Compensated absences - 2,083,193 161,024 2,083,193 161,024 559,086 - 2,349,670 2,349,670 796,931 - - - 179,754 - - - 179,754 - 2,349,670 2,349,670 976,685 - 30,227 30,227 58,342,372 77,564,143 - 1,411,295 77,564,143 1,411,295 3,145,548 1,441,522 79,005,665 Total current liabilities Non-current liabilities: Compensated absences Total non-current liabilities Total liabilities <5,042> Net position Net investment in capital assets Restricted for loans and other financial assistance Unassigned Total net position $ 77,564,143 $ Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds Net position of business-type activities 2,212 $ The notes to the financial statements are an integral part of this statement. 2013 Comprehensive Annual Financial Report 24 79,007,877 $ 61,487,920 Exhibit 6 Arizona Department of Transportation Statement of Revenues, Expenses, and Changes in Fund Net Position Proprietary Funds for the fiscal year ended June 30, 2013 Business-type Activities - Enterprise Funds Highway Arizona Governmental Expansion and Highways Activities - Extension Loan Program Fund Magazine Fund Internal Service Fund Total Operating revenues Sales and charges for services (net of write off $18,267) $ Interest on loans receivables Other - $ 4,625,508 $ 4,625,508 $ 27,008,976 5,606 - 562,840 5,606 562,840 82,004 5,606 5,188,348 5,193,954 27,090,980 Publication and promotional cost - 1,699,319 1,699,319 - Repair and maintenance - 7,527 7,527 2,035,752 Fuel and lubricants - - - 12,772,579 Salaries and related benefits - 1,479,610 1,479,610 12,241,616 Shipping and postage - 696,805 696,805 - Supplies - 10,468 10,468 132,062 Total operating revenues Operating expenses Equipment purchase and rental - 22,695 22,695 298,064 Professional and outside services - 599,291 599,291 340,681 Travel - 9,626 9,626 86,460 Depreciation Other - 10,721 97,537 10,721 97,537 8,537,992 693,348 - 4,633,599 4,633,599 37,138,554 5,606 554,749 560,355 Income from investments 722,371 24,564 746,935 Investment expense <46,140> <1,566> <47,706> <2,154> - <2,154> - Total operating expenses Operating income <10,047,574> Non-operating revenues 12,672 <770> Gain on sale/disposal of capital assets Insurance recoveries - Total non-operating revenues 676,231 20,844 697,075 341,150 - - - 20,134,573 681,837 76,882,306 575,593 865,929 1,257,430 10,428,149 51,059,771 Capital contributions Changes in net position Total net position - July 1 Total net position - June 30 $ 77,564,143 $ 1,441,522 $ Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds Change in net position of business-type activities 2,212 $ The notes to the financial statements are an integral part of this statement. 2013 Comprehensive Annual Financial Report 25 120,706 208,542 1,259,642 61,487,920 Exhibit 7 Arizona Department of Transportation Statement of Cash Flows Proprietary Funds for the fiscal year ended June 30, 2013 Business-type Activities - Enterprise Funds Highway Arizona Governmental Expansion and Highways Activities - Extension Loan Program Fund Magazine Fund Internal Service Fund Total Cash flows from operating activities Receipts from customers $ Receipts from other agencies, Arizona counties, and cities 7,914 $ 4,530,216 530,450 $ - 4,538,130 $ 530,450 15,784,224 11,209,515 Payments to suppliers - <3,053,169> <3,053,169> <16,483,248> Payments to employees Other receipts - <1,468,322> 562,840 <1,468,322> 562,840 <12,203,901> 82,004 <1,611,406> Net cash provided by operating activities 538,364 571,565 1,109,929 Proceeds from sale of capital assets - - - 1,435,158 Acquisition of capital assets Insurance recoveries - - - <266,280> 208,542 - - - 1,377,420 Cash flows from capital and related financing activities Net cash provided by capital and related financing activities Cash flows from investing activities Income from investments Investment expense Net cash provided by investing activities Net increase in cash Cash - July 1 Cash - June 30 722,371 <46,140> 24,564 <1,566> 746,935 <47,706> 12,672 <770> 676,231 22,998 699,229 11,902 1,214,595 76,349,548 594,563 2,263,107 1,809,158 78,612,655 $ 77,564,143 $ 2,857,670 $ 80,421,813 $ 5,606 $ 554,749 $ 560,355 <222,084> 634,754 $ 412,670 Reconciliation of operating income to net cash provided by operating activities Operating income $ <10,047,574> Adjustment to reconcile operating income to net cash provided by operating activities: Depreciation - 10,721 10,721 8,537,992 Receivables 532,758 26,386 559,144 <15,237> Inventories - 31,933 31,933 <190,815> Prepaid items - 3,706 3,706 <19,947> Accounts payable - 54,460 54,460 19,152 Accrued payroll and other accrued expenses - <2,334> <2,334> 105,023 Unearned revenues Compensated absences - <121,678> 13,622 <121,678> 13,622 - Net changes in assets and liabilities: Net cash provided by operating activities $ 538,364 $ Non-cash capital and financing activities Certain vehicles were contributed to the Equipment Revolving Fund by the General Fund totaling $20,134,573 The notes to the financial statements are an integral part of this statement. 2013 Comprehensive Annual Financial Report 26 571,565 $ 1,109,929 $ <1,611,406> FIDUCIARY FUNDS FINANCIAL STATEMENT AGENCY FUNDS Highway Properties - Privilege Tax Fund This fund collects monies from renters of properties previously acquired by the Department for use in future highway development. Monies collected are distributed to the Department of Revenue. Highway Properties - 24 Percent Fund This fund collects 24 percent of the Department's rental income from properties for use in future highway development. Monies collected are distributed to the local counties. 2013 Comprehensive Annual Financial Report Exhibit 8 Arizona Department of Transportation Statement of Net Position Agency Funds June 30, 2013 ASSETS Restricted cash on deposit with the State Treasurer Due from Department of Revenue Total assets LIABILITIES Due to Department of Revenue Due to Arizona counties Total liabilities $ $ $ $ The notes to the financial statements are an integral part of this statement. 2013 Comprehsive Annual Financial Report 27 376,522 12 376,534 376,534 376,534 Notes to the Financial Statements 2013 Comprehensive Annual Financial Report Arizona Department of Transportation Index – Notes to the Financial Statements June 30, 2013 Page Note 1 – Summary of Significant Accounting Policies ................................................................................................. 29 A – Reporting Entity ............................................................................................................................................ 29 B – Government-wide and Fund Financial Statements ...................................................................................... 29 C – Measurement Focus, Basis of Accounting, and Financial Statement Presentation...................................... 30 D – Assets, Liabilities, and Net Position/Fund Balance ....................................................................................... 32 E – Revenues and Expenditures/Expenses ......................................................................................................... 36 F – Interfund Activity and Balances .................................................................................................................... 36 G – Use of Estimates ........................................................................................................................................... 37 Note 2 – Funds by Classification .................................................................................................................................. 37 Note 3 – Budgeting, Budgetary Control, and Legal Compliance.................................................................................. 37 Note 4 – Accounting Pronouncements and Reconciliation of Government-wide and Fund Financial Statements .... 38 A – New Accounting Pronouncements. .............................................................................................................. 38 B – Explanations of Reconciling Items of the Balance Sheet of Governmental Funds to the Statement of Net Position ....................................................................................................................... 39 C – Explanations of Reconciling Items of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities ................................. 40 Note 5 – Detailed Notes on all Funds and Activities.................................................................................................... 42 A – Capital Assets................................................................................................................................................ 42 B – Construction Commitments.......................................................................................................................... 43 C – Deferred/Unearned Revenues...................................................................................................................... 44 D – Interfund Receivables, Payables, Advances, and Transfers.......................................................................... 44 E – Leases ............................................................................................................................................................ 45 F – Non-Current Liabilities .................................................................................................................................. 46 G – Fund Balances............................................................................................................................................... 51 Note 6 – Other Information ......................................................................................................................................... 51 A – Contingent Liabilities .................................................................................................................................... 51 B – Pension and Other Postemployment Benefits ............................................................................................. 52 2013 Comprehensive Annual Financial Report 28 Arizona Department of Transportation Notes to the Financial Statements June 30, 2013 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting and reporting policies of the Arizona Department of Transportation (Department) conform in all material respects to accounting principles generally accepted in the United States of America (GAAP) as applicable to governments. The Governmental Accounting Standards Board (GASB) is the primary standard-setting body for establishing governmental accounting and financial reporting principles, which are primarily set forth in the GASB’s Codification of Governmental and Financial Reporting Standards (GASB Codification). Following is a summary of the Department’s significant accounting policies. A. Reporting Entity The Department is a department of the State of Arizona (State) and is not a legally separate entity. The Department has no component units. The Director of the Department serves as the Chief Executive 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, approving all highway construction contracts, 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 and other 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. B. Government-wide and Fund Financial Statements The government-wide financial statements (i.e., the Statement of Net Position and the Statement of Activities) report information on all of the non-fiduciary activities of the government. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by federal reimbursement, taxes, and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for services. The Statement of Net Position presents the reporting entity’s non-fiduciary assets and liabilities, with the difference reported as net position. Net position is reported in three categories: Net investment in capital assets consists of capital assets, net of accumulated depreciation and is reduced by outstanding balances for bonds, notes, and other debt that are attributed to the acquisition, construction, or improvement of those assets. Restricted results when constraints placed on asset use are either externally imposed by creditors, grantors, contributors, and the like, or imposed by law through constitutional provisions or enabling legislation. Unrestricted consists of those assets which do not meet the definition of the two preceding categories. Unrestricted often are designated to indicate that management does not consider them to be available for general operations. The unrestricted component often has constraints on resources which are imposed by management, but can be removed or modified by management or the Transportation Board. The Statement of Activities demonstrates the degree to which the direct expenses of a given function are offset by program revenues. Direct expenses are those that are clearly identified with a specific function. Program revenues include: charges to customers or applicants who purchase, use, or directly benefit from goods, services, or 2013 Comprehensive Annual Financial Report 29 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2013 privileges provided by a given function; and grants and contributions that are restricted to meeting the operational or capital requirements of a particular function. Taxes and other items not properly included among program revenues are reported instead as general revenues. Fund Financial Statements Separate statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major proprietary funds are reported as separate columns in the fund financial statements, with non-major funds being reported in a single column. C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the full accrual basis of accounting, as are the proprietary funds. Revenues are recorded when earned and expenses are recorded when the liability is incurred, regardless of the timing of related cash flows. Taxes are recognized as revenues in the year they are levied for transportation excise, aircraft licensing, aviation and motor fuel, flight property, and underground storage tanks. Motor carrier and vehicle license taxes are recognized when received. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. For the year ended June 30, 2013, the Department implemented the provisions of GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements, which incorporates into the GASB’s authoritative literature certain accounting and financial reporting guidance that is included in FASB and AICPA Pronouncements issued on or before November 30, 1989 which does not conflict with or contradict GASB Pronouncements. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the Department considers revenues to be available if they are collected within 60 days of the end of the fiscal year, e.g., federal revenue reimbursements, vehicle license taxes, and highway user revenue taxes. Expenditures generally are recorded when a liability is incurred as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due and payable. Financial Statement Presentation The Department reports the following major governmental funds: The General Fund, known as the State Highway Fund, is the primary operating fund. It accounts for all financial resources except for those required to be accounted for in another fund. Expenditures are reported for 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 registrations, titles, licenses and related fees; and federal grants. 2013 Comprehensive Annual Financial Report 30 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2013 The Maricopa Regional Area Road Construction Fund is a special revenue fund that receives a portion of Maricopa County Transportation Excise Tax monies collected by the Department of Revenue. These monies are expended for the construction of new freeways and other routes, improvements to existing freeways and other routes, and improvements to the arterial street system, which are included in the Maricopa County Regional Transportation Plan. The Motor Vehicle Division Clearing Fund is a special revenue fund which accounts for the collection and disbursement of certain Motor Vehicle Division revenues (e.g., vehicle registration, title, license, and related taxes and fees, and fuel and motor carrier taxes and fees). The Highway User Revenue Fund is a special revenue fund which collects motor vehicle and liquid use fuel taxes and receives certain Motor Vehicle Division revenues from the Motor Vehicle Division Clearing Fund. These monies are distributed to the General Fund (State Highway Fund), the Department of Public Safety, the Economic Strength Project Fund, incorporated cities, towns, counties, and other legislatively appropriated entities. The Debt Service Fund is used to account for the accumulation of resources for, and the payments of, general long-term debt principal and interest of the governmental funds. The Capital Projects Fund is used to account for financial resources to be used for the acquisition or construction of major capital facilities in the governmental funds. The Department reports the following major proprietary funds: The Highway Expansion and Extension Loan Program Fund is an innovative financing mechanism to administer funds designated to provide loan and credit enhancement assistance to sponsors of local transportation projects. The Arizona Highways Magazine Fund publishes and markets the Arizona Highways Magazine and various other products that promote the State of Arizona. Additionally, the Department reports the following funds: The Internal Service Fund, which accounts for purchases and maintenance of equipment and materials to be used by other divisions in the Department and other government agencies. The Equipment Revolving Fund is the Department’s only internal service fund. The Agency Fund is custodial in nature (assets equal liabilities) and does not involve measurement of results of operations. The Department has two agency funds: the Highway Properties – Privilege Tax Fund and the Highway Properties – 24 Percent Fund (neither are included in the government-wide statements). As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are charges for services by the Equipment Revolving Fund to the other governmental functions. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenues include: charges for services, operating grants and contributions, and capital grants and contributions. Internally dedicated resources are reported as general revenues rather than program revenues. Likewise, general revenues include all taxes. 2013 Comprehensive Annual Financial Report 31 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2013 Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues are charges for services and magazine subscriptions. The Department also recognizes as operating revenues interest on loan receivables and other revenues intended to recover the cost of services. Operating expenses for the enterprise funds and the internal service fund include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. When both restricted and unrestricted resources are available for use, the Department generally expends the restricted resources first, and then unrestricted resources, as they are needed to maintain appropriate cash balances and finance the construction program. D. Assets, Liabilities, and Net Position/Fund Balance Deposits and Investments The Department’s cash includes petty cash and deposits with the State Treasurer for pooled investments. 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, obligations of the U.S. Government, or other permitted investments. All investments are carried at fair value. These balances are not subject to GASB Statement No. 3, Deposits with Financial Institutions, Investments (including Repurchase Agreements), and Reverse Repurchase Agreements, and GASB Statement No. 40, Deposit and Investment Risk Disclosures – an amendment of GASB Statement No. 3, classification because they are included in the state’s investment pool. The investment pool is not required to register (and is not registered) with the Securities and Exchange Commission under the 1940 Investment Advisors Act. The activity and performance of the pool is reviewed monthly by the State Board of Investment in accordance with Arizona Revised Statutes, §35-311. The fair value of investments is measured on a monthly basis. Participant shares are purchased and sold based on the Net Asset Value (NAV) of the shares. The NAV is determined by dividing the fair value of the portfolio by the total shares outstanding. The State Treasurer does not contract with an outside insurer in order to guarantee the value of the portfolio or the price of shares redeemed. As of June 30, 2013, the State’s investment pool 2, pool 3, and pool 4 were not rated. The weighted average maturity at year end for investment pool 2 was 10.27 years while for investment pool 3 it was 5.46 years, and for investment pool 4 it was 5.60 years. State statutes require the State Treasurer to maintain separate investment accounts for the portions of the Highway Revenue Bond Proceeds Fund relating to the Highway Revenue Bond issues and the Maricopa Regional Area Road Bond Proceeds Fund relating to the Transportation Excise Tax Revenue Bond issues. These funds may be invested by the Treasurer in the state’s investment pool. The Department’s investments are included in the state investment pool and these investments are not shown in the Department’s name. From the perspective of the Department, the pool functions as both a cash management pool and a demand deposit account. Therefore, the Department presents its equity in the internal pool as required in GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, and carries the investments at amortized cost, which approximates fair value. The Department has restricted cash for payment of capital projects for Maricopa and Pima Counties, for future debt service payments, and for the Statewide Transportation Acceleration Needs account. 2013 Comprehensive Annual Financial Report 32 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2013 Receivables, Payables and Advances Activities between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as interfund receivables/payables. All other outstanding balances between the U.S. Government, Arizona counties and cities, and other state agencies are reported as due to/from. Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as internal balances. Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. The other receivables and subscriptions receivable are shown net of allowance for doubtful accounts. For other receivables comprising recoverable insurance claims, the amount reserved for doubtful accounts is comprised of 100% of balances greater than six years old, 95% of balances from four to six years old, and a percentage of balances less than four years old. The subscriptions receivable allowance for doubtful accounts is equivalent to an estimated number of issues delivered on outstanding subscription payments past due more than 90 days. Notes receivable represents loans made to parties purchasing assets previously owned by the Department for highway construction purposes. Inventories and Prepaid Items The governmental activities inventory is valued at cost, which approximates market, using the moving average method. This inventory is accounted for using the consumption method. Under this method, inventories are recorded as expenditures as they are used. The fund financial statement reports inventory as nonspendable for the like amount indicating it does not constitute available expendable resources. No reservation of net assets is shown in the government-wide statements for inventories. The business-type activities’ inventories are stated at the lower of cost or market. Costs of enterprise fund inventories consisting of resale products and supplies are generally determined by moving average cost and specific identification methods, respectively. Costs of the internal service fund’s inventories (consisting of vehicle parts and supplies, fuels and lubricants, and other supplies) are determined by moving average cost methods. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both the government-wide and fund financial statements. Restricted Assets Certain proceeds of the Department’s governmental revenue bonds, as well as certain resources of the General Fund (State Highway Fund) and the Highway Expansion and Extension Loan Program Fund (enterprise fund) are classified as restricted assets on the balance sheet because they are maintained in separate accounts and their use is limited by applicable bond covenants or state statutes. State law requires 12.6 percent of the revenues allocated each year to the General Fund (State Highway Fund) from the Highway User Revenue Fund be allocated for design, purchase of right-of-way, or construction of controlled-access highways, arterial streets, and local highways that are included in the regional transportation plan of counties with populations in excess of 400,000 (Maricopa and Pima counties). State Transportation Board policy further allocates 2.6 percent of the revenues for the same purpose as listed above. The debt service fund is used to report the resources set aside for payment of future debt service. Bond proceeds are deposited in the capital projects fund and are restricted for acquisitions of right-of-way and construction of federal, state, and local highways. 2013 Comprehensive Annual Financial Report 33 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2013 Capital Assets Capital assets, which include land, buildings and improvements, improvements other than buildings, machinery and equipment, infrastructure, and construction in progress, are reported in the applicable governmental or business-type columns in the government-wide financial statements. Capital assets are defined by the Department as assets with an initial, individual cost of $5,000 or more and an estimated useful life in excess of one year. Purchased capital assets are recorded at historical cost or estimated historical cost if historical cost is not available. Donated capital assets are recorded at estimated fair value at the date of donation. Costs of normal maintenance and repairs that do not add to the value of the asset or materially extend the asset’s life are not capitalized. Outlays for capital assets are capitalized at the time of the purchase or, in the case of infrastructure, at the time of final acceptance by the Department from the contractor. Asset preservation costs are expensed as incurred. The Department depreciates non-infrastructure capital assets on a straight-line basis using the following estimated useful lives: Assets Buildings and improvements Improvements other than buildings Machinery and equipment Mobile fleet and aircraft Years 20-40 20-40 5-15 5-15 Infrastructure was capitalized for the first time in fiscal year 2002. The infrastructure assets are reported in the governmental activities column of the Statement of Net Position. The Department’s infrastructure assets consist of roads and bridges and are presented using the modified approach and, therefore, are not depreciated. In order to utilize the modified approach, the Department is required to maintain an asset management system that includes an up-to-date inventory of eligible infrastructure assets, perform condition assessments of eligible assets and summarize the results using a measurement scale, estimate each year the annual amount to maintain and preserve the assets at the condition level established and disclosed by the Department, and document that the assets are being preserved approximately at or above the established condition level. Deferred/Unearned Revenues In the government-wide statements and proprietary fund financial statements, deferred/unearned revenues are recorded when cash, receivables, or other assets are received prior to revenue being recognized. In the governmental funds, amounts are reported as deferred revenues until they are available to liquidate liabilities of the current period. Deferred/unearned revenues are reported in the government-wide statements for the business-type activities and in the fund statements for both the governmental and proprietary funds. In the government-wide statements, the unearned revenues relate to unearned subscription revenue for the Arizona Highways Magazine. Unearned subscription revenue is recorded when subscription orders are received and is amortized as revenue over the terms of the related subscriptions. Costs associated with the selling of subscriptions are expensed in the year incurred. In the fund statements for the General Fund (State Highway Fund), the deferred revenue represents the amount for the notes receivable for loans made to parties who purchased assets previously owned by the Department for highway construction purposes. For the Non-Major Governmental Funds, the deferred revenue represents loans to various local governments for airport capital improvements designed to generate airport revenues and/or related airport economic development efforts. Loans are typically for construction of aircraft storage hangars, fuel dispensing and storage facilities, and terminal buildings. Loan rates 2013 Comprehensive Annual Financial Report 34 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2013 vary and are based on the Bond Buyer Index (BBI) for 25 year national revenue bonds. Loan periods are typically 10 to 25 years in length. Compensated Absences It is the Department’s policy to permit employees to accumulate earned but unused sick leave and vacation benefits as well as compensatory time. There is no liability for unpaid accumulated sick leave for the Department. All vacation pay and compensatory time is accrued when incurred in the government-wide and proprietary fund financial statements. 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 employee’s 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. Per Arizona Revised Statute 38-615D, the benefit shall be paid either in a lump sum or in installments over three years. The Retiree Accumulated Sick Leave Fund is accounted for on the state’s financial statements as an Internal Service Fund. Most employees accrue vacation time which is paid when taken or upon termination of employment at the individual’s then current rate of pay. Additionally, some employees may earn compensatory time in lieu of overtime pay, which is paid in the same manner as vacation time. To limit the Department’s liability, employees are allowed to carry forward a maximum of 240 hours of vacation time if covered and 320 hours if uncovered at the end of each calendar year, while compensatory time accrual is capped at 240 hours at any time. The liabilities for vacation and compensatory time outstanding as of June 30 for both the governmental and proprietary funds are reported on the Statement of Net Position. Long-term Obligations In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities. Bond premiums and discounts are deferred and amortized using the straight-line method. Bonds payable are reported net of the applicable premium or discount. Debt issuance costs are reported as deferred charges and amortized over the term of the related debt. Effective June 30, a change in accounting was implemented whereby any debt issuance costs were expensed for any new bonds not related to refundings. Other long-term obligations also include amounts that other governmental entities advance the Department for highway road construction projects. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as issuance costs, during the current period. The face amount of the debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Advances from other governmental entities are recorded as debt issuance in other financing sources. Net Position/Fund Balance The difference between assets and liabilities is “Net Position” on the government-wide and proprietary statements and “Fund Balance” on the governmental fund statements. Fund balances for governmental funds may be classified as nonspendable, restricted, committed, assigned, or unassigned in the fund financial statements. Nonspendable fund balance describes that portion of fund balance 2013 Comprehensive Annual Financial Report 35 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2013 that cannot be spent because of its form; restricted fund balance describes that portion of fund balance that reflects resources that are subject to externally enforceable legal restrictions; committed fund balance describes that portion which has self-imposed limitations; assigned fund balance describes that portion of fund balance that reflects a governments’ intended use of resources; and unassigned fund balance represents net resources in excess of what can properly be classified in one of the other categories. The Department’s highest level of Authority is the state legislature where the legislative appropriations are determined, identifying the uses of funds for specific purposes. The Arizona State Legislature also grants authority to other Boards and Commissions to authorize fund uses. E. Revenues and Expenditures/Expenses In the government-wide Statement of Activities, revenues and expenses are segregated by activity (governmental or business-type), then further by function (e.g., Administration, Highway). Additionally, revenues are classified between program and general revenues. Program revenues include charges for services, operating grants and contributions, and capital grants and contributions. Internally dedicated resources are reported as general revenue rather than as program revenue. General revenue includes all taxes and income on investments. In the governmental fund financial statements, revenues are reported by source. Expenditures are reported by function (e.g., Administration, Distributions to Arizona counties and cities, Distributions to other state agencies, Debt service, Capital outlay). The distributions to Arizona counties and cities and distributions to other state agencies are shared tax revenues that are distributed based on statutory requirements. Debt service includes both interest and principal outlays related to bonds, loans, advances, board funding obligations, and capitalized leases. Capital outlay includes expenditures for real property or infrastructure (i.e., bridges and roads). Revenues and expenses of proprietary funds are classified as operating and non-operating and are sub-classified by object (e.g., salaries, equipment rental, depreciation). Operating revenues and expenses generally result from providing services and producing and delivering goods. All other revenues and expenses are reported as nonoperating. Other Financing Sources Other financing sources are additions to the governmental fund balances in the fund financial statements and include resources and financing provided by bond issuance, sale of capital assets, capital leases, insurance recovery, and transfers from other funds. Other financing uses are reductions of governmental fund resources in fund financial statements normally resulting from transfers to other funds. F. Interfund Activity and Balances Interfund Activity As a general rule, the effect of interfund activity has been eliminated from the government-wide statements. Exceptions to this rule are activities between the funds reported as governmental activities and the funds reported as business-type activities (e.g., the transfer of the gain or loss from the Equipment Revolving Fund). Interfund Balances Interfund receivables and payables have been eliminated from the Statement of Net Position, except for the residual amounts due between governmental and business-type activities. 2013 Comprehensive Annual Financial Report 36 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2013 G. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make a number of estimates and assumptions that affect the reported amounts of assets, liabilities, and net assets, the disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses/expenditures during the reporting period. Actual results could differ from those estimates. 2. FUNDS BY CLASSIFICATION The following table lists all of the funds whose balances are reflected in this financial report. FUND TYPES MAJOR FUNDS Governmental Funds: General Fund (State Highway Fund) Special Revenue Funds: Maricopa Regional Area Road Construction Fund Motor Vehicle Division Clearing Fund Highway User Revenue Fund Debt Service Fund Capital Projects Fund NON-MAJOR FUNDS Other Governmental Funds: Special Revenue Funds: State Aviation Fund Safety Enforcement and Transportation Infrastructure Fund Motor Vehicle Liability Insurance Enforcement Fund Motor Vehicle Inspection and Title Enforcement Fund Motor Carrier Safety Revolving Fund Underground Storage Tank Fund Economic Strength Project Fund Grant Anticipation Notes Fund Local Agency Deposits Fund Proprietary Funds: Enterprise Funds: Arizona Highways Magazine Fund Highway Expansion and Extension Loan Program Fund Internal Service Fund Equipment Revolving Fund FIDUCIARY FUNDS Agency Funds: Highway Properties–Privilege Tax Fund Highway Properties–24 Percent Fund 3. BUDGETING, BUDGETARY CONTROL, AND LEGAL COMPLIANCE An annual budget for the operating expenditures of the General Fund (State Highway Fund) is submitted to the governor in accordance with state law. The budget is legally enacted as appropriations after approval by the state legislature and signature of the governor. The legal level of control for operating expenditures is set at the agency level and expenditure budgets are appropriated using a lump-sum by agency format with a special line-item appropriation for highway maintenance. Expenditure details for personal services, employee-related expenditures, and all other operating expenditures are specifically allocated within all divisions. In certain divisions, other specific programs are allocated in addition to these categories. Revenue budgets are developed internally by the Department and are not part of the appropriation process. 2013 Comprehensive Annual Financial Report 37 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2013 Amendments to the approved appropriations require legislative approval. However, since the Department’s appropriation is a lump sum appropriation, the allocation of funds between personal services, employee-related expenditures, and other operating expenditures is an internal decision. Accordingly, transfers between line items such as personal services and other operating expenditures within a particular program may be made by the program manager. Expenditures may not exceed appropriations. All transfers of funds are reported to the Department’s Office of Strategic Planning and Budgeting for monitoring purposes. Budgets are prepared on the cash basis except that liabilities incurred before the end of the fiscal year and paid within the first month of the subsequent fiscal year are charged against the prior fiscal year’s budget. The Department’s appropriations lapse at fiscal year-end unless exempted by the legislature. In addition, budgets for capital outlay, including land, building, and improvements for the State Highway Fund and State Aviation Fund, are also submitted to the governor in accordance with state law. The capital outlay appropriation includes state highway construction and land, building, and improvements for the State Highway Fund. A legal limitation is adopted for land, building, and improvements; however, legislation allows the Department to spend in excess of its appropriation for state highway construction up to the current fund balance. The Department monitors expenditures through an internal budgetary process and the Five-Year Transportation Facilities Construction Program approved by the Transportation Board. 4. ACCOUNTING PRONOUNCEMENTS AND RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS A. New Accounting Pronouncements Statement No. 57 OPEB Measurements by Agent Employers and Agent Multiple-Employer Plans The objectives of this Statement are to address issues related to the use of the alternative measurement method and the frequency and timing of measurements by employers that participate in agent multiple-employer other post-employment benefit (OPEB) plans (i.e., agent employers). In addition, this Statement clarifies that when actuarially determined OPEB measures are reported by an agent multiple-employer OPEB plan and its participating employers, those measures should be determined as of a common date and at a minimum frequency to satisfy the agent multiple-employer OPEB plan’s financial reporting requirements. The requirements of this Statement are effective for financial statements for periods beginning after June 15, 2011. The Department has implemented this Statement as appropriate. There was no impact to the Department. Statement No. 60 Accounting and Financial Reporting for Service Concession Arrangements The objective of this Statement is to improve financial reporting by addressing issues related to service concession arrangements, which are a type of public-private or public-public partnership. The requirements of this Statement are effective for financial statements for periods beginning after December 15, 2011. The Department has implemented this Statement as appropriate. There was no impact to the Department. Statement No. 63 Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position The objective of this Statement is to provide guidance for reporting deferred outflows of resources, deferred inflows of resources, and net position in a statement of financial position and related disclosures. The provisions of this Statement are effective for financial statements for periods beginning after December 15, 2011. The Department has implemented this Statement as appropriate. There was no significant impact to the Department. 2013 Comprehensive Annual Financial Report 38 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2013 Statement No. 65 Items Previously Reported as Assets and Liabilities The objective of this Statement is to either (a) properly classify certain items that were previously reported as assets and liabilities as deferred outflows of resources or deferred inflows of resources or (b) recognize certain items that were previously reported as assets and liabilities as outflows of resources (expenses or expenditures or inflows of resources (revenues). The requirements of this Statement are effective for financial statements for periods beginning after December 15, 2012. The Department has not implemented this Statement. B. Explanations of Reconciling Items of the Balance Sheet of Governmental Funds to the Statement of Net Position The governmental funds Balance Sheet includes a reconciliation between total fund balances – governmental funds and net position of governmental activities as reported on the government-wide Statement of Net Position. The following explanations are necessary to clarify these differences between the governmental fund Balance Sheet and the government-wide Statement of Net Position: 1. Capital assets are not included on the fund statements, but are included on the government-wide statement as follows: Capital assets not subject to depreciation $ 19,064,641,314 Capital assets subject to depreciation 199,129,917 19,263,771,231 Less Internal Service Fund (Equipment Revolving Fund) assets <58,342,372> $ 19,205,428,859 2. Deferred revenues for assets shown in the fund statements for the following funds: Governmental funds: General Fund (State Highway Fund) State Aviation Fund $ 3,115,585 3,750,820 $ 6,866,405 3. Long-term liabilities, including bonds payable, are not due and payable in the current period and are not reported in the current period on the fund statements. The detail for the difference is as follows: Bonds payable $ Deferred charges - bond issuance costs <3,306,239,402> 15,084,498 Capital leases <22,271,210> Compensated absences <15,879,908> Advances and notes payable Business activity share of Equipment Revolving Fund gain <105,816,381> <2,212> $ 2013 Comprehensive Annual Financial Report 39 <3,435,124,615> Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2013 C. Explanations of Reconciling Items of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities The governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balances includes a reconciliation between net change in fund balances – total governmental funds and changes in net position of governmental activities as reported on the government-wide Statement of Activities. The following explanations are necessary to clarify these differences between the governmental fund Statement of Revenues, Expenditures, and Changes in Fund Balances and the government-wide Statement of Activities: 1. Governmental funds report capital outlay as expenditures. However, in the Statement of Activities, these costs are removed; some costs are capitalized as assets while other costs are expensed as follows: Capital outlay $ 715,714,017 Reduction in construction in progress resulting from certain infrastructure projects being reclassified from capital outlay to non-capital <26,967,477> Change in net capital assets – Internal Service Fund (Equipment Revolving Fund) <10,548,410> Assets removed from service, net of accumulated depreciation <17,684,406> Other 893,070 Less depreciation expense – governmental funds <7,216,602> Less depreciation expense – Internal Service Fund (Equipment Revolving Fund) <8,537,992> $ 645,652,200 2. The issuance of long-term debt (e.g., bonds) provides current financial resources to governmental funds, while the repayment of principal of long-term debt consumes current financial resources of the governmental funds. Neither transaction, however, has any effect on net position. Also, the government reports the effect of debt issuance costs, premiums, discounts, and similar items when debt is first issued, whereas these amounts are amortized in the Statement of Activities. The details of this difference are as follows: Debt issued or incurred: Issuance of Highway Revenue Bonds $ <715,470,000> Premium on bonds <128,862,512> Bond issuance costs Advances and notes payable 1,775,124 <51,549,938> $ <894,107,326> Principal repayments: Highway Revenue Bonds $ 602,150,000 Transportation Excise Tax Revenue Bonds 55,870,000 Grant Anticipation Notes (GARVEE bonds) 38,990,000 Amortization of premium and discount 27,014,797 Amortization of debt issuance costs Repayment of advances and notes payable <1,541,310> 1,400,000 Repayment of capital leases 3,615,344 $ 727,498,831 2013 Comprehensive Annual Financial Report 40 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2013 3. The internal Service Fund (Equipment Revolving Fund) is used by the Department to charge the cost for purchases and maintenance of equipment and material to be used by other funds and state agencies. The gain in the Internal Service Fund (Equipment Revolving Fund) represents over billing and must be eliminated from the government-wide Statement of Activities for the business activity. Internal Service Fund (Equipment Revolving Fund): Changes in net position $ 10,428,149 4. Some items reported in the Statement of Activities do not provide or require the use of current financial resources and, therefore, are not reported in the governmental funds. The details are as follows: Notes and loans receivables Compensated absences Assumption of lease by General Fund (State Highway Fund) $ 994,804 <1,623,354> <15,157,729> $ <15,786,279> 2013 Comprehensive Annual Financial Report 41 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2013 5. DETAILED NOTES ON ALL FUNDS A. Capital Assets Capital assets activity for the year ended June 30, 2013, was as follows: July 1, 2012 Beginning Balance Governmental Activities Capital assets, not being depreciated: Land Infrastructure Construction in progress $ 2,763,156,972 12,207,437,415 3,443,198,162 Decreases Including Transfers Increases $ 87,737,237 752,907,467 604,150,537 June 30, 2013 Ending Balance $ <22,862,911> $ 2,828,031,298 <9,151,843> 12,951,193,039 <761,931,722> 3,285,416,977 18,413,792,549 1,444,795,241 <793,946,476> 19,064,641,314 192,509,769 33,844,604 49,844,993 147,163,073 1,211,648 30,927 1,304,025 20,038,670 <5,133> <2,046,059> <7,399,985> 193,716,284 33,875,531 49,102,959 159,801,758 423,362,439 22,585,270 <9,451,177> 436,496,532 Less accumulated depreciation for: Buildings and improvements Improvements other than buildings Machinery and equipment Mobile fleet and aircraft <83,797,456> <9,368,955> <36,512,515> <99,905,441> <4,068,226> <1,111,789> <2,131,725> <8,442,853> 3,267 1,742,019 6,227,059 <87,862,415> <10,480,744> <36,902,221> <102,121,235> Total accumulated depreciation <229,584,367> <15,754,593> 7,972,345 <237,366,615> 193,778,072 6,830,677 <1,478,832> 199,129,917 Total capital assets, not being depreciated Capital assets, being depreciated: Buildings and improvements Improvements other than buildings Machinery and equipment Mobile fleet and aircraft Total capital assets, being depreciated Total capital assets, being depreciated, net Governmental activities capital assets, net $ 18,607,570,621 $ July 1, 2012 Beginning Balance Business-type Activities Capital assets, not being depreciated: Land $ Capital assets, being depreciated: Buildings and improvements Machinery and equipment Total capital assets, being depreciated 7,900 1,451,625,918 $ <795,425,308> $ 19,263,771,231 Increases $ June 30, 2013 Ending Balance Decreases - $ - $ 7,900 981,157 2,169,288 - <2,125,625> 981,157 43,663 3,150,445 - <2,125,625> 1,024,820 Less accumulated depreciation for: Buildings and improvements Machinery and equipment <957,479> <2,157,764> <9,331> <1,390> 2,123,471 <966,810> <35,683> Total accumulated depreciation <3,115,243> <10,721> 2,123,471 <1,002,493> Total capital assets, being depreciated, net Business-type activities capital assets, net 35,202 $ 43,102 $ <10,721> <2,154> 22,327 <10,721> $ <2,154> $ 30,227 2013 Comprehensive Annual Financial Report 42 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2013 Depreciation expense was charged to functions/programs as follows: Governmental Activities: Administration Highway Highway maintenance Motor vehicle $ 2,198,575 1,843,282 1,765,100 1,409,644 7,216,601 B. Capital assets held by the Department's internal service fund are charged to the various functions based on their usage of the assets Total depreciation expense - governmental activities 8,537,992 $ 15,754,593 Business-type Activities Arizona Highways Magazine Fund $ 10,721 Construction Commitments The Department’s outstanding commitments for contracts at June 30, 2013, were $558,458,198. Expenditures To Remaining Date Commitment Construction contracts: Rural roadways $ Small urban roadways Urban roadways Large urban roadways General roadways Sub-total Design contracts Other commitments Total 334,214,925 70,842,298 267,163,509 271,415,659 147,213,599 $ 144,702,887 11,121,542 109,264,424 51,515,312 68,161,713 1,090,849,990 384,765,878 237,026,246 229,270,922 76,562,238 97,130,082 $ 1,557,147,158 $ 558,458,198 Area type designations for highways and roads are primarily determined by geographic location and population, as noted below: Rural – outside of urbanized areas and urban clusters, generally long roads carrying little traffic. Small urban – in areas of 5,000 to 49,999 in population. Urban – interstate highways, freeways, expressways, principal arteries serving major centers of activity in metropolitan areas. Large urban – in areas of equal to or greater than 200,000 in population. General roadways – statewide projects that cross categories. 2013 Comprehensive Annual Financial Report 43 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2013 C. Deferred/Unearned Revenues In the fund financial statements, the deferred/unearned revenues represent the amount for notes receivable for loans made to parties who purchased assets previously owned by the fund for highway construction purposes. The State Aviation Fund amount represents loans to various local governments for construction of hangars, taxiway extensions, runways, etc. These loans were made at fixed interest rates and with various maturity dates. The proprietary fund includes the amount for unearned subscriptions. The following schedule is a summary of the amounts outstanding as of June 30, 2013: Governmental funds: General Fund (State Highway Fund) State Aviation Fund $ 3,115,585 3,750,820 $ 6,866,405 Proprietary funds: Arizona Highways Magazine Fund D. $ 2,083,193 Interfund Receivables, Payables, Advances, and Transfers The balances of current interfund receivables and payables as of June 30, 2013, were: Receivables Payables Amount Governmental activities: General Fund (State Highway Fund) Highway User Revenue Fund Non-Major Governmental Funds Highway User Revenue Fund Motor Vehicle Division Clearing Fund Capital Projects Fund Motor Vehicle Division Clearing Fund General Fund (State Highway Fund) Motor Vehicle Division Clearing Fund $ 97,571,665 169,009 3,802,589 34,847,145 1,279,132 2,914,325 140,583,865 Business-type acivities: Arizona Highways Magazine Motor Vehicle Division Clearing Fund 29,534 $140,613,399 The General Fund (State Highway Fund) receivable of $97,571,665 is an accrual for fuel taxes imposed in fiscal year 2013 from the Highway User Revenue Fund that will be collected in fiscal year 2014. The Highway User Revenue Fund receivable of $34,847,145 is an accrual for vehicle license taxes due in fiscal year 2013 from the Motor Vehicle Division Clearing Fund that will be collected in fiscal year 2014. 2013 Comprehensive Annual Financial Report 44 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2013 Interfund transfers for the year ended June 30, 2013, consisted of the following: Interfund Transfers In: Total Debt Service Fund Interfund Transfers Out: General Fund (State Highway Fund) Maricopa Regional Area Road Construction Fund Non-Major Governmental Funds $ 124,776,920 103,218,632 55,070,206 Total $ 283,065,758 The General Fund (State Highway Fund) ($124,776,920), the Maricopa Regional Area Road Construction Fund ($103,218,632), and Non-Major Governmental Funds - Grant Anticipation Notes Fund ($55,070,206) made transfers to the Debt Service Fund to pay bond debt service. E. Leases Operating Leases The Department leases data processing equipment, other equipment, and certain facilities from various lessors. The majority of these leases are for a one-year term, renewable annually. Total rental expenditures (excluding interfund transactions) for the fiscal year ended June 30, 2013, approximated $2.1 million. In fiscal year 2002, the Department entered into a lease agreement with the City of Phoenix for a facility located on East Washington Street in Phoenix. During fiscal year 2010, the Department renegotiated the lease with the City. This renegotiated lease, effective July 1, 2010, will result in fewer square feet being leased by the Department than had been the case under the original lease. The future operating lease commitments are as follows: Year ending June 30 2014 Future operating lease commitments Amount $ 535,510 $ 535,510 In fiscal year 2003, the Department entered into a long-term lease to build a structure to house lab facilities in Gilbert, Arizona. The future operating lease commitments are as follows: Year ending June 30 2014 2015 2016 2017 2018 Future operating lease commitments Amount $ 126,000 126,000 126,000 126,000 94,500 $ 598,500 2013 Comprehensive Annual Financial Report 45 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2013 Capital Leases The Department has entered into lease agreements as lessee for financing the acquisition of various vehicles. These lease agreements qualify as capital leases for accounting purposes and, therefore, have been recorded at the present value of their future minimum lease payments as of the inception date. The assets acquired through capital leases are as follows: Governmental Activities Assets: Machinery and equipment Less accumulated depreciation $ 27,416,311 <3,399,844> Total $ 24,016,467 The future minimum lease obligations and the net present value of these minimum lease payments as of June 30, 2013, were as follows: Year Ending June 30 2014 2015 2016 2017 2018 Governmental Activities $ Total minimum lease payments Less amount representing interest Present value of minimum lease payments 5,793,404 5,793,401 5,742,756 3,911,313 2,057,480 23,298,354 <1,027,144> $ 22,271,210 Capital outlay on Exhibit 4 includes $15.2 million of capital leases. F. Non-Current Liabilities Arizona Transportation Board Highway Revenue Bonds The Transportation Board has issued Senior and Subordinate Lien Highway Revenue Bonds to provide funds for acquisition of right-of-way, design, and construction of federal and state highways. The balance of Highway Revenue Bonds issued in prior years and outstanding at the start of the fiscal year was $1,619,965,000. During the year, Highway Revenue Bonds totaling $715,470,000 were issued to (i) finance portions of the Transportation Board’s Five-Year Transportation Facilities Construction Program, (ii) pay interest on any bonds issued for highway purposes, (iii) pay costs of issuing the bonds, and (iv) refund portions of the Board’s outstanding Subordinated Series 2003A Bonds ($48,350,000), Subordinated Refunding Series 2004B Bonds ($68,490,000), Senior Refunding Series 2005A Bonds ($100,435,000), Senior Series 2005B Bonds ($84,860,000), and Senior Series 2006 Bonds ($239,475,000). 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 General Fund (State Highway Fund). On September 21, 2006, House Bill 2206 became effective and eliminated the restriction that limited the principal amount of Highway Revenue Bonds that could be outstanding at any time to $1.3 billion. Also, during fiscal year 2007, the Transportation Board received legislative authority to 2013 Comprehensive Annual Financial Report 46 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2013 begin issuing Highway Revenue Bonds with maturities up to 30 years in length, replacing the 20-year maturity requirement that had been in place since 1980. Highway Revenue Bonds currently outstanding are as follows: Purpose Interest Rates Governmental activities 3.0% - 5.25% Governmental activities - refunding Amount $ 5.00% 465,705,000 1,267,580,000 $ 1,733,285,000 Annual debt service requirements to maturity for Highway Revenue Bonds are as follows: Fiscal year Highway Revenue Bonds Principal ending June 30 2014 $ 2015 2016 2017 2018 2019-2023 2024-2028 2029-2033 2034-2038 Interest Total 58,485,000 $ 80,494,780 $ 138,979,780 60,970,000 70,370,000 73,040,000 76,125,000 427,145,000 451,140,000 388,270,000 127,740,000 78,008,080 75,612,884 72,942,372 69,858,434 302,826,374 193,639,120 85,834,014 18,035,750 138,978,080 145,982,884 145,982,372 145,983,434 729,971,374 644,779,120 474,104,014 145,775,750 $ 1,733,285,000 $ 977,251,808 $ 2,710,536,808 The Department has pledged future motor vehicle and related fuel fees and taxes to repay $1,733,285,000 in outstanding Highway Revenue Bonds issued since 2001. Proceeds from the bonds finance portions of the Transportation Board’s Five-Year Transportation Facilities Construction Program. The bonds are payable solely from motor vehicle and related fuel fees and taxes and are payable through 2038. The total principal and interest remaining to be paid on the bonds is $2,710.5 million. Principal and interest paid for the current year and total pledged revenues were $138.7 million and $524.3 million, respectively. The annual principal and interest payments on the bonds required 26.5 percent of the pledged revenues. Arizona Transportation Board Transportation Excise Tax Revenue Bonds The Maricopa Regional Area Road Construction Fund is used to record all payments of principal and interest for Transportation Excise Tax Revenue Bonds issued by the Transportation Board. These bonds are secured by a portion of transportation excise taxes collected by the Arizona Department of Revenue on behalf of Maricopa County. The balance of Transportation Excise Tax Revenue Bonds issued in prior years and outstanding at the start of the fiscal year was $981,845,000. All Transportation Excise Tax Revenue Bonds mature no later than July 1, 2025. Transportation Excise Tax Revenue Bonds currently outstanding are as follows: Purpose Governmental activities Interest Rates 2.0% - 5.25% Amount $ 925,975,000 2013 Comprehensive Annual Financial Report 47 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2013 Annual debt service requirements to maturity for Transportation Excise Tax Revenue Bonds are as follows: Fiscal year Transportation Excise Tax Revenue Bonds ending June 30 Principal 2014 $ 58,600,000 2015 2016 2017 2018 2019-2023 2024-2025 Interest $ 44,988,107 Total 103,588,107 $ 61,395,000 64,355,000 67,495,000 70,790,000 410,000,000 193,340,000 42,198,107 39,233,431 36,096,681 32,801,481 107,954,919 13,842,288 103,593,107 103,588,431 103,591,681 103,591,481 517,954,919 207,182,288 $ 925,975,000 $ 317,115,014 $ 1,243,090,014 The Department has pledged future transportation excise taxes to repay $925,975,000 in outstanding Transportation Excise Tax Revenue Bonds issued since 2007. Proceeds from the bonds pay the costs of design, right-of-way purchase, or construction of certain freeways and other routes within Maricopa County. The bonds are payable solely from transportation excise taxes and are payable through 2025. The total principal and interest remaining to be paid on the bonds is $1,243.1 million. Principal and interest paid for the current year and total pledged revenues were $103.6 million and $227.9 million, respectively. The annual principal and interest payments on the bonds required 45.5 percent of the pledged revenues. Arizona Transportation Board Grant Anticipation Notes (GARVEE) The Grant Anticipation Notes Fund administers all payments of principal and interest for notes issued by the Transportation Board and is secured by revenues received from the Federal Highway Administration under grant agreements and certain other federal-aid revenues. The balance of Grant Anticipation Notes (“GARVEE bonds”) issued in prior years and outstanding at the start of the fiscal year was $335,230,000. Grant Anticipation Notes (GARVEE) currently outstanding are as follows: Purpose Interest Rates Governmental activities Governmental activities - refunding Amount 2.5% - 5.25% $ 234,940,000 3.625% - 5.0% 61,300,000 $ 296,240,000 Annual debt service requirements to maturity for Grant Anticipation Notes (GARVEE) are as follows: Fiscal year Grant Anticipation Notes ending June 30 2014 2015 2016 2017 2018 2019-2023 2024-2026 (GARVEE) Interest Principal $ Total 48,530,000 53,040,000 47,350,000 11,770,000 12,325,000 71,270,000 51,955,000 $ 14,256,331 11,854,731 9,552,631 7,392,881 6,838,031 24,551,955 5,539,201 $ 62,786,331 64,894,731 56,902,631 19,162,881 19,163,031 95,821,955 57,494,201 $ 296,240,000 $ 79,985,761 $ 376,225,761 2013 Comprehensive Annual Financial Report 48 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2013 The Department has pledged federal revenues to repay $296,240,000 in outstanding Grant Anticipation Notes (“GARVEE bonds”) issued since 2003. Proceeds from the bonds pay the costs of design, right-of-way purchase, or construction of certain freeways and other routes within Arizona. The bonds are payable solely from federal revenues and are payable through 2026. The total principal and interest remaining to be paid on the bonds is $376.2 million. Principal and interest paid for the current year and total pledged revenues were $55.3 million and $802.9 million, respectively. The annual principal and interest payments on the bonds required 6.8 percent of the pledged revenues. Refunded Bonds Deposited with Escrow Agents In prior fiscal years, the Transportation Board had refinanced various bond issues through refunding arrangements. Under the terms of the refunding bond issues, sufficient assets to pay all principal, redemption premium, if any, 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. The Department refunded the Highway Revenue Bonds Subordinated Series 2003A Bonds ($48,350,000), Subordinated Refunding Series 2004B Bonds ($68,490,000), Senior Refunding Series 2005A Bonds ($100,435,000), Senior Series 2005B Bonds ($84,860,000), and Senior Series 2006 Bonds ($239,475,000) to reduce the total debt service payments by $9,496,842 and to obtain an economic gain (difference between the present values of the debt service payments on the old and new debt) of $22,299,237. The payment to the refunded bond escrow agent totaled $611,874,333, representing principal of $541,610,000 and interest of $70,264,333. Refunded bonds of the Department deposited with escrow agents at June 30, 2013, are as follows: Original Issue 2003 Series 2003 Series A 2004 Series B 2003 Series A 2004 Series B Escrow Type Maturity Date Highway Revenue Bonds July 1, 2013 Highway Revenue Bonds July 1, 2014 Highway Revenue Bonds July 1, 2014 Grant Anticipation Notes July 1, 2013 Grant Anticipation Notes July 1, 2014 Total refunded bonds deposited with escrow agent $ $ Balance 89,895,000 75,465,000 92,265,000 18,335,000 25,665,000 301,625,000 Advances and Notes Payable The Department’s outstanding advances and notes payable as of June 30, 2013, were $105,816,381 in governmental activities. The advances and notes payable represent amounts for other intergovernmental advances. 2013 Comprehensive Annual Financial Report 49 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2013 Annual debt service requirements to maturity for advances and notes payable are as follows: Fiscal year Governmental Activities ending June 30 2014 2015 2020 2021 Principal $ 704 83,637,034 151,430 22,027,213 $ 105,816,381 Business-type Activities Interest $ Principal - $ $ - $ Total Interest $ $ Principal - $ 704 83,637,034 151,430 22,027,213 $ 105,816,381 Interest $ - $ Changes in non-current liabilities The activity for the fiscal year ended June 30, 2013, was as follows: Beginning Balance July 1, 2012 Governmental Activities Bonds and notes: Highway Revenue Bonds Transportation Excise Tax Revenue Bonds Grant Anticipation Notes Premium on bonds Total bonds and notes $ 1,619,965,000 Additions $ 715,470,000 Reductions $ Ending Balance June 30, 2013 <602,150,000> $ 1,733,285,000 Due Within One Year $ 58,485,000 981,845,000 335,230,000 248,891,687 3,185,931,687 128,862,512 844,332,512 <55,870,000> <38,990,000> <27,014,797> <724,024,797> 925,975,000 296,240,000 350,739,402 3,306,239,402 58,600,000 48,530,000 27,383,360 192,998,360 Capital leases Compensated absences Advances and notes payable Total governmental activities 10,728,825 14,890,371 55,666,443 3,267,217,326 15,157,729 14,790,557 51,549,938 925,830,736 <3,615,344> <13,062,180> <1,400,000> <742,102,321> 22,271,210 16,618,748 105,816,381 3,450,945,741 5,360,832 12,377,502 704 210,737,398 Business-type Activities Compensated absences Total business-type activities 147,402 147,402 102,498 102,498 <88,876> <88,876> 161,024 161,024 20,750 20,750 Total non-current liabilities $ 3,267,364,728 $ 925,933,234 $ <742,191,197> $ 3,451,106,765 $ 210,758,148 The Internal Service Fund predominantly serves the governmental funds. Accordingly, long-term liabilities for that fund are included as part of the above totals for governmental activities. At year-end, $738,840 of the Internal Service Fund’s compensated absences is included in the above amounts. The capital leases will be liquidated by the General Fund (State Highway Fund). The General Fund (State Highway Fund) has paid compensated absences in the past while the advances and notes payable will be repaid with funds from the General Fund (State Highway Fund) and the Maricopa Regional Area Road Construction Fund. Bonds and notes issued by the Department require compliance with a number of covenants. The Department believes that it is in compliance with all such covenants. In addition, certain of the Department’s obligations are subject to Internal Revenue Service regulations pertaining to issuance of tax-exempt debt by governmental entities. The Department does not have and has not accrued a liability under these regulations. 2013 Comprehensive Annual Financial Report 50 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2013 G. Fund Balances The Department’s fund balance, as of June 30, 2013, is composed of the following: Unassigned Administration Highway Operations Highway Maintenance Motor Vehicle Inventories Land Held for Resale Other $ Nonspendable - $ <8,128,423> $ <8,128,423> $ 7,206,835 7,206,835 Restricted Committed 1,722,748 1,175,923,500 698,679 $ 1,178,344,927 $ 137,842,000 147,238 2,926,663 4,237,651 19,058,878 $ 164,212,430 $ Total $ 139,564,748 1,176,070,738 2,926,663 <3,890,772> 7,206,835 19,058,878 698,679 $ 1,341,635,769 The <$8.1> million in the unassigned portion of the fund balance is due to Arizona Revised Statutes, §28-6542 (B), which prohibits adjustments more than 24 months after the original distribution. 6. OTHER INFORMATION A. Contingent Liabilities Risk Management Insurance Losses 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 Financial Report. Claims 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. 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. Light Rail Transit System Arizona Revised Statutes, §28-9201, requires the Department to establish, implement, and enforce minimum safety standards for light rail transit systems. If a violation of the safety standards is discovered, the Department shall report the violation in writing to the Federal Transit Administration. Furthermore, the organization that operates a light rail transit system shall include a safety oversight function and pay the Department’s costs resulting from administration. 2013 Comprehensive Annual Financial Report 51 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2013 B. Pension and Other Postemployment Benefits Plan descriptions – The Department contributes to a cost-sharing, multiple-employer defined benefit pension plan; a cost-sharing, multiple-employer defined benefit health care plan; and a cost-sharing, multiple-employer defined benefit long-term disability plan, all of which are administered by the Arizona State Retirement System. The System (through its Retirement Fund) provides retirement (i.e., pension), death, and survivor benefits; the Health Benefit Supplement Fund provides health insurance premium benefits (i.e., a monthly subsidy); and the Long-Term Disability Fund provides long-term disability benefits. Benefits are established by state statute. The System is governed by the Arizona State Retirement System Board according to the provisions of Arizona Revised Statutes, Title 38, Chapter 5, Article 2. The System issues a Comprehensive Annual Financial Report that includes financial statements and required supplementary information. The most recent report may be obtained by writing the Arizona State Retirement System, 3300 North Central Avenue, P.O. Box 33910, Phoenix, AZ 85067-3910, or by calling (602) 240-2000 or (800) 621-3778. Funding policy – The Arizona state legislature establishes and may amend active plan members’ and the Department’s contribution rates. For the year ended June 30, 2013, active plan members were required by statute to contribute at the actuarially determined rate of 11.14 percent (10.90 percent for retirement and 0.24 percent for long-term disability) of the members’ annual covered payroll and the Department was required by statute to contribute at the actuarially determined rate of 11.14 percent (10.51 percent for retirement, 0.63 percent for health insurance premium, and 0.24 percent for long-term disability) of the members’ annual covered payroll. The Department’s contributions for the current and two preceding years, all of which were equal to the required contributions, were as follows: Fiscal year Health Benefit Long-Term ended June 30 Retirement Fund Supplement Fund Disability Fund 2013 2012 2011 $ 18,233,215 $ 17,230,639 14,551,983 1,088,444 $ 1,441,900 1,175,632 Total 456,141 $ 19,777,800 451,367 19,123,906 423,310 16,150,925 The Department's total payroll for fiscal year 2013 was $190.1 million. The System is funded through payroll deductions from employees' gross earnings and amounts contributed by the Department. Retirement benefits, health care benefits, and long term disability benefits are obligations of the System and not of the Department. The Arizona Revised Statutes provide statutory authority for employee and employer contributions. The contribution requirement for fiscal year 2013 was $19.8 million each by both the employees and the Department. 2013 Comprehensive Annual Financial Report 52 Required Supplementary Information (Other than MD&A) Budgetary Comparison Schedule – General Fund (State Highway Fund) Note to Required Supplementary Schedule Information About Infrastructure Assets Reported Using the Modified Approach 2013 Comprehensive Annual Financial Report Arizona Department of Transportation Required Supplementary Information June 30, 2013 Budgetary Comparison Schedule (Non-GAAP Basis) General Fund (State Highway Fund) for the fiscal year ended June 30, 2013 Variance with Actual Final Budget Positive Final Amounts $ 326,789,200 $ 326,566,325 Budgeted Amounts Original Expenditures appropriated by State legislature in 2013 budget Department of Transportation $ 326,789,200 Timing differences: Prior year appropriation expenditures expended in current budgetary year 7,068,842 Basis differences: Net increase from cash basis for budgeting purposes and modified accrual basis for financial reporting purposes 7,211,753 Entity differences: Funds not appropriated, but included for financial reporting purposes 4,153,816 Perspective differences: Expenditures on modified accrual basis and not recognized on budgetary basis: Capital outlay and asset preservation 443,897,296 Distributions to Arizona counties and cities 42,495,963 Distributions to other state agencies 6,915,696 Interest expense Principal repayment of debt 340,013 5,015,344 Total expenditures as reported on the Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds (General Fund) - Exhibit 4 The note to required supplementary information is an integral part of this schedule. 2013 Comprehensive Annual Financial Report 53 $ 843,665,048 $ 222,875 Arizona Department of Transportation Required Supplementary Information (continued) June 30, 2013 Note to Required Supplementary Information 1. Budgets and budgetary accounting An annual budget for the operating expenditures of the General Fund (State Highway Fund) is submitted to the governor in accordance with state law. The budget is legally enacted as appropriations after approval by the state legislature and signature of the governor. The legal level of control for operating expenditures is set at the agency level and expenditure budgets are appropriated using a lump-sum by agency format. Revenue budgets are developed internally by the Department and are not part of the appropriation process. Amendments to the approved appropriations require legislative approval. However, since the Department’s appropriation is a lump sum appropriation by agency, the allocation of funds between personal services, employeerelated expenditures, and other operating expenditures is an internal decision. Accordingly, transfers between line items such as personal services and other operating expenditures within a particular program may be made by the program manager. Expenditures may not exceed appropriations. All transfers of funds are reported to the Department’s Office of Strategic Planning and Budgeting for monitoring purposes. Budgets are prepared on the cash basis except that liabilities incurred before the end of the fiscal year and paid within the first month of the subsequent fiscal year are charged against the prior fiscal year’s budget. The Department’s appropriations lapse at fiscal year-end unless exempted by the legislature. For financial reporting purposes, the accompanying financial statements present the legally adopted budget for the operations of the General Fund (State Highway Fund) that is subject to legislative appropriation. In addition, budgets for capital outlay, including land, building, and improvements for the General Fund (State Highway Fund) and State Aviation Fund, are also submitted to the governor in accordance with state law. The capital outlay appropriation includes state highway construction and land, building, and improvements for the General Fund (State Highway Fund). A legal limitation is adopted for land, building, and improvements; however, legislation allows the Department to spend in excess of its appropriation for state highway construction up to the current fund balance. The Department monitors expenditures through an internal budgetary process and the Five-Year Transportation Facilities Construction Program approved by the Transportation Board. 2013 Comprehensive Annual Financial Report 54 Arizona Department of Transportation Required Supplementary Information (continued) June 30, 2013 Information About Infrastructure Assets Reported Using the Modified Approach As allowed by Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements – and Management’s Discussion and Analysis – for State and Local Governments (GASB 34), as amended, the Arizona Department of Transportation (Department) reports its roads and bridges using the modified approach. Assets accounted for under the modified approach include 6,751 center lane miles (21,213 travel line miles) of roads and 4,754 bridges that the Department is responsible to maintain. In order to utilize the modified approach, the Department is required to: Maintain an asset management system that includes an up to date inventory of eligible infrastructure assets. Perform condition assessments of eligible assets and summarize the results using a measurement scale. Estimate each year the annual amount to maintain and preserve the assets at the condition level established and disclosed by the Department. Document that the assets are being preserved approximately at or above the established condition level. As adopted by the Transportation Board of the State of Arizona Department of Transportation (Transportation Board) on an annual basis, the Five-Year Transportation Facilities Construction Program (Program) contains estimated expenditures for highway system improvements and the preservation of existing roadway and bridges. Both of these factors impact the condition assessment of the roads and bridges as described in the following sections. The Program in effect for fiscal year 2013 and beyond was adopted by the Transportation Board on June 15, 2012. This Program is a dynamic instrument and adjustments are made to the annual plans based on the needs of the Department to maintain the condition level of the roads and bridges at a level equal to, or greater than, the goals established by the Department. In addition, not only are adjustments made during the life of the Program, circumstances may require that refinements to the individual components of the Program be made during the fiscal year. In comparing Estimated to Actual Expenditures in the tables that follow, significant variances can occur. These variances are primarily due to the methodology used in the preparation of the Program. In this Program, the Estimated Expenditures for the current year are based on “programmed” projects which may or may not be spent in the current year of the Program. Programmed expenditures consist of those items that are planned for the future, with contracts that have not yet been awarded. Furthermore, the Actual Expenditures will include projects that were programmed for a prior year’s Estimated Expenditures, but which did not occur, or were not completed, in the prior year. The following information pertains to the condition assessment and maintenance of infrastructure assets and reflects the Department’s success in achieving condition levels that exceed the established levels. Roads The mission of the Department’s Pavement Management Section (PMS) is to develop and provide a cost effective pavement rehabilitation construction program that preserves the state’s investment in its highway system and enhances public transportation and safety. The requirements of GASB 34 and the PMS both work toward the same basic goal, the efficient, effective management of the Department’s assets to produce long-term benefits while minimizing expenditures. The PMS has developed performance goals for the condition level of the pavement in the state highway system. These goals require periodic assessment of pavement conditions and the budget level needed to meet that goal. The goal is expressed as a measure called “Serviceability” which can be defined as the ability of a pavement to serve the traveling public (as documented in 1961 after American Association of State Highway and Transportation Officials (AASHTO) Road Test, 1956-1961). Serviceability is based on detailed measurements of objective features of the pavement. Many 2013 Comprehensive Annual Financial Report 55 Arizona Department of Transportation Required Supplementary Information (continued) June 30, 2013 Information About Infrastructure Assets Reported Using the Modified Approach (continued) surveys since the original road test have shown that these measurements closely track the subjective opinion of the traveling public. Most commonly, this number is called Present Serviceability Rating and abbreviated as PSR. PSR is a five-point scale (5 excellent, 0 impassable), similar to the Weaver/AASHTO Scale shown as follows: Numerical Rating 5 4 3 2 1 0 PSR Excellent Good Fair Poor Very Poor Impassable Weaver/AASHTO Scale Perfect Very Good Good Fair Poor Very Poor The goal of the Department is to maintain a condition level (PSR) rating of 3.23 or better for all roads in the state highway system. Annually, Transportation Material Technicians drive over the system with inertial profiling equipment and measure the roughness of the pavement. This process is continuous throughout the year in order to assess the condition level of all pavement on an annual basis. As of the end of fiscal year 2013, an overall rating of 3.67 was achieved, as shown in the following graph: Condition Level-Roads 5 PSR 4 3 Actual 2 Goal 1 0 2009 2010 2011 2012 2013 Fiscal Year Figure 1 2013 Comprehensive Annual Financial Report 56 Arizona Department of Transportation Required Supplementary Information (continued) June 30, 2013 Information About Infrastructure Assets Reported Using the Modified Approach (continued) Preservation of the roads is accomplished through programs managed primarily by the Department’s PMS, as well as other units within the Department. The estimated (as specified in the Program as programmed amounts) and actual expenditures for fiscal years 2009 through 2013 were as follows: Fiscal Year 2009 2010 2011 2012 2013 Estimated Expenditures (in millions) $264.4 227.4 265.7 261.9 276.3 Actual Expenditures (in millions) $236.0 220.9 373.4 373.6 291.3 Bridges The Department’s bridge assets constitute a significant portion of all infrastructure assets in Arizona. As of June 30, 2013, the Department owned and maintained 4,754 bridges with an approximate total deck area of 48,250,819 square feet. Bridges, for purposes of this report, include all structures erected over an opening or depression with a centerline of 20 feet or more. Information related to these bridges is stored and updated in the Arizona Bridge Information and Storage System (ABISS). This system is used to efficiently manage the bridge inventory through storing all bridge related data and assisting bridge engineers in arriving at appropriate bridge preservation decisions. Also, ABISS is used for reporting bridge inventory and condition, on a biennial basis, to the Federal Highway Administration (FHWA). A Condition Rating Index (CRI) is used to track the condition of the bridge network. The CRI is based on four selected bridge inspection condition ratings, which in turn are based on standards established in the FHWA’s “Recording and Coding Guide for the Structural Inventory of the Nation’s Bridges.” The four selected condition ratings that are included in the CRI computation are: the bridge joints condition, the deck condition, the super-structure condition, and the sub-structure condition. The bridge joints condition rating is an Arizona-specific rating item not included in the FHWA condition rating guidelines, whereas the other three condition ratings are federally mandated condition ratings. The CRI is computed by subtracting from one the ratio of the sum of the deck areas of all bridges with a condition rating of four or less (see table below), which indicates that the rated element is at best in a poor condition, to the total sum of the deck areas. The rating system in this guide is as follows: Numerical Rating 9 8 7 6 5 4 3 2 1 Condition Rating Excellent Very Good Good Satisfactory Fair Poor Serious Critical Imminent Failure 2013 Comprehensive Annual Financial Report 57 Arizona Department of Transportation Required Supplementary Information (continued) June 30, 2013 Management of the bridge inventory is a major function of the Department’s Bridge Group and regularly scheduled biennial inspections are made of all bridges. A civil or structural engineer, licensed to practice in Arizona, performs these inspections. It is the policy of the Department to maintain state highway bridges so that the CRI exceeds 92.5%. In fiscal year 2013, the CRI was computed at 93.2%. CRI Condition Levels-Bridges 95% 95% 94% 94% 93% 93% 92% 92% 91% 91% 90% Actual Goal 2009 2010 2011 2012 2013 Fiscal Year Figure 2 Bridges represent a major public investment, and their inspection and maintenance is an essential function of the Department in its mission of providing products and services for a safe, efficient, and cost effective transportation system. Figure 3 indicates that approximately 57% of the bridges in the state were constructed prior to the 1970s while only 14% have been constructed since 2000. Age of Department's Bridge Population 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% <1930 30s 40s 50s 60s 70s 80s 90s Figure 3 2013 Comprehensive Annual Financial Report 58 2000s 2010s Arizona Department of Transportation Required Supplementary Information (continued) June 30, 2013 Information About Infrastructure Assets Reported Using the Modified Approach (continued) Preservation of the bridges is accomplished through programs managed by the Bridge Group. The estimated (as specified in the Program as programmed amounts) and actual expenditures for fiscal years 2009 through 2013 were as follows: Fiscal Year 2009 2010 2011 2012 2013 Estimated Expenditures (in millions) $14.3 16.1 11.8 12.5 14.7 Actual Expenditures (in millions) 2013 Comprehensive Annual Financial Report 59 $17.3 22.4 26.0 20.6 10.7 NON-MAJOR GOVERNMENTAL FUNDS FINANCIAL STATEMENTS SPECIAL REVENUE FUNDS Special revenue funds are used to account for specific revenues that are legally restricted to expenditures for particular purposes. The State Aviation Fund is appropriated by the legislature and receives monies from aviation gasoline taxes, sale of abandoned or seized aircraft, flight property taxes, and the operation of the Grand Canyon National Park Airport. The State Aviation Fund monies are used to build and maintain airport facilities throughout Arizona. The Safety Enforcement and Transportation Infrastructure Fund is appropriated by the legislature and receives monies from registration fees for non-resident vehicles and single trip and limited use fuel tax permits. Monies are used for enforcement of vehicle safety requirements, and construction and maintenance of transportation facilities within twenty-five miles of the border between Arizona and Mexico. The Motor Vehicle Liability Insurance Enforcement Fund is appropriated by the legislature and receives reinstatement fees for insurance-related driver license and vehicle registration suspensions. Monies are used to administer the State's Mandatory Liability Insurance Program. The Vehicle Inspection and Title Enforcement Fund is appropriated by the legislature and receives monies from the fees charged for certain vehicle inspections. Monies are used to defray the cost of investigations involving certificates of title, licensing fraud, registration enforcement, and other enforcement related issues. The Motor Carrier Safety Revolving Fund receives fees to administer and enforce the rules governing the safety operations of motor carriers, shippers, and vehicles transporting hazardous materials, substances, or waste. The Underground Storage Tank Fund receives certain Department revenues for distribution to the Department of Environmental Quality. The Economic Strength Project Fund receives monies from the Highway User Revenue Fund for use on approved economic strength projects recommended by the Department of Commerce and Economic Development Commission. The Grant Anticipation Notes Fund receives revenues from the Federal Highway Administration under various grant agreements for the repayment of Grant Anticipation Notes (GARVEE bonds). The Local Agency Deposits Fund receives monies from the U.S. Government and local agencies for the payment of local agency sponsored county secondary road construction projects. 2013 Comprehensive Annual Financial Report Arizona Department of Transportation Combining Balance Sheet Non-Major Governmental Funds June 30, 2013 State Aviation Fund Assets Unrestricted cash on deposit with the State Treasurer Receivables: Interfund Notes and loans Other (net) Amounts due from U.S. Government Restricted cash on deposit with the State Treasurer Total assets Liabilities and fund balances Liabilities: Accounts payable Accrued payroll and other accrued expenditures Contracts and retainage payable Interfund payables Amounts due to: Other state agencies Arizona counties and cities Deferred revenue Total liabilities Fund balances: Restricted Committed Total fund balances Total liabilities and fund balances $ 27,334,801 Safety Enforcement Motor Vehicle Motor Vehicle and Liability Inspection Transportation Insurance and Title Infrastructure Enforcement Enforcement Fund Fund Fund 950,702 $ 2,277,292 43,841 3,750,820 3,457,502 - 68,489 - 88,443 - 41,255 - $ 34,586,964 $ 1,019,191 $ 2,365,735 $ 779,581 $ $ $ $ - 275 $ - - $ 738,326 23,984 1,108,299 - 17,761 - 15,323 - 18,924 - 3,750,820 4,883,378 17,761 15,323 18,924 29,703,586 29,703,586 $ 34,586,964 1,001,430 1,001,430 $ 1,019,191 2,350,412 2,350,412 $ 2,365,735 760,657 760,657 779,581 2013 Comprehensive Annual Financial Report 60 $ Exhibit 9 Motor Carrier Safety Revolving Fund $ Underground Storage Tank Fund 33,852 $ - Economic Strength Project Fund $ Grant Anticipation Notes Fund 2,508,263 $ - Local Agency Deposits Fund $ Total Non-Major Governmental Funds - $ 33,843,236 - 2,672,297 - - - 2,371,660 16,670,229 2,914,325 3,750,820 5,829,162 16,670,229 $ 33,852 39,346 $ 2,711,643 $ 2,508,263 $ 2,692 2,692 14,430,368 $ 33,472,257 14,472,406 $ 77,480,178 $ - $ $ - $ - $ $ $ - 72,279 72,554 - - - - 17,643,344 - 75,992 18,751,643 - - 2,711,643 2,711,643 2,508,263 2,508,263 - 17,715,623 2,711,643 2,508,263 3,750,820 27,870,915 33,852 33,852 33,852 $ 2,711,643 2,508,263 2,692 2,692 2,692 15,756,634 15,756,634 $ 33,472,257 15,759,326 33,849,937 49,609,263 $ 77,480,178 $ $ 2013 Comprehensive Annual Financial Report 61 Arizona Department of Transportation Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Non-Major Governmental Funds for the fiscal year ended June 30, 2013 State Aviation Fund Revenues Vehicle registration, title, license, and related taxes and fees Fuel and motor carrier taxes and fees Flight property taxes Reimbursement of construction expenditures - federal aid Other federal grants and reimbursements Reimbursements from Arizona counties and cities Interest on loans receivable Income from investments Grand Canyon National Park Airport Other Total revenues $ Expenditures Current: Administration Highway Motor vehicle Total current expenditures Intergovernmental: Distributions to other state agencies Distributions to Arizona counties and cities Capital outlay Total expenditures Excess of revenues over expenditures 8,463,286 367,375 8,084,374 Safety Enforcement and Transportation Infrastructure Fund Motor Vehicle Liability Insurance Enforcement Fund Motor Vehicle Inspection and Title Enforcement Fund $ $ $ 1,377,869 - 9,337 20,870 2,972,249 2,577,092 1,377,869 7,936,198 7,936,198 1,876,333 1,876,333 1,072,109 1,072,109 1,452,508 1,452,508 9,106,572 419,357 17,462,127 1,510,300 3,386,633 327,600 1,399,709 1,452,508 <414,384> 1,177,383 Other financing sources Transfers out for debt service Total other financing sources - $ 2,577,092 - 403,840 962,028 205,236 254,012 1,044,326 184,552 19,969,029 2,506,902 Net change in fund balances Fund balances - July 1 Fund balances - June 30 2,942,042 - 2,506,902 27,196,684 29,703,586 - $ <414,384> 1,415,814 1,001,430 $ 2013 Comprehensive Annual Financial Report 62 <74,639> 1,177,383 1,173,029 2,350,412 - $ <74,639> 835,296 760,657 Exhibit 10 Motor Carrier Safety Revolving Fund $ $ Underground Storage Tank Fund - $ 28,075,654 - Economic Strength Project Fund $ Grant Anticipation Notes Fund 1,000,000 - $ Local Agency Deposits Fund - $ Total Non-Major Governmental Funds - $ 11,405,328 33,397,990 8,084,374 2,083 2,083 11,814 28,087,468 19,216 1,019,216 55,070,317 25 55,070,342 100,948,366 2,497,255 103,445,621 55,474,157 100,948,366 3,459,283 205,236 294,404 1,044,326 207,505 214,520,969 - 64,405 64,405 1,226 1,226 2 2 102,332,256 102,332,256 110,268,456 4,466,581 114,735,037 - 28,023,063 28,087,468 1,017,990 1,019,216 2 102,332,256 29,860,963 10,124,562 419,357 155,139,919 2,083 - - 55,070,340 1,113,365 59,381,050 - - - <55,070,206> <55,070,206> 2,083 31,769 33,852 - - $ $ 134 2,558 2,692 $ 1,113,365 14,643,269 $ 15,756,634 2013 Comprehensive Annual Financial Report 63 <55,070,206> <55,070,206> $ 4,310,844 45,298,419 49,609,263 FIDUCIARY FUNDS FINANCIAL STATEMENTS Combining Statement of Net Position Statement of Changes in Assets and Liabilities AGENCY FUNDS Highway Properties - Privilege Tax Fund collects monies from renters of properties previously acquired by the Department for use in future highway development. Monies collected are distributed to the Department of Revenue. Highway Properties - 24 Percent Fund collects 24 percent of the Department's rental income from properties for use in future highway development. Monies collected are distributed to the local counties. 2013 Comprehensive Annual Financial Report Exhibit 11 Arizona Department of Transportation Combining Statement of Net Position Agency Funds June 30, 2013 Highway Properties Privilege Tax Fund ASSETS Restricted cash on deposit with the State Treasurer Due from Department of Revenue Total assets $ $ LIABILITIES Due to Arizona counties Total liabilities $ $ 2013 Comprehsive Annual Financial Report 64 Highway Properties - 24 % Lieu Tax Fund <12> $ 12 - $ - $ $ Total 376,534 376,534 $ $ 376,522 12 376,534 376,534 376,534 $ $ 376,534 376,534 Exhibit 12 Arizona Department of Transportation Statement of Changes in Assets and Liabilities Agency Funds for the fiscal year ended June 30, 2013 Balance July 1, 2012 Additions Deductions Balance June 30, 2013 Highway Properties - Privilege Tax Fund Assets Restricted cash on deposit with the State Treasurer Due from Department of Revenue Total assets Liabilities Due to Department of Revenue Total liabilities $ 721 - $ 7,102 12 $ <7,835> $ - <12> 12 $ 721 $ 7,114 $ <7,835> $ - $ 721 $ - $ <721> $ - $ 721 $ - $ <721> $ - $ $ 412,324 412,324 $ $ 425,409 425,409 $ <461,199> $ $ <461,199> $ 376,534 376,534 $ 412,324 $ 425,409 $ <461,199> $ 376,534 $ 412,324 $ 425,409 $ <461,199> $ 376,534 $ 413,045 - $ 432,511 12 $ <469,034> $ - 376,522 12 $ 413,045 $ 432,523 $ <469,034> $ 376,534 $ 721 412,324 $ 425,409 $ <721> $ <461,199> 376,534 $ 413,045 $ 425,409 $ <461,920> $ 376,534 Highway Properties - 24 Percent Fund Assets Restricted cash on deposit with the State Treasurer Total assets Liabilities Due to Department of Revenue Due to Arizona counties Total liabilities Total Assets Restricted cash on deposit with the State Treasurer Due from Department of Revenue Total assets Liabilities Due to Department of Revenue Due to Arizona counties Total liabilities 2013 Comprehensive Annual Financial Report 65 STATISTICAL SECTION 2013 Comprehensive Annual Financial Report Arizona Department of Transportation Overview – Statistical Section for the fiscal year ended June 30, 2013 This part of the Arizona Department of Transportation’s (Department) Comprehensive Annual Financial Report provides detail in the form of graphs and tables intended to assist the reader of the report with understanding the information presented in the financial statements, note disclosures, and required supplementary information regarding the overall financial health of the Department. Financial Trends These schedules show trend information that gives an insight into the Department’s financial well-being and performance over time. Revenue Capacity Information about the Motor Vehicle Fuel Tax and the Highway User Revenue Fund, the Department’s most significant own-source revenues, is presented in these tables. Debt Capacity These tables present information to help the reader assess the affordability of the Department’s current levels of outstanding debt as well as the Department’s ability to issue additional debt in the future. Demographic and Economic Information The demographic and economic indicators presented in this section offer an understanding of the environment in which the Department’s financial activities take place. Operating Information The Department’s relationship of the financial report to the services provided as well as its activities is illustrated in these tables depicting service and infrastructure information. Sources: Unless otherwise stated, all information in the following tables is derived from the Comprehensive Annual Financial Reports for the years shown. 2013 Comprehensive Annual Financial Report 66 Arizona Department of Transportation Index – Statistical Section for the fiscal year ended June 30, 2013 Page Financial Trends Table A-1 – Change in Net Position .......................................................................................................................68-71 Table A-2 – Statement of Revenues, Expenditures, and Changes in Fund Balances .............................................72-75 Table A-3 – Fund Balances of Governmental Funds ..............................................................................................76-77 Table A-4 – Expenditures of Federal Awards .............................................................................................................. 78 Table A-5 – Government-wide Expenses by Function ...........................................................................................79-80 Table A-6 – Government-wide Revenues ..............................................................................................................81-82 Table A-7 – Net Position by Component................................................................................................................83-84 Revenue Capacity Table B-1 – Highway User Revenue Fund Collections ................................................................................................ 85 Table B-2 – Highway User Revenue Fund Distributions ............................................................................................. 86 Table B-3 – Fuel Tax Rates .......................................................................................................................................... 87 Table B-4 – Motor Vehicle Fuel Tax – Top Ten Suppliers............................................................................................ 88 Table B-5 – Gasoline Volume Sold – Top Twenty-Five Suppliers ...........................................................................89-90 Debt Capacity Table C-1 – Highway User Revenue Fund – Legal Debt Margin .................................................................................. 91 Table C-2 – Highway Revenue Bonds – Bond Coverage ............................................................................................. 92 Table C-3 – Transportation Excise Tax Revenue Bonds – Bond Coverage .................................................................. 93 Table C-4 – Transportation Excise Tax Revenue Bonds – Debt Service Revenue and Cost Per Capita ....................... 94 Table C-5 – Ratios of Outstanding Debt by Type ...................................................................................................95-96 Demographic and Economic Information Table D-1 – Number of Vehicle Registrations Per Year .............................................................................................. 97 Table D-2 – Vehicle Registrations Per Year Compared to Fuel Sales .......................................................................... 98 Table D-3 – Demographic and Economic Statistics..................................................................................................... 99 Table D-4 – Principal Employers ............................................................................................................................... 100 Operating Information Table E-1 – Full Time Equivalents (FTEs) ................................................................................................................... 101 Table E-2 – Capital Assets – Schedule by Function and Activity ............................................................................... 102 Table E-3 – Capital Assets – Schedule of Changes by Function and Activity ............................................................ 103 Table E-4 – Total Public Road Mileage by Highway Class and Governmental Ownership ........................................ 104 Table E-5 – Daily Vehicle Miles Traveled with Population Data ............................................................................... 105 2013 Comprehensive Annual Financial Report 67 Table A-1 Arizona Department of Transportation Change in Net Position for fiscal year ended June 30 (Thousands of Dollars) Expenses Governmental Activities: Administration Aeronautics Highway1 Highway maintenance Motor vehicle Other Non-capital, including asset preservation1 Distributions to other state agencies Distributions to Arizona counties and cities Local governmental assistance Interest on long-term debt Total governmental activities expenses Business-type Activities: Arizona Highways Magazine Highway Expansion and Extension Loan Program Total business-type activities expenses Total primary government expenses 2004 $ $ Program Revenues Governmental Activities: Charges for services: Administration Aeronautics Highway Highway maintenance Motor vehicle Other Local governmental assistance Operating grants and contributions Capital grants and contributions Total governmental activities program revenues Business-type Activities: Charges for services: Arizona Highways Magazine Highway Expansion and Extension Loan Program Total business-type activities program revenues Total primary governmental program revenues Net /revenues: Governmental Activities Business-type Activities Total primary government net expense $ $ 2005 57,703 7,512 93,656 95,642 86,845 9,815 333,930 161,029 1,022,768 39,205 89,431 1,997,536 $ 10,007 4,414 14,421 2,011,957 10,270 4,360 14,630 $ 2,076,001 $ $ $ 902 108,346 4,848 4,129 44,008 418,174 580,407 9,271 3,529 12,800 593,207 $ 42,298 9,804 125,889 105,037 91,676 6,871 156,678 306,853 1,086,955 42,440 86,870 2,061,371 2006 919 1,518 113,506 5,564 4,760 58,948 484,276 669,491 8,443 3,009 11,452 680,943 $ $ 45,002 10,705 118,147 114,119 96,937 9,394 <53,981> 206,903 1,095,671 36,771 88,279 1,767,947 8,175 4,273 12,448 1,780,395 1,214 537 121,179 7,099 4,040 67,241 387,614 588,924 8,012 3,281 11,293 600,217 $ <1,417,129> $ <1,391,880> $ <1,179,023> <1,621> <3,178> <1,155> $ <1,418,750> $ <1,395,058> $ <1,180,178> NOTES: 1 Adjustments were made to Highway and Non-capital, including asset preservation, for the years 2004 - 2007 to conform to the current year's presentation. 2013 Comprehensive Annual Financial Report 68 Table A-1 Arizona Department of Transportation Change in Net Position for fiscal year ended June 30 (Thousands of Dollars) 2007 $ $ $ $ 2008 $ 8,072 4,355 12,427 2,013,206 7,712 4,053 11,765 $ 2,185,569 7,410 2,112 9,522 $ 2,322,986 $ $ $ $ 8,060 2,909 10,969 595,691 $ 9,706 940 1,451 1,765 127,900 8,263 79,747 523,728 753,500 7,624 1,755 9,379 762,879 $ $ 56,066 10,993 116,742 110,963 133,415 216,198 413,940 1,091,893 48,571 114,683 2,313,464 2010 51,667 5,418 138,788 120,163 105,961 113,569 114,795 1,219,208 48,760 82,450 2,000,779 8,843 1,133 2,953 577 132,274 12,239 72,679 354,024 584,722 54,918 4,373 132,874 137,100 112,880 187,004 176,692 1,238,383 37,285 92,295 2,173,804 2009 8,752 936 1,765 887 117,267 9,789 90,619 552,488 782,503 6,291 1,128 7,419 789,922 $ $ 2011 93,040 37,070 129,700 99,949 345,590 254,702 1,024,756 163,035 128,768 2,276,610 2012 65,781 34,721 102,932 102,926 122,747 251,392 1,057,720 83,230 129,626 1,951,075 $ 6,288 147 6,435 1,957,510 5,664 126 5,790 $ 2,282,400 4,979 75 5,054 $ 2,301,940 $ 9,766 1,266 1,858 111,412 5 146,936 575,448 846,691 $ $ $ 5,975 566 6,541 853,232 5,619 154 5,773 $ 1,103,912 10,770 2,798 2,667 117,427 220,759 743,718 1,098,139 $ 94,075 39,632 125,331 116,095 351,116 307,885 1,005,114 93,557 164,081 2,296,886 2013 11,947 1,681 2,290 111,429 161,992 776,814 1,066,153 5,581 2 5,583 $ 1,071,736 $ $ $ <1,416,057> $ <1,420,304> $ <1,530,961> $ <1,104,384> $ <1,178,471> $ <1,230,733> $ <1,458> <2,386> <2,103> 106 <17> 529 $ <1,417,515> $ <1,422,690> $ <1,533,064> $ <1,104,278> $ <1,178,488> $ <1,230,204> $ 2013 Comprehensive Annual Financial Report 69 101,370 46,076 139,762 107,655 257,126 213,394 1,074,086 102,332 187,315 2,229,116 4,637 46 4,683 2,233,799 12,254 842 1,887 119,733 168,436 651,798 954,950 5,188 6 5,194 960,144 <1,274,166> 511 <1,273,655> Table A-1 Arizona Department of Transportation Change in Net Position for fiscal year ended June 30 (continued) (Thousands of Dollars) General Revenues and Other Changes in Net Position Governmental Activities: Transportation excise taxes Vehicle registration, title, license, and related taxes and fees Fuel and motor carrier taxes and fees Flight property taxes Income from investments Other Transfers Governmental activities before accounting change Special Item - State appropriation for Statewide Transportation Acceleration Needs (STAN) Total governmental activities Business-type Activities: Income from investments Other Transfers Total business-type activities Total primary government Change in Net Position Governmental Activities Business-type Activities Total primary government 2004 $ $ $ $ 288,600 914,657 698,406 6,321 8,352 24,775 1,941,111 2005 $ 316,806 966,885 759,633 13,180 19,245 27,120 2,102,869 2006 $ 316,491 994,052 770,596 13,686 28,538 11,026 2,134,389 1,941,111 2,102,869 2,134,389 1,588 505 2,093 1,943,204 2,764 380 3,144 $ 2,106,013 $ 3,518 3,518 2,137,907 710,989 $ <34> 710,955 $ 955,366 2,363 957,729 523,982 472 524,454 $ $ (continued) 2013 Comprehensive Annual Financial Report 70 Table A-1 Arizona Department of Transportation Change in Net Position for fiscal year ended June 30 (continued) (Thousands of Dollars) 2007 $ 262,264 1,029,001 790,909 15,303 55,760 9,998 2,163,235 2008 $ 245,000 2,408,235 $ $ $ 253,742 1,033,505 766,394 13,822 59,528 38,772 2,165,763 2009 $ 2,165,763 2010 $ $ 745,459 2,385 747,844 $ 1,930,334 1,818,302 1,819,920 1,848,811 1,882,464 514 514 1,818,816 554 851 1,405 $ 1,821,325 783 783 $ 1,849,594 $ 747 747 1,883,211 $ $ $ $ $ $ 713,918 620 714,538 $ 206,545 $ 216,281 874,191 899,345 704,727 700,620 9,798 10,735 9,415 11,388 16,095 10,442 <851> 1,819,920 1,848,811 2013 199,672 893,287 690,503 9,527 16,347 8,966 1,818,302 399,373 8 399,381 $ 2012 219,165 $ 976,075 667,200 11,975 33,588 22,831 <500> 1,930,334 5,563 4,788 1,612 <3> <17> <1> 500 5,560 4,771 2,111 2,413,795 $ 2,170,534 $ 1,932,445 $ 992,178 4,102 996,280 2011 641,449 1,388 642,837 2013 Comprehensive Annual Financial Report 71 $ 617,239 1,313 618,552 $ $ 227,800 913,326 708,062 8,084 11,781 13,411 1,882,464 608,298 1,257 609,555 Table A-2 Arizona Department of Transportation Statement of Revenues, Expenditures, and Changes in Fund Balances for fiscal year ended June 30 (Thousands of Dollars) 2005 2004 Revenues Transportation excise taxes Vehicle registration, title, license, and related taxes and fees Fuel and motor carrier taxes and fees Flight property taxes Reimbursement of construction expenditures - federal aid Other federal grants and reimbursements Reimbursements from Arizona counties and cities Distributions from other state agencies Interest on loans receivable Income from investments Grand Canyon National Park Airport Rental income Other $ Total revenues Expenditures Current: Transportation: Administration Aeronautics Highway Highway maintenance Motor vehicle Other Total Transportation 288,600 1,023,004 698,406 6,321 421,220 6,146 38,012 933 1,880 8,333 902 1,635 5,161 $ 316,806 1,080,391 759,633 13,180 503,646 9,078 32,186 2,349 945 19,162 919 1,596 6,216 $ 316,491 1,207,265 770,596 13,686 407,891 32,044 13,566 1,490 739 28,351 1,214 1,702 6,490 2,500,553 2,746,107 2,801,525 56,484 7,228 130,117 95,144 84,921 2,940 40,599 9,517 159,408 105,887 90,208 1,802 43,372 10,470 161,496 111,378 95,198 2,309 376,834 407,421 424,223 Transportation not appropriated by State legislature: - Intergovernmental: Distributions to other state agencies Distributions to Arizona counties and cities 2006 - - 160,029 1,022,768 306,852 1,086,955 206,903 1,190,962 Debt service: Principal Interest Bond issuance costs 284,815 92,371 2,546 302,202 94,344 1,996 173,745 83,017 1,252 Non-capital, including asset preservation Capital outlay 333,929 599,819 156,678 623,829 250,736 663,316 2,873,111 2,980,277 2,994,154 <372,558> $ <234,170> $ <192,629> Total expenditures Excess of revenues over expenditures $ 2013 Comprehensive Annual Financial Report 72 Table A-2 Arizona Department of Transportation Statement of Revenues, Expenditures, and Changes in Fund Balances for fiscal year ended June 30 (Thousands of Dollars) 2008 2007 $ 262,264 1,159,379 792,717 15,303 334,376 72,548 34,971 1,799 928 55,393 1,133 1,434 7,088 $ 253,742 1,159,474 768,046 13,822 494,584 79,747 38,609 463 697 59,197 940 1,367 6,206 $ 2010 219,165 1,064,147 696,075 11,975 531,981 94,521 27,498 876 427 33,221 936 1,788 21,579 $ 2011 199,672 1,002,312 692,632 9,527 544,498 146,936 31,503 936 596 15,853 866 1,800 6,370 $ 2012 206,545 991,335 704,727 9,799 736,803 219,743 10,078 845 436 9,083 798 2,554 9,913 $ 2013 216,281 1,010,548 700,620 10,735 770,900 157,437 9,645 1,842 351 11,130 821 3,096 8,177 $ 227,800 1,032,846 708,062 8,084 653,236 165,939 1,079 989 298 11,576 1,044 5,244 7,987 2,739,333 2,876,894 2,704,189 2,653,501 2,902,659 2,901,583 2,824,184 44,875 3,876 184,240 118,940 103,801 - 44,322 4,089 171,134 135,629 110,982 - 46,056 10,471 163,570 111,346 131,665 - 52,971 115,061 94,014 101,142 - 81,477 200,216 120,716 98,115 - 80,627 135,908 118,230 114,327 - 190,606 42,996 143,972 105,462 - 455,732 466,156 463,108 363,188 500,524 449,092 483,036 - $ 2009 - - - - - - 114,795 1,217,883 173,405 1,241,110 404,569 1,100,959 244,836 1,046,576 254,210 1,022,512 305,218 1,004,768 213,395 1,073,876 100,395 90,836 1,592 192,663 102,583 3,447 199,687 126,932 3,967 144,232 143,133 121 201,219 144,748 2,099 196,338 137,213 3,043 160,415 142,524 2,455 63,273 741,506 158,991 989,882 142,604 1,077,835 217,338 998,502 313,179 709,250 286,217 701,657 200,638 715,714 2,786,012 3,328,237 3,519,661 3,157,926 3,147,741 3,083,546 2,992,053 <451,343> $ <815,472> $ <504,425> $ <245,082> $ <181,963> $ <167,869> <46,679> $ (continued) 2013 Comprehensive Annual Financial Report 73 Table A-2 Arizona Department of Transportation Statement of Revenues, Expenditures, and Changes in Fund Balances for fiscal year ended June 30 (continued) (Thousands of Dollars) 2005 2004 Other financing sources Transfers in Transfers out for debt service Transfers out other Capital leases Sale of capital assets Insurance recovery Debt issuance Debt issuance - refunding bond Premium from debt issuance Payment to refunded bond escrow agent $ Total other financing sources Net change in fund balances before accounting change 449,100 $ <374,852> <74,249> 16,023 1,407 319,942 130,573 31,647 <145,965> 137,986 <18,932> 103,110 <54,643> - <18,932> 452,884 $ 433,952 Debt service as a percentage of non-capital expenditures Debt service as a percentage of total revenues 16.7% 15.2% 2013 Comprehensive Annual Financial Report 74 262,216 <251,891> <10,325> 11,118 537 118,250 147,400 22,407 <161,726> 337,280 - Fund balances - June 30 388,046 $ <374,162> <13,885> 18,392 1,518 292,645 24,726 - 353,626 Special item - State appropriation for Statewide Transportation Acceleration Needs (STAN) Net change in fund balances Fund balances - July 1 2006 - 103,110 433,952 $ 537,062 16.9% 14.5% <54,643> 537,062 $ 482,419 11.1% 9.2% Table A-2 Arizona Department of Transportation Statement of Revenues, Expenditures, and Changes in Fund Balances for fiscal year ended June 30 (continued) (Thousands of Dollars) 2008 2007 $ 225,499 $ <186,856> <38,643> 2,129 10,162 577 325,000 26,201 - 303,513 $ <231,563> <71,950> 28,233 1,765 711,479 31,862 - 2010 239,447 $ <221,232> <17,252> 2,127 887 796,819 58,123 - 2011 271,408 $ <266,934> <9,013> 3,088 1,765 32,628 - 2012 331,547 $ <331,547> <2,400> 3,712 2,529 349,698 38,876 - 2013 330,856 $ <330,856> 1,815 1,818 269,001 499,725 90,753 <560,228> 283,066 <283,066> 1,636 1,679 261,003 521,175 128,863 <611,874> 364,069 773,339 858,919 32,942 392,415 302,884 302,482 317,390 321,996 43,447 <471,483> 147,333 120,921 134,613 - 245,000 562,390 482,419 $ 2009 1,044,809 9.4% 7.0% - 321,996 1,044,809 $ 1,366,805 12.8% 10.4% - 43,447 1,366,805 $ 1,410,252 - <471,483> 1,410,252 $ 938,769 13.5% 12.2% 147,333 938,769 $ 13.3% 10.8% 2013 Comprehensive Annual Financial Report 75 - 1,086,102 14.3% 12.0% - 120,921 1,086,102 $ 1,207,023 14.1% 12.1% 134,613 1,207,023 $ 1,341,636 14.7% 12.0% Table A-3 Arizona Department of Transportation Fund Balances of Governmental Funds for fiscal year ended June 30 (Thousands of Dollars) 2004 General Fund (State Highway Fund): Reserved Unreserved Nonspendable Restricted Committed Total General Fund All other governmental funds Reserved: Debt service Capital projects Unreserved, reported in: Non-major special revenue funds Unassigned Nonspendable Restricted Committed 2005 2006 2007 $ 155,755 $ 48,619 - 166,420 57,123 - $ 172,784 9,342 - $ 507,723 <10,032> - $ 204,374 $ 223,543 $ 182,126 $ 497,691 $ 18,592 190,640 $ 2,288 277,884 $ 2,159 258,236 $ 2,688 495,428 20,346 - 33,348 - 39,898 - 49,002 - Total all other governmental funds $ 229,578 $ 313,520 $ 300,293 $ 547,118 Total general and other governmental funds $ 433,952 $ 537,063 $ 482,419 $ 1,044,809 NOTE: GASB 54 rules state that Fund Balances should be reported with the categories listed in the above table for 2011. Years 2004 - 2010 will continue to be reported in the old format until 10 years of information is available. 2 Estimated in 2012 CAFR and have been revised for 2012 actuals. 1 (continued) 2013 Comprehensive Annual Financial Report 76 Table A-3 Arizona Department of Transportation Fund Balances of Governmental Funds for fiscal year ended June 30 (Thousands of Dollars) 2008 2009 1 2 2011 2010 2012 2013 $ 505,691 57,899 - $ 230,885 94,686 - $ 270,550 $ 80,251 - $ 9,765 229,559 102,350 $ 8,235 240,444 25,229 7,207 267,414 123,662 $ 563,590 $ 325,571 $ 350,801 341,674 273,908 398,283 $ 3,212 774,644 $ 2,692 1,078,478 $ 1,894 $ 576,331 25,359 - 3,574 - $ 9,743 - - $ $ 719,966 24,462 - $ $ <8,128> 789,547 37,352 <8,128> 910,931 40,550 $ 803,215 $ 1,084,744 $ 587,968 $ 744,428 $ 826,899 $ 943,353 $ 1,366,805 $ 1,410,315 $ 938,769 $ 1,086,102 $ 1,100,807 $ 1,341,636 2013 Comprehensive Annual Financial Report 77 Table A-4 Arizona Department of Transportation 1 Expenditures of Federal Awards for the fiscal year ended June 30 (Thousands of Dollars) Fiscal Year $ FTA NHTSA 198 $ 19,056 $ 488 19,261 3,844 21,451 7,938 22,769 3,902 13,853 715 15,530 610 10,169 4,338 8,837 4,203 8,466 480 5,549 FHWA FMCSA 123 $ 793,218 $ 755,092 1,132 904,735 120 574,068 101 571,867 106 523,810 101 353,192 69 389,575 96 456,924 84 384,416 BLM 2,747 $ 1,518 3,891 4,148 4,734 2,642 1,769 2,231 282 434 BIA - $ 1,004 124 268 57 544 162 152 79 USGSA - $ - $ 541 <21> 278 - USDA Sub-total - $ 80 - 815,342 $ 776,359 936,057 609,167 594,725 542,860 366,364 405,212 470,401 391,042 LAD 1 NOTE: 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); Federal Motor Carrier Safety Administration (FMCSA); Bureau of Land Management (BLM); Bureau of Indian Affairs (BIA); and Local Agency Deposit Fund (LAD) Total Expenditures of Federal Awards $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 2004 2005 2006 2007 2008 2009 Fiscal Year 2013 Comprehensive Annual Financial Report 78 2010 2011 2012 Total 100,948 $ 916,290 85,557 861,916 169,779 1,105,836 82,267 691,434 31,776 626,501 31,472 574,332 40,559 406,923 33,268 438,480 42,323 512,724 36,324 427,366 SOURCE: Single Audit Reports - fiscal years 2004 through 2013 Thousands of Dollars 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 FAA 2013 Table A-5 Arizona Department of Transportation Government-wide Expenses by Function for the fiscal year ended June 30 (Thousands of Dollars) Distributions to Arizona Counties, Highway Fiscal Year Admin. 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 $ 101,370 $ 94,075 93,040 65,781 56,282 54,918 51,667 45,002 42,298 57,703 Aeronautics - $ 10,993 4,373 5,418 10,705 9,804 7,512 Highway 46,076 $ 39,632 37,070 34,721 116,697 132,874 138,788 118,147 125,889 93,656 Maintenance Cities and Other 1 Motor Vehicle 139,762 $ 476,447 475,290 225,679 311,605 324,104 233,732 60,138 261,714 429,571 107,655 $ 116,095 99,949 102,926 133,243 112,880 105,961 96,937 91,676 86,845 State Agencies 1,287,481 1,312,999 1,279,459 1,309,112 1,505,835 1,415,075 1,334,003 1,394,609 1,393,808 1,183,797 1 NOTE: Includes Non-capital, including asset preservation. (continued) 2013 Comprehensive Annual Financial Report 79 Table A-5 Arizona Department of Transportation Government-wide Expenses by Function for the fiscal year ended June 30 (Thousands of Dollars) Local Highway Expansion Governmental Premium on Long- Interest on Long- Assistance Term Debt Term Debt $ 102,332 $ 93,557 163,035 83,230 48,571 37,285 48,760 36,771 42,440 39,205 - $ 1,419 - Arizona Highways and Extension Loan 187,315 $ 162,662 128,768 129,626 114,683 92,295 82,450 88,278 86,870 89,431 Program Magazine Other 257,126 $ 9,394 6,871 9,815 4,637 $ 4,978 5,664 6,288 7,410 7,712 8,072 8,175 10,270 10,007 Total 46 $ 75 126 147 2,110 4,053 4,355 4,273 4,360 4,414 Government-wide Expenses Thousands of Dollars $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $0 2004 2005 2006 2007 2008 2009 2010 Fiscal Year 2013 Comprehensive Annual Financial Report 80 2011 2012 2013 2,233,800 2,301,939 2,282,401 1,957,510 2,307,429 2,185,569 2,013,206 1,872,429 2,076,000 2,011,956 Table A-6 Arizona Department of Transportation Government-wide Revenues for the fiscal year ended June 30 (Thousands of Dollars) Program Revenues Governmental Fiscal Year 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Charges for Services $ Operating Grants and Contributions 134,716 $ 127,347 133,661 124,307 139,396 150,024 158,019 134,068 126,267 118,225 Capital Grants and Contributions 168,436 $ 161,992 220,759 146,936 90,619 79,747 72,679 67,241 58,948 44,008 1 NOTE: Includes transfers for multiple years. 2013 Comprehensive Annual Financial Report 81 Business-Type Charges for Services 651,798 $ 776,814 743,718 575,448 552,488 523,728 354,024 387,614 484,276 418,174 5,194 5,583 5,773 6,541 7,418 9,379 10,969 11,293 11,452 12,800 Table A-6 Arizona Department of Transportation Government-wide Revenues for the fiscal year ended June 30 (Thousands of Dollars) General Revenues Total Governmental Taxes $ Business-Type Other Revenues 1,857,273 $ 1,826,980 1,795,291 1,792,989 1,874,415 2,067,464 2,097,476 2,186,859 2,056,503 1,907,984 1 Income from Investments 13,290 $ 9,604 16,079 8,965 22,331 38,772 9,998 11,026 27,120 24,775 Other Revenues 11,781 $ 11,388 9,402 16,347 33,588 59,528 57,760 28,538 19,245 8,352 Income from Investments 1 121 $ 851 500 (18) (3) 381 505 Government-wide Revenues 747 $ 783 555 514 1,612 4,788 5,563 3,518 2,764 1,588 2,843,356 2,920,491 2,926,089 2,672,047 2,722,367 2,933,412 2,766,485 2,830,157 2,786,956 2,536,411 Government-wide Revenues $3,000,000 Thousands of Dollars $2,900,000 $2,800,000 $2,700,000 $2,600,000 $2,500,000 $2,400,000 $2,300,000 2004 2005 2006 2007 2008 2009 2010 Fiscal Year 2013 Comprehensive Annual Financial Report 82 2011 2012 2013 Table A-7 Arizona Department of Transportation Net Position by Component for fiscal year ended June 30 (Thousands of Dollars) Business-type Activities Governmental Activities Net Investment in Capital Fiscal Year 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Assets $ 16,290,605 $ 15,818,053 15,159,086 14,620,099 13,951,802 13,285,438 12,211,861 11,806,376 10,780,474 10,179,585 Net Investment in Capital Restricted Unrestricted 738,969 $ 666,828 669,811 566,794 534,535 704,929 1,006,512 466,337 491,995 408,410 150,721 $ 106,932 125,860 126,415 113,053 209,650 236,186 189,669 234,548 208,032 Total 17,180,295 $ 16,591,813 15,954,757 15,313,308 14,599,390 14,200,017 13,454,559 12,462,382 11,507,017 10,796,027 Assets 30 43 54 92 131 173 225 249 499 810 (continued) 2013 Comprehensive Annual Financial Report 83 Table A-7 Arizona Department of Transportation Net Position by Component for fiscal year ended June 30 (Thousands of Dollars) Business-type Activities Primary Government Net Investment in Restricted $ Unrestricted 77,564 $ 76,882 76,192 75,619 74,703 74,115 71,708 67,713 65,273 63,900 Total 1,414 $ 825 192 (663) (406) 132 102 (30) (204) 892 Restricted Capital Assets 79,008 $ 77,750 76,438 75,048 74,428 74,420 72,035 67,932 65,568 65,602 16,290,635 $ 15,818,096 15,159,139 14,620,191 13,951,933 13,285,611 12,212,086 11,806,625 10,780,973 10,180,395 Unrestricted 816,533 $ 743,710 746,003 642,413 609,238 779,044 1,078,220 534,050 557,268 472,310 Total 152,135 $ 107,757 126,052 125,752 112,647 209,782 236,288 189,639 234,344 208,924 Primary Government Net Assets By Component $20,000,000 $18,000,000 Thousands of Dollars $16,000,000 $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $0 2004 2005 2006 Unrestricted 2007 2008 2009 Fiscal Year Restricted 2010 2012 Invested in Capital Assets, net of related debt 2013 Comprehensive Annual Financial Report 84 2011 2013 17,259,303 16,669,563 16,031,194 15,388,356 14,673,818 14,274,437 13,526,594 12,530,314 11,572,585 10,861,629 Table B-1 Arizona Department of Transportation Highway User Revenue Fund Collections for the fiscal year ended June 30 (Thousands of Dollars) Motor Vehicle Fuel Tax Revenues Fiscal Year 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 $ Motor Vehicle Reg. Fee Revenues Motor Carrier Tax Revenues Motor Vehicle Operators' License Fees and Other Fees Motor Vehicle License (In Lieu) Tax Revenues Total Deposited to Arizona HURF 647,858 $ 180,115 $ 17,103 $ 67,373 $ 321,864 $ 1,234,313 538,352 636,507 633,771 637,054 697,771 725,787 710,115 701,965 656,881 180,685 175,179 170,453 178,953 196,151 194,308 178,112 163,463 163,689 17,085 17,466 17,157 18,930 21,758 22,473 20,824 18,573 16,623 69,765 64,361 59,431 58,500 60,630 57,085 56,495 50,789 42,829 228,317 275,132 331,080 349,399 400,787 389,503 372,168 318,689 309,688 1,034,204 1,168,645 1,211,892 1,242,836 1,377,097 1,389,156 1,337,714 1,253,479 1,189,710 Highway User Revenue Fund Collections $1,500,000 $1,350,000 Thousands of Dollars $1,200,000 $1,050,000 $900,000 $750,000 $600,000 $450,000 $300,000 $150,000 $0 2004 2005 2006 2007 2008 2009 Fiscal Year 2010 2013 Comprehensive Annual Financial Report 85 2011 2012 2013 Table B-2 Arizona Department of Transportation Highway User Revenue Fund Distributions for the fiscal year ended June 30 (Thousands of Dollars) Fiscal State Highway Cities and Department of Public Economic Strength 1 Other Year Fund Towns Counties Safety Project Fund Total 2013 $ 555,030 $ 327,732 $ 219,228 $ 119,965 $ 1,000 $ 11,358 $ 1,234,313 2012 401,172 306,376 190,857 123,211 1,000 11,588 1,034,204 2011 522,556 341,502 212,739 79,216 1,000 11,631 1,168,644 2010 520,484 399,900 211,741 78,626 1,000 60,141 1,271,892 2009 513,379 346,443 215,817 84,950 1,000 81,247 1,242,836 2008 680,530 415,556 258,871 10,000 1,000 11,140 1,377,097 2007 688,451 417,541 260,107 10,000 1,000 12,057 1,389,156 2006 636,094 385,759 240,309 63,999 1,000 10,553 1,337,714 2005 483,047 362,965 226,110 52,216 1,000 128,141 1,253,479 2004 570,801 344,699 214,731 48,698 1,000 9,781 1,189,710 The Highway User Revenue Fund receives certain Motor Vehicle Division revenues from the Motor Vehicle Division Clearing Fund. These monies are distributed: 50.5% to the State Highway Fund, 27.5% to Cities and Towns, 3% to Cites with population over 300,000, and 19% to Couties based on Arizona Revised Statues - Section 28-6538. SOURCES: Basic Financial Statements - fiscal years 2004 through 2013 NOTE: 1 An appropriation for Arizona State Parks is included. Fiscal years 2005, 2009, 2010, 2011 and 2012 include distributions to State General Fund. 2013 Comprehensive Annual Financial Report 86 Table B-3 Arizona Department of Transportation Fuel Tax Rates for the fiscal year ended June 30 (Cents per Gallon) Fiscal Gasoline Year Tax 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 $ Use Fuel Tax 1 0.18 $ 0.26 0.18 0.26 0.18 0.26 0.18 0.26 0.18 0.26 0.18 0.26 0.18 0.26 0.18 0.26 0.18 0.26 0.18 0.26 SOURCE: Arizona Revised Statutes §28-5606 Imposition of Motor Fuel Taxes NOTES: Gasohol is currently taxed at the same rate as gasoline and use fuel. Use fuel is primarily diesel. 1 Lightweight motor vehicles under 26,000 pounds pay $.18 per gallon. 2013 Comprehensive Annual Financial Report 87 Table B-4 Arizona Department of Transportation Motor Vehicle Fuel Tax - Top Ten Suppliers for fiscal year ended June 30 (Thousands) Fiscal Year Gallons from Top Revenue from Top Ten Suppliers Ten Suppliers 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 3,110,955 3,025,722 2,898,241 2,905,890 2,871,995 2,839,622 2,807,989 2,588,981 2,545,685 2,627,194 $ 613,799 589,607 564,353 569,974 565,889 559,609 552,997 504,052 504,128 515,901 All Motor Vehicle Fuel Tax Revenue $ Revenue Percentage from Top Ten Suppliers 685,320 688,642 686,591 683,880 698,959 753,036 772,100 750,574 723,425 697,428 89.6% 85.6% 82.2% 83.3% 81.0% 74.3% 71.6% 67.2% 69.7% 74.0% SOURCE: Revenue & Fuel Tax Administration reporting, based on gallonage data reported by fuel suppliers. NOTE: Above data reflects a change in gasoline and use fuel gallons reported by the Revenue & Fuel Tax Administration for 2004 - 2013. Motor Vehicle Fuel Tax Sources $800,000 $700,000 Thousands of Dollars $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Fiscal Year All Fuel Tax Revenue Top Ten Suppliers 2013 Comprehensive Annual Financial Report 88 Table B-5 Arizona Department of Transportation Gasoline Volume Sold - Top Twenty-Five Suppliers for fiscal year ended June 30 2004 Range - in Millions of Gallons 2006 2007 Suppliers % of Total Suppliers Suppliers % of Total Suppliers % of Total within Gallons within within Gallons within Range Sold Range Gallons Sold Range Sold Range < 25 26 - 50 51 - 100 101 - 200 201 - 300 > 300 2008 % of Total Gallons Sold Suppliers % of Total within Gallons Range Sold 4 4 8 2 4 3 1.6% 3.9% 16.7% 9.4% 27.6% 35.4% 3 4 6 6 3 3 1.5% 3.1% 13.0% 27.0% 19.0% 30.9% 5 2 5 6 3 4 2.4% 2.4% 12.0% 21.8% 17.6% 38.5% 6 1 5 6 3 4 2.0% 1.0% 11.1% 24.5% 18.2% 40.4% 8 6 3 5 3 - 1.5% 4.2% 12.1% 11.1% 34.8% 32.7% 25 94.6% 25 94.5% 25 94.7% 25 97.2% 25 96.4% Total Gallons of Gasoline (Thousands) Gasoline % of Total Total Gallons of Use Fuel (Diesel) (Thousands) Diesel % of Total 2005 2,650,746 2,730,911 2,781,197 2,871,528 2,797,714 75.8% 75.5% 74.3% 74.5% 74.5% 845,256 887,406 963,551 981,647 959,406 24.2% 24.5% 25.7% 25.5% 25.5% Note: Above data reflects a change in gasoline and use fuel gallon reported by the Revenue & Fuel Tax Administration for 2004 - 2013. (continued) 2013 Comprehensive Annual Financial Report 89 Table B-5 Arizona Department of Transportation Gasoline Volume Sold - Top Twenty-Five Suppliers for fiscal year ended June 30 2009 Range - in Millions of Gallons 2011 2012 Suppliers % of Total Suppliers Suppliers % of Total Suppliers % of Total within Gallons within within Gallons within Range Sold Range Gallons Sold Range Sold Range < 25 26 - 50 51 - 100 101 - 200 201 - 300 > 300 2013 % of Total Gallons Sold Suppliers within Range % of Total Gallons Sold 7 5 2 3 3 5 3.3% 5.2% 3.2% 11.4% 17.9% 55.8% 7 8 1 2 3 4 2.7% 9.2% 1.5% 9.8% 21.7% 51.6% 7 5 3 3 3 4 3.2% 4.9% 4.6% 15.3% 19.0% 49.8% 15 1 1 3 1 4 5.9% 1.3% 1.8% 16.1% 7.7% 65.3% 14 2 1 2 2 4 5.9% 2.4% 2.0% 10.2% 12.7% 64.2% 25 96.8% 25 96.5% 25 96.8% 25 98.1% 25 97.4% Total Gallons of Gasoline (Thousands) Gasoline % of Total Total Gallons of Use Fuel (Diesel) (Thousands) Diesel % of Total 2010 2,634,840 2,607,660 2,616,186 2,616,570 2,612,577 75.3% 76.0% 75.9% 75.8% 76.0% 864,455 824,996 829,530 837,151 827,138 24.7% 24.0% 24.1% 24.2% 24.0% Note: Above data reflects a change in gasoline and use fuel gallon reported by the Revenue & Fuel Tax Administration for 2004 - 2013. 2013 Comprehensive Annual Financial Report 90 Table C-1 Arizona Department of Transportation Highway User Revenue Fund Legal Debt Margin for the fiscal year ended June 30 (Thousands of Dollars) Fiscal Year 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Debt Limit $ 1,2 N/A N/A N/A N/A N/A N/A N/A 1,300,000 1,300,000 1,300,000 Total Principal Applicable to Limit $ N/A N/A N/A N/A N/A N/A N/A 1,223,425 1,161,355 1,017,360 Total Principal Applicable to the Limit Legal Debt as a Percentage of Margin Debt Limit N/A N/A N/A N/A N/A N/A N/A $ 76,575 138,645 282,640 N/A N/A N/A N/A N/A N/A N/A 94.11% 89.34% 78.26% 1 NOTES: The statutory limitation on the issuance of bonds, as outlined in ARS §28-7510, applies only to the Highway User Revenue Fund (HURF). The only limitation on Maricopa County Regional Area Road Fund (RARF) and Grant Anticipation Notes (GARVEE) is the ability to secure the debts with available excise tax monies and available grant revenues, respectively, pursuant to the applicable bond resolutions. 2 As stated in House Bill 2206 of the Second Regular Session of the Forty-seventh Legislature, the $1.3 billion debt limit is eliminated from ARS §28-7510. The general effective date of this change was September 21, 2006. 2013 Comprehensive Annual Financial Report 91 Table C-2 Arizona Department of Transportation Highway Revenue Bonds Bond Coverage for the fiscal year ended June 30 (Thousands of Dollars) Fiscal Year 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Pledged Principal Interest 1,2 Revenues Total $ 60,540 $ 78,198 $ 138,738 $ 67,885 71,113 138,998 71,770 83,960 155,730 68,140 87,661 155,801 64,190 89,825 154,015 60,645 75,538 136,183 57,825 73,785 131,610 54,830 62,222 117,052 44,265 60,459 104,724 51,155 53,149 104,304 512,971 392,648 504,175 502,874 509,183 658,616 635,140 624,408 461,763 557,854 Coverage 3.7 2.8 3.2 3.2 3.3 4.8 4.8 5.3 4.4 5.3 SOURCES: Highway User Revenue Fund Schedule fiscal years 2004 through 2013; Debt Service Funds fiscal years 2004 through 2013. 1 NOTES: Includes vehicle license tax revenues distributed directly to the State Highway Fund. Fiscal year 2005 is net of a $118 million distribution to the State General Fund. Fiscal year 2009 is net of $66 million, 2010 is net of $44 million and 2011 is net of $45 million distribution to the State General Fund. 2 The Highway Revenue Bonds are secured by a prior lien on and pledge of motor vehicle and related fuel fees and taxes. Highway Revenue Bonds - Bond Coverage $700,000 Thousands of Dollars $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 2004 2005 2006 2007 2008 2009 2010 Fiscal Year Revenue Debt Service 2013 Comprehensive Annual Financial Report 92 2011 2012 2013 Table C-3 Arizona Department of Transportation Transportation Excise Tax Revenue Bonds Bond Coverage for the fiscal year ended June 30 (Thousands of Dollars) Fiscal Pledged Year 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 $ 55,870 55,460 45,970 33,315 13,825 19,045 80,375 208,625 199,400 1 Interest Total Revenues Coverage $ 47,721 48,129 42,496 38,225 17,193 10,673 1,566 14,318 23,553 $ 103,591 103,589 88,466 71,540 31,018 29,718 81,941 222,943 222,953 $ 227,800 216,281 206,545 199,672 219,165 253,742 262,264 316,491 316,806 288,600 2.2 2.1 2.3 2.8 7.1 8.5 N/A 3.9 1.4 1.3 Principal SOURCE: Maricopa County Regional Area Road Fund Report NOTES: Bond coverage ratio is based upon total Maricopa County Transportation Excise Tax collections. 1 The Transportation Excise Tax Revenue Bonds are secured by transportation excise taxes collected by the Department of Revenue on behalf of Maricopa County. Transportation Excise Tax Revenue Bonds - Bond Coverage Thousands of Dollars $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 2004 2005 2006 2007 2008 2009 Fiscal Year Revenue 2010 Debt Service 2013 Comprehensive Annual Financial Report 93 2011 2012 2013 Table C-4 Arizona Department of Transportation Transportation Excise Tax Revenue Bonds Debt Service Revenue and Cost Per Capita for the fiscal year ended June 30 (Thousands) Fiscal Maricopa County Total Year Principal 2012 2011 2010 2009 2008 2007 2006 2005 2004 $ 55,460 $ 45,970 33,315 13,825 19,045 80,375 208,625 199,400 Interest 48,129 42,496 38,225 17,193 10,673 1,567 14,318 23,553 1 Cost Revenue $ 103,589 88,466 71,540 31,018 29,718 81,942 222,943 222,953 $ 216,281 206,545 199,672 219,165 253,742 262,264 316,491 316,806 288,600 Cost Revenue Population per capita per capita 3,942 3,880 3,817 4,023 3,955 3,907 3,793 3,649 3,538 $ 26 23 19 8 8 22 61 63 $ SOURCES: Maricopa County Regional Area Road Fund Report; population data from the U.S. Census Bureau available only through 2012 NOTE: 1 Based upon total Maricopa County Transportation Excise Tax collections. Transportation Excise Tax Revenue and Cost Per Capita $100 $90 $80 Thousands of Dollars $70 $60 $50 $40 $30 $20 $10 $0 2004 2005 2006 2007 2008 2009 Fiscal Year Revenue 2010 Cost 2013 Comprehensive Annual Financial Report 94 2011 2012 55 53 52 54 64 67 83 87 82 Table C-5 Arizona Department of Transportation Ratios of Outstanding Debt by Type for the fiscal year ended June 30 (Thousands of Dollars) 2003 Governmental Activities Highway Revenue Bonds $ Transportation Excise Tax Revenue Bonds Grant Anticipation Notes (GARVEE) Premium on bonds Capital leases Advances and notes payable Total Governmental activities Business-Type Activities Notes payable Total Business-type Activities Total Primary Government $ Debt as a Percentage of Personal Income Amount of Debt per Capita1 2004 932,700 $ 2005 2006 1,017,360 $ 1,161,355 $ 1,223,425 488,400 169,145 34,423 916 180,438 1,806,022 289,000 308,585 60,481 1,121 165,305 1,841,852 80,375 363,970 76,721 5,910 169,473 1,857,804 325,430 90,852 11,130 195,018 1,845,855 151,545 151,545 142,414 142,414 146,454 146,454 150,494 150,494 1,957,567 $ 1.26% $ 350 $ 1,984,266 $ 1.17% 345 $ 2,004,258 $ 1,996,349 1.07% 0.96% 335 $ 322 SOURCES: U.S. Bureau of Economic Analysis (for population, personal income, and per capita personal income figures); U.S. Bureau of the Census (also for population) population data only availabe through 2012 NOTE: 1 The Arizona population data are midyear population estimates of the U.S. Bureau of the Census. Year 2003 through 2009 have been revised to reflect revisions made by the U.S. Bureau of the Cencus. Per capital personal income is total personal income divided by total midyear pouplation estimates of the U.S. Bureau of the Census. Previous years have been revised to reflect revisions in personal income and pouplation estimates. (continued) 2013 Comprehensive Annual Financial Report 95 Table C-5 Arizona Department of Transportation Ratios of Outstanding Debt by Type for the fiscal year ended June 30 (Thousands of Dollars) 2007 $ $ 2008 2010 2011 2012 1,490,600 $ 1,623,905 $ 1,740,765 $ 1,672,625 $ 1,600,855 $ 1,619,965 282,860 108,034 10,601 168,287 2,060,382 350,955 298,280 128,586 7,535 56,739 2,466,000 777,130 329,650 173,313 4,326 42,668 3,067,852 743,815 304,480 158,601 1,304 60,711 2,941,536 877,845 392,495 180,225 4,910 59,892 3,116,222 981,845 335,230 248,892 10,729 55,666 3,252,327 154,534 154,534 2,170 2,170 - - - - 2,214,916 $ 1.01% $ 2009 348 $ 2,468,170 $ 1.10% 380 $ 3,067,852 $ 1.40% 465 $ 2,941,536 $ 1.31% 441 $ 2013 Comprehensive Annual Financial Report 96 3,116,222 $ 1.37% 481 $ 3,252,327 1.38% 496 Table D-1 Arizona Department of Transportation Number of Vehicle Registrations Per Year for fiscal year ended June 30 (Thousands) Change in Number of Registered Fiscal Year Total Vehicles Vehicles 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 6,824 6,840 6,741 6,693 6,734 6,609 6,318 5,945 5,639 5,312 <16> 99 48 <41> 125 290 373 306 327 193 Arizona Population 1 Change in Vehicles Population Per Person 71 69 <183> 96 137 170 217 215 168 139 1.041 1.055 1.051 1.015 1.036 1.039 1.020 0.995 0.979 0.950 6,553 6,483 6,413 6,596 6,499 6,362 6,192 5,975 5,759 5,591 SOURCE: Vehicle registrations from Motor Vehicle Division's annual reports. NOTES: 1 The Arizona population data are midyear population estimates of the U.S. Bureau of the Census. Year 2010 has been revised to reflect revisions made by the U.S. Bureau of the Census. Population data available only through fiscal year 2012. Change in Vehicles Registered Compared to Population Change 500,000 400,000 Change 300,000 200,000 100,000 <100,000> <200,000> <300,000> 2004 2005 2006 2007 2008 Vehicles 2009 2010 Population 2013 Comprehensive Annual Financial Report 97 2011 2012 2013 Table D-2 Arizona Department of Transportation Vehicle Registrations Per Year Compared to Fuel Sales for fiscal year ended June 30 (Thousands) Fiscal Vehicle Percentage Fuel Percentage Year Registrations Change Sales Change 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 7,181 6,824 6,840 6,741 6,693 6,734 6,609 6,318 5,945 5,639 5.2% <0.2%> 1.5% 0.7% <0.6%> 1.9% 4.6% 6.3% 5.4% 6.2% 3,360,587 3,409,594 3,411,652 3,369,732 3,398,866 3,731,808 3,759,465 3,636,195 3,542,631 3,429,136 <1.4%> <0.1%> 1.2% <0.9%> <8.9%> <0.7%> 3.4% 2.6% 3.3% 2.7% 1 SOURCES: Vehicle registrations from Motor Vehicle Division's annual reports; fuel sales from Motor Vehicle Division data reported by fuel suppliers 1 NOTES: Fuel sales include both gasoline and use fuel (primarily diesel) sales. Fuel Sales numbers for 2009 and 2010 have been revised to reflect revisions made to the Motor Vehicle Division data. Percentage Change in Vehicle Registrations and Fuel Sales 8.0% 6.0% Percentage Change 4.0% 2.0% 0.0% <2.0%> <4.0%> <6.0%> <8.0%> <10.0%> 2004 2005 2006 2007 2008 2009 2010 2011 Fiscal Year Vehicle Registrations Fuel Prices 2013 Comprehensive Annual Financial Report 98 2012 2013 Table D-3 Arizona Department of Transportation Demographic and Economic Statistics for the Last Ten Calendar Years Calendar Year Ended December 31 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 Personal Income 2 Population 6,553,255 6,482,505 6,676,627 6,587,653 6,499,207 6,360,238 6,190,987 5,973,970 5,758,692 5,590,820 1 (in thousands) 235,780,739 227,286,519 223,716,314 219,026,704 223,961,131 218,587,551 206,958,398 188,152,439 170,026,128 155,607,258 Per Capita Personal Unemployment 3 Income $ 35,979 35,062 33,507 33,248 34,460 34,368 33,429 31,495 29,525 27,833 4 Rate 9.5% 10.0% 9.7% 5.9% 3.8% 4.1% 4.7% 5.0% 5.7% 6.0% SOURCES: U.S. Bureau of Economic Analysis (for population, personal income, and per capita personal income figures); U.S. Bureau of the Census (also for population); Arizona Department of Economic Security's website, www.workforce.az.gov (for unemployment rates) 1 NOTES: The Arizona population data are midyear population estimates of the U.S. Bureau of the Census. Previous years have been revised to reflect revisions made by the U.S. Bureau of the Census. 2 Personal income estimates for previous years were revised to reflect revisions made by the U.S. Bureau of the Census. 3 Per capita personal income is total personal income divided by total midyear population estimates of the U.S. Bureau of the Census. Previous years have been revised to reflect revisions in personal income and population estimates. 4 The unemployment rates were revised to reflect a revision made by the Arizona Department of Commerce website, www.workforce.az.gov. 2013 Comprehensive Annual Financial Report 99 Table D-4 Arizona Department of Transportation Principal Employers Current and Nine Years Ago Employer State of Arizona Wal-Mart Stores Inc. Banner Health City of Phoenix Wells Fargo Maricopa County Bank of America Arizona State University Raytheon Co. J P Morgan Chase & Co. Honeywell International, Inc. U.S. Postal Services Alberston's-Osco Intel Corp. Total Calendar Year Ended December 31, 2012 Full-Time Percentage Equivalent of Total State Calendar Year Ended December 31, 2003 Full-Time Percentage Equivalent of Total State Employees Rank Employment Employees Rank Employment 52,076 31,837 25,126 14,983 13,679 13,308 12,500 12,222 11,500 11,407 198,638 1 2 3 4 5 6 7 8 9 10 1.72% 1.05% 0.83% 0.49% 0.45% 0.44% 0.41% 0.40% 0.38% 0.38% 0.00% 0.00% 0.00% 0.00% 50,363 18,677 13,756 13,095 1 2 3 5 13,482 4 10,005 10,200 9 8 12,000 11,406 9,500 9,500 6 7 10 10 6.55% 171,984 1.85% 0.68% 0.50% 0.48% 0.00% 0.49% 0.00% 0.37% 0.37% 0.00% 0.44% 0.42% 0.35% 0.35% 6.30% SOURCES: Business Journal, Book of Lists 2012 and 2003 for employers; Arizona Department of Commerce website, www.workforce.az.gov (for annual State employment) 2013 Comprehensive Annual Financial Report 100 Table E-1 Arizona Department of Transportation Full-Time Equivalents (FTEs) for the fiscal year ended June 30 Appropriated Multimodal Fiscal Year Admin. 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 792 756 745 692 692 692 692 692 686 685 Highways 2,235 2,262 2,267 2,153 2,255 2,255 2,223 2,223 2,227 2,223 Non-appropriated Enforcement & Total Arizona Total Non- Appropriated Highways Appropriated Total All FTEs Magazine FTEs FTEs Planning Motor Vehicle Compliance Division Division Division 78 87 52 46 46 46 46 46 48 48 1,075 1,075 1,111 1,657 1,755 1,751 1,730 1,688 1,665 1,649 1 368 368 373 - 4,548 4,548 4,548 4,548 4,748 4,744 4,691 4,649 4,626 4,605 1 NOTES ECD FTE total was included in the Motor Vehicle Division 2004-2010. 2013 Comprehensive Annual Financial Report 101 18 23 22 23 28 28 60 72 72 72 HELP Other 1 2 2 3 3 3 3 45 44 44 43 24 24 49 38 31 13 63 68 68 68 52 52 112 113 106 88 4,611 4,616 4,616 4,616 4,800 4,796 4,803 4,762 4,732 4,693 Table E-2 Arizona Department of Transportation Capital Assets Used in the Operation of Governmental Funds Schedule by Function and Activity1 June 30, 2013 (Thousands of Dollars) Land Function and Activity Administration Highway: $ Administrative and other services Highway construction Highway development Materials engineering Traffic engineering Transportation planning and research Highway maintenance Motor vehicle Total governmental funds capital assets 879 Buildings and Improvements other than Machinery and Improvements Buildings Equipment $ 47,266 $ 18,574 $ 13,397 Construction in Infrastructure $ Progress - $ Total - $ 80,116 936 37,855 1,798 3,235 - - 43,824 2,808,958 710 - 10,567 105 4,908 357 384 7 22 3,934 2,667 4,265 1,207 12,951,193 - 3,285,417 - 19,060,453 3,482 9,180 1,586 - 153 123 316 - - 592 4,907 11,641 45,260 47,244 9,396 3,572 8,848 7,831 - - 68,411 70,288 $ 2,828,031 $ 193,715 $ 33,876 $ 45,700 $ 12,951,193 $ 3,285,417 Note: 1 This schedule presents only the cost of the capital asset balances related to governmental funds. Accordingly, the cost of the capital assets reported in the internal service fund are excluded from the above amounts. Generally, the capital assets of the internal service fund are included as governmental activities in the statement of net assets. 2013 Comprehensive Annual Financial Report 102 $ 19,337,932 Table E-3 Arizona Department of Transportation Capital Assets Used in the Operation of Governmental Funds Schedule of Changes by Function and Activity1 for the fiscal year ended June 30, 2013 Governmental Funds Capital Assets Function and Activity Administration Governmental Funds Capital Assets July 1, 2012 $ Additions 79,582,382 $ 533,165 Deductions $ June 30, 2013 - $ 80,115,547 Highway: Administrative and other services Highway construction Highway development Materials engineering Traffic engineering Transportation planning and research Highway maintenance Motor Vehicle Functional sub-total Construction in progress Total governmental funds capital assets $ 43,787,074 14,966,406,578 3,331,138 9,088,030 1,585,297 531,159 69,154,355 70,075,719 38,258 840,644,704 151,256 91,964 60,522 1,112,792 211,877 <479> <32,014,754> <1,855,792> - 43,824,853 15,775,036,528 3,482,394 9,179,994 1,585,297 591,681 68,411,355 70,287,596 15,243,541,732 842,844,538 <33,871,025> 16,052,515,245 3,443,198,162 604,150,537 <761,931,722> 3,285,416,977 18,686,739,894 $ 1,446,995,075 $ <795,802,747> $ NOTE: 1 This schedule presents only the capital asset balances related to governmental funds. Accordingly, the capital assets reported in the internal service fund are excluded from the above amounts. Generally, the capital assets of the internal service fund are included as governmental activities in the statement of net assets. 2013 Comprehensive Annual Financial Report 103 19,337,932,222 Table E-4 Arizona Department of Transportation Total Public Road Mileage by Highway Class and Governmental Ownership for the calendar year ended December 31 (In Center Lane Miles) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Functional Classification Rural: Interstate Freeway 1 Principal Arterial Freeways & Expressways Principal Arterial Minor Arterial Major Collector Minor Collector Local 980 980 981 981 980 980 980 980 Additional categorization beginning 2011 980 982 25 43 1,141 1,276 4,233 2,117 26,004 1,187 1,343 4,301 2,210 26,016 1,167 1,363 4,332 2,188 27,015 1,168 1,359 4,303 2,186 27,819 1,167 1,357 4,301 2,185 27,685 1,167 1,358 4,302 2,191 27,525 1,167 1,378 4,342 2,134 30,845 1,259 1,276 4,338 1,735 31,157 1,267 1,328 4,413 2,032 31,548 1,267 1,308 6,416 31,370 35,751 36,037 37,046 37,816 37,675 37,523 40,846 40,745 41,593 41,386 187 188 188 188 188 188 188 188 188 187 145 150 156 168 171 176 176 175 178 181 1,087 1,189 2,200 16,969 1,156 1,279 2,161 17,142 1,400 1,790 1,645 17,564 1,400 1,791 1,632 17,380 1,400 1,792 1,632 17,735 1,399 1,807 1,632 17,735 1,400 1,808 1,649 17,817 1,390 1,752 1,631 17,806 1,435 1,788 1,653 18,256 1,437 1,786 1,642 18,645 21,777 22,076 22,743 22,559 22,918 22,937 23,038 22,942 23,498 23,878 Statewide composite: Freeways and expressways Arterials Collectors Locals 1,312 4,693 8,550 42,973 1,318 4,965 8,672 43,158 1,325 5,720 8,165 44,579 1,337 5,718 8,121 45,199 1,339 5,716 8,118 45,420 1,344 5,731 8,125 45,260 1,344 5,753 8,125 48,662 1,343 5,677 7,704 48,963 1,346 5,843 8,098 49,804 1,350 4,533 9,366 50,015 Total statewide composite 57,528 58,113 59,789 60,375 60,593 60,460 63,884 63,687 65,091 65,264 Total Rural Urban: Interstate freeway 2 Principal Arterial Freeways & Expressways Principal arterial Minor arterial Urban collector Local Total urban SOURCE: Arizona's Highway Performance Monitoring System (HPMS) 1 Additional category created for 2011 reporting. 2 Before 2012 this category was titled "Urban Expressway". Total Public Road Mileage 70,000 60,000 Miles 50,000 40,000 30,000 20,000 10,000 0 2003 2004 2005 2006 2007 2008 2009 Calendar Year Urban Rural 2013 Comprehensive Annual Financial Report 104 2010 2011 2012 Table E-5 Arizona Department of Transportation Daily Vehicle Miles Traveled with Population Data for calendar year ended December 31 (Thousands) Calendar1 Year Ended Non-State State All Public Arizona2 December 31 Highways Highways Highways Population 2012 85,285 79,003 164,288 6,553 2011 83,955 79,312 163,267 6,483 2010 84,427 79,699 164,126 6,413 2009 87,608 76,714 164,322 6,588 2008 86,886 81,496 168,382 6,499 2007 91,042 81,456 172,498 6,360 2006 89,016 82,178 171,194 6,191 2005 85,352 78,473 163,825 5,974 2004 75,070 81,808 156,878 5,759 2003 75,396 72,258 147,654 5,591 Daily Miles per capita 25.1 25.2 25.6 24.9 25.9 27.1 27.7 27.4 27.2 26.4 SOURCES: Arizona's Highway Performance Monitoring System (HPMS); ADOT Multimodal Planning Division office records. The Arizona population data are midyear population estimates of the U.S. Bureau of the Census. 1 NOTES: Year 2012 is the latest population information avaible at the time of publication. 2 Years 2002 through 2009 and 2011 population information has been revised to reflect revisions made by the U.S. Bureau of the Census. Daily Vehicle Miles Traveled 200,000 180,000 160,000 Thousands of Miles 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 2002 2003 2004 2005 2006 2007 2008 Calendar Year State Highways Non-State Highways 2013 Comprehensive Annual Financial Report 105 2009 2010 2011 ACKNOWLEDGMENTS The Comprehensive Annual Financial Report was prepared by Financial Management Services, Fiscal Operations: Keith Fallstrom Anita Kleinman, CPA Diane Wascher, CPA Jennifer Crummey Yolanda Flores Joel Konopken Winifred Gettings Nichole Zumbrunnen Jeffrey Aiazzi 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. 2013 Comprehensive Annual Financial Report 106