COMPREHENSIVE ANNUAL FINANCIAL REPORT Arizona Department of Transportation For the fiscal year ended June 30, 2014 Comprehensive Annual Financial Report For the fiscal year ended June 30, 2014 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, 2014 TABLE OF CONTENTS 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 .............................................................................................................................. 1-3 Management's Discussion and Analysis .............................................................................................................4-14 Basic Financial Statements Government-wide Financial Statements: Statement of Net Position (Exhibit 1) .......................................................................................................... 15 Statement of Activities (Exhibit 2) ............................................................................................................... 16 Governmental Funds Financial Statements: Balance Sheet - Governmental Funds (Exhibit 3) .................................................................................... 17-18 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position {Exhibit 3.1) ......................................................................................... 19 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds (Exhibit 4) ........................................................................................ 20-23 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities (Exhibit 4.1) ........................... 24 Proprietary Funds Financial Statements: Statement of Net Position - Proprietary Funds (Exhibit 5) .......................................................................... 25 Statement of Revenues, Expenses, and Changes in Fund Net Position - Proprietary Funds (Exhibit 6) ..... 26 Statement of Cash Flows - Proprietary Funds {Exhibit 7) ............................................................................ 27 Fiduciary Funds Financial Statement Statement of Net Position - Agency Fund {Exhibit 8} .................................................................................. 28 Index of Notes to the Financial Statements ..................................................................................................... 29 Notes to the Financial Statements .............................................................................................................. 30-55 Required Supplementary Information (Other than MD&A) Budgetary Comparison Schedule - General Fund (State Highway Fund) ......................................................... 56 Note to Required Supplementary Information ................................................................................................ 57 Information About Infrastructure Assets Reported Using the Modified Approach .................................... 58-62 2014 Comprehensive Annual Financial Report Arizona Department of Transportation Comprehensive Annual Financial Report for the fiscal year ended June 3D, 2014 TABLE OF CONTENTS (continued) Supplementary Information Non-Major Governmental Funds Financial Statements: Combining Balance Sheet {Exhibit 9) ...................................................................................................... 63-64 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances (Exhibit 10) ........... 65-66 Fiduciary Funds Financial Statements: Combining Statement of Net Position - Agency Fund {Exhibit 11) .............................................................. 67 Statement of Changes in Assets and Liabilities - Agency Fund (Exhibit 12) ................................................ 68 STATISTICAL SECTION Overview ................................................................................................................................................................ 69 Index of Statistical Section ..................................................................................................................................... 70 Financial Trends: Change in Net Position (Table A-1) .............................................................................................................. 71-74 Statement of Revenues, Expenditures, and Changes in Fund Balances (Table A-2) .................................... 75-78 Fund Balances of Governmental Funds (Table A-3) ..................................................................................... 79-80 Expenditures of Federal Awards (Table A-4) .................................................................................................... 81 Government-wide Expenses by Function (Table A-5) ................................................................................. 82-83 Government-wide Revenues (Table A-6) ..................................................................................................... 84-85 Net Position by Component (Table A-7) ...................................................................................................... 86-87 Revenue Capacity: Highway User Revenue Fund Collections (Table B-1) ....................................................................................... 88 Highway User Revenue Fund Distributions (Table B-2) .................................................................................... 89 Fuel Tax Rates (Table B-3) ................................................................................................................................. 90 Motor Vehicle Fuel Tax - Top Ten Suppliers (Table B-4) .................................................................................. 91 Gasoline Volume Sold - Top Twenty-Five Suppliers (Table B-5) ................................................................. 92-93 Highway User Revenue Fund - Legal Debt Margin (Table C-1) ........................................................................ 94 Highway Revenue Bonds - Bond Coverage (Table C-2) ......................................................................................... 95 Transportation Excise Tax Revenue Bonds - Bond Coverage (Table C-3) ........................................................ 96 Transportation Excise Tax Revenue Bonds - Debt Service Revenue and Cost Per Capita (Table C-4) ............. 97 Ratios of Outstanding Debt by Type (Table C-5) .......................................................................................... 98-99 2014 Comprehensive Annual Financial Report Arizona Department of Transportation Comprehensive Annual Financial Report for the fiscal year ended June 30, 2014 TABLE OF CONTENTS (continued) Debt Capacity: Demographic and Economic Information: Number of Vehicle Registrations Per Year (Table D-1) ................................................................................... 100 Vehicle Registrations Per Year Compared to Fuel Sales (Table D-2) .............................................................. 101 Demographic and Economic Statistics (Table D-3) ......................................................................................... 102 Principal Employers (Table D-4) ...................................................................................................................... 103 Operating Information: Full-Time Equivalents (FTEs) (Table E-1) ......................................................................................................... 104 Capital Assets _ Schedule by Function and Activity (Table E-2) ..................................................................... 105 Capital Assets - Schedule of Changes by Function and Activity (Table E-3) ................................................... 106 Total Public Road Mileage by Highway Class and Governmental Ownership (Table E-4) .............................. 107 Daily Vehicle Miles Traveled with Population Data {Table E-5} ...................................................................... 108 Acknowledgments ..................................................................................................................................................... 109 2014 Comprehensive Annual Financial Report INTRODUCTORY SECTION 2014 Comprehensive Annual Financial Report A DOT I Phoenix, Arizona 185007 Janice K. Brewer, Governor John S. Halikowski, Director Kristine Ward, Chief Financial Officer 206 South lih Avenue Office of the Director December 18, 2014 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) of the Department for the fiscal year ended June 3D, 2014. 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 3D, 2014, and contracted with the independent auditing firm of CliftonLarsonAlien LLP. to au'dit 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 Departmenfs financial statements for the fiscal year ended June 3D, 2014, 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 2014 Comprehensive Annual Financial Report reviews accounting controls and performs operational audits of 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 obligatio ns. As of June 3D, 2014, the Department was organized into five major operating divisions supported by several groups, such as Human Resources, Information Technology and Financial Management Services. The five major 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 & 2014 Comprehensive Annual Financial Report ii 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 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. Overall, the Department employs approximately 4,200 persons. Budgetary Controls Upon the effective date of the operating budget 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 Economv In fiscal year 2014, Arizona saw modest economic improvements with sluggish growth in employment, personal income and population. The U.S. economy experienced negative GDP growth in the third quarter (first quarter on calendar basis) due mainly to the cold winter that swept across most of the United States that ultimately reduced the commercial truck activity in Arizona and around the nation. According to the July 17, 2014 Arizona Department of Administration's employment report, the Arizona unemployment rate decreased from 8.1 percent in June 2013 to 6.9 percent in June 2014. During this period, the private sector created 45,900 jobs while the government sector lost 3,100 jobs for a net gain of 42,800. The number of jobs gained in FY 2014 was lower than the 49AOO jobs gained in FY 2013. The Department's two main funding sources, the Highway User Revenue Fund (HURF) and the Regional Area Road Fund (RARF), also known as the Maricopa County Transportation Excise Tax, posted positive results in fiscal year 2014. In fiscal year 2014, the HURF revenue collections were $1,241.3 million, 2.6 percent above fiscal year 2013 and 1.4 percent above the forecast. The Regional Area Road Fund revenues equaled $365.6 million, an increase of 7.0 percent over fiscal year 2013 and 1.0 percent above the estimate. Despite strong year-over-year growth, HURF and RARF revenue sources remain at fiscal year 2005 and fiscal year 2006 revenue levels, respectively. 2014 Comprehensive Annual Financial Report iii Arizona's economy is expected to grow over the next two years but at a slower rate than the historical growth prior to the economic boom in 2005 to 2007. On May 1, 2014, the Arizona Department of Administration estimated Arizona non-farm employment will grow by 2.1 and 2.4 percent in calendar years 2014 and 2015, respectively. According to the September 1, 2014 Western Blue Chip report, personal income in Arizona is expected to increase by 4.7 percent in calendar year 2014 and 5.3 percent in calendar year 2015. The population of Arizona is forecasted to grow by 1.5 percent in calendar year 2014 and 1.7 percent in calendar year 2015. The Department's fiscal year 2015 HURF revenue estimate amounts to $1,270.6 million, an increase of 2.4 percent over fiscal year 2014. The HURF average compound growth rate for fiscal years 2005 through 2014 was 0.0 percent. The distribution of HURF revenues in fiscal year 2015 is estimated to be as follows: State Highway Fund $584.6 million; Arizona cities and towns $366.7 million; Arizona counties $228.4 million; Department of Public Safety $89.3 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 $7.7 million will be re-allocated from the State Highway Fund share of HURF vehicle license tax revenues with $4.9 million going to the State General Fund and $2.8 million going to the Department of Public Safety. The Maricopa County Transportation Excise Tax revenue forecast for fiscal year 2015 totals $378.4 million, an increase of 3.5 percent over fiscal year 2014. The Maricopa County Transportation Excise Tax average compound growth rate for fiscal years 2005 through 2014 was 1.6 percent. The distribution of the Maricopa County Transportation Excise Tax revenue in fiscal year 2015 is estimated to be as follows: Maricopa County Regional Area Road Fund $212.7 million for highways, $39.7 million for arterial streets, and $126.0 million for the Public Transportation Fund. 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 2014, the Transportation Board approved a $4.4 billion statewide Highway Construction Program as part of the Five-Year Transportation Facilities Construction Program for fiscal years 2015 through 2019. 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 $2.7 billion for system improvements, $.5 billion for system management, and $1.2 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 $4.2 billion. The Department currently has 11 major RTP Freeway Program projects under design and 6 major projects under construction. The Department acquired 4,122 acres of land for the RTP Freeway Program. 2014 Comprehensive Annual Financial Report iv As part of the Five-Year Transportation Facilities Construction Program, the Transportation Board also adopted a $161.2 million (state share) Five-Year Airport Development Program that includes 709 projects at general aviation and air carrier airports located throughout the state. Other Information 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, 2014. Single Audit Awards The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the Arizona Department of Transportation for its Comprehensive Annual Financial Report for the fiscal year ended June 30, 2013. This accomplishment was the twenty-fourth consecutive year that the Department has achieved this prestigious award. In order to be awarded a Certificate of Achievement, a government unit must publish an easily readable and efficiently organized Comprehensive Annual Financial Report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe our current Comprehensive Annual Financial Report continues to meet the Certificate of Achievement Program's requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. Acknowledgments We would like to express our sincere appreciation to the many individuals whose dedicated efforts have made this report possible. A special note of thanks is extended to the staff of Fiscal Operations whose commitment, professionalism, and dedicated efforts contributed to the timely preparation of the fiscal year 2014 Comprehensive Annual Financial Report. Respectfully Submitted, hn S. Halikowski, Director Arizona Department of Transportation ,;» ~a-o Kristine Ward, Assistant Director for Finance and Accounting Arizona Department of Transportation 2014 Comprehensive Annual Financial Report v Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to Arizona Department of Transportation F or its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2013 Executive Director/CEO vi 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 Orner Assistant Director Multimodal Planning Division Sonya E. Herrera Assistant Director Administrative Services Division Kevin Biesty Assistant Director Government Relations and Policy Development Office Kristine Ward Assistant Director for Finance and Accounting Arizona State Transportation Board Counties Member Stephen W. Christy, Chairman Kelly O. Anderson, Vice Chairman Vacant Joseph E. La Rue Deanna L. Beaver William R. Cuthbertson Jack Sellers 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) District 1 (Maricopa County) 2014 Comprehensive Annual Financial Report vii Term Expires 2015 2016 2017 2018 2018 2019 2020 - - - - - - - State of Arizona Department of Transportation Organization Chart viii FINANCIAL SECTION 2014 Comprehensive Annual Financial Report G CliftonLarsonAlien LLP CLAconnect.com Cl ifton LarsonAlien INDEPENDENT AUDITORS' REPORT The Honorable Janice K. Brewer Governor of the State of Arizona Members of the Arizona State Legislature Arizona Department of Transportation Phoen ix, Arizona Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the businesstype activities, each major fund, and the aggregate remaining fund information of the Arizona Department of Transportation (Department), as of and for the year ended June 30, 2014, and the related notes to the financial statements, which collectively comprise the Department's basic financia l statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is respons ible for the preparation and fair presentation of these financial statements in accordance w ith accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financia l statements that are free from material misstatement, whether due to fraud or error. Auditors' Responsibility Our responsibility is to express opInions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards genera lly accepted in the United States of America and the standards applicable to financial audits conta ined in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the aud it to obtain reasonable assurance about whether the financial statements are free from material misstatement. An aud it involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the aud itor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's interna l control. According ly, we express no such opinion. An aud it also includes evaluating the appropriateness of accounting pol icies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the aud it evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. INTERN AT I O:-.'AL Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Arizona Department of Transportation as of June 30, 2014, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis on pages 4 through 14, budgetary comparison information on pages 56 and 57, and information about infrastructure assets reported using the modified approach on page 58 through 62 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Supplementary and Other Information Our audit was conducted for the purpose of forming opInions on the financial statements that collectively comprise the Arizona Department of Transportation's basic financial statements. The accompanying supplementary information such as the Introductory Section, Supplementary Information, and Statistical Section, as listed in the table of contents, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The Supplementary Information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Supplementary Information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. The Introductory Section and Statistical Section have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Govemment Auditing Standards, we have issued our report dated December 18, 2014, on our consideration of the Department's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing , and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Govemment Auditing Standards in considering the Department's internal control over financial reporting and compliance. Phoenix, Arizona December 18, 2014 Arizona Department of Transportation Management's Discussion and Analysis June 3D, 2014 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, 2014. 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 15, 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 17.9 billion, compared to $17.3 billion for fiscal year 2013, an increase of 3.5 percent. Of this amount, $160.9 million represents the unrestricted component and may be used to meet the Department's ongoing obligations to citizens and creditors as compared to $152.1 million at the end of 2013. • The Department's capital assets are $19.7 billion, compared to $19.3 billion for fiscal year 2013, an increase of 2.1 percent. This increase is attributable to the results of highway construction activity. The Department's net investment in capital assets is $16.8 billion, compared to $16.3 billion for fiscal year 2013, an increase of 3.1 percent. • The Department's non-current liabilities are $3.3 billion, compared to $3.5 billion in 2013. The Department had $165.6 million less in bonds outstanding in 2014 than in 2013. During fiscal year 2014, there were no new bonds issued and $165.6 million in bonds repaid. 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 $1.3 billion in 2013. • The total restricted fund balance is $1.1 billion; the majority of this amount is restricted for capital projects. Inventories of $6.8 million represent the non-spendable portion of fund balance while $178.9 million represents the committed fund balance portion. • The proprietary funds reported net position at year-end of $80.0 million, as compared to $79.0 million in 2013. 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. 2014 Comprehensive Annual Financial Report 4 Arizona Department of Transportation Management's Discussion and Analysis (continued) June 30, 2014 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 represents 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 15-16 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 expensed as governmental activities. • 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. 2014 Comprehensive Annual Financial Report 5 Arizona Department of Transportation Management's Discussion and Analysis (continued) June 30,2014 • 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 17 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 from 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 17-24 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. 2014 Comprehensive Annual Financial Report 6 Arizona Department of Transportation Management's Discussion and Analysis (continued) June 30, 2014 The proprietary funds financial statements can be found on pages 25-27 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 28. 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 30-55 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 56-62 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 63-68 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, 2014 and 2013. The Department's combined net position increased by $598.6 million over the course of this fiscal year's operations, an increase of 3.5 percent. The net position of the governmental activities increased by $597.5 million, or 3.5 percent; business-type activities increased by $1.0 million, an increase of 1.3 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, 2014 and 2013: Business-type Activities 2014 2013 Governmental Activities 2014 2013 Total 2014 2013 Assets Current and other assets Capital assets Total assets Uabilities $ 1,553,134,014 19,732,480,170 21,285,614,184 $ 1,651,917,165 19,263,771,231 20,915,688,396 $ 82,297,617 23,704 82,321,321 $ 81,327,320 30,227 81,357,547 $ 1,635,431,631 19,732,503,874 21,367,935,505 $ 1,733,244,485 19,263,801,458 20,997,045,943 Other liabilities Non-current liabilities Total liabilities 257,124,800 3,250,661,052 3,507,785,852 284,448,317 3,450,945,741 3,735,394,058 2,128,181 153,055 2,281,236 2,188,646 161,024 2,349,670 259,252,981 3,250,814,107 3,510,067,088 286,636,963 3,451,106,765 3,737,743,728 Net position Net investment in capital assets Restricted Unrestricted Total net position 16,812,808,367 805,892,958 159,127,007 17,777,828,332 16,290,604,770 738,968,893 150,720,675 17,180,294,338 23,704 78,226,426 1,789,955 80,040,085 30,227 77,564,143 1,413,507 79,007,877 16,812,832,071 884,119,384 160,916,962 17,857,868,417 16,290,634,997 816,533,036 152,134,182 17,259,302,215 $ $ $ $ 2014 Comprehensive Annual Financial Report 7 $ Arizona Department of Transportation Management's Discussion and Analysis (continued) June 30, 2014 The total assets of the Department were $21.4 billion, while total liabilities were $3.5 billion, resulting in a net position balance of $17.9 billion. The majority of the Department's net position, $16.8 billion (94.1 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 HURF bond in Fiscal Year 2013 and no new bonds were issued in Fiscal year 2014. 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 2014 2013 Business-type Activities 2014 2013 Total 2014 2013 Revenues Program revenues: Charges for services Operating grants and contributions Capital grants and contributions General reven ues: Transportation excise taxes Motor vehicle registration, title, and related taxes Fuel and motor carrier taxes and fees Flight property taxes Income from investments Gain on sale of capital assets Other Total revenues $ 137,724,749 157,704,815 546,680,156 $ 134,715,560 168,435,801 651,798,476 $ 5,164,129 $ 5,193,954 $ 142,888,878 157,704,815 546,680,156 $ 139,909,514 168,435,801 651,798,476 243,786,442 227,800,355 243,786,442 227,800,355 963,221,368 714,852,146 12,974,652 11,633,977 26,213 13,904,713 2,802,509,231 913,326,182 708,062,017 8,084,374 11,781,298 120,706 13,290,109 2,837,414,878 963,221,368 714,852,146 12,974,652 12,369,126 26,213 13,904,713 2,808,408,509 913,326,182 708,062,017 8,084,374 12,528,233 120,706 13,290,109 2,843,355,767 106,199,775 51,073,648 122,977,082 111,397,196 312,518,589 216,674,664 101,369,817 46,076,242 139,761,650 107,654,532 257,126,025 213,394,662 106,199,775 51,073,648 122,977,082 111,397,196 312,518,589 216,674,664 101,369,817 46,076,242 139,761,650 107,654,532 257,126,025 213,394,662 1,065,798,330 90,375,747 13,553,975 114,406,231 1,074,085,950 102,332,256 1,074,085,950 102,332,256 735,149 746,935 5,899,278 5,940,889 Expenses Administration Highway Highway maintenance Motor vehicle Non-capital, incl udi ng asset preservation Di stri buti ons to oth e r state age n ci e s Distributions to Arizona counties and cities Local governmental assistance Issuance costs on long term debt Interest on long-term debt Arizona Highways Magazine Highway Expansion and Extension Loan Program Total expenses Changes in net position Net position - July 1 Net position - June 30 4,821,234 4,637,319 1,065,798,330 90,375,747 13,553,975 114,406,231 4,821,234 187,315,278 187,315,278 4,637,319 2,204,975,237 2,229,116,412 45,836 4,867,070 46,140 4,683,459 45,836 2,209,842,307 46,140 2,233,799,871 597,533,994 17,180,294,338 $17,777,828,332 608,298,466 16,571,995,872 $17,180,294,338 1,032,208 79,007,877 $ 80,040,085 1,257,430 77,750,447 $ 79,007,877 598,566,202 17,259,302,215 $17,857,868,417 609,555,896 16,649,746,319 $17,259,302,215 2014 Comprehensive Annual Financial Report 8 Arizona Department of Transportation Management's Discussion and Analysis (continued) June 30, 2014 Governmental Activities The following chart depicts revenues of the governmental activities for the fiscal year ended June 30, 2014: Revenues - Governmental Activities $2,802,509,231 • Income from investments 0.4% • Fuel and motor carrier taxes and fees 5.5% • Transportation excise taxes 8.7% o Other revenues including flight property taxes and gain on sale of capital assets 1.0% o o Vehicle registration, title, license and related taxes 34.4% o Operating grants and contributions 5.6% Charges for services 4.9% Capital grants and contributions 19.5% $2.2 billion (or 79 .3 percent) of the Department's revenues are from the following three revenue sources: • • • Vehicle registration, title, license, and related taxes comprise the Department's largest revenue source of $963 million (34.4 percent). Fuel and motor carrier taxes and fees represent the Department's second largest revenue source of $714.9 million (25.5 percent). Capital grants and contributions represent the Department's third largest revenue source of $546.7 million (19.5 percent). The Department's two main funding sources, the Highway User Revenue Fund (HURF) and the Regional Area Road Fund (RARF), also known as the Maricopa County Transportation Excise Tax, posted positive year-results in fiscal year 2014. HURF collections totaled approximately $1,241.3 million, 2.6 percent above fiscal year 2013 and 1.4 percent above the forecast. Maricopa County Transportation Excise Tax collections totaled $365.6 million, an increase of 7.0 percent over fiscal year 2013 and 1.0 percent above the Department's estimate. The Transportation Excise Tax distribution to the Department was $243.8 million compared to $227.8 million for fiscal year 2013. 2014 Comprehensive Annual Financial Report 9 Arizona Department of Transportation Management's Discussion and Analysis (continued) June 30,2014 The following chart depicts expenses of the governmental activities for the fiscal year ended June 30, 2014: Expenses - Governmental Activities $2,204,975,237 • o Distributions to Arizona counties and cities 48.3% Distributions to other state agencies 9.8% o Local governmental assistance 4.1% • Bond issuance Costs 0.6% Interest on long-term debt 5.2% Adm inistration 4.8% • Non-capital, including asset preservation 14.2% o o Highway maintenance 5.6% Motor vehicle 5.1% $1.6 billion (or 72.3 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 (48.3 percent). Non-capital, including asset preservation, represents the Department's second largest expense of $312.5 million (14.2 percent). Distributions to other state agencies represent the Department's third largest expense of $216.7 million (9.8 percent). Distributions to Arizona counties and cities increased in fiscal year 2014 as compared to fiscal year 2013 due to an increase in fuel tax and vehicle license tax collections. The distributions to other government entities equals 1.4 Billion (62.2 percent); making up more than half of the expenditures for fiscal year 2014. 2014 Comprehensive Annual Financial Report 10 Arizona Department of Transportation Management's Discussion and Analysis (continued) June 30, 2014 Business-type Activities Net position for business-type activities increased by $1.0 million in fiscal year 2014. Total revenues were $5.9 million, with charges for services representing 87.5 percent and income from investments 12.5 percent. The total expenses for business-type activities were $4.9 million. The Highway Expansion and Extension Loan Program did not approve or disburse any loans in Fiscal Year 2014. Interest revenue increased this fiscal year due to the fund not issuing any new loans which increased average cash balances during the year. The Arizona Highways Magazine had a decrease in operating revenues of $24 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 17-24) 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 63-66. As of the end of the fiscal year, the fund balances of the governmental funds totaled $1.3 billion, a decrease of $52.14 million over the previous fiscal year. The majority of this amount is restricted for capital projects. The General Fund (State Highway Fund) is the primary operating fund of the Department. At the end of the current fiscal year, the non-spendable fund balance was $6.8 million; the restricted fund balance was $295.4 million; and the committed fund balance was $129.1 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 2014 were $386.1 million; Transportation Excise Tax revenue of $243.8 million (or 63.1 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 $137.0 million were transferred in from the General Fund (State Highway Fund), Maricopa Regional Area Road Construction Fund ($103.3 million), and Grant Anticipation Notes Fund ($62.8 million), and were used to pay the debt service. 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 Funds' expenditures were 2014 Comprehensive Annual Financial Report 11 Arizona Department of Transportation Management's Discussion and Analysis (continued) June 30, 2014 $150.2 million. Capital outlay expenditures of $134.9 million (89.8 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 The Department's appropriated operating budget from the General Fund (State Highway Fund) increased by about $7.2 million from fiscal year 2013 to fiscal year 2014. The increase was primarily due to the increased cost to maintain and operate new lane miles. In fiscal year 2013, the Department spent 98.8% of its budget and in fiscal year 2014 the Department spent 99.0% of its budget. Ultimately, the Department spent about $7.7 million more in fiscal year 2014 than in fiscal year 2013 from its appropriated operating budget from the General Fund (State Highway Fund). Reference the budgetary comparison schedule on page 56. 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, 2014, amounts to $19.7 billion (net of accumulated depreciation), a $468.7 million increase over the previous fiscal year. Governmental Activities 2014 2013 Land I nfrastructu re Construction in progress Buildings and improvements Improvements other than buildings Machinery and equipment Mobile fleet and aircraft Total $ 2,906,121,499 13,778,329,207 2,843,910,023 103,775,596 22,306,468 12,204,261 65,833,116 $19,732,480,170 $ 2,828,031,298 12,951,193,039 3,285,416,977 105,853,869 23,394,787 12,200,738 57,680,523 $ 19,263,771,231 Business-type Activities 2014 2013 $ $ 7,900 $ 7,900 8,838 14,347 6,966 7,980 23,704 $ 30,227 Total 2014 $ 2,906,129,399 13,778,329,207 2,843,910,023 103,784,434 22,306,468 12,211,227 65,833,116 $19,732,503,874 2013 $ 2,828,039,198 12,951,193,039 3,285,416,977 105,868,216 23,394,787 12,208,718 57,680,523 $19,263,801,458 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 6,800 center line miles of roads (21,390 travel lane miles) and 4,787 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 (S 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 3.69 was achieved for fiscal year 2014. 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 2014, a CRI of 93.8 percent was achieved. 2014 Comprehensive Annual Financial Report 12 Arizona Department of Transportation Management's Discussion and Analysis (continued) June 30,2014 In addition to many smaller projects, the following major highway construction contracts in excess of $10 million were started during fiscal year 2014: Contract Start Date Description 12/8/2013 Capacity additions-major widening at US 93 at Antelope Wash 19,395,413 Fiscal Year 2014 Construction Exnendjtures $ 4,562,333 Contract Amount $ Capacity additions-major widening on Interstate 10 at Penyville road traffic interchange 1118/2013 18,797,950 13,001,656 System preservation-reconstruction at US 89 and state route 64, Little Colorado river 1011112013 36,669,325 7,103,304 System preservation-reconstruction at Deep Well Ranch road at south alino Valley limits 2114/2014 17,357,818 3,528,786 System preservation-restoration/rehab/resurface at Rattlesnake Wash at Junction 93 411112014 11,249,398 1,112,855 Capacity additions-reconstruction on state route lOlL at Maryland avenue HOV ramps 9/1312013 11,725,000 11,696,980 Capacity additions (major bridge rehabilitation) on 1-15 Virgin River bridge, structure # 1619 111712014 27,182,791 7,463,480 Furthermore, the following major highway construction projects had expenditures in excess of $15 million in fiscal year 2014_ These project expenditures include payments made to construction contractors (as shown below) as well as utility, design, right-of-way, and landscaping costs: Location Description 2014 Project Expenditures Contract Start Date SR202L; Santan to Ellsworth Rd in Maricopa County 2/17/2012 Traffic Interchange between 1-10 and State Route 303L in Maricopa County SR303L; Camelback Road to Glendale Avenue in Maricopa County Salt Rive r to Base Ii ne Road in Mari copa Cou nty Ruthrauff to Prince Road in Pima County 110; Sarival to SR101L in MariCopa County US89 to SR 98 in Coconino County 110; Perryville Road Traffic Interchange in Maricopa County 9/16/2011 2/8/2013 NA 7/15/2011 12/24/2007 5/9/2013 11/8/2013 2014 Comprehensive Annual Financial Report 13 $ 65,400,261 47,281,412 30,916,717 23,527,845 22,577,680 18,899,963 18,370,855 15,384,130 Arizona Department of Transportation Management's Discussion and Analysis (continued) June 30, 2014 Non-Current Liabilities (See Note SF to the financial statements for additional information) The Department's non-current liabilities for its governmental and business-type activities as of June 30, 2014, amount to $3.3 billion, a decrease of $200.3 million from the previous fiscal year. Governmental Activities 2014 $ 1,674,800,000 Highway revenue bonds Transportation excise tax revenue bonds Grant anticipation notes (GARVEE bonds) Amortized Premium on bonds Capital leases Compensated absences Advances and notes payable Total governmental activities 2013 867,375,000 247,710,000 323,356,042 $1,733,285,000 925,975,000 296,240,000 350,739,402 29,323,520 18,231,307 89,865,183 22,271,210 16,618,748 105,816,381 3,250,661,052 3,450,945,741 153,055 161,024 153,055 161,024 Business-type Activities Compensated absences Total business-type activities $ 3,250,814,107 $ 3,451,106,765 Total non-current liabilities The Department has issued revenue bonds in 33 separate issues since 2000. All bonds outstanding as of June 30, 2014, are scheduled to mature on various dates, but none later than July I, 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. The senior lien Highway Revenue Bonds have been rated AAA/Aai 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+/Aal. 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. lih Avenue, Phoenix, Arizona, 85007, or by visiting our website at: http://www .azdot. go vI abo ut/Fi nanc ial ManagementServi ces/transportation -fun din glfinanc i aI-reports. 2014 Comprehensive Annual Financial Report 14 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 2014 Comprehensive Annual Financial Report Exhibit 1 Arizona Department of Transportation Statement of Net Position June 30, 2014 Governmental Activities Assets Unrestricted cash on deposit with the State Treasurer $ 88,926,759 Business-type Activities $ Receivables: Subscriptions, net of allowance for doubtful accounts 3,292,491 Total $ 80,475 80,475 62,116,543 3,772,362 Taxes and fees Notes and loans 62,116,543 3,772,362 16,070,809 Other, net of allowance for doubtful accounts Due from U.S. Government for reimbursable costs 80,235,918 <35,617> 9,954,553 Other assets/prepaid items Restricted cash on deposit with the State Treasurer Capital assets not subject to depreciation (Note SA) Capital assets subject to depreciation, net of accumulated depreciation (Note 5A) Total assets Liabilities Accounts payable and other current liabilities Accrued payroll and other accrued expenses Contracts and retainage payable Due to other state agencies Due to Arizona counties and cities 35,617 285,815 10,240,368 1,292,092,686 300,910 78,226,426 300,910 1,370,319,112 19,528,360,729 7,900 19,528,368,629 204,119,441 15,804 204,135,245 21,285,614,183 82,321,321 21,367,935,504 6,862,280 4,486,856 113,142,657 7,319,814 125,313,192 52,698 35,560 6,914,978 Due within one year Due in more than one year Total liabilities 4,522,416 113,142,657 7,319,814 125,313,192 Unearned revenues (Note 5C) Non-current liabilities (Note 5F): Net position Net investment in capital assets Restricted: Loans and other financial assistance Debt service Capital projects Unrestricted Total net position 16,146,692 75,883 80,235,918 Internal balances Inventories 2,039,923 2,039,923 220,506,329 3,030,154,723 28,861 124,194 220,535,190 3,030,278,917 3,507,785,851 2,281,236 3,510,067,087 16,812,808,367 23,704 16,812,832,071 78,226,426 78,226,426 2,714 2,714 S 805,890,244 159,127,007 17,777,828,332 The notes to the financial statements are an integral part of this statement. 2014 Comprehensive Annual Financial Report 15 92,219,250 S 1,789,955 80,040,085 805,890,244 160,916,962 S 17,857,868,417 Exhibit 2 Arizona Department of Transportation Statement of Activities for the fiscal year ended June 30, 2014 Program Revenues Capital Grants Fu nctionsjProgra ms Expenses Charges for Operating Grants and Net Services and Contributions Contributions Revenues Governmental Activities $ Administration Highway 106,199,775 $ 12,400,103 51,073,648 863,980 Highway maintenance 122,977,082 2,418,242 Motor vehicle 111,397,196 122,042,424 Non-capital, including asset preservation 312,518,589 Distributions to other state agencies Distributions to Arizona counties and cities $ 1,879,012 544,801,144 63,918,720 $ <91,920,660> 558,510,196 <120,558,840> 10,645,228 <312,518,589> 216,674,664 <216,674,664> 1,065,798,330 <1,065,798,330> Local governmental assistance 90,375,747 Amortization of Issuance costs Interest on long-term debt 13,553,975 114,406,231 Total governmental activities $ 93,786,095 3,410,348 <13,553,975> <114,406,231> 2,204,975,237 137,724,749 4,821,234 5,164,129 157,704,815 546,680,156 < 1,362,865,517> Business-type Activities Arizona Highways Magazine Highway Expansion and Extension Loan Program 342,895 <45,836> 45,836 Total business-type activities Total 4,867,070 5,164,129 $ 2,209,842,307 $ 142,888,878 297,059 $ 157,704,815 Governmental Activities $ 546,680,156 $ <1,362,568,458> Business-type Activities Total $ <1,362,865,517> $ Net revenues 297,059 $ <1,362,568,458> General revenues: Transportation excise taxes 243,786,442 243,786,442 Motor vehicle registration, title, and related taxes 963,221,368 963,221,368 Fuel and motor carrier taxes and fees 714,852,146 714,852,146 Flight property taxes 12,974,652 12,974,652 11,633,977 Income from investments Gain on sale of capital assets Other Total general revenues 735,149 26,213 13,904,713 26,213 13,904,713 Changes in net position Net position - July 1 1,960,399,511 735,149 1,961,134,660 597,533,994 17,180,294,338 1,032,208 79,007,877 598,566,202 17,259,302,215 80,040,085 $ 17,857,868,417 $ 17,777,828,332 Net position - June 30 The notes to the financial statements are an integral part of this statement. 2014 Comprehensive Annual Financial Report 16 12,369,126 $ GOVERNMENTAL FUNDS FINANCIAL STATEMENTS MA,ORFUNDS 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-MA,OR 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. 2014 Comprehensive Annual Financial Report Arizona Department of Transportation Balance Sheet Governmental Funds June 3D, 2014 Special Revenue Funds Assets Unrestricted cash on deposit with the State Treasurer Receivables: Interfund (Note 50) Taxes and fees Maricopa Motor General Regional Vehicle Highway Fund Area Road Division User (State Highway Fund) Construction Fund Clearing Fund Revenue Fund $ 44,534,423 $ $ 96,513,018 Notes and loans 1,062,796 Other (net) 9,729,524 295,115 Amounts due from U.S. Government 52,710,615 6,444,604 Inventories Restricted cash on deposit with the 6,832,503 State Treasurer Total assets Liabilities and fund balances Liabilities: Accounts payable Accrued payroll and other accrued expenditures Contracts and retainage payable Interfund payables (Note 50) $ 1,314,989 38,843,509 10,736,247 51,380,296 295,360,733 508,463,636 54,581,314 101,132,268 $ 506,743,612 $ 515,203,355 $ 66,632,550 $ 191,356,073 $ $ $ 1,669,966 3,533,915 4,024,571 65,760,583 $ 58,235 23,782,591 1,707,335 41,471,268 95,015,997 409,140 26,763,833 258,300 74,760,973 191,356,073 96,340,076 Amounts due to: Other state agencies 4,597,606 Arizona counties and cities Surety and rental deposits Total liabilities 75,435,544 23,840,826 Fund balances : (Note 5G) Unassigned <8,128,423> Nonspendable 6,832,503 Restricted Committed 295,360,733 129,114,832 Total fund balances Total liabilities and fund balances 484,662,529 6,700,000 431,308,068 491,362,529 S506,743,612 S 515,203,355 The notes to the financial statements are an integral part of this statement. 2014 Comprehensive Annual Financial Report 17 S <8,128,423> 66,632,550 S 191,356,073 Exhibit 3 Debt Service Funds Capital Projects Funds $ $ Total Non-Major Governmental Funds (See Exhibit 9) $ 44,392,336 Total Governmental Funds $ 2,813,759 139,485,275 62,116,543 3,772,362 16,070,809 80,235,918 6,832,503 2,709,566 6,046,170 21,080,699 S 178,720 178,720 312,579,926 $ 312,579,926 S $ $ $ 18,821,009 95,863,539 1,000,138 2,800,773 23,599,483 2,722,208 3,533,362 33,655,964 178,720 312,579,926 178,720 312,579,926 $ 312,579,926 S 178,720 $ 19,169,696 43,037,879 62,207,575 95,863,539 88,926,759 1,291,117,606 S 1,688,557,775 $ 6,204,019 6,883,579 113,142,657 139,518,679 7,319,814 125,313,192 667,440 399,049,380 <8,128,423> 6,832,503 1,111,951,604 178,852,711 1,289,508,395 S 1,688,557,775 2014 Comprehensive Annual Financial Report 18 Exhibit 3.1 Arizona Department of Transportation Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position June 30, 2014 $ Total fund balances - governmental funds (Exhibit 3) 1,289,508,395 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 19,666,033,500 and, therefore, are not reported in the funds (Note 4 B1). 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). 69,441,218 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). <3,247,154,781> S Net position of governmental activities (Exhibit 1) The notes to the financial statements are an integral part of this statement. 2014 Comprehensive Annual Financial Report 19 17,777,828,332 Arizona Department of Transportation Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds for the fiscal year ended June 30, 2014 Special Revenue Funds Maricopa Motor General Regional Vehicle Highway Fund Area Road Division User (State Highway Fund) Construction Fund Clearing Fund Revenue Fund Revenues $ 243,786,442 $ Transportation excise taxes $ $ Vehicle registration, title, license, and related taxes and fees Fuel and motor carrier taxes and fees 287,045,595 461,584,090 325,908,620 308,026,646 19,128,899 354,292,251 Flight property taxes Reimbursement of construction expenditures - federal aid 337,944,137 Other federal grants and reimbursements Reimbursements from Arizona counties and cities Distributions from other state agencies Interest on loans receivable Income from investments 134,735,136 63,914,583 601,654 8,761,605 914,992 89,325 2,657,105 4,046,454 315,151 4,642,060 3,162,013 1,383,197 1,579,132 5,763,428 1,017,158,061 386,132,015 85,214,859 269,467 36,875,071 945,210 Grand Canyon National Park Airport Rental income Other Total revenues 480,712,989 686,279,450 1,961,877 4,771,522 1,961,877 4,771,522 Expenditures Current: Administration Highway Highway maintenance Motor vehicle Total current expenditures 133,572,358 98,251,460 353,913,748 1,214,677 The notes to the financial statements are an integral part of this statement. 2014 Comprehensive Annual Financial Report 20 Exhibit 4 Capital Projects Fund Debt Service Fund $ $ 868,353 3,312,062 3,312,062 65A75 232,221 232,221 Total Governmental Funds $ $ 868,353 65A75 Total Non-Major Governmental Funds (See Exh ib it 10) 243,786A42 10,627,979 33A04,349 12,974,652 1,085,166,284 714,852,145 12,974,652 63,513,077 84,987,754 9,950,513 536,192,350 148,902,337 19,313,772 914,992 227,743 11A99,733 1,170,320 6,025,257 11,959,422 2,792,985A49 138A18 300,608 1,170,320 1A54,849 218,522,519 7,184,226 90,375,747 4,568,064 92,966,248 128,196,028 133,572,358 109,552,923 102,128,037 464,287,557 (continued) 2014 Comprehensive Annual Financial Report 21 Arizona Department of Transportation Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds for the fiscal year ended June 30, 2014 Special Revenue Funds Maricopa Motor General Regional Vehicle Highway Fund Area Road Division User (State Highway Fund) Construction Fund Clearing Fund Revenue Fund $ 47,840,553 $ 128,538,896 430,910,559 552,969,032 480,712,989 686,279,450 Expenditures (continued) Intergove rn menta I: $ Distributions to other state agencies Distributions to Arizona counties and cities 9,204,052 $ 30,292,165 41,515,502 6,183,510 45,080,751 Debt service: Principal 519,850 Interest Non-capital, including asset preservation Capital outlay Total expenditures Excess of revenues over expenditures 208,495,442 254,996,394 173,548,634 863,605,161 261,359,564 153,552,900 124,772,451 <136,991,290> <103,252,009> Other financing sources Transfers in Transfers out for debt service 900,071 Sale of capital assets Insurance recovery Debt and capital lease issuances 2,327,699 13,235,820 Total other financing sources Net changes in fund balances Fund balances - July 1 Fund balances - June 30 29,130,257 <120,527,700> <74,121,752> 33,025,200 398,282,867 50,650,699 440,711,830 $ 431,308,067 $ 491,362,529 The notes to the financial statements are an integral part of this statement. 2014 Comprehensive Annual Financial Report 22 <8,128,423> $ <8,128,423> $ Exhibit 4 Debt Service Fund $ Total Non-Major Governmental Funds (See Exhibit 10) Capital Projects Fund $ $ 30,898,863 10,111,071 Total Governmental Funds $ 216,879,261 140,259,068 223,572,060 563,428,033 2,890,706,672 165,615,000 139,739,218 305,419,693 15,076,618 134,883,005 150,191,844 143,137,971 <304,551,340> <146,879,782> 75,384,548 <97,721,223> 303,029,536 <62,786,237> 303,029,536 <303,029,536> 900,071 2,327,699 42,366,077 45,593,847 12,598,311 49,609,263 <52,127,374> 1,341,635,769 <62,786,237> 303,029,536 <1,521,804> 1,700,524 $ 178,720 <146,879,782> 459,459J08 $ 312,579,926 $ 216,482,364 1,065,798,329 62,207,574 $ 1,289,508,395 2014 Comprehensive Annual Financial Report 23 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, 2014 Net changes in fund balances - total governmental funds (Exhibit 4) $ <52,127,374> 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 Cl). 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 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 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). Changes in net position of governmental activities (Exhibit 2) The notes to the financial statements are an integral part of this statement. 2014 Comprehensive Annual Financial Report 24 460,604,641 <29,130,257> 242,732,098 7,953,298 <32,498,412> S 597,533,994 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. 2014 Comprehensive Annual Financial Report Exhibit 5 Arizona Department of Transportation Statement of Net Position Proprietary Funds June 30,2014 Business-type Activities - Enterprise Funds Highway Arizona Expansion and Extension Loan Program Fund Highways Magazine Fund Assets Current assets: Unrestricted cash on deposit with the State Treasurer $ Receivables: Interfund (Note SO) Subscriptions, net of allowance for doubtful account Other, net allowance for doubtful accounts Inventories Prepaid items Restricted cash on deposit with the State Treasurer Total current assets Non-current assets: Capital assets not subject to depreciation Capital assets subject to depreciation, net of accumulated depreciation Total non-current assets Total assets $ 3,292,491 78,226,426 Liabilities Current liabilities: Accounts payable Accrued payroll and other accrued expenses Unearned revenues (Note 5q Compensated absences Total current liabilities Non-current liabilities: Compensated absences Total non-current liabilities Total liabilities Net position Net investment in capital assets Restricted for loans and other financial assistance Unrestricted Total net position $ 7,900 7,900 15,804 23,704 4,092,683 15,804 23,704 82,319,109 52,698 35,560 2,039,923 153,055 2,281,236 52,698 35,560 2,039,923 153,055 2,281,236 3,122,050 975,079 4,097,129 66,446,670 66,446,670 70,543,799 <9,179> 312,843 559,276 862,940 239,641 239,641 1,102,581 2,281,236 2,281,236 23,704 66,446,670 1,787,743 23,704 78,226,426 1,787,743 1,811,447 80,037,873 $ 69,441,218 Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds The notes to the financial statements are an integral part of this statement. 2014 Comprehensive Annual Financial Report 25 $ 4,068,979 78,226,426 $ 78,226,426 3,292,491 33,405 80,475 75,883 285,815 300,910 78,226,426 82,295,405 33,405 80,475 75,883 285,815 300,910 78,226,426 78,226,426 $ Total Governmental Activities Internal Service Fund 2,212 $ 80,040,085 2,994,548 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, 2014 Business-type Activities - Enterprise Funds Highway Expansion and Extension Loan Program Fund Operating revenues Sales and charges for services (net of write off $18,267) Other Arizona Highways Magazine Fund $ 4,507,285 656,844 $ Total operating revenues Operating expenses Publication and promotional cost Repair and maintenance Fuel and lubricants Salaries and related benefits Shipping and postage Supplies 5,164,129 1,811,037 1,811,037 1,847 1,847 2,086,955 11,749,039 1,563,204 677,369 1,563,204 13,389,076 677,369 9,891 13,510 112,532 122,368 13,510 617,745 6,388 Travel Depreciation Other Total operating expenses 6,523 77,551 4,785,065 379,064 Operating income Total Activities Internal Service Fund $ 4,507,285 656,844 5,164,129 9,891 Equipment purchase and rental Professional and outside services Govern mental 617,745 6,388 6,523 77,551 4,785,065 379,064 $ 27,325,866 54,447 27,380,313 199,564 79,711 10,080,179 658,314 38,477,738 <11,097,425> Non-operating revenues Income from investments Investment expense 708,119 27,030 735,149 <45,836> <1,769> <47,605> <34,400> <34,400> 90,543 <192,300> 653,144 <69,868> Gain on sale/disposal of capital assets Insurance recoveries Distributions to other state agencies Total non-operating revenues 662,283 <9,139> Capital contributions 6,118 <442> 26,213 19,120,591 Changes in net position Total net position - July 1 662,283 77,564,143 $ 78,226,426 Total net position - June 30 369,925 1,441,522 $ 1,811,447 Changes in net position of business-type activities 1,032,208 $ 1,032,208 The notes to the financial statements are an integral part of this statement. 2014 Comprehensive Annual Financial Report 26 7,953,298 61,487,920 $ 69,441,218 Exhibit 7 Arizona Department of Transportation Statement of Cash Flows Proprietary Funds for the fiscal year ended June 30,2014 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 $ 4,485,604 $ Receipts from customers $ 4,485,604 $ 16,116,425 Receipts from other agencies, Arizona counties, and cities 11,229,783 Payments to suppliers <3,133,565> <3,133,565> < 14,365,738> Payments to employees Other receipts <1,564,923> 656,844 <1,564,923> 656,844 < 13,338, 754> 54,447 Net cash provided by operating activities 443,960 443,960 <303,837> <34,400> <34,400> <192,300> <34,400> <34,400> <192,300> Cash flows from non-capital financing activities: Transfer from other funds Distribution to other state agencies Net cash provided by capital and related financing activitie Cash flows from capital and related financing activities Proceeds from sale of capital assets 968,293 Acquisition of capital assets Insurance recoveries <5,966> 90,543 Net cash provided by capital and related financing activitie 1,052,870 cash flows from investing activities Income from investments Investment expense 708,119 <45,836> 662,283 27,030 <1,769> 735,149 <47,605> 6,118 <442> 25,261 687,544 5,676 662,283 77,564,143 434,821 2,857,670 1,097,104 80,421,813 562,409 412,670 $ 78,226,426 $ 3,292,491 $ 81,518,917 $ $ $ $ $ <11,097,425> Net cash provided by investing activities Net increase in cash Cash - July 1 Cash - June 30 975,079 Reconciliation of operating income to net cash provided by operating activities Operating income 379,064 379,064 Adjustment to reconcile operating income to net cash provided by operating activities: Depreciation 6,523 6,523 10,080,179 Net changes in assets and liabilities: Receivables 21,589 21,589 20,342 Inventories 61,755 61,755 567,171 Prepaid items Accounts payable Accrued payroll and other accrued expenses Unearned revenues Compensated absences Net cash provided by operating activities 43,463 43,463 <23,445> <23,445> 6,250 $ $ <43,270> <7,969> 443,960 <4,137> 6,250 $ 62,704 <43,270> <7,969> 443,960 $ 67,329 <303,837> Non-cash capital and financing activities Certain vehicles were contributed to the Equipment Revolving Fund by the General Fund totaling The notes to the financial statements are an integral part of this statement. 2014 Comprehensive Annual Financial Report 27 $ 19,120,591 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. 2014 Comprehensive Annual Financial Report Exhibit 8 Arizona Department of Transportation Statement of Net Position Agency Funds June 3D, 2014 ASSETS Restricted cash on deposit with the State Treasurer Due from Department of Revenue Total assets $ 464,306 12 $ 464,318 $ 567 463,751 $ 464,318 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. 2014 Comprehensive Annual Financial Report 28 Notes to the Financial Statements 2014 Comprehensive Annual Financial Report Arizona Department of Transportation Index - Notes to the Financial Statements June 30, 2014 Note 1- Summary of Significant Accounting Policies ................................................................................................. 30 A - Reporting Entity ............................................................................................................................................ 30 B - Government-wide and Fund Financial Statements ...................................................................................... 30 C - Measurement Focus, Basis of Accounting, and Financial Statement Presentation ..................................... 31 D - Assets, Liabilities, and Net Position/Fund Balance ....................................................................................... 33 E - Revenues and Expenditures/Expenses ......................................................................................................... 37 F -Interfund Activity and Balances .................................................................................................................... 37 G - Use of Estimates ........................................................................................................................................... 38 Note 2 - Funds by Classification .................................................................................................................................. 38 Note 3 - Budgeting, Budgetary Control, and Legal Compliance ................................................................................. 38 Note 4 - Accounting Pronouncements and Reconciliation of Government-wide and Fund Financial Statements .... 39 A - New Accounting Pronouncements ............................................................................................................... 39 B - Explanations of Reconciling Items of the Balance Sheet of Governmental Funds to the Statement of Net Position ....................................................................................................................... 40 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 .............................................................................................................................................. 53 Note 6 - Other Information ......................................................................................................................................... 54 A - Contingent Liabilities .................................................................................................................................... 54 B - Pension and Other Postemployment Benefits ............................................................................................. 55 2014 Comprehensive Annual Financial Report 29 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2014 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 (Le., 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. 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. 2014 Comprehensive Annual Financial Report 30 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2014 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 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 measurementjocus and the full accrual basis oj 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, 2014, the Department implemented the provisions through GASB Statement No. 66, updating the June 30, 2011, Codification oj Governmental Accounting and Financial Reporting Standards. See note 4A. Governmental fund financial statements are reported using the currentjinancial resources measurementjocus and the modified accrual basis oj 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. 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 2014 Comprehensive Annual Financial Report 31 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30,2014 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. 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 2014 Comprehensive Annual Financial Report 32 - - - - - - -- --~----- Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2014 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. 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, 2014, 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 5.76 years while for investment pool 3 it was 4.46 years, and for investment pool 4 it was 6.61 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. 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. 2014 Comprehensive Annual Financial Report 33 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2014 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 eight years old, and 17% of balances from one to seven years old. The subscriptions receivable allowance for doubtful accounts is the portion of any receivable greater than 90 days that has been recognized as revenue. The remainder of the subscriptions receivable that has not been recognized is still unearned. 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. 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. 2014 Comprehensive Annual Financial Report 34 Arizona Department of Transportation Notes to the Financial Statements (continued) June 3D, 2014 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. Unearned Revenues In the government-wide statements and proprietary fund financial statements, 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 unearned revenues until they are available to liquidate liabilities of the current period. 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 unearned 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 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 2014 Comprehensive Annual Financial Report 35 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30,2014 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 SO 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 expensed in the current period .. 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 pre,miums 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 reported in classifications that comprise a hierarchy based primarily on the extent to which the Department is bound to honor constraints on the specific purposes for which amounts in those fund can be spent. Five classifications are available: Nonspendable fund balance - describes that portion that cannot be spent because of its form (inventories, prepaid amounts, etc.) and are not expected to be converted to cash. Restricted fund balance - describes that portion of fund balance that reflects resources that are subject to externally enforceable legal restrictions (voter initiatives, court orders, etc.) Committed fund balance - describes that portion which can be used only for specific purposes pursuant to constraints imposed by a formal action of the Department's highest level of decision-making authority. This formal action is the passage of law by the Legislature creating, modifying or rescinding fund balance com mitments. 2014 Comprehensive Annual Financial Report 36 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30,2014 Assigned fund balance - describes that portion of that reflects the Department's intended use of resources for a specific purpose, but are neither restricted nor committed. 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 Arizona 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. When an expenditure is incurred for purposes for which restricted, committed and unassigned fund balance is available, the Department considers restricted, committed and unassigned amounts to have been spent in that order. 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 (Le., 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). 2014 Comprehensive Annual Financial Report 37 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2014 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. 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 NON-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 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 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. 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 2014 Comprehensive Annual Financial Report 38 Arizona Department of Transportation Notes to the Financial Statements (continued) June 3D, 2014 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. 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 provisions of GASB 65 are required to be applied retroactively. Therefore, net assets as of June 30, 2013 would have been re-stated, however, the Department's adoption of GASB 65 was not material to the financial statements for the governmental activities. The requirements of this Statement are effective for financial statements for periods beginning after December 15, 2012 (fiscal year 2014). The Department has implemented this Statement as appropriate. As such $13.5 million in previously amortized costs were expensed in the current year. Statement No. 66 Technical Corrections - 2012 - an amendment of GASB Statements No. 10 and No. 62 The objective of this Statement is to improve accounting and financial reporting for a governmental financial reporting entity by resolving conflicting guidance that resulted from the issuance of two pronouncements, Statements No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, and No. 62, Codification of Accounting and Financial Reporting Guidance contained in Pre-November 30, 1989 FASB and A/CPA Pronouncements. The provisions of this Statement are effective for financial statements for periods beginning after December 15, 2012 (fiscal year 2014). The Department has implemented this Statement as appropriate. There was no impact to the Department. Statement No. 68 Accounting and Financial Reporting for Pensions - an amendment of GASB Statement No. 27 The provisions of this Statement are effective for financial statements for periods beginning after June 15, 2014 (FY15) and will require the Department to record a new liability representing the "proportionate share" of the 2014 Comprehensive Annual Financial Report 39 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2014 collective net pension liability. This is anticipated to have an impact to the financial statements of the Department in future years. Statement No. 70 Financial Reporting for Non-Exchange Financial Guarantees The objective of this Statement is to improve financial reporting for non-exchange financial guarantees issued to other governments. The requirements of this Statement are effective for financial statements for periods beginning after June 15, 2013 (fiscal year 2014). The Department has implemented this Statement as appropriate. There was no impact to the Department. B. Explanations of Reconciling Items of the Balance Sheet of Governmental Funds to the Statement of Net Position The governmental funds Balance Sheet includes 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: $ 19,528,360,729 Capital assets not subject to depreciation 204,119,441 Capital assets subject to depreciation 19,732,480,170 Less Internal Service Fund (Equipment Revolving Fund) assets <66.446.670> $ 19.666.033.500 2. 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 Capital leases Compensated absences Intergovernmental advances Business activity share of Equipment Revolving Fund gain/ $ <3,113,241,042> <29,323,520> <17,432,390> <89,865,183> 2,707,354 $ <3.247.154.781> 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: 2014 Comprehensive Annual Financial Report 40 Arizona Department of Transportation Notes to the Financial Statements (continued) June 3D, 2014 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 Reduction from reclassification of non-capital and asset preservation Increase in Infrastructure resulting from selected projects, previously Identified not to be Infrastructure, being classified as Infrastructure Change in net capital assets -Internal Service Fund (Equipment Revolving) Assets removed from service, net of accumulated depreciation Other Less depreciation expense - governmental funds Less depreciation expense -Internal Service Fund (Equipment Revolving) $ 563,428,033 <71,981,634> 6,352 <8,104,298> <5,045,408> 645,892 <8,264,117> <10,080,179> $ 460.604.641 2. The issuance of long-term debt (e.g., bonds) provides current financial resources to while the repayment of principal of long-term debt consumes current financial resources funds. Neither transaction, however, has any effect on net position. Also, the government premiums, discounts, and similar items when debt is first issued, whereas these amounts Statement of Activities. The details of this difference are as follows: Debt issued or incurred: Advances and notes payable Principal repayments: Highway Revenue Bonds Transportation Excise Tax Revenue Bonds Grant Anticipation Notes (GARVEE bonds) Amortization of premium and discount Amortization of bond issuance costs Repayment of advances and notes payable Repayment of capital leases governmental funds, of the governmental reports the effect of are amortized in the $ <29.129.553> $ 58,485,000 58,600,000 48,530,000 27,383,360 <1,530,523> 45,080,751 6,183,510 242.732.098 $ 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 $ 7.953.298 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: Adjustment for Unearned Revenues Compensated Absences Assumption of Lease from Equipment Services fund by Highway fund $ Implementation of GASB 65 $ 2014 Comprehensive Annual Financial Report 41 <4,156,137> <1,552,481> <13,235,820> <18,944,438> <13,553,974> <32.498.412> Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2014 5. DETAILED NOTES ON ALL FUNDS A. Capital Assets Capital assets activity for the year ended June 30,2014, was as follows: July I, 2013 Beginning Balance Governmental Activities Capital assets, not being depreciated: Land Infrastructure Construction in progress $ Total capital assets, not being depreciated 2,828,031,298 12,951,193,039 3,285,416,977 Decreases Including Transfers Increases $ 81,390,426 827,734,586 461,509,447 19,528,360,729 2,046,649 33,470 3,425,394 18,341,218 <2,614,123> <8,068,181> 195,762,933 33,909,001 49,914,230 170,074,795 436,496,532 23,846,731 <10,682,304> 449,660,959 Less accumulated depreciation for: Buildings and improvements Improvements other than buildings Machinery and equipment Mobile fleet and aircraft <87,862,415> <1 0,480, 744> <36,902,221> <102,121,235> <4,124,922> <1,121,789> <3,740,460> <9,357,125> 2,932,712 7,236,681 <91,987,337> <11,602,533> <37,709,969> <104,241,679> Total accumulated depreciation <237,366,615> <18,344,296> 10,169,393 <245,541,518> 199,129,917 5,502,435 19,263,771,231 $ 1,376,136,894 Total capital assets, being depreciated Total capital assets, being depreciated, net Governmental activities capital assets, net Business-!y~e $ 1,370,634,459 193,716,284 33,875,531 49,102,959 159,801, 758 <3,300,225> $ 2,906,121,499 <598,418> 13,778,329,207 <903,016,401> 2,843,910,023 <906,915,044> Capital assets, being depreciated: Buildings and improvements Improvements other than buildings Machinery and equipment Mobile fleet and aircraft 19,064,641,314 $ June 30, 2014 Ending Balance July 1, 2013 Beginning Balance Activities Capital assets, not being depreciated: Land $ Capital assets, being depreciated: Buildings and improvements Machinery and equipment 7,900 <512,911> $ <907,427,955> $ 19,732,480,170 June 30,2014 Ending Balance Decreases Increases $ 204,119,441 $ $ 981,157 43,663 1,024,820 Total capital assets, being depreciated 7,900 981,157 43,663 1,024,820 Less accumulated depreciation for: Buildings and improvements Machinery and equipment <966,810> <35,683> <5,509> <1,014> <972,319> <36,697> Total accumulated depreciation <1,002,493> <6,523> <1,009,016> Total capital assets, being depreCiated, net Business-type activities capital assets, net 22,327 $ 30,227 <6,523> $ <6,523> $ 2014 Comprehensive Annual Financial Report 42 15,804 $ 23,704 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2014 Depreciation expense was charged to functions/programs as follows: Governmental Activities: Admi nistration Highway Highway Maintenance Motor Vehicle B. $ $ 2,734,108 2,080,292 1,906,764 1,542,953 8,264,117 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 $ 10,080,179 18344,296 Business-type Activities: Arizona Highways Magazine Fund $ 6,523 Construction Commitments The Department's outstanding commitments for contracts at June 30,2014, were $632,171,076. Expenditures To Date Construction Contracts: Rural roadways Small urban roadways Urban roadways Large urban roadways General roadways $ Design Contracts Other Commitments 366,707,381 72,543,050 127,472,498 156,870,238 109,946,271 833,539,438 346,305,147 347 1786 1928 $ 1.527,631,513 Remaining Commitment $ 167,821,409 20,655,949 51,015,432 123,206,561 64 1613 1618 427,312,969 89,679,445 115,178,662 $ 632,171,076 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 2014 Comprehensive Annual Financial Report 43 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30,2014 c. Unearned Revenues The proprietary fund includes the amount for unearned subscriptions. The following schedule is a summary of the amounts outstanding as of June 30, 2014. Proprietary funds: Arizona Highways Magazine Fund D. $ 2.039.923 Interfund Receivables, Payables, Advances, and Transfers The balances of current interfund receivables and payables as of June 30, 2014, were: Receivables Governmental Activities: General Fund (State Highway Fund) Highway User Revenue Fund Motor Vehicle Division Clearing Fund Non-Major Governmental Funds Business-type Activities: Arizona Highways Magazine Payables Amount Highway User Revenue Fund Motor Vehicle Division Clearing Fund Motor Vehicle Division Clearing Fund General Fund (State Highway Fund) General Fund (State Highway Fund) Motor Vehicle Division Clearing Fund $ $ 96,340,077 172,941 38,451,163 392,346 1,314,989 2,813,759 139,485,275 $ 33,405 139.518.680 Motor Vehicle Division Clearing Fund The General Fund (State Highway Fund) receivable of $96,340,077 is an accrual for fuel taxes imposed in fiscal year 2014 from the Highway User Revenue Fund that will be collected in fiscal year 2015. The Highway User Revenue Fund receivable of $38,451,163 is an accrual for vehicle license taxes due in fiscal year 2014 from the Motor Vehicle Division Clearing Fund that will be collected in fiscal year 2015. Interfund transfers for the year ended June 30, 2014, consisted of the following: Interfund Transfers Out: Interfund Transfers In: $ General Fund (State Highway Fund) Maricopa Regional Area Road Construction Fund Non-Major Governmental Funds Total Debt Service Fund $ 136,991,290 103,252,009 62,786,237 303.029.536 The General Fund (State Highway Fund) ($136,991,290), the Maricopa Regional Area Road Construction Fund ($103,252,009), and Non-Major Governmental Funds - Grant Anticipation Notes Fund ($62,786,237) made transfers to the Debt Service Fund to pay bond debt service. 2014 Comprehensive Annual Financial Report 44 Arizona Department of Transportation Notes to the Financial Statements (continued) June 3D, 2014 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, 2014, approximated $3.5 million. During fiscal year 2014 the Department entered into rental agreements for four facilities, on which Motor Vehicle Division offices are housed, as well as one for the Executive Hearing Office. Additionally, agreements initiated in prior years, for office space in East Phoenix and a lab in Gilbert, remain in force. Future commitments on operating leases are as follows: 2016 2015 Description Payson MVD 28,056 $ North Tucson MVD 34,472 Show Low MVD 63,888 South Mesa MVD 17,616 Phoenix EHO 550,236 Phoenix, E. Washington Street 535,510 Gilbert Laboratory 126 1000 $ 1.355.778 $ 28,056 34,472 63,888 17,616 806J44 2017 $ 2018 28,056 34,472 63,888 17,616 830,225 $ 9,352 34,472 63,888 17,616 853,699 126 1000 126 1000 94 1500 $ 1076.776 $ 1.100.257 $ 1073.527 2019 $ 42,592 15,532 877,177 $ 935.301 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: Governmenta I Activities Machinery and equipment Less accumulated depreciation Total $ 40,606,812 <7,018,860> $ 33,587,952 The future minimum lease obligations and the net present value of these minimum lease payments as of June 30, 2014, were as follows: 2014 Comprehensive Annual Financial Report 45 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30,2014 Yea r Endi ng June 30 2015 2016 2017 2018 2019 Govern menta I Activities $ 8,581,290 8,530,651 6,699,204 4,845,375 1,877,927 Total minimum lease payments Less a mount representi ng interest 30,534,447 <1,210,927> Present va I ue of mi ni mum I ease payments $ 29,323,520 Capital outlay on Exhibit 4 includes $13.2 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 $1,733,285,000. During the year, no new Highway Revenue Bonds 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, and (iii) pay costs of issuing the bonds. 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 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: 2014 Comprehensive Annual Financial Report 46 Arizona Department of Transportation Notes to the Financial Statements (continued) June 3D, 2014 OUTSTANDING HIGWAY REVENUE BONDS As of June 30, 2014 Maturity (7/1) 2014 2014 2015 2015 2016 2016 2017 2018 2018 2018 2019 2019 2020 2020 2021 2021 2022 2023 2023 2024 2025 2026 2027 2028 2028 2029 2029 2030 2030 2031 2032 2032 2033 2033 2034 2035 2036 2037 2038 Totals I Series 20048 Principal Coupon $5,715,000 5.000% II Series 2005A Principal Coupon 10,415,000 5.000% 10,935,000 5.000% 11,490,000 5.000% II Series 20058 Principal Coupon $290,000 4.000% $6,365,000 5.000% 740,000 4.000% 6,245,000 5.000% 7,325,000 5.000% II Series 2006 Principal Coupon $3,000,000 4.125% $8,500,000 5.000% 3,000,000 4.250% 13,685,000 5.000% 940,000 4.250% 16,550,000 5.000% 18,350,000 5.000% II Series 2008A Principal Coupon $6,265,000 4.125% 7,440,000 0.05 14,335,000 0.05 15,050,000 0.05 15,805,000 0.05 16,595,000 0.05 1,550,000 4.375% 15,875,000 0.05 18,285,000 5.000% 19,200,000 5.000% 20,160,000 0.05 21,165,000 5.000% 22,225,000 5.000% $5,715,000 $32,840,000 $20,965,000 $64,025,000 2014 Comprehensive Annual Financial Report 47 $193,950,000 I Arizona Department of Transportation Notes to the Financial Statements (continued) June 30,2014 OUTSTANDING HIGWAY REVENUE BONDS As of June 30,2014 (continued) Maturity (7/1) 2014 2014 2015 2015 2016 2016 2017 2018 2018 2018 2019 2019 2020 2020 2021 2021 2022 2023 2023 2024 2025 2026 2027 2028 2028 2029 2029 2030 2030 2031 2032 2032 2033 2033 2034 2035 2036 2037 2038 Totals I Series 20088 Principal Coupon $1,600,000 4.125% 11,155,000 0.05 13,380,000 0.05 14,050,000 0.05 14,750,000 0.05 15,490,000 0.05 16,265,000 5.000% II Series 2011A Coupon Principal $2,000,000 3.000% $12,340,000 5.000% 1,000,000 3.000% 9,380,000 5.000% 145,000 3.000% 10,740,000 5.000% 36,390,000 5.000% 270,000 3.000% 10,475,000 4.000% 27,480,000 5.000% 600,000 4.000% 39,390,000 5.000% 200,000 4.000% 33,315,000 5.000% 200,000 4.000% 48,465,000 5.000% 53,210,000 5.000% 13,475,000 5.000% 30,170,000 30,885,000 7,000,000 7,370,000 7,740,000 Series 20118 Coupon Principal $9,425,000 1.299% 8,125,000 5.250% 17,930,000 5.000% 8,550,000 5.250% 18,830,000 0.05 19,770,000 5.000% 9,000,000 4,220,000 5,250,000 9,915,000 $460,130,000 Series 2013A Coupon Principal II Series 20138 Principal Coupon $435,000 0.499% 6,440,000 0.600% 9,700,000 1.997% 13,480,000 0.944% 9,895,000 2.492% 10,140,000 2.842% 8,405,000 1.194% 27,760,000 1.631% 10,435,000 3.024% 28,245,000 1.831% $7,000,000 3.500% 13,050,000 5.000% 36,020,000 5.000% 27,940,000 2.179% 35,710,000 5.000% 53,430,000 5.000% 40,080,000 32,880,000 49,950,000 44,840,000 14,500,000 32,580,000 2,100,000 47,200,000 20,000,000 31,740,000 14,835,000 15,580,000 5.250% 4.000% 5.250% 5.000% 5.000% 5.000% 5.000% 5.000% 4.000% 5.000% 4.000% 5.000% 4.000% 5.000% 5.000% 5.000% 16,360,000 5.000% 10,415,000 5.000% 10,935,000 5.000% 11,480,000 5.000% $181,050,000 II 9,545,000 1.647% 5.000% 5.000% 5.250% 5.000% 5.000% 17,075,000 5.000% 400,000 4.500% 20,355,000 0.05 II $59,140,000 17,175,000 18,035,000 18,935,000 19,885,000 20,880,000 $602,765,000 2014 Comprehensive Annual Financial Report 48 5.000% 5.000% 5.000% 5.000% 5.000% $112,705,000 I Arizona Department of Transportation Notes to the Financial Statements (continued) June 30,2014 Annual debt service requirements to maturity for Highway Revenue Bonds are as follows: Highway Revenue Bonds Fiscal year ending June 30 2015 2016 2017 2018 2019 2020-2024 2025-2029 2030-2034 2035-2038 Interest Principal $ 60,970,000 $ 78,008,080 Total $ 75,612,882 72,942,372 69,858,434 67,316,390 283,542,410 171,219,313 66,608,402 11,648,750 70,370,000 73,040,000 76,125,000 78,670,000 446,440,000 445,960,000 323,075,000 100,150,000 138,978,080 145,982,882 145,982,372 145,983,434 145,986,390 729,982,410 617,179,313 389,683,402 111,798,750 $ 1,674,800,000 $ 896,757,033 $ 2,571,557,033 The Department has pledged future motor vehicle and related fuel fees and taxes to repay $1,674,800 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 $2,572.0 million. Principal and interest paid for the current year and total pledged revenues were $139.0 million and $537.8 million, respectively. The annual principal and interest payments on the bonds required 25.8 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 $925,975,000. All Transportation Excise Tax Revenue Bonds mature no later than July 1, 2025. Transportation Excise Tax Revenue Bonds currently outstanding are as follows: 2014 Comprehensive Annual Financial Report 49 Arizona Department of Transportation Notes to the Financial Statements (continued) June 3D, 2014 OUTSTANDING TRANSPORTATION EXCISE TAX REVENUE BONDS As of June 30, 2014 Maturity (7/1) 2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 2019 2019 2020 2020 2021 2022 2023 2024 2025 2025 Totals 2007 Series Principal Coupon 13,715,000 3,670,000 13,725,000 4,495,000 17,060,000 2,025,000 17,770,000 2,250,000 20,485,000 515,000 22,045,000 5.000% 4.000% 5.000% 4.000% 5.000% 4.000% 5.000% 4.000% 5.000% 4.000% 5.000% 23,145,000 5.000% 24,300,000 25,515,000 26,795,000 28,135,000 29,540,000 5.000% 5.000% 5.000% 5.000% 5.000% $275,185,000 I 2009 Series Principal Coupon $4,315,000 $18,380,000 $2,405,000 $21,335,000 5,625,000 $19,245,000 325,000 $25,730,000 27,355,000 3.000% 5.000% 2.500% 5.000% 4.000% 5.000% 3.000% 5.000% 5.000% 6,700,000 $22,020,000 340,000 $29,765,000 $31,680,000 $33,345,000 $35,010,000 $36,760,000 $830,000 $37,770,000 $358,935,000 4.250% 5.000% 3.500% 5.250% 5.250% 5.000% 5.000% 5.000% 4.000% 5.000% II 28.10 Series Principal Coupon 2011 Series Principal Coupon II $850,000 3.000% $8,750,000 5.000% 10,065,000 5.000% $8,920,000 5.000% 4.000% 5.000% 2.000% 5.000% 3.000% 5.000% 2.500% 5.000% 4.000% 5.000% 5.000% 5.000% 5.000% 5.000% 3.125% 5.000% 9,830,000 5.000% 450,000 $10,120,000 1,685,000 $9,405,000 1,505,000 $10,090,000 2,370,000 $9,775,000 5,250,000 $7,445,000 $13,275,000 $13,940,000 $14,635,000 $15,370,000 $735,000 $15,400,000 $151,115,000 I 9,370,000 5.000% 10,330,000 5.000% 10,840,000 5.000% 11,385,000 5.000% 11,955,000 5.000% $12,555,000 $13,180,000 $13,575,000 $14,115,000 $14,685,000 5.000% 3.000% 4.000% 4.000% 3.000% $140,740,000 Annual debt service requirements to maturity for Transportation Excise Tax Revenue Bonds are as follows: Fiscal year ending June 30 Transportation Excise Tax Revenue Bonds Principal Interest Total $ 61,395,000 $ 42,198,106 $ 2015 2016 103,593,106 64,355,000 39,233,431 103,588,431 2017 67,495,000 36,096,681 103,591,681 2018 2019 70,790,000 74,295,000 32,801,481 29,297,231 103,591,481 103,592,231 2020-2024 430,085,000 87,867,757 517,952,757 2025 98,960,000 4,632,219 103,592,219 $ 867,375,000 $272,126,906 $1,139,501,906 The Department has pledged future transportation excise taxes to repay $867,375,000 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 $1,140.0 million. Principal and interest paid for the current year and total pledged revenues were $103.6 million and $243.8 million, respectively. The annual principal and interest payments on the bonds required 42.5 percent of the pledged revenues. 2014 Comprehensive Annual Financial Report 50 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30,2014 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 C'GARVEE bonds") issued in prior years and outstanding at the start of the fiscal year was $296,240,000. Grant Anticipation Notes (GARVEE) currently outstanding are as follows: OUTSTANDING GRANT ANTICIPATION NOTES As of June 30,2014 Maturity (7/1) 2014 2014 2015 2015 2016 2016 2016 2017 2017 2018 2018 2019 2019 2020 2020 2021 2021 2022 2022 2023 2023 2024 2025 2025 2026 Totals Series 2003A Principal Coupon $2,000,000 3.750% 15,475,000 5.000% II Series 20048 Principal Coupon $12,935,000 5.000% II Series 2008A Principal Coupon $18,000,000 5.000% II Series 2009A Principal Coupon $1,685,000 $19,735,000 310,000 2,215,000 21,475,000 $17,475,000 II $5,855,000 4.000% $5,410,000 5.000% 3,365,000 8,405,000 1,830,000 10,495,000 2,800,000 10,125,000 260,000 13,285,000 270,000 13,945,000 1,085,000 13,840,000 275,000 15,385,000 16,440,000 600,000 16,705,000 18,210,000 $158,585,000 Grant Anticipation Notes ending June 30 2015 2016 2017 2018 2019 2020-2024 2025-2026 (GARVEE} Interest Principal $ 53,040,000 47,350,000 11,770,000 12,325,000 12,925,000 74,785,000 35,515,000 Total $ 11,854,732 $ 64,894,732 $ 247,710,000 9,552,631 7,392,881 6,838,031 6,240,081 21,035,012 2,816,063 56,902,631 19,162,881 19,163,031 19,165,081 95,820,012 38,331,063 $ 65,729,431 $ 313,439,431 2014 Comprehensive Annual Financial Report 51 12,085,000 4.00% 4.000% 5.000% 4.000% 5.000% 4.000% 5.000% 4.000% 5.000% 4.000% 5.000% 4.000% 5.000% 4.125% 5.000% 5.250% 4.500% 5.250% 5.250% Annual debt service requirements to maturity for Grant Anticipation Notes (GARVEE) are as follows: Fiscal year Series 2012 Principal Coupon $120,000 3.00% 31,620,000 4.00% 3.000% 5.000% 3.000% 4.000% 5.000% $45,420,000 $18,000,000 $12,935,000 Series 2011A Principal Coupon II $43,825,000 I Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2014 The Department has pledged federal revenues to repay $247,710,000 in outstanding Grant Anticipation Notes (ilGARVEE 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 $313.4 million. Principal and interest paid for the current year and total pledged revenues were $64.9 million and $688.1 million, respectively. The annual principal and interest payments on the bonds required 9.1 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. Monies deposited with escrow agents at June 30, 2014 fully provide for the following refunded bonds of the Department: Type Highway Revenue Bonds Highway Revenue Bonds Highway Revenue Bonds Highway Revenue Bonds Highway Revenue Bonds Grant Anticipation Notes Original Issue Series 2003A Series 2004B Series 2005A Series 2005B Series 2006 Series 2004B Escrow Maturity Date Balance July 1,2014 July 1,2014 July 1,2015 January 1,2016 July 1,2016 July 1,2014 Total Refunded Bonds $123,815,000 160,755,000 100,435,000 84,860,000 239,475,000 25,665,000 $735,005,000 Advances and Notes Payable The Department's outstanding advances and notes payable as of June 30, 2014, were $89,865,183 in governmental activities. The advances and notes payable represent amounts for other intergovernmental advances. Annual debt service requirements to maturity for advances and notes payable are as follows: Fiscal year ending June 30 2015 2020 2021 Governmental Principal $ 67,686,540 151,430 22.027,213 $ 89.865.183 Activities Interest $ 0 0 __ 0 $ 0 2014 Comprehensive Annual Financial Report 52 ~ i Arizona Department of Transportation Notes to the Financial Statements (continued) June 30,2014 Changes in non-current liabilities The activity for the fiscal year ended June 30, 2014, was as follows: Beginning Balance July 1,2013 Governmental Activities Bonds and notes: Highway Revenue Bonds Transportation Excise Tax Revenue Bonds Grant Anticipation Notes Amortized Premium on bonds Total bonds and notes $1,733,285,000 Additions Reductions $ $ 925,975,000 296,240,000 350,739,402 3,306,239,402 Ending Balance June 30,2014 Due Within One Year <58,485,000> $ 1,674,800,000 $ 60,970,000 <58,600,000> <48,530,000> <27,383,360> <192,998,360> 867,375,000 247,710,000 323,356,042 3,113,241,042 61,395,000 53,040,000 24,452,868 199,857,868 8,038,748 12,609,713 Capital leases Compensated absences Advances and notes payable Total governmental activitie! 22,271,210 16,618,748 105,816,381 3,450,945,741 13,235,820 15,421,374 291,430,257 320,087,451 <6,183,510> <13,808,815> <45,081,455> <258,072,140> 29,323,520 18,231,307 352,165,183 3,512,961,052 220,506,329 Business-type Activities Compensated absences Total business-type activities 161,024 161,024 73,909 73,909 <81,878> <81,878> 153,055 153,055 28,861 28,861 $3,451,106,765 S 320,161,360 <258,154,018> S 3,513,114,107 S 220,535,190 Total non-current liabilities S 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, $798,917 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. G. Fund Balances The Department's fund balance, as of June 30, 2014, is composed of the following: 2014 Comprehensive Annual Financial Report 53 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30,2014 Unassigned Administration $ $ Restricted NonsQendable $ 210,838 Committed $ 168,264,357 $ Highway Maintenance <8,128,423> 5,581,287 5,581,287 5,007,067 <3,121,356> 6,832,503 6,832,503 Inventories 802,887 Other $ <8,128,423> $ 6,832,503 168,475,195 1,110,937,879 1,110,937,879 Highway Operations Motor Vehicle Total $ 1,111,951,604 802,887 $ 178,852,711 $ 1,289,508,395 The <$8.1> million in the unassigned portion of the fund balance is due to Arizona Revised Statutes, §28-6542 (8), 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. 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. 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. 2014 Comprehensive Annual Financial Report 54 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30,2014 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. 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 (Le., pension), death, and survivor benefits; the Health Benefit Supplement Fund provides health insurance premium benefits (Le., 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, by calling (602) 240-2000 or (800) 621-3778 or visiting the website at www.azasrs.gov/content/annual-reports. 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, 2014, active plan members were required by statute to contribute at the actuarially determined rate of 11.54 percent (11.30 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 11.54 percent (10.7 percent for retirement, 0.6 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 2014 2013 2012 $ 19,604,754 $ 18,233,215 17,230,639 1,123,095 $ 1,088,444 1,441,900 475,418 456,141 451,367 Total $ 21,203,267 19,777,800 19,123,906 The Department's total payroll for fiscal year 2014 was $198.1 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 2014 was $21.2 million each by both the employees and the Department. 2014 Comprehensive Annual Financial Report 55 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 2014 Comprehensive Annual Financial Report Arizona Department of Transportation Required Supplementary Information June 30, 2014 Budgetary Comparison Schedule General Fund (State Highway Fund) - Budgetary Basis for the fiscal year ended June 30, 2014 Budgeted Amounts Final Original Amounts Variance with Final BudgetPositive $ 333,926,816 $ 3,396,384 Actual Expenditures appropriated by State legislature in 2014 budget Department of Transportation $337,323,200 $ 337,323,200 Timing differences: Prior year appropriation expenditures expended in current budgetary y 9,677,440 Basis differences: Net increase from cash basis for budgeting purposes and 7,237,738 modified accrual basis for financial reporti ng purposes Entity differences: Funds not appropriated, but included for financial reporting purposes Perspective differences: 3,071,754 Expenditures on modified accrual basis and not recognized on budgetary basis: Capital outlay and asset preservation 463,491,836 Distributions to Arizona counties and cities 30,292,165 Distributions to other state agencies Interest expense Principal repayment of debt 9,204,052 519,850 6,183,510 Total expenditures as reported on the Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds (General Fund) - Exhibit 4 $ 863,605,160 The note to required supplementary information is an integral part ofthis schedule. 2014 Comprehensive Annual Financial Report 56 Arizona Department of Transportation Required Supplementary Information (continued) June 30, 2014 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 ofthe 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. 2014 Comprehensive Annual Financial Report 57 Arizona Department of Transportation Required Supplementary Information (continued) June 30,2014 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 6,800 center line miles (21,390 travel lane miles) of roads and 4,787 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 2014 and beyond was adopted by the Transportation Board on June 25, 2013. 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 mayor 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 2014 Comprehensive Annual Financial Report 58 Arizona Department of Transportation Required Supplementary Information (continued) June 30, 2014 Information About Infrastructure Assets Reported Using the Modified Approach (continued) 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 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 Weaver/AASHTO Scale Perfect Very Good Good Fair Poor Very Poor PSR Excellent Good Fair Poor Very Poor Impassable 2 1 0 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 2014, an overall rating of 3.69 was achieved, as shown in the following graph: Condition Level-Roads 5 4 3 •• •• •• •• •• 2010 2011 2012 2013 2014 1 o Fiscal Year Figure 1 2014 Comprehensive Annual Financial Report 59 -+- Actual ___ Goal Arizona Department of Transportation Required Supplementary Information (continued) June 30, 2014 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 2010 through 2014 were as follows: Fiscal Year 2010 2011 2012 2013 2014 Estimated Expenditures (in millions) $227.4 265.7 261.9 276.3 271.2 Actual Expenditures (in millions) $220.9 373.4 373.6 291.3 287.2 Bridges The Department's bridge assets constitute a significant portion of all infrastructure assets in Arizona. As of June 30, 2014, the Department owned and maintained 4,787 bridges with an approximate total deck area of 49,066,801 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: Condition Rating Excellent Very Good Good Satisfactory Fair Poor Serious Critical Imminent Failure Numerical Rating 9 8 7 6 5 4 3 2 1 2014 Comprehensive Annual Financial Report 60 Arizona Department of Transportation Required Supplementary Information (continued) June 30, 2014 Information About Infrastructure Assets Reported Using the Modified Approach (continued) 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 2014, the CRI was computed at 93.8%. Condition Levels- Bridges 95% 95% 94% 94% 93% ~ 93% u 92% 92% 91% 91% 90% ... ..-- -- - - 2010 2011 2012 .--+ - - 2013 2014 ~ Actual ___ Goal 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 56% 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% 25% • % of bridges built in corresponding decade 20% 15% 10% 5% 0% < 1930 30s 40s 50s 60s 70s 80s 90s 2000s 2010s Figure 3 2014 Comprehensive Annual Financial Report 61 Arizona Department of Transportation Required Supplementary Information (continued) June 30, 2014 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 2010 through 2014 were as follows: Fiscal Year Estimated Expenditures (in millions) Actual Expenditures (in millions) 2010 2011 2012 2013 2014 $16.1 11.8 12.5 14.7 21.2 $22.4 26.0 20.6 10.7 20.5 2014 Comprehensive Annual Financial Report 62 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. 2014 Comprehensive Annual Financial Report Arizona Department of Transportation Combining Balance Sheet Non-Major Governmental Funds June 3D, 2014 Safety Enforcement Motor Vehicle Motor Vehicle and Liability Inspection State Transportation Insurance and Title Aviation Fund Infrastructure Fund Enforcement Fund Enforcement Fund $ 125,280 $ 3,909,820 $ 46,050 48,123 171,330 $ 3,957,943 $ $ $ Assets Unrestricted cash on deposit with the $ 36,016,148 State Treasu rer 765,374 Receivables: Interfund 45,322 Notes and loans 2,709,566 Other (net) 3,096,398 26,300 Amounts due from U.S. Government Restricted cash on deposit with the State Treasurer Total assets $ 41,867,434 $ $ $ 791,674 liabilities and fund balances Lia bi lities: Accounts payable 992,081 Accrued payroll and other accrued expenditures 2,729,607 25,911 22,954 22,301 3,721,688 25,911 22,954 22,301 38,145,746 145,419 3,934,989 769,373 Contracts and retainage payable Interfund payables Amounts due to: Other state agencies Arizona counties and cities Total liabilities Fund balances: Restricted Committed Total fund balances Total liabilities and fund balances 38,145,746 $ 41,867,434 $ 145,419 3,934,989 171,330 $ 3,957,943 2014 Comprehensive Annual Financial Report 63 769,373 $ 791,674 Exhibit 9 Motor Carrier Safety Revolving Fund $ 42,352 Underground Storage Tank Fund $ $ Economic Strength Grant Anticipation Project Fund Notes Fund 3,533,362 $ Local Agency Deposits Fund Total Non-Major Governmental Funds $ 44,392,336 $ 2,647,964 2,813,759 2,709,566 74,244 $ 42,352 $ $ 2,722,208 $ $ $ 3,533,362 $ 2,949,772 6,046,170 21,080,699 21,080,699 2,714 18,744,051 18,821,009 2,714 $ 42,774,522 $ 95,863,539 $ $ $ 8,057 1,000,138 2,800,773 23,599,483 2,722,208 2,722,208 3,533,362 3,533,362 2,722,208 3,533,362 2,714 23,607,540 33,655,964 19,166,982 19,169,696 43,037,879 42,352 42,352 $ 42,352 2,714 19,166,982 62,207,575 $ 2,714 ======= $ 42,774,522 $ 95,863,539 ---"----- $ 2,722,208 $ 3,533,362 23,599,483 2014 Comprehensive Annual Financial Report 64 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} 2014 Safety Enforcement Motor Vehicle Motor Vehicle and Liability Inspection State Transportation Insurance and Title Aviation Fund Infrastru ct u re Fund Enforcement Fund Enforcement Fund Revenues Vehicle registration, title, license, $ and related taxes and fees 6,575A52 $ 2,571,544 $ $ 1,480,983 3,009,865 314,556 Fuel and motor carrier taxes and fees 12,974,652 Flight property taxes Reimbursement of construction 726,840 expenditures - federal aid Other federal grants and reimbursements 1,152}172 Reimbursements from Arizona counties and cities Interest on loans receivable 138A18 Income from investments Grand Canyon National Park Airport Other Total revenues 259,810 4,060 1,170,320 1All,539 34,810 24,723,759 2,610A14 3,009,865 1A80,983 1,886,625 1,087,688 lA61,868 7,184,226 1,886,625 1,087,688 1,461,868 11AOO 1,579,800 337,600 10,400 3A66A25 1,425,288 1,472,268 8A42,160 <856,011> 1,584,577 8,715 8A42,160 29,703,586 <856,011> 1,001,430 1,584,577 2,350,412 8,715 760,658 Expenditures Current: 7,184,226 Administration Highway Motor vehicle Total current expenditures Intergovern mental: Distributions to other state agencies Distributions to Arizona counties and cities Capital outlay 9,085,973 Total expenditures 16,281,599 Excess of revenues over expenditures Other financing sources Transfers out for debt service Total other financing sources Net change in fund balances Fund balances - July 1 Fund balances - June 30 $ 38,145,746 $ 145,419 2014 Comprehensive Annual Financial Report 65 $ 3,934,989 $ 769,373 Exhibit 10 Motor Carrier Underground Economic Grant Local Total Safety Storage Strength Anticipation Agency Non-Major Revolving Fund Tank Fund Project Fund Notes Fund Deposits Fund Governmental Funds $ $ 29,079,928 $ $ $ $ 10,627,979 1,000,000 33,404,349 12,974,652 63,513,077 62,786,237 84,987,754 84,987,754 8,798,341 9,950,513 138,418 9,852 26,864 22 300,608 1,170,320 1,454,849 8,500 8,500 29,089,780 1,026,864 62,786,259 93,786,095 218,522,519 90,375,747 90,375,747 4,568,064 90,375,747 102,128,037 7,184,226 130,117 1,766 130,117 1,766 28,959,663 30,898,863 1,025,098 29,089,780 10,111,071 1,026,864 8,500 62,786,259 42,352 $ $ 143,137,971 3,410,348 75,384,548 <62,786,237> <62,786,237> <62,786,237> <62,786,237> 8,500 33,852 $ 90,375,747 $ 22 2,692 3,410,348 15,756,634 12,598,311 49,609,263 2,714 $ 19,166,982 $ 62,207,574 2014 Comprehensive Annual Financial Report 66 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. 2014 Comprehensive Annual Financial Report Exhibit 11 Arizona Department of Transportation Combining Statement of Net Position Agency Funds June 30,2014 Highway Properties Privilege Tax Fund ASSETS Restricted cash on deposit with the State Treasurer Due from Department of Revenue Total assets Highway Properties - 24 % Lieu Tax Fund Total $ 555 12 $ 463,751 $ $ 567 $ 463,751 =$==4=64==,3=1=8 $ 567 $ ===== 464,306 12 LIABILITIES Due to Department of Revenue Due to Arizona counties $ 567 463,751 463,751 $ 567 ====== Total liabilities 2014 Comprehsive Annual Financial Report 67 $ 463,751 ==4=64==,3=1=8 ==$ Exhibit 12 Arizona Department of Transportation Statement of Changes in Assets and Liabilities Agency Funds for the fiscal year ended June 30, 2014 Balance July 1,2013 Highwa~ Additions Deductions Balance June 30, 2014 ProQerties - Privilege Tax Fund Assets Restricted cash on deposit with the State Treasurer Due from Department of Revenue Total assets $ 8,072 $ <7,505> $ 555 12 $ $ 8,072 $ <7,505> $ 567 $ $ 567 $ 567 $ $ 567 $ $ $ 567 $ <12> 12 Liabilities Due to Department of Revenue Total liabilities Highwa~ ProQerties - 24 Percent Fund Assets Restricted cash on deposit with the State Treasurer Total assets $ $ 376.534 376,534 $ $ 463,798 463,798 $ <376,581> $ $ <376,581> $ 463,751 463,751 $ $ 376,534 $ $ 463,798 $ <376,581> $ $ <376,581> $ 463,751 463,798 $ 376,522 12 $ 471,870 $ <384,086> $ 464,306 12 $ 376,534 $ 471,870 $ <384,086> $ 464,318 $ 567 463,798 $ $ 567 463,751 464,365 $ <376,581> $ 464,318 Liabilities Due to Arizona counties Total liabilities 376,534 463,751 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 $ 376,534 $ 376,534 $ 2014 Comprehensive Annual Financial Report 68 <376,581> STATISTICAL SECTION 2014 Comprehensive Annual Financial Report Arizona Department of Transportation Overview - Statistical Section for the fiscal year ended June 3D, 2014 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. 2014 Comprehensive Annual Financial Report 69 Arizona Department of Transportation Index - Statistical Section for the fiscal year ended June 30, 2014 Financial Trends Table A-1- Change in Net Position ....................................................................................................................... 71-74 Table A-2 - Statement of Revenues, Expenditures, and Changes in Fund Balances ............................................. 75-78 Table A-3 - Fund Balances of Governmental Funds .............................................................................................. 79-80 Table A-4 - Expenditures of Federal Awards .............................................................................................................. 81 Table A-5 - Government-wide Expenses by Function ........................................................................................... 82-83 Table A-6 - Government-wide Revenues .............................................................................................................. 84-85 Table A-7 - Net Position by Component ............................................................................................................... 86-87 Revenue Capacity Table B-1- Highway User Revenue Fund Collections ................................................................................................ 88 Table B-2 - Highway User Revenue Fund Distributions ............................................................................................. 89 Table B-3 - Fuel Tax Rates .......................................................................................................................................... 90 Table B-4 - Motor Vehicle Fuel Tax - Top Ten Suppliers ........................................................................................... 91 Table B-5 - Gasoline Volume Sold - Top Twenty-Five Suppliers ........................................................................... 92-93 Debt Capacity Table C-1- Highway User Revenue Fund - Legal Debt Margin .................................................................................. 94 Table C-2 - Highway Revenue Bonds - Bond Coverage ............................................................................................. 95 Table C-3 - Transportation Excise Tax Revenue Bonds - Bond Coverage .................................................................. 96 Table C-4 - Transportation Excise Tax Revenue Bonds - Debt Service Revenue and Cost Per Capita ....................... 97 Table C-5 - Ratios of Outstanding Debt by Type ................................................................................................... 98-99 Demographic and Economic Information Table D-1- Number of Vehicle Registrations Per Year ............................................................................................ 100 Table D-2 - Vehicle Registrations Per Year Compared to Fuel Sales ........................................................................ 101 Table D-3 - Demographic and Economic Statistics .................................................................................................. 102 Table D-4 - Principal Employers ............................................................................................................................... 103 Operating Information Table E-1- Full Time Equivalents {FTEs} ................................................................................................................... 104 Table E-2 - Capital Assets - Schedule by Function and Activity ............................................................................... 105 Table E-3 - Capital Assets - Schedule of Changes by Function and Activity ............................................................ 106 Table E-4 - Total Public Road Mileage by Highway Class and Governmental Ownership ....................................... 107 Table E-S - Daily Vehicle Miles Traveled with Population Data ............................................................................... 108 2014 Comprehensive Annual Financial Report 70 Table A-1 Arizona Deparbnent of Transportation Change in Net Position for fiscal year ended June 30 (Thousands of Dollars) 2005 Expenses Governmental Activities: Administration Aeronautics $ 2006 42,298 9,804 $ 1 Non-capital, including asset preservation Distributions to other state agencies Distributions to Arizona counties and cities local governmental assistance 2 Issuance cost on long-term debt Interest on long-term debt 156,678 306,853 1,086,955 42,440 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 $ 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 primary governmental program revenues Net /revenues: Governmental Activities Business-type Activities $ 138,788 120,163 105,961 113,569 114,795 1,219,208 48,760 <53,981> 206,903 1,095,671 36,771 86,870 88,279 82,450 1,767,947 2,000,779 10,270 4,360 8,175 4,273 8,072 4,355 12,427 14,630 12,448 2,076,001 $ 1,780,395 $ 2,013,206 $ $ 8,843 1,133 2,953 577 132,274 919 1,214 1,518 113,506 5,564 4,760 58,948 484,276 537 121,179 7,099 4,040 67,241 387,614 12,239 72,679 354,024 669,491 588,924 584,722 8,443 3,009 8,012 3,281 8,060 2,909 11,452 11,293 10,969 Business-type Activities: Charges for services: Arizona Highways Magazine Highway Expansion and Extension loan Program Total business-type activities program revenues 51,667 5,418 2,061,371 $ Total governmental activities program revenues $ 118,147 114,119 96,937 9,394 125,889 105,037 91,676 6,871 Highwal Highway maintenance Motor vehicle Other 45,002 10,705 2007 680,943 $ 600,217 $ 595,691 $ <1,391,880> $ <1,179,023> $ <1,416,057> <3,178> Total primary government net expense <1,155> <1,458> $ <1,395,058> $ <1,180,178> $ <1,417,515> 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. 2Notes to Financial Statement (A), New Accounting Pronouncements, Statement Number 65. 2014 Comprehensive Annual Financial Report 71 Table A-l Arizona Deparbnent of Transportation Change in Net Position for fiscal year ended June 30 (Thousands of Dollars) $ 54,918 4,373 $ 56,066 10,993 2011 2010 2009 2008 $ 65,781 $ 93,040 94,075 $ 101,370 $ 106,200 132,874 137,100 112,880 116,742 110,963 133,415 34,721 102,932 102,926 37,070 129,700 99,949 39,632 125,331 116,095 46,076 139,762 107,655 51,074 122,977 111,397 187,004 176,692 1,238,383 37,285 216,198 413,940 1,091,893 48,571 122,747 251,392 1,057,720 83,230 345,590 254,702 1,024,756 163,035 351,116 307,885 1,005,114 93,557 257,126 213,394 1,074,086 102,332 312,519 216,675 1,065,798 90,376 92,295 114,683 129,626 128,768 164,081 187,315 13,554 114,406 2,173,804 2,313,464 1,951,075 2,276,610 2,296,886 2,229,116 2,204,976 7,712 4,053 7,410 2,112 6,288 147 5,664 126 4,979 75 4,637 46 4,821 46 11,765 9,522 6,435 5,790 5,054 4,683 4,867 $ 2,301,940 $ 2,233,799 $ 2,209,843 11,947 $ 12,254 $ 12,400 $ 2,185,569 $ 2,322,986 $ 1,957,510 $ 2,282,400 $ 9,706 940 1,451 1,765 127,900 $ 8,752 936 1,765 887 117,267 $ 9,766 $ 10,770 $ $ 2014 2013 2012 $ 1,266 1,858 111,412 2,798 2,667 117,427 1,681 2,290 111,429 842 1,887 119,733 864 2,418 122,042 8,263 79,747 523,728 9,789 90,619 552,488 5 146,936 575,448 220,759 743,718 161,992 775,976 168,436 651,798 157,705 546,680 753,500 782,503 846,691 1,098,139 1,065,315 954,950 842,109 7,624 1,755 6,291 1,128 5,975 556 5,619 154 5,581 2 5,188 6 5,164 9,379 7,419 6,531 5,773 5,583 5,194 5,164 762,879 $ 789,922 $ 853,222 $ 1,103,912 $ 1,070,898 $ 960,144 $ $ <1,420,304> $ <1,530,961> $ <1,104,384> $ <1,178,471> $ <1,231,571> $ <1,274,166> $ <2,386> <2,103> 106 <17> 529 511 $ <1,422,690> $ <1,533,064> $ <1,104,278> $ <1,178,488> $ <1,231,042> $ <1,273,655> $ 2014 Comprehensive Annual Financial Report 72 847,273 <1,362,867> 297 <1,362,570> 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 2005 Governmental Activities: Transportation excise taxes Motor vehicle registration, title, and related taxes 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) 316,806 966,885 759,633 13,180 19,245 27,120 $ 2,134,389 262,264 1,029,001 790,909 15,303 55,760 9,998 2,163,235 2,102,869 2,134,389 2,764 380 3,518 5,563 <3> 3,144 3,518 5,560 2,106,013 $ 2,137,907 $ 2,413,795 Total business-type activities $ Total primary government 316,491 994,052 770,596 13,686 28,538 11,026 2007 245,000 Total governmental activities Changes in Net Position Governmental Activities Business-type Activities $ 2,102,869 Business-type Activities: Income from investments Other Transfers Total primary government 2006 2,408,235 $ 710,989 <34> $ 955,366 2,363 $ 992,178 4,102 $ 710,955 $ 957,729 $ 996,280 (continued) 2014 Comprehensive Annual Financial Report 73 Table A-1 Arizona Department of Transportation Change in Net Position for fiscal year ended June 30 (continued) (Thousands of Dollars) 2008 $ 253,742 1,033,505 766,394 13,822 59,528 38,772 2009 $ 2011 2010 219,165 $ 976,075 667,200 11,975 33,588 22,831 <500> 199,672 893,287 690,503 9,527 16,347 8,966 $ 206,545 $ 874,191 704,727 9,798 9,415 16,095 <851> 2014 2013 2012 216,281 899,345 700,620 10,735 11,388 10,442 $ 227,800 913,326 708,062 8,084 11,781 13,411 $ 243,786 963,221 714,852 12,975 11,634 13,931 2,165,763 1,930,334 1,818,302 1,819,920 1,848,811 1,882,464 1,960,399 2,165,763 1,930,334 1,818,302 1,819,920 1,848,811 1,882,464 1,960,399 783 747 735 735 4,788 <17> 1,612 <1> 500 514 554 4,771 2,111 514 1,405 783 747 $ 2,170,534 $ 1,932,445 $ 1,818,816 $ 1,821,325 $ 1,849,594 $ 1,883,211 $ 1,961,134 $ 745,459 2,385 $ 399,373 8 $ 713,918 620 $ 641,449 1,388 $ 617,239 1,313 $ 608,298 1,257 $ 597,532 1,032 $ 747,844 $ 399,381 $ 714,538 $ 642,837 $ 618,552 $ 609,555 $ 598,564 851 2014 Comprehensive Annual Financial Report 74 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) 2006 2005 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 $ 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 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 2,746,107 2,801,525 2,739,333 40,599 9,517 159,408 105,887 90,208 1,802 43,372 10,470 161,496 111,378 95,198 2,309 44,875 3,876 184,240 118,940 103,801 407,421 424,223 455,732 306,852 1,086,955 206,903 1,190,962 114,795 1,217,883 Debt service: Principal Interest Bond issuance costs 302,202 94,344 1,996 173,745 83,017 1,252 100,395 90,836 1,592 Non-capital, including asset preservation Capital outlay 156,678 623,829 250,736 663,316 63,273 741,506 2,980,277 2,994,154 2,786,012 <234,170> $ <192,629> $ Total revenues Expenditures Current: Transportation: Administration Aeronautics Highway Highway maintenance Motor vehicle Other Total Transportation Transportation not appropriated by State legislature: Intergovernmental: Distributions to other state agencies Distributions to Arizona counties and cities Total expenditures Excess of revenues over expenditures $ 2014 Comprehensive Annual Financial Report 75 <46,679> 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) $ $ 253,742 1,159,474 768,046 13,822 494,584 79,747 38,609 463 697 59,197 940 1,367 6,206 $ 219,165 1,064,147 696,075 11,975 531,981 94,521 27,498 876 427 33,221 936 1,788 21,579 $ 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 2011 2010 2009 2008 $ 206,545 991,335 704,727 9,799 736,803 219,743 10,078 845 436 9,083 798 2,554 9,913 $ 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 2014 2013 $ $ 5,244 7,779 243,786 1,085,166 714,852 12,975 536,192 148,902 19,314 915 228 11,500 1,170 6,025 11,959 227,800 1,021,441 613,607 597,762 66,217 <2,380> 989 93 11,282 2,876,894 2,704,189 2,653,501 2,902,659 2,901,583 2,549,834 2,792,984 44,322 4,089 171,134 135,629 110,982 46,056 10,471 163,570 111,346 131,665 52,971 81,477 80,627 80,612 92,966 115,061 94,014 101,142 200,216 120,716 98,115 135,908 118,230 114,327 42,996 125,199 100,993 128,196 133,572 109,553 466,156 463,108 363,188 500,524 449,092 349,800 464,287 173,405 1,241,110 404,569 1,100,959 244,836 1,046,576 254,210 1,022,512 305,218 1,004,768 132,685 1,053,543 216,482 1,065,798 192,663 102,583 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 2,455 216,879 140,259 158,991 989,882 142,604 1,077,835 217,338 998,502 313,179 709,250 286,217 701,657 242,039 677,236 223,572 563,428 3,328,237 3,519,661 3,157,926 3,147,741 3,083,546 2,760,697 2,890,705 <451,343> $ <815,472> $ <504,425> $ <245,082> $ <181,963> $ <210,863> $ <97,721> (continued) 2014 Comprehensive Annual Financial Report 76 Table A-2 Arizona Department of Transportation Statement of Revenues, Expendirures, and Changes in Fund Balances for fiscal year ended June 30 (continued) (Thousands of Dollars) 2006 2005 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 Amortized premium from debt issuance Payment to refunded bond escrow agent $ 388,046 $ <374,162> <13,885> 24,726 Net change in fund balances before accounting change 262,216 $ <251,891> <10,325> 11,118 537 118,250 147,400 22,407 <161,726> 18,392 1,518 292,645 Total other financing sources 2007 225,499 <186,856> <38,643> 2,129 10,162 577 325,000 26,201 337,280 137,986 364,069 103,110 <54,643> 317,390 103,110 433,952 <54,643> 537,062 Special item - State appropriation for Statewide Transportation Acceleration Needs (STAN) 245,000 Net change in fund balances Fund balances - July 1 $ Fund balances - June 30 537,062 16.9% 14.5% Debt service as a percentage of non-capital expenditures Debt service as a percentage of total revenues 2014 Comprehensive Annual Financial Report 77 $ 482A19 11.1% 9.2% 562,390 482,419 $ 1,044,809 9.4% 7.0% Table A-2 Arizona Deparbnent of Transportation Statement of Revenues, Expenditures, and Changes in Fund Balances for fiscal year ended 'une 30 (continued) (Thousands of Dollars) 2008 $ $ 2010 2009 303,513 $ <231,563> <71,950> 239,447 $ <221,232> <17,252> 2011 271,408 $ <266,934> <9,013> 2012 331,547 $ <331,547> <2,400> 330,856 $ <330,856> 283,066 $ <227,996> 1,815 1,818 269,001 499,725 90,753 <560,228> 1,636 1,679 767,020 92,477 36,385 <611,874> 900 2,328 42,366 303,030 <303,030> 28,233 1,765 711,479 2,127 887 796,819 31,862 58,123 773,339 858,919 32,942 392,415 302,884 342,393 45,594 321,996 43,447 <471,483> 147,333 120,921 131,530 <52,127> 321,996 1,044,809 43,447 1,366,805 <471,483> 1,410,252 147,333 938,769 120,921 1,086,102 131,530 1,169,853 <52,127> 1,341,636 1,366,805 12.8% 10.4% $ lA10,252 13.5% 12.2% 3,712 2,529 349,698 2014 2013 3,088 1,765 32,628 38,876 $ 938,769 $ 1,086,102 13.3% 10.8% $ 1,207,023 14.3% 12.0% 2014 Comprehensive Annual Financial Report 78 14.1% 12.1% $ 1,301,383 14.7% 12.0% $ 1,289,509 15.3% 12.8% Table A-3 Arizona Department of Transportation Fund Balances of Governmental Funds for fiscal year ended June 30 (Thousands of Dollars) 2006 2005 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 2008 2007 $ 166,420 57,123 $ 172,784 9,342 $ 507,723 <10,032> $ 505,691 57,899 $ 223,543 $ 182,126 $ 497,691 $ 563,590 $ 2,288 277,884 $ 2,159 258,236 $ 2,688 495,428 $ 3,212 774,644 33,348 49,002 39,898 25,359 Total all other governmental funds $ 313,520 $ 300,293 $ 547,118 $ 803,215 Total general and other governmental funds $ 537,063 $ 482,419 $ 1,044,809 $ 1,366,805 NOTE: GASB 54 rules state that Fund Balances should be reported with the categories listed in the above table for years beginning in 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) 2014 Comprehensive Annual Financial Report 79 Table A-3 Arizona Department of Transportation Fund Balances of Governmental Funds for fiscal year ended June 30 (Thousands of Dollars) 2009 $ 2011 2010 230,885 94,686 $ 270,550 80,251 1 2013 $ $ 9,765 229,559 102,350 $ 325,571 $ 350,801 $ $ 2,692 1,078A78 $ 1,894 576,331 $ 3,574 $ 8,235 240A44 25,229 341,674 $ 273,908 $ 2014 $ 7,207 267A14 123,662 $ 398,283 $ 6,833 295,361 129,115 $ 431,309 $ 9,743 <8,128> 719,966 24A62 <8,128> 789,547 37,352 <8,128> 910,931 40,550 816,591 49,738 $ 1,084,744 $ 587,968 $ 744A28 $ 818,771 $ 943,353 $ 858,201 $ lAl0,315 $ 938,769 $ 1,086,102 $ 1,092,679 $ 1,341,636 $ 1,289,510 2014 Comprehensive Annual Financial Report 80 Table A-4 Arizona Department of Transportation Expenditures of Federal Awards 1 for the fiscal year ended June 30 (Thousands of Dollars) Federal Agencys Fiscal Year 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 BIA BJA - $ BLM $ - $ FAA - $ 454 $ 660,644 13 1,004 124 268 57 544 162 152 <21> 278 FHWA 198 488 3,844 7,938 3,902 715 610 4,338 4,203 794,912 840,649 988,403 574,068 603,643 555,282 393,751 389,575 456,924 FMCSA FRA $ 2,204 $ 65 2,747 1,518 3,891 4,148 4,734 2,642 1,769 2,231 282 611 1 Total Federal FTA GSA $ 18,107 $ 234 19,056 19,261 21,451 22,769 13,853 15,530 10,169 8,837 8,466 NHTSA OST $ 112 $ 1,512 123 USDA Expend itu res $ - $ 344 80 541 1,143 120 101 106 101 69 96 683,332 818,004 862,537 1,019,736 609,167 626,501 574,332 406,923 405,212 470,401 SOURCE: Single Audit Reports - fiscal years 2005 through 2014 NOTE: 1 Bureau of Indian Affairs (BIA); Bureau of Justice Assistance (BJA); Bureau of Land Management (BLM); Federal Aviation Administration (FAA); Federal Highway Administration (FHWA); Federal Motor Carrier Safety Administration (FMCSA); Federal Railroad Administration (FRA); Federal Transit Administration (FTA); General Services Administration (GSA); National Highway Transportation Safety Administration (NHTSA); Office of the Secretary Administration Secretariate (OST); United States Department of Agriculture (USDA). Total Expenditures of Federal Awards $1,200,000 $1,000,000 $800,000 ~ ~ (5 0 ...... 0 $600,000 III -.:J C ro III ~ 0 ~ $400,000 I- $200,000 $2005 2006 2007 2008 2009 2010 2011 Fiscal Year 2014 Comprehensive Annual Financial Report 81 2012 2013 2014 TableA-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. $ 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 NOTE: 1 106,200 $ 101,370 94,075 93,040 65,781 56,282 54,918 51,667 45,002 42,298 Highway Aeronautics - $ 10,993 4,373 5,418 10,705 9,804 51,074 46,076 39,632 37,070 34,721 116,697 132,874 138,788 118,147 125,889 Maintenance $ Cities and Other 1 122,977 139,762 476,447 475,290 225,679 311,605 324,104 233,732 60,138 261,714 Motor Vehicle $ 111,397 107,655 116,095 99,949 102,926 133,243 112,880 105,961 96,937 91,676 State Agencies $ 1,282,473 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 Includes Non-capital, including asset preservation. (continued) 2014 Comprehensive Annual Financial Report 82 - - - - -- - Table A-5 Arizona Department of Transportation Government-wide Expenses by Function for the fiscal year ended June 30 (Thousands of Dollars) Highway Arizona Expansion and Highways Extension Loan Magazine Program Local Governmental Premium on Interest on Long- Assistance Long-Term Debt Term Debt 90,376 102,332 93,557 163,035 83,230 48,571 37,285 48,760 36,771 42A40 $ - $ $ 1A19 114A06 187,315 162,662 128,768 129,626 114,683 92,295 82A50 88,278 86,870 Other $ 326,073 257,126 $ 9,394 6,871 4,821 4,637 4,978 5,664 6,288 7A10 7,712 8,072 8,175 10,270 $ 46 46 75 126 147 2,110 4,053 4,355 4,273 4,360 Total $ Government-wide Expenses $2,500,000 ~ $2,000,000 ..:2 (5 0 L+- 0 $1,500,000 V1 -0 C ro V1 :J 0 ..c I- $1,000,000 $500,000 $0 2005 2006 2007 2008 2009 2010 2011 Fiscal Year 2014 Comprehensive Annual Financial Report 83 2012 2013 2014 2,209,843 2,233,800 2,301,939 2,282A01 1,957,510 2,307A29 2,185,569 2,013,206 1,872A29 2,076,000 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 Operating Grants and Capital Grants and Contributions Contributions Charges for Services $ 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 NOTE: 1 137,725 134,716 127,347 133,661 124,307 139,396 150,024 158,019 134,068 126,267 Business-Type $ 157,705 168,436 161,992 220,759 146,936 90,619 79,747 72,679 67,241 58,948 $ Includes transfers for multiple years. 2014 Comprehensive Annual Financial Report 84 546,680 651,798 776,814 743,718 575,448 552,488 523,728 354,024 387,614 484,276 Charges for Services $ 5,164 5,194 5,583 5,773 6,541 7,418 9,379 10,969 11,293 11,452 Table A-6 Arizona Department of Transportation Government-wide Revenues for the fiscal year ended June 30 (Thousands of Dollars) General Revenues Total Governmental Business-Type Income from Other Revenues Taxes 1,934,835 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 13,905 13,290 9,604 16,079 8,965 22,331 38,772 9,998 11,026 27,120 $ Investments Other Revenues 11,634 11,781 11,388 9,402 16,347 33,588 59,528 57,760 28,538 19,245 $ 1 26 121 $ Income from Government-wide Investments Revenues $ 85 1 500 (18) (3) 381 735 747 783 555 514 1,612 4,788 5,563 3,518 2,764 $ 2,808,409 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 Government-wide Revenues $3,000,000 $2,950,000 ~ ~ o o 4o $2,900,000 $2,850,000 $2,800,000 II) ""0 C ro ::::s $2,750,000 II) o ..!: $2,700,000 I- $2,650,000 $2,600,000 $2,550,000 $2,500,000 2005 2006 2007 2008 2009 2010 2011 Fiscal Year 2014 Comprehensive Annual Financial Report 85 2012 2013 2014 Table A-7 Arizona Department of Transportation Net Position by Component for fiscal year ended June 30 (Thousands of Dollars) Business-type Governmental Activities Activities Net Investment in Net Investment in Fiscal Year 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 Ca pita I Assets $ 16,812,808 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 Restricted $ 805,893 738,969 666,828 669,811 566,794 534,535 704,929 1,006,512 466,337 491,995 Total Unrestricted $ 159,127 150,721 106,932 125,860 126,415 113,053 209,650 236,186 189,669 234,548 $ 17,777,828 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 Capital Assets $ 24 30 43 54 92 131 173 225 249 499 (continued) 2014 Comprehensive Annual Financial Report 86 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 Unrestricted Restricted 78,226 77,564 76,882 76,192 75,619 74,703 74,115 71,708 67,713 65,273 $ Total 1,790 $ 1,414 825 192 (663) (406) 132 102 (30) (204) $ Capital Assets 80,040 79,008 77,750 76,438 75,048 74,428 74,420 72,035 67,932 65,568 $ 16,812,832 16,290,635 15,818,096 15,159,140 14,620,191 13,951,933 13,285,611 12,212,086 11,806,625 10,780,973 Restricted $ 884,119 816,533 743,710 746,003 642,413 609,238 779,044 1,078,220 534,050 557,268 Unrestricted $ Total 160,917 152,135 107,757 126,052 125,752 112,647 209,782 236,288 189,639 234,344 $ 2013 2014 Primary Government Net Assets By Component $20,000,000 $18,000,000 $16,000,000 ~ ~ $14,000,000 (5 0 $12,000,000 0 $10,000,000 Vl "'0 c: ro Vl $8,000,000 :J 0 J:: f- $6,000,000 $4,000,000 $2,000,000 $0 2005 2006 2007 2008 2009 2010 2011 2012 Fiscal Year .Invested in Capital Assets, net of related debt 1:1 Restricted 2014 Comprehensive Annual Financial Report 87 • Unrestricted 17,857,868 17,259,303 16,669,563 16,031,195 15,388,356 14,673,818 14,274,437 13,526,594 12,530,314 11,572,585 Table B-1 Arizona Deparbnent of Transportation Highway User Revenue Fund Collections for the fiscal year ended June 30 (Thousands of Dollars) Motor Veh icle Mot or Vehicle Motor Motor Vehicle Motor Vehicle Total Operat ors' License Deposited Fiscal Fuel Tax Reg. Fee Carrier Tax License Fees (In Lieu) Tax to Arizona Year Reven ues Revenues Revenues and Other Fees Revenues HURF 2014 632,544 $ $ 647,858 538,352 636,507 633J71 637,054 697,771 725J87 710,115 701,965 2013 2012 2011 2010 2009 2008 2007 2006 2005 182A92 17,953 $ 180,115 180,685 175,179 170A53 178,953 196,151 194,308 178,112 163A63 68A52 $ 17,103 17,085 17A66 17,157 18,930 21,758 22A73 20,824 18,573 $ 67,373 69J65 64,361 59A31 58,500 60,630 57,085 56A95 50,789 345,603 $ 321,864 228,317 275,132 331,080 349,399 400J87 389,503 372,168 318,689 1,247,044 1,234,313 1,034,204 1,168,645 1,211,892 1,242,836 1,377,097 1,389,156 1,337,714 1,253A79 Highway User Revenue Fund Collections $1,500,000 $1,350,000 $1,200,000 Vl I- ~ '0 0 $1,050,000 $900,000 4- 0 Vl "C c ro Vl $750,000 $600,000 :l 0 ~ I- $450,000 $300,000 $150,000 $0 2005 2006 2007 2008 2009 2010 2011 Fiscal Year 2014 Comprehensive Annua l Financia l Report 88 2012 2013 2014 Table 8-2 Arizona Deparbnent of Transportation Highway User Revenue Fund Distributions for the fiscal year ended June 30 (Thousands of Dollars) Fiscal State Highway Cities and Year Fund Towns 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 Counties $ 559,765 $ 340,718 $ 212,251 $ 327,732 306,376 341,502 399,900 346,443 415,556 417,541 385,759 362,965 555,030 401,172 522,556 520,484 513,379 680,530 688,451 636,094 483,047 219,228 190,857 212,739 211,741 215,817 258,871 260,107 240,309 226,110 Department of Public Economic Strength Safety Project Fund 119,247 119,965 123,211 79,216 78,626 84,950 10,000 10,000 63,999 52,216 $ 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 Other $ 1 14,063 11,358 11,588 11,631 60,141 81,247 11,140 12,057 10,553 128,141 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 2005 through 2014 NOTE: 1 An appropriation for Arizona State Parks is included. Fiscal years 2005, 2009, 2010, 2011 and 2012 include distributions to State General Fund. 2014 Comprehensive Annual Financial Report 89 Total $ 1,247,044 1,234,313 1,034,204 1,168,644 1,271,892 1,242,836 1,377,097 1,389,156 1,337,714 1,253,479 Table B-3 Arizona Department of Transportation Fuel Tax Rates for the fiscal year ended June 30 (Cents per Gallon) Fiscal Gasoline Year Tax 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 $ Use Fuel Tax 0.18 0.18 0.18 0.18 0.18 0.18 0.18 0.18 0.18 0.18 $ 1 0.26 0.26 0.26 0.26 0.26 0.26 0.26 0.26 0.26 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. Lightweight motor vehicles under 26,000 pounds pay $.18 per gallon. 1 2014 Comprehensive Annual Financial Report 90 Table B-4 Arizona Departtnent of Transportation Motor Vehicle Fuel Tax - Top Ten Suppliers for fiscal year ended June 30 (Thousands) Revenue Percentage Fiscal Year 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 Gallons from Top Revenue from Top All Motor Vehicle from Top Ten Ten Suppl iers Ten Suppliers Fuel Tax Revenue Suppliers 3,138,450 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 $ 617,134 613,799 589,607 564,353 569,974 565,889 559,609 552,997 504,052 504,128 691,250 685,320 688,642 686,591 683,880 698,959 753,036 772,100 750,574 723,425 $ 89.3% 89.6% 85.6% 82.2% 83.3% 81.0% 74.3% 71.6% 67.2% 69.7% SOURCE: Revenue & Fuel Tax Administration reporting, based on gallonage data reported by fuel suppliers. NOTE: Above data reflects a change in gasol ine and use fuel gallons reported by the Revenue & Fuel Tax Administration for 2005 - 2014. Motor Vehicle Fuel Tax Sources $800,000 $700,000 $600,000 ~ ro o o $500,000 4- o V) "0 $400,000 C ro V) ::::l o r- ..c $300,000 $200,000 $100,000 $0 2005 2006 2007 2008 2009 2010 2011 2012 2013 Fiscal Year All Fuel Tax Revenue • Top Ten Suppliers 2014 Comprehensive Annua l Financial Repo rt 91 2014 Table 6-5 Arizona Deparbnent of Transportation Gasoline Volume Sold - Top Twenty-Five Suppliers for fiscal year ended June 30 2005 2006 2008 2007 Suppliers % of Total Suppliers % of Total Suppliers % of Total within Gallons within Gallons Sold Range Sold Range Sold 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% 7 5 2 3 3 5 3.3% 5.2% 3.2% 11.4% 17.9% 55.8% 25 97.2% 25 96.4% 25 96.8% Range - in Suppliers % of Total Suppliers Millions of within Gallons within % of Total within Gallons Gallons Range Sold Range Gallons Sold Range 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% 25 94.5% 25 94.7% < 25 26 - 50 51-100 101- 200 201- 300 >300 Total Gallons of Gasoline (Thousands) Gasoline % of Total Total Gallons of Use Fuel (Diesel) (Thousands) Diesel % of Total 2009 2,730,911 2,781,197 2,871,528 2,797,714 2,634,840 75.5% 74.3% 74.5% 74.5% 75.3% 887,406 963,551 981,647 959,406 864,455 24.5% 25.7% 25.5% 25.5% 24.7% Note: Above data reflects a change in gasoline and use fuel gallon reported by the Revenue & Fuel Tax Administration for 2005 - 2014. (continued) 2014 Comprehensive Annual Financial Report 92 Table B-5 Arizona Department of Transportation Gasoline Volume Sold - Top Twenty-Five Suppliers for fiscal year ended June 30 2010 2012 2011 2013 Range - in Suppliers % of Total Suppliers % of Total Suppliers % of Total Millions of within Gallons within % of Total within Gallons within Gallons within Gallons Gallons Range Sold Range Gallons Sold Range Sold Range Sold Range Sold 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% 13 2 2 3 1 4 4.8% 2.0% 4.2% 15.0% 6.2% 65.0% 25 96.5% 25 96.8% 25 98.1% 25 97.4% 25 97.2% < 25 26 - 50 51-100 101- 200 201- 300 >300 Total Gallons of Gasoline (Thousands) Gasoline % of Total Total Gallons of Use Fuel (Diesel) (Thousands) Diesel % of Total Suppliers % of Total Suppliers 2014 2,607,660 2,616,186 2,616,570 2,612,577 2,644,667 76.0% 75.9% 75.8% 76.0% 76.0% 824,996 829,530 837,151 827,138 827,731 24.0% 24.1% 24.2% 24.0% 24.0% Note: Above data reflects a change in gasoline and use fuel gallon reported by the Revenue & Fuel Tax Administration for 2005 - 2014. 2014 Comprehensive Annual Financial Report 93 Table (-1 Arizona Department of Transportation Highway User Revenue Fund Legal Debt Margin for the fiscal year ended June 30 (Thousands of Dollars) Total Principal Applicable to the Limit 1 Debt Limit ,2 Fiscal Year 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 NOTES: $ N/A N/A N/A N/A N/A N/A N/A N/A 1,300,000 1,300,000 Total Principal Legal Debt as a Percentage of Applicable to Limit Margin Debt Limit $ N/A N/A N/A N/A N/A N/A N/A N/A 1,223,425 1,161,355 $ N/A N/A N/A N/A N/A N/A N/A N/A 76,575 138,645 N/A N/A N/A N/A N/A N/A N/A N/A 94.11% 89.34% 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. 1 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. 2 2014 Comprehensive Annual Financial Report 94 Table C-2 Arizona Department of Transportation Highway Revenue Bonds Bond Coverage for the fiscal year ended June 30 (Thousands of Dollars) Fiscal Pledged Year Principal $ 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 58,485 60,540 67,885 71,770 68,140 64,190 60,645 57,825 54,830 44,265 Interest Revenues Total $ 80,495 $ 78,198 71,113 83,960 87,661 89,825 75,538 73,785 62,222 60,459 138,980 138,738 138,998 155,730 155,801 154,015 136,183 131,610 117,052 104,724 1,2 Coverage $537,768 512,971 392,648 504,175 502,874 509,183 658,616 635,140 624,408 461,763 3.7 3.7 2.8 3.2 3.2 3.3 4.8 4.8 5.3 4.4 SOURCES: Highway User Revenue Fund Schedule fiscal years 2005 through 2014; Debt Service Funds fiscal years 2005 through 2014. 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. 1 The Highway Revenue Bonds are secured by a prior lien on and pledge of motor vehicle and related fuel fees and taxes. 2 Highway Revenue Bonds - Bond Coverage $700,000 $600,000 V) I- ~ $500,000 "0 0 4- 0 $400,000 Vl "'0 c ro Vl :::J 0 ..c. $300,000 $200,000 I- $100,000 $0 2005 2006 2007 2008 2009 2010 2011 Fiscal Year Revenue • Debt Service 2014 Comprehensive Annual Financial Report 95 2012 2013 2014 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 Principal Year 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 $ Interest Total 58,600 55,870 55,460 45,970 33,315 13,825 19,045 $ 44,988 47,721 48,129 42,496 38,225 17,193 10,673 $ 103,588 103,591 103,589 88,466 71,540 31,018 29,718 80,375 208,625 1,566 14,318 81,941 222,943 Revenues $ 1 Coverage 243,786 227,800 216,281 206,545 199,672 219,165 253,742 262,264 316,491 316,806 2.4 2.2 2.1 2.3 2.8 7.1 8.5 N/A 3.9 1.4 SOURCE: Maricopa County Regional Area Road Fund Report NOTES: Bond coverage ratio is based upon total Maricopa County Transportation Excise Tax collections. IThe 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 $350,000 ~ ro 0 Cl $300,000 $250,000 '+- 0 Vl $200,000 "'C C ro Vl ~ $150,000 0 ..c I- $100,000 $50,000 $0 2005 2006 2007 2008 2009 2010 2011 2012 Fiscal Year Revenue • Debt Service 2014 Comprehensive Annual Financial Report 96 2013 2014 Table C-4 Arizona Departtnent 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 2013 2012 2011 2010 2009 2008 2007 2006 2005 $ 55,870 55,460 45,970 33,315 13,825 19,045 80,375 208,625 Interest $ Revenue Cost 47,721 48,129 42,496 38,225 17,193 10,673 $ 103,591 103,589 88,466 71,540 31,018 29,718 1,567 14,318 81,942 222,943 $ 1 227,800 216,281 206,545 199,672 219,165 253,742 262,264 316,491 316,806 Cost Revenue Population per capita per capita 4,009 3,942 3,880 3,817 4,023 3,955 3,907 3,793 3,649 $ 26 26 23 19 8 8 $ 22 61 SOURCES: Maricopa County Regional Area Road Fund Report; population data from the U.S. Census Bureau available only through 2013. NOTE: 1 Based upon total Maricopa County Transportation Excise Tax collections. Transportation Excise Tax Revenue and Cost Per Capita $100 $90 $80 ~ ~ 0 0 $70 $60 I+- 0 Vl $50 "'C c ro Vl $40 :::J 0 .£: I- $30 $20 $10 $0 2005 2006 2007 2008 2009 2010 2011 Fiscal Year • Cost Revenue 2014 Comprehensive Annual Financial Report 97 2012 2013 57 55 53 52 54 64 67 83 87 Table C-5 Arizona Deparbnent of Transportation Ratios of Outstanding Debt by Type for the fiscal year ended June 30 (Thousands of Dollars) 2005 2004 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 Capital 1,017,360 $ 2007 2006 1,161,355 $ 1,223,425 $ 1,490,600 289,000 308,585 60,481 1,121 165,305 80,375 363,970 76,721 5,910 169,473 325,430 90,852 11,130 195,018 282,860 108,034 10,601 168,287 1,841,852 1,857,804 1,845,855 2,060,382 142,414 146,454 150,494 154,534 142,414 146.454 150.494 154,534 1,984,266 $ 1.17% $ 345 2,004,258 $ 1.07% $ 335 1,996,349 2,214,916 $ 0.96% $ 322 1.01% $ 348 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 available through 2013 NOTE: lThe 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 Census. Per capital 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. (continued) 2014 Comprehensive Annual Financial Report 98 Table C-5 Arizona Department of Transportation Ratios of Outstanding Debt by Type for the fiscal year ended June 30 (Thousands of Dollars) 2008 $ 2009 1,623,905 $ 2010 1,740,765 $ 2011 1,672,625 $ 2012 1,600,855 $ 2013 1,619,965 $ 1,733,285 350,955 298,280 128,586 7,535 56,739 777,130 329,650 173,313 4,326 42,668 743,815 304,480 158,601 1,304 60,711 877,845 392,495 180,225 4,910 59,892 981,845 335,230 248,892 10,729 55,666 925,975 296,240 350,739 22,271 105,816 2,466,000 3,067,852 2,941,536 3,116,222 3,252,327 3,434,326 3,252,327 $ 3,434,326 ============ 2,170 2,170 $ 2,468,170 $ 1.10% $ 380 2,941,536 1.40% $ 465 $ 1.31% $ 441 3,116,222 $ 1.38% 1.37% $ 481 $ 2014 Comprehensive Annual Financial Report 99 496 1.40% $ 518 Table 0-1 Arizona Deparbnent 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 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 7,181 6,975 6,840 6,741 6,693 6,734 6,609 6,318 5,945 5,639 205 136 99 48 <41> 125 290 373 306 327 Arizona . Popu Iatlon 1 Change in Vehicles Population Per Person 73 71 69 <183> 96 137 170 217 215 168 1.084 1.064 1.055 1.051 1.015 1.036 1.039 1.020 0.995 0.979 6,627 6,553 6,483 6,413 6,596 6,499 6,362 6,192 5,975 5,759 SOURCE: Vehicle registrations from Motor Vehicle Division's annual reports. NOTES: 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. Year 2012 Vehicles has been revised to reflect revisions made by MVD. Population data available only through fiscal year 2013. 1 Change in Vehicles Registered Compared to Population Change 500,000 400,000 300,000 OJ tl.O c ro ..s::: 200,000 100,000 u <100,000> <200,000> <300,000> 2004 2005 2006 2007 - 2008 Vehicles 2009 - 2010 Population 2014 Comprehensive Annual Financial Report 100 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 2014 7,453 5.5% 3,389,934 5.5% 2013 2012 2011 2010 2009 2008 2007 2006 2005 7,181 6,824 6,840 6,741 6,693 6,734 6,609 6,318 5,945 5.2% <0.2%> 1.5% 0.7% <0.6%> 1.9% 4.6% 6.3% 5.4% 3,360,587 3,409,594 3,411,652 3,369,732 3,398,866 <1.4%> <0.1%> 1.2% <0.9%> <8.9%> <0.7%> 3.4% 2.6% 3.3% 1 Change 3J31,808 3,759,465 3,636,195 3,542,631 SOURCES: Vehicle registrations from Motor Vehicle Division's annual reports; fuel sales from Motor Vehicle Division data reported by fuel suppliers 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. 1 Percentage Change in Vehicle Registrations and Fuel Sales 8.0% 6.0% -~--~__--~~------------------------------------------------~ 4.0% (I) tl.O c 2.0% (0 ..r: U OJ tl.O (0 0.0% -~------------------~--~~~~~--~~----~~~----~------~ C <2.0%> -~--------------------~--------~~--------------------------~ OJ u "OJ <4.0%> ..~----------------------~------,.-----------------------------~ -+-' a.. <6.0%> +-------------------------~--~------------------------------~ <8.0%> - ~------------------------~~--------------------------------~ <10.0%> . ~----~----~----_r----~----~----~r_----~----~----~----~ 2005 2006 2007 2008 2009 2010 2011 2012 Fiscal Year - Vehicle Registrations - Fuel Prices 2014 Comprehensive Annual Financial Report 101 2013 2014 Table D-3 Arizona Deparbnent of Transportation Demographic and Economic Statistics for the Last Ten Calendar Years Calendar Personal Per Capita Year Ended Income 2 Personal Population December 31 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 6,626,624 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 1 (in thousands) $ 245,070,457 235,780,739 227,286,519 223,716,314 219,026,704 223,961,131 218,587,551 206,958,398 188,152,439 170,026,128 Income 3 $ 36,983 35,979 35,062 33,507 33,248 34,460 34,368 33,429 31,495 29,525 Unemployment Rate 4 7.9% 8.3% 9.4% 10.4% 9.8% 6.0% 3.7% 4.1% 4.7% 5.0% 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 Securityts website, www.workforce.az.gov (for unemployment rates) NOTES: IThe 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. Personal income estimates for previous years were revised to reflect revisions made by the u.s. Bureau of the Census. 2 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. 3 4The unemployment rates were revised to reflect a revision made by the Arizona Department of Commerce website, www.workforce.az.gov. 2014 Comprehensive Annual Financial Report 102 Table D-4 Arizona Deparbnent of Transportation Principal Employers Current and Ten Years Ago Employer Calendar Year Ended Calendar Year Ended December 31,2013 December 31,2003 Full-Time Equivalent Percentage of Total State Full-Time Equivalent Percentage of Total State Employees Rank Employment Employees Rank Employment State of Arizona 49,278 1 1.63% 50,363 1 1.85% Wal-Mart Stores Inc. Banner Health City of Phoenix Wells Fargo Maricopa County Arizona State University Intel Corp. J P Morgan Chase & Co. Bank of America Honeywell International, Inc. U.S. Postal Services Albertson's-Osco Raytheon co. 32,169 25,270 14,983 14,713 12,698 12,222 11,900 11,042 11,000 2 3 4 5 6 7 8 9 10 1.06% 0.83% 0.49% 0.49% 0.42% 0.40% 0.39% 0.36% 0.36% 0.00% 0.00% 0.00% 0.00% 18,677 13,756 13,095 2 3 5 13,482 10,005 9,500 4 9 10 12,000 11,406 9,500 10,200 6 7 10 8 0.68% 0.50% 0.48% 0.00% 0.49% 0.37% 0.35% 0.00% 0.00% 0.44% 0.42% 0.35% 0.37% 6.43% 171,984 Total 195,275 6.30% SOURCES: Resources: Bizjournals.com for 2013 employers, Business Journal, Book of Lists 2003 for employers; Arizona Department of Commerce website, www.workforce.az.gov (for annual State employment). The sources are those most current at the time of printing. Note: Prior years reflect 9 year range only - beginning this year there will be a 10 year range. 2014 Comprehensive Annual Financial Report 103 Table E-1 Arizona Department of Transportation Full-Time Equivalents (FTEs) for the fiscal year ended June 30 Non-appropriated Appropriated Fiscal Year Admin. 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 792 792 756 745 692 692 692 692 692 686 NOTES Highways 2,235 2,235 2,262 2,267 2,153 2,255 2,255 2,223 2,223 2,227 1 Multimodal Motor Enforcement & Planning Vehicle Compliance Division Division Division 78 78 87 52 46 46 46 46 46 48 1,060 1,075 1,075 1,111 1,657 1,755 1,751 1,730 1,688 1,665 1 383 368 368 373 Total Arizona Total Non- Appropriated Highways Appropriated Total All FTEs Magazine FTEs FTEs 4,548 4,548 4,548 4,548 4,548 4,748 4,744 4,691 4,649 4,626 ECD FTE total was included in the Motor Vehicle Division 2005-2010. 2014 Comprehensive Annual Financial Report 104 20 18 23 22 23 28 28 60 72 72 Other HELP 1 1 2 2 3 3 3 44 45 44 44 43 24 24 49 38 31 65 63 68 68 68 52 52 112 113 106 4,613 4,611 4,616 4,616 4,616 4,800 4,796 4,803 4,762 4,732 Table E-2 Arizona Department of Transportation Capital Assets Used in the Operation of Governmental Funds Schedule by Function and Activityl June 30, 2014 (Thousands of Dollars) 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 Land $ 879 Buildings and Improvements other than Machinery and Improvements Buildings Equipment $ 49,314 $ 18,607 $ 12,368 Construction in Progress Infrastructure $ Total $ $ 81,168 936 37,855 1,798 3,279 2,885,892 710 10,567 105 4,908 357 384 7 22 4,470 2,667 4,301 1,218 153 123 316 592 45,260 47,244 9,396 3,572 9,013 8,455 68,576 72,068 4,907 12,797 $ 2,906,121 $ 195,763 $ 33,909 $ 46,087 43,868 13,778,329 $ 13,778,329 $ 2,843,910 Note: 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. 1 2014 Comprehensive Annual Financial Report 105 19,523,552 3,482 9,216 1,597 2,843,910 $ 19,804,119 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, 2014 Governmental Funds Capital Assets July 1, 2013 Function and Activity Administration Governmental Funds Capital Assets $ Deductions Additions 80,115,547 $ 3,305,221 $ June 3D, 2014 <2,252,910> $ 81,167,858 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 NOTE: $ 43,824,853 15,775,036,528 3,482,394 9,179,994 1,585,297 591,681 68,411,355 70,287,596 43,967 908,503,336 16,052,515,245 913,845,938 <6,152,304> 16,960,208,879 3,285,416,977 461,509,447 <903,016,401> 2,843,910,023 $ <909,168,705> $ 19,804,118,902 19,337,932,222 <3,899,394> 36,468 10,851 165,323 1,780,772 $ 1,375,355,385 43,868,820 16,679,640,470 3,482,394 9,216,462 1,596,148 591,681 68,576,678 72,068,368 This schedule presents only the capital asset balances (not net of depreciation) 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. 1 2014 Comprehensive Annual Financial Report 106 -------- ----- 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 Line Miles) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Functional Classification Rural: Interstate Freeway 981 980 lPrincipal Arterial Freeways & 981 980 980 980 980 Additional categorization beginning 2011 Expressways 980 982 921 25 43 18 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 2,19l 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 1,174 1,173 4,179 1,794 30,870 36,037 37,046 37,816 37,675 37,523 40,846 40,745 41,593 41,386 40,129 188 188 188 188 188 188 188 188 187 248 150 156 168 171 176 176 175 178 181 208 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 1,491 1,957 2,100 20,308 22,076 22,743 22,559 22,918 22,937 23,038 22,942 23,498 23,878 26,312 Statewide composite : Freeways and expressways Arterials Collectors Locals 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 1,377 5,813 8,073 51,178 Total statewide composite 58,113 59,789 60,375 60,593 60,460 63,884 63,687 65,091 65,264 66,441 Principal Arterial Minor Arterial Major Collector Minor Collector Local Total Rural Urban: Interstate freeway 2Principal Arterial Freeways & Expressways Principal arterial Minor arterial Urban collector Local Total urban SOURCE Arizona's Highway Performance Monitoring System (HPMS) lAdditional category created for 2011 reporting, 2Before 2012 this category was titled "Urban Expressway", Total Public Road Mileage 70,000 60,000 50,000 VI Q) ~ 40,000 30,000 20,000 10,000 ° 2005 2006 2007 2008 2009 2010 2011 2012 Calendar Year • Rural Urban 2014 Comprehensive Annual Financial Report 107 2013 2014 Table E-5 Arizona Department of Transportation Daily Vehicle Miles Traveled with Population Data for calendar year ended December 31 (Thousands) 1 Calendar Year Ended December 31 Non-State Highways State Highways All Public Highways 2 Arizona Population Da ily Miles per capita 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 88,153 85,285 83,955 84,427 87,608 86,886 91,042 89,016 85,352 75,070 77,837 79,003 79,312 79,699 76,714 81,496 81,456 82,178 78,473 81,808 165,990 164,288 163,267 164,126 164,322 168,382 172,498 171,194 163,825 156,878 6,627 6,553 6,467 6,413 6,588 6,499 6,360 6,191 5,974 5,759 25.0 25.1 25.2 25.6 24.9 25.9 27.1 27.7 27.4 27.2 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. NOTES: 1 Year 2013 is the latest population information avaible at the time of publication. 2Years 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 200,000 180,000 160,000 140,000 V'l ~ ~ '+- 120,000 100,000 0 V'l -0 C 80,000 til V'l :J 0 60,000 .s:: I- 40,000 20,000 0 2003 2004 2005 2006 2007 2008 2009 2010 Calendar Year • State Highways Non-State Highways 2014 Comprehensive Annual Financial Report 108 2011 2012 2013 ACKNOWLEDGMENTS The Comprehensive Annual Financial Report was prepared by Financial Management Services, Fiscal Operations: Keith Fallstrom Anita Kleinman, CPA Diane Wascher, CPA Sheryl Bodmer, CPA Anne Ball, CPA Sauching (Veronica) Chen Yolanda Flores Curtis Jarrell Leisa Garton Joel Konopken Francine Rubin 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. 2014 Comprehensive Annual Financial Report 109