ARIZONA HIGHWAY USER REVENUE FUND Forecasting Process & Results FY 2015-2024 Financial Management Services September 2014 TABLE OF CONTENTS Introduction 1 Background 1 Risk Analysis Panel 2 Model Results 2 Summary 3 Supplementary Information 1. HURF Official Revenue Forecast 2. HURF Revenue Risk Analysis Results by Probability 3. HURF Official Revenue Forecast Distribution 4. Panel Data Values 5. Panel Members Inputs by Independent Variable 6. Independent Variable Historical Values 4 5 6 7-10 11-15 16-20 ARIZONA HIGHWAY USER REVENUE FUND OFFICIAL FORECAST UPDATE RISK ANALYSIS OF EXPECTED VALUES Introduction This document presents the forecast of expected values for the Arizona Highway User Revenue Fund for the period FY 2015-2024, as prepared by the Arizona Department of Transportation. Background The State of Arizona taxes motor fuels and collects a variety of fees relating to the registration and operation of motor vehicles in the state. These collections include gasoline and use fuel taxes, motor carrier fees, vehicle license taxes, motor vehicle registration fees, and other miscellaneous fees. These revenues are deposited in the Arizona Highway User Revenue Fund (HURF) and are then distributed to the cities, towns and counties of the State and to the State Highway Fund, which is administered by the Department. These taxes and fees represent a source of revenues available to the state for highway related expenses. Since 1986, the Department has estimated Highway Revenues using a comprehensive regressionbased econometric model. In 1989, the model was updated by Dr. Alberta Charney of the University of Arizona. The model relied on the estimates of certain “independent variables” to predict future tax revenues. Any variability between estimated and actual values could lead to variances in the tax forecast. In order to deal with this variability, the Department introduced the Risk Analysis Process (RAP) in 1992. The RAP relies upon probability analysis and the independent evaluation of the model’s variables by an expert panel of economists. This results in a series of forecasts with specified probabilities of occurrence, rather than a single or “best guess” estimate. In 1997, Hickling Lewis Brod Inc. (HLB), working in conjunction with Dr. Dennis Hoffman of Arizona State University, developed a new forecasting model to incorporate certain economic data generated over the past ten years and evaluate the inclusion of independent variables absent from the 1989 model, to enhance the model’s forecasting accuracy. The new model also took into consideration 1997 legislation which eliminated the weight distance tax on motor carriers, increased weight and use fees for use class vehicles, and changed the point of taxation on fuel. In September 2000 and 2003, HLB reviewed the model and updated the equations. The independent variables contained in the model in 2003 included Arizona Real Income Growth Per Capita, Population Growth, Wage & Salary Employment Growth and Fleet Fuel Efficiency. In 2005, HDR\HLB developed a new forecasting model to incorporate additional economic data that would enhance the model’s forecasting accuracy. The Arizona Real Gross Domestic Product Growth independent variable was added to the model to incorporate the impact of the Arizona economy on the commercial registration activities. In September 2008, HDR\HLB reviewed the forecasting model and added the Arizona Real Gas Price Growth independent variable to improve the model’s forecasting accuracy for changes in Arizona gasoline consumption. In September 2009, HDR\HLB reviewed the forecasting model and added September 2014 1 the West Coast No. 2 Real Diesel Price Growth independent variable to improve the model’s forecasting accuracy for changes in Arizona use fuel (diesel) consumption. In September 2011, the income, gross domestic product, gas price and diesel price variables were converted to nominal dollars at the request of the panel members from the August 2010 RAP panel meeting. The September 2011 RAP panel recommended the Arizona nominal Gross Domestic Product independent variable be eliminated from the model. The current model includes: 1. 2. 3. 4. 5. 6. Arizona nominal personal income Arizona population Arizona non-farm employment Arizona fleet fuel efficiency (Not part of RAP Process) Arizona nominal gas price West Coast No. 2 nominal diesel price Risk Analysis Panel The Risk Analysis Process relies heavily on the judgments of an expert panel of economic and financial participants to provide information critical to the forecasting process. In August 2014, a panel of eleven economic and finance experts representing public, private, and academic sectors submitted their individual estimates of the model’s independent variables and comments on the future economic outlook. The information gathered from the panelists was input into the model to produce a series of forecasts with associated probabilities of occurrence. The panelists’ inputs are reflected in the attached tables at the back of this report. Model Results This year’s panel inputs produced a mean forecast of $15,342.4 million for the period FY 2015-2024 with a compound growth rate of 3.6 percent. The Department’s Official Forecast for FY 2015-2024 amounts to $14,866.4 million with a compound growth rate of 3.4 percent. The Official Forecast incorporates the 50 percent confidence interval for all revenue categories. The FY 2015 forecast of $1,270.6 million was developed in July 2014 by ADOT staff using time-series techniques, historical and projected growth rates, and recent legislative changes. FY 2015 Official Forecast (Dollars in Millions) Fiscal Year 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Total Ave. CGR September 2014 Mean Forecast $1,294.8 1,350.9 1,401.6 1,456.9 1,508.7 1,560.2 1,610.5 1,662.4 1,718.4 1,777.9 $15,342.4 3.6% Official Forecast $1,270.6 1,316.8 1,363.2 1,411.0 1,459.4 1,510.4 1,557.1 1,607.7 1,659.2 1,711.0 $14,866.4 3.4% Confidence Level 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 2 For comparison purposes, the November 2013 Official Forecast and the September 2014 Official Forecast are shown below: FY 2015-2024 Comparative Forecast (Dollars in Millions) Summary Fiscal Year 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Total Ave. CGR Nov. 13 Official Forecast $1,255.4 1,302.3 1,351.8 1,400.0 1,448.9 1,499.0 1,545.7 1,596.3 1,647.6 1,698.6 $14,745.7 3.4% Sep. 14 Official Forecast $1,270.6 1,316.8 1,363.2 1,411.0 1,459.4 1,510.4 1,557.1 1,607.7 1,659.2 1,711.0 $14,866.4 3.4% Difference $15.2 14.5 11.4 11.0 10.5 11.4 11.4 11.4 11.6 12.4 $120.7 The Department’s Official Forecast for FY 2015-2024 totals $14,866.4 million, an increase of $120.7 million from the November 2013 Official Forecast. The Risk Analysis Process panel members were again pessimistic about the Arizona economy in that they see only slow growth going forward with no expected sharp rebound. In addition, there was concern that employment, population and personal income growth will not return to levels experienced before the Great Recession. The main reason for the increase in the September 2014 revenue forecast over the November 2013 revenue forecast is stronger than expected FY 2014 revenues which set a higher revenue base for the FY 2015 forecast and beyond. Supplementary Information The remaining pages of this report present supplementary information on the detailed results of the Risk Analysis Process, the Department’s model and the values of the independent variables forecast by the expert panel. While the Official Forecast period is FY 2015-2024 panel inputs were requested for FY 2015-2019, 2024, 2029 and 2034. Data displayed for other than the requested years has been extrapolated. September 2014 3 56.5 $1,241.3 Total 163.7 Registration Other 348.5 Vehicle License Tax 176.4 Use Fuel Tax 38.8 $457.4 Gasoline Tax Motor Carrier Fee 2014 Actual Fiscal Year Percentile $1,270.6 57.1 165.8 370.6 39.4 177.4 $460.3 2015 N/A $1,316.8 60.2 171.9 384.6 41.5 184.8 $473.8 2016 50% $1,363.2 62.0 177.0 407.0 43.0 190.2 $484.0 2017 50% $1,411.0 64.0 182.5 430.2 44.7 196.1 $493.5 2018 50% $1,459.4 65.8 187.4 455.0 46.4 202.4 $502.4 2019 50% $1,510.4 67.7 192.2 481.8 48.0 208.6 $512.1 2020 50% $1,557.1 69.6 196.6 507.7 49.5 214.5 $519.2 2021 50% HURF OFFICIAL REVENUE FORECAST With Category Detail and Confidence Interval By Fiscal Year (Current Dollars in Millions) $1,607.7 71.4 201.5 536.4 51.3 221.0 $526.1 2022 50% $1,659.2 73.3 206.3 564.3 52.9 227.7 $534.7 2023 50% $1,711.0 75.4 211.6 592.1 54.7 234.1 $543.1 2024 50% 1,350.9 1,401.6 1,456.9 1,508.7 1,560.2 1,610.5 1,662.4 1,718.4 1,777.9 2016 2017 2018 2019 2020 2021 2022 2023 2024 2,292.2 2,208.9 2,126.8 2,054.2 1,984.4 1,906.2 1,830.5 1,742.8 1,662.3 $1,560.4 10% $15,342.4 $19,368.7 $1,294.8 2015 Total Mean Fiscal Year 1,933.6 1,870.6 1,806.5 1,747.2 1,692.6 1,632.4 1,570.7 1,509.1 1,447.9 $1,378.2 30% 1,811.7 1,751.5 1,713.8 1,643.0 1,592.8 1,539.0 1,486.6 1,446.9 1,388.8 $1,334.2 40% $17,743.0 $16,588.7 $15,708.3 2,084.1 2,010.4 1,938.6 1,876.5 1,813.5 1,742.2 1,675.6 1,606.8 1,537.0 $1,458.2 20% 1,613.4 1,558.8 1,514.8 1,472.7 1,428.1 1,384.5 1,342.5 1,297.7 1,258.3 $1,217.1 60% 1,526.8 1,480.0 1,436.5 1,394.2 1,355.7 1,318.6 1,279.5 1,236.2 1,203.6 $1,168.1 70% $14,866.4 $14,088.0 $13,399.4 1,711.0 1,659.2 1,607.7 1,557.1 1,510.4 1,459.4 1,411.0 1,363.2 1,316.8 $1,270.6 50% HURF TOTAL TAX REVENUE RISK ANALYSIS RESULTS (Current Dollars in Millions) 1,308.1 1,272.2 1,237.8 1,209.8 1,178.0 1,146.7 1,119.8 1,088.6 1,069.3 $1,053.7 90% $12,620.3 $11,684.0 1,427.7 1,379.3 1,342.5 1,308.4 1,277.2 1,242.0 1,209.4 1,174.1 1,143.5 $1,116.3 80% HURF $1,270.6 1,316.8 1,363.2 1,411.0 1,459.4 1,510.4 1,557.1 1,607.7 1,659.2 1,711.0 $14,866.4 Net HURF $1,149.7 1,275.8 1,292.2 1,400.0 1,448.4 1,499.4 1,546.1 1,596.7 1,648.2 1,700.0 $14,556.5 DPS Parity Comp. Fund /2 ($2.8) (2.9) (3.1) (3.3) (3.5) (3.7) (3.9) (4.1) (4.3) (4.5) ($36.1) ADOT 50.5% /1,3 $576.9 640.5 652.6 698.8 723.1 748.6 772.0 797.3 823.1 849.1 $7,282.1 Cities/Towns 27.5% /1 $330.6 365.3 384.2 385.0 398.3 412.3 425.2 439.1 453.3 467.5 $4,060.8 Cities +300K 3% /1 $36.1 39.8 41.9 42.0 43.5 45.0 46.4 47.9 49.4 51.0 $443.0 Counties 19% /1 $228.4 252.4 265.5 266.0 275.2 284.9 293.8 303.4 313.2 323.0 $2,805.6 NOTES: FY 2015 HURF estimate based on July 2014 Forecast. FY 2016-2024 HURF estimate based on September 2014 Official Forecast. /1. The DPS/ESP includes $1 million for Economic Strength Project (ESP) each year. The DPS transfer in FY 2015 is $89.255 million per Laws 2014, 2nd Regular Session, Chapter 18, (HB 2703) and $10 million each year thereafter, which is subject to change. In addition, Laws 2014, 2nd Regular Session, Chapter 9 (SB 1487) appropriated $30 million in FY 2015 and FY 2016 and $60 million in FY 2017 to cities, towns and counties. A portion of these monies are distributed to the state highway fund for projects in Maricopa and Pima counties (Counties over 800,000). The distribution of SB 1487 appropriations are included in the columns ADOT 50.5%, Cities/Towns 27.5%, Cities over 300,000 3% and Counties 19%. FY 2015 also includes a $651,800 appropriation to MVD for the registration compliance program/3rd Party programs. /2. Per Laws 2005, Chapter 306 (SB 1119), 1.51 percent of the state highway fund share of HURF VLT is transferred to the DPS Parity Compensation Fund. /3 Net of the DPS Parity Compensation Fund transfer and includes transfers per Laws 2011. 1st Regular Session, Chapter 28 (SB 1616) which transfers the state highway fund share of HURF VLT difference between the two-year registration and the five-year registration to the state general fund. Laws 2010, 7th Special Session, Chapter 12, (HB 2012) an amount equal to 90 percent of the fees collected under 28-4802 (A) and 60 percent of the fees collected under 28-4802 (B) shall be transferred from the state highway fund share of HURF VLT to the state general fund. Fiscal Year 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Total DPS/ ESP /1 $120.9 41.0 71.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0 $309.9 HURF OFFICIAL REVENUE FORECAST DISTRIBUTION (Current Dollars in Millions) PANELIST DATA VALUES AZ Nominal Income Growth Arizona Population Growth Arizona Non-Farm Employ. Growth AZ Nominal Gas Price Growth West Coast Nominal Diesel Price Growth 4.66% 3.30% 6.04% 1.69% 1.11% 2.26% 2.22% 1.18% 3.27% -0.33% -8.61% 6.59% -0.13% -8.87% 7.08% 4.93% 3.66% 6.49% 1.87% 1.22% 2.48% 2.35% 1.29% 3.52% 0.98% -7.75% 8.13% 1.24% -7.83% 8.74% 5.21% 3.85% 6.86% 1.99% 1.28% 2.65% 2.57% 1.41% 3.93% 1.86% -7.49% 10.02% 2.17% -7.42% 10.80% 5.20% 3.68% 6.89% 2.03% 1.30% 2.69% 2.68% 1.35% 4.23% 2.80% -7.29% 11.54% 3.02% -6.86% 12.23% 5.29% 3.69% 7.01% 2.00% 1.22% 2.66% 2.69% 1.16% 4.20% 2.96% -7.44% 12.51% 3.42% -6.93% 13.32% 4.62% 2.68% 6.77% 1.78% 0.91% 2.64% 2.42% 0.80% 4.17% 2.64% -9.88% 13.83% 3.24% -9.23% 14.31% 4.32% 2.31% 6.59% 1.65% 0.73% 2.62% 2.23% 0.32% 4.17% 2.43% -11.00% 15.25% 3.17% -11.12% 16.06% 4.22% 1.93% 6.68% 1.57% 0.57% 2.55% 2.07% -0.10% 4.16% 2.24% -12.55% 16.80% 3.17% -12.61% 17.03% FY 2015 Median Lower 10% Upper 10% FY 2016 Median Lower 10% Upper 10% FY 2017 Median Lower 10% Upper 10% FY 2018 Median Lower 10% Upper 10% FY 2019 Median Lower 10% Upper 10% FY 2024 Median Lower 10% Upper 10% FY 2029 Median Lower 10% Upper 10% FY 2034 Median Lower 10% Upper 10% All data in the above table are percentage growth rates. September 2014 7 Arizona Nominal Personal Income Growth 10.0% 8.0% Growth Rate 6.0% 4.0% 2.0% 0.0% -2.0% 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Fiscal Year Median Lower 10% Upper 10% Arizona Population Growth 6.0% 5.0% Growth Rate 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Fiscal Year Median September 2014 Lower 10% Upper 10% 8 Arizona Non-Farm Employment Growth 8.0% 6.0% Growth Rate 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% -8.0% 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2023 2024 Fiscal Year Median Lower 10% Upper 10% Arizona Nominal Gas Price Growth 30.0% 20.0% Growth Rate 10.0% 0.0% -10.0% -20.0% -30.0% 2015 2016 2017 2018 2019 2020 2021 2022 Fiscal Year Median September 2014 Lower 10% Upper 10% 9 West Coast No. 2 Nominal Diesel Price Growth 30.0% 20.0% Growth Rate 10.0% 0.0% -10.0% -20.0% -30.0% 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Fiscal Year Median September 2014 Lower 10% Upper 10% 10 Arizona Nominal Personal Income Growth 2015 2016 2017 2018 2019 Panelist 1 Median 5.2% 5.9% 6.1% 5.5% 5.9% Lower 10% 3.0% 3.6% 3.9% 2.9% 3.0% Upper 10% 6.6% 7.1% 7.5% 7.3% 7.5% Panelist 2 Median 4.8% 5.0% 5.5% 5.8% 6.0% Lower 10% 3.7% 4.0% 4.2% 4.3% 4.4% Upper 10% 5.5% 6.0% 6.2% 6.5% 6.3% Panelist 3 Median 5.2% 5.6% 6.3% 6.0% 5.7% Lower 10% 3.6% 4.0% 4.7% 4.4% 4.1% Upper 10% 6.8% 7.2% 7.9% 7.6% 7.3% Panelist 4 Median 4.5% 4.7% 5.1% 5.5% 5.5% Lower 10% 4.0% 4.6% 4.8% 4.8% 4.6% Upper 10% 5.2% 5.5% 6.5% 6.0% 6.5% Panelist 5 Median 5.0% 5.5% 6.0% 6.1% 5.8% Lower 10% 3.2% 3.2% 3.0% 2.9% 2.8% Upper 10% 6.5% 7.0% 7.5% 7.7% 7.8% Panelist 6 Median 4.0% 4.0% 3.5% 3.0% 4.0% Lower 10% 3.5% 3.5% 3.0% 2.5% 3.5% Upper 10% 6.0% 6.0% 5.5% 5.0% 6.0% Panelist 7 Median 5.2% 5.6% 6.2% 6.2% 5.9% Lower 10% 3.9% 4.1% 4.4% 4.5% 4.4% Upper 10% 6.5% 6.7% 6.9% 6.9% 6.8% Panelist 8 Median 3.6% 2.7% 1.8% 1.9% 1.9% Lower 10% 1.5% 1.5% 1.5% 1.5% 1.5% Upper 10% 5.6% 5.7% 5.8% 6.2% 6.2% Panelist 9 Median 5.1% 5.5% 6.0% 6.0% 6.0% Lower 10% 3.7% 4.4% 4.7% 4.7% 4.4% Upper 10% 6.5% 7.2% 7.5% 7.5% 7.0% Panelist 10 Median 4.5% 5.0% 5.5% 6.0% 6.5% Lower 10% 3.8% 4.2% 4.5% 4.6% 4.7% Upper 10% 5.5% 6.5% 7.0% 8.0% 9.0% Panelist 11 Median 4.1% 4.8% 5.4% 5.3% 5.0% Lower 10% 2.4% 3.1% 3.7% 3.5% 3.2% Upper 10% 5.8% 6.5% 7.1% 7.1% 6.8% All data in the above table are percentage growth rates. September 2014 2025 2029 2034 5.8% 2.9% 7.2% 5.0% 3.0% 6.5% 5.5% 2.5% 7.5% 4.9% 3.5% 5.8% 4.8% 3.2% 5.5% 4.7% 3.0% 5.5% 4.8% 1.3% 8.3% 4.8% 1.3% 8.3% 4.8% 1.3% 8.3% 5.0% 2.9% 6.0% 4.2% 2.3% 6.0% 4.0% 1.9% 6.5% 4.8% 2.5% 7.9% 4.8% 0.8% 8.0% 4.8% 0.0% 8.2% 4.0% 3.5% 6.0% 3.5% 3.0% 5.5% 3.0% 2.5% 5.0% 5.0% 2.5% 6.5% 4.6% 2.5% 6.3% 4.5% 2.0% 6.3% 1.7% 1.5% 6.0% 1.7% 1.5% 6.0% 1.7% 1.5% 6.0% 4.9% 3.2% 6.6% 4.8% 2.7% 6.9% 4.7% 2.1% 7.3% 6.0% 4.0% 8.0% 5.5% 3.5% 7.5% 5.0% 3.0% 7.0% 3.9% 1.7% 6.1% 3.8% 1.6% 6.0% 3.7% 1.5% 5.9% 11 Arizona Population Growth 2015 2016 2017 2018 2019 2024 Panelist 1 Median 1.9% 2.1% 2.4% 2.5% 2.5% 2.2% Lower 10% 1.0% 1.3% 1.2% 1.3% 1.3% 1.4% Upper 10% 2.8% 3.0% 3.1% 3.3% 3.3% 3.7% Panelist 2 Median 1.9% 2.0% 2.2% 2.3% 2.2% 2.0% Lower 10% 1.4% 1.4% 1.5% 1.6% 1.6% 1.4% Upper 10% 2.2% 2.4% 2.5% 2.6% 2.5% 2.4% Panelist 3 Median 1.8% 1.9% 2.0% 1.9% 1.9% 1.7% Lower 10% 1.0% 1.0% 1.0% 0.9% 0.9% 0.5% Upper 10% 2.6% 2.8% 3.0% 2.9% 2.7% 2.9% Panelist 4 Median 1.3% 1.7% 1.7% 1.8% 1.9% 2.0% Lower 10% 0.7% 1.2% 1.2% 1.5% 1.5% 0.7% Upper 10% 1.9% 2.4% 2.6% 2.7% 2.7% 2.8% Panelist 5 Median 1.5% 1.8% 2.0% 2.0% 2.0% 1.6% Lower 10% 0.9% 0.9% 1.3% 1.2% 1.0% 0.7% Upper 10% 2.1% 2.3% 2.8% 2.9% 3.0% 3.1% Panelist 6 Median 1.4% 1.6% 1.7% 1.7% 1.7% 1.2% Lower 10% 1.2% 1.2% 1.2% 1.2% 1.2% 0.7% Upper 10% 1.6% 2.0% 2.2% 2.2% 2.2% 1.7% Panelist 7 Median 1.6% 1.7% 1.8% 1.9% 1.9% 1.7% Lower 10% 1.3% 1.4% 1.5% 1.5% 1.3% 0.9% Upper 10% 2.1% 2.3% 2.5% 2.5% 2.5% 2.5% Panelist 8 Median 2.1% 2.0% 2.0% 2.0% 1.9% 2.0% Lower 10% 0.8% 0.8% 0.8% 0.8% 0.8% 0.8% Upper 10% 3.3% 3.3% 3.2% 3.1% 3.1% 3.1% Panelist 9 Median 1.8% 2.0% 2.2% 2.3% 2.0% 1.7% Lower 10% 1.3% 1.5% 1.6% 1.6% 1.4% 0.8% Upper 10% 2.3% 2.5% 2.6% 2.6% 2.6% 2.6% Panelist 10 Median 1.6% 1.7% 1.8% 1.9% 2.0% 1.8% Lower 10% 1.3% 1.3% 1.3% 1.2% 1.1% 0.9% Upper 10% 1.9% 2.0% 2.1% 2.2% 2.3% 2.2% Panelist 11 Median 1.8% 2.0% 2.1% 2.1% 2.0% 1.7% Lower 10% 1.3% 1.5% 1.6% 1.5% 1.4% 1.3% Upper 10% 2.1% 2.4% 2.6% 2.5% 2.4% 2.1% All data in the above table are percentage growth rates. September 2014 2029 2034 2.2% 2.3% 1.6% 1.5% 3.8% 3.9% 1.8% 1.8% 1.2% 1.0% 2.4% 2.2% 1.6% 1.5% 0.4% 0.3% 2.8% 2.7% 1.7% 1.5% 0.3% 0.2% 2.7% 2.5% 1.5% 1.5% 0.5% 0.2% 3.3% 3.3% 1.0% 0.6% 0.4% 0.0% 1.6% 1.2% 1.5% 1.5% 0.5% 0.3% 2.5% 2.5% 2.0% 2.0% 0.8% 0.8% 3.1% 3.1% 1.6% 1.5% 0.5% 0.2% 2.7% 2.8% 1.7% 1.6% 0.7% 0.7% 2.1% 2.0% 1.6% 1.5% 1.1% 1.0% 1.9% 1.8% 12 Arizona Non-Farm Employment Growth 2015 2016 2017 2018 2019 2024 2029 2034 Panelist 1 Median Lower 10% Upper 10% Panelist 2 Median Lower 10% Upper 10% Panelist 3 Median Lower 10% Upper 10% Panelist 4 Median Lower 10% Upper 10% Panelist 5 Median Lower 10% Upper 10% Panelist 6 Median Lower 10% Upper 10% Panelist 7 Median Lower 10% Upper 10% Panelist 8 Median Lower 10% Upper 10% Panelist 9 Median Lower 10% Upper 10% Panelist 10 Median Lower 10% Upper 10% Panelist 11 Median Lower 10% Upper 10% 2.2% 0.6% 2.9% 2.4% 2.5% 0.8% 1.0% 3.4% 4.1% 3.0% 1.2% 4.4% 3.0% 1.4% 4.6% 2.5% 2.2% 2.0% 0.6% -0.1% -0.6% 4.4% 4.5% 4.6% 2.2% 1.5% 2.8% 2.7% 3.0% 1.5% 1.4% 3.3% 3.8% 3.2% 1.8% 3.8% 3.0% 1.9% 3.8% 2.7% 2.0% 3.5% 2.5% 1.8% 3.5% 2.2% 1.7% 3.5% 2.3% 0.8% 3.9% 2.4% 2.9% 0.9% 1.4% 4.0% 4.5% 2.9% 1.4% 4.5% 2.5% 1.0% 4.1% 2.3% 0.8% 3.9% 2.2% 0.7% 3.8% 2.1% 0.6% 3.7% 2.5% 1.1% 3.0% 2.6% 2.9% 1.7% 1.9% 3.5% 4.5% 3.2% 2.2% 5.0% 3.2% 1.8% 4.6% 2.5% 2.3% 2.0% 0.4% -0.2% -0.8% 4.6% 4.8% 4.8% 2.2% 1.3% 3.2% 2.5% 3.0% 1.2% 1.4% 3.5% 4.2% 3.2% 1.2% 5.0% 3.2% 1.0% 5.2% 2.5% 2.5% 2.5% 0.5% -0.5% -2.0% 5.4% 5.5% 5.7% 2.2% 2.0% 2.5% 2.3% 2.0% 2.0% 1.7% 2.6% 2.8% 1.5% 1.1% 2.8% 2.0% 1.5% 2.8% 2.3% 1.8% 2.8% 2.2% 1.5% 3.0% 2.5% 3.1% 1.7% 1.7% 3.5% 4.2% 3.0% 1.5% 4.5% 3.0% 0.0% 4.2% 2.5% 2.0% 1.8% 0.0% -0.5% -0.5% 4.2% 4.2% 4.2% 1.7% 0.0% 5.0% 1.2% 0.9% 0.0% 0.0% 4.5% 3.7% 1.1% 0.0% 3.9% 1.3% 0.0% 4.1% 1.6% 0.0% 4.4% 2.2% 1.5% 3.2% 2.5% 3.0% 1.7% 2.2% 3.7% 4.2% 3.2% 1.7% 4.9% 3.0% 1.4% 4.6% 2.5% 2.2% 2.0% 0.6% -0.1% -0.6% 4.4% 4.5% 4.6% 2.3% 1.8% 2.6% 2.5% 2.7% 1.9% 2.0% 3.1% 3.6% 2.9% 2.0% 4.1% 3.1% 2.0% 4.5% 3.0% 1.8% 4.3% 2.9% 1.0% 4.0% 2.8% 0.0% 3.8% 2.4% 1.0% 3.9% 2.3% 2.3% 0.8% 0.8% 3.7% 3.7% 2.3% 0.7% 3.8% 2.3% 0.7% 3.8% 2.2% 0.5% 4.0% 2.1% 0.4% 3.9% 2.0% 0.3% 3.8% 2.0% 1.0% 3.0% 1.6% 0.0% 4.4% 1.8% 0.8% 2.8% 1.6% 0.0% 4.4% All data in the above table are percentage growth rates. September 2014 13 Arizona Nominal Gas Price Growth 2015 2016 2017 2018 2019 2024 2029 2034 Panelist 1 Median Lower 10% Upper 10% Panelist 2 Median Lower 10% Upper 10% Panelist 3 Median Lower 10% Upper 10% Panelist 4 Median Lower 10% Upper 10% Panelist 5 Median Lower 10% Upper 10% Panelist 6 Median Lower 10% Upper 10% Panelist 7 Median Lower 10% Upper 10% Panelist 8 Median Lower 10% Upper 10% Panelist 9 Median Lower 10% Upper 10% Panelist 10 Median Lower 10% Upper 10% Panelist 11 Median Lower 10% Upper 10% -4.1% -10.3% 2.1% -0.2% -9.1% 8.7% 2.4% -6.5% 11.3% 2.6% -6.3% 11.5% -3.5% -5.0% 1.0% -1.5% -3.0% 1.0% -1.0% -3.0% 1.0% 1.0% -2.0% 2.0% -0.5% -7.5% 6.5% 0.0% -7.0% 7.0% 1.0% -6.0% 8.0% 2.6% -6.5% 11.7% 2.6% 2.0% 1.5% 1.7% -6.5% -11.5% -14.0% -15.9% 11.7% 15.5% 17.0% 19.3% -6.4% -4.1% -12.6% -10.3% -0.2% 2.1% -1.5% -9.1% 8.7% 2.4% -6.5% 11.3% 2.6% 2.0% 1.5% 1.7% -6.3% -11.4% -14.1% -16.1% 11.5% 12.0% 15.0% 20.0% 1.6% -6.0% 6.5% 1.8% -5.5% 8.0% 2.0% 2.0% 2.0% 2.0% -6.0% -11.0% -12.0% -16.0% 10.0% 15.0% 17.0% 20.0% 3.0% 3.0% 3.0% 3.0% -20.0% -20.0% -20.0% -20.0% 30.0% 30.0% 30.0% 30.0% 3.0% 3.0% 3.0% 3.0% -20.0% -20.0% -20.0% -20.0% 30.0% 30.0% 30.0% 30.0% 2.5% 2.5% 2.5% 2.5% -10.0% -10.0% -10.0% -10.0% 5.0% 6.0% 7.0% 10.0% 2.5% 2.5% 2.5% 2.5% -10.0% -10.0% -10.0% -10.0% 10.0% 10.0% 10.0% 10.0% 1.1% -6.5% 4.0% 1.5% -5.5% 5.0% 3.3% 1.8% 2.5% 1.9% -6.6% -10.2% -11.7% -14.4% 13.2% 13.8% 16.7% 18.2% 1.5% 0.0% 3.0% 0.0% 0.0% 0.0% 2.0% 0.0% 3.5% 0.0% 0.0% 0.0% 2.2% 0.0% 3.5% 0.0% 0.0% 0.0% 2.5% 0.0% 3.5% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% -9.9% 5.0% 2.0% -7.2% 7.0% 3.0% -6.8% 10.0% 2.5% -6.2% 10.8% 2.5% 2.5% 2.5% 2.5% -6.6% -10.2% -11.7% -14.4% 13.2% 13.8% 16.7% 18.2% 0.0% -3.0% 2.0% 2.0% -4.0% 4.0% 3.0% -5.0% 6.0% 5.0% -6.0% 7.0% 5.0% -7.0% 8.0% 4.0% -7.0% 8.0% 2.0% -7.0% 8.0% 4.6% -1.4% 10.5% 4.6% -1.4% 10.5% 4.6% -2.5% 11.7% 4.6% -3.9% 13.1% 4.6% -5.3% 14.5% 4.6% -7.5% 16.6% 4.6% 4.6% -9.6% -11.7% 18.7% 20.9% 0.0% -7.0% 8.0% All data in the above table are percentage growth rates. September 2014 14 West Coast No. 2 Nominal Gas Price Growth 2015 2016 2017 2018 2019 2024 2029 2034 3.3% 1.8% 2.5% 1.9% -6.6% -10.4% -12.0% -14.9% 13.2% 14.0% 17.0% 18.7% Panelist 1 Median Lower 10% Upper 10% Panelist 2 Median Lower 10% Upper 10% Panelist 3 Median Lower 10% Upper 10% Panelist 4 Median Lower 10% Upper 10% Panelist 5 Median Lower 10% Upper 10% Panelist 6 Median Lower 10% Upper 10% Panelist 7 Median Lower 10% Upper 10% Panelist 8 Median Lower 10% Upper 10% Panelist 9 Median Lower 10% Upper 10% Panelist 10 Median Lower 10% Upper 10% Panelist 11 Median Lower 10% Upper 10% -4.1% -10.3% 2.1% -0.2% -9.3% 8.9% 2.4% -6.7% 11.5% 2.6% -6.5% 11.7% -3.5% -5.0% 1.0% -1.5% -3.0% 1.0% -1.0% -3.0% 1.0% 1.0% -2.0% 2.0% -0.5% -7.5% 6.5% 0.0% -7.0% 7.0% 1.0% -6.0% 8.0% 2.6% -6.5% 11.7% 2.6% 2.0% 1.5% 1.7% -6.5% -11.5% -14.0% -15.9% 11.7% 15.5% 17.0% 19.3% -7.0% -4.1% -12.6% -10.3% -0.2% 2.1% -2.0% -9.1% 8.7% 2.0% -6.5% 11.3% 2.6% 2.5% 1.5% 1.7% -6.3% -10.0% -15.0% -15.0% 11.5% 12.0% 15.0% 15.0% 1.6% -8.2% 9.0% 1.8% -7.5% 10.0% 2.0% 2.0% 2.0% 2.0% -8.5% -11.0% -15.0% -18.0% 12.5% 15.0% 20.0% 22.0% 1.1% -9.0% 4.5% 1.5% -8.0% 6.5% 1.5% 0.0% 3.0% 2.0% 0.0% 3.5% 2.2% 0.0% 3.5% 2.5% 0.0% 3.5% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% -20.0% -20.0% -20.0% -20.0% -20.0% -20.0% -20.0% -20.0% 30.0% 30.0% 30.0% 30.0% 30.0% 30.0% 30.0% 30.0% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% -10.0% -10.0% -10.0% -10.0% -10.0% -10.0% -10.0% -10.0% 5.0% 6.0% 7.0% 10.0% 10.0% 10.0% 10.0% 10.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% -9.9% 5.0% 2.0% -7.2% 7.0% 3.0% -6.8% 10.0% 2.5% -6.2% 10.8% 2.5% 2.5% 2.5% 2.5% -6.6% -10.2% -11.7% -14.4% 13.2% 13.8% 16.7% 18.2% 0.0% -5.0% 3.0% 2.0% -4.0% 5.0% 4.0% -4.0% 8.0% 5.0% -3.0% 10.0% 7.0% -2.0% 11.0% 7.0% -4.0% 10.0% 7.0% -6.0% 10.0% 7.0% -8.0% 10.0% 7.2% 0.5% 14.0% 7.2% 0.4% 14.0% 7.2% -0.4% 14.8% 7.2% -0.5% 14.8% 7.2% -2.8% 17.1% 7.1% -5.2% 19.3% 7.0% -7.6% 21.5% 6.9% -9.9% 23.7% All data in the above table are percentage growth rates. September 2014 15 HISTORICAL DATA ARIZONA NOMINAL PERSONAL INCOME GROWTH (Annual Percent Change) HISTORICAL DATA BY FISCAL YEAR (July 1 through June 30) 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 15.1% 14.0% 10.0% 9.5% 11.9% 15.3% 17.8% 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 16.4% 16.7% 9.6% 6.2% 11.7% 12.1% 10.3% 8.9% 7.9% 7.6% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 6.1% 4.9% 5.9% 7.2% 8.7% 9.2% 8.6% 8.5% 9.2% 8.0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 7.8% 6.9% 4.2% 4.5% 7.2% 9.9% 10.8% 8.0% 3.4% -1.3% 2010 2011 2012 2013 2014 * 2015 2016 2017 2018 2019 -1.6% 3.2% 4.4% 3.2% 3.8% BEA for FY 1973-2013, Western Blue Chip, June 2014 for FY 2014* and FY 2015, and ADOT staff for FY 2016-34. Percent Change HISTORICAL DATA - GRAPHED 22.0% 22% 22.0% 20.0% 20% 20.0% 18.0% 18% 18.0% 16.0% 16% 16.0% 14.0% 14% 14.0% 12.0% 12.0% 12% 10.0% 10.0% 10% 8.0% 8.0% 8% 6.0% 6.0% 6% 4.0% 4.0% 4% 2.0% 2.0% 2% 0.0% 0.0% 0% -2.0% -2.0% -2% -4.0% -4.0% -4% -6.0% -6.0% -6% 73 74 75 7677 77 78 79 80 83 84 85 86 8787 8989 90 91 92 96 97 9897 9998 0099 0100 02 03 0907 1008 1109 1210 13 14 73 7374 7475 7576 7677 7878 7979 8080 8181 828283 83 84 84 85 85 86 86 87 8888 9090 9191 9293 92 9394 93 9495 94 95 95 96 96 97 98 99 00 01 01 0204 02 0305 03 0406 04 0507 05 0608 06 07 08 09 10 11 11 12 Fiscal Year HISTORICAL DATA - ANALYSIS Period 5 Years 10 Years Full Period September 2014 Historical Min. Max. Mean -1.6% 4.4% 2.6% -1.6% 10.8% 4.4% -1.6% 17.8% 8.4% Std. 80% Range Dev. Lower Upper 2.4% 0.3% 4.2% 4.2% -1.3% 10.0% 4.4% 3.4% 15.0% 16 HISTORICAL DATA ARIZONA POPULATION GROWTH (Annual Percent Change) HISTORICAL DATA BY FISCAL YEAR (July 1 through June 30) 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 3.3% 5.6% 5.9% 5.8% 4.6% 2.8% 2.7% 3.4% 3.7% 4.8% 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 3.9% 2.6% 2.8% 2.7% 3.3% 3.8% 3.9% 3.9% 2.9% 2.5% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 1.7% 2.8% 3.4% 3.8% 4.4% 4.4% 3.5% 3.3% 3.1% 2.9% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 3.0% 2.2% 2.3% 2.6% 3.1% 3.5% 3.2% 2.6% 1.5% 0.3% 2010 2011 2012 2013 2014 * 2015 2016 2017 2018 2019 0.2% 0.6% 0.9% 1.3% 1.2% Census Bureau FY 1970-2000. FY 2001-2034 from ADOA Office of Employment and Population Statistics. * FY 2014 Estimated. HISTORICAL DATA - GRAPHED 7.0% 7.0% 7% Percent Change 6.0% 6.0% 6% 5.0% 5.0% 5% 4.0% 4% 4.0% 3.0% 3% 3.0% 2.0% 2% 2.0% 1.0% 1% 1.0% 0.0% 0% 0.0% 7069 7271 70 72 74 73 74 76 75 76 78 77 78 80 79 80 82 81 82 84 83 84 86 85 86 88 87 88 90 89 92 91 94 93 96 95 98 97 00 99 02 01 90 92 94 96 98 00 02 04 Fiscal Year 04 03 06 06 05 08 08 07 10 10 09 12 HISTORICAL DATA - ANALYSIS Period 5 Years 10 Years Full Period September 2014 Historical Min. Max. 0.2% 1.3% 0.2% 3.5% 0.2% 5.9% Mean 0.8% 1.5% 3.0% Std. Dev. 0.5% 1.2% 1.3% 80% Range Lower Upper 0.4% 1.3% 0.3% 3.2% 1.2% 4.5% 17 12 11 14 HISTORICAL DATA ARIZONA TOTAL NON-FARM EMPLOYMENT GROWTH (Annual Percent Change) HISTORICAL DATA BY FISCAL YEAR (July 1 through June 30) 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 4.0% 9.6% 10.9% 8.6% -0.5% 1.4% 4.8% 9.0% 10.9% 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 6.6% 2.3% 1.1% 0.0% 9.0% 8.9% 6.4% 3.7% 3.3% 2.2% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2.3% 1.1% 1.1% 3.1% 5.7% 6.4% 5.7% 5.2% 4.7% 4.4% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 4.0% 2.3% 0.5% 0.7% 2.6% 4.6% 5.2% 3.2% -0.3% -4.7% 2010 2011 2012 2013 2014* 2015 2016 2017 2018 2019 -4.7% -0.4% 1.6% 2.1% 2.1% Bureau of Labor Statistics for FY 1971-2013, ADOA, Office of Employment & Population Statistics, Employment Forecast Report, on May 1, 2014 for estimates in 2014* and 2015 and ADOT staff estimates for FY 2016-2034. HISTORICAL DATA - GRAPHED 14.0% 14% 12.0% 12% Percent Change 10.0% 10% 8.0% 8% 6.0% 6% 4.0% 4% 2.0% 2% 0.0% 0% -2.0% -2% -4.0% -4% -6.0% -6% -8.0% -8% 71 72 73 73 74 74 75 75 76 7677 7778 7879 7980 80818182828383 8484 8585 8686 8787 88 88 89 89 90 90 91 91 92 93 92 94 93 95 94 96 95 97 9698 9799 9800 9901 00020103020403 0504 0605 0706 0807 09 08 10 09 11 10 12 11 13 14 12 Fiscal Year HISTORICAL DATA - ANALYSIS Period 5 Years 10 Years Full Period September 2014 Historical Min. Max. -4.7% 2.1% -4.7% 5.2% -4.7% 10.9% Mean 0.1% 0.9% 3.7% Std. 80% Range Dev. Lower Upper 2.9% -3.0% 2.1% 3.4% -4.7% 4.7% 3.6% -0.2% 9.0% 18 HISTORICAL DATA ARIZONA NOMINAL GAS PRICE GROWTH (Annual Percent Change) HISTORICAL DATA BY FISCAL YEAR (July 1 through June 30) 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 -0.3% -9.2% -25.2% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 13.8% -16.0% 14.2% -3.3% -0.5% 7.2% 9.0% -10.3% -16.8% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 37.2% 20.2% -21.9% 25.4% 21.6% 17.4% 32.1% 0.5% 20.2% -19.3% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 4.7% 20.1% 16.1% -0.5% -3.9% U.S. Department of Energy (EIA Administration) for FY 1985-2011, AAA Arizona for FY 2012-2014 and Global Insight, 1st Quarter 2014, Trend Forecast report for FY 2015-34 HISTORICAL DATA - GRAPHED 50.0% 50% 40.0% 40% Percent Change 30.0% 30% 20.0% 20% 10.0% 10% 0.0% 0% -10.0% -10% -20.0% -20% -30.0% -30% -40.0% -40% -50.0% -50% 91 92 92 93 93 9494 9595 9696 97 9798 9899 99 00 00 01 01 02 03 02 04 03 05 04 0605 0706 08 0709 0810 09 11 10 12 11 13 Fiscal Year HISTORICAL DATA - ANALYSIS Period 5 Years 10 Years Full Period September 2014 Historical Min. Max. -3.9% 20.1% -19.3% 32.1% -21.9% 37.2% Mean 7.3% 8.7% 7.0% Std. 80% Range Dev. Lower Upper 10.4% -2.5% 18.5% 15.1% -5.4% 21.4% 16.4% -16.6% 24.3% 19 12 14 HISTORICAL DATA WEST COAST NO. 2 NOMINAL DIESEL PRICE GROWTH (Annual Percent Change) HISTORICAL DATA BY FISCAL YEAR (July 1 through June 30) 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 2.7% 6.4% 43.3% 31.4% 5.8% 10.0% 9.1% 22.4% 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 48.1% 30.2% 4.3% -8.0% -6.8% 0.1% -4.0% 2.1% 2.3% 1.2% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 14.2% 4.6% -3.2% 3.1% 2.7% -3.4% 4.9% 5.8% -11.8% -5.9% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 25.0% 16.4% -16.4% 12.4% 13.6% 27.8% 25.5% 2.7% 25.8% -17.2% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 -3.4% 23.5% 14.2% 0.0% -2.0% U.S. Department of Energy (EIA Administration) for FY 1972-2014 and Global Insight, 1st Quarter 2014, Trend Forecast report for FY 2015-34 HISTORICAL DATA - GRAPHED 50.0% 50% 40.0% 40% Percent Change 30.0% 30% 20.0% 20% 10.0% 10% 0.0% 0% -10.0% -10% -20.0% -20% -30.0% -30% -40.0% -40% -50.0% -50% 72737475767778798081828384858687888990919293949596979899000102030405060708091011121314 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 Fiscal Year HISTORICAL DATA - ANALYSIS Period 5 Years 10 Years Full Period September 2014 Historical Min. Max. -3.4% 23.5% -17.2% 27.8% -17.2% 48.1% Mean 6.5% 9.7% 8.4% Std. 80% Range Dev. Lower Upper 11.8% -2.8% 19.8% 15.7% -4.8% 26.0% 14.8% -6.6% 27.4% 20