2001 Comprehensive Annual Financial Report For the fiscal year Ended June 30, 2001 State of Arizona Department of Transportation CERTIFICATE OF ACHIEVEMENT FOR EXCELLENCE IN FINANCIAL REPORTING PRESENTED TO ARIZONA DEPARTMENT OF TRANSPORTATION FOR ITS COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2000 A Certificate of Achievement for Excellence in Financial Reporting is presented by the government Finance Officers Association of the United States and Canada to government units and public employee retirement systems whose comprehensive annual financial reports (CAFRs) achieve the highest standards in government accounting and financial reporting. (signed) Anne Spray Kinney President (signed) Jeffrey L. Esser Executive Director STATE OF ARIZONA-DEPARTMENT OF TRANSPORTATION COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2001 TABLE OF CONTENTS Exhibit INTRODUCTORY SECTION Letter of Transmittal List of Principle Officials Organizational Chart i-xv Xvi xvii FINANCIAL SECTION Independent Auditor’s Report General Purpose Financial Statements Combined Balance Sheet – All Fund Types and Account Groups Combined Statement of Revenues, Expenditures and Changes in Fund Balances – All Government Fund Types Combined Statement of Revenues and Expenditures – Budget and Actual (Budget Basis) – Budgeted Special Revenue Funds Combined Statement of Revenues, Expenses and Changes in Retained Earnings – All Proprietary Fund Types Combined Statement of Cash Flows – All Proprietary Fund Types Notes to Financial Statements Page 1 1 2 2-5 6 3 7 4 8 5 9 10-30 A-1 A-2 31-32 33-36 A-3 37-40 Debt Service Funds Combining Balance Sheet Combining Statement of Revenues, Expenditures and Changes in Fund Balances B-1 B-2 41 42 Capital Projects Funds Combining Balance Sheet Combining Statement of Revenues, Expenditures and Changes in Fund Balances C-1 C-2 43 44 D-1 D-2 45 46 D-3 47 Combining and Individual Fund and Account Group Financial Statements and Schedules: Special Revenue Funds Combining Balance Sheet Combining Statement of Revenues, Expenditures and Changes in Fund Balances Combining Schedule of Revenues and Expenditures – Budget and Actual (Budget Basis) Enterprise Fund Combining Balance Sheet Combining Statement of Revenues, Expenditures and Changes in Retained Earnings Comparative Statements of cash Flows Internal Service Fund Comparative Balance Sheets Comparative Statements of Revenues, Expenses and Changes in Retained Earnings Comparative Statements of Cash Flows Agency Funds Combining Balance Sheet Combining Statement of Changes in Assets and Liabilities General Fixed Assets Account Group Comparative Schedules of General Fixed Assets – By Source Schedule of General Fixed Assets – By Function and Activity Schedule of Changes in General Fixed Assets – By Function and Activity General Long-term Debt Account Group Schedule of Debt Service Requirements E-1 E-2 48 49 E-3 50 F-1 F-2 51-52 53-55 G-1 G-2 G-3 56 57 58 H 59-62 Table STATISTICAL SECTION Governmental Fund Expenditures Governmental Fund Revenues Expenditures of Federal Awards Fuel Tax Rates Highway User Revenue Fund Collections Highway User Revenue Fund Distributions Regional Area Road Fund Series Bond Coverage Total Public Road Mileage by Highway Class and Governmental Ownership Acknowledgments l ll lll lV V Vl Vll Vlll 63 64 65 66 67 68 69 70 lX 71 Office of the Director 206 South 17th Avenue Mail Drop 100A Phoenix, Arizona 85007-3213 Phone 602.712.7227 FAX 602.712.6941 Jane Dee Hull Governor December 3, 2001 John A. Bogert Chief of Staff Victor M. Mendez Director The Honorable Jane D. Hull, Governor of the State of Arizona, Members of the Legislature, and Citizens of the State of Arizona: The Arizona Department of Transportation (Department) is pleased to submit the comprehensive annual financial report of the Arizona Department of Transportation, for the fiscal year ended June 30, 2001. Responsibility for both the accuracy of the data and the completeness and fairness of the presentation, including all disclosures, rests with the Department. To the best of our knowledge and belief, the enclosed data is accurate in all material respects and is reported in a manner designed to present fairly the financial position and results of operations of the various funds and account groups. All disclosures necessary to enable the reader to gain an understanding of the Department’s financial activities have been included. The Department was established by the State Legislature in July 1974 by combining the former Arizona Highway Department (originally established in 1927) and the State Department of Aeronautics (originally established in 1962). The Department is not legally separate from the State of Arizona’s primary government. The Department’s mission is to provide a safe and efficient transportation system, together with the means of revenue collection and licensing for Arizona. It serves as the State’s public agency to plan, develop, maintain and operate facilities for the efficient movement of people and goods by surface and air throughout the State. The Department has statutory responsibility for carrying out its programs under Arizona Revised Statutes, Titles 28, 35 and 41. The Department receives guidance in capital planning and program development from a seven-member Transportation Board of the State of Arizona Department of Transportation (Transportation Board) appointed by the Governor. The Transportation Board is responsible for the annual update of the 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, board funding obligations and approval of privatization agreements for toll facilities. The Department is organized into three operating divisions plus a planning division: Intermodal Transportation Division, Motor Vehicle Division, Aeronautics Division and Transportation 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, processes motor vehicle registrations and drivers’ license applications, issues certificates of title for motor vehicles and also operates 23 port-of-entry stations. The Aeronautics Division coordinates general aviation in the State and is responsible for registering and licensing all general aviation aircraft, conducting the Local Airports Grant Program and representing the State at air service hearings. The Transportation Planning Division is responsible for the planning of the statewide transportation system including highways and airports, and produces an annually updated Five-Year Transportation Facilities Construction Program for the Board, from which the Board establishes the priorities for highway and airport projects within the State. In addition, the Department has a Transportation Services Group (TSG) that provides support to the Department’s operating and planning divisions. TSG contains units for Financial Management Services, Information Technology, General Services, Human Resources, Community Relations, Civil Rights, Audit and Analysis, Safety, Training and Arizona Highways Magazine. Overall, the Department employs approximately 4,800 persons. The Department’s key responsibilities to its customers include: This report includes all funds and account groups used to record the financial activity of the Department. The activities of the State Highway Fund (construction and debt service), the Maricopa Regional Area Road Fund, Bond Funds, and other funds that show the “pass-through” of State and Federal monies are reflected in this report. w The Department’s two main funding sources, the Highway User Revenue Fund (HURF) and the Maricopa County Transportation Excise Tax saw slower growth in fiscal year 2001 due mainly to the slowing economy and economic uncertainty. w w ECONOMIC CONDITIONS AND OUTLOOK For the Year Ended June 30, 2001 Planning, designing, constructing, and maintaining a statewide transportation system. Providing title, registration, and licensing services. Providing revenue collection and distribution for both highway user and aviation-related taxes and fees. The HURF collections in fiscal year 2001 totaled $1.02 billion, an increase of 1.1 percent over fiscal year 2000, but 1.1 percent below the estimate. The Gas Tax and Vehicle License Tax (VLT) were the only revenue categories to post year-over-year growth. To meet the needs of its customers, the Department’s responsibilities are carried out at locations throughout the State. Most administrative activities are headquartered in or near the Capitol Complex in Phoenix. Field activities for the Motor Vehicle Division are carried out statewide including 23 Portsof-Entry around the State’s borders, and 67 Driver’s License/Title and Registration Offices. The Intermodal Transportation Division services its customers through 10 District Offices located throughout the State. These District Offices are responsible for all construction and maintenance activities for the State highway system. The economic picture in Arizona has moderated over the past year with slower employment and personal income growth. However, Arizona has not felt the full impact of the slowdown in the national economy due to continued population growth and steady consumer spending, especially in the housing market. Even with the moderated growth, Arizona ranks among the top states in population, personal income and employment growth. The unemployment rate for Arizona alone has remained at or near the lowest levels in more than 30 years. The slower growth in HURF collections during fiscal year 2001 can be attributed to the slowdown in the national economy, which impacted commercial registration and weight fees. Additionally, the economic uncertainty contributed to slower consumer spending for new motor vehicles, which ultimately impacted VLT growth. Finally, the Use Fuel Tax rate was reduced from $0.27 per gallon to $0.26 per gallon effective July 1, 2000, leading to no growth in this revenue category. The comprehensive annual financial report is presented in three sections: Introductory, Financial, and Statistical. The Introductory Section includes this letter of transmittal, a list of principal officials and the Department’s organizational chart. The Financial Section includes the independent auditors ’ report, general purpose financial statements, notes, the combining and individual fund and account group financial statements. The Statistical Section includes additional financial information and transportation data presented on a multi-year comparative basis. The objectives of this comprehensive annual financial report are to provide data relative to the financial position of the Department in conformity with accounting principles generally accepted in the United Sates of America (GAAP) and to include the required financial audits of the State Highway Fund and the remaining funds. Arizona’s population has grown at an average annual rate of 3.3 percent since 1992, reaching an estimated 5.2 million by July 2001. Arizona continues to rank as one of the fastest growing states in the nation. Personal income in Arizona has grown at an annual average rate of 7.9 percent since 1992 compared to 5.6 percent for the United States. Arizona wage and ii salary employment has grown by 4.4 percent creating an average of 80,000 jobs each year for the same time period. million; Arizona counties $197 million; Department of Public Safety $27 million; and Economic Strength Project Fund $1 million. The Maricopa County Transportation Excise Tax funds the Maricopa County Regional Freeway System. This tax, with receipts deposited into the Maricopa County Regional Area Road Fund (RARF), is applied to business activity in Maricopa County, including retail sales, contracting, utilities, rental of real and personal property, restaurant and bar receipts, and other smaller activities. Laws 1999, Chapter 5 eliminated the State Highway Fund share of non-HURF VLT effective December 1, 2000. This legislation also specified that replacement funding in the form of a State General Fund appropriation be made to hold the State Highway Fund revenue neutral. However, Laws 2001, Chapter 238 (HB 2636) contained no appropriation to the State Highway Fund from the State General Fund for fiscal years 2002 and 2003. To hold the State Highway Fund revenue neutral, Laws 2001, Chapter 238 provided additional funding, which is detailed in the Debt Administration section of this transmittal letter. Maricopa County Transportation Excise Tax collections totaled $265 million during fiscal year 2001, an increase of 6.5 percent over fiscal year 2000 and 0.3 percent above the forecast. Since 1992, the Maricopa County Transportation Excise Tax collections have grown by an average annual growth rate of 9.2 percent. The 6.5 percent growth rate in fiscal year 2001 was the slowest growth rate in excise tax collections since fiscal year 1992. The fiscal year 2002 Transportation Excise Tax collections are projected to be $280 million, an increase of 5.6 percent over fiscal year 2001. The first half of fiscal year 2002 may experience below average growth due to economic uncertainty that may impact consumer spending habits. However, the second half should provide near average growth rates assuming the national economy does not slip into a recession. The Transportation Excise Tax average annual compound growth rate for fiscal years 1992 through 2001 has been 9.5 percent. The economic uncertainty, caused by the sharp decline in the stock market as well as job layoffs, impacted collections over the last six months of fiscal year 2001. On a positive note, consumer spending for housing continues at near record pace due in part to lower mortgage rates and second home buyers. For the Future Landmark Federal transportation legislation was enacted into law on June 9, 1998, providing Arizona funding through fiscal year 2003 under a multi-year authorization bill. This measure, the Transportation Equity Act for the 21st Century (TEA-21), provides a record level of investment for transportation infrastructure. Under TEA-21, Arizona is expected to receive $2.7 billion in appropriations over the fiscal year 1998-2003 period. On an annual basis, the Department expects to receive an average of $348 million per year in Federal highway apportionments with an additional $108 million allocated to local governments. The TEA-21 funding level for Arizona is estimated to be approximately 80 percent higher than the average Arizona received under the previous Federal Transportation Act (ISTEA). The magnitude of the impact on the Department’s future revenues and operating budget due to the tragic events that occurred on September 11, 2001, is unknown at this time. However, consumer spending was softening prior to the September 11th events and has decreased sharply since then. It is anticipated that revenues will be negatively impacted. However, the negative impact is expected to be short term. The Department estimates HURF collections will reach $1.066 billion in fiscal year 2002, an increase of 3.4 percent above fiscal year 2001. Although the slowdown is expected to continue into the first half of fiscal year 2002, the second half is expected to show modest growth across the board. The HURF average annual compound growth rate for fiscal years 1992 through 2001 has been 4.8 percent. In developing the State’s transportation plans and budgets, the goal is to produce a balanced program that maximizes the investment of transportation dollars, while meeting priority needs, both in the construction and operations areas. The Department has developed and implemented a strategic approach to transportation financial planning which is linked to The distribution of HURF collections in fiscal year 2002 is estimated to be as follows: State Highway Fund $524 million; Arizona cities and towns $317 iii the budget to ensure that the resources necessary to implement the plan are allocated in accordance with priorities reflected in the plan. Department had $1.097 billion construction work underway. in highway The Regional Freeway Program in Maricopa County that was redefined in 1995 to complete 107 miles of freeways by 2006 has been advanced and expanded to include 37 additional miles on the Santan and Red Mountain freeways, previously shown in the Long Range Plan. Under the “2007 Acceleration Plan,” 147 miles of new freeways are planned to be opened by the end of 2007. Currently 84 miles have been opened to traffic and 15 more miles are under construction. The acceleration is being accomplished through the use of two new financing techniques, Grant Anticipation Notes and Board Funding Obligations. The framework for strategic financial planning encompasses the use of enhanced tools, models and techniques, including cash flow models, statistical and econometric models, and bond optimization modeling. Life cycle management and risk analysis are enhancements that have significantly strengthened the planning process, further ensuring that programs remain in fiscal balance. Through strategic planning, the Department integrates the needs of projected budgets for operations, the Five-Year Transportation Facilities Construction Program, and Land, Building and Improvements (Facilities) into a composite plan for operating within the constraints of a dedicated, but limited, revenue stream. This planning process involves the evaluation of alternatives to ensure the efficient and effective use of limited resources. The product of this process is a deliverable plan of transportation improvements that is fiscally conservative. The Department’s Freeway Management System (FMS) added seven miles of traffic monitoring technology to the Phoenix area freeway system during fiscal year 2001. ADOT’s FMS network includes traffic sensors, electronic message signs, computers, communications equipment, cameras and operators. The system allows real-time monitoring of traffic conditions and the timely notification of emergency response crews when crashes or other incidents occur along the freeways. The technology now covers 57 miles of Valley freeways, with construction of an additional 40 miles scheduled over the next two years. Local radio traffic reporting services now depend on the system to advise listeners about traffic conditions. A traffic monitoring system along 11 miles of Interstates 10 and 19 in Tucson is under construction. When the Tucson system comes online in 2002, it will be linked to the State FMS in Phoenix. The use of Intelligent Transportation Systems (ITS) technology also is expanding to rural areas with the design and installation of 17 overhead message signs along rural highways, including Interstate 17 between Phoenix and Flagstaff, now underway. This growing network of signs is used to warn drivers of changing road conditions and incidents that could affect their travel. MAJOR INITIATIVES For the Year Ended June 30, 2001 During fiscal year 2001, the Department continued to make significant progress in delivering quality products and services to Arizona residents and visitors. Highlighted below are the Department’s most notable achievements. The Department’s emphasis on providing quality services and products to the citizens of Arizona resulted in the Department being named as a recipient of the Arizona’s Governor’s Award for Quality. The Department becomes only the fifth organization to receive the highest level of the Arizona State Quality Awards since the awards were created in 1993, joining AVNET, Honeywell Satellite Systems, Raytheon Missile Systems, and the 56th Medical Group of the 56th Fighter Wing as award recipients. In June 2001, the Transportation Board approved a $3.984 billion Highway Construction Program as part of the Five-Year Transportation Facilities Construction Program for fiscal years 2002 through 2006, which provides funding for highway facilities on both the National Highway System and the statewide system. The Five-Year Program includes approximately: $1.201 billion for freeway and expressway construction in Maricopa County funded During fiscal year 2001, a total of $1.155 billion was obligated for highway construction. This total included $414 million for Maricopa County Regional Freeway System projects, $255 million for other projects in Maricopa County, and $485 million for work statewide. At the end of fiscal year 2001, the iv in large part from the Maricopa County Regional Area Road Fund; $1.796 billion for system improvements, which includes $130 million for freeway and expressway construction in Maricopa County; $697 million for system preservation; and $290 million for system management. 125,000 transactions per month. Other third parties are performing inspections on out-of-state vehicles transferring titles to Arizona, administering driver license exams, processing driver license applications and providing motor vehicle records. In addition, nearly 45,000 vehicle owners per month are renewing their vehicle registration on the Internet or by interactive voice response (IVR) on the telephone with the Division’s electronic service delivery system, ServiceArizona. A major new service added to ServiceArizona during fiscal year 2001 was personalized license plates. This Internet service allows a customer to select from several license plate styles, enter a personalized message, view the plate and place the order online. More than 1,000 personalized plates have been ordered each month since this service was introduced. Other services available on ServiceArizona are special license plate orders, duplicate driver license orders, address changes and filing sold notices. This system has won industry awards and national recognition for its innovative use of technology to improve customer service. MVD is working to encourage even more customers to renew by mail, Internet, and IVR thereby avoiding a trip to a MVD office. As part of the Five-Year Transportation Facilities Construction Program, the Transportation Board also adopted a $392 million Five-Year Airport Development Program that includes 622 projects at general aviation and air carrier airports located throughout the State. For the fiscal year 2001, State-owned Grand Canyon National Park Airport remained the third busiest air carrier airport in the State with 136,226 takeoffs and landings and with 1,052,386 passengers enplaning and deplaning. The airport has been owned by the State since its construction in 1965. Grand Canyon National Park Airport revenue for fiscal year 2001 amounted to $1.8 million. Governor Hull signed legislation that returned the operation of the Grand Canyon National Park Airport to the Department, which assumed operational control on July 18, 2000. The Department’s web site is accessed over 700,000 times a week by customers and business partners seeking current transportation information. In addition to the online services offered by MVD, meeting agendas of the Governor's Transportation Vision 21 Task Force and the Transportation Board are available. Visitors will also find Geographic Information System (GIS) maps, news releases and legislative summaries. Cameras showing freeway conditions have proven to be a viewing favorite. ADOTNet, the Department's Intranet site, has enabled employees to improve and expand their internal exchange of information for almost two years. By providing an online policies and procedures system, virus alerts, training schedules, forms, documents and information regarding current events, individuals within our organization are better informed and are enjoying a more collaborative work environment. Mary Peters had served as Director of the Department since March, 1998. On July 11, 2001, President George W. Bush announced the nomination of Ms. Peters to the position of Administrator of the Federal Highway Administration, subject to the confirmation by the United States Senate. Ms. Peters’ appointment was confirmed by the United States Senate on September 26, 2001, and Ms. Peters resigned as Director on October 2, 2001. Victor Mendez was fulfilling the Director’s responsibilities during this time. He was appointed Director by the Governor Hull on October 23, 2001. For the Future Looking ahead, it is anticipated that increasing demands will be placed on the State’s transportation infrastructure and support services, in response to an expanding population base. The Department will be challenged to maintain existing facilities, meet the demand for new or upgraded roadways, and provide needed services for its citizens. Given increasing requirements in an environment of constrained revenues, one of the Department’s key strategies will focus on optimizing resources through process The Motor Vehicle Division’s Third Party Program continues to expand in line with the strategic direction to focus on customer service and promote competitive government by partnering with public and private sector contractors to provide certain MVD services. By the end of fiscal year 2001, there were 63 third party companies providing title and registration services at a rate of approximately v improvements, encouraging more competitive business practices, and leveraging existing revenues. Innovative financing and public-private partnerships will continue to play a key role in maximizing resources to better meet transportation needs. Another key strategy will be workforce development to ensure that the Department retains a high performing workforce with the skill sets to meet the changing needs of the Department. Scottsdale Road and from Pima Road to Loop 202. The final segment linking Scottsdale Road to Pima Road is under construction and is expected to open to traffic in the summer of 2002. Price Freeway (Loop 101) This north-south route is the City of Chandler’s first freeway, giving this growing community direct access to the Regional Freeway System. The final two projects between Guadalupe and Frye Roads are now complete and open to traffic. The Price Freeway interchange with the Santan Freeway (Loop 202) is expected to be completed by the end of 2004. Innovative Financing Investment in transportation infrastructure will continue to play an important role in the strengthening of the Arizona economy in the 21st Century. In order to optimize dollars for construction, the Department has implemented several innovative financing mechanisms. These mechanisms include additional funding of the Highway Expansion and Extension Loan Program (HELP) and Grant Anticipation Notes. HELP is Arizona’s state infrastructure bank, which is a loan fund that is capitalized with Federal and State dollars as well as Board Funding Obligations issued by the Department to the State Treasurer. Grant Anticipation Notes are a financing mechanism that leverages future receipt of Federal highway aid. Red Mountain Freeway (Loop 202) The Red Mountain Freeway continues to reach farther into the East Valley. Also known as the Loop 202, this freeway is a popular alternative to the Superstition Freeway (US 60). In August 1998, the Red Mountain Freeway opened to Country Club Drive (SR 87), making it easier for motorists to reach the State’s rim country. Over the next six years, the Department will obligate more than $270 million to complete the Red Mountain Freeway to the Superstition Freeway (US 60), which will serve the rapidly growing communities of the East Valley. Two segments between Country Club Road and Higley Road are currently under construction. The segment between Country Club Road and Gilbert Road is targeted for completion near the end of 2001 and the segment between Gilbert Road and Higley Road is projected to open in mid 2003 Maricopa County Regional Freeway System Transportation serves a vital strategic role in regional development. A safe and efficient transportation system can further economic growth, enhance competitiveness in the global marketplace, and provide a better quality of life for the citizens of the region. Improved or new transportation facilities often serve as a catalyst in business location decisions. Over the sixteen-year period from fiscal year 1986 through 2001, the Department has spent $4.2 billion on new regional freeway projects in the Phoenix area, financed largely with the 1985 voter approved transportation excise tax. This investment has been a powerful engine for economic growth in the region. Squaw Peak Freeway (SR 51) The Squaw Peak Freeway has been opened to Bell Road, bringing the total number of open miles on this facility to eight. The remaining two miles, which connect the Squaw Peak Freeway with the Pima Freeway (Loop 101), are under construction and expected to open by the summer of 2003. Between fiscal year 2002 and 2007, the Department will spend an additional $1.3 billion to build new freeways in the Phoenix area. Planned construction is highlighted below: Agua Fria Freeway (Loop 101) Pima Freeway (Loop 101) The Northwest Valley has seen major strides toward the completion of the Agua Fria Freeway. The full freeway corridor between Construction on the Pima Freeway is complete and open to traffic from Interstate 17 to vi Interstate 10 and Interstate 17 is now open to traffic. The final segments between Interstate 10 and Northern Avenue were opened in October 2000. The residents of the growing West Valley suburbs now have direct access to downtown Phoenix. Center in Phoenix to monitor traffic conditions and alert drivers to problems ahead. Drivers are able to use a toll-free telephone number (1-888-411-ROAD) or log on at www.azfms.com to check on traffic restrictions. ADOT has been part of the public-private initiative known as AZTech, working with Maricopa County, Valley cities and private companies to install ITS related technologies. The project is now focusing on integrating existing systems with newer ones to provide a seamless flow of traffic information. In addition to ADOT’s Freeway Management System, local cities also are installing cameras and message signs on key surface streets to monitor their own traffic conditions. The synchronization of traffic signals between cities and ADOT’s freeway system is designed to improve traffic flow across the Valley. Meanwhile, private traveler information companies continue to develop and provide services via the Internet, pagers, in-car devices and e-mails to provide subscribers with up-to-the-minute traffic information. Santan Freeway (Loop 202) Construction of the Santan Freeway is underway with initial projects at the Interstate 10 / Santan system interchange now under construction. An estimated $670 million will be obligated over the next six years to complete the freeway. Completion of the Santan Freeway from Interstate 10 to the Price Freeway (Loop 101) is targeted for 2004 and the completion of the remaining Santan Freeway is targeted for 2007. The Santan Freeway will provide improved mobility to the rapidly growing Southeast Valley. FINANCIAL INFORMATION South Mountain Freeway (Loop 202) Department management is responsible for establishing and maintaining internal control designed to help ensure that the assets of the Department are protected from loss, theft, or misuse, and to ensure that adequate accounting data are compiled to allow for the preparation of financial statements in conformity with accounting principles generally accepted in the United Sates of America (GAAP) as applied to governmental units. The internal control is designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that: 1) the cost of a control should not exceed the benefits likely to be derived; and 2) the valuation of costs and benefits requires estimates and judgments by Department management. The acceleration of the Regional Freeway System includes an early connection of the Interstate 10 / Santan / South Mountain interchange to the west that will connect to existing Pecos Road at 40th Street. ADOT continues developing the South Mountain corridor by initiating an Environmental Impact Statement and Design Concept Study. The proposed interim South Mountain Freeway connection between Pecos Road at 19th Avenue to Baseline Road near 59th Avenue, which will provide access to the Ahwatukee community, to and from the west will be evaluated as part of the study. Technology The Department’s internal control includes both automated controls, which are an integral component of the financial accounting system, and comprehensive policies and procedures. In addition, the Department’s Office of Audit and Analysis is an independent unit that reviews accounting controls and performs operational audits of the various divisions and units of the Department. ADOT is considered a nationwide leader in the use of technology to improve traffic flow and keep drivers informed of freeway and highway conditions. Computerized technology is a key component of the Department’s efforts to keep up with the increase in traffic volumes, especially in the major metropolitan areas. As the Phoenix area freeway system grows, so does ADOT’s network of overhead message boards and traffic flow detectors. This application of Intelligent Transportation Systems (ITS) allows operators in the Department’s Traffic Operations vii General Government Functions The following two schedules present a summary of All Governmental Fund Types, which includes the Special Revenue Funds, Debt Service Funds, and Capital Projects Funds, revenues and expenditures, respectively, for fiscal year 2001, and the amount and percent of increases or decreases in relation to the prior year’s amounts. Operating revenues from all governmental funds totaled $1,303.0 million during the fiscal year 2001, an increase of 2.4 percent from the preceding year. The increase in revenues can be attributed to increase in the following major sources: fuel and motor carrier taxes, intergovernmental revenue (primarily Federal) and transportation excise taxes. The following is a summary of the Department’s governmental fund revenues. viii Schedule 1 Summary Statement of Revenues All Governmental Fund Types Fiscal years ended June 30, 2001 and 2000 (Expressed in Millions) Percent 2001 Amount Revenues Fuel and Motor Carrier Taxes $ Percent of Total 2000 Amount 300.8 23.1% License and Related Fees Intergovernmental Revenue 219.7 428.3 Transportation Excise Taxes $ Percent of Total 276.2 21.7% 16.9% 32.9% 255.1 414.0 Increase Increase from Prior Year from Prior Year $ 24.6 8.9% 20.0% 32.5% <35.4> 14.3 <13.9%> 3.5% 6.5% Vehicle Registration, Title, 264.7 20.3% 248.6 19.5% 16.1 Interest* 44.6 3.4% 41.5 3.3% 3.1 7.5% Other* 27.7 2.1% 18.0 1.4% 9.7 53.9% Transfers from Other State Funds* 17.2 1.3% 19.2 1.5% <2.0> <10.4%> 1,303.0 100.0% 1,272.6 100.0% 30.4 2.4% Total Revenues $ $ $ Summary Statement of Revenues $450.0 $400.0 Millions of Dollars $350.0 $300.0 $250.0 $200.0 $150.0 $100.0 $50.0 $0.0 Fuel and Motor Carrier Taxes Vehicle Registration Fees and Permits Intergovernmental Revenue 2000 ix 2001 Transportation Excise Taxes Other * Governmental expenditures totaled $1,612.1 million during fiscal year 2001, a $102.8 million increase from the previous year. The largest increase in expenditures was $59.5 million for capital outlay. This increase is attributable to the Department’s acceleration of the completion of the Maricopa County Regional Freeway System by the year 2007. The total fund balance for governmental funds increased by $146.2 million or 26.5 percent to $696.6 million. The following is a summary of governmental fund expenditures. Schedule 2 Summary Statement of Expenditures All Governmental Fund Types Fiscal years ended June 30, 2001 and 2000 (Expressed in Millions) 2001 Amount Expenditures Appropriated by Legislature (Operating) Administration Highway Highway Maintenance Motor Vehicle Division Aeronautics Division Other $ Total Appropriated Reimbursements & Other Debt Service Capital Outlay Not Appropriated by Legislature Total Expenditures $ Percent of Total 48.2 43.1 89.4 77.3 1.7 1.0 3.0% 2.7% 5.5% 4.8% 0.1% 0.1% 260.7 37.0 292.9 1,014.9 6.6 1,612.1 2000 Amount $ Percent of Total 47.8 42.3 83.4 74.5 1.8 0.7 3.9% 3.7% 6.8% 5.6% 0.9% 0.1% 16.2% 2.3% 18.2% 63.0% 0.4% 250.5 42.8 253.8 955.4 6.8 21.0% 5.4% 17.8% 54.8% 1.0% 100.1% $ 1,509.3 100.0% Increase from Prior Year $ $ Percent Increase from Prior Year 0.4 0.8 6.0 2.8 <0.1> 0.3 0.8% 1.9% 7.2% 3.8% <5.6%> 42.9% 10.2 <5.8> 39.1 59.5 <0.2> <13.6%> 15.4% 6.2% <2.9%> 102.8 Summary Statement of Expenditures $1,200.0 Millions of Dollars $1,000.0 $800.0 $600.0 $400.0 $200.0 $0.0 Total Appropriated Remibursements & Other 2000 x Debt Service 2001 Capital Outlay 6.8% Budgetary Controls The Department employs a significant number of tools and techniques in its budgetary control process. Arizona Revised Statutes, §35-113, outlines the Department’s basic budgetary responsibilities. During the 1998 legislative session, the Legislature changed the budget process to require a biennial submittal every even-numbered year. The most recent two-year budget was submitted in 2000 for fiscal years 2002 and 2003. During the 2000 session, the Legislature appropriated and the Governor approved $325 million for the Department’s Operating Budget for fiscal year 2002 and $327 million for fiscal year 2003. The annual capital improvement plan, which contains proposals for State spending on land acquisition, capital projects, energy systems, energy management systems and building renewal for the building system, was also changed to a two-year budget submitted each even-numbered year. detailed operating budget which guides the divisions and programs in their financial operation. When the Legislature convenes in “non-budget” years, the Governor may, nonetheless, submit to the Legislature any proposed revisions to the enacted operating budgets for the current and ensuing fiscal years. The revisions must include an estimate of all available monies and revenues and an explanation for any proposed changes. The 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, monthly or quarterly allotment controls, appropriation allocation and control capabilities to the expense budget and organization unit level, and management control reports from the expense budget/organizational unit level, with summary reporting capabilities by program, division or appropriation. 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 building project is often identified for control purposes. The budgets are prepared on a cash basis except that liabilities (encumbrances) incurred before the end of the fiscal year and paid within the next calendar month are charged against that prior fiscal year’s budget. With a few exceptions, such as the capital budgets and highway maintenance, State appropriations typically lapse at the end of the fiscal year. The Director of the Department is also responsible for developing a Strategic Plan for the Department and for developing a Master List of programs within the Department. The Plan shall extend to the current fiscal year and the two ensuing fiscal years and shall contain a mission statement, goals, objectives and performance measures for the Department as a whole. Each program included on the Master List shall similarly include its mission statement, goals, performance measures that emphasize results and budgetary data for the current and prior fiscal years. The budgetary data shall include funding amounts, regardless of source. As noted above, a Strategic Plan (as well as a Master List) complying with these requirements was completed September 1, 2001. A legal limitation is adopted for capital outlay including land, building and improvements for the State Highway Fund, Aviation Fund, and Safety Enforcement and Transportation Infrastructure Fund. Any balances and collections in these three funds in excess of the specific amounts appropriated in the General Appropriations Act are appropriated to the Department. The Department monitors expenditures through an internal budgetary process and the FiveYear Transportation Facilities Construction Program approved by the Transportation Board. A legal limitation is not adopted for the other special revenue funds, the debt service funds, capital projects funds, proprietary funds and fiduciary funds. Budgets are submitted to the Governor in accordance with State law. The appropriations are legally enacted after approval by the Governor and the Legislature. After passage by the Legislature, the appropriation bills are sent to the Governor for approval and signature. Upon receipt of the operating budget appropriations bill, allocations are made to organizational levels within each division, including changes such as for pay adjustments. The result is a In addition, the Department’s Office of Strategic Planning and Budgeting staff performs expenditure projection analyses of all appropriated and nonxi appropriated funds on a monthly basis. These analyses utilize financial and management reports from both AFIS and ADVANTAGE to project total year-end expenditures by organizational unit and highlight potential problem areas. The Office also reviews progress in meeting the Department’s key objectives and performance measurements monthly and makes recommendations for remedial changes as necessary. Retirement Plan The Arizona State Retirement System Board administers the Arizona State Retirement Plan (Plan), a cost sharing multiemployer public employee retirement system, for the benefit of Arizona employees and employees of certain other governmental entities. Plan provisions, including death, disability, and retirement benefits, are established by State statute. Substantially all employees of the Department are covered by the Plan. The Department’s total payroll for fiscal year 2001 was $153 million. The Plan is funded through payroll deductions from employees’ gross earnings and amounts contributed by the Department. Retirement benefits are obligations of the Plan and not of the Department. The Arizona Revised Statutes provide statutory authority for employee and employer contributions. The employee and employer contribution rate for the fiscal year ended June 30, 2001, was actuarially computed to be 2.66 percent of covered payroll by an actuarial valuation performed at June 30, 1999. The contribution requirement for fiscal year 2001 was $4.0 million by both the employees and the Department. Proprietary Operations Proprietary funds are used to account for the Department’s on-going organizations and activities that are similar to those often found in the private sector. All assets, liabilities, equities, revenues, expenses, and transfers relating to the Department’s business and quasi-business activities where net income and capital maintenance are measured - are accounted for through proprietary funds. The measurement focus is on determination of net income, financial position, and cash flows. The proprietary funds type include an enterprise fund and an internal service fund. An enterprise fund is used to account for operations that are financed and operated in a manner similar to private business enterprises — where the intent of the Department is that the costs (including depreciation) of providing goods or services to the general public on a continuing basis be financed from sales or other revenues. The only enterprise fund of the Department is the Arizona Highways Magazine Fund. Debt Administration As of June 30, 2001, the Department had $1.57 billion in outstanding bonds payable. This total includes $394 million in Highway Revenue Bonds “HURF bonds” secured by a firstlien pledge against the Department’s share of highway user revenues and $306 million in subordinated bonds. In addition, the Department has $351 million in Transportation Excise Tax Bonds “RARF bonds” outstanding, which are secured by a first-lien pledge against the sales tax revenues flowing into the Maricopa Regional Area Road Fund, and $339 million in subordinate Transportation Excise Tax Bonds secured by a second-lien pledge against those revenues flowing into the Maricopa Regional Area Road Fund. During fiscal year 2001, the Department issued Grant Anticipation Notes (GANs) for the first time and had $182 million secured by a first-lien pledge against the Department’s share of Federal aid revenues. The bonds have been sold in 22 separate issues between 1986 and 2001. All bonds issued as of June 30, 2001, are scheduled to mature not later than July 1, 2020. The bonds are obligations of the Transportation Board and are not obligations of the State of Arizona. An internal service fund is used to account for the financing of goods or services provided by one department or agency to other departments or agencies, or to other governments, on a costreimbursement basis. The internal service fund of the Department is the Equipment Fund. Fiduciary Funds Fiduciary funds are used to account for assets held by the Department in a trustee capacity or as an agent for individuals, private organizations, other governmental units, and/or other funds. The fiduciary funds type includes agency funds. Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. The agency funds of the Department include the Privilege Tax, Motor Vehicle Division Clearing, Highway User Revenue, Underground Storage Tank, Highway Properties, and Economic Strength Project. Of the $3.76 billion total in bonds issued between 1986 and 2001, $1.12 billion, or approximately 30 percent, have been refunding issues to lower debt service costs. These efforts have resulted in cumulative savings of $57 million in current dollars and $39 million on a present value basis. xii collateral for the Department’s investments. The Department prepares cash flow forecasts, develops cash strategies, forecasts interest rates and market conditions, and conducts cash management studies to improve collection, deposit, disbursement, and fund transfer procedures. The senior lien HURF bonds have been rated AAA/Aa1 by Standard & Poor’s Rating Services Group (S&P) and Moody’s Investors Service, respectively. The Department’s subordinate lien HURF bonds are rated AA/Aa2. The RARF senior lien bonds are rated AA/Aa2, while the RARF subordinate bonds are rated A/Aa3. The GANs senior lien bonds are rated AA-/Aa3/AA with the additional rating provided by Fitch, Inc. It is the policy of the Department, in cooperation with the State Treasurer’s Office, to invest public funds for maximum return, while maintaining the safety of investment principal and adequate liquidity to meet cash flow requirements in conformity with State statutes governing investment of the Department’s funds. This investment policy applies to all financial assets administered by the Department under statutory authority. Laws 1999, Chapter 189 (SB 1201) authorized the Transportation Board to issue nonnegotiable Board Funding Obligations (BFOs) for purchase by the Arizona State Treasurer. The new law restricts the Transportation Board to issuing $100 million in fiscal years 2000, 2001 and 2004 and that no more than $100 million be outstanding at any one time. The BFOs are used to capitalize Arizona’s State Infrastructure Bank, which allows the Department and political subdivisions to apply for loans from the new Highway Expansion and Extension Loan Program (HELP) established by this legislation. As of June 30, 2001, the Department had $100 million in outstanding BFOs. The Investment Program has grown from a total of six funds in 1980 to 31 funds currently invested. The system has been computerized and several daily and monthly monitoring reports have been developed. An annual Investment Planning and Monitoring Report has been developed, including annual objectives and strategies for key performance areas. The emphasis of the Investment Program has focused on maintaining 99.5 percent of cash invested and maximizing the investment yield. Laws 2001, Chapter 238 (HB 2636) increased the HURF bonding cap to $1 billion from $800 million. Additionally, the legislation authorized the Transportation Board to issue $100 million in BFOs in fiscal year 2002 and increased the BFO authority in fiscal year 2004 to $200 million from $100 million. The distribution of this additional BFO authority is $60 million to the State Highway Fund, $40 million to the HELP fund in fiscal years 2002 and 2004. Risk Management The Department continues to place emphasis in the area of risk management in order to control exposure and losses. The Office of Risk Management is responsible for the coordination of all activities necessary within the Department, and, in conjunction with the State’s Risk Management Division and Attorney General’s Office, to investigate and defend the Department from all losses arising from tort liability claims. Cash Management During fiscal year 2001, the Department earned over $44 million in interest from its investment program. The interest was earned from investing, on average, 99.8 percent of the Department’s $748 million average cash balance during the year. An average yield of 5.9 percent was received on the Department’s investments during fiscal year 2001. The State has a self-insured retention workers’ compensation program. The Department’s Safety Office has increased its emphasis on training, accident investigation, and the handling of hazardous materials to minimize exposure and injury to employees. The Department has first dollar replacement value on real property coverage for all losses exceeding $100. The Cash Management Unit has responsibility for the Department’s investment program in cooperation with the State Treasurer’s Office. The Cash Management Unit processes investment transactions through the State Treasurer’s Office by informing the Treasurer of the amount available to invest and the desired maturity date. The State Treasurer is responsible for purchasing and selling investment securities in the market and administering the xiii OTHER INFORMATION Single Audit The Department is required to undergo an annual Single Audit in accordance with the provisions of the Single Audit Act Amendments of 1996 and the U.S. Office of Management and Budget Circular A-133, “Audits of States, Local Governments, and Non-Profit Organizations.” The Department’s Single Audit information is included in the Single Audit of the State for the fiscal year ended June 30, 2001. Independent Audit Arizona Revised Statutes, §41-1279.03, requires the State Auditor General to “conduct or cause to be conducted at least biennial financial and compliance audits of financial transactions and accounts kept by or for all state agencies subject to the Single Audit Act Amendments of 1996 (P.L. 104-156). The audits shall be conducted in accordance with generally accepted accounting principles and Government Auditing Standards and, accordingly, shall include tests of the accounting records and other auditing procedures as may be considered necessary in the circumstances. The audits shall include the issuance of suitable reports required by the Single Audit Act Amendments of 1996 (P.L. 98-502).” A requirement of the Single Audit is to ensure that adequate internal control is in place and that the Department is in compliance with applicable Federal laws and regulations. The internal control has been reviewed by the United States Department of Transportation’s (U.S. DOT) Inspector General on several occasions in the past. The U.S. DOT auditors typically rely on the Department’s internal audit staff in determining the scope of their review. These reviews are in addition to the comprehensive review of the Department’s internal control previously mentioned. In fulfillment of this requirement, the Department contracts with an independent public accounting firm to perform an annual audit of the Department and submit a “comprehensive financial report of all funds for the preceding year including a report by the independent public accounting firm attesting that the financial statements present fairly the financial position of the Department in conformity with generally accepted accounting principles.” Independent audits have been conducted on an annual basis since the Department’s formation in 1974. 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, 2000. This was the eleventh 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. For fiscal year 2001, the accounting firm of Deloitte & Touche LLP conducted the Department’s financial audit and Single Audit procedures related to the Federal awards of the Department as required by the Arizona Revised Statutes. Deloitte & Touche LLP considered internal control in order to determine auditing procedures for the purpose of expressing an opinion on the general purpose financial statements and not to provide assurance on internal control. The consideration of internal control would not necessarily disclose all matters in internal control that might be material weaknesses under standards established by the American Institute of Certified Public Accountants. However, Deloitte & Touche LLP noted no matters involving internal control and its operation that they consider to be material weaknesses. 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. xiv Acknowledgments We wish to express our sincere appreciation to the many individuals whose dedicated efforts have made this report possible. A special note of thanks is extended to the staff of Fiscal Operations and Resource Administration whose commitment, professionalism, and dedicated efforts contributed to the timely preparation of the fiscal year 2001 comprehensive annual financial report. Sincerely, (signed by) Victor M. Mendez, Director Arizona Department of Transportation (signed by) John E. McGee, Chief Financial Officer Financial Management Services Arizona Department of Transportation List of Principal Officials Victor M. Mendez Director Vacant Deputy Director John A. Bogert Chief of Staff Edward D. Wright State Engineer Intermodal Transportation Division Stacey K. Stanton Assistant Director Motor Vehicle Division Mary Lynn Tischer, PhD Assistant Director Transportation Planning Division Gary Adams Assistant Director Aeronautics Division John E. McGee Chief Financial Officer Arizona State Transportation Board F. Rockne Arnett, Chairperson Katie Dusenberry, Vice Chairperson Ingo Radicke Bill Jeffers Richard Hileman Dallas Gant James W. Martin xvi District One District Two District Four District Five District Six District One District Three xvii Arizona Department of Transportation Combined Balance Sheet - All Fund Types and Account Groups June 30, 2001 (With comparative totals at June 30, 2000) Proprietary Fund Type Governmental Fund Types Special Revenue Assets: Cash and cash equivalents on deposit with the State Treasurer: Restricted (Note 4) Unrestricted Receivables: Subscriptions (net of allowance for uncollectibles) Notes and loans (Note 5) Accrued interest Taxes and fees Other Due from U.S. Government for reimbursable construction costs Due from other Arizona Department of Transportation funds (Note 6) Due from Arizona counties, cities and other state agencies Inventories Prepaid items Advances to other Arizona Department of Transportation funds (Note 6) Fixed assets - net of accumulated depreciation (Note 7) $ Debt Service 81,830,804 341,404,745 $ 18,275,447 $ Enterprise 270,552,513 $ 2,396,073 46,642,263 3,182,819 19,203,397 1,812,454 793 1,706,946 - 474,595 5,750 45,672 56,729,799 - - - 76,908,684 - - - 22,770,802 4,090,591 - - - 2,924,776 721,810 20,000,000 - - - - - - 1,755,773 - - - - - - - - Other debits: Amount available in debt service funds for retirement of general long-term debt Amount to be provided for retirement of general long-term debt Total assets and other debits $ Capital Projects 672,763,904 The notes to the financial statements are an integral part of this statement. 2 $ 20,088,694 $ 272,259,459 $ 8,324,449 Exhibit 1 Proprietary Fund Type Fiduciary Fund Type Internal Service $ $ $ General Long-Term Debt General Fixed Assets Agency 5,439,547 Totals (Memorandum Only) Account Groups 3,416,319 104,812,670 $ - $ 2001 - $ 85,247,123 742,880,995 2000 $ 97,602,207 559,297,868 54,976 49,905 459,966 71,335,049 277,293 - - 474,595 46,642,263 7,222,911 71,335,049 19,577,060 358,776 71,475,088 8,744,396 149,085,188 12,557,832 - - - - 56,729,799 39,617,335 265,644 15,344,752 - - 92,519,080 129,600,202 533,673 2,449,028 - 90,120 - - - 23,394,595 9,464,395 721,810 21,416,747 9,082,012 668,778 - - - - 20,000,000 20,000,000 44,211,338 - 224,593,943 - 270,561,054 242,707,393 - - - 20,088,694 20,088,694 19,345,409 - - - 1,562,386,909 1,562,386,909 1,328,453,809 53,004,111 $ 195,736,169 $ 224,593,943 $ 1,582,475,603 $ 3,029,246,332 $ 2,694,082,988 (Continued) 3 Arizona Department of Transportation Combined Balance Sheet - All Fund Types and Account Groups June 30, 2001 (With comparative totals at June 30, 2000) Proprietary Fund Type Governmental Fund Types Special Revenue Debt Service Capital Projects Enterprise Liabilities, equity and other credits Liabilities: Contracts and retainage payable Accounts payable Accrued payroll and other accrued expenditures/expenses Due to other Arizona Department of Transportation funds (Note 6) Due to Arizona counties, cities and other state agencies Deferred revenue Surety and rental deposits Federal arbitrage rebate Advances from other Arizona Department of Transportation funds (Note 6) Notes payable (Note 9) Bonds payable (Note 9) Capital leases payable (Note 9) Long-term accrued vacation leave (Note 9) Total liabilities $ Equity and other credits: Contributed capital Investment in general fixed assets Retained earnings: Reserved for replacement of equipment Unreserved Fund balances: Reserved for: Highway construction Repayment of advance Inventories Loans and other financial assistance Unreserved, undesignated Total equity and other credits Total liabilities, equity and other credits $ 70,696,574 8,597,052 $ - $ 20,767,742 601,104 $ 127,527 5,579,160 - - 183,525 685,245 - - 75 101,348,198 - - - 4,420,885 - 20,000,000 40,190,611 247,096,840 - - - - 21,368,846 4,732,012 - - - 1,038,698 - - - - 2,553,739 172,260,918 20,000,000 4,090,591 80,790,551 148,525,004 425,667,064 20,088,694 20,088,694 250,890,613 250,890,613 3,592,437 672,763,904 The notes to the financial statements are an integral part of this statement. 4 $ 20,088,694 $ 272,259,459 $ 8,324,449 Exhibit 1 Proprietary Fund Type Fiduciary Fund Type Internal Service $ $ $ General Long-Term Debt General Fixed Assets Agency 197,427 Totals (Memorandum Only) Account Groups 1,780,678 $ - $ 2001 - $ 91,464,316 11,303,788 2000 $ 40,360,359 37,862,184 783,946 - - - 6,546,631 6,631,922 485 91,833,275 - - 92,519,080 129,600,202 6,549 - 100,083,742 2,038,474 - - - 201,438,489 4,420,885 2,038,474 - 247,235,293 4,484,216 2,056,717 1,512,260 7,482,690 8,471,097 - - 1,572,161,784 1,370,161 8,943,658 20,000,000 47,673,301 1,572,161,784 1,370,161 8,943,658 20,000,000 68,362,765 1,337,108,423 2,065,773 8,625,022 195,736,169 - 1,582,475,603 2,059,880,567 1,905,905,094 6,322,179 - - 224,593,943 - 7,360,877 224,593,943 7,331,935 194,956,023 38,210,835 - - - 40,764,574 9,985,210 30,339,291 44,533,014 - 224,593,943 - 443,240,225 20,000,000 4,090,591 80,790,551 148,525,004 969,365,765 312,300,184 20,000,000 3,961,476 55,508,591 153,795,142 788,177,894 53,004,111 $ 195,736,169 $ 224,593,943 $ 1,582,475,603 5 $ 3,029,246,332 $ 2,694,082,988 Exhibit 2 Arizona Department of Transportation Combined Statement of Revenues, Expenditures and Changes in Fund Balances All Governmental Fund Types For the fiscal year ended June 30, 2001 (With comparative totals for the fiscal year ended June 30, 2000) Special Revenue Revenues: Transportation excise taxes Vehicle registration, title, license and related fees Fuel and motor carrier taxes and fees Reimbursements of construction expenditures Federal aid Other Federal grants and reimbursements State match Reimbursements from Arizona counties, cities and other state agencies State appropriations Interest on loans receivable Interest Other Total revenues $ Expenditures: Current: Transportation - appropriated by State legislature Transportation - not appropriated by State legislature Capital outlay: Highway construction Land, buildings and improvements appropriated by State legislature Contracts and capital leases payable Arizona Department of Public Safety distributions appropriated by State legislature Debt service: Principal Interest Bond issuance costs Federal arbitrage rebate Distributions to Arizona counties, cities and other state agencies Interest on loans payable Other Total expenditures Excess of revenues over expenditures Other financing sources : Proceeds from sale of bonds Proceeds from refunding bonds Payment to refunded bond escrow agent Proceeds from contracts and capital leases payable Operating transfers in Operating transfers out: Debt service Other Total other financing sources Excess of revenues and other financing sources over expenditures and other financing uses Fund balances, July 1 Residual equity transfer Fund balances, June 30 264,722,440 219,745,920 300,749,961 $ - Capital Projects $ 2001 - $ 264,722,440 219,745,920 300,749,961 2000 $ 248,595,990 255,087,892 276,188,840 421,577,938 6,711,805 - - - 421,577,938 6,711,805 - 402,266,192 11,748,706 396,600 16,894,425 255,991 92,913 27,242,634 27,692,530 1,285,686,557 8,478,825 793 8,479,618 8,833,990 8,833,990 16,894,425 255,991 92,913 44,555,449 27,693,323 1,303,000,165 18,608,709 179,690 1,591,725 39,942,195 18,011,577 1,272,618,116 260,699,265 6,597,216 - - 260,699,265 6,597,216 250,508,766 6,820,619 789,270,170 - 219,319,580 1,008,589,750 941,913,498 5,418,193 909,714 - - 5,418,193 909,714 10,956,144 2,577,187 12,500,000 - - 12,500,000 12,500,000 - 208,920,000 78,501,394 - - 208,920,000 78,501,394 - 175,075,000 76,603,575 308,200 155,863 24,352,489 5,509,064 1,105,256,111 116,582 287,537,976 219,319,580 24,352,489 5,509,064 116,582 1,612,113,667 30,070,861 1,679,790 172,834 1,509,342,337 180,430,446 <279,058,358> <210,485,590> <309,113,502> <236,724,221> 909,714 107,067,394 280,692,617 454,380,594 - 454,380,594 909,714 387,760,011 250,499,349 26,172,174 <25,115,000> 2,577,187 294,626,329 <280,692,617> <65,179,076> <237,894,585> <890,974> 279,801,643 <40,997,344> 413,383,250 <280,692,617> <107,067,394> 455,290,308 <227,118,977> <67,507,352> 254,133,710 743,285 202,897,660 146,176,806 17,409,489 19,345,409 20,088,694 47,992,953 250,890,613 551,219,565 <750,000> 696,646,371 $ <57,464,139> $ Totals (Memorandum Only) Governmental Fund Types Debt Service 483,881,203 <750,000> 425,667,064 $ The notes to the financial statements are an integral part of this statement. 6 $ $ 534,560,076 <750,000> 551,219,565 Exhibit 3 Arizona Department of Transportation Combined Statement of Revenues and Expenditures - Budget and Actual (Budget Basis) Budgeted Special Revenue Funds For the fiscal year ended June 30, 2001 Special Revenue Funds Budget Revenues: Vehicle registration, title, license and related fees Fuel and motor carrier taxes and fees Interest Flight property taxes Grand Canyon National Park Airport Other Total revenues $ 254,869,500 292,012,000 1,824,000 7,472,000 664,000 10,000 556,851,500 Expenditures appropriated by State legislature in FY 2001 budget: Transportation: Administration Highway Highway Maintenance Motor Vehicle Division Aeronautics Division Air Quality Program Public Transit Program Total transportation Capital outlay - land, buildings and improvements: Highway Arizona Department of Public Safety transfers Expenditures appropriated by State legislature by carryover of previous years' unexpended budgets Total expenditures Excess of revenues over expenditures $ $ 239,404,114 291,674,063 1,385,078 6,693,590 1,880,755 120,936 541,158,536 $ <15,465,386> <337,937> <438,922> <778,410> 1,216,755 110,936 <15,692,964> 48,775,600 43,855,400 91,877,779 79,845,300 1,741,500 46,400 36,832,200 47,834,431 43,227,766 89,425,237 76,296,928 1,501,823 46,400 36,829,643 941,169 627,634 2,452,542 3,548,372 239,677 2,557 302,974,179 295,162,228 7,811,951 17,866,411 5,418,193 12,448,218 12,500,000 12,500,000 - 1,435,828 334,776,418 723,995 313,804,416 711,833 20,972,002 222,075,082 The notes to the financial statements are an integral part of this statement. 7 Variance Favorable Actual Non-GAAP $ 227,354,120 $ 5,279,038 Exhibit 4 Arizona Department of Transportation Combined Statement of Revenues, Expenses and Changes in Retained Earnings All Proprietary Fund Types For the fiscal year ended June 30, 2001 (With comparative totals for the fiscal year ended June 30, 2000) Totals (Memorandum Only) 2001 2000 Proprietary Fund Types Enterprise Internal Service Operating revenues: Equipment rentals Equipment sales Magazine sales Sales of related products Inter-agency Other Total operating revenues $ Operating expenses: Equipment operations Cost of sales General and administrative Depreciation Total operating expenses 6,105,620 4,101,576 371,875 10,579,071 $ 9,551,682 1,212,552 313,615 11,077,849 26,312,583 111,405 2,893,457 1,400,518 30,717,963 $ 26,312,583 111,405 6,105,620 4,101,576 2,893,457 1,772,393 41,297,034 $ 26,104,085 504,746 6,223,932 4,489,024 3,504,235 596,405 41,422,427 22,573,790 7,161,742 29,735,532 22,573,790 9,551,682 1,212,552 7,475,357 40,813,381 <498,778> 982,431 483,653 151,891 305,467 457,358 395,840 <938> 150,953 <500,000> <194,533> <938> <500,000> <43,580> <68,953> 326,887 Net income <347,825> 787,898 440,073 <695,709> Retained earnings, July 1 Retained earnings, June 30 2,901,564 2,553,739 37,422,937 38,210,835 40,324,501 40,764,574 Operating income Non-operating revenues : Interest Loss on sale/disposal of fixed assets Legislative transfer out Total non-operating revenues $ The notes to the financial statements are an integral part of this statement. 8 $ $ 22,548,005 10,177,574 1,253,531 8,465,913 42,445,023 <1,022,596> $ 41,020,210 40,324,501 Exhibit 5 Arizona Department of Transportation Combined Statement of Cash Flows All Proprietary Fund Types For the fiscal year ended June 30, 2001 (With comparative totals for the fiscal year ended June 30, 2000) Totals (Memorandum Only) 2001 2000 Proprietary Fund Types Enterprise Internal Service Cash flows from operating activities: Operating income Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation Changes in assets and liabilities: Accounts receivables Due from other Arizona Department of Transportation funds Due from other state agencies Inventories Prepaid expenses Accounts payable Accrued payroll and other accrued expenses Due to other Arizona Department of Transportation funds Due to other state agencies Deferred revenue Net cash provided by operating activities $ <498,778> $ 313,615 Cash flows from capital and related financing activities: Acquisition of fixed assets Proceeds from sale of fixed assets Reduction of contributed capital Increase of contributed capital Legislative transfer out Net cash used for capital and related financing activities Cash flows from investing activities: Earnings on investments Net cash provided by investing activities Net increase in cash and cash equivalents Cash and cash equivalents, July 1 Cash and cash equivalents, June 30 483,653 $ <1,022,596> 7,475,357 8,465,913 <85,601> 186,880 101,279 22,882 <138,646> <53,032> <36,129> <197,528> <533,673> <114,622> 197,427 <197,528> <533,673> <253,268> <53,032> 161,298 1,707,231 20,254 255,496 <62,487> <639,742> 2,258 56,854 59,112 <238,382> 75 <63,331> 485 6,549 - 560 <1,808> <559,569> 7,746,545 7,180,427 8,715,913 <5,238> <500,000> - <8,842,418> 1,108,231 528,942 <500,000> <8,847,656> 1,108,231 <500,000> 528,942 <500,000> <10,050,449> 1,035,668 - <505,238> <7,705,245> <8,210,483> <9,014,781> <63,331> 226,605 151,891 151,891 305,467 305,467 457,358 457,358 413,293 413,293 <912,916> 346,767 <566,149> 114,425 The notes to the financial statements are an integral part of this statement. 9 $ 7,161,742 3,308,989 2,396,073 $ 982,431 $ 5,092,780 5,439,547 $ 8,401,769 7,835,620 $ 8,287,344 8,401,769 Arizona Department of Transportation Notes to Financial Statements June 30, 2001 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Reporting entity Fund accounting The Arizona Department of Transportation (Department) is a department of the State of Arizona and is not legally separate. The Department has no component units. The Director of the Department serves as the Chief Administrative Officer and is directly responsible to the Governor. The Governor appoints a seven-member Transportation Board of the State of Arizona Department of Transportation (Transportation Board) which has responsibility for establishing a complete system of State highway routes and distributing monies for local airport facilities’ projects through a grant program. The accounts of the Department are organized on the basis of funds and account groups, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures or expenses, as appropriate. Government resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. The various funds of the Department are grouped, in the financial statements, into six fund types and two account groups within four categories as follows: The Department is responsible for the construction and maintenance of all State highways. The Department cooperates with the various cities and counties within the State in the construction and maintenance of State roads and with the Federal Highway Administration in the construction and maintenance of interstate highways. Assistance in the development of local airports, registering motor vehicles and aircraft, licensing drivers and the publishing of the Arizona Highways Magazine are also responsibilities of the Department. GOVERNMENTAL FUNDS Governmental funds are those through which most governmental functions typically are financed. The acquisition, use, and balances of the Department’s expendable financial resources and the related current liabilities, except those accounted for in proprietary funds, are accounted for through governmental funds (special revenue, debt service, and capital projects). All governmental funds are accounted for using a current financial resources measurement focus. The Financial Services Division of the Arizona Department of Administration controls expenditures and adherence to annual budgets . The State Treasurer invests the cash balances of the Department. Governmental funds are, in essence, accounting segregations of financial resources. Expendable assets are assigned to the various governmental funds according to the purposes for which they may or must be used; current liabilities are assigned to the fund from which they are to be paid; and the difference between governmental fund assets and liabilities, the fund equity, is referred to as “Fund Balance.” The general purpose financial statements of the Department have been prepared in conformity with accounting principles generally accepted (GAAP) in the United Sates of America as applicable to governmental units. The more significant of the Department’s accounting policies are described below. 10 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2001 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Special Revenue Funds - Special revenue funds, excluding the State Highway Fund, are used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes. The State Highway Fund is used to account for all financial transactions applicable to the general operations of the Department, including road and bridge repairs, maintenance and construction, planning and development, engineering, and administration. Revenues are received from the following primary sources: fuel and motor carrier taxes and fees; vehicle registration, title, licenses and related fees; and Federal grants. Other special revenue funds of the Department include the State Aviation Fund, Safety Enforcement and Transportation Infrastructure Fund, Grant Anticipation Notes Fund, Highway Expansion and Extension Loan Program Fund, Local Agency Deposits Fund, Maricopa Regional Area Road Construction Fund, Motor Carrier Safety Revolving Fund, Motor Vehicle Liability Insurance Enforcement Fund, and Vehicle Inspection and Title Enforcement Fund. major capital facilities (other than those financed by proprietary funds and trust funds). The capital projects funds of the Department are the Highway Revenue Bond Proceeds Fund, which accounts for transactions related to the issuance and use of the proceeds from Arizona Transportation Board Highway Revenue Bonds, the Maricopa Regional Area Road Bond Proceeds Fund, which accounts for the issuance and use of the proceeds from the State of Arizona Transportation Excise Tax Revenue Bonds, and the Grant Anticipation Notes Fund, which accounts for issuance and use of the proceeds from the State of Arizona Grant Anticipation Notes. PROPRIETARY FUNDS Proprietary funds are used to account for the Department’s on-going organizations and activities that are similar to those often found in the private sector. All assets, liabilities, equities, revenues, expenses, and transfers relating to the Department’s business and quasi-business activities, where net income and capital maintenance are measured, are accounted for through proprietary funds. The measurement focus is on determination of net income, financial position and cash flows. Debt Service Funds - Debt service funds are used to account for the accumulation of resources for, and the payment of, general long-term debt principal, interest, and related costs. Debt service funds include the Highway Revenue Bond Principal Redemption and Interest Fund which accounts for the State of Arizona highway improvement bonds and revenue bonds, the Maricopa Regional Area Road Bond Fund which accounts for the State of Arizona transportation excise tax revenue bonds, and the Grant Anticipation Notes Fund which accounts for revenues received from the Federal Highway Administration. Enterprise Fund - An enterprise fund is used to account for operations that are financed and operated in a manner similar to private business enterprises, where the intent of the Department is that the costs (including depreciation) of providing goods and/or services to the general public on a continuing basis be financed from sales or other revenues. The only enterprise fund of the Department is the Arizona Highways Magazine Fund. The fund publishes a monthly magazine, Arizona Highways Magazine, as well as a number of books and sells several related products. Capital Projects Funds – The capital projects funds are used to account for financial resources to be used for the acquisition or construction of 11 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2001 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Internal Service Fund – An internal service fund is used to account for the financing of goods or services provided by one department or agency to other departments or agencies of the Department, or to other governments, on a cost-reimbursement basis. The internal service fund of the Department is the Equipment Fund. General Long-Term Debt - Long-term liabilities expected to be financed from governmental funds are accounted for in the General Long-Term Debt Account Group. Basis of accounting The modified accrual basis of accounting is used for all governmental fund types and agency funds. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual (i.e., when they become both measurable and available). “Measurable” means the amount of the transaction can be determined and “available” means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. FIDUCIARY FUNDS Fiduciary funds are used to account for assets held by the Department in a trustee capacity or as an agent for individuals, private organizations, other governmental units, and/or other funds. Agency Funds Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. The agency funds of the Department include the Privilege Tax Fund, Motor Vehicle Division Clearing Fund, Highway User Revenue Fund, Underground Storage Tank Fund, Highway Properties Fund, and Economic Strength Project Fund. Expenditures are recorded when the related fund liability is incurred. Principal and interest on general long-term debt are recorded as fund liabilities when due. Reimbursements of construction expenditures, due primarily from the Federal government on a percentage of costs incurred basis, are recognized when the related obligation is incurred. Those revenues susceptible to accrual are Federal grants, and reimbursable county, city and other state agency construction costs incurred by the Department. Federal grant monies are received after the incurrence of qualifying expenditures. As a result, the Federal share of all qualifying goods or services received or performed prior to year end has been accrued. ACCOUNT GROUPS Account groups are used to establish accounting control and accountability for the Department’s general fixed assets and unmatured principal of its general long-term debt. General Fixed Assets - Fixed assets used in governmental fund type operations are accounted for in the General Fixed Assets Account Group rather than in governmental funds. All proprietary funds are accounted for using the accrual basis of accounting. Under this basis, revenues are recorded when they are earned and expenses are recorded when incurred. 12 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2001 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Budgets and budgetary accounting Budgets are prepared on the cash basis except that liabilities incurred before the end of the fiscal year and paid within the next calendar month are charged against the prior fiscal year’s budget. Most State appropriations lapse at year end. Biennial budgets for the operating expenditures and capital outlay including land, building and improvements for the State Highway Fund, Aviation Fund, Safety Enforcement and Transportation Infrastructure Fund, Air Quality Program and Public Transit Program are submitted to the Governor in accordance with State law. The budgets are legally enacted as appropriations after approval by the Legislature and signature by the Governor. The legal level of control is at the program level and expenditure budgets are appropriated using a lump sum format with special line items . Expenditure details for personal services, employee related expenditures and all other operating expenditures are specifically budgeted within most divisions. In certain divisions, other specific programs are budgeted in addition to these categories. Revenue budgets are developed internally by the Department and are not a part of the appropriation process For financial reporting purposes, the accompanying financial statements present the legally adopted budget for those operations subject to legislative appropriation. A legal limitation is adopted for capital outlay including land, building and improvements for the State Highway Fund, Aviation Fund, and Safety Enforcement and Transportation Infrastructure Fund. Any balances and collections in these three funds in excess of the specific amounts appropriated in the general appropriations act are appropriated to the Department. The Department monitors expenditures through an internal budgetary process and the fiveyear construction program approved by the Transportation Board. A legal limitation is not adopted for the other special revenue funds, the debt service funds, capital projects funds, proprietary funds and fiduciary funds. Amendments to the approved appropriations require Legislative approval. However, since the Agency's appropriation is a lump sum appropriation by program, the allocation of funds between personal services, employee-related expenses, and other operating expenses is an internal decision for the program manager. Accordingly, transfers between line items such as personal services and other operating expenses within a particular program may be done by the program manager. Transfers of funds between programs require the approval of the Joint Legislative Budget Committee. Absent an amendment to the Agency's appropriated amount by the full legislature, expenditures may not exceed appropriations. Encumbrance accounting Encumbrance accounting, under which purchase orders, contracts, and other commitments for the expenditure of monies are recorded in order to reserve that portion of the applicable fund balance, is used by the Department as a budgetary control mechanism. However, outstanding encumbrances lapse at yearend. Accordingly, no reserve for encumbrances is reflected in the accompanying financial statements. All transfers of funds are reported to the Department’s Office of Strategic Planning and Budgeting for monitoring purposes. 13 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2001 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Application of FASB pronouncements to proprietary activities Financial Reporting for Certain Investments and for External Investment Pools. The Department has elected, in accordance with Governmental Accounting Standards Board (GASB) Statement No. 20, not to apply Financial Accounting Standards Board (FASB) Statements and Interpretations issued after November 30, 1989. Inventories The State Highway Fund inventory is valued at cost, which approximates market, using the first-in, first-out (FIFO) method. This inventory is accounted for using the consumption method. Under this method, inventories are recorded as expenditures as they are used. Cash and cash equivalents The Department’s cash and cash equivalents balance is on deposit with the State Treasurer for pooled investment purposes and is not evidenced by securities that exist in physical or book entry form in the Department’s name. All investments are carried in the name of the State of Arizona. State statutes require the State Treasurer to invest these pooled funds in collateralized time certificates of deposit, repurchase agreements or obligations of the U.S. Government. All investments are carried at cost, which approximates fair value. Proprietary fund inventories are stated at the lower of cost or market. 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 internal service funds’ inventories (consisting of vehicle parts and supplies, fuels and lubricants, and other supplies) are determined by moving average cost methods. Fixed assets 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. General fixed assets purchased are recorded as expenditures in the governmental funds and capitalized at cost in the General Fixed Assets Account Group. Land is recorded primarily at cost. If cost is not determinable based on previously acquired property, estimated cost is used. Other general fixed assets are stated at either actual or estimated costs. Contributed fixed assets are recorded in the General Fixed Assets Account Group at estimated fair value on the date received. Public domain (infrastructure) general fixed assets consisting of roads and bridges are not capitalized, as these assets are immovable and of value only to the government. No depreciation is provided on general fixed assets. For purposes of the statement of cash flows, cash equivalents are defined as short-term, highly liquid investments (investments with original maturities of three months or less). The Department’s investments are included in the State investment pool and these investments are not shown in the Department’s name. Therefore, the Department presents its equity in the internal pool as required in GASB Statement No. 31, Accounting and Property and equipment of the proprietary funds are stated at cost, or estimated historical cost if original cost is not available; and, if donated, are stated at estimated fair value on the date received. 14 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2001 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Depreciation is provided using the straight-line method based on estimated useful life as follows: ssociated with the procurement of subscriptions are expensed in the year incurred. Buildings 40 years Long-term obligations Buildings improvements 20 years Furniture and fixtures Mobile equipment 5 years Long-term debt is recognized as a liability of a governmental fund when due. For other long-term obligations, only that portion expected to be financed from expendable available financial resources is reported as a liability of a governmental fund. The remaining portion of such obligations is reported in the General Long-Term Debt Account Group. 3-15 years Shop tool, office and computer equipment and software 5 years The cost of additions, improvements, and renewals which substantially extend the useful life of a particular asset are capitalized in the property accounts . Repairs and maintenance expenditures are charged to operations as incurred. The cost and related accumulated depreciation of assets sold or otherwise disposed of are eliminated from the property accounts and any resultant gain or loss is recognized as income or expense. Compensated absences Effective July 1, 1998, State employees are eligible to receive payment for an accumulated sick leave balance of 500 hours or more with a maximum of 1,500 hours, upon retirement directly from State service. The benefit value is calculated by taking the State hourly rate of pay at the retirement date, multiplied by the number of sick hours at the retirement date, times the eligibility percentage. The eligibility percentage varies based upon the number of accumulated sick hours from 25 percent for 500 hours to a maximum of 50 percent for 1,500 hours. The maximum benefit value is $30,000. The benefit is paid out in annual installments over three years. The Retiree Accumulated Sick Leave Fund is accounted for on the State’s financial statements as an Expendable Trust Fund. As of June 30, 2001, employees had accumulated $28,201,384 of nonvested unpaid sick leave. Bond premiums, discounts and issuance costs Premiums or discounts on bond issuances are netted against the bond proceeds in the capital projects fund. The bonds are recorded at their face value in the General Long-Term Debt Account Group, except in the case of capital appreciation bonds. These bonds are initially recorded net of their discount. The discount is amortized over the life of the issue using the effective interest method. All costs related to bond issuance are recorded as debt service expenditures in the appropriate fund as incurred. Employees are allowed to accumulate up to 240 hours of vacation leave (320 hours for exempt employees) which is paid when vacation is taken or upon termination of employment at the individual’s then current rate of pay. An accrual for vacation leave has been made and the current portion is included under Deferred revenue Deferred revenue relates to unearned subscription income associated with the enterprise fund. Unearned subscription income is recorded when subscription orders are received and is amortized into income over the terms of the related subscriptions. Costs 15 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2001 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) the caption “Accrued payroll and other accrued expenditures/expenses.” For governmental funds, the portion of the vacation normally taken in the first sixty days of the next fiscal year is recorded as a current liability. The amount of long-term accrued vested vacation leave recorded in the General Long-Term Debt Account Group represents that portion which is not expected to be liquidated with expendable available financial resources. For proprietary funds, all of the outstanding vacation accrual is recorded as a current liability. Nonrecurring or nonroutine transfers of equity between funds are treated as residual equity transfers and are reported as additions to or deductions from the fund balance of governmental funds. Residual equity transfers to proprietary funds are treated as contributed capital, and such transfers from proprietary funds are reported as reductions of retained earnings or contributed capital as is appropriate in the circumstances. All other transactions are treated as operating transfers and are included in the results of operations of both governmental and proprietary funds. Administrative expenditures Certain services, including accounting and investment services and claims, are furnished to certain funds by various other funds of the Department without charge. The Department renders certain services (primarily administrative services as trustee or agent) to counties and cities of Arizona as well as to other agencies of the State of Arizona, the costs of which are accounted for in the State Highway Fund, a special revenue fund. No charges are made for these services. The Department receives certain services (primarily claims processing and treasury services) without cost from other Arizona state agencies. Operations of the internal service fund are conducted in facilities recorded in the General Fixed Assets Account Group, the costs of which are accounted for in the State Highway Fund, a special revenue fund of the Department. The internal service fund pays the costs of repairs and maintenance of those facilities, but no rental charges are made to the funds for the use thereof. The Arizona Highways Magazine Fund provides promotional magazines to other Arizona state agencies without charge. Use of estimates Transactions between funds The preparation of these financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Transactions that would be treated as revenue, expenditures, or expenses if they involved organizations external to the governmental unit are accounted for as revenue, expenditures, or expenses in the funds involved. Transactions which constitute reimbursements to a fund for expenditures or expenses initially made from that fund which are applicable to another fund are recorded as expenditures or expenses in the reimbursing fund and as reductions of expenditures or expenses in the fund that is reimbursed. Memorandum and comparative totals Total columns for 2001 and 2000 included in the accompanying combined financial statements are captioned memorandum only to indicate they are presented only to facilitate financial analysis. The 16 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2001 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) information in the columns is not intended to present financial position, results of operations or cash flows of its proprietary fund types in conformity with GAAP. This information is not comparable to a consolidation and interfund eliminations have not been made in the aggregation of the information. shown as an Agency Fund in fiscal year 2000 and has been reclassified as a Special Revenue Fund in fiscal year 2001. The Privilege Tax Fund was shown as a Special Revenue Fund in fiscal year 2000 and has been reclassified as an Agency Fund in fiscal year 2001. Reclassifications New accounting pronouncement Certain 2000 amounts have been reclassified to conform to the 2001 presentation. Adjustments were made for Local Agency Deposits Fund and Privilege Tax Fund. The Local Agency Deposits Fund was The Department’s financial statements are in compliance with Statement No. 33 of the Governmental Accounting Standards Board, Accounting and Financial Reporting for Nonexchange Transactions, effective for fiscal year 2001. NOTE 2. BUDGET BASIS OF ACCOUNTING The Department prepares its annual budget on a basis that differs from GAAP. The budget and the actual results of transactions are presented in accordance with the Department’s method (budget basis) in the Combined Statement of Revenues and Expenditures Budget and Actual (Budget Basis) - Budgeted Special Revenue Funds in order to provide a meaningful comparison of actual results with the budget. The adjustments required to convert the revenues and expenditures for the budgeted special revenue funds from the GAAP basis to the budgetary basis consist of accrual to cash basis adjustments and the exclusion of funds not budgeted through legislative appropriation. 17 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2001 NOTE 2. BUDGET BASIS OF ACCOUNTING (Continued) Adjustments necessary to convert the excess of revenues and other financing sources over expenditures and other financing uses for the year ended June 30, 2001, on a GAAP basis to budget basis are as follows: Special Revenue Funds Deficiency of revenues and other financing sources over expenditures and other financing uses — GAAP basis $ Basis differences Net increase in accounts payable, accrued payroll and other accruals not recognized as expenditures on budget basis Net increase in receivables related to fuel and motor carrier taxes and fees, vehicle registration, title, license, and related fees not recognized as revenue on budget basis Total basis differences <35,187,802> 11,513,009 <23,674,793> Perspective differences Revenues and other financing sources not recognized on budget basis: Reimbursements of construction expenditures - Federal aid Other Federal grants and reimbursements Reimbursements from Arizona counties, cities, and other state agencies State appropriations Interest Other Proceeds from contracts and capital leases payable Operating transfers in Expenditures and other financing uses not recognized on budget basis: Transportation - not appropriated by State legislature Capital outlay - highway construction Capital outlay - contracts and capital leases payable Distributions to Arizona counties, cities and other state agencies Interest Debt service transfer out Other operating transfers out Total perspective differences Entity differences Less excess of revenues over expenditures for funds for which no annual budgets are prepared Excess of revenues over expenditures — budget basis 18 <57,758,017> <360,869,634> <4,879,297> <2,900,099> <255,991> <13,798,461> <17,640,143> <909,714> <84,939,589> 6,360,624 621,346,580 909,714 16,863,659 3,320,981 86,529,221 20,016,934 269,154,785 39,632,145 $ 227,354,120 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2001 NOTE 2. BUDGET BASIS OF ACCOUNTING (Continued) Throughout the fiscal year, the Legislature may revise the budget. The following schedule reflects the original budgeted expenditures, subject to legislative limitations and cumulative revisions during the current fiscal year: Special Revenue Funds Original Budget Cumulative Revisions $ 294,999,139 39,777,279 Revised Budget $ 334,776,418 NOTE 3. SECURITIES HELD IN LIEU OF RETENTION In accordance with Arizona law, a contractor may assign to the Department, in lieu of contract retention, time certificates of deposit in federally insured banks licensed by the State of Arizona or securities of the United States of America, the State of Arizona, its counties, municipalities and school districts or deposits in savings and loan institutions authorized to transact business in the State of Arizona. At June 30, 2001, the Trustee held assignment on securities aggregating $23,037,219, and $3,589,732 in lieu of contractor retentions for construction in the special revenue funds, and capital projects fund, respectively. Additional securities aggregating $361,909 were on deposit but not assigned to a specific project. These additional securities are not reflected in the accompanying financial statements. NOTE 4. RESTRICTION OF USE OF THE STATE HIGHWAY FUND CASH Effective July 1, 1981, State law required accumulation of at least 15 percent, which in fiscal year 1996 was modified to 12.6 percent, of the revenues allocated each year to the State Highway Fund (special revenue fund) from the Highway User Revenue Fund (agency fund) for the design, purchase of right-of-way or construction of controlled-access highways which are included in the regional transportation plan of counties with populations in excess of 400,000 (Maricopa and Pima counties). At June 30, 2001, approximately $82,000,000 including interest, of the fund balance was reserved, representing such unspent monies. NOTE 5. NOTES AND LOANS RECEIVABLES Notes receivable represent real estate mortgage loans made to individuals purchasing homes previously owned by the Department for highway construction purposes. The loans were made at a fixed rate and mature ten years from the date of origination. Loans receivable represent loans made pursuant to Loan Repayment Agreements in the Highway Expansion and Extension Loan Program Fund. Twenty loans have been authorized and ten loans were outstanding as of June 30, 2001, to ADOT and other cities and towns. 19 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2001 NOTE 6. INTERFUND RECEIVABLES AND PAYABLES A summary of interfund receivables and payables at June 30, 2001, follows: Interfund Receivables Special Revenue Funds: State Highway Fund: Due from Highway User Revenue Fund for taxes and fees Due to Highway Expansion and Extension Loan Program Fund Other Total State Highway Fund $ Interfund Payables 76,063,377 $ - 335,080 76,398,457 510,130 443,537 953,667 59,625 67,267 63,282 42,192 510,130 36,560 157 10 165 75 - 77,177,513 954,074 - 75 265,644 485 Agency Funds: Motor Vehicle Division Clearing Fund Highway User Revenue Fund Underground Storage Tank Fund 524,684 12,946,037 1,874,031 15,682,535 76,150,740 - Total Agency Funds 15,344,752 91,833,275 92,787,909 $ 92,787,909 State Aviation Fund Safety Enforcement and Transportation Infrastructure Fund Motor Vehicle Liability Insurance Enforcement Fund Vehicle Inspection and Title Enforcement Fund Highway Expansion and Extension Loan Program Fund Maricopa Regional Area Road Construction Fund Total Special Revenue Funds Enterprise Funds: Arizona Highways Magazine Fund Internal Service Funds: Equipment Fund Total All Funds $ Advances Senate Bill 1201 authorized the transfer of $20,000,000 from the State Highway Fund in fiscal year 2000. This amount is shown as Advances to other Arizona Department of Transportation funds in the State Highway Fund and Advances from other Arizona Department of Transportation funds in the Highway Expansion and Extension Loan Program Fund. The advance is due no later than December 31, 2008. 20 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2001 NOTE 7. FIXED ASSETS A summary of changes in general fixed assets follows: Balance July 1, 2000 Land Buildings and improvements Improvements other than buildings Airport facilities Machinery and equipment Total General Fixed Assets $ $ Additions (1) 13,499,044 133,198,724 9,403,527 38,854,728 194,956,023 $ $ 2,947,523 1,894,193 1,655,049 19,569,077 7,771,048 33,836,890 Disposals $ $ <100> $ <4,198,870> <4,198,970> $ Balance June 30, 2001 16,446,467 135,092,917 11,058,576 19,569,077 42,426,906 224,593,943 Summary of proprietary fund type fixed assets at June 30, 2001: Enterprise Fund Land Buildings Shop tools, office and computer equipment, and software Mobile equipment $ Less accumulated depreciation Total proprietary fund fixed assets $ 7,900 $ 981,156 2,427,692 3,416,748 <1,660,975> 1,755,773 $ Internal Service Fund 2,542,510 110,376,195 112,918,705 <68,707,367> 44,211,338 (1) The acquisition of assets includes the transfer of $19,569,077 in facilities located at the Grand Canyon National Park Airport from the Grand Canyon Airport Authority in fiscal year 2001. NOTE 8. FUND EQUITY Fund equity for the proprietary funds consists of the following: Enterprise Fund: Contributed Capital Arizona Highways Magazine Fund Retained Totals Earnings 2001 2000 Balance, July 1, 2000 Reduction of contributed capital Net income $ 1,538,698 $ 2,901,564 $ 4,440,262 $ 4,945,657 <500,000> <500,000> <347,825> <347,825> <505,395> Balance, June 30, 2001 $ 1,038,698 $ 2,553,739 21 $ 3,592,437 $ 4,440,262 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2001 NOTE 8. FUND EQUITY (Continued) Arizona Revised Statutes (ARS), Section 28-7315, established an Arizona Highways Magazine Fund. The Fund consists of monies appropriated by the Legislature from the State Highway Fund, a special revenue fund, not to exceed $500,000 annually, in addition to all Arizona Highways Magazine revenues received less expenses. The balance of contributed capital represents contributions from the State Highway Fund of $38,698 and $2,000,000 during 1991 and 1990, respectively, less a reduction of $500,000 in fiscal years 1999 and 2001. Balances remaining in the Fund at the end of the fiscal year do not revert to the State of Arizona General Fund or the State Highway Fund. Internal Service Fund: Equipment Fund Unreserved Retained Earnings Contributed Capital Reserved Retained Earnings Balance, July 1, 2000 Reduction of reserved retained earnings Net income $ 5,793,237 $ 9,985,210 Balance, June 30, 2001 $ 5,793,237 - <9,985,210> $ - The Equipment Fund was established by Arizona Revised Statute, Section 28-7006. The Fund consists of monies appropriated by the Legislature from the State Highway Fund. In fiscal year 1999 and 2001 Totals 2001 2000 $ 27,437,727 $ 43,216,174 $ 43,406,488 9,985,210 1,208,390 1,208,390 $ 38,631,327 $ 44,424,564 <190,314> $ 43,216,174 Senate Bill required a transfer of $500,000 each year to the Department of Public Safety. These transfers were recorded as legislative transfer out and not a return of contributed capital. Residual equity transfer Residual equity transfer occurs when nonroutine transfers are made from one fund to another. During fiscal years 2000 and 2001, fund transfers were based upon Senate Bill 1001 passed during the 1999 first special session. The residual equity transfers of $750,000 were made in each fiscal year from the Safety Enforcement and Transportation infrastructure Fund to the Department of Public Safety. 22 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2001 NOTE 9. GENERAL LONG-TERM DEBT AND OTHER OBLIGATIONS The following is a summary of changes in general long-term debt for the fiscal year ended June 30, 2001: Balance July 1, 2000 Bonds & Notes: Highway Revenue Bonds: 1991 Series A, Subordinated $ 10,495,000 1992 Series A, Subordinated, Refunding 25,205,000 1992 Series B, Subordinated 36,560,000 1993 Series, Refunding 124,260,000 1993 Series A, Subordinated, Refunding 226,620,000 1993 Series B, Subordinated, Refunding 35,000,000 1999 Series 150,540,000 2000 Series Transportation Excise Tax Revenue Bonds: 1988 Series A, Capital Appreciation 57,918,423 1992 Series A, Refunding 127,020,000 1992 Series B 13,955,000 1993 Series, Subordinated Refunding 122,065,000 1995 Series A, Subordinated 77,440,000 1995 Series B, Subordinated, Refunding 86,195,000 1998 Series A 136,135,000 1999 Series, Subordinated 107,700,000 2000 Series Grant Anticipation Notes 2000 Series A 2001 Series A Total Bonds & Notes Payable Other long-term liabilities: Capital leases payable Long-term accrued vacation leave Total General Long-Term Debt Retirements/ Refundings Additions $ - $ Amortization of Discount - $ - Balance June 30, 2001 $ 10,495,000 - 25,205,000 11,385,000 - 36,560,000 112,875,000 - 2,010,000 - 224,610,000 143,655,000 13,455,000 - - 35,000,000 137,085,000 143,655,000 - 40,170,000 2,500,000 4,333,361 - 62,251,784 86,850,000 11,455,000 - 8,890,000 13,925,000 - 113,175,000 63,515,000 113,690,000 255,000 37,985,000 31,645,000 21,495,000 - 85,940,000 98,150,000 76,055,000 92,195,000 39,405,000 142,890,000 - - 39,405,000 142,890,000 1,337,108,423 439,640,000 208,920,000 4,333,361 1,572,161,784 2,065,773 909,714 1,605,326 - 1,370,161 8,625,022 $ 1,347,799,218 318,636 $ 440,868,350 $ 210,525,326 $ 4,333,361 8,943,658 $ 1,582,475,603 23 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2001 NOTE 9. GENERAL LONG-TERM DEBT AND OTHER OBLIGATIONS (Continued) Bonds payable Bonds payable are due in varying annual principal amounts plus varying semiannual interest amounts, except for the 1988 Series A Capital Appreciation Bonds which are due in annual installments of $21,500,000 in 2002 through 2004 with the balance of $8,500,000 due in 2005. Bonds payable at June 30, 2001, are comprised of the following individual issues: Interest Rates Issue State of Arizona Highway Revenue Bonds: 1991 Series A, Subordinated 1992 Series B, Subordinated 1993 Series, Refunding 1993 Series A, Subordinated, Refunding 1993 Series B, Subordinated, Refunding 1999 Series 2001 Series Total Highway Revenue Bonds State of Arizona Transportation Excise Tax Revenue Bonds: 1988 Series A Capital Appreciation Bonds (maturity value of $73,000,000) 1992 Series A, Refunding 1992 Series B 1993 Series, Subordinated, Refunding 1995 Series A, Subordinated 1995 Series B, Subordinated, Refunding 1998 Series A 1999 Series, Subordinated 2000 Series Total Transportation Excise Tax Revenue Bonds State of Arizona Grant Anticipation Notes: 2000 Series A 2001 Series A Total Grant Anticipation Notes Total Bonds and Notes Payable Final Maturity Date Balance at June 30, 2001 8.8% 6.1% - 8.0% 4.7% - 5.3% 4.3% - 6.0% 5.1% - 6.0% 4.5% - 6.3% 3.8% - 5.5% 7/1/2004 7/1/2006 7/1/2009 7/1/2011 7/1/2011 7/1/2019 7/1/2020 $ 10,495,000 36,560,000 112,875,000 224,610,000 35,000,000 137,085,000 143,655,000 700,280,000 7.3% - 7.5% 5.4% - 5.8% 5.4% - 5.8% 4.4% - 5.6% 4.5% - 6.5% 4.5% - 6.5% 4.0% - 5.0% 4.8% - 5.3% 4.4% - 5.8% 7/1/2005 7/1/2005 7/1/2005 7/1/2005 7/1/2005 7/1/2005 7/1/2005 7/1/2005 7/1/2005 62,251,784 86,850,000 11,455,000 113,175,000 63,515,000 85,940,000 98,150,000 76,055,000 92,195,000 689,586,784 4.8% - 5.6% 4.0% - 5.3% 1/1/2004 1/1/2008 39,405,000 142,890,000 182,295,000 $ 1,572,161,784 The Highway Revenue Bonds are secured by a prior lien on and a pledge of motor vehicle and related fuel fees and taxes of the State Highway Fund, a special revenue fund. Arizona Revised Statutes prohibit the total principal amount of Arizona Highway Revenue Bonds, excluding refunded bonds, from exceeding $800,000,000. 24 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2001 NOTE 9. GENERAL LONG-TERM DEBT AND OTHER OBLIGATIONS (Continued) The Transportation Excise Tax Revenue Bonds are secured by transportation excise taxes collected by the Arizona Department of Revenue on behalf of Maricopa County. which were issued by AMBAC Assurance Corporation. These policies are noncancelable and insure payment, up to the policy amount, of the bond interest on their respective payment dates. The policies shall terminate on the earlier of July 1, 2005, or the date when no respective bonds are outstanding under the bond resolution. The premiums on these insurance policies are recorded as expenditures in the year of payment. The Grant Anticipation Notes are secured by revenues received from the Federal Highway Administration and certain other Federal-aid revenues. Bonds aggregating $562,685,000 ($410,105,00 of Highway Revenue Bonds, $113,175,000 of Transportation Excise Tax Revenue Bonds, and $39,405,000 of Grant Anticipation Notes, respectively) are subject to redemption prior to their maturity dates, at the option of the Transportation Board, in whole at any time, or in part at various interest payment dates. These bonds may be redeemed at various redemption prices ranging from 100 percent to 102 percent of principal, plus accrued interest to the date fixed for redemption. Bonds aggregating $1,020,225,000 are not subject to redemption prior to maturity. The carrying basis of the 1988 Series A Capital Appreciation Bonds increases as a result of accretion of the original issuance discount. At June 30, 2001, the carrying basis was $62,251,784. At maturity on July 1, 2005, the carrying basis will equal the maturity amount of $73,000,000. On July 11, 2000, the Department issued $39,405,000 in Grant Anticipation Notes (Series 2000A) to (i) pay a portion of the costs of acquiring right-of-way for, design and construction of certain controlled-access highways in the City of Phoenix, Arizona, and (ii) a portion of the costs of issuing the Series 2000A Notes. The Series 2000A Notes are due January 1, 2003, and January 1, 2004. Net proceeds totaled $39,200,196 (after payment of $34,804 original issue discount and $170,000 underwriting fees). The Bond Resolution adopted by the Transportation Board on July 25, 1986, established a debt service reserve requirement equal to the maximum annual interest due in the current year or future years on any series of outstanding Transportation Excise Tax Revenue Bonds. The Second Supplemental Transportation Excise Tax Revenue Bond Resolution adopted by the Transportation Board on September 22, 1988, gives the Transportation Board the option, which it has elected, of acquiring debt service reserve insurance policies in lieu of the debt service reserve requirement. Accordingly, no debt service reserve is reflected in the accompanying financial statements. The policies (aggregating $70,063,698 at June 30, 2001) were issued by Financial Guaranty Insurance Company, except for the 1993 Series Subordinated Bonds policies, which were issued by MBIA Insurance Corporation, and the 1995 Series A and Series B Subordinated Bonds policies On September 15, 2000, the Department issued $113,690,000 in Transportation Excise Tax Revenue Bonds (2000 Series) to (i) finance the acquisition of land and the design and construction of certain controlled access highway within Maricopa County, Arizona and (ii) pay cost of issuing the 2000 Series Bonds. The 2000 Series Bonds are due July 1, 2001, through 2005. Net proceeds totaled $115,001,157 (after receipt of $1,960,638 of reoffering premium and payment of $649,481 in underwriting fees). On January 15, 2001, the Department issued $143,655,00 of Highway Revenue Bonds (Series 25 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2001 NOTE 9. GENERAL LONG-TERM DEBT AND OTHER OBLIGATIONS (Continued) 2001) to (I) finance portions of the Transportation Board’s five year capital program, and (ii) pay costs of issuing the 2001 Series Bonds. The 2001 Series Bonds are due July 1, 2007, through 2020. Net proceeds totaled $150,000,853 (after receipt of $7,278,759 of reoffering premium and payment of $932,906 in underwriting fees). 2001A) to (i) pay a portion of the costs of acquiring right-of-way for, design and construction of certain controlled-access highways in the City of Phoenix, Arizona, and (ii) a portion of the costs of issuing the Series 2001A Notes. The Series 2001A Notes are due January 1, 2004, and January 1, 2008. Net proceeds totaled $147,248,251 (after receipt of $5,420,281 of reoffering premium and payment of $1,061,760 in underwriting fees). On May 15, 2001, the Department issued $142,890,000 in Grant Anticipation Notes (Series Future debt service requirements of bonds and notes outstanding at June 30, 2001, are as follows: Fiscal Year 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Highway Revenue Bonds Principal Interest $ 37,790,000 $ 37,819,589 39,595,000 36,001,478 41,465,000 33,651,876 44,315,000 31,287,180 46,760,000 28,842,361 56,460,000 26,249,382 59,285,000 23,426,215 62,600,000 20,111,170 65,805,000 16,906,657 69,420,000 13,288,691 16,595,000 9,814,682 17,515,000 8,893,806 18,505,000 7,904,719 19,560,000 6,849,474 20,675,000 5,736,825 21,850,000 4,560,288 23,045,000 3,364,762 24,305,000 2,103,726 14,735,000 773,588 $ 700,280,000 $ 317,586,469 Transportation Excise Tax Revenue Bonds Principal Interest $ 163,455,000 $ 33,442,329 171,110,000 25,789,218 178,675,000 18,223,485 187,095,000 9,804,902 Grant Anticipation Notes Principal Interest $ - $ 10,180,858 13,150,000 8,683,403 36,755,000 7,488,470 49,000,000 5,400,850 38,540,000 3,209,175 37,000,000 1,307,500 7,850,000 196,250 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - $ 700,335,000 $ 87,259,934 26 $ 182,295,000 - $ 36,466,506 $ Total Principal 201,245,000 $ 223,855,000 256,895,000 280,410,000 85,300,000 93,460,000 67,135,000 62,600,000 65,805,000 69,420,000 16,595,000 17,515,000 18,505,000 19,560,000 20,675,000 21,850,000 23,045,000 24,305,000 14,735,000 $ 1,582,910,000 Interest 81,442,776 70,474,099 59,363,831 46,492,932 32,051,536 27,556,882 23,622,465 20,111,170 16,906,657 13,288,691 9,814,682 8,893,806 7,904,719 6,849,474 5,736,825 4,560,288 3,364,762 2,103,726 773,588 $ 441,312,909 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2001 NOTE 9. GENERAL LONG-TERM DEBT AND OTHER OBLIGATIONS (Continued) Refunded bonds In prior years, the Transportation Board refinanced various bond issues through advance refunding arrangements. Under the terms of the refunding bond issues, sufficient assets to pay all principal and interest on the refunded bond issues have been placed in irrevocable trust accounts at commercial banks and invested in U.S. Government securities which, together with interest earned thereon, will provide amounts sufficient for future payment of principal and interest of the issues refunded. The assets, liabilities, and financial transactions of these trust accounts and the liability for the defeased bonds are not reflected in the financial statements of the Department. Refunded bonds of the Department outstanding at June 30, 2001, are as follows: Original Issue Date 1991 Series A, Subordinated 1992 Series B, Subordinated 1988 Series A Type Highway Revenue Bonds Highway Revenue Bonds Transportation Excise Tax Revenue Bonds Capital Appreciaiton Bonds Escrow Balance Maturity Date Outstanding July 1, 2001 $ 160,645,000 July 1, 2002 52,350,000 July 1, 2005 Total refunded bonds outstanding 8,996,156 $ 221,991,156 Capital leases payable Modular buildings and other equipment totaling $3,895,054 acquired through purchase contracts are recorded in the General Fixed Assets Account Group. Payments are due in monthly installments through March 2006 with interest rates ranging from 4.71 percent to 5.89 percent. At June 30, 2001, remaining annual principal payments under purchase contracts were as follows: Fiscal Year Amount 2002 $ 466,977 2003 498,941 2004 296,714 2005 185,798 2006 64,435 Total minimum lease payments 1,512,865 Less: amount representing interest <142,204> Present value of minimum lease payments $ 1,370,661 27 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2001 NOTE 9. GENERAL LONG-TERM DEBT AND OTHER OBLIGATIONS (Continued) Notes payable principal and interest payments are due monthly, with interest rates varying from 1.75 percent to 3.92 percent per annum. The final loan repayments are due in 2005. The interest rate on the RARF loan is 1.75 percent per annum, with interest payments due monthly. RARF loan principal repayments will commence in fiscal year 2003, with monthly repayment amounts corresponding to the actual monthly draw down amounts. The Equipment Fund loan payments are due in monthly installments through January 2005 with interest rates ranging from 4.71 percent to 5.41 percent per annum. Notes payable represent $32,662,040 in the State Highway Fund for the Highway Expansion and Extension Loan Program (HELP) Fund loans, $7,528,571 in Maricopa Regional Area Road (RARF) Construction Fund for a City of Mesa construction loan, and $7,482,690 in the Equipment Fund for heavy equipment purchases with third party financing. The RARF loan is based on actual draw downs from the City of Mesa construction loan account used to fund actual construction expenditures. The HELP loan Equipment Fund Fiscal Year 2002 2003 2004 2005 Total Outstanding NOTE 10. OPERATING LEASES The Department leases data processing and other equipment and certain facilities from various lessors. The majority of the leases are for a one-year term, renewable annually. Total rental expenditures (excluding interfund transactions) for the year ended June 30, 2001, approximated $4,361,000. In Fiscal Year 2000, the Department entered into a long-term lease for a facility located on Washington Street in Phoenix. The future operating lease commitments are as follows: 2002 2003 2004 2005 2006 2007 Future operating leasing commitments 28 $ 1,206,772 1,247,679 1,288,586 1,329,494 1,370,401 1,411,309 $ 7,854,241 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2001 NOTE 10. OPERATING LEASES (Continued) Various funds also rent mobile equipment from the Equipment Fund on an as-needed basis . Rental income for mobile equipment for the year ended June 30, 2001, is as follows: State Highway Fund Arizona Highways Magazine Fund Other Total operating leases $ 26,113,140 30,978 168,465 $ 26,312,583 NOTE 11. RETIREMENT PLANS The Arizona State Retirement System Board administers the Arizona State Retirement Plan (Plan), a cost sharing multi-employer defined benefit pension plan, for the benefit of Arizona employees and employees of certain other governmental entities. Plan provisions, including death, disability, and retirement benefits, are established by State statute. Substantially all employees of the Department are covered by the Plan. Central Avenue, P. O. Box 33910, Phoenix, Arizona 85067-3910 or by calling (602) 240-2000 or (800) 6213778. Arizona Revised Statutes provide statutory authority for employee and employer contributions. The employee and employer contribution rate for the year ended June 30, 2001, was computed to be 2.66 percent of covered payroll by an actuarial valuation performed at June 30, 1999. Contributions for the years ended June 30, 1999, 2000 and 2001 were $4,705,156, $3,877,921 and $4,032,399, respectively, for both the employees and the Department, which were equal to the required contributions for each year. The Arizona State Retirement System (System) issues a Comprehensive Annual Financial Report that includes financial statements and required supplementary information. The most recent report may be obtained by writing the System, 3300 North NOTE 12. CONTINGENT LIABILITIES Risk management insurance losses Accordingly, the Department has no risk of loss beyond adjustments to future years’ premium payments to the State’s self-insurance program. All estimated losses for unsettled claims and actions of the State are determined on an actuarial basis and are included in the State of Arizona’s Comprehensive Annual Report. The Department 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. 29 Arizona Department of Transportation Notes to Financial Statements (Continued) June 30, 2001 NOTE 12. CONTINGENT LIABILITIES (Continued) Grants applicable statutes at the time did not permit the State to collect Disputed Revenues for certain tax years prior to 1997 relating to travel on state maintained roads crossing Federal lands. The Arizona Legislature subsequently clarified the statutes in 1997. The State filed its notice of appeal to the Arizona Court of Appeals on September 3, 1999. Oral argument was held May 23, 2000. The Department disputes the claimants’ interpretation of the applicable statutes and intends to assert a vigorous defense. However, if the plaintiff in the Hurley case were to prevail, the maximum potential amount of the claim is difficult to predict with certainty because the amount of each claim would vary based on the nature of the actual roads used and mileage of each claimant. If the plaintiff were to prevail on both counts and all existing claimants were to receive a lump sum payment in a single fiscal year, the Department does not believe that the maximum potential payment from the Arizona Highway User Revenue Fund would reduce the amount of State Highway Fund revenues by more than ten percent (10%) for the single fiscal year in which such payment were made. 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. Claims The Department has a variety of claims pending against it that arose during the normal course of its activities. Management of the Department believes, based on the advice of legal counsel, that losses, if any, resulting from settlement of these claims will not have a material effect on the financial position of the Department’s fund types. On August 5, 1999, in Hurley Trucking Co., Inc. v. State, the Tax Court of the State ruled in favor of a refund claim for motor vehicle use fuel (diesel) taxes and motor carrier taxes (based on vehicle weight and mileage) paid to the State (the “Disputed Revenues”). Several trucking companies have additionally filed refund claims. The claimants assert that the Commitments under construction contracts The Department’s outstanding commitments under construction contracts were approximately $974,163,000 at June 30, 2001. NOTE 13. SUBSEQUENT EVENTS On October 15, 2001, the Department issued $66,010,000 in Transportation Excise Tax Revenue Bonds (Series 2001) to (I) finance the costs of design, right-of-way purchase, or construction of certain controlled-access highways within Maricopa County, Arizona and (ii) pay costs of issuing the Series 2001 Bonds. The Series 2001 Bonds are due July 1, 2003, through July 1, 2005. Net proceeds totaled $68,421,205 (after receipt of $2,805,666 of reoffering premium and payment of $394,461 in underwriting fees) writing on final closing to complete this section. 30 Arizona Department of Transportation Special Revenue Funds Combining Balance Sheet June 30, 2001 (With comparative totals at June 30, 2000) State Highway Fund Assets Cash and cash equivalents on deposit with the State Treasurer: Retricted Unrestricted Receivables: Notes and loans Accrued interest Other Due from U.S. Government for reimbursable construction costs Due from other Arizona Department of Transportation funds Due from Arizona counties, cities and other state agencies Inventories Advances to other Arizona Department of Transportation funds Total assets Liabilities and fund balances Liabilities: Contracts and retainage payable Accounts payable Accrued payroll and other accrued expenditures Due to other Arizona Department of Transportation funds Due to Arizona counties, cities and other state agencies Federal arbitrage rebate Advances from other Arizona Department of Transportation funds Notes payable Total liabilities Fund balances: Reserved for highway construction Repayment of advance Reserved for inventories Reserved for loans and other financial assistance Unreserved, undesignated Total fund balances Total liabilities and fund balances $ $ $ $ 81,830,804 82,753,461 State Aviation Fund $ 12,025,819 Budgeted Safety Enforcement and Transportation Infrastructure Fund Motor Vehicle Liability Insurance Enforcement Fund Vehicle Inspection and Title Enforcement Fund $ $ $ 4,758,351 1,840,537 821,577 2,046,709 15,585,471 6,231,139 207,910 233,903 31,380 - - 24,620 52,419,798 - - - - 76,398,457 59,625 67,267 63,282 42,192 12,006 4,090,591 133,682 - - - - 20,000,000 335,137,297 59,797,351 7,871,358 $ $ 18,892,078 16,205 $ $ 4,856,998 215,149 10,055 $ $ 1,903,819 100,922 $ $ 888,389 6,074 5,486,638 28,706 18,960 10,782 23,260 684,838 157 10 165 75 632,784 - - - - - 32,662,040 107,135,009 45,068 244,174 111,869 29,409 81,830,804 20,000,000 4,090,591 122,080,893 228,002,288 335,137,297 18,847,010 18,847,010 18,892,078 4,612,824 4,612,824 4,856,998 1,791,950 1,791,950 1,903,819 858,980 858,980 888,389 $ 31 $ $ $ Exhibit A-1 Grant Anticipation Notes Fund Highway Expansion and Extension Loan Program Fund $ $ $ $ $ 324,126 163,414,888 Maricopa Regional Area Road Construction Fund Local Agency Deposits Fund $ 5,029,061 $ Motor Carrier Safety Revolving Fund 70,428,529 $ 8,396 Totals 2001 $ 81,830,804 341,404,745 2000 $ 95,020,770 385,822,246 1,618 - 36,795,608 751,385 - 1,043,265 3,615,516 143,817 2,316,138 - 46,642,263 3,182,819 19,203,397 71,475,088 5,411,832 12,209,328 - - 4,138,597 171,404 - 56,729,799 39,617,335 - 241,301 - 36,560 - 76,908,684 93,371,232 - 310,947 - 40,552 - 22,273,615 - - 22,770,802 4,090,591 21,349,115 3,961,476 325,744 793 $ $ 201,514,129 - $ $ 10,251,475 4,181,752 - $ $ 98,985,579 6,502,322 591,645 $ $ 8,396 - $ $ 20,000,000 672,763,904 70,696,574 8,597,052 $ $ 20,000,000 748,238,422 40,246,394 30,609,714 - 8,164 - 2,650 - 5,579,160 5,723,563 - - - - - 685,245 4,230,093 - - - - 101,348,198 - 103,202,509 1,512,260 793 100,715,414 20,000,000 120,723,578 4,181,752 7,528,571 14,625,188 - 20,000,000 40,190,611 247,096,840 20,000,000 58,832,686 264,357,219 324,951 324,951 325,744 80,790,551 80,790,551 201,514,129 6,069,723 6,069,723 10,251,475 84,360,391 84,360,391 98,985,579 8,396 8,396 8,396 172,260,918 20,000,000 4,090,591 80,790,551 148,525,004 425,667,064 672,763,904 250,615,994 20,000,000 3,961,476 55,508,591 153,795,142 483,881,203 748,238,422 $ $ $ $ 32 $ $ Arizona Department of Transportation Special Revenue Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances For the fiscal year ended June 30, 2001 (With comparative totals for the fiscal year ended June 30, 2000) Budgeted Safety State Highway Fund Revenues: Transportation excise taxes Vehicle registration, title, license and related fees Fuel and motor carrier taxes and fees Reimbursement of construction expenditures - Federal aid Other Federal grants and reimbursements State match Reimbursements from Arizona counties, cities and other state agencies State appropriations Interest on loans receivable Interest Flight property taxes Grand Canyon National Park Airport Other Total revenues Expenditures: Current: Transportation - appropriated by State legislature: Administration Highway Highway Maintenance Motor Vehicle Division Aeronautics Division Other Total Transportation - appropriated by State legislature Transportation - not appropriated by State legislature Capital outlay: Highway construction Land, buildings and improvements - appropriated by State legislature Contracts and capital leases payable Federal arbitrage rebate $ Enforcement and Transportation Infrastructure Fund State Aviation Fund - $ - $ - Motor Vehicle Liability Insurance Enforcement Fund $ Vehicle Inspection and Title Enforcement Fund - $ - 210,086,489 300,354,146 3,263,528 395,815 3,244,391 - 1,955,043 - 1,178,466 - 360,869,634 4,879,115 - 182 - - - - 2,900,099 255,991 13,844,679 16,689,696 909,879,849 1,096,837 6,693,589 968,046 1,071,383 13,489,380 242,023 3,486,414 1,955,043 1,178,466 48,149,597 43,116,888 89,400,095 73,442,885 1,021,429 1,673,730 - 2,073,011 - 985,517 - 835,269 - 255,130,894 1,673,730 2,073,011 985,517 835,269 6,360,624 - - - - 620,188,336 - 1,158,244 - - 5,418,193 - - - - 909,714 - - - - - 33 Exhibit A-2 Highway Expansion and Extension Loan Program Fund Grant Anticipation Notes Fund $ - $ Maricopa Regional Area Road Construction Fund Local Agency Deposits Fund - $ - $ Motor Carrier Safety Revolving Fund 264,722,440 $ Totals 2001 - $ 2000 264,722,440 $ 248,595,990 - - - - 18,003 - 219,745,920 300,749,961 255,087,892 276,188,840 1,832,508 - - 33,261,471 - 27,446,833 - - 421,577,938 6,711,805 - 402,266,192 11,748,706 396,600 - 5,462,781 - 378,945 2,211,453 92,913 6,493,500 6,586,413 146,741 38,870,993 8,531,545 5,186,650 2,123,075 308,010,543 18,003 16,894,425 255,991 92,913 27,242,634 6,693,589 968,046 20,030,895 1,285,686,557 18,608,709 179,690 1,591,725 24,715,652 6,709,385 346,040 10,956,092 1,257,391,513 844 - - - - 48,149,597 43,116,888 89,400,095 77,336,682 1,673,730 1,022,273 47,847,296 42,302,275 83,397,548 74,492,133 1,814,658 654,856 844 - - - - 260,699,265 250,508,766 - 236,592 - - - 6,597,216 6,820,619 - - 38,362,507 129,561,083 - 789,270,170 772,989,156 - - - - - 5,418,193 10,956,144 - - - - - 909,714 - 2,577,187 155,863 (Continued) 34 Arizona Department of Transportation Special Revenue Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances For the fiscal year ended June 30, 2001 (With comparative totals for the fiscal year ended June 30, 2000) Budgeted Safety State Highway Fund Arizona Department of Public Safety distributions - appropriated by State legislature Distributions to Arizona counties, cities and other state agencies Interest on loans payable Total expenditures Excess of revenues over expenditures Enforcement and Transportation Infrastructure Fund State Aviation Fund Vehicle Inspection and Title Enforcement Fund 12,500,000 - - - - 3,052,152 903,559,913 16,605,959 18,279,689 3,231,255 985,517 257,700 1,092,969 255,159 969,526 85,497 - - - 6,319,936 <4,790,309> Other financing sources : Proceeds from contracts and capital leases payable Operating transfers in Operating transfers out: Debt service Other Total other financing sources 909,714 84,939,201 388 <86,529,221> <20,007,142> <20,687,448> 388 Excess of revenues and other financing sources over expenditures and other financing uses <14,367,512> <4,789,921> Fund balances, July 1 Residual equity transfer Fund balances, June 30 242,369,800 228,002,288 23,636,931 18,847,010 $ Motor Vehicle Liability Insurance Enforcement Fund $ 35 <9,792> <9,792> 245,367 $ 5,117,457 <750,000> 4,612,824 $ - . - 969,526 85,497 822,424 1,791,950 773,483 858,980 $ Exhibit A-2 Highway Expansion and Extension Loan Program Fund Grant Anticipation Notes Fund Motor Carrier Safety Revolving Fund Totals 2001 2000 - - - - - 12,500,000 12,500,000 844 2,456,912 2,693,504 38,362,507 7,421,930 136,983,013 66,900 66,900 24,352,489 5,509,064 1,105,256,111 30,070,861 1,679,790 1,088,258,386 2,210,609 3,892,909 508,486 171,027,530 <48,897> 180,430,446 169,133,127 - 21,389,051 - 738,754 - 909,714 107,067,394 2,577,187 67,507,352 - <280,692,617> <65,179,076> <237,894,585> <227,118,977> <19,001,167> <176,035,605> <57,464,139> <6,902,478> <1,885,658> <1,885,658> $ Maricopa Regional Area Road Construction Fund Local Agency Deposits Fund 21,389,051 <92,935> <92,935> <192,277,738> <45,069,207> <236,608,191> 324,951 25,281,960 415,551 <65,580,661> <48,897> 324,951 55,508,591 80,790,551 5,654,172 6,069,723 149,941,052 84,360,391 57,293 8,396 $ $ $ 36 $ $ 483,881,203 <750,000> 425,667,064 $ 491,533,681 <750,000> 483,881,203 Exhibit A-3 Arizona Department of Transportation Special Revenue Funds Combining Schedule of Revenues and Expenditures - Budget and Actual (Budget Basis) For the fiscal year ended June 30, 2001 State Highway Fund Actual Non-GAAP Budget Revenues: Vehicle registration, title, license and related fees Fuel and motor carrier taxes and fees Interest Flight property taxes Grand Canyon National Park Airport Other Total revenues Expenditures appropriated by State legislature in FY 2001 budget: Administration: Personal services Employee related expenditures Other operating expenditures Total Administration Highway: Personal services Employee related expenditures Other operating expenditures Radio communication Total Highway Highway Maintenance: Personal services Employee related expenditures Other operating expenditures Highway Maintenance (nonreverting balance forward) Total Highway Maintenance Motor Vehicle Division: Personal services Employee related expenditures Other operating expenditures License plates and tabs Medical advisory board Abandoned Vehicle Attorney General Legal Plate to Owner On-line SSN Vertification Fee Acct and Rev Mgt Syst Intergrated Inventory Syst Total Motor Vehicle Division Air Quality Program: Personal services Employee related expenditures Other operating expenditures Total Air Quality Program Public Transit Program: Personal services Employee related expenditures Other operating expenditures HELP & VLT Deduction Appropriations Total Public Transit Program $ 246,332,900 291,454,000 537,786,900 $ State Aviation Fund Variance Favorable 229,580,665 291,217,587 520,798,252 $ Budget <16,752,235> $ <236,413> <16,988,648> Variance Favorable Actual Non-GAAP 2,400,000 558,000 1,574,000 7,472,000 664,000 10,000 12,678,000 $ 3,182,080 456,476 1,130,698 6,693,590 1,880,755 120,936 13,464,535 $ 782,080 <101,524> <443,302> <778,410> 1,216,755 110,936 786,535 18,028,200 3,953,000 26,794,400 48,775,600 18,027,849 3,952,740 25,853,842 47,834,431 351 260 940,558 941,169 - - - 28,445,400 6,131,100 8,873,000 405,900 43,855,400 28,390,796 6,105,418 8,326,181 405,371 43,227,766 54,604 25,682 546,819 529 627,634 - - - 29,357,900 7,497,700 52,436,100 29,107,616 7,490,796 50,240,915 250,284 6,904 2,195,185 2,586,079 91,877,779 2,585,910 89,425,237 169 2,452,542 - - - 39,879,800 10,335,500 19,857,600 2,295,300 200,000 431,700 127,900 900,600 191,200 1,527,000 1,032,200 76,778,800 39,864,475 10,323,830 18,958,811 2,295,300 200,000 404,198 127,900 193,873 190,403 409,319 397,327 73,365,436 15,325 11,670 898,789 27,502 706,727 797 1,117,681 634,873 3,413,364 - - - 39,557 6,643 200 46,400 39,557 6,643 200 46,400 - - - - 62,900 16,000 5,200 36,748,100 36,832,200 61,847 14,931 4,765 36,748,100 36,829,643 1,053 1,069 435 2,557 - - - 37 Safety Enforcement and Transportation Infrastructure Fund $ Variance Favorable Actual Non-GAAP Budget 3,263,400 250,000 3,513,400 $ Motor Vehicle Liability Insurance Enforcement Fund 3,296,972 254,380 3,551,352 $ 33,572 4,380 37,952 $ Variance Favorable Actual Non-GAAP Budget 1,665,900 1,665,900 $ Vehicle Inspection and Title Enforcement Fund 2,080,743 2,080,743 $ 414,843 414,843 Budget $ Variance Favorable Actual Non-GAAP 1,207,300 1,207,300 $ 1,263,654 1,263,654 $ 56,354 56,354 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 600,900 154,200 343,800 1,098,900 582,443 138,956 238,727 960,126 18,457 15,244 105,073 138,774 369,200 94,800 533,700 997,700 368,567 94,024 519,899 982,490 633 776 13,801 15,210 479,000 137,900 353,000 969,900 477,916 131,661 379,299 988,876 - - - - - - - - - - - - - - - - - - 38 1,084 6,239 <26,299> <18,976> Exhibit A-3 Totals Budget $ Variance Favorable Actual Non-GAAP 254,869,500 292,012,000 1,824,000 7,472,000 664,000 10,000 556,851,500 $ 239,404,114 291,674,063 1,385,078 6,693,590 1,880,755 120,936 541,158,536 $ <15,465,386> <337,937> <438,922> <778,410> 1,216,755 110,936 <15,692,964> 18,028,200 3,953,000 26,794,400 48,775,600 18,027,849 3,952,740 25,853,842 47,834,431 351 260 940,558 941,169 28,445,400 6,131,100 8,873,000 405,900 43,855,400 28,390,796 6,105,418 8,326,181 405,371 43,227,766 54,604 25,682 546,819 529 627,634 29,357,900 7,497,700 52,436,100 29,107,616 7,490,796 50,240,915 250,284 6,904 2,195,185 2,586,079 91,877,779 2,585,910 89,425,237 169 2,452,542 41,328,900 10,722,400 21,088,100 2,295,300 200,000 431,700 127,900 900,600 191,200 1,527,000 1,032,200 79,845,300 41,293,401 10,688,471 20,096,736 2,295,300 200,000 404,198 127,900 193,873 190,403 409,319 397,327 76,296,928 35,499 33,929 991,364 27,502 706,727 797 1,117,681 634,873 3,548,372 39,557 6,643 200 46,400 39,557 6,643 200 46,400 - 62,900 16,000 5,200 36,748,100 36,832,200 61,847 14,931 4,765 36,748,100 36,829,643 1,053 1,069 435 2,557 (Continued) Exhibit A-3 Arizona Department of Transportation Special Revenue Funds Combining Schedule of Revenues and Expenditures - Budget and Actual (Budget Basis) For the fiscal year ended June 30, 2001 State Highway Fund Actual Non-GAAP Budget Aeronautics Division: Personal services Employee related expenditures Other operating expenditures Total Aeronautics Division Capital outlay - land, buildings and improvements Arizona Department of Public Safety transfers Expenditures appropriated by State legislature by carryover of previous years' unexpended budgets Total expenditures Excess of revenues over expenditures $ State Aviation Fund Variance Favorable Variance Favorable Actual Non-GAAP Budget - - - 430,500 147,600 1,163,400 1,741,500 684,908 163,093 653,822 1,501,823 17,866,411 5,418,193 12,448,218 - - - 12,500,000 12,500,000 - - - - 1,435,828 329,968,418 723,995 309,371,101 711,833 20,597,317 1,741,500 1,501,823 239,677 207,818,482 $ 211,427,151 39 $ 3,608,669 $ 10,936,500 $ 11,962,712 <254,408> <15,493> 509,578 239,677 $ 1,026,212 Safety Enforcement and Transportation Infrastructure Fund $ Variance Favorable Actual Non-GAAP Budget Motor Vehicle Liability Insurance Enforcement Fund Variance Favorable Actual Non-GAAP Budget Vehicle Inspection and Title Enforcement Fund Variance Favorable Actual Non-GAAP Budget - - - - - - - - - - - - - - - - - - 1,098,900 960,126 138,774 997,700 982,490 15,210 969,900 988,876 2,414,500 $ 2,591,226 $ 176,726 $ 668,200 $ 1,098,253 40 $ 430,053 $ 237,400 $ 274,778 <18,976> $ 37,378 Exhibit A-3 Totals Budget $ Variance Favorable Actual Non-GAAP 430,500 147,600 1,163,400 1,741,500 684,908 163,093 653,822 1,501,823 17,866,411 5,418,193 12,448,218 12,500,000 12,500,000 - 1,435,828 334,776,418 723,995 313,804,416 711,833 20,972,002 222,075,082 $ 227,354,120 <254,408> <15,493> 509,578 239,677 $ 5,279,038 Exhibit B-1 Arizona Department of Transportation Debt Service Funds Combining Balance Sheet June 30, 2001 (With comparative totals at June 30, 2000) Highway Revenue Bond Fund Maricopa Regional Area Road Bond Fund Grant Anticipation Notes Bond Fund $ $ Assets Cash and cash equivalents on deposit with the State Treasurer Accrued interest receivable Accounts receivable Total assets $ 1,165,367 757,778 $ 1,923,145 $ 17,110,080 1,054,676 18,164,756 Fund balances Reserved for highway construction Total fund balances $ 1,923,145 $ 1,923,145 $ $ 18,164,756 18,164,756 41 Totals 2001 2000 $ 793 793 $ 18,275,447 1,812,454 793 $ 20,088,694 $ $ 17,061,567 2,283,842 19,345,409 $ $ 793 793 $ 20,088,694 $ 20,088,694 $ $ 19,345,409 19,345,409 Exhibit B-2 Arizona Department of Transportation Debt Service Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances For the fiscal year ended June 30, 2001 (With comparative totals for the fiscal year ended June 30, 2000) Highway Revenue Bond Fund Revenues: Interest Other Total revenues $ Expenditures: Debt service: Principal Interest Bond issuance costs Other Total expenditures Deficiency of revenues under expenditures Other financing sources : Operating transfers in Proceeds from refunding bonds Payment to refunded bond escrow agent Operating transfers out Total other financing sources Excess of revenues and other financing sources over expenditures and other financing uses Fund balances, July 1 Fund balances, June 30 $ 2,660,302 2,660,302 Maricopa Regional Area Road Bond Fund $ 5,818,523 5,818,523 Grant Anticipation Notes Bond Fund $ 793 793 Totals 2001 $ 8,478,825 793 8,479,618 2000 $ 8,592,130 8,592,130 52,055,000 36,581,209 37,376 88,673,585 156,865,000 40,035,320 78,413 196,978,733 1,884,865 793 1,885,658 208,920,000 78,501,394 116,582 287,537,976 175,075,000 76,603,575 308,200 172,834 252,159,609 <86,013,283> <191,160,210> <1,884,865> <279,058,358> <243,567,479> 86,529,221 - 192,277,738 - 1,885,658 - 280,692,617 - 227,118,977 26,172,174 <158,974> 86,370,247 <732,000> 191,545,738 1,885,658 <890,974> 279,801,643 <25,115,000> 228,176,151 356,964 385,528 1,566,181 1,923,145 17,779,228 $ 18,164,756 42 793 $ 793 743,285 $ 19,345,409 20,088,694 <15,391,328> $ 34,736,737 19,345,409 Exhibit C-1 Arizona Department of Transportation Capital Projects Funds Combining Balance Sheet June 30, 2001 (With comparative totals at June 30, 2000) Highway Revenue Bond Proceeds Fund Assets Cash and cash equivalents on deposit with the State Treasurer Accrued interest receivable Total assets Liabilities and fund balances Liabilities: Construction contracts payable Accounts payable Due to other Arizona Department of Transportation Funds Total liabilities Fund balances - reserved for highway construction Total liabilities and fund balances $ $ $ $ 114,028,945 818,899 114,847,844 4,224,902 6,997 Maricopa Regional Area Road Bond Proceeds Fund Grant Anticipation Notes Bond Proceeds Fund $ 10,877,947 86,085 $ 10,964,032 $ $ $ 2,887,556 594,107 4,231,899 3,481,663 110,615,945 114,847,844 7,482,369 $ 10,964,032 43 $ Totals 2001 145,645,621 801,962 146,447,583 $ 13,655,284 - $ $ 13,655,284 $ 132,792,299 146,447,583 270,552,513 1,706,946 272,259,459 20,767,742 601,104 2000 $ $ $ 21,368,846 $ 250,890,613 272,259,459 50,410,037 559,451 50,969,488 113,965 1,020,788 1,841,782 2,976,535 $ 47,992,953 50,969,488 Exhibit C-2 Arizona Department of Transportation Capital Projects Funds Combining Statement of Revenues, Expenditures and Changes in Fund Balances For the fiscal year ended June 30, 2001 (With comparative totals for the fiscal year ended June 30, 2000) Highway Revenue Bond Proceeds Fund Revenues: Interest Other Total revenues $ Expenditures: Capital outlay - highway construction Total expenditures 3,552,334 3,552,334 Maricopa Regional Area Road Bond Proceeds Fund $ 2,847,255 2,847,255 Grant Anticipation Notes Bond Proceeds Fund $ 2,434,401 2,434,401 Totals 2001 $ 8,833,990 8,833,990 2000 $ 6,634,413 60 6,634,473 83,634,649 83,634,649 78,394,621 78,394,621 57,290,310 57,290,310 219,319,580 219,319,580 168,924,342 168,924,342 Deficiency of revenues under expenditures <80,082,315> <75,547,366> <54,855,909> <210,485,590> <162,289,869> Other financing sources : Proceeds from sale of bonds Operating transfers out Total other financing sources 150,933,759 <8,228,452> 142,705,307 115,650,638 <32,620,903> 83,029,735 187,796,197 <147,989> 187,648,208 454,380,594 <40,997,344> 413,383,250 250,499,349 <48,506,185> 201,993,164 62,622,992 7,482,369 132,792,299 202,897,660 39,703,295 47,992,953 250,890,613 8,289,658 $ 47,992,953 Excess of revenues and other financing sources over expenditures and other financing uses Fund balances, July 1 Fund balances, June 30 $ 47,992,953 110,615,945 7,482,369 $ 44 $ 132,792,299 $ Exhibit D-1 Arizona Department of Transportation Arizona Highways Magazine Fund Comparative Balance Sheets June 30, 2001 and 2000 2000 2001 Assets Current assets: Cash and cash equivalents on deposit with the State Treasurer Subscriptions receivable, less allowance for doubtful accounts of $7,300 in 2001 and 2000 Accrued interest receivable Accounts receivable - retail/commercial, less allowance for returns of $10,000 in 2001 and 2000 Inventories Prepaid expenses Total current assets $ Fixed assets, net of accumulated depreciation Total assets Liabilities and fund equity Current liabilities: Accounts payable Accrued payroll and other accrued expenses Due to other Arizona Department of Transportation funds Deferred revenue - unearned subscription revenue Total current liabilities 2,396,073 $ 474,595 5,750 358,776 28,205 45,672 2,924,776 721,810 6,568,676 53,435 2,786,130 668,778 7,204,313 1,755,773 2,065,088 9,269,401 $ 8,324,449 $ $ 127,527 183,525 75 4,420,885 4,732,012 $ Fund equity: Contributed capital Retained earnings Total fund equity $ 45 8,324,449 163,656 181,267 4,484,216 4,829,139 1,038,698 2,553,739 3,592,437 Total liabilities and fund equity 3,308,989 1,538,698 2,901,564 4,440,262 $ 9,269,401 Exhibit D-2 Arizona Department of Transportation Arizona Highways Magazine Fund Comparative Statements of Revenues, Expenses and Changes in Retained Earnings For the fiscal years ended June 30, 2001 and 2000 2001 Operating revenues: Magazine sales Sales of related products Other Total operating revenues $ Operating expenses: Publication and promotional costs Salaries and wages Employee benefits Shipping and postage Supplies Equipment rental Temporary help, professional and outside services Repairs and maintenance Travel Write-off of uncollectible accounts Other Depreciation Total operating expenses Operating loss Non-operating revenues : Interest Loss on disposal of fixed assets Total non-operating revenues Net Retained earnings, July 1 Retained earnings, June 30 $ 46 2000 6,105,620 4,101,576 371,875 10,579,071 $ 6,223,932 4,489,024 475,953 11,188,909 5,241,594 2,097,029 483,733 1,729,326 99,862 48,365 574,025 76,496 27,351 60,522 325,931 313,615 11,077,849 5,644,967 2,122,261 466,296 1,944,050 112,112 90,776 541,960 83,058 26,397 91,127 308,101 366,702 11,797,807 <498,778> <608,898> 151,891 <938> 150,953 172,456 <68,953> 103,503 <347,825> <505,395> 2,901,564 2,553,739 3,406,959 $ 2,901,564 Exhibit D-3 Arizona Department of Transportation Arizona Highways Magazine Fund Comparative Statements of Cash Flows For the fiscal years ended June 30, 2001 and 2000 2000 2001 Cash flows from operating activities: Operating loss Adjustments to reconcile operating loss to net cash used for operating activities: Depreciation Changes in current assets and liabilities: Accounts receivable Inventories Prepaid expenses Accounts payable Accrued payroll and other accrued expenses Due to other Arizona Department of Transportation funds Deferred revenue Total adjustments $ <498,778> $ <608,898> 313,615 366,702 <85,601> <138,646> <53,032> <36,129> 2,258 75 <63,331> <60,791> 185,315 29,064 <62,487> <82,585> <56,578> <1,808> 226,605 604,228 <559,569> <4,670> <5,238> <500,000> <505,238> <80,349> <80,349> 151,891 151,891 172,456 172,456 Net increase in cash and cash equivalents <912,916> 87,437 Cash and cash equivalents, July 1 Cash and cash equivalents, June 30 3,308,989 2,396,073 Net cash used for operating activities Cash flows from capital and related financing activities: Acquisition of fixed assets Reduction of contributed capital Net cash used for capital and related financing activities Cash flows from investing activities: Earnings on investments Net cash provided by investing activities $ 47 $ 3,221,552 3,308,989 Exhibit E-1 Arizona Department of Transportation Equipment Fund Comparative Balance Sheets June 30, 2001 and 2000 2001 Assets Current assets: Cash and cash equivalents on deposit with the State Treasurer Receivables: Accrued interest Other Due from other Arizona Department of Transportation funds Due from other state agencies Inventories Total current assets Fixed assets, net of accumulated depreciation Total assets $ Liabilities and fund equity Liabilities: Accounts payable Accrued payroll and other accrued expenses Due to other Arizona Department of Transportation funds Due to other state agencies Notes payable Total liabilities Fund equity: Contributed capital Retained earnings: Reserved for replacement of equipment Unreserved Total fund equity Total liabilities and fund equity $ 5,092,780 54,976 49,905 34,825 256,936 265,644 533,673 2,449,028 8,792,773 68,116 2,334,406 7,787,063 $ 44,211,338 53,004,111 $ 45,686,282 53,473,345 $ 197,427 $ - $ 48 5,439,547 2000 783,946 727,092 485 6,549 7,482,690 8,471,097 9,530,079 10,257,171 6,322,179 5,793,237 38,210,835 44,533,014 53,004,111 9,985,210 27,437,727 43,216,174 53,473,345 $ Exhibit E-2 Arizona Department of Transportation Equipment Fund Comparative Statements of Revenues, Expenses and Changes in Retained Earnings For the fiscal years ended June 30, 2001 and 2000 2001 2000 $ 26,312,583 111,405 2,893,457 1,400,518 30,717,963 $ 26,104,085 504,746 3,504,235 120,452 30,233,518 Operating expenses: Equipment maintenance Fuel and lubricants Salaries and related benefits Supplies Professional and outside services Insurance Travel Other Depreciation 5,755,197 5,056,593 9,175,997 445,403 515,920 605,300 114,335 905,045 7,161,742 Total operating expenses 29,735,532 5,712,905 4,871,554 8,933,988 368,417 505,538 605,300 106,650 1,443,653 8,099,211 30,647,216 Operating revenues: Equipment rentals Equipment sales Inter-agency Other Total operating revenues Operating income 982,431 <413,698> Non-operating revenues : Interest Legislative transfer out 305,467 <500,000> 223,384 - <194,533> 223,384 787,898 <190,314> Total non-operating revenues Net income Retained earnings, July 1 Retained earnings, June 30 37,422,937 $ 38,210,835 49 37,613,251 $ 37,422,937 Exhibit E-3 Arizona Department of Transportation Equipment Fund Comparative Statements of Cash Flows For the fiscal years ended June 30, 2001 and 2000 2001 Cash flows from operating activities: Operating income Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation Changes in assets and liabilities: Accounts receivables Due from other Arizona Department of Transportation funds Due from other state agencies Inventories Accounts payable Accrued payroll and other accrued expenses Due to other Arizona Department of Transportation funds Due to other state agencies Total adjustments $ 982,431 7,161,742 2000 $ <413,698> 8,099,211 186,880 <162,433> <197,528> <533,673> <114,622> 197,427 56,854 1,707,231 20,254 226,432 <557,157> <181,804> 485 6,549 6,764,114 9,151,734 7,746,545 8,738,036 Cash flows from capital and related financing activities: Acquisition of fixed assets Proceeds from sale of fixed assets Increase of contributed capital Legislative transfer out <8,842,418> 1,108,231 528,942 <500,000> <9,970,100> 1,035,668 - Net cash used for capital and related financing activities <7,705,245> <8,934,432> Net cash provided by operating activities Cash flows from investing activities: Earnings on investments Net cash provided by investing activities 305,467 305,467 223,384 223,384 Net increase in cash and cash equivalents 346,767 26,988 5,092,780 5,439,547 5,065,792 $ 5,092,780 Cash and cash equivalents, July 1 Cash and cash equivalents, June 30 $ 50 Arizona Department of Transportation Agency Funds Combining Balance Sheet June 30, 2001 (With comparative totals at June 30, 2000) Motor Vehicle Division Clearing Privilege Tax Assets Cash and cash equivalents on deposit with the State Treasurer: Restricted Unrestricted Receivables: Accrued interest Taxes and fees Other Due from other Arizona Department of Transportation funds Due from Arizona counties, cities and other state agencies Total assets Liabilities Liabilities: Accounts payable Due to other Arizona Department of Transportation funds Due to Arizona Department of Public Safety Due to Arizona counties, cities and other state agencies Surety and rental deposits Total liabilities $ 282 - $ 28,019,559 Underground Storage Tank Highway User Revenue $ 76,380,505 468,281 - $ 412,606 - 9,537,905 - 436,519 61,797,144 - 6,598 - - - 524,684 12,946,037 1,874,031 - $ 2,348,910 $ 412,606 $ $ 412,606 $ 282 $ 38,082,148 $ 90,120 151,650,325 $ 282 $ 1,080,473 $ - $ $ Highway Properties 10,024 - 15,682,535 76,150,740 - - - - - - - 282 19,280,666 2,038,474 38,082,148 75,499,585 151,650,325 2,338,886 $ 2,348,910 412,606 $ 51 $ $ Exhibit F-1 Economic Strength Project Totals 2001 $ 2,947,756 - $ 2000 3,416,319 104,812,670 $ 2,581,479 81,672,155 16,849 277,293 459,966 71,335,049 277,293 426,241 149,085,188 38,133 - 15,344,752 36,160,854 $ 3,241,898 90,120 195,736,169 $ 67,632 270,031,682 277,293 1,780,678 $ 6,068,026 - 91,833,275 123,528,327 - - 2,685,000 2,964,605 $ 3,241,898 100,083,742 2,038,474 195,736,169 135,693,612 2,056,717 270,031,682 $ $ $ $ 52 Exhibit F-2 Arizona Department of Transportation Agency Fund Combining Statement of Changes in Assets and Liabilities For the fiscal year ended June 30, 2001 Balance July 1, 2000 Privilege Tax Assets: Cash and cash equivalents on deposit with the State Treasurer, restricted Additions Deletions Balance June 30, 2001 $ 42 $ 4,659 $ 4,419 $ 282 Total assets $ 42 $ 4,659 $ 4,419 $ 282 Liabilities: Accounts payable $ 42 $ 4,659 $ 4,419 $ 282 $ 42 $ 4,659 $ 4,419 $ 282 $ 17,809,183 72,677,349 $ 890,879,382 827,806,256 $ 880,669,006 890,945,700 $ 28,019,559 9,537,905 Total liabilities Motor Vehicle Division Clearing Assets: Cash and cash equivalents on deposit with the State Treasurer, unrestricted Taxes and fees receivable Due from other Arizona Department of Transportation funds Due from Arizona counties, cities and other state agencies Total assets Liabilities: Accounts payable Due to other Arizona Department of Transportation funds Due to Arizona counties, cities and other state agencies Surety and rental deposits Total liabilities 654,106 - 129,422 524,684 $ 4,737 91,145,375 $ 21,656 1,718,707,294 $ 26,393 1,771,770,521 $ 38,082,148 $ 5,946,241 $ 90,238,504 $ 95,104,272 $ 1,080,473 $ 39,655,730 441,395,003 465,368,198 15,682,535 43,486,687 2,056,717 91,145,375 295,973,741 827,607,248 320,179,762 18,243 880,670,475 19,280,666 2,038,474 38,082,148 $ $ $ (Continued) 53 Exhibit F-2 Arizona Department of Transportation Agency Fund Combining Statement of Changes in Assets and Liabilities For the fiscal year ended June 30, 2001 Balance July 1, 2000 Highway User Revenue Assets: Cash and cash equivalents on deposit with the State Treasurer, unrestricted Receivables: Accrued interest Taxes and fees Due from other Arizona Department of Transportation funds Due from Arizona counties, cities and other state agencies Total assets Liabilities: Due to other Arizona Department of Transportation funds Due to Arizona Department of Public Safety Due to Arizona counties, cities and other state agencies Total liabilities Underground Storage Tank Assets: Cash and cash equivalents on deposit with the State Treasurer, restricted Accrued interest receivable Due from other Arizona Department of Transportation funds Total assets Liabilities: Accounts payable Due to Arizona counties, cities and other state agencies Total liabilities Highway Properties Assets: Cash and cash equivalents on deposit with the State Treasurer, unrestricted Accounts receivable Total assets Liabilities: Accounts payable Due to other Arizona Department of Transportation funds Due to Arizona counties, cities and other state agencies Total liabilities $ Additions 61,382,787 $ $ 76,380,505 436,519 61,797,144 32,120,113 396,191,254 415,365,330 12,946,037 $ $ 83,872,435 2,685,000 $ 83,808,109 170,365,544 $ 425,834 14,745 $ 119,789 2,082,291,748 504,611,288 10,937,500 508,740,618 1,024,289,406 29,159,847 206 $ 27,638,890 56,798,943 121,743 $ 3,705,471 3,827,214 $ $ 3,386,635 3,827,214 $ $ $ $ 2,480,185 38,133 2,518,318 $ - $ 1,043,004,625 2,156,408 640,388,040 62,895 $ $ 2,201,017 625,777,345 170,365,544 $ 1,058,002,343 391,910 76,407,839 $ $ Balance June 30, 2001 Deletions $ $ $ $ 92,564 2,101,006,967 512,332,983 13,622,500 517,049,142 1,043,004,625 29,117,400 8,353 $ $ 76,150,740 75,499,585 151,650,325 468,281 6,598 $ $ 1,874,031 2,348,910 997,270 $ 1,108,989 $ 10,024 26,641,826 27,639,096 $ 28,008,411 29,117,400 $ 2,338,886 2,348,910 $ $ $ 4,992,347 38,133 5,030,480 $ 412,606 412,606 $ $ 412,606 $ - $ 412,606 162 - 162 2,518,156 2,518,318 412,606 2,518,156 2,518,318 54 $ 90,120 151,650,325 29,151,494 58,277,247 2,924,768 2,924,768 $ $ $ - $ 412,606 (Continued) Exhibit F-2 Arizona Department of Transportation Agency Fund Combining Statement of Changes in Assets and Liabilities For the fiscal year ended June 30, 2001 Balance July 1, 2000 Economic Strength Project Assets: Cash and cash equivalents on deposit with the State Treasurer, restricted Receivables: Accounts receivable Accrued interest receivable Due from other Arizona Department of Transportation funds Total assets Liabilities: Accounts payable Due to Arizona counties, cities and other state agencies Total liabilities Total - All Agency Funds Assets: Cash and cash equivalents on deposit with the State Treasurer: Restricted Unrestricted Receivables: Accrued interest Taxes and fees Other Due from other Arizona Department of Transportation funds Due from Arizona counties, cities and other state agencies Total assets Liabilities: Accounts payable Due to other Arizona Department of Transportation funds Due to Arizona Department of Public Safety Due to Arizona counties, cities and other state agencies Surety and rental deposits Total liabilities $ Additions 2,155,603 $ 19,586 1,151,778 $ 277,293 149,041 - Balance June 30, 2001 Deletions 359,625 $ 151,778 1,000,000 2,947,756 277,293 16,849 1,000,000 - $ 2,175,189 $ 2,578,112 $ 1,511,403 $ 3,241,898 $ - $ 277,293 $ - $ 277,293 $ 2,175,189 2,175,189 $ 977,733 1,255,026 $ 188,317 188,317 $ 2,964,605 3,241,898 $ 2,581,479 81,672,155 $ 426,241 149,085,188 38,133 30,316,284 1,951,806,493 $ 2,350,264 1,453,583,601 # 277,293 36,160,854 424,830,144 29,481,444 1,928,665,978 $ 3,416,319 104,812,670 2,316,539 1,531,333,740 38,133 459,966 71,335,049 277,293 445,646,246 15,344,752 $ 67,632 270,031,682 $ 141,445 3,863,305,524 $ 118,957 3,937,601,037 $ 90,120 195,736,169 $ 6,068,026 $ 91,930,332 $ 96,217,680 $ 1,780,678 $ 123,528,327 2,685,000 946,006,291 10,937,500 977,701,343 13,622,500 91,833,275 - 135,693,612 2,056,717 270,031,682 832,333,918 1,881,208,041 867,943,788 18,243 1,955,503,554 100,083,742 2,038,474 195,736,169 $ 55 $ $ Exhibit G-1 Arizona Department of Transportation Comparative Schedules of General Fixed Assets By Source June 30, 2001 and 2000 2001 General fixed assets Land Buildings and improvements Improvements other than buildings Airport facilities Machinery and equipment Total general fixed assets $ $ Investment in general fixed assets by source Special revenue funds Proprietary funds Third-party financing Total investment in general fixed assets $ $ 56 2000 16,446,467 135,092,917 11,058,576 19,569,077 42,426,906 224,593,943 $ 216,386,063 1,705,000 6,502,880 224,593,943 $ $ $ 13,499,044 133,198,724 9,403,527 38,854,728 194,956,023 187,863,944 1,498,913 5,593,166 194,956,023 Exhibit G-2 Arizona Department of Transportation Schedule of General Fixed Assets - By Function and Activity June 30, 2001 Function and Activity Administration Aeronautics Division Motor Vehicle Division Highway: Highway development Highway construction Transportation planning and research Materials engineering Traffic engineering Administrative and other services Highway Maintenance Total general fixed assets Land $ 879,016 10,101,592 Buildings and Improvements $ 141,465 936,421 4,387,973 $ 16,446,467 $ 14,303,750 21,604 41,941,184 4,577,391 4,815,144 282,332 30,331,276 38,820,236 135,092,917 57 Improvements Other than Buildings Machinery and Equipment $ $ $ 732,130 19,573,331 2,185,158 259,962 121,106 17,942 866,538 6,871,486 30,627,653 $ 13,676,793 979,123 8,006,906 3,144,733 3,459,065 602,030 3,165,224 954,266 3,896,642 4,542,124 42,426,906 Total $ $ 29,591,689 20,574,058 62,234,840 3,144,733 8,437,883 723,136 7,980,368 1,254,540 36,030,877 54,621,819 224,593,943 Exhibit G-3 Arizona Department of Transportation Schedule of Changes in General Fixed Assets - By Function and Activity For the fiscal year ended June 30, 2001 General Fixed Assets July 1, 2000 Function and Activity Administration Aeronautics Division Motor Vehicle Division Highway: Highway development Highway construction Transportation planning and research Materials engineering Traffic engineering Administrative and other services Highway Maintenance Total general fixed assets $ $ Additions 29,508,357 202,629 59,619,922 3,341,178 7,352,627 715,486 7,646,125 990,017 35,543,647 50,036,035 194,956,023 58 $ 3,076,078 20,379,475 2,860,164 Deductions $ 358,896 1,135,474 62,115 444,222 331,550 552,682 4,636,234 $ 33,836,890 General Fixed Assets June 30, 2001 <2,992,746> $ <8,046> <245,246> <555,341> <50,218> <54,465> <109,979> <67,027> <65,452> <50,450> $ <4,198,970> $ 29,591,689 20,574,058 62,234,840 3,144,733 8,437,883 723,136 7,980,368 1,254,540 36,030,877 54,621,819 224,593,943 Exhibit H Arizona Department of Transportation Schedule of Debt Service Requirements June 30, 2001 Subordinated Highway Revenue Bonds Fiscal 1991 Series A Bonds Year 2002 2003 2004 2005 2006 Principal $ $ 10,495,000 10,495,000 1992 Series B Bonds Interest $ $ 918,312 918,312 1,836,624 Principal $ $ 5,990,000 6,870,000 7,300,000 7,885,000 8,515,000 36,560,000 Interest $ $ 2,687,330 2,321,940 1,896,000 1,312,000 681,200 8,898,470 Highway Revenue Bonds Fiscal 1993 Series Refunding Bonds Year 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Principal $ $ 13,380,000 1,000,000 16,760,000 17,600,000 14,820,000 15,605,000 16,425,000 17,285,000 112,875,000 1993 Series A and B Subordinated, Refunding Bonds Interest $ 5,821,328 5,179,088 5,129,088 4,291,088 3,367,088 2,589,038 1,769,776 907,464 $ 29,053,958 Principal $ $ 13,970,000 16,585,000 1,620,000 13,820,000 18,170,000 28,235,000 29,610,000 31,395,000 51,685,000 54,520,000 259,610,000 1999 Series Interest $ 13,138,982 12,524,302 11,777,976 11,703,456 11,053,916 10,181,758 8,805,300 7,028,700 5,458,950 2,624,700 $ 94,298,040 Principal $ $ 4,450,000 4,645,000 15,785,000 5,010,000 5,255,000 5,515,000 5,790,000 6,100,000 6,420,000 6,790,000 7,195,000 7,625,000 8,080,000 8,575,000 9,110,000 9,680,000 10,235,000 10,825,000 137,085,000 Interest $ $ 7,709,533 7,513,732 7,304,708 6,436,532 6,196,053 5,934,482 5,658,733 5,347,062 5,029,863 4,655,897 4,252,638 3,825,262 3,367,763 2,872,862 2,336,925 1,767,550 1,210,950 622,438 82,042,983 (Continued) 59 Exhibit H Arizona Department of Transportation Schedule of Debt Service Requirements June 30, 2001 Fiscal Highway Revenue Bonds 2001 Series Year Principal 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 $ $ 7,105,000 7,460,000 7,820,000 7,700,000 8,110,000 9,400,000 9,890,000 10,425,000 10,985,000 11,565,000 12,170,000 12,810,000 13,480,000 14,735,000 143,655,000 Total Interest $ 7,544,104 7,544,104 7,544,104 7,544,104 7,544,104 7,544,104 7,192,406 6,827,944 6,417,844 6,008,094 5,562,044 5,068,544 4,536,956 3,976,612 3,399,900 2,792,738 2,153,812 1,481,288 773,588 $ 101,456,394 Principal $ $ 37,790,000 39,595,000 41,465,000 44,315,000 46,760,000 56,460,000 59,285,000 62,600,000 65,805,000 69,420,000 16,595,000 17,515,000 18,505,000 19,560,000 20,675,000 21,850,000 23,045,000 24,305,000 14,735,000 700,280,000 Interest $ 37,819,589 36,001,478 33,651,876 31,287,180 28,842,361 26,249,382 23,426,215 20,111,170 16,906,657 13,288,691 9,814,682 8,893,806 7,904,719 6,849,474 5,736,825 4,560,288 3,364,762 2,103,726 773,588 $ 317,586,469 (Continued) 60 Exhibit H Arizona Department of Transportation Schedule of Debt Service Requirements June 30, 2001 Transportation Excise Tax Revenue Bonds 1988 Series A Capital Appreciation Bonds Fiscal Year Principal 2002 2003 2004 2005 $ 1992 Series A Refunding Bonds Interest 21,500,000 21,500,000 21,500,000 8,500,000 73,000,000 Principal - $ $ 110,000 23,240,000 24,545,000 38,955,000 86,850,000 1992 Series B Bonds Interest 4,958,740 4,952,690 3,651,250 2,239,913 $ 15,802,593 Principal $ 2,635,000 2,780,000 2,935,000 3,105,000 11,455,000 Interest $ 647,905 502,980 347,300 178,538 1,676,723 Transportation Excise Tax Revenue Bonds 1995 Series B Subordinated, 1993 Series Subordinated, 1995 Series A Subordinated Bonds Refunding Bonds Fiscal Year Principal 2002 2003 2004 2005 $ Interest 30,835,000 31,180,000 32,335,000 18,825,000 113,175,000 Principal 5,502,045 3,775,285 2,372,185 884,775 $ 12,534,290 $ 14,555,000 15,355,000 16,275,000 17,330,000 63,515,000 Refunding Bonds Interest $ 3,819,500 3,018,975 2,097,675 1,039,800 9,975,950 Principal $ 33,185,000 10,215,000 12,470,000 30,070,000 85,940,000 Interest $ 5,091,063 3,099,963 2,614,750 1,804,200 12,609,976 Transportation Excise Tax Revenue Bonds Fiscal 1998 Series A Bonds Year 2002 2003 2004 2005 Principal $ $ 1999 Series Subordinated Bonds Interest 21,580,000 25,865,000 25,615,000 25,090,000 98,150,000 $ 4,818,000 3,757,000 2,481,750 1,217,000 $ 12,273,750 Principal $ $ 17,685,000 18,555,000 19,420,000 20,395,000 76,055,000 2000 Series Bonds Interest $ $ 3,853,738 2,969,487 2,041,737 1,070,738 9,935,700 Principal $ $ 21,370,000 22,420,000 23,580,000 24,825,000 92,195,000 Interest $ $ 4,751,338 3,712,838 2,616,838 1,369,938 12,450,952 Transportation Excise Tax Revenue Bonds Fiscal Total Year 2002 2003 2004 2005 Principal $ $ 163,455,000 171,110,000 178,675,000 187,095,000 700,335,000 Interest $ 33,442,329 25,789,218 18,223,485 9,804,902 $ 87,259,934 (Continued) 61 Exhibit H Arizona Department of Transportation Schedule of Debt Service Requirements June 30, 2001 Grant Anticipation Notes Fiscal Year 2002 2003 2004 2005 2006 2007 2008 2001 Series A 2000 Series A Principal $ $ Interest 13,150,000 26,255,000 39,405,000 Fiscal $ $ 1,884,866 1,572,553 630,120 4,087,539 Principal $ $ 10,500,000 49,000,000 38,540,000 37,000,000 7,850,000 142,890,000 Total Bonds & Notes Year Principal Interest Total 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 $ 201,245,000 223,855,000 256,895,000 280,410,000 85,300,000 93,460,000 67,135,000 62,600,000 65,805,000 69,420,000 16,595,000 17,515,000 18,505,000 19,560,000 20,675,000 21,850,000 23,045,000 $ 81,442,776 70,474,099 59,363,831 46,492,932 32,051,536 27,556,882 23,622,465 20,111,170 16,906,657 13,288,691 9,814,682 8,893,806 7,904,719 6,849,474 5,736,825 4,560,288 3,364,762 $ 282,687,776 294,329,099 316,258,831 326,902,932 117,351,536 121,016,882 90,757,465 82,711,170 82,711,657 82,708,691 26,409,682 26,408,806 26,409,719 26,409,474 26,411,825 26,410,288 26,409,762 2019 2020 24,305,000 14,735,000 $ 1,582,910,000 2,103,726 773,588 $ 441,312,909 26,408,726 15,508,588 $ 2,024,222,909 62 Total Interest $ 8,295,992 7,110,850 6,858,350 5,400,850 3,209,175 1,307,500 196,250 $ 32,378,967 Principal $ $ 13,150,000 36,755,000 49,000,000 38,540,000 37,000,000 7,850,000 182,295,000 Interest $ $ 10,180,858 8,683,403 7,488,470 5,400,850 3,209,175 1,307,500 196,250 36,466,506 Table I Arizona Department of Transportation Governmental Fund Expenditures For the fiscal year ended June 30 (Thousands of Dollars) Fiscal Year 2001 2000 1999 1998 1997 Administration /1 $ 48,150 47,847 44,648 43,914 43,981 Administrative Services /5 $ 36,406 36,933 45,363 38,473 34,620 $ 43,117 42,302 42,035 41,381 40,230 Highway Division /6 $ 108,670 108,495 104,288 111,188 105,725 $ 77,337 74,492 67,144 63,056 30,147 Motor Vehicle Division $ 33,486 35,221 27,992 30,776 29,588 Highway Maintenance $ Highway Construction /3 89,400 83,398 79,304 76,597 70,336 $ 1,008,590 941,913 853,695 602,955 540,203 Transportation Planning Highway Construction Aeronautics $ $ $ 3,214 3,381 3,468 3,589 4,047 555,087 418,601 481,538 446,676 450,793 Debt Service Aeronautics $ 18,280 21,640 26,787 30,734 18,975 11,107 9,239 13,579 17,279 17,406 $ Other /4 292,930 253,823 226,928 199,948 210,446 $ Debt Service $ 34,310 43,927 62,600 65,625 84,433 Total $ Other /7 200,364 182,554 181,519 168,684 159,096 $ 87,960 57,757 78,254 66,274 65,679 1,612,114 1,509,342 1,403,141 1,124,210 1,038,751 Total $ 1,036,294 852,181 936,001 882,939 866,954 SOURCE: General Purpose Financial Statements - fiscal years 1992 through 2001. NOTES: /1 Includes the Director's Office, Financial Management (formerly Administrative) Services, Transportation Support Services and the Department's Risk Management Premium. /2 Includes Transportation Planning. /3 For years prior to 1999, includes Expendable Trust Fund. /4 Includes Transportation not appropriated, Land, Building & Improvements, Leases Payable and Transfers /5 Includes the Department's Risk Management Premium. /6 Includes Highway Maintenance. /7 Includes Reimbursements, Transfers, Director's Office, Highway Safety Office, and Land, Buildings & Improvements. Total Expenditures $1,800,000 $1,600,000 $1,400,000 Thousands of Dollars 1996 1995 1994 1993 1992 Highway /2 Motor Vehicle Division $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 1992 1993 1994 1995 1996 1997 Fiscal Year 63 1998 1999 2000 2001 Table II Arizona Department of Transportation Governmental Fund Revenues For the fiscal year ended June 30 (Thousands of Dollars) Fiscal Year Motor Fuel Tax 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 $ 300,750 276,189 298,394 273,806 288,878 291,000 293,870 280,394 264,307 261,678 Reg., Fees, Permits, Expenditures Service of Federal Investment Charges Awards /1 Earnings $ 219,746 255,088 250,121 210,370 198,002 171,823 133,689 117,412 102,524 89,261 $ 428,290 414,015 401,464 283,982 305,438 268,605 225,607 261,000 183,407 174,683 $ 44,648 41,534 34,377 34,382 33,238 29,603 22,340 14,229 18,560 22,422 Other Reimbursements Total /2 $ 292,416 267,004 257,479 223,486 231,792 228,698 190,498 177,561 153,333 138,097 $ 17,150 18,788 15,748 8,505 15,083 32,711 17,808 13,130 22,604 18,513 $ 1,303,000 1,272,618 1,257,583 1,034,531 1,072,431 1,022,440 883,812 863,726 744,735 704,654 SOURCE: General Purpose Financial Statements - Fiscal Years 1992 through 2001. NOTE: /1 For years prior to 1999, includes Expendable Trust Fund. /2 Method of accounting for taxpayer assessed revenues has been changed due to the adoption of GASB Statement No. 22 during fiscal year 1995. Total Revenues $1,400,000 $1,200,000 Thousands of Dollars $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 1992 1993 1994 1995 1996 1997 Fiscal Year 64 1998 1999 2000 2001 Table III Arizona Department of Transportation Expenditures of Federal Awards /1 For the fiscal year ended June 30 (Thousands of Dollars) Fiscal Year FAA FRA FTA 2001 $ - $ 14 $ 4,746 2000 1999 1998 1997 1996 1995 1994 1993 6 6,278 2,379 91 506 849 129 3,208 2 69 14 130 499 475 437 441 1992 4,369 12 SOURCE: NHTSA FHWA BLM 65 $ 390,204 $ - 3,717 5,107 3,392 2,508 3,552 1,687 3,448 1,715 65 275 49 55 409,177 388,761 278,148 302,633 261,820 221,818 256,986 177,968 1,097 54 169,151 $ BIA Sub-total FHWA /2 Total - $ 395,029 ####### ######## 28 20 1,048 974 76 2,228 750 - 414,015 401,464 283,982 305,438 268,605 225,607 261,000 183,407 15,219 17,748 - 429,234 419,212 283,982 305,438 268,605 225,607 261,000 183,407 - - 174,683 - 174,683 $ Single Audit Reports - fiscal years 1992 through 2001 NOTES: /1 Federal Aviation Administration (FAA); Federal Railroad Administration (FRA); Federal Transit Administration (FTA) - previously Urban Mass Transit Administration (UMTA); National Highway Transportation Safety Administration (NHTSA); Federal Highway Administration (FHWA); Bureau of Land Management (BLM); Bureau of Indian Affairs (BIA); and Department of Agriculture (DOA). /2 Prior to 1999, the Local Agency Deposits Fund was an Expendable Trust Fund. It is now a Special Revenue Fund. Total Expenditures of Federal Awards $450,000 $400,000 Thousand of Dollars $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 1992 1993 1994 1995 1996 1997 65 1998 1999 2000 2001 Table IV Arizona Department of Transportation Fuel Tax Rates For the fiscal year ended June 30 (Cents per Gallon) Fiscal Year Effective Date Gasoline Tax Use Fuel Tax 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 07/01/2000 12/31/1997 - 18 18 18 18 18 18 18 18 18 18 26 27 27 27 18 18 18 18 18 18 SOURCE: Arizona Revised Statutes §28-5606, §28-5708 NOTE: Gasohol is currently taxed at the same rate as gasoline and use fuel. Use fuel is primarily diesel fuel. 66 Table V Arizona Department of Transportation Highway User Revenue Fund Collections For the fiscal year ended June 30 (Thousands of Dollars) Motor Veh. Fuel Tax Revenue Fiscal Year 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 $ 566,115 545,901 636,117 508,544 488,701 473,741 451,089 422,556 387,235 369,789 Motor Veh. Reg. Fee Revenues Motor Carrier Tax Revenues $ $ 148,336 158,424 145,340 109,445 101,528 97,601 86,159 83,826 80,717 74,180 15,094 15,040 14,409 56,123 90,186 85,433 92,103 118,530 120,303 109,573 Motor Veh. Operators' License Fees and Other Fees $ 43,248 43,508 15,939 36,426 41,294 42,654 39,238 37,161 24,161 25,507 Total Deposited To Arizona Hwy. User Rev. Fund Motor Veh. License (In Lieu) Tax Revenues $ 251,496 235,287 217,905 176,950 175,253 160,145 131,562 113,990 105,027 96,146 $ 1,024,289 998,160 1,029,710 887,488 896,962 859,574 800,151 776,063 717,443 675,195 SOURCES: General Purpose Financial Statement - Fiscal Years 1999 through 2001. Arizona Highway User Revenue Fund Revenue Collections by Category Fiscal Years 1992 through 1998. Highway User Revenue Fund Collections $1,050,000 $900,000 Thousands of Dollars $750,000 $600,000 $450,000 $300,000 $150,000 $0 1992 1993 1994 1995 1996 1997 Fiscal Year 67 1998 1999 2000 2001 Table VI Arizona Department of Transportation Highway User Revenue Fund Distributions For the fiscal year ended June 30 (Thousands of Dollars) Fiscal Year State Highway Fund /1 Cities and Towns Counties 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 $ 503,611 493,697 512,149 435,882 444,927 429,171 412,206 406,376 355,304 339,807 $ 305,009 323,798 295,879 263,220 268,696 256,901 244,512 205,479 210,531 201,394 $ 188,982 157,594 199,591 163,973 167,350 152,571 145,349 134,511 124,468 119,068 Department of Public Safety Economic Strength Project Fund $ $ 10,937 13,622 12,630 14,688 17,188 19,688 20,000 24,925 24,928 12,453 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 Other /2 Total $ 14,750 8,449 8,461 8,519 9,289 9,304 9,084 532 1,212 1,473 $ 1,024,289 998,160 1,029,710 887,282 908,450 868,635 832,151 772,823 717,443 675,195 The Highway User Revenue Fund receives certain Motor Vehicle Division revenues from the Motor Vehicle Division Clearing Fund. These monies are distributed to the State Highway Fund and various counties and cities, based on statutory formulas. SOURCES: General Purpose Financial Statement - Fiscal Years 1994 through 2001. Highway User Revenue Fund Schedule 1 Summary for Revenue Collected Fiscal Years 1992 and 1993. Monthly Reports MV675580-01 fiscal years 1993 through 2001 (adjusted for accrual basis in years 1994 through 2001); Highway User Revenue Fund Report (Budgetary Basis) - fiscal year 1992. NOTES: /1 In fiscal year 1995, HB 2431 authorized the transfer of $1 million for border transportation projects. The revenues beginning in fiscal year 1994 are presented on an accrual basis and are not the same as Table VII. /2 Appropriation to the Motor Vehicle Division for funding of mandatory insurance enforcement administration for fiscal years 1992 through 1994. In fiscal years 1995 through 2001, an appropriation for Arizona State Parks is included. 68 Table VII Arizona Department of Transportation Bond Coverage Highway User Revenue Fund Series For the fiscal year ended June 30 (Thousands of Dollars) Fiscal Year Principal 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 $ Interest 52,055 46,270 43,805 43,405 40,970 38,430 36,330 33,425 27,865 26,185 $ 36,581 33,994 31,090 33,266 36,148 38,770 40,974 44,037 48,289 39,957 Total $ 88,636 80,264 74,895 76,671 77,118 77,200 77,304 77,462 76,154 66,142 Pledged Revenues /1 Coverage $ 513,890 528,721 509,935 468,240 468,542 429,825 399,605 385,844 355,304 339,807 5.8 6.6 6.8 6.1 6.1 5.6 5.2 5.0 4.7 5.1 SOURCES: Highway User Revenue Fund Schedule 1 Summary For Revenue Collected Monthly Reports MV675577-1 fiscal years 1993 through 2001; Highway User Revenue Fund Report (Budgetary Basis) - fiscal year 1992; Debt Service Funds - fiscal years 1992 through 2001. /1 For fiscal years 1992 through 1996, net of 7% distributed to cities with a population greater than 300,000 persons. For fiscal years 1997 and after, includes vehicle license tax revenues distributed directly to the State Highway Fund. Highway User Revenue Fund Series Bond Coverage $550,000 $500,000 $450,000 Thousands of Dollars $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 1992 1993 1994 1995 1996 1997 Fiscal Year REVENUE DEBT SERVICE 69 1998 2000 2001 Table VIII Arizona Department of Transportation Bond Coverage Regional Area Road Fund Series For the fiscal year ended June 30 (Thousands of Dollars) Fiscal Year Principal Interest Total Revenues Coverage 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 $ 156,865 128,805 106,765 82,765 78,015 76,955 57,930 54,710 45,650 38,410 $ 40,035 42,609 43,251 40,512 45,248 46,209 47,320 49,347 46,880 54,544 ######## 171,414 150,016 123,277 123,263 123,164 105,250 104,057 92,530 92,954 ######## 248,596 229,470 209,263 192,257 178,413 160,319 142,846 127,273 116,497 1.3 1.5 1.5 1.7 1.6 1.4 1.5 1.4 1.4 1.3 SOURCE: Maricopa County Regional Area Road Fund Report. NOTE: Bond coverage ratio is based upon total Maricopa Transportation Excise Tax collections. Regional Area Road Fund Series Bond Coverage $300,000 $250,000 Thousands of Dollars $200,000 $150,000 $100,000 $50,000 $0 1992 1993 1994 1995 1996 1998 Fiscal Year REVENUE DEBT SERVICE 70 1999 2000 2001 Table IX Arizona Department of Transportation Total Public Road Mileage By Highway Class and Governmental Ownership For the calendar year ended December 31, 2000 (With comparative totals for the calendar year ended December 31, 1999) (In Miles) TOTAL FUNCTIONAL CLASSIFICATION RURAL: Interstate Freeway Principal Arterial Minor Arterial Major Collector Minor Collector Local TOTAL RURAL URBAN: Interstate Freeway Urban Expressway Principal Arterial Minor Arterial Urban Collector Local TOTAL URBAN STATEWIDE COMPOSITE: Freeways and Expressways Arterials Collectors Locals TOTAL STATEWIDE STATE COUNTY MUNICIPAL FEDERAL 2000 1999 995 1,115 1,132 1,850 366 361 45 101 1,554 1,130 14,481 17 23 242 62 1,574 7 841 746 10,247 995 1,184 1,256 4,487 2,304 26,663 996 1,186 1,257 4,505 2,300 26,937 5,819 17,311 1,918 11,841 36,889 37,181 172 111 262 133 8 101 2 100 291 485 929 13 659 868 1,229 12,890 5 17 30 172 126 1,021 1,297 1,739 13,950 172 108 1,028 1,275 1,749 12,944 787 1,807 15,659 52 18,305 17,276 1,278 2,642 2,224 462 2 537 3,169 15,410 13 1,567 1,533 14,464 12 1,604 10,277 1,293 4,758 8,530 40,613 1,276 4,746 8,554 39,881 6,606 19,118 17,577 11,893 55,194 54,457 Source: Arizona's Highway Performance Monitoring System (HPMS) 2000 & 1999 Data 71 ACKNOWLEDGMENTS The Comprehensive Annual Financial Report was prepared by Financial Management Services, Fiscal Operations: Craig Rudolphy, MBA, CGFM, CPA, CPFO Theresa Simms, MBA, CGFM, CPA Lawrence H. Ehrke, Jr., MBA Stanley Brown, MS Richard Gromoll, MBA Elaine Buenvich John Ralston, CPA Marsha Bloom, CPA Special acknowledgment goes to: All Financial Management Services staff whose cooperation and hard work contributed to the compilation of financial information that appears in this report. A special thank you to Dave McDarby of the Transportation Planning Division for his graphic design and photography. 72