fiscal year Comprehensive Annual Financial Report For the fiscal year ended June 30, 2009 State of Arizona Department of Transportation Comprehensive Annual Financial Report for the fiscal year ended June 30, 2009 Prepared by Financial Management Services State of Arizona Department of Transportation Arizona Department of Transportation Comprehensive Annual Financial Report for the fiscal year ended June 30, 2009 TABLE OF CONTENTS Page INTRODUCTORY SECTION Letter of Transmittal.............................................................................................................................................. i-v Certificate of Achievement for Excellence in Financial Reporting.........................................................................vi List of Principal Officials .......................................................................................................................................vii Organization Chart ................................................................................................................................................viii FINANCIAL SECTION Independent Auditors’ Report.............................................................................................................................. 1-2 Management’s Discussion and Analysis .............................................................................................................3-14 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Assets (Exhibit 1) .............................................................................................................15 Statement of Activities (Exhibit 2)...............................................................................................................16 Governmental Funds Financial Statements: Balance Sheet - Governmental Funds (Exhibit 3) ...................................................................................17-18 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets (Exhibit 3.1) ............................................................................................19 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds (Exhibit 4) .......................................................................................20-23 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities (Exhibit 4.1)...........................24 Proprietary Funds Financial Statements: Statement of Net Assets – Proprietary Funds (Exhibit 5) ............................................................................25 Statement of Revenues, Expenses, and Changes in Fund Net Assets – Proprietary Funds (Exhibit 6) .......26 Statement of Cash Flows – Proprietary Funds (Exhibit 7)...........................................................................27 Fiduciary Funds Financial Statement Statement of Net Assets – Agency Funds (Exhibit 8) ..................................................................................28 Index of Notes to the Financial Statements ......................................................................................................29 Notes to the Financial Statements................................................................................................................30-54 Required Supplementary Information (Other than MD&A): Budgetary Comparison Schedule – General Fund (State Highway Fund)........................................................55 Note to Required Supplementary Information..................................................................................................56 Information About Infrastructure Assets Reported Using the Modified Approach .....................................57-61 2009 Comprehensive Annual Financial Report Arizona Department of Transportation Comprehensive Annual Financial Report for the fiscal year ended June 30, 2009 TABLE OF CONTENTS (Continued) Page Supplementary Information: Non-Major Governmental Funds Financial Statements: Combining Balance Sheet (Exhibit 9) ....................................................................................................62-63 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances (Exhibit 10) ..........64-65 Fiduciary Funds Financial Statements: Combining Statement of Net Assets – Agency Funds (Exhibit 11) .............................................................66 Statement of Changes in Assets and Liabilities – Agency Funds (Exhibit 12) ............................................67 STATISTICAL SECTION Overview ................................................................................................................................................................68 Index of Statistical Section.....................................................................................................................................69 Financial Trends: Change in Net Assets (Table A-1) ...............................................................................................................70-73 Statement of Revenues, Expenditures, and Changes in Fund Balances (Table A-2) ...................................74-77 Fund Balances of Governmental Funds (Table A-3) ........................................................................................78 Expenditures of Federal Awards (Table A-4) ...................................................................................................79 Government-wide Expenses by Function (Table A-5) .....................................................................................80 Government-wide Revenues (Table A-6) .........................................................................................................81 Net Assets by Component (Table A-7).............................................................................................................82 Revenue Capacity: Highway User Revenue Fund Collections (Table B-1) ....................................................................................83 Highway User Revenue Fund Distributions (Table B-2)..................................................................................84 Fuel Tax Rates (Table B-3)...............................................................................................................................85 Motor Vehicle Fuel Tax – Top Ten Suppliers (Table B-4)...............................................................................86 Gasoline Volume Sold – Top Twenty-Five Suppliers (Table B-5)..............................................................87-88 Debt Capacity: Highway User Revenue Fund – Legal Debt Margin (Table C-1) .....................................................................89 Highway Revenue Bonds – Bond Coverage (Table C-2) .................................................................................90 Transportation Excise Tax Revenue Bonds – Bond Coverage (Table C-3)......................................................91 Transportation Excise Tax Revenue Bonds – Debt Service Revenue and Cost Per Capita (Table C-4) ..........92 Ratios of Outstanding Debt by Type (Table C-5) .............................................................................................93 2009 Comprehensive Annual Financial Report Arizona Department of Transportation Comprehensive Annual Financial Report for the fiscal year ended June 30, 2009 TABLE OF CONTENTS (Continued) Page Demographic and Economic Information: Number of Vehicle Registrations Per Year (Table D-1)...................................................................................94 Vehicle Registrations Per Year Compared to Fuel Sales (Table D-2) ..............................................................95 Demographic and Economic Statistics (Table D-3)..........................................................................................96 Principal Employers (Table D-4)......................................................................................................................97 Operating Information: Appropriated Full-Time Equivalents (FTEs) (Table E-1)............................................................................98-99 Capital Assets – Schedule by Function and Activity (Table E-2)...................................................................100 Capital Assets – Schedule of Changes by Function and Activity (Table E-3)................................................101 Total Public Road Mileage by Highway Class and Governmental Ownership (Table E-4) ...........................102 Daily Vehicle Miles Traveled with Population Data (Table E-5)...................................................................103 Acknowledgments .....................................................................................................................................................104 2009 Comprehensive Annual Financial Report fiscal yearComprehensive Annual Financial Report Introductory Section Janice K. Brewer Governor John S. Halikowski Director John A. Bogert Chief of Operations December 7, 2009 John McGee Executive Director for Planning & Policy The Honorable Janice K. Brewer Governor of the State of Arizona Members of the Legislature, and Citizens of the State of Arizona Dear Governor Brewer: The Arizona Department of Transportation (Department) is pleased to submit the Comprehensive Annual Financial Report (CAFR) of the Department for the fiscal year ended June 30, 2009. The CAFR is presented in three sections: Introductory, Financial, and Statistical. The Introductory Section includes this letter of transmittal, a list of principal officials, and the Department's organization chart. The Financial Section includes the independent auditors' report, management’s discussion and analysis, basic financial statements, notes to the financial statements, required supplementary information, as well as other supplementary information. The Statistical Section includes additional financial information and transportation data presented on a multi-year comparative basis. Arizona Revised Statutes, §41-1279.03, require the State Auditor General to "conduct or cause to be conducted at least biennial financial and compliance audits of financial transactions and accounts kept by or for all state agencies subject to the single audit act of 1984 (P.L. 98-502)." In fulfillment of this requirement, the Department prepared this CAFR, for the fiscal year ended June 30, 2009, and contracted with the independent auditing firm of Deloitte & Touche LLP to audit the financial statements. The objective of the independent audit is to provide a reasonable assurance that the financial statements are free from material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unqualified opinion that the Department's financial statements for the fiscal year ended June 30, 2009, are fairly presented in conformity with accounting principles generally accepted in the United States of America (GAAP). The independent auditors’ report is presented as the first component of the financial section of this report. GAAP require that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management's Discussion and Analysis (MD&A). This letter of transmittal is designed to complement MD&A and should be read in conjunction with it. The Department's MD&A can be found immediately following the report of the independent auditors, beginning on page 3. The CAFR includes all funds used to record the financial activity of the Department. Responsibility for both the accuracy of the data and the completeness and fairness of the presentation, including all disclosures, rests with the Department. To provide a reasonable basis for making these representations, the Department has established a comprehensive internal control framework that is designed both to protect the Department's assets from loss, theft, or misuse and to compile sufficiently reliable information for the preparation of the financial statements in conformity with GAAP. The Department's internal control includes both automated controls, which are an integral component of the financial accounting system, and comprehensive policies and procedures. In addition, the Department's Office of Audit and Analysis is an independent unit that reviews accounting controls and performs operational audits of the various divisions and units of the Department. Because the cost of internal controls should not outweigh their benefits, the Department's comprehensive framework of internal control has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatements. To the best of our knowledge and belief, this financial report is complete and reliable in all material respects and is reported in a manner designed to present fairly the financial position and results of operations of the various funds. All disclosures necessary to enable the reader to gain an understanding of the Department's financial activities have been included. Profile of the Department The Department was established by the State Legislature in July 1974 by combining the former Arizona Highway Department (originally established in 1927) and the 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 products and services for a safe, efficient, cost-effective transportation system that links Arizona to the global economy, promotes economic prosperity, and demonstrates respect for Arizona’s environment and quality of life. 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 and confirmed by the State Senate. The Transportation Board is responsible for the annual update of the Five-Year Transportation Facilities Construction Program and awards contracts each month for highway projects. The Transportation Board also has authority for the issuance of highway revenue and transportation excise tax bonds, grant anticipation notes (GARVEE bonds), and board funding obligations. The Department is organized into five operating divisions supported by the Transportation Services Group. The five operating divisions include: Intermodal Transportation Division, Motor Vehicle Division, Aeronautics Division, Multimodal Planning Division, and Communication and Community Partnerships. • 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, collects motor vehicle fuel taxes, registration fees, motor carrier fees, motor vehicle operators’ license fees, and miscellaneous fees and revenues. The Motor Vehicle Division annually processes motor vehicle registrations and records, issues certificates of title for motor vehicles, and processes drivers’ license applications. The Motor Vehicle Division also operates 21 ports-of-entry. • The Aeronautics Division is responsible for registering and licensing all general aviation aircraft based in the State of Arizona. The Aeronautics Division is also responsible for managing the Grand Canyon National Park Airport and the administration of grants and loans to publicly owned and operated airports in Arizona. In addition, the Aeronautics Division promotes aviation through education and outreach programs. • The Multimodal Planning Division is responsible for the planning of the statewide transportation system including highways and airports in coordination with local and regional planning agencies. The Division produces the FiveYear Transportation Facilities Construction Program through which the Transportation Board establishes the priorities for highways and airports. The Division also supports statewide public transit planning, administers federal grants for transit planning in rural and metropolitan areas, and performs State regulatory safety oversight for the light rail system in Maricopa County. • The Communication and Community Partnerships (CCP) Division is responsible for activities and functions that include the Adopt A Highway Program, government relations, the Highway Hawk, news releases, partnering efforts, public involvement, publication of the TRANsend Magazine, and the promotion of work zone safety. CCP takes a comprehensive approach to traffic management, work zone safety, and driver engagement projects through public information and outreach programs. • In addition, the Department has a Transportation Services Group that provides support to the Department's operating and other divisions, and contains units for Financial Management, Budget and Strategic Planning, Information Technology, Physical Plant Operations, Human Resources, Civil Rights, Audit and Analysis, Procurement, Safety, Training, and Arizona Highways Magazine. Overall, the Department employs approximately 4,800 persons. ii Budgetary Controls Upon receipt of the operating budget appropriations bill, allocations are made to organizational levels within each division. The result is a detailed operating budget that guides the divisions and programs in their financial operation. State funding for the Five-Year Transportation Facilities Construction Program is included in the capital outlay appropriations bill as a lump-sum budget without identifying individual projects. In the land, building, and improvements portion of that bill, each separate capital project is identified for control purposes. This bill also provides funding for building renewal purposes. The budgets are prepared on a cash basis except that liabilities (encumbrances) incurred before the end of the fiscal year and paid within the next calendar month are charged against that prior fiscal year's budget. With a few exceptions, such as the capital budgets, highway maintenance, and special line items, State appropriations typically lapse at the end of the fiscal year. The Department relies on the Arizona Financial Information System (AFIS) to control total expenditures by appropriation. In addition, the Department utilizes several control features in its internal accounting system (Advantage®) to ensure budgetary compliance and management control. These features include: encumbrance and pre-encumbrance capabilities, appropriation allocation and control capabilities to the expense budget/organization unit level, and management control reports from the expense budget/organizational unit level, with summary reporting capabilities by program, division, or appropriation. Factors Affecting Financial Condition Arizona Economy In fiscal year 2009, Arizona experienced one of the worst economic years since the Great Depression primarily due to the national banking crisis, falling home values, and increasing unemployment. The Federal government injected approximately $1 trillion into the financial markets to stabilize the banking industry while home prices decreased over 30 percent from last year in the Phoenix urban area. Arizona continued to experience steep job losses totaling 197,300 between June 2008 and June 2009 causing the unemployment rate to increase from 5.5 percent to 8.7 percent. The Department’s two main funding sources, the Highway User Revenue Fund (HURF) and the Maricopa County Transportation Excise Tax recorded the worst performances on record in fiscal year 2009. The HURF totaled $1.2 billion, a decrease of 9.7 percent from fiscal year 2008 and 10.0 percent below the forecast. This decrease represents the first time HURF has had two consecutive years of negative year-over-year growth. The Maricopa County Transportation Excise Tax revenues totaled $328.2 million, a decrease of 13.7 percent from fiscal year 2008 and 13.7 percent below the forecast. This decrease is the second consecutive year for negative year-over-year growth for the Maricopa County Transportation Excise Tax. Both revenue sources have fallen back to fiscal year 2005 revenue levels. The economic fallout will continue over the next year in Arizona with negative growth in employment projected through calendar year 2009 and no growth expected in calendar year 2010. The job losses have caused Arizona population growth to fall from a recent high of 3.7 percent in fiscal year 2005 to a projected 1.4 percent in fiscal year 2009 and 1.6 percent in fiscal year 2010. Arizona personal income growth is expected to bottom out in calendar year 2009 at 0.5 percent and then trend upward to a projected 2.6 percent in calendar year 2010. The Department’s fiscal year 2010 HURF revenue estimate amounts to $1.2 billion, a decrease of 0.1 percent from fiscal year 2009. The HURF average compound growth rate for fiscal years 2000 through 2009 has decreased to 2.3 percent. The distribution of HURF revenues in fiscal year 2010 is estimated to be as follows: State Highway Fund $543.9 million; Arizona cities and towns $356.2 million; Arizona counties $221.9 million; Department of Public Safety $78.2 million; Economic Strength Project Fund $1.0 million; and the Motor Vehicle Division for registration compliance $0.6 million. An additional $46.0 million will be allocated from the State Highway Fund share of HURF vehicle license tax revenues to the Department of Public Safety Parity Compensation Fund and the State General Fund. The Maricopa County Transportation Excise Tax revenue forecast for FY 2010 totals $315.3 million, a decrease of 3.9 percent from fiscal year 2009. The Maricopa County Transportation Excise Tax average compound growth rate for fiscal years 2000 through 2009 has fallen to 3.1 percent. The distribution of the Maricopa County Transportation Excise Tax revenue in fiscal year 2010 is estimated to be as follows: Maricopa County Regional Area Road Fund $177.2 million for highways and $33.1 million for arterial streets, and the Public Transportation Fund $105.0 million. The Department’s third major funding source, federal funds, may see increases in funding over the next several years. On August 10, 2005, President Bush signed the Safe, Accountable, Flexible, Efficient Transportation Equity Act: a Legacy for Users (SAFETEA-LU), a multi-year transportation funding bill. Under the bill, Arizona was expected to receive approximately 40% more in average apportionments for the years 2004 – 2009 than it received under the prior reauthorization bill (TEA-21) for the years 1998 – 2003. On an inflation-adjusted basis, this increase should result in a 17-20 percent higher funding level. However, funding under SAFETEA-LU ends on September 30, 2009. With no replacement iii program currently designated, it is expected that there will be a temporary extension of SAFETEA-LU until more permanent legislation is put in place. The Highway Account of the Highway Trust Fund very nearly reached a zero balance in September of 2008. However, Congress, working in conjunction with the President, transferred over $8 billion of federal funds from the General Fund to the Highway Trust Fund to maintain adequate funding to the states. A similar deficit in the Highway Trust Fund is expected in September 2009. In addition, the American Recovery and Reinvestment Act of 2009 (ARRA) provided for approximately $350 million in funding for the Department, $156 million for local government transportation projects, and another $16 million for enhancement projects. This new money should have a positive impact on revenues for the coming years. Long-term Financial Planning The Department has developed a long-range forecasting model for revenues to be deposited in the Highway User Revenue Fund and the Maricopa County Regional Area Road Fund. This econometric modeling approach provides a framework that allows for the complex interaction of economic, demographic, and technological factors which influence revenue collections over the long term. Using this process, the Department updates and publishes its official forecast on an annual basis, after the close of the fiscal year, and uses this data in developing cash-flow projections for the Statewide Highway Construction Program and the Regional Transportation Plan (RTP) Freeway Program, two components of the Five-Year Transportation Facilities Construction Program (the third component being the Airport Program). These cash-flow projections incorporate estimates of all funding sources available to the capital program and estimates of projectrelated and other expenditures. Historically, these forecasts have predicted revenue collections in future years with a high degree of accuracy. Because of the unprecedented economic and financial conditions that existed in fiscal year 2009, the Department recognized that the forecasts developed in September 2008 were unlikely to be achieved, and developed interim forecasts and revised its cashflow projections. These revisions resulted in the Department deferring a significant portion of its fiscal year 2009 capital program to future fiscal years, and making adjustments totaling $370 million to its fiscal years 2009 through 2013 capital programs. As is its practice, the Department intends to continue to monitor future revenue collections and adjust the capital programs, as necessary. Planned Construction Activity In June 2009, the Transportation Board approved a $6.2 billion Statewide Highway Construction Program as part of the Five-Year Transportation Facilities Construction Program for fiscal years 2010 through 2014. This program provides funding for highway facilities on the National Highway System and the statewide system, as well as the Maricopa County Regional Transportation Plan. Altogether (including Maricopa County), the program includes $4.5 billion for system improvements, $.5 billion for system management, and $1.1 billion for system preservation. The Five-Year Transportation Facilities Construction Program includes approximately $3.7 billion for the RTP of freeway and expressway construction in Maricopa County, funded in large part from the Maricopa County Regional Area Road Fund. Obligations for the RTP Freeway Program to date total $2.1 billion. ADOT currently has twenty major RTP projects under design and fourteen major projects under construction. ADOT also acquired 2,080 acres of land for the RTP Freeway Program. As part of the Five-Year Transportation Facilities Construction Program, the Transportation Board also adopted a $67.9 million (state share) Five-Year Airport Development Program that includes 779 projects at general aviation and air carrier airports located throughout the State. Other Information Single Audit The Department is required to undergo an annual Single Audit in accordance with the provisions of the Single Audit Act Amendments of 1996 and the U.S. Office of Management and Budget Circular A-133, "Audits of States, Local Governments, and Non-Profit Organizations." The Department's Single Audit information is included in the Single Audit of the State of Arizona for the fiscal year ended June 30, 2009. 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, 2008. This accomplishment was the nineteenth 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. iv 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. Acknowlednmentg We would like to express our sincere appreciation to the many individuals whose dedicated efforts have made this report possible. A special note of thanks is extended to the staff of Fiscal Operations whose commitment, professionalism, and dedicated efforts contributed to the timely preparation of the fiscal year 2009 Comprehensive Annual Financial Report. 8 M o n a Department of Transportation R. Fink, Assistant Director for Finance and Accounting Department of Transportation vi Arizona Department of Transportation List of Principal Officials John S. Halikowski Director John A. Bogert Chief of Operations John E. McGee Executive Director for Planning and Policy Floyd P. Roehrich, Jr. State Engineer Intermodal Transportation Division Stacey K. Stanton Assistant Director Motor Vehicle Division Jennifer A. Toth Assistant Director Multimodal Planning Division Barclay L. Dick Assistant Director Aeronautics Division John R. Fink Assistant Director for Finance and Accounting Matthew P. Burdick Assistant Director Communication and Community Partnerships Arizona State Transportation Board Member Delbert Householder, Chairman Robert M. Montoya, Vice Chairman S. L. Schorr * Felipe Andres Zubia William (Bill) J. Feldmeier Barbara (Bobbie) Ann Lundstrom Victor Flores Counties District 4 (Gila, Graham, and Pinal Counties) District 5 (Navajo, Apache, and Coconino Counties) District 2 (Pima County) District 1 (Maricopa County) District 6 (Yavapai, Yuma, Mohave, and LaPaz Counties) District 3 (Cochise, Greenlee, and Santa Cruz Counties) District 1 (Maricopa County) *Mr. Schorr serves on the Board until a new member is appointed by the Governor 2009 Comprehensive Annual Financial Report vii Term Expires 2010 2011 2009 2012 2012 2013 2014 State of Arizona Department of Transportation State of Arizona Organization Chart Department of Transportation Organization Chart Citizens Governor Intermodal Transportation Division Motor Vehicle Division State Transportation Board Director Chief of Operations Transportation Services Group viii Multimodal Planning Division Aeronautics Division Communication and Community Partnerships fiscal yearComprehensive Annual Financial Report Financial Section Arizona Department of Transportation Management’s Discussion and Analysis June 30, 2009 As management of the Arizona Department of Transportation (Department), we offer readers of the Department’s financial statements this narrative overview and analysis of the financial activities of the Department for the fiscal year ended June 30, 2009. We encourage readers to consider the information presented here in conjunction with the letter of transmittal, which can be found on pages i-v, and the Department’s basic financial statements, which begin on page 15, with the accompanying notes and Required Supplementary Information (RSI). Financial Highlights Government-wide: • The net assets of the Department at the close of the fiscal year are $14.7 billion, compared to $14.3 billion for fiscal year 2008, an increase of 2.8 percent. Of this amount, $112.6 million represents unrestricted net assets and may be used to meet the Department’s ongoing obligations to citizens and creditors as compared to $209.8 million at the end of 2008. • The Department’s capital assets are $16.2 billion, compared to $15.2 billion for fiscal year 2008, an increase of 6.5 percent. This increase is primarily attributable to the results of increased highway construction activity. The Department’s invested in capital assets, net of related debt, is $14.0 billion, compared to $13.3 billion for fiscal year 2008, an increase of 5.0 percent. • The Department’s non-current liabilities are $3.1 billion, compared to $2.5 billion in 2008. The Department had $574.4 million more in bonds outstanding in 2009 than in 2008. During 2009, there were $676.5 million in bonds issued and $102.1 million in bonds repaid. Fund Level: • As of the close of the fiscal year, the governmental funds of the Department reported combined ending fund balances of approximately $1.4 billion, as compared to approximately $1.4 billion in 2008. • The total reserved fund balance is $1.3 billion; of this, approximately $1.3 billion (99.2 percent) is reserved for capital projects. Approximately $98.3 million (7.0 percent) is available for spending at the Department’s discretion (unreserved fund balance) as compared to $83.3 million (6.1 percent) in 2008. At the end of the fiscal year, the unreserved fund balance for the General Fund (State Highway Fund) was $94.7 million. • The proprietary funds reported net assets at year-end of $74.4 million, as compared to $74.4 million in 2008. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction of the Department’s basic financial statements. The Department’s basic financial statements consist of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other Required Supplementary Information in addition to the basic financial statements. Government-wide Financial Statements (Reporting the Department as a Whole) The government-wide financial statements are designed to present an overall picture of the financial position of the Department. These statements consist of the Statement of Net Assets and the Statement of Activities, and are prepared using the accrual basis of accounting, which is similar to the accounting used by most private-sector companies. All of the current year’s revenues and expenses are taken into account regardless of when cash is received or paid. The Statement of Net Assets combines and consolidates the Department’s current financial resources with capital assets and long-term obligations. This statement includes all of the Department’s non-fiduciary assets and liabilities. 2009 Comprehensive Annual Financial Report 3 Arizona Department of Transportation Management’s Discussion and Analysis (continued) June 30, 2009 Net assets are the difference between the Department’s assets and liabilities, and represent one measure of the Department’s financial health. • An increase or decrease in the Department’s net assets from one year to the next is an indicator of whether its financial health is improving or declining. • Other indicators of the Department’s financial health include the condition of its roads and bridges (infrastructure) and economic trends affecting the Department’s future tax revenues. The Statement of Activities focuses on both the gross and net cost of various activities (governmental and businesstype); these costs are paid by the Department’s general tax and other revenues. This statement summarizes the cost of providing specific Department services and includes all current year revenues and expenses. The Statement of Net Assets and the Statement of Activities divide the Department’s activities into two types: Governmental Activities The Department’s basic services are reported here, including administration, aeronautics, highway, highway maintenance, motor vehicle division, and other activities. Taxes, fees, and federal grants finance most of these activities. Business-type Activities Activities for which the Department charges a fee to customers to pay most or all of the costs of certain services it provides are reported as business-type activities. The Department’s Arizona Highways Magazine and Highway Expansion and Extension Loan Program are reported here. The government-wide financial statements can be found on pages 15-16 of this report. This report includes two schedules (Exhibit 3.1 and Exhibit 4.1) that reconcile the amounts reported on the governmental fund financial statements (prepared using the modified accrual basis of accounting and current financial resources measurement focus) with governmental activities (prepared using the accrual basis of accounting and economic resources measurement focus) on the appropriate government-wide statements. The following summarizes the impact of utilizing Governmental Accounting Standards Board Statement 34 (GASB 34) reporting: • Capital assets used in governmental activities are not reported on governmental fund statements. • Other long-term assets that are not available to pay for current period expenditures are not reported on governmental fund statements. • Internal service fund activities are reported as governmental activities, but reported as proprietary funds in the fund financial statements. • Bond issuance costs are capitalized and amortized to expense as governmental activities, but reported as expenditures in the governmental fund statements. • Unless currently due and payable, long-term liabilities, such as capital lease obligations, compensated absences, notes payable, and others only appear as liabilities on the government-wide statements. • Capital outlay spending results in capital assets on the government-wide statements, but is reported as expenditures on the governmental fund statements. • Bond and note proceeds result in liabilities on the government-wide statements, but are recorded as other financing sources on the governmental fund statements. 2009 Comprehensive Annual Financial Report 4 Arizona Department of Transportation Management’s Discussion and Analysis (continued) June 30, 2009 • Certain other outflows represent either increases or decreases in liabilities on the government-wide statements, but are reported as expenditures on the governmental fund statements. Fund Financial Statements (Reporting the Department’s Major Funds) The fund financial statements begin on page 17 and provide detailed information about the major individual funds. A fund is an accounting entity with a self-balancing set of accounts that the Department uses to keep track of specific sources of funding and spending for a particular purpose. The Department, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the Department can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental Funds A majority of the Department’s activities are reported in governmental funds. Reporting of these funds focuses on how financial resources flow in to and out of the funds, and amounts remaining at year-end for future spending. Governmental funds are accounted for using the modified accrual basis of accounting, which measures cash and other assets that can be readily converted to cash. The governmental fund statements provide a detailed short-term view of the Department’s general governmental operations and the basic services it provides. This information should help determine whether there are more or less current financial resources available for the Department’s programs. The reconciliations following the fund financial statements explain the differences between the government’s activities, reported in the government-wide statement of activities, and the governmental funds. The Department maintains fifteen individual governmental funds. Information is presented separately in the governmental funds Balance Sheet and the governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balances for the General Fund (State Highway Fund), Maricopa Regional Area Road Construction Fund, Motor Vehicle Division Clearing Fund, Highway User Revenue Fund, Debt Service Fund, and Capital Projects Fund which are considered to be major funds. Data from the other nine governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds are provided in the form of combining statements elsewhere in this report. The legislature appropriates an annual budget for the Department’s General Fund (State Highway Fund). The Budgetary Comparison Schedule – General Fund (State Highway Fund) has been provided to demonstrate compliance with this budget and is presented as Required Supplementary Information. The governmental funds financial statements can be found on pages 17-24 of this report. Proprietary Funds When the Department charges customers for the services it provides, these services are generally reported in proprietary funds. Proprietary funds (enterprise and internal service) utilize full accrual accounting, the same method used by private sector businesses. Enterprise funds report activities that provide supplies and services to outside customers, to other agencies, or to other divisions of the Department. The Department’s enterprise funds are the Arizona Highways Magazine Fund and the Highway Expansion and Extension Loan Program Fund. The internal service fund reports activities that provide supplies and services for the Department’s other programs and activities and other state agencies. The Equipment Fund is the Department’s only internal service fund. Internal service fund activities are reported as governmental activities on the government-wide statements. The proprietary funds financial statements can be found on pages 25-27 of this report. Fiduciary Funds Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the Department’s own programs. The fiduciary funds financial statement can be found on page 28. 2009 Comprehensive Annual Financial Report 5 Arizona Department of Transportation Management’s Discussion and Analysis (continued) June 30, 2009 Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 29-54 of this report. Required Supplementary Information In addition to the basic financial statements, including accompanying notes, this section presents certain Required Supplementary Information including the Department’s Budgetary Comparison Schedule – General Fund (State Highway Fund) and the modified approach to reporting infrastructure assets. Required Supplementary Information can be found on pages 55-61 of this report. Supplementary Information Other Supplementary Information includes the combining statements for the nonmajor governmental funds and agency funds, and is presented immediately following the Required Supplementary Information on budget and infrastructure assets. Combining and individual fund statements and schedules can be found on pages 62-67 of this report. Government-wide Financial Analysis As noted earlier, net assets may serve over time as a useful indicator of the Department’s financial health. The following tables, graphs, and analyses discuss the financial position and changes to financial position for the Department as a whole as of and for the fiscal years ended June 30, 2009 and 2008. The Department’s combined net assets increased by $399.4 million over the course of this fiscal year’s operations, an increase of 2.8 percent. The net assets of the governmental activities increased by $399.4 million or 2.8 percent and business-type activities neither significantly increased nor decreased over the previous year. The overall increase in the Department’s net assets was due to an increase in the Department’s infrastructure resulting from more construction and more money received in federal grants. The following table reflects the condensed Statement of Net Assets as of June 30, 2009 and 2008: Governmental Activities 2009 2008 Business-type Activities 2009 2008 Total 2009 2008 Assets: Current and other assets Capital assets Total assets Liabilities: Other liabilities Non-current liabilities Total liabilities Net assets: Invested in capital assets, net of related debt Restricted Unrestricted Total net assets $ 1,723,616,777 16,235,946,963 17,959,563,740 $ 1,791,104,044 15,249,215,994 17,040,320,038 276,592,412 3,083,581,205 3,360,173,617 358,846,843 2,481,455,779 2,840,302,622 13,951,802,265 534,534,542 113,053,316 $14,599,390,123 13,285,437,940 704,929,654 209,649,822 $14,200,017,416 $ $ 77,302,707 131,415 77,434,122 $ 129,735,062 172,725 129,907,787 $ 1,800,919,484 16,236,078,378 18,036,997,862 $ 1,920,839,106 15,249,388,719 17,170,227,825 2,862,022 143,578 3,005,600 53,172,272 2,315,611 55,487,883 279,454,434 3,083,724,783 3,363,179,217 412,019,115 2,483,771,390 2,895,790,505 172,725 74,115,046 132,133 74,419,904 13,951,933,680 609,237,528 112,647,437 $14,673,818,645 13,285,610,665 779,044,700 209,781,955 $14,274,437,320 131,415 74,702,986 <405,879> 74,428,522 $ The total assets of the Department were $18.0 billion, while total liabilities were $3.4 billion, resulting in a net assets balance of $14.7 billion. By far, the largest portion of the Department’s net assets, $14.0 billion (95.2 percent), was invested in capital assets (e.g., land, infrastructure, buildings, machinery, and equipment), net of any related debt used to acquire those assets. The Department uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the Department’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other resources, since the capital assets themselves cannot be used to liquidate these liabilities. 2009 Comprehensive Annual Financial Report 6 Arizona Department of Transportation Management’s Discussion and Analysis (continued) June 30, 2009 As of June 30, 2009, the Department is able to report positive balances in all three categories of net assets for the governmental activities. The same situation held true for the prior fiscal year. The governmental activities reported an increase in capital assets with the largest increase being in the area of construction in progress. The Department also issued new Highway Revenue Bonds, Transportation Excise Tax Revenue Bonds, and Grant Anticipation Notes which caused the non-current liabilities to increase for the governmental activities. Both the current assets and other liabilities decreased for the business-type activities due to the repayment of $50 million in board funding obligations. The business-type activities reported a negative amount in unrestricted net assets for fiscal year 2009. The General Fund (State Highway Fund) transferred $0.5 million to the Arizona Highways Magazine Fund in order to meet its current operating expenses. The following condensed financial information was derived from the government-wide Statement of Activities and reflects how the Department’s net assets changed during the year, compared to the prior year: Governmental Activities 2009 2008 Business-type Activities 2009 2008 Total 2009 2008 Revenues: Program revenues: Charges for services Operating grants and contributions Capital grants and contributions General revenues: Transportation excise taxes Vehicle, registration, title, license and related taxes Fuel and motor carrier taxes and fees Flight property taxes Income from investments Gain on sale of capital assets Other Total revenues Expenses: Administration Aeronautics Highway Highway maintenance Motor Vehicle Non-capital, including asset preservation Distributions to Arizona counties and cities Distributions to other state agencies Local governmental assistance Interest on long-term debt Arizona Highways Magazine Highway Expansion and Extension Loan Program Total expenses Change in net assets before transfers Transfers Change in net assets Net assets - July 1 Net assets - June 30 $ 139,396,149 90,618,854 552,487,847 150,024,350 79,747,102 523,727,885 $ 7,418,982 - $ 9,379,457 - 253,741,944 - - 1,033,504,644 766,393,661 13,821,790 59,528,386 30,515,557 8,256,693 2,919,262,012 1,611,859 9,030,841 56,065,971 10,993,313 116,742,251 110,963,383 133,414,626 216,197,547 54,918,357 4,372,514 132,873,981 137,099,909 112,879,673 187,004,474 - - 56,065,971 10,993,313 116,742,251 110,963,383 133,414,626 216,197,547 54,918,357 4,372,514 132,873,981 137,099,909 112,879,673 187,004,474 1,091,893,287 413,939,328 48,571,041 114,683,341 - 1,238,382,891 176,691,851 37,285,011 92,294,932 - 7,410,148 7,711,629 1,091,893,287 413,939,328 48,571,041 114,683,341 7,410,148 1,238,382,891 176,691,851 37,285,011 92,294,932 7,711,629 2,313,464,088 2,173,803,593 2,112,075 9,522,223 4,053,391 11,765,020 2,112,075 2,322,986,311 4,053,391 2,185,568,613 2,385,247 - 399,381,325 - 747,843,666 - 2,385,247 72,034,657 $ 74,419,904 399,381,325 14,274,437,320 $ 14,673,818,645 747,843,666 13,526,593,654 $ 14,274,437,320 219,165,314 976,074,508 667,199,745 11,975,326 33,588,389 <839,893> 23,670,556 2,713,336,795 399,872,707 <500,000> 399,372,707 14,200,017,416 $ 14,599,390,123 $ 745,458,419 745,458,419 13,454,558,997 $ 14,200,017,416 <491,382> 500,000 8,618 74,419,904 $74,428,522 4,788,328 <17,518> 14,150,267 2009 Comprehensive Annual Financial Report 7 $ 146,815,131 90,618,854 552,487,847 219,165,314 976,074,508 667,199,745 11,975,326 35,200,248 <839,893> 23,670,556 2,722,367,636 $ 159,403,807 79,747,102 523,727,885 253,741,944 1,033,504,644 766,393,661 13,821,790 64,316,714 30,498,039 8,256,693 2,933,412,279 Arizona Department of Transportation Management’s Discussion and Analysis (continued) June 30, 2009 Governmental Activities: The following chart depicts revenues of the governmental activities for the fiscal year ended June 30, 2009: Revenues - Governmental Activities $2,713,336,795 Income from investments 1.2% Fuel and motor carrier taxes and fees 24.6% Other revenues including flight property taxes and loss on sale of capital assets 1.3% Transportation excise taxes 8.1% Charges for services 5.1% Vehicle, registration, title, license and related taxes 36.0% Capital grants and contributions 20.4% Operating grants and contributions 3.3% $2.4 billion (or 89.1 percent) of the Department’s revenues are from the following four revenue sources: • Vehicle, registration, title, license, and related taxes comprise the Department’s largest revenue source of $976.1 million (36.0 percent). • Fuel and motor carrier taxes and fees represent the Department’s second largest revenue source of $667.2 million (24.6 percent). • Capital grants and contributions total $552.5 million (20.4 percent). • Transportation excise taxes total $219.2 million (8.1 percent). The Department’s two main funding sources, the Highway User Revenue Fund (HURF) and the Maricopa County Transportation Excise Tax, posted declines in fiscal year 2009. HURF collections totaled approximately $1.2 billion, a decrease of 9.7 percent from fiscal year 2008 and 10.0 percent below the estimate. Maricopa County Transportation Excise Tax collections totaled $328.2 million, a decrease of 13.7 percent from fiscal year 2008, and 13.7 percent below the forecast. However, the Transportation Excise Tax distribution to the Department was $219.2 million compared to $253.7 million for fiscal year 2008. The Transportation Excise Tax revenues were negatively impacted as in the previous fiscal year by the increase in unemployment and home foreclosures along with decreased personal income and slower population growth. All of these factors caused consumers to restrain their spending again in fiscal year 2009. For the second year in a row the fuel and motor carrier tax percentage also decreased due to consumer restraint on spending. 2009 Comprehensive Annual Financial Report 8 Arizona Department of Transportation Management’s Discussion and Analysis (continued) June 30, 2009 Capital grants and contributions increased from fiscal year 2008 due to an increase in the amount received in federal aid for fiscal year 2009. The General Fund (State Highway Fund) was the only fund that reported an increase this fiscal year. The majority of the increase this fiscal year was due to using federal funding on a larger percentage of highway construction projects, and therefore, increasing the capital grants and contributions revenue figure. The following chart depicts expenses of the governmental activities for the fiscal year ended June 30, 2009: Expenses - Governmental Activities $2,313,464,088 Distributions to other state agencies 17.9% Local governmental assistance 2.1% Distributions to Arizona counties and cities 47.2% Interest on long-term debt 5.0% Administration 2.4% Highway 5.0% Highway Maintenance 4.8% Non-capital, including asset preservation 9.3% Aeronautics 0.5% Motor Vehicle 5.8% $1.9 billion (or 80.2 percent) of the Department’s expenses were for the following: • Distributions to Arizona counties and cities $1.1 billion (47.2 percent). • Distributions to other state agencies $413.9 million (17.9 percent). • Non-capital, including asset preservation $216.2 million (9.3 percent). • Motor vehicle $133.2 million (5.8 percent). Distributions to Arizona counties and cities decreased in fiscal year 2009 as compared to fiscal year 2008. The distributions to Arizona counties and cities was impacted by a decline in Highway User Revenue Fund (HURF) collections. Non-capital, including asset preservation, increased this fiscal year primarily due to more funds programmed in fiscal year 2009 for pavement and bridge preservation. House Bill 2209 and Senate Bills 1001 and 1002 addressed statewide budget adjustments to help balance the State General Fund budget, in part by sweeping funds and transferring excess fund balances from state agencies to the State General Fund. In total, $299.5 million was transferred from the Department, which accounts for the Department’s increased distributions to other state agencies. Motor vehicle increased due to third party retained fees and credit card fees being shown as an expense instead of a reduction to revenue for fiscal year 2009. 2009 Comprehensive Annual Financial Report 9 Arizona Department of Transportation Management’s Discussion and Analysis (continued) June 30, 2009 Business-type Activities: Net assets for business-type activities neither significantly increased nor decreased in fiscal year 2009. Total revenues were $9.0 million, with charges for services representing 77.8 percent, income from investments 17.8 percent, and other revenues 4.4 percent. The total expenses for business-type activities were $9.5 million. The Highway Expansion and Extension Loan Program had a decrease in revenues of $3.8 million which was primarily due to the Department using cash to pay off the board funding obligations and, therefore, not having the funds available for investment purposes. Interest revenue decreased this fiscal year due to a lower average principal balance outstanding on loans that were issued by the Department. The Arizona Highways Magazine had a decrease in revenues of $1.4 million primarily due to a roughly 10 percent decline in the number of subscribers for the monthly publication (many of whom would also purchase related products, including books, calendars, and holiday catalog gift items). This decline in demand is consistent with industry trending for many other consumer periodicals with revenues based predominantly on annual subscriptions, as well as an overall weaker economy, especially in Arizona where the majority of subscribers are located. Additionally, an increased emphasis on improving profitability has resulted in the loss of some sales in 2009. Financial Analysis of the Department’s Funds As previously mentioned, the Department uses fund accounting to ensure and demonstrate compliance with budgetary and legal requirements. The following is a brief discussion of financial highlights from the fund financial statements. Governmental Funds The focus of the Department’s governmental funds financial statements (pages 17-24) is to provide information on near-term inflows, outflows, and balances of spendable resources. All major governmental funds are discretely presented on these financial statements, while the non-major governmental funds are combined into a single column. Combining statements for the non-major governmental funds may be found on pages 62-65. As of the end of the fiscal year, the fund balances of the governmental funds totaled $1.4 billion, an increase of $43.4 million over the previous fiscal year. Of this $1.4 billion balance, $98.3 million or 7.0 percent constitutes the unreserved fund balance, which was available for spending for the general purposes of the Department. The remaining fund balance of $1.3 billion, or 93.0 percent, was reserved for the following: 1) $7.4 million for inventories, 2) $2.6 million to pay debt service, and 3) $1.3 billion to pay for capital projects. The General Fund (State Highway Fund) is the primary operating fund of the Department. At the end of the current fiscal year, the unreserved fund balance of the General Fund (State Highway Fund) was $94.7 million and the reserved fund balance was $230.9 million. As a measure of the General Fund’s (State Highway Fund) liquidity, it may be useful to compare both the unreserved fund balance and the total fund balance to the total fund expenditures. Unreserved fund balance represents 7.4 percent of total General Fund (State Highway Fund) expenditures, while total fund balance represents 25.3 percent of the same amount. The Maricopa Regional Area Road Construction Fund is a major special revenue fund that receives a portion of Maricopa County Transportation Excise Tax monies that are used to provide a funding source for the construction of new freeways and other routes, improvements to existing freeways and other routes, and improvements to the arterial street system within Maricopa county. Total revenues collected in fiscal year 2009 were $302.5 million; Transportation Excise Tax revenue of $219.2 million (or 72.4 percent) was the bulk of the revenue. The remaining revenue was mainly federal revenue and interest on investments. The Debt Service Fund is used for the accumulation of resources for, and the payment of, general long-term debt principal and interest of the governmental funds. The other financing sources of $221.2 million were transferred in from the General Fund (State Highway Fund) ($134.1 million), Maricopa Regional Area Road Construction Fund ($31.0 million), Grant Anticipation Notes Fund ($38.5 million), and Capital Projects Fund ($17.6 million) and were used to pay the debt service. The remaining fund balance of $2.6 million is restricted for future debt service payments. 2009 Comprehensive Annual Financial Report 10 Arizona Department of Transportation Management’s Discussion and Analysis (continued) June 30, 2009 The Capital Projects Fund is used to account for financial resources used for the acquisition or construction of major capital facilities in the governmental funds. During the fiscal year, the Department’s expenditures were $507.2 million. Capital outlay expenditures of $459.1 million (90.5 percent) accounted for the majority of the expenditures in the Capital Projects Fund. This expenditure for the acquisition and construction of new highways was converted to capital assets on the government-wide statements. The fund balance increased by $222.3 million due to unspent bond proceeds from three new bond issues. Budget Variances As a consequence of lower revenue collections and legislative fund sweeps, the Department reduced its fiscal year 2009 operating spending levels in order to ensure that there would be sufficient cash in the Department’s General Fund (State Highway Fund) to cover debt service, contractor payments, fund transfers, and daily operational expenses. Accordingly, actual expenditures for fiscal year 2009 were significantly less than the Department’s appropriated budget. Variances reflect personnel savings resulting from the statewide hiring freeze and agency furloughs; and operational savings from the elimination of non-mission critical overtime and travel; reduced frequency of highway sweeping, landscaping and litter pickup; and deferred roadway equipment replacement, facility repair, and routine highway repair and maintenance. The Department’s final budgeted amounts were either the same or less than the original budgeted amounts and the actual amounts spent in fiscal year 2009 were less than the final budgeted amounts. The reductions for the Department were implemented to accommodate the economic situation and the budgetary condition of the State. Capital Assets and Debt Administration Capital Assets (See Note 5A to the financial statements for additional information): The Department’s investment in capital assets for its governmental and business-type activities as of June 30, 2009, amounts to $16.2 billion (net of accumulated depreciation), a $986.7 million increase over the previous fiscal year. Business-type Activities 2009 2008 Governmental Activities 2009 2008 Land Buildings and improvements Improvements other than buildings Mobile fleet and aircraft Machinery and equipment Infrastructure Construction in progress Total $ 2,384,913,372 102,310,229 19,950,935 49,627,903 16,869,440 10,631,789,084 3,030,486,000 $ 16,235,946,963 $ 2,351,812,086 92,264,229 20,300,630 54,522,212 20,981,704 10,101,407,936 2,607,927,197 $ 15,249,215,994 $ $ 7,900 102,497 21,018 131,415 $ $ 7,900 136,315 28,510 172,725 Total 2009 2008 $ 2,384,921,272 102,412,726 19,950,935 49,627,903 16,890,458 10,631,789,084 3,030,486,000 $ 16,236,078,378 $ 2,351,819,986 92,400,544 20,300,630 54,522,212 21,010,214 10,101,407,936 2,607,927,197 $ 15,249,388,719 As provided by accounting principles generally accepted in the United States (GAAP), the Department has elected to record its infrastructure assets using the modified approach, as defined in GASB Statement 34. Assets accounted for under the modified approach include 6,753 center lane miles (18,544 travel lane miles) and 4,648 bridges that the Department is responsible for maintaining. The Five-Year Transportation Facilities Construction Program (Program) is a dynamic program and adjustments are made to the annual plans based on the needs of the Department to maintain the condition level of the roads and bridges at a level equal to, or greater than, the goals established by the Department. The Program is updated annually and adjustments are made monthly during the fiscal year, as circumstances may require. The Department manages its roads using the Present Serviceability Rating (PSR), which measures the condition of the pavement and its ability to serve the traveling public. The PSR uses a five-point scale (5 excellent, 0 impassable) to characterize the condition of the roadway. The Department’s serviceability rating goal is 3.23 for the overall system. The Department’s most recent assessment indicated that an overall rating of 3.74 was achieved for fiscal year 2009. 2009 Comprehensive Annual Financial Report 11 Arizona Department of Transportation Management’s Discussion and Analysis (continued) June 30, 2009 The Department manages its bridges using the Arizona Bridge Information and Storage System (ABISS). The Department determines the condition rating based on standards developed by the Federal Highway Administration and additional internal criteria. It is the policy of the Department to maintain a Condition Rating Index (CRI) of 92.5 percent or better. In fiscal year 2009, a CRI of 93.4 percent was achieved. In addition to many smaller projects, each of the following major highway construction contracts in excess of $20 million was started during fiscal year 2009: Description Major widening of State Route 202L from the Interstate 10 and State Route 51 interchange to State Route 101L in Maricopa County. Construction of new roads on State Route 303L from Happy Valley Parkway to Lake Pleasant Parkway in Maricopa County. Major widening of US 93 from Hoover Dam to MP 17 in Mohave County. Construction of new roads on State Route 303L from Lake Pleasant Parkway to Interstate 17 in Maricopa County. Construction of new roads on Interstate 10 in Pima County. Construction of new roads on State Route 195 from Avenue B to 14th Street in Yuma County. Reconstruction on State Route 303L at the Cactus, Waddell, and Bell Road traffic interchanges in Maricopa County. Construction of frontage road on State Route 85 in Maricopa County. Reconstruction on State Route 202L from State Route 101L to Gilbert Road in Maricopa County. 1 Fiscal Year 2009 Construction Contract Start Date Contract Amount 11/17/2008 $ 188,895,000 11/17/2008 100,415,927 29,771,496 10/28/2008 4/17/2009 71,269,683 69,347,672 17,546,430 - 4/20/2009 8/18/2008 50,484,367 43,205,681 4,272,385 35,243,838 1/30/2009 28,196,892 - 9/22/2008 2/23/2009 23,854,933 20,565,000 11,347,207 4,151,228 Expenditures $ 1 45,157,595 Construction Expenditures are strictly those costs paid to the primary contractor for each project shown. In addition to many smaller projects, the following major highway construction projects had expenditures in excess of $20 million in fiscal year 2009. These project expenditures include payments made to construction contractors (as shown above) as well as utility, design, right-of-way, and landscaping costs. Fiscal Year 2009 Project Location Description Interstate 10 from Prince Road to 29th Street in Pima County. Interstate 17 from Jomax Road to Carefree Highway in Maricopa County. Interstate 10 from Sarival to State Route 101 in Maricopa County. State Route 195 from Avenue B to County 14th Street in Yuma County. State Route 202L from the Interstate 10 and State Route 51 interchange to State Route 101L in Maricopa County. State Route 101L from Princess Drive to State Route 202L in Maricopa County. State Route 303L from Happy Valley Parkway to Lake Pleasant Parkway in Maricopa County. State Route 179 south of Sedona in Coconino and Yavapai Counties. Interstate 10 from the Picacho Peak interchange to the Pinal Air Park in Pinal County. Construction of frontage road on State Route 85 in Maricopa County. State Route 101L from State Route 202L (Red Mountain) to State Route 202L (Santan) in Maricopa County. State Route 202L from the junction of Interstate10 west to the junction of Interstate 10 south in Maricopa County. 2 Expenditures $ 97,772,424 91,635,463 54,908,426 54,655,301 48,059,451 36,373,695 34,588,038 30,979,457 30,101,905 24,954,758 24,258,812 22,849,347 Project Expenditures include not only construction costs, but also engineering and design work, payroll (if applicable), and any other project related costs. 2009 Comprehensive Annual Financial Report 12 2 Arizona Department of Transportation Management’s Discussion and Analysis (continued) June 30, 2009 Non-Current Liabilities (See Note 5G to the financial statements for additional information): The Department’s non-current liabilities for its governmental and business-type activities as of June 30, 2009, amount to $3.1 billion, an increase of $600.0 million from the previous fiscal year. The decrease in capital leases was due to the payoff of principal and not entering into any new lease agreements in fiscal year 2009. The decrease in advances and notes payable in governmental activities was due primarily to the repayment of loans to the Highway Expansion and Extension Loan Program by the General Fund (State Highway Fund). Governmental Activities Highway revenue bonds Transportation excise tax revenue bonds Grant anticipation notes (GARVEE bonds) Premium on bonds Compensated absences Capital leases Advances and notes payable Total governmental activities Business-type Activities Accrued interest payable Compensated absences Total business-type activities Total non-current liabilities 2009 2008 $ 1,740,765,000 777,130,000 329,650,000 173,312,639 15,729,549 4,326,184 42,667,833 3,083,581,205 $1,623,905,000 350,955,000 298,280,000 128,586,354 15,455,342 7,535,394 56,738,689 2,481,455,779 143,578 143,578 2,170,356 145,255 2,315,611 $ 3,083,724,783 $ 2,483,771,390 The Department has issued revenue bonds in 49 separate issues between 1980 and 2009. All bonds outstanding as of June 30, 2009, are scheduled to mature on various dates, but not later than July 1, 2033. The bonds are obligations of the Transportation Board of the State of Arizona Department of Transportation (Transportation Board) and are not obligations of the State of Arizona. This data was gathered from the various bond records on file since the 1980s. Of the $7.3 billion total in bonds issued between 1980 and 2009, $1.4 billion, or approximately 19 percent, have been refunding issues to lower debt service costs. These efforts have resulted in cumulative debt service savings of $82.4 million in current dollars and $60.5 million on a present value basis. The senior lien Highway Revenue Bonds have been rated AAA/Aa1 by Standard & Poor’s Ratings Services and Moody’s Investors Service, respectively. The Department’s subordinate lien Highway Revenue Bonds, as a result of a rating increase on September 26, 2006, are rated AAA/Aa2. The Department’s Transportation Excise Tax Revenue Bonds are rated AA+/Aa2. The Grant Anticipation Notes (GARVEE bonds) are rated AA-/Aa3/AA with the additional rating provided by Fitch Ratings. Arizona Revised Statutes, §28-7678, authorized the Transportation Board to issue non-negotiable Board Funding Obligations (BFOs) for purchase by the Arizona State Treasurer. Laws 2005, Chapter 150 (HB 2123), authorized the Transportation Board to issue BFOs in the principal amount of $200 million in any fiscal year from fiscal years 2006 through 2020, and that mature no later than four calendar years after the date of issuance. The BFOs are used to help capitalize Arizona’s State Infrastructure Bank, which allows the Department and political subdivisions to apply for loans from the fund established by this legislation. Because of State General Fund cash requirements, the State Treasurer called all outstanding BFOs during fiscal year 2009. As a result, the amount of outstanding BFOs declined from $110 million, as of the end of fiscal year 2008, to zero as of the end of fiscal year 2009. In fiscal year 2009, the Department issued Highway Revenue Bonds totaling $181,050,000 to (1) finance portions of the Transportation Board’s Five-Year Transportation Facilities Construction Program and (2) pay costs of issuing the bonds. In fiscal year 2007, the State Transportation Board received legislative authority to begin issuing 2009 Comprehensive Annual Financial Report 13 Arizona Department of Transportation Management’s Discussion and Analysis (continued) June 30, 2009 Highway Revenue Bonds with maturities up to 30 years in length, replacing the 20 year maturity requirement that had been in place since 1980, and were issued under this new authority. Also in fiscal year 2009, the Department issued Transportation Excise Tax Revenue bonds totaling $440,000,000 to pay (1) the costs of design, right-of-way purchase, or construction of certain freeways and other routes within Maricopa County and (2) the costs of issuing the bonds, and issued Grant Anticipation Notes (GARVEE bonds) totaling $55,420,000 for the purpose of (1) paying a portion of the costs of certain controlled-access highways in Maricopa County and (2) paying the costs of issuing the note. Requests for Information This financial report is designed to provide our citizens, taxpayers, customers, investors, and creditors with overview of the Department’s finances. Questions concerning any of the information provided in this report requests for additional financial information should be addressed to the Controller, Arizona Department Transportation, 206 S. 17th Avenue, Phoenix, Arizona, 85007 or by visiting our website http://www.azdot.gov/Inside_ADOT/fms/cafr/CAFRindex.asp. 2009 Comprehensive Annual Financial Report 14 an or of at fiscal yearComprehensive Annual Financial Report Basic Financial Statements Government-wide Financial Statements – include the Statement of Net Assets and the Statement of Activities and use the accrual basis of accounting for financial reporting. Governmental Funds Financial Statements – include the Balance Sheet and Statement of Revenues, Expenditures, and Changes in Fund Balances for the major governmental funds and use the modified accrual basis of accounting for financial reporting. Also include the reconciliations to the governmentwide financial statements. Proprietary Funds Financial Statements – include the Statement of Net Assets, the Statement of Revenues, Expenses, and Changes in Fund Net Assets and the Statement of Cash Flows for the businesstype activities and use the accrual basis of accounting for financial reporting. Fiduciary Funds Financial Statement – includes the Statement of Net Assets for assets being held for parties outside of the Department. Notes to the Financial Statements Exhibit 1 Arizona Department of Transportation Statement of Net Assets June 30, 2009 Governmental Activities ASSETS Unrestricted cash on deposit with the State Treasurer $ Total 6,704,270 $ 1,530,866 - 143,741 143,741 3,571,595 61,018,057 486,904 - 4,058,499 61,018,057 24,050,822 147,228 15,416 33,840,271 26,125,218 57,968,125 - Receivables: Subscriptions, net of allowance for doubtful accounts Accrued interest Taxes and fees Business-type Activities $ 8,235,136 Notes and loans Other, net of allowance for doubtful accounts Due from U.S. Government for reimbursable costs Internal balances 9,789,449 25,977,990 57,968,125 <15,416> Inventories Other assets/prepaid items 10,158,259 42,688,219 460,262 247,378 10,618,521 42,935,597 Deferred charges 21,824,948 - 21,824,948 1,483,931,281 16,047,188,456 50,220,090 7,900 1,534,151,371 16,047,196,356 188,758,507 17,959,563,740 123,515 77,434,122 188,882,022 18,036,997,862 11,616,037 12,258,377 134,910,970 128,577 88,729 - 11,744,614 12,347,106 134,910,970 4,793,776 - 4,793,776 113,013,252 - 30,590 2,614,126 113,043,842 2,614,126 161,397,950 2,922,183,255 3,360,173,617 143,578 3,005,600 161,541,528 2,922,183,255 3,363,179,217 13,951,802,265 131,415 13,951,933,680 Restricted cash on deposit with the State Treasurer Capital assets not subject to depreciation (Note 5A) Capital assets subject to depreciation, net of accumulated depreciation (Note 5A) Total assets LIABILITIES Accounts payable and other current liabilities Accrued payroll and other accrued expenses Contracts and retainage payable Due to other state agencies Due to Arizona counties and cities Unearned revenues (Note 5C) Non-current liabilities (Note 5G): Due within one year Due in more than one year Total liabilities NET ASSETS Invested in capital assets, net of related debt Restricted: Loans and other financial assistance Debt service Capital projects Unrestricted Total net assets 1,768,915 532,765,627 113,053,316 $ 14,599,390,123 The notes to the financial statements are an integral part of this statement. 2009 Comprehensive Annual Financial Report 15 74,702,986 74,702,986 1,768,915 532,765,627 <405,879> 112,647,437 $ 74,428,522 $ 14,673,818,645 Exhibit 2 Arizona Department of Transportation Statement of Activities for the fiscal year ended June 30, 2009 Program Revenues Functions/Programs Governmental Activities: Administration Aeronautics Highway Highway maintenance Motor Vehicle Non-capital, including asset preservation Distributions to other state agencies Distributions to Arizona counties and cities Local governmental assistance Interest on long-term debt Total governmental activities Business-type Activities: Arizona Highways Magazine Highway Expansion and Extension Loan Program Total business-type activities Total Expenses $ 56,065,971 10,993,313 116,742,251 110,963,383 133,414,626 216,197,547 413,939,328 $ Charges for Services Operating Grants and Contributions Capital Grants and Contributions 8,752,492 936,211 1,765,197 886,675 117,266,825 - $ $ 58,843,310 - 3,901,863 548,585,984 - Net Revenues $ <47,313,479> <6,155,239> 492,452,240 <110,076,708> <16,147,801> <216,197,547> <413,939,328> 1,091,893,287 48,571,041 114,683,341 2,313,464,088 9,788,749 139,396,149 31,775,544 90,618,854 552,487,847 <1,091,893,287> <7,006,748> <114,683,341> <1,530,961,238> 7,410,148 6,291,223 - - <1,118,925> 2,112,075 9,522,223 $ 2,322,986,311 1,127,759 7,418,982 $ 146,815,131 90,618,854 $ 552,487,847 <984,316> <2,103,241> $ <1,533,064,479> Business-type Activities Total $ Governmental Activities Net General revenues: Transportation excise taxes Vehicle, registration, title, license, and related taxes and fees Fuel and motor carrier taxes and fees Flight property taxes Income from investments Gain on sale of capital assets Other Transfers Total general revenues and transfers $ <1,530,961,238> $ <2,103,241> $ <1,533,064,479> Change in net assets Net assets - July 1 Net assets - June 30 399,372,707 14,200,017,416 $ 14,599,390,123 219,165,314 976,074,508 667,199,745 11,975,326 33,588,389 <839,893> 23,670,556 <500,000> 1,930,333,945 The notes to the financial statements are an integral part of this statement. 2009 Comprehensive Annual Financial Report 16 1,611,859 500,000 2,111,859 8,618 74,419,904 $ 74,428,522 219,165,314 976,074,508 667,199,745 11,975,326 35,200,248 <839,893> 23,670,556 1,932,445,804 399,381,325 14,274,437,320 $ 14,673,818,645 fiscal yearComprehensive Annual Financial Report Governmental Funds Financial Statements Major Funds General Fund (State Highway Fund) This fund is used to account for all financial transactions applicable to the general operations of the Department. The fund receives money from the Highway User Revenue Fund including vehicle registration, title, license, and related fees, and fuel and motor carrier taxes. Reimbursements for certain construction expenditures are received from the federal government, Arizona cities and counties, and other state agencies. The fund also receives interest and other revenues. The fund disburses money primarily for the engineering, construction, improvement, and maintenance of state highways, parts of highways forming state routes, and highways under cooperative agreements with the United States and day-to-day operating expenses. Maricopa Regional Area Road Construction Fund This fund receives certain Maricopa County transportation excise tax monies collected by the Department of Revenue. These monies are used for the construction of new freeways and other routes, improvements to existing freeways and other routes, and improvements to the arterial street system within Maricopa County. Motor Vehicle Division Clearing Fund This fund accounts for the collection and disbursement of Motor Vehicle Division revenues. Highway User Revenue Fund This fund receives all revenues collected by the Motor Vehicle Division and its agents that are not designated for other purposes. The revenues include: motor fuel taxes, a portion of vehicle license tax, vehicle registration fees, driver license fees, dealer fees, permits, and other miscellaneous fees. These monies are distributed to the General Fund (State Highway Fund), the Department of Public Safety, the Economic Strength Project Fund, incorporated cities, counties, and other legislatively appropriated entities. Debt Service Fund This fund is used to administer all payments of principal and interest on bonds and notes issued by the Arizona Transportation Board for Highway Revenue Bonds, Transportation Excise Tax Revenue Bonds, and Grant Anticipation Notes (GARVEE bonds). Capital Projects Fund This fund is used to administer bond proceeds for Arizona Transportation Board Highway Revenue Bonds, Arizona Transportation Board Transportation Excise Tax Revenue Bonds, and Grant Anticipation Notes (GARVEE bonds). These monies are expended for the construction of projects in the Five-Year Transportation Facilities Construction Program. Non-Major Funds Other Governmental Funds are the non-major funds and are all special revenue funds. These funds can be found on Exhibit 9 and Exhibit 10. Arizona Department of Transportation Balance Sheet Governmental Funds June 30, 2009 General Fund (State Highway Fund) ASSETS Unrestricted cash on deposit with the State Treasurer Receivables: Accrued interest Interfund (Note 5E) Taxes and fees Notes and loans Other (net) Amounts due from U.S. Government Inventories Deferred charges Land held for resale Restricted cash on deposit with the State Treasurer Total assets $ LIABILITIES AND FUND BALANCES Liabilities: Accounts payable Accrued payroll and other accrued expenditures Contracts and retainage payable Interfund payables (Note 5E) Amounts due to: Other state agencies Arizona counties and cities Surety and rental deposits Deferred revenue (Note 5C) Total liabilities Fund balances: Reserved for: Inventories Debt service Capital projects Unreserved reported in: General fund Non-major special revenue funds Total fund balances Total liabilities and fund balances 2,251,096 Special Revenue Funds Motor Vehicle Division Clearing Fund Maricopa Regional Area Road Construction Fund $ - $ 814,301 88,571,471 2,094,390 18,890,558 45,655,498 7,446,777 42,688,219 843,655 4,031,937 6,052,219 - 223,437,744 $ 431,850,054 314,724,314 $ 325,652,125 $ $ $ $ 2,537,078 11,319,259 79,507,346 495,903 104,129 37,445,258 475 - Highway User Revenue Fund $ 5,550,106 8,128,423 48,369,601 62,048,130 8,688,267 26,380,377 85,366 23,220,799 55,467,951 - $ $ 96,884,737 175,658,853 10,877 87,753,350 325,182 12,094,390 106,279,158 37,549,862 2,139,395 24,818,591 21,500 62,048,130 87,894,626 175,658,853 7,446,777 223,437,744 288,102,263 - - 94,686,375 325,570,896 $ 431,850,054 288,102,263 $ 325,652,125 62,048,130 175,658,853 The notes to the financial statements are an integral part of this statement. 2009 Comprehensive Annual Financial Report 17 $ $ Exhibit 3 Debt Service Fund $ Total Non-Major Governmental Funds (See Exhibit 9) Capital Projects Fund - $ - $ 3,338,635 Total Governmental Funds $ 324,156 - 1,461,763 13,070 - 35,440 3,200,380 7,695,059 2,991,195 6,260,408 - 2,305,040 $ 2,629,196 781,401,918 $ 782,876,751 16,807,927 $ 40,329,044 $ $ $ $ $ - 3,748,975 7,500 30,953 229,579 14,209,391 380,435 5,589,731 3,564,681 115,005,720 61,018,057 9,789,449 25,913,690 57,968,125 7,446,777 8,128,423 42,688,219 1,483,931,281 1,821,044,153 11,256,298 11,663,844 134,910,970 115,018,040 - 3,756,475 2,654,381 300,035 7,695,059 25,499,833 4,793,776 113,013,252 346,682 19,789,449 410,792,311 2,629,196 - 779,120,276 94 11,255,402 7,446,777 2,629,290 1,301,915,685 2,629,196 $ 2,629,196 779,120,276 $ 782,876,751 3,573,715 14,829,211 $ 40,329,044 94,686,375 3,573,715 1,410,251,842 1,821,044,153 $ 2009 Comprehensive Annual Financial Report 18 Exhibit 3.1 Arizona Department of Transportation Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets June 30, 2009 Total fund balances - governmental funds (Exhibit 3) $ 1,410,251,842 Amounts reported for governmental activities in the Statement of Net Assets (Exhibit 1) are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds (Note 4 B). Internal service funds are used by management to charge the costs of equipment rentals to individual funds. The assets and liabilities of the internal service funds are included in governmental activities in the Statement of Net Assets (Exhibit 5). Other long-term assets are not available to pay for current-period expenditures and, therefore, are deferred in the funds (Note 4 B). Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in the funds (Note 4 B). Net assets of governmental activities (Exhibit 1) 16,185,394,857 50,041,763 19,789,449 <3,066,087,788> $ 14,599,390,123 The notes to the financial statements are an integral part of this statement. 2009 Comprehensive Annual Financial Report 19 Arizona Department of Transportation Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds for the fiscal year ended June 30, 2009 Maricopa Regional Area Road Construction Fund General Fund (State Highway Fund) Revenues: Transportation excise taxes Vehicle registration, title, license, and related taxes and fees Fuel and motor carrier taxes and fees Flight property taxes Reimbursement of construction expenditures - federal aid Other federal grants and reimbursements Reimbursements from Arizona counties and cities Distributions from other state agencies Interest on loans receivable Income from investments Grand Canyon National Park Airport Rental income Other Total revenues Expenditures: Current: Administration Aeronautics Highway Highway maintenance Motor Vehicle Total current expenditures $ Special Revenue Funds Motor Vehicle Division Clearing Fund - $ 219,165,314 230,611,734 295,460,829 - - 523,402,109 6,551,785 - 299,869,488 359,537,857 - 436,943,996 58,843,310 11,347,289 875,838 150,720 13,214,885 1,204,176 3,964,140 1,052,616,917 56,496,270 6,362,356 3,697 4,567,624 584,138 15,342,784 302,522,183 529,953,894 689,764 2,165,996 662,263,105 45,269,038 112,717,590 111,346,235 120,041,930 389,374,793 185,466 2,281,629 2,467,095 1,487,212 1,487,212 4,526,767 4,526,767 The notes to the financial statements are an integral part of this statement. 2009 Comprehensive Annual Financial Report 20 $ - Highway User Revenue Fund $ - Exhibit 4 Debt Service Fund $ Total Non-Major Governmental Funds (See Exhibit 10) Capital Projects Fund - $ - $ Total Governmental Funds - $ 219,165,314 - - 10,263,469 34,524,701 11,975,326 1,064,146,800 696,075,172 11,975,326 1,814,499 1,814,499 12,501,202 12,501,202 38,540,432 35,677,407 9,788,749 272,561 433,402 936,211 104,805 142,517,063 531,980,698 94,520,717 27,498,394 875,838 426,978 33,221,376 936,211 1,788,314 21,577,725 2,704,188,863 56,077 56,077 545,686 545,686 10,470,525 48,571,041 5,608,923 64,650,489 46,056,267 10,470,525 163,570,260 111,346,235 131,664,832 463,108,119 (continued) 2009 Comprehensive Annual Financial Report 21 Arizona Department of Transportation Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds for the fiscal year ended June 30, 2009 Maricopa Regional Area Road Construction Fund General Fund (State Highway Fund) Intergovernmental: Distributions to other state agencies Distributions to Arizona counties and cities Debt service: Principal Interest Bond issuance costs Non-capital, including asset preservation Capital outlay Total expenditures Excess of revenues over expenditures Other financing sources : Transfers in Transfers out for debt service Transfers out other Sale of capital assets Insurance recovery Debt issuance Premium from debt issuance Total other financing sources Net change in fund balances Fund balances - July 1 Fund balances - June 30 $ 146,067,015 52,688,102 $ Special Revenue Funds Motor Vehicle Division Clearing Fund Highway User Revenue Fund 50,987,755 $ 100,657,220 427,809,462 $ 95,476,074 562,260,264 97,621,879 5,423,309 82,955,177 510,827,673 1,284,957,948 16,074,011 107,932,308 177,461,169 529,953,894 662,263,105 <232,341,031> 125,061,014 - - 16,750,902 <134,085,483> <500,000> 1,693,211 886,675 109,577,476 <5,677,219> <30,974,382> <16,750,902> 433,784 10,771,232 <36,520,268> - - - - <238,018,250> 88,540,746 199,561,517 563,589,146 $ 325,570,896 $ 288,102,263 The notes to the financial statements are an integral part of this statement. 2009 Comprehensive Annual Financial Report 22 $ $ Exhibit 4 Debt Service Fund $ Total Non-Major Governmental Funds (See Exhibit 10) Capital Projects Fund - $ - $ Total Governmental Funds 62,368,919 7,213,797 $ 404,569,228 1,100,959,380 134,233,205 199,686,879 126,931,998 3,966,731 142,604,054 1,077,834,940 3,519,661,329 102,065,000 121,508,689 223,629,766 3,966,731 43,574,866 459,074,959 507,162,242 <221,815,267> <494,661,040> 8,283,858 <815,472,466> 221,232,107 221,232,107 <17,631,810> 676,470,000 58,122,782 716,960,972 1,464,100 <38,540,432> <37,076,332> 239,447,109 <221,232,107> <17,250,902> 2,126,995 886,675 796,818,708 58,122,782 858,919,260 $ <583,160> 222,299,932 556,820,344 3,212,356 2,629,196 $ 779,120,276 <28,792,474> 43,446,794 43,621,685 1,366,805,048 $ 14,829,211 $ 1,410,251,842 2009 Comprehensive Annual Financial Report 23 Exhibit 4.1 Arizona Department of Transportation Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities for the fiscal year ended June 30, 2009 Net change in fund balances - total governmental funds (Exhibit 4) $ 43,446,794 Amounts reported for governmental activities in the Statement of Activities (Exhibit 2) are different because: Capital outlays are reported as expenditures in governmental funds (Note 4C). Bond proceeds provide current financial resources to governmental funds. However, issuing debt increases long-term liabilities in the statement of net assets. Governmental funds report the effect of issuance costs, premiums, discounts, and similar items when the debt is first issued, whereas these amounts are deferred and amortized in the statement of activities (Note 4C). Repayment of long-term debt is reported as an expenditure in governmental funds, but the repayment reduces long-term liabilities in the statement of net assets (Note 4C). Internal service funds are used by management to charge the cost of equipment rentals to individual funds. The net loss of the internal service funds is reported with governmental activities (Note 4C). Some items reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds (Note 4C). Change in net assets of governmental activities (Exhibit 2) 991,803,659 <753,764,977> 114,479,195 <5,559,471> 8,967,507 $ 399,372,707 The notes to the financial statements are an integral part of this statement. 2009 Comprehensive Annual Financial Report 24 fiscal yearComprehensive Annual Financial Report Proprietary Funds Financial Statements Major Funds Arizona Highways Magazine Fund The Department uses this fund in the publishing and marketing of the Arizona Highways Magazine and various other products that promote the State of Arizona. Highway Expansion and Extension Loan Program Fund This fund is an innovative financing mechanism to administer monies designated to provide loans and credit enhancement assistance to the Department and to sponsors of local transportation projects. Non-Major Fund Internal Service Fund The Department’s own internal service fund, known as the Equipment Fund, purchases and maintains equipment and materials to be used by other funds and state agencies. Exhibit 5 Arizona Department of Transportation Statement of Net Assets Proprietary Funds June 30, 2009 Business-type Activities - Enterprise Funds Highway Expansion and Extension Loan Program Fund ASSETS Current assets: Unrestricted cash on deposit with the State Treasurer Receivables: $ Subscriptions, net of allowance for doubtful accounts Accrued interest Loans Other, net allowance for doubtful accounts Inventories Prepaid items Restricted cash on deposit with the State Treasurer Total current assets - Arizona Highways Magazine Fund $ 1,530,866 Total $ 1,530,866 Governmental Activities Internal Service Fund $ 1,114,539 481,944 8,390,822 50,220,090 59,092,856 143,741 4,960 159,548 460,262 247,378 2,546,755 143,741 486,904 8,390,822 159,548 460,262 247,378 50,220,090 61,639,611 6,914 64,300 2,711,482 3,897,235 Non-current assets: Loans receivable Capital assets not subject to depreciation Capital assets subject to depreciation, net of accumulated depreciation Total noncurrent assets Total assets 15,660,000 - 7,900 15,660,000 7,900 - 15,660,000 74,752,856 123,515 131,415 2,678,170 123,515 15,791,415 77,431,026 50,552,106 50,552,106 54,449,341 LIABILITIES Current liabilities: Accounts payable Accrued payroll and other accrued expenses Due to Arizona counties and cities Unearned revenues (Note 5C) Compensated absences Capital leases payable (Note 5F) Total current liabilities 197 6,754 30,590 12,329 49,870 128,380 81,975 2,614,126 131,249 2,955,730 128,577 88,729 30,590 2,614,126 143,578 3,005,600 13,057 594,533 564,856 2,594,159 3,766,605 Non-current liabilities: Compensated absences Capital leases payable (Note 5F) Total noncurrent liabilities Total liabilities 49,870 2,955,730 3,005,600 153,612 487,361 640,973 4,407,578 NET ASSETS Invested in capital assets, net of related debt Restricted for loans and other financial assistance Unrestricted Total net assets $ 74,702,986 74,702,986 $ 131,415 <408,975> <277,560> 131,415 74,702,986 <408,975> 74,425,426 $ Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds Net assets of business-type activities $ The notes to the financial statements are an integral part of this statement. 2009 Comprehensive Annual Financial Report 25 3,096 74,428,522 47,470,586 2,571,177 50,041,763 Exhibit 6 Arizona Department of Transportation Statement of Revenues, Expenses, and Changes in Fund Net Assets Proprietary Funds for the fiscal year ended June 30, 2009 Business-type Activities - Enterprise Funds Highway Expansion and Extension Loan Program Fund Operating revenues: Sales and charges for services (net of write off $78,462) Interest on loans receivables Other Total operating revenues Operating expenses: Publication and promotional cost Repair and maintenance Fuel and lubricants Salaries and related benefits Shipping and postage Supplies Equipment purchase and rental Professional and outside services Insurance Travel Interest on Board Funding Obligations Depreciation Other Total operating expenses $ 1,127,759 1,127,759 Arizona Highways Magazine Fund $ 141,207 197 32,000 1,877,425 461 2,051,290 Operating income Total non-operating revenues 366,101 1,572,256 <58,785> <2,000> 39,603 <1,561> <865> <1,482,600> 1,511,471 <1,445,423> Capital contributions Transfer in Transfer out - Changes in net assets Total net assets - July 1 Total net assets - June 30 587,940 74,115,046 $ 74,702,986 $ 2,104,482 24,448 1,779,619 1,020,814 57,131 11,517 700,861 10,300 9,786 40,445 165,719 5,925,122 <923,531> Non-operating revenues : Income from investments Investment expense Gain on sale/disposal of capital assets Insurance recoveries Interest on capital leases Distributions to other state agencies 5,895,412 395,811 6,291,223 Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds The notes to the financial statements are an integral part of this statement. 2009 Comprehensive Annual Financial Report 26 $ 38,398,598 38,741 38,437,339 2,104,482 24,448 1,920,826 1,020,814 57,328 11,517 732,861 10,300 9,786 1,877,425 40,445 166,180 7,976,412 1,787,154 8,787,613 13,102,058 148,740 110,566 48,144 605,300 32,398 9,146,536 665,921 34,434,430 1,611,859 <60,346> <865> <1,484,600> <579,322> 301,762 <277,560> Change in net assets of business-type activities 5,895,412 1,127,759 395,811 7,418,982 <557,430> 500,000 - $ Total Governmental Activities Internal Service Fund $ 4,002,909 93,358 <2,603> <151,646> 257,903 <165,538> <9,370,100> 66,048 <9,338,626> 500,000 - 1,240,346 <1,464,100> 8,618 <5,559,471> 55,601,234 $ 50,041,763 8,618 Exhibit 7 Arizona Department of Transportation Statement of Cash Flows Proprietary Funds for the fiscal year ended June 30, 2009 Business-type Activities - Enterprise Funds Highway Expansion and Extension Loan Program Fund Cash flows from operating activities: Receipts from customers Receipts from other funds Receipts from Arizona counties and cities Payments to suppliers Payments to employees Payments to other funds Payments to Arizona counties and cities Other receipts Net cash provided by operating activities Cash flows from non-capital financing activities: $ Distributions to other state agencies Transfers from other funds Repayment of Board Funding Obligations Net cash provided by non-capital financing activities $ $ <923,531> $ 43,971,705 781 30,590 <1,492> <20,000,000> 1,877,425 $ $ 24,955,478 Non-cash capital and financing activities: Certain vehicles were contributed to the Equipment Fund by the General Fund totaling $1,240,346. The notes to the financial statements are an integral part of this statement. 2009 Comprehensive Annual Financial Report <9,370,100> <1,464,100> <10,834,200> - 39,603 <1,561> 38,042 - 27 <1,484,600> 500,000 <54,047,781> <55,032,381> - 1,743,070 <58,785> 1,684,285 <27,410,018> 77,630,108 $ 50,220,090 Reconciliation of operating income to net cash provided by operating activities: Operating income Adjustment to reconcile operating income to net cash provided by operating activities: Depreciation Net changes in assets and liabilities: Receivables Inventories Prepaid items Accounts payable Accrued payroll and other accrued expenses Due to Arizona counties and cities Unearned revenues Compensated absences Advance/interfund payable Accrued interest payable Net cash provided by operating activities Total <1,482,600> 500,000 <982,600> - Cash flows from investing activities: Interest on investments Investment expense Net cash provided by investing activities Governmental Activities Internal Service Fund 1,144,879 $ 5,730,939 $ 6,875,818 $ 33,900,000 33,900,000 29,645,006 14,067,252 14,067,252 8,752,492 <32,000> <3,827,687> <3,859,687> <11,362,535> <142,115> <1,790,591> <1,932,706> <13,186,713> <20,000,000> <20,000,000> <3,982,077> <3,982,077> 399,011 398,550 859 <461> 511,672 25,467,150 13,849,109 24,955,478 <2,000> <54,047,781> <54,049,781> Cash flows from capital and related financing activities: Proceeds from sale of capital assets Acquisition of capital assets Insurance recoveries Capital lease payments Net cash provided by capital and related financing activities Net increase in cash Cash - July 1 Cash - June 30 Arizona Highways Magazine Fund 1,097,707 <4,082,854> 257,903 <2,962,650> <5,689,894> 1,782,673 <60,346> 1,722,327 93,358 <2,603> 90,755 <432,886> <27,842,904> 1,963,752 79,593,860 1,530,866 $ 51,750,956 <2,584,230> 3,698,769 $ 1,114,539 366,101 40,445 $ <557,430> $ 40,445 4,002,909 9,146,536 198,503 44,170,208 <37,882> 247,987 247,987 813,728 442 442 28,942 28,942 <22,825> <10,787> <10,006> <14,103> 30,590 <359,776> <359,776> <185> <1,677> <38,154> <20,000,000> <1,100> 1,877,425 511,672 $ 25,467,150 $ 13,849,109 fiscal yearComprehensive Annual Financial Report Fiduciary Funds Financial Statement Agency Funds Highway Properties - Privilege Tax Fund This fund collects monies from renters of properties previously acquired by the Department for use in future highway development. Monies collected are distributed to the Department of Revenue. Highway Properties - 24 Percent Fund This fund collects 24 percent of the Department’s rental income from properties for use in future highway development. Monies collected are distributed to the local counties. Exhibit 8 Arizona Department of Transportation Statement of Net Assets Agency Funds June 30, 2009 ASSETS Restricted cash on deposit with the State Treasurer Total assets $ 229,560 $ 229,560 LIABILITIES Due to Arizona counties Total liabilities $ 229,560 $ 229,560 The notes to the financial statements are an integral part of this statement. 2009 Comprehensive Annual Financial Report 28 fiscal yearComprehensive Annual Financial Report Notes to the Financial Statements Arizona Department of Transportation Index – Notes to the Financial Statements June 30, 2009 Page Note 1 – Summary of Significant Accounting Policies ...............................................................................................30 A – Reporting Entity...........................................................................................................................................30 B – Government-wide and Fund Financial Statements.......................................................................................30 C – Measurement Focus, Basis of Accounting, and Financial Statement Presentation ......................................31 D – Assets, Liabilities, and Net Assets/Fund Balance........................................................................................33 E – Revenues and Expenditures/Expenses .........................................................................................................36 F – Interfund Activity and Balances ...................................................................................................................37 Note 2 – Funds by Classification.................................................................................................................................37 Note 3 – Budgeting, Budgetary Control, and Legal Compliance ................................................................................38 Note 4 – Accounting Pronouncements and Reconciliation of Government-wide and Fund Financial Statements .....38 A – New Accounting Pronouncements...............................................................................................................38 B – Explanations of Reconciling Items of the Balance Sheet of Governmental Funds to the Statement of Net Assets ...........................................................................................................................40 C – Explanations of Reconciling Items of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities .................................41 Note 5 – Detailed Notes on all Funds ..........................................................................................................................43 A – Capital Assets ..............................................................................................................................................43 B – Construction Commitments .........................................................................................................................44 C – Deferred/Unearned Revenues ......................................................................................................................44 D – Securities Held in Lieu of Retention............................................................................................................45 E – Interfund Receivables, Payables, Advances, and Transfers .........................................................................45 F – Leases ...........................................................................................................................................................46 G – Non-Current Liabilities................................................................................................................................47 H – Short-term Debt – Board Funding Obligations............................................................................................52 I – Fund Balances ...............................................................................................................................................52 Note 6 – Other Information .........................................................................................................................................53 A – Contingent Liabilities ..................................................................................................................................53 B – Pension and Other Postemployment Benefits ..............................................................................................53 2009 Comprehensive Annual Financial Report 29 Arizona Department of Transportation Notes to the Financial Statements June 30, 2009 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting and reporting policies of the Arizona Department of Transportation (Department) conform in all material respects to accounting principles generally accepted in the United States of America (GAAP) as applicable to governments. The Governmental Accounting Standards Board (GASB) is the primary standard setting body for establishing governmental accounting and financial reporting principles, which are primarily set forth in the GASB’s Codification of Governmental and Financial Reporting Standards (GASB Codification). Following is a summary of the Department’s significant accounting policies. A. Reporting Entity The Department is a department of the State of Arizona (State) and is not a legally separate entity. The Department has no component units. The Director of the Department serves as the Chief 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, approving all highway construction contracts, and distributing monies for local airport facilities’ projects through a grant program. The Department is responsible for the construction and maintenance of all State highways. The Department cooperates with the various cities and counties within the state in the construction and maintenance of State roads and with the Federal Highway Administration in the construction and maintenance of interstate and other highways. Assistance in the development of local airports, registering motor vehicles and aircraft, licensing drivers, and the publishing of the Arizona Highways Magazine are also responsibilities of the Department. B. Government-wide and Fund Financial Statements The government-wide financial statements (i.e., the Statement of Net Assets and the Statement of Activities) report information on all of the non-fiduciary activities of the government. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by federal reimbursement, taxes, and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for services. The Statement of Net Assets presents the reporting entity’s non-fiduciary assets and liabilities, with the difference reported as net assets. Net assets are reported in three categories: Invested in capital assets, net of related debt consists of capital assets, net of accumulated depreciation and is reduced by outstanding balances for bonds, notes, and other debt that are attributed to the acquisition, construction, or improvement of those assets. Restricted net assets result when constraints placed on asset use are either externally imposed by creditors, grantors, contributors, and the like, or imposed by law through constitutional provisions or enabling legislation. Unrestricted net assets consist of net assets which do not meet the definition of the two preceding categories. Unrestricted net assets often are designated to indicate that management does not consider them to be available for general operations. Unrestricted net assets often have constraints on resources which are imposed by management, but can be removed or modified by management or the Transportation Board. The Statement of Activities demonstrates the degree to which the direct expenses of a given function are offset by program revenues. Direct expenses are those that are clearly identified with a specific function. Program revenues include: 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function, and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function. Taxes and other items not properly included among program revenues are reported instead as general revenues. 2009 Comprehensive Annual Financial Report 30 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2009 Fund Financial Statements Separate statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major proprietary funds are reported as separate columns in the fund financial statements, with non-major funds being reported in a single column. C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the full accrual basis of accounting, as are the proprietary funds. Revenues are recorded when earned and expenses are recorded when the liability is incurred, regardless of the timing of related cash flows. Taxes are recognized as revenues in the year they are levied for transportation excise, aircraft licensing, aviation and motor fuel, flight property, and underground storage tanks. Motor carrier and vehicle license taxes are recognized when received. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. As allowed by GASB Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities that Use Proprietary Fund Accounting, the Department’s enterprise funds follow GASB pronouncements and those Financial Accounting Standard Board Statements (FASB) and Interpretations, Accounting Principle Board Opinions, and Accounting Research Bulletins that were issued on or before November 30, 1989, except those that conflict with a GASB pronouncement. The enterprise funds do not follow any FASB Statements and Interpretations issued after November 30, 1989. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the Department considers revenues to be available if they are collected within 60 days of the end of the fiscal year, e.g. federal revenue reimbursements, vehicle license taxes, and highway user revenue taxes. Expenditures generally are recorded when a liability is incurred as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due and payable. Financial Statement Presentation The Department reports the following major governmental funds: The General Fund, known as the State Highway Fund, is the primary operating fund. It accounts for all financial resources except for those required to be accounted for in another fund. Expenditures are reported for general operations of the Department, including road and bridge repairs, maintenance and construction, planning and development, engineering, and administration. Revenues are received from the following primary sources: fuel and motor carrier taxes and fees; vehicle registrations, titles, licenses and related fees; and federal grants. The Maricopa Regional Area Road Construction Fund is a special revenue fund that receives a portion of Maricopa County Transportation Excise Tax monies collected by the Department of Revenue. These monies are expended for the construction of new freeways and other routes, improvements to existing freeways and other routes, and improvements to the arterial street system, which are included in the Maricopa County Regional Transportation Plan. The Motor Vehicle Division Clearing Fund is a special revenue fund which accounts for the collection and disbursement of certain Motor Vehicle Division revenues e.g. vehicle registration, title, license, and related taxes and fees, and fuel and motor carrier taxes and fees. 2009 Comprehensive Annual Financial Report 31 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2009 The Highway User Revenue Fund is a special revenue fund which collects motor vehicle and liquid use fuel taxes and receives certain Motor Vehicle Division revenues from the Motor Vehicle Division Clearing Fund. These monies are distributed to the General Fund (State Highway Fund), the Department of Public Safety, the Economic Strength Project Fund, incorporated cities, counties and other legislatively appropriated entities. The Debt Service Fund is used to account for the accumulation of resources for, and the payments of, general long-term debt principal and interest of the governmental funds. The Capital Projects Fund is used to account for financial resources to be used for the acquisition or construction of major capital facilities in the governmental funds. The Department reports the following major proprietary funds: The Highway Expansion and Extension Loan Program Fund is an innovative financing mechanism to administer funds designated to provide loan and credit enhancement assistance to sponsors of local transportation projects. The Arizona Highways Magazine Fund publishes and markets the Arizona Highways Magazine and various other products that promote the State of Arizona. Additionally, the Department reports the following funds: The Internal Service Fund, which accounts for purchases and maintenance of equipment and materials to be used by other divisions in the Department and other government agencies. The Equipment Fund is the Department’s only internal service fund. The Agency Funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. The Department has two agency funds: the Highway Properties – Privilege Tax Fund and the Highway Properties – 24 Percent Fund (neither are included in the government-wide statements). As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are charges for services by the Equipment Fund to the other governmental functions. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenues include: 1) charges for services, 2) operating grants and contributions, and 3) capital grants and contributions. Internally dedicated resources are reported as general revenues rather than program revenues. Likewise, general revenues include all taxes. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues are charges for services and magazine subscriptions. The Department also recognizes as operating revenues interest on loan receivables and other revenues intended to recover the cost of services. Operating expenses for the enterprise funds and the internal service fund include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. When both restricted and unrestricted resources are available for use, the Department generally expends the restricted resources first, and then unrestricted resources, as they are needed to maintain appropriate cash balances and finance the construction program. 2009 Comprehensive Annual Financial Report 32 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2009 D. Assets, Liabilities, and Net Assets/Fund Balance Deposits and Investments The Department’s cash includes petty cash, bank accounts, and deposits with the State Treasurer for pooled investments. All investments are carried in the name of the State of Arizona. State statutes require the State Treasurer to invest these pooled funds in collateralized time certificates of deposit, repurchase agreements, obligations of the U.S. Government, or other permitted investments. All investments are carried at fair value. These balances are not subject to GASB Statement No. 3, Deposits with Financial Institutions, Investments (including Repurchase Agreements), and Reverse Repurchase Agreements, and GASB Statement No. 40, Deposit and Investment Risk Disclosures – an amendment of GASB Statement No. 3, classification because they are included in the state’s investment pool. The investment pool is not required to register (and is not registered) with the Securities and Exchange Commission under the 1940 Investment Advisors Act. The activity and performance of the pool is reviewed monthly by the State Board of Investment in accordance with Arizona Revised Statutes, §35-311. The fair value of investments is measured on a monthly basis. Participant shares are purchased and sold based on the Net Asset Value (NAV) of the shares. The NAV is determined by dividing the fair value of the portfolio by the total shares outstanding. The State Treasurer does not contract with an outside insurer in order to guarantee the value of the portfolio or the price of shares redeemed. As of June 30, 2009, the state’s investment pools were not rated. State statutes require the State Treasurer to maintain separate investment accounts for the portions of the Highway Revenue Bond Proceeds Fund relating to the Highway Revenue Bond issues and the Maricopa Regional Area Road Bond Proceeds Fund relating to the Transportation Excise Tax Revenue Bond issues. These funds may be invested by the Treasurer in the state’s investment pool. The Department’s investments are included in the state investment pool and these investments are not shown in the Department’s name. From the perspective of the Department, the pool functions as both a cash management pool and a demand deposit account. Therefore, the Department presents its equity in the internal pool as required in GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools and carries the investments at amortized cost. The Department has restricted cash for payment of capital projects for Maricopa and Pima Counties, for future debt service payments, and for the Statewide Transportation Acceleration Needs account. Receivables, Payables and Advances Activities between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as interfund receivables/payables. All other outstanding balances between U.S. Government, Arizona counties and cities, and other state agencies are reported as due to/from. Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as internal balances. Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. The other receivables and subscriptions receivables are shown net of allowance for doubtful accounts. For other receivables comprising recoverable insurance claims, the amount reserved for doubtful accounts is comprised of 100% of balances greater than six years old, 95% of balances from four to six years old, and a percentage of balances less than four years old. The subscriptions receivable allowance for doubtful accounts is equivalent to an estimated number of issues delivered on outstanding subscription payments past due more than 90 days. Notes receivable represents loans made to parties purchasing assets previously owned by the Department for highway construction purposes. 2009 Comprehensive Annual Financial Report 33 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2009 Inventories and Prepaid Items The governmental activities inventory is valued at cost, which approximates market, using the moving average method. This inventory is accounted for using the consumption method. Under this method, inventories are recorded as expenditures as they are used. The fund financial statement shows a reservation for inventory for the like amount indicating it does not constitute available expendable resources. No reservation of net assets is shown in the government-wide statements for inventories. The business-type activities’ inventories are stated at the lower of cost or market. Costs of enterprise fund inventories consisting of resale products and supplies are generally determined by moving average cost and specific identification methods, respectively. Costs of the internal service fund’s inventories (consisting of vehicle parts and supplies, fuels and lubricants, and other supplies) are determined by moving average cost methods. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both the government-wide and fund financial statements. Restricted Assets Certain proceeds of the Department’s governmental revenue bonds, as well as certain resources of the General Fund (State Highway Fund) and the Highway Expansion and Extension Loan Program Fund (enterprise fund) are classified as restricted assets on the balance sheet because they are maintained in separate accounts and their use is limited by applicable bond covenants or state statutes. State law requires 12.6 percent of the revenues allocated each year to the General Fund (State Highway Fund) from the Highway User Revenue Fund be allocated for design, purchase of right-of-way, or construction of controlled-access highways, arterial streets and local highways that are included in the regional transportation plan of counties with populations in excess of 400,000 (Maricopa and Pima counties). State Transportation Board policy further allocates 2.6 percent of the revenues allocated each year to the General Fund (State Highway Fund) from the Highway User Revenue Fund for the design, purchase of right-ofway, or construction of controlled-access highways, that are included in the regional transportation plan of counties with populations in excess of 400,000 (Maricopa and Pima counties). The debt service fund is used to report the resources set aside for payment of future debt service. Bond proceeds are deposited in the capital projects fund and are restricted for acquisitions of right-of-way and construction of federal, state, and local highways. The Department has restricted cash for payment of capital projects for Maricopa and Pima Counties, for future debt service payments, and for the Statewide Transportation Acceleration Needs account. Capital Assets Capital assets, which include land, buildings and improvements, improvements other than buildings, machinery and equipment, infrastructure, and construction in progress, are reported in the applicable governmental or business-type columns in the government-wide financial statements. Capital assets are defined by the Department as assets with an initial, individual cost of $5,000 or more and an estimated useful life in excess of one year. Purchased capital assets are recorded at historical cost or estimated historical cost if historical cost is not available. Donated capital assets are recorded at estimated fair value at the date of donation. Costs of normal maintenance and repairs that do not add to the value of the asset or materially extend the assets’ lives are not capitalized. Outlays for capital assets are capitalized at the time of the purchase or, in the case of infrastructure, at the time of final acceptance by the Department from the contractor. Asset preservation costs are expensed as incurred. 2009 Comprehensive Annual Financial Report 34 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2009 The Department depreciates non-infrastructure capital assets on a straight-line basis using the following estimated useful lives: Assets Buildings and improvements Improvements other than buildings Machinery and equipment Mobile fleet and aircraft Years 20-40 20-40 5-15 5-15 Infrastructure was capitalized for the first time in fiscal year 2002. The infrastructure assets are reported in the governmental-type activities column of the Statement of Net Assets. The Department’s infrastructure assets consist of roads and bridges and are presented using the modified approach and, therefore, are not depreciated. In order to utilize the modified approach, the Department is required to: 1) maintain an asset management system that includes an up to date inventory of eligible infrastructure assets, 2) perform condition assessments of eligible assets and summarize the results using a measurement scale, 3) estimate each year the annual amount to maintain and preserve the assets at the condition level established and disclosed by the Department, and 4) document that the assets are being preserved approximately at or above the established condition level. Deferred/Unearned Revenues In the government-wide statements and proprietary fund financial statements, deferred/unearned revenues are recorded when cash, receivables, or other assets are received prior to revenue being recognized. In the governmental funds, amounts are reported as deferred revenues until they are available to liquidate liabilities of the current period. Deferred/unearned revenues are reported in the government-wide statements for the business-type activities and in the fund statements for both the governmental and proprietary funds. In the government-wide statements, the unearned revenues relate to unearned subscription revenue for the Arizona Highways Magazine. Unearned subscription revenue is recorded when subscription orders are received and is amortized as revenue over the terms of the related subscriptions. Costs associated with the selling of subscriptions are expensed in the year incurred. In the fund statements for the General Fund (State Highway Fund), the deferred revenue represents the amount for the notes receivable for loans made to parties who purchased assets previously owned by the Department for highway construction purposes. For the Non-Major Governmental Funds, the deferred revenue represents airport capital improvements designed to generate airport revenues and/or related airport economic development efforts. Loans are typically for construction of aircraft storage hangars, fuel dispensing and storage facilities, and terminal buildings. Loan rates vary and are based on the Bond Buyer Index (BBI) for 25 year national revenue bonds. Loan periods are typically 10 to 25 years in length. Compensated Absences It is the Department’s policy to permit employees to accumulate earned but unused sick leave and vacation benefits as well as compensatory time. There is no liability for unpaid accumulated sick leave for the Department. All vacation pay and compensatory time is accrued when incurred in the government-wide and proprietary fund financial statements. Effective July 1, 1998, state employees are eligible to receive payment for an accumulated sick leave balance of 500 hours or more with a maximum of 1,500 hours, upon retirement directly from state service. The benefit value is calculated by taking the employee’s hourly rate of pay at the retirement date, multiplied by the number of sick hours at the retirement date, times the eligibility percentage. The eligibility percentage varies based upon the number of accumulated sick hours from 25 percent for 500 hours to a maximum of 50 percent for 1,500 hours. The maximum benefit value is $30,000. 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 Internal Service Fund. 2009 Comprehensive Annual Financial Report 35 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2009 Employees are allowed to accumulate up to 240 hours of vacation leave (320 hours for uncovered employees) and up to 240 hours of compensatory time which is paid when vacation or compensatory time is taken or upon termination of employment at the individual’s then current rate of pay. The liabilities for vacation and compensatory time outstanding as of June 30 for both the governmental and proprietary funds are reported on the Statement of Net Assets. Long-term Obligations In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities. Bond premiums and discounts are deferred and amortized using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. Other long-term obligations also include amounts that other governmental entities advance the Department for highway road construction projects. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as issuance costs, during the current period. The face amount of the debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Advances from other governmental entities are recorded as debt issuance in other financing sources. Net Assets/Fund Balance The difference between assets and liabilities is “Net Assets” on the government-wide and proprietary statements and “Fund Balance” on the governmental fund statements. Reservations Fund balances for governmental funds are classified as either reserved or unreserved in the fund financial statements. Reserved fund balances reflect either: 1) funds legally segregated for a specific purpose, or 2) assets, which, by their nature, are not available for expenditure. Unreserved fund balances reflect the balances available for appropriation for the general purposes of the fund. E. Revenues and Expenditures/Expenses In the government-wide Statement of Activities, revenues and expenses are segregated by activity (governmental or business-type), then further by function (e.g. Administration, Aeronautics, Highway, etc). Additionally, revenues are classified between program and general revenues. Program revenues include: 1) charges for services, 2) operating grants and contributions, and 3) capital grants and contributions. Internally dedicated resources are reported as general revenue rather than as program revenue. General revenue includes all taxes and interest on investments. In the governmental fund financial statements, revenues are reported by source. Expenditures are reported by function (e.g., Administration, Distributions to Arizona counties and cities, Distributions to other state agencies, Debt service, Capital outlay, etc.). The Distributions to Arizona counties and cities and Distributions to other state agencies are shared tax revenues that are distributed based on statutory requirements. Debt service includes both interest and principal outlays related to bonds, loans, advances, board funding obligations and capitalized leases. Capital outlay includes expenditures for real property or infrastructure (e.g. bridges and roads). Revenues and expenses of proprietary funds are classified as operating and non-operating and are sub-classified by object (e.g., salaries, equipment rental, depreciation, etc). Operating revenues and expenses generally result from providing services and producing and delivering goods. All other revenues and expenses are reported as nonoperating. 2009 Comprehensive Annual Financial Report 36 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2009 Other Financing Sources Other financing sources are additions to the governmental fund balances in the fund financial statements and include resources and financing provided by bond issuance, sale of capital assets, capital leases, insurance recovery, and transfers from other funds. Other financing uses are reductions of governmental fund resources in fund financial statements normally resulting from transfers to other funds. F. Interfund Activity and Balances Interfund Activity As a general rule, the effect of interfund activity has been eliminated from the government-wide statements. Exceptions to this rule are activities between the funds reported as governmental activities and the funds reported as business-type activities (e.g. the transfer of the gain or loss from the Equipment Fund). Interfund Balances Interfund receivables and payables have been eliminated from the Statement of Net Assets, except for the residual amounts due between governmental and business-type activities. 2. FUNDS BY CLASSIFICATION The following table lists all of the funds whose balances are reflected in this financial report. MAJOR FUNDS Governmental Funds: General Fund (State Highway Fund) Special Revenue Funds: Maricopa Regional Area Road Construction Fund Motor Vehicle Division Clearing Fund Highway User Revenue Fund Debt Service Fund Capital Projects Fund NON-MAJOR FUNDS Other Governmental Funds: Special Revenue Funds: State Aviation Fund Safety Enforcement and Transportation Infrastructure Fund Motor Vehicle Liability Insurance Enforcement Fund Motor Vehicle Inspection and Title Enforcement Fund Motor Carrier Safety Revolving Fund Underground Storage Tank Fund Economic Strength Project Fund Grant Anticipation Notes Fund Local Agency Deposits Fund Proprietary Funds: Arizona Highways Magazine Fund Highway Expansion and Extension Loan Program Fund FIDUCIARY FUNDS Agency Funds: Highway Properties–Privilege Tax Fund Highway Properties–24 Percent Fund 2009 Comprehensive Annual Financial Report 37 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2009 3. BUDGETING, BUDGETARY CONTROL, AND LEGAL COMPLIANCE An annual budget for the operating expenditures of the General Fund (State Highway Fund) is submitted to the Governor in accordance with state law. The budget is legally enacted as appropriations after approval by the state legislature and signature by the Governor. The legal level of control for operating expenditures 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 allocated within all divisions. In certain divisions, other specific programs are allocated in addition to these categories. Revenue budgets are developed internally by the Department and are not a part of the appropriation process. Amendments to the approved appropriations require legislative approval. However, since the Department’s appropriation is a lump sum appropriation by program, the allocation of funds between personal services, employeerelated expenses, and other operating expenditures is an internal decision for the program manager. Accordingly, transfers between line items such as personal services and other operating expenditures within a particular program may be made by the program manager. Transfers of funds between programs require the approval of the Director of the Department of Administration. Expenditures may not exceed appropriations. All transfers of funds are reported to the Department’s Office of Strategic Planning and Budgeting for monitoring purposes. Budgets are prepared on the cash basis except that liabilities incurred before the end of the fiscal year and paid within the first month of the subsequent fiscal year are charged against the prior fiscal year’s budget. The Department’s appropriations lapse at year-end unless exempted by the legislature. In addition, budgets for capital outlay, including land, building, and improvements for the General Fund (State Highway Fund) and State Aviation Fund, are also submitted to the Governor in accordance with state law. The capital outlay appropriation includes state highway construction and land, building, and improvements for the General Fund (State Highway Fund). A legal limitation is adopted for land, building, and improvements; however, legislation allows the Department to spend in excess of its appropriation for state highway construction up to the current fund balance. The Department monitors expenditures through an internal budgetary process and the 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. 4. ACCOUNTING PRONOUNCEMENTS AND RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS A. New Accounting Pronouncements Statement No. 49 Accounting and Financial Reporting for Pollution Remediation Obligations This Statement addresses accounting and financial reporting standards for pollution (including contamination) remediation obligations, which are obligations to address the current or potential detrimental effects of existing pollution by participating in pollution remediation activities such as site assessments and cleanups. The scope of the document excludes pollution prevention or control obligations with respect to current operations, and future pollution remediation activities that are required upon retirement of an asset, such as landfill closure and post closure care and nuclear plant decommissioning. Essentially, once any one of five specified obligating events occurs, a government is required to estimate the components of expected pollution remediation outlays and determine whether outlays for those components should be accrued as a liability or, if appropriate, capitalized when goods and services are acquired. The provisions of this Statement are effective for periods beginning after December 15, 2007. The Department has implemented this Statement. 2009 Comprehensive Annual Financial Report 38 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2009 Statement No. 50 Pension Disclosures This Statement more closely aligns the financial reporting requirements for pensions with those for other postemployment benefits and, in doing so, enhances information disclosed in notes to financial statements or presented as required supplementary information by pension plans and by employers that provide pension benefits. This Statement amends Statements 25 and 27 to require defined benefit pension plans and sole and agent employers to present certain information related to note disclosures or required supplementary information. The provisions of this Statement are effective for periods beginning after June 15, 2007. The Department does not have any pension plans, as defined by this Statement, and therefore, this Statement is not applicable to the Department. Statement No. 51 Accounting and Financial Reporting for Intangible Assets The objective of this Statement is to establish accounting and financial reporting requirements for intangible assets to reduce inconsistencies, thereby enhancing the comparability of the accounting and financial reporting of such assets among state and local governments. This Statement requires that all intangible assets not specifically excluded by its scope provisions be classified as capital assets. Accordingly, existing authoritative guidance related to the accounting and financial reporting for capital assets should be applied to these intangible assets, as applicable. This Statement also provides authoritative guidance that specifically addresses the nature of these intangible assets. Such guidance should be applied in addition to the existing authoritative guidance for capital assets. The provisions of this Statement are effective for periods beginning after June 15, 2009. The Department will implement this Statement as appropriate. The effect of implementation has not yet been determined. Statement No. 52 Land and Other Real Estate Held as Investments by Endowments This statement establishes consistent standards for the reporting of land and other real estate held as investments by essentially similar entities. It requires endowments to report their land and other real estate investments at fair value. Governments also are required to report the changes in fair value as investment income and to disclose the methods and significant assumptions employed to determine fair value, and other information that they currently present for other investments reported at fair value. The provisions of this Statement are effective for periods beginning after June 15, 2008. This Statement is not applicable to the Department. Statement No. 53 Derivative Instruments This statement addresses the recognition, measurement, and disclosure of information regarding derivative instruments entered into by state and local governments. Governments enter into derivative instruments as investments; as hedges of identified financial risks associated with assets or liabilities, or expected transactions; or to lower the cost of borrowing. The requirements of this statement are effective for financial statements for periods beginning after June 15, 2009. The Department will implement this Statement as appropriate. The effect of implementation has not yet been determined. Statement No. 54 Fund Balance Reporting and Governmental Fund Type Definitions The objective of this Statement is to enhance the usefulness of fund balance information by providing clearer fund balance classifications that can be more consistently applied and by clarifying the existing governmental fund type definitions. This Statement establishes fund balance classifications that comprise a hierarchy based primarily on the extent to which a government is bound to observe constraints imposed upon the use of the resources reported in governmental funds. The initial distinction that is made in reporting fund balance information is identifying amounts that are considered nonspendable, such as fund balance associated with inventories. This Statement also provides for additional classification as restricted, committed, assigned, and unassigned based on the relative strength of the constraints that control how specific amounts can be spent. Governments also are required to classify and report amounts in the appropriate fund balance classifications by applying their accounting policies that determine whether restricted, committed, assigned, and unassigned amounts are considered to have been spent. Disclosures of the policies in the notes to the financial statements is required. The requirements of this Statement are effective for 2009 Comprehensive Annual Financial Report 39 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2009 financial statements for periods beginning after June 15, 2010. The Department will implement this Statement as appropriate. The effect of implementation has not yet been determined. Statement No. 55 The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments The objective of this Statement is to incorporate the hierarchy of generally accepted accounting principles (GAAP) for state and local governments into the Governmental Accounting Standards Board’s (GASB) authoritative literature. The “GAAP hierarchy” consists of the sources of accounting principles used in the preparation of financial statements of state and local governmental entities that are presented in conformity with GAAP, and the framework for selecting those principles. The GASB is responsible for establishing GAAP for state and local governments. However, the current GAAP hierarchy is set forth in the American Institute of Certified Public Accountants’ (AICPA) Statement on Auditing Standards No. 69, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles, rather than in the authoritative literature of the GASB. The requirements in this Statement were effective upon its issuance in March 2009. Statement No. 56 Codification of Accounting and Financial Reporting Guidance Contained in the AICPA Statements on Auditing Standards The objective of this Statement is to incorporate into the Governmental Accounting Standards Board’s (GASB) authoritative literature certain accounting and financial reporting guidance presented in the American Institute of Certified Public Accountants Statements on Auditing Standards. This Statement addresses three issues not included in the authoritative literature that establishes accounting principles. The presentation of principles used in the preparation of financial statements is more appropriately included in accounting and financial reporting standards rather than in the auditing standards. This Statement does not establish new accounting standards but rather incorporates the existing guidance (to the extent appropriate in a governmental environment) into the GASB standards. The requirements in this Statement were effective upon its issuance in March 2009. B. Explanations of Reconciling Items of the Balance Sheet of Governmental Funds to the Statement of Net Assets The governmental funds Balance Sheet includes reconciliation between total fund balances – governmental funds and net assets of governmental activities as reported on the government-wide Statement of Net Assets. The following explanations are necessary to clarify these differences between the governmental fund Balance Sheet and the government-wide Statement of Net Assets: 1. Capital assets are not included on the fund statements, but are included on the government-wide statement as follows: 2. Capital assets not subject to depreciation Capital assets subject to depreciation $ 16,047,188,456 188,758,507 Less Internal Service Fund (Equipment Fund) assets 16,235,946,963 <50,552,106> $ 16,185,394,857 Deferred revenues for assets shown in fund statements for the following funds: Governmental Funds: General Fund (State Highway Fund) State Aviation Fund $ 12,094,390 7,695,059 $ 19,789,449 2009 Comprehensive Annual Financial Report 40 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2009 3. Long-term liabilities, including bonds payable, are not due and payable in the current period and are not reported in the current period on the fund statements. The detail for the difference is as follows: Bonds payable Deferred charges - bond issuance costs - outstanding amount Capital leases Compensated absences Advances and notes payable Business activity share of Equipment Fund gain $ <3,020,857,639> 13,696,525 <1,244,664> <15,011,081> <42,667,833> <3,096> $ <3,066,087,788> C. Explanations of Reconciling Items of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities The governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balances includes a reconciliation between net change in fund balances – total governmental funds and changes in net assets of governmental activities as reported on the government-wide Statement of Activities. The following explanations are necessary to clarify these differences between the governmental fund Statement of Revenues, Expenditures, and Changes in Fund Balances and the government-wide Statement of Activities: 1. Governmental funds report capital outlay as expenditures. However, in the Statement of Activities, these costs are removed; some costs are capitalized as assets while other costs are expensed as follows: Capital outlay Adjustment to infrastructure Less depreciation expense – governmental funds $ 1,077,834,940 <68,571,719> <17,459,562> $ 991,803,659 2009 Comprehensive Annual Financial Report 41 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2009 2. The issuance of long-term debt (e.g. bonds) provides current financial resources to governmental funds, while the repayment of principal of long-term debt consumes current financial resources of the governmental funds. Neither transaction, however, has any effect on net assets. Also, the government reports the effect of bond issuance costs, premiums, discounts, and similar items when debt is first issued, whereas these amounts are amortized in the Statement of Activities. The details of this difference are as follows: Debt issued or incurred: Issuance of Highway Revenue Bonds Issuance of Transportation Excise Tax Revenue Bonds Issuance Grant Anticipation Notes (GARVEE bonds) Premium on bonds Bond issuance costs Advances and notes payable $<181,050,000> <440,000,000> <55,420,000> <58,122,782> 3,966,731 <23,138,926> $<753,764,977> Principal repayments: Highway Revenue Bonds Transportation Excise Tax Revenue Bonds Grant Anticipation Notes (GARVEE bonds) Amortization of premium and discount Amortization of bond issuance costs $ 64,190,000 13,825,000 24,050,000 13,396,497 <982,302> $ 114,479,195 3. The Internal Service Fund is used by the Department to charge the cost for purchases and maintenance of equipment and material to be used by other funds and state agencies. The gain in the Internal Service Fund represents over billing and must be eliminated from the government-wide Statement of Activities for the business activity. Internal Service Fund (Equipment Fund): Changes in net assets Business activity share of Equipment Fund loss $ <5,559,471> $ <5,559,471> 4. Some expenses reported in the Statement of Activities do not require the use of current financial resources and therefore, are not reported as expenditures in the governmental funds. The details are as follows: Capital lease Notes and loans Compensated absences $ $ 2009 Comprehensive Annual Financial Report 42 412,097 8,867,771 <312,361> 8,967,507 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2009 5. DETAILED NOTES ON ALL FUNDS A. Capital Assets Capital assets activity for the year ended June 30, 2009, was as follows: July 1, 2008 Beginning Balance Governmental Activities Capital assets, not being depreciated: Land Infrastructure Construction in progress Total capital assets, not being depreciated $ Capital assets, being depreciated: Buildings and improvements Improvements other than buildings Machinery and equipment Mobile fleet and aircraft Total capital assets, being depreciated Less accumulated depreciation for: Buildings and improvements Improvements other than buildings Machinery and equipment Mobile fleet and aircraft Total accumulated depreciation 2,351,812,086 10,101,407,936 2,607,927,197 15,061,147,219 Increases $ Decreases 81,801,844 533,372,387 970,940,620 1,586,114,851 <2,101,600> <10,989,907> <13,091,507> 173,940,271 23,570,336 54,940,705 137,072,847 389,524,159 <66,466,379> <3,247,541> <38,150,927> <88,310,276> <196,175,123> <3,655,821> <371,860> <4,541,587> <8,890,294> <17,459,562> <1,507,842> 4,621,249 9,755,626 12,869,033 <71,630,042> <3,619,401> <38,071,265> <87,444,944> <200,765,652> 912,206 Governmental activities capital assets, net $ 15,249,215,994 $ 1,587,027,057 July 1, 2008 Beginning Balance $ Capital assets, being depreciated: Buildings and improvements Machinery and equipment Total capital assets, being depreciated 7,900 $ Business-type activities capital assets, net 164,825 $ 172,725 $ June 30, 2009 Ending Balance Decreases - $ - $ 7,900 <8,647> <8,647> 981,157 2,182,794 3,163,951 <33,818> <6,627> <40,445> 7,782 7,782 <878,660> <2,161,776> <3,040,436> <40,445> <865> 123,515 <40,445> $ <865> $ 131,415 2009 Comprehensive Annual Financial Report 43 188,758,507 $ <600,296,088> $ 16,235,946,963 - <844,842> <2,162,931> <3,007,773> Total capital assets, being depreciated, net <222,474> Increases 981,157 2,191,441 3,172,598 Less accumulated depreciation for: Buildings and improvements Machinery and equipment Total accumulated depreciation <48,700,558> $ 2,384,913,372 <2,991,239> 10,631,789,084 <548,381,817> 3,030,486,000 <600,073,614> 16,047,188,456 15,209,663 22,165 <2,090,326> 5,230,266 18,371,768 188,068,775 Capital assets, not being depreciated: Land $ 158,730,608 23,548,171 59,132,631 142,832,488 384,243,898 Total capital assets, being depreciated, net Business-type Activities June 30, 2009 Ending Balance Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2009 Depreciation expense was charged to functions/programs as follows: Governmental Activities: Administration Aeronautics Highway Highway Maintenance Motor Vehicle $ 1,867,584 530,469 2,466,814 1,818,512 1,629,647 8,313,026 Capital assets held by the Department's internal service fund are charged to the various functions based on their usage of the assets B. 9,146,536 Total depreciation expense - governmental activities $ 17,459,562 Business-type Activities Arizona Highways Magazine Fund $ 40,445 Construction Commitments The Department’s outstanding commitments for contracts at June 30, 2009, were $1,137,247,223. Construction Contracts: Rural Roadways Small Urban Roadways Urban Roadways Large Urban Roadways Sub-total Design Contracts Other Commitments Total C. Expenditures To Date Remaining Commitment $ 408,912,416 72,712,913 109,004,773 712,494,940 1,303,125,042 811,431,736 437,731,925 $2,552,288,703 $ 264,056,339 51,786,268 42,001,613 299,315,672 657,159,892 94,255,332 385,831,999 $ 1,137,247,223 Deferred/Unearned Revenues In the fund financial statements, the deferred/unearned revenues represent the amount for notes receivable for loans made to parties who purchased assets previously owned by the fund for highway construction purposes. The State Aviation Fund amount represents loans to various local governments for construction of hangars, taxiway extensions, runways, etc. These loans were made at a fixed rate and with various maturities. The proprietary fund includes the amount for unearned subscriptions. The following schedule is a summary of the amounts outstanding as of June 30, 2009: Governmental Funds: General Fund (State Highway Fund) State Aviation Fund Proprietary Funds: Arizona Highways Magazine Fund $ 12,094,390 7,695,059 $ 19,789,449 $ 2,614,126 2009 Comprehensive Annual Financial Report 44 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2009 D. Securities Held in Lieu of Retention In accordance with Arizona law, a contractor may assign to the Department securities in lieu of retention and will deposit with a bank, cash, time certificates of deposit in federally insured banks licensed by the State of Arizona (Certificates of Deposit), securities of or guaranteed by the United States of America (Treasury Bills), or other eligible securities as defined in the Arizona Revised Statutes, Title 35, Chapter 2, Article 2, §35-313. At June 30, 2009, the banks held assignment on securities aggregating approximately $184,000 in lieu of contractor retentions for construction. These additional securities are not reflected in the accompanying financial statements. E. Interfund Receivables, Payables, Advances, and Transfers The balances of current interfund receivables and payables as of June 30, 2009, were: Receivables Governmental activities: General Fund (State Highway Fund) Highway User Revenue Fund Capital Projects Fund Non-Major Governmental Funds Business-type acivities: Arizona Highways Magazine Payables Amount Highway User Revenue Fund Motor Vehicle Division Clearing Fund Maricopa Regional Area Road Fund Capital Projects Fund Local Agency Deposits Fund Motor Vehicle Division Clearing Fund General Fund (State Highway Fund) General Fund (State Highway Fund) General Fund (State Highway Fund) Motor Vehicle Division Clearing Fund $ 87,753,350 429,711 475 7,500 380,435 23,145,066 75,733 13,070 407,100 2,793,280 115,005,720 Motor Vehicle Division Clearing Fund 12,320 $ 115,018,040 The General Fund (State Highway Fund) receivable of $87,753,350 is an accrual for fuel tax revenues imposed in fiscal year 2009 from the Highway User Revenue Fund that will be collected in fiscal year 2010. The Highway User Revenue Fund receivable of $23,145,066 is an accrual for vehicle license taxes due in fiscal year 2009 from the Motor Vehicle Division Clearing Fund that will be collected in fiscal year 2010. 2009 Comprehensive Annual Financial Report 45 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2009 Interfund transfers for the year ended June 30, 2009, consisted of the following: Interfund Transfers In: Interfund Transfers Out: General Fund (State Highway Fund) Capital Projects Fund Maricopa Regional Area Road Construction Fund Non-Major Governmental Funds Internal Service Fund (Equipment Fund) Total General Fund (State Highway Fund) - Debt Service Fund $ 134,085,483 17,631,810 16,750,902 $ 16,750,902 30,974,382 38,540,432 $ 221,232,107 $ Arizona Non-Major Highways Governmental Magazine Funds Fund $ - $500,000 1,464,100 $ 1,464,100 $500,000 Total $ 134,585,483 17,631,810 47,725,284 38,540,432 1,464,100 $ 239,947,109 The General Fund (State Highway Fund) ($134,085,483), the Capital Projects Fund ($17,631,810), the Maricopa Regional Area Road Construction Fund ($30,974,382), and Non-Major Governmental Funds - Grant Anticipation Notes Fund ($38,540,432) made transfers to the Debt Service Fund to pay bond debt service. The General Fund (State Highway Fund) transferred money to the Arizona Highways Magazine Fund to provide for continuing operating expenses. The Maricopa Regional Area Road Construction Fund ($16,750,902) made loan principal and interest payments to the General Fund (State Highway Fund) for loan repayments to the Highway Expansion and Extension Loan Program Fund. And the Internal Service Fund (Equipment Fund) transferred money to the NonMajor Governmental Funds (Aviation Fund) to provide for continuing operating expenditures. F. Leases Operating Leases The Department leases data processing equipment, other equipment, and certain facilities from various lessors. The majority of these leases are for a one-year term, renewable annually. Total rental expenditures (excluding interfund transactions) for the fiscal year ended June 30, 2009, approximated $3.8 million. In fiscal year 2002, the Department renegotiated its long-term lease with the City of Phoenix for a facility located on Washington Street in Phoenix. The lease contains a three year option period which the Department has exercised. The future operating lease commitments are as follows: Year ending June 30 2010 Total future operating lease commitments Amount $ 940,872 $ 940,872 In fiscal year 2003, the Department entered into a long-term lease to build a structure to house lab facilities in Gilbert, Arizona. The future operating lease commitments are as follows: Year ending June 30 2010 2011 2012 2013 Total future operating lease commitments Amount $ 120,660 124,095 127,635 97,758 $ 470,148 2009 Comprehensive Annual Financial Report 46 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2009 Capital Leases The Department has entered into lease agreements as lessee for financing the acquisition of various vehicles, equipment, and modular office buildings. These lease agreements qualify as capital leases for accounting purposes and, therefore, have been recorded at the present value of their future minimum lease payments as of the inception date. The assets acquired through capital leases are as follows: Governmental Activities Assets: Machinery and equipment Modular office buildings Less accumulated depreciation Total $ 13,316,743 2,139,711 <4,786,419> $ 10,670,035 The future minimum lease obligations and the net present value of these minimum lease payments as of June 30, 2009, were as follows: Governmental Activities Year Ending June 30 2010 2011 2012 $ Total minimum lease payments Less amount representing interest Present value of minimum lease payments G. $ 3,128,385 961,062 378,375 4,467,822 <141,638> 4,326,184 Non-Current Liabilities Arizona Transportation Board Highway Revenue Bonds The Transportation Board has issued Senior and Subordinate Lien Highway Revenue Bonds to provide funds for acquisition of right-of-way, design, and construction of federal and state highways. The original amount of Highway Revenue Bonds issued in prior years and outstanding at the start of the fiscal year was $1,623,905,000. During the year, Highway Revenue Bonds totaling $181,050,000 were issued to (1) finance portions of the Transportation Board’s Five-Year Transportation Facilities Construction Program and (2) pay costs of issuing the bonds. The Highway Revenue Bonds are secured by a prior lien on and a pledge of motor vehicle and related fuel fees and taxes of the General Fund (State Highway Fund). On September 21, 2006, House Bill 2206 became effective and eliminated the restriction that limited the principal amount of Highway Revenue Bonds that could be outstanding at any time to $1.3 billion. Also during fiscal year 2007, the Transportation Board received legislative authority to begin issuing Highway Revenue Bonds with maturities up to 30 years in length, replacing the 20 year maturity requirement that had been in place since 1980. Highway Revenue Bonds currently outstanding are as follows: Purpose Governmental activities Governmental activities - refunding Interest Rates 3.5% - 6.0% 3.9% - 6.0% Amount $ 1,420,590,000 320,175,000 $ 1,740,765,000 2009 Comprehensive Annual Financial Report 47 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2009 Annual debt service requirements to maturity for Highway Revenue Bonds are as follows: Fiscal year ending June 30 2010 2011 2012 2013 2014 2015-2019 2020-2024 2025-2029 2030-2033 Highway Revenue Bonds Principal Interest Total $ 68,140,000 $ 85,552,139 $ 153,692,139 71,770,000 83,959,625 155,729,625 75,415,000 80,361,575 155,776,575 79,230,000 76,588,215 155,818,215 83,235,000 72,555,075 155,790,075 483,510,000 295,331,389 778,841,389 482,985,000 170,008,240 652,993,240 236,445,000 70,318,236 306,763,236 20,483,750 180,518,750 160,035,000 $ 1,740,765,000 $ 955,158,244 $ 2,695,923,244 The Department has pledged future motor vehicle and related fuel fees and taxes to repay $1,740,765,000 in outstanding Highway Revenue Bonds issued since 1993. Proceeds from the bonds finance portions of the Transportation Board’s Five-Year Transportation Facilities Construction Program. The bonds are payable solely from motor vehicle and related fuel fees and taxes and are payable through 2033. The total principal and interest remaining to be paid on the bonds is $2,695.9 million. Principal and interest paid for the current year and total pledged revenues were $154.0 million and $509.2 million, respectively. The annual principal and interest payments on the bonds required 30.2 percent of the pledged revenues. Arizona Transportation Board Transportation Excise Tax Revenue Bonds The Maricopa County Regional Area Road Fund is used to record all payments of principal and interest for Transportation Excise Tax Revenue Bonds issued by the Transportation Board. These bonds are secured by a portion of transportation excise taxes collected by the Arizona Department of Revenue on behalf of Maricopa County. The original amounts of Transportation Excise Tax Revenue Bonds issued in prior years and outstanding at the start of the fiscal year was $350,955,000. During the year, Transportation Excise Tax Revenue Bonds totaling $440,000,000 were issued to pay (1) costs of design, right-of-way purchase, or construction of certain freeways and other routes within Maricopa County, Arizona and (2) costs of issuing the bonds. On September 21, 2007, the Transportation Board adopted a Master Resolution relating to Transportation Excise Tax Revenue Bonds. On April 17, 2009, the Transportation Board adopted the Second Supplemental Resolution authorizing the issuance of the second series of bonds under the Master Resolution in an amount not to exceed $440,000,000. No debt service reserve is required for the outstanding bonds. All Transportation Excise Tax Revenue Bonds mature no later than July 1, 2025. Transportation Excise Tax Revenue Bonds currently outstanding are as follows: Purpose Govermental activities Interest Rates 2.0% - 5.25% $ Amount 777,130,000 2009 Comprehensive Annual Financial Report 48 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2009 Annual debt service requirements to maturity for Transportation Excise Tax Revenue Bonds are as follows: Fiscal year ending June 30 2010 Transportation Excise Tax Revenue Bonds Principal Interest Total $ 33,315,000 $ 38,224,801 $ 71,539,801 2011 2012 2013 2014 2015-2019 2020-2024 2025 35,000,000 36,485,000 38,210,000 40,080,000 231,110,000 294,790,000 68,140,000 $ 777,130,000 36,537,938 35,050,988 33,330,938 31,457,238 126,583,636 62,895,462 3,398,700 $ 367,479,701 71,537,938 71,535,988 71,540,938 71,537,238 357,693,636 357,685,462 71,538,700 $ 1,144,609,701 Bonds aggregating $404,805,000 are subject to redemption prior to their maturity dates at the option of the Transportation Board in whole or in part, at any time, on or after July 1, 2017. These bonds may be redeemed at par, plus accrued interest to the date fixed for redemption. Bonds aggregating $372,325,000 are not subject to redemption. The Department has pledged future transportation excise taxes to repay $777,130,000 in outstanding Transportation Excise Tax Revenue Bonds issued since 2007. Proceeds from the bonds pay the costs of design, right-of-way purchase, or construction of certain freeways and other routes within Maricopa County, Arizona. The bonds are payable solely from transportation excise taxes and are payable through 2025. The total principal and interest remaining to be paid on the bonds is $1,144.6 million. Principal and interest paid for the current year and total pledged revenues were $31.0 million and $219.2 million, respectively. The annual principal and interest payments on the bonds required 14.1 percent of the pledged revenues. Arizona Transportation Board Grant Anticipation Notes (GARVEE bonds) The Grant Anticipation Notes Fund administers all payments of principal and interest for notes issued by the Transportation Board and is secured by revenues received from the Federal Highway Administration under grant agreements and certain other federal-aid revenues. The original amount of Grant Anticipation Notes (GARVEE bonds – Grant Anticipation Revenue Vehicles) issued in prior years and outstanding at the start of the fiscal year was $298,280,000. During the year, Grant Anticipation Notes (GARVEE bonds – Grant Anticipation Revenue Vehicles) totaling $55,420,000 were issued to pay (1) costs of the projects (as specified) and (2) costs of issuing the bonds. Grant Anticipation Notes (GARVEE bonds) currently outstanding are as follows: Purpose Govermental activities Governmental activities - refunding Interest Rates 2.5% - 5.0% 3.25% - 5.0% Amount $ 231,565,000 98,085,000 $ 329,650,000 2009 Comprehensive Annual Financial Report 49 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2009 Annual debt service requirements to maturity for Grant Anticipation Notes (GARVEE bonds) are as follows: Fiscal year ending June 30 2010 2011 2012 2013 2014 2015-2016 Grant Anticipation Notes (GARVEE bonds) Principal Interest Total $ 25,170,000 $ 16,369,725 $ 41,539,725 70,570,000 14,834,007 85,404,007 43,885,000 11,404,407 55,289,407 45,340,000 9,284,307 54,624,307 55,265,000 7,121,132 62,386,132 89,420,000 6,165,100 95,585,100 $ 329,650,000 $ 65,178,678 $ 394,828,678 The Department has pledged federal revenues to repay $329,650,000 in outstanding Grant Anticipation Notes (GARVEE bonds – Grant Anticipation Revenue Vehicles) issued since 2003. Proceeds from the bonds pay the costs of design, right-of-way purchase, or construction of certain freeways and other routes within Arizona. The bonds are payable solely from federal revenues and are payable through 2016. The total principal and interest remaining to be paid on the bonds is $394.8 million. Principal and interest paid for the current year and total pledged revenues were $38.5 million and $532.0 million, respectively. The annual principal and interest payments on the bonds required 7.2 percent of the pledged revenues. Refunded Bonds Deposited with Escrow Agents In prior fiscal years, the Transportation Board had refinanced various bond issues through refunding arrangements. Under the terms of the refunding bond issues, sufficient assets to pay all principal, redemption premium, if any, and interest on the refunded bond issues have been placed in irrevocable trust accounts at commercial banks and invested in U.S. Government securities which, together with interest earned thereon, will provide amounts sufficient for future payment of principal and interest of the issues refunded. The assets, liabilities, and financial transactions of these trust accounts and the liability for the defeased bonds are not reflected in the financial statements of the Department. Refunded bonds of the Department deposited with escrow agents at June 30, 2009, are as follows: Original Issue 1999 Series - Senior 1999 Series - Senior 2001 Series - Senior 2002 Series B - Senior Type Escrow Maturity Date Highway Refunding Bonds July 1, 2009 Highway Refunding Bonds July 1, 2009 Highway Revenue Bonds July 1, 2011 Highway Revenue Bonds July 1, 2012 Total refunded bonds deposited with escrow agent Balance $ 64,130,000 13,985,000 86,170,000 48,595,000 $ 212,880,000 Advances and Notes Payable The Department’s outstanding advances and notes payable as of June 30, 2009, were $42,667,833 in governmental activities. The advances and notes payable represent a loan to the City of Goodyear, Arizona, for $3,450,823 for highway construction and amounts for other intergovernmental advances of $39,217,010. 2009 Comprehensive Annual Financial Report 50 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2009 Annual debt service requirements to maturity for advances and notes payable are as follows: Fiscal year ending June 30 2010 2012 2014 2021 2022 Governmental Activities Principal Interest $ 3,450,823 $ 12,051,869 17,401,236 151,430 9,612,475 $ 42,667,833 $ - Business-type Activities Principal Interest $ - $ - $ - $ Total $ Principal 3,450,823 12,051,869 17,401,236 151,430 9,612,475 $ 42,667,833 Interest $ - $ Changes in non-current liabilities The activity for the fiscal year ended June 30, 2009, was as follows: Beginning Balance July 1, 2008 Additions $ 1,623,905,000 $ 181,050,000 350,955,000 440,000,000 <13,825,000> 777,130,000 33,315,000 298,280,000 128,586,354 55,420,000 58,122,782 <24,050,000> <13,396,497> 329,650,000 173,312,639 25,170,000 17,089,777 Total bonds and notes Capital leases Compensated absences Advances and notes payable Total governmental activities 2,401,726,354 7,535,394 15,455,342 56,738,689 2,481,455,779 734,592,782 12,559,882 23,138,926 770,291,590 <115,461,497> <3,209,210> <12,285,675> <37,209,782> <168,166,164> 3,020,857,639 4,326,184 15,729,549 42,667,833 3,083,581,205 143,714,777 3,022,402 11,209,948 3,450,823 161,397,950 Business-type Activities: Accrued interest payable Compensated absences Total business-type activities 2,170,356 145,255 2,315,611 100,509 100,509 <2,170,356> <102,186> <2,272,542> 143,578 143,578 143,578 143,578 $ 2,483,771,390 $ 770,392,099 $ <170,438,706> $ 3,083,724,783 $ 161,541,528 Governmental Activities: Bonds and notes: Highway Revenue Bonds Transportation Excise Tax Revenue Bonds Grant Anticipation Notes (GARVEE bonds) Premium on bonds Total non-current liabilities Reductions $ Ending Balance June 30, 2009 <64,190,000> $ 1,740,765,000 Due Within One Year $ 68,140,000 Internal service funds predominantly serve the governmental funds. Accordingly, long-term liabilities for them are included as part of the above totals for governmental activities. At year-end, $718,468 of the internal service fund’s compensated absences and $3,081,520 of capital leases are included in the above amounts. The capital leases will be liquidated by the internal service fund as well as the General Fund (State Highway Fund). The General Fund (State Highway Fund) has paid compensated absences in the past while the advances and notes payable will be repaid with funds from the General Fund (State Highway Fund) and the Maricopa Regional Area Road Construction Fund. Bonds and notes issued by the Department require compliance with a number of covenants. The Department believes that it is in compliance with all such covenants. In addition, certain of the Department’s obligations are subject to Internal Revenue Service regulations pertaining to issuance of tax-exempt debt by governmental entities. The Department does not have and has not accrued a liability under these regulations. 2009 Comprehensive Annual Financial Report 51 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2009 H. Short-term Debt – Board Funding Obligations The Transportation Board has issued Board Funding Obligations (BFOs) to the State Treasurer in accordance with Arizona Revised Statutes, §28-7678. The BFOs are nonnegotiable and are authorized by Transportation Board resolution specifying the rate(s) of interest, the date(s) of maturity, the terms of redemption, the form and manner of execution of the funding obligation, any terms necessary to secure credit enhancement or other sources of payment or security and any other item the Transportation Board determines is necessary. The total principal amount of BFOs at any one time shall not be more than $200 million and shall mature no later than four calendar years after the delivery. Up to $60 million of the proceeds shall be deposited into the General Fund (State Highway Fund) and up to $140 million shall be deposited into the Highway Expansion and Extension Loan Program Fund. The BFOs are special obligations of the Transportation Board; are not obligations that are general, special or otherwise of the State; are not a legal debt of the State; and are payable and enforceable only from the monies pledged and assigned in the authorizing resolutions of the Transportation Board. The State Treasurer shall provide written notice to the Transportation Board and the Department when the operating monies fall below $400 million. If operating monies fall below $200 million, the State Treasurer is required to call the investment in the BFOs in $25 million increments up to the amount that the operating monies are below $200 million. The State Treasurer shall give the Transportation Board and the Department at least fifteen days' notice of the call. The activity for the fiscal year ended June 30, 2009, was as follows: Beginning Balance July 1, 2008 Governmental Activities: Board Funding Obliations Total governmental activities Business-type Activities: Board Funding Obligations Total business-type activities Total short-term debt $ Additions 60,000,000 60,000,000 $ 50,000,000 50,000,000 $ 110,000,000 $ Reductions - $ Ending Balance June 30, 2009 <60,000,000> $ <60,000,000> - - <50,000,000> <50,000,000> - - $ <110,000,000> $ - During fiscal year 2009, the Department repaid $60,000,000 in principal and $4,905,271 in accrued interest for the Series 2007 BFOs in the General Fund (State Highway Fund). The Department also repaid $50,000,000 in principal and $4,047,781 in accrued interest for the Series 2007 BFOs in the Highway Expansion and Extension Loan Program Fund. I. Fund Balances Reservations 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 General Fund (State Highway Fund) from the Highway User Revenue Fund for the design, purchase of right-of-way, or construction of controlled-access highways and other permitted facilities which are included in the regional transportation plan of counties with populations in excess of 400,000 (Maricopa and Pima counties). State Transportation Board policy further allocates 2.6 percent of the revenues allocated each year to the General Fund (State Highway Fund) from the Highway User 2009 Comprehensive Annual Financial Report 52 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2009 Revenue Fund for the design, purchase of right-of-way, or construction of controlled-access highways, that are included in the regional transportation plan of counties with populations in excess of 400,000 (Maricopa and Pima counties). At June 30, 2009, approximately $118.6 million was reserved in the General Fund (State Highway Fund) for these purposes. In addition, the Statewide Transportation Acceleration Needs account held $101.7 million. The remaining $10.6 million was reserved for highway construction from federal highway monies and right of way. The Maricopa Regional Area Road Construction Fund is reserved for capital projects. The Capital Projects Fund is reserved for capital projects funded with Highway Revenue Bonds, Transportation Excise Tax Revenue Bonds, and Grant Anticipation Notes (GARVEE bonds). The Debt Service Fund reserve is for future debt service payments. 6. OTHER INFORMATION A. Contingent Liabilities Risk Management Insurance Losses The Department is exposed to various risks of loss related to torts; thefts of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The Department is a participant in the state’s selfinsurance program and, in the opinion of the Department’s management, any unfavorable outcomes from these claims and actions would be covered by the self-insurance program. Accordingly, the Department has no risk of loss beyond adjustments to future years’ premium payments to the state’s self-insurance program. All estimated losses for unsettled claims and actions of the state are determined on an actuarial basis and are included in the State of Arizona’s Comprehensive Annual Financial Report. Claims The Department has a variety of claims pending against it that arose during the normal course of its activities. Management of the Department believes, based on the advice of legal counsel, that losses, if any, resulting from settlement of these claims will not have a material effect on the financial position of the Department. Grants Amounts received or receivable from grant agencies are subject to audit and adjustment by grantor agencies, principally the federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures which may be disallowed by the grantor cannot be determined at this time although the Department expects such amounts, if any, to be immaterial. Light Rail Transit System Arizona Revised Statutes, §28-9201, requires the Department to establish, implement, and enforce minimum safety standards for light rail transit systems. If a violation of the safety standards is discovered, the Department shall report the violation in writing to the Federal Transit Administration. Furthermore, the organization that operates a light rail transit system shall include a safety oversight function and pay the Department’s costs resulting from administration. B. Pension and Other Postemployment Benefits Plan descriptions – The Department contributes to a cost-sharing, multiple-employer defined benefit pension plan; a cost-sharing, multiple-employer defined benefit health care plan; and a cost-sharing, multiple-employer defined benefit long-term disability plan, all of which are administered by the Arizona State Retirement (System). The System (through its Retirement Fund) provides retirement (i.e. pension), death, and survivor benefits; the Health Benefit Supplement Fund provides health insurance premium benefits (i.e. a monthly subsidy); and the Long-Term Disability Fund provides long-term disability benefits. Benefits are established by state statute. The System is 2009 Comprehensive Annual Financial Report 53 Arizona Department of Transportation Notes to the Financial Statements (continued) June 30, 2009 governed by the Arizona State Retirement System Board according to the provisions of Arizona Revised Statutes, Title 38, Chapter 5, Article 2. The System issues a Comprehensive Annual Financial Report that includes financial statements and required supplementary information. The most recent report may be obtained by writing the Arizona State Retirement System, 3300 North Central Avenue, P.O. Box 33910, Phoenix, AZ 85067-3910 or by calling (602) 240-2000 or (800) 621-3778. Funding policy – The Arizona State Legislature establishes and may amend active plan members’ and the Department’s contribution rates. For the year ended June 30, 2009, active plan members were required by statute to contribute at the actuarially determined rate of 9.45 percent (8.95 percent for retirement and 0.5 percent for longterm disability) of the members’ annual covered payroll and the Department was required by statute to contribute at the actuarially determined rate of 9.45 percent (7.99 percent for retirement, 0.96 percent for health insurance premium, and 0.5 percent for long-term disability) of the members’ annual covered payroll. The Department’s contributions for the current and two preceding years, all of which were equal to the required contributions, were as follows: Fiscal year Health Benefit Long-Term ended Retirement Fund Supplement Fund Disability Fund June 30 2009 2008 2007 $ 13,762,453 $ 15,697,915 13,589,541 2,551,648 2,047,553 1,772,548 $ Total 910,496 $ 17,224,597 18,720,487 975,019 16,206,154 844,065 The Department's total payroll for fiscal year 2009 was $188.0 million. The System is funded through payroll deductions from employees' gross earnings and amounts contributed by the Department. Retirement benefits, health care benefits, and long term disability benefits are obligations of the System and not of the Department. The Arizona Revised Statutes provide statutory authority for employee and employer contributions. The contribution requirement for fiscal year 2009 was $17.2 million each by both the employees and the Department. 2009 Comprehensive Annual Financial Report 54 fiscal yearComprehensive Annual Financial Report Required Supplementary Information (Other than MD&A) Budgetary Comparison Schedule – General Fund (State Highway Fund) Note to Required Supplementary Information Information About Infrastructure Assets Reported Using the Modified Approach Arizona Department of Transportation Required Supplementary Information June 30, 2009 Budgetary Comparison Schedule General Fund (State Highway Fund) for the fiscal year ended June 30, 2009 Budgeted Amounts Original Final Expenditures appropriated by State legislature in 2009 budget Administration $ 45,470,000 Highways 270,373,900 Motor Vehicle 104,191,900 Total $ 420,035,800 $ 45,470,000 250,065,619 103,498,383 $ 399,034,002 Timing differences: Prior year appropriation expenditures expended in current budgetary year Current year appropriation expenditures expended in future budgetary year Basis differences: Net increase from cash basis for budgeting purposes and modified accrual basis for financial reporting purposes Entity differences: Funds not appropriated, but included for financial reporting purposes Perspective differences: Expenditures on modified accrual basis and not recognized on budgetary basis: Capital outlay and asset preservation Distributions to Arizona counties and cities Distributions to other state agencies Interest expense Principal repayment of debt Total expenditures as reported on the Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds (General Fund) - Exhibit 4 The note to required supplementary information is an integral part of this schedule. 2009 Comprehensive Annual Financial Report 55 $ Actual Amounts Variance with Final Budget Positive 43,347,612 226,001,222 94,859,778 364,208,612 $ 2,122,388 24,064,397 8,638,605 $ 34,825,390 3,204,965 <4,154,705> 20,383,317 5,732,603 593,782,850 52,688,103 146,067,015 5,423,309 97,621,879 $ 1,284,957,948 Arizona Department of Transportation Required Supplementary Information (continued) June 30, 2009 Note to Required Supplementary Information 1. Budgets and budgetary accounting An annual budget for the operating expenditures of the General Fund (State Highway Fund) is submitted to the Governor in accordance with state law. The budget is legally enacted as appropriations after approval by the state legislature and signature by the Governor. The legal level of control for operating expenditures 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 allocated within all divisions. In certain divisions, other specific programs are allocated in addition to these categories. Revenue budgets are developed internally by the Department and are not a part of the appropriation process. Amendments to the approved appropriations require legislative approval. However, since the Department’s appropriation is a lump sum appropriation by program, the allocation of funds between personal services, employeerelated expenses, and other operating expenditures is an internal decision for the program manager. Accordingly, transfers between line items such as personal services and other operating expenditures within a particular program may be made by the program manager. Transfers of funds between programs require the approval of the Director of the Department of Administration. Expenditures may not exceed appropriations. All transfers of funds are reported to the Department’s Office of Strategic Planning and Budgeting for monitoring purposes. Budgets are prepared on the cash basis except that liabilities incurred before the end of the fiscal year and paid within the first month of the subsequent fiscal year are charged against the prior fiscal year’s budget. The Department’s appropriations lapse at year-end unless exempted by the legislature. For financial reporting purposes, the accompanying financial statements present the legally adopted budget for the operations of the General Fund (State Highway Fund) that is subject to legislative appropriation. In addition, budgets for capital outlay, including land, building, and improvements for the General Fund (State Highway Fund) and State Aviation Fund, are also submitted to the Governor in accordance with state law. The capital outlay appropriation includes state highway construction and land, building, and improvements for the General Fund (State Highway Fund). A legal limitation is adopted for land, building, and improvements; however, legislation allows the Department to spend in excess of its appropriation for state highway construction up to the current fund balance. The Department monitors expenditures through an internal budgetary process and the Five-Year Transportation Facilities Construction Program approved by the Transportation Board. 2009 Comprehensive Annual Financial Report 56 Arizona Department of Transportation Required Supplementary Information (continued) June 30, 2009 Information About Infrastructure Assets Reported Using the Modified Approach As allowed by Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements – and Management’s Discussion and Analysis – for State and Local Governments (GASB 34), the Arizona Department of Transportation (Department) reports its roads and bridges using the modified approach. Assets accounted for under the modified approach include 6,753 center lane miles (18,544 travel line miles) of roads and 4,648 bridges that the Department is responsible to maintain. In order to utilize the modified approach, the Department is required to: • Maintain an asset management system that includes an up to date inventory of eligible infrastructure assets. • Perform condition assessments of eligible assets and summarize the results using a measurement scale. • Estimate each year the annual amount to maintain and preserve the assets at the condition level established and disclosed by the Department. • Document that the assets are being preserved approximately at or above the established condition level. As adopted by the Transportation Board of the State of Arizona Department of Transportation (Transportation Board) on an annual basis, the Five-Year Transportation Facilities Construction Program (Program) contains estimated expenditures for highway system improvements and the preservation of existing roadway and bridges. Both of these factors impact the condition assessment of the roads and bridges as described in the following sections. The Program in effect for fiscal year 2010 and beyond was adopted by the Transportation Board on June 19, 2009. This Program is a dynamic instrument and adjustments are made to the annual plans based on the needs of the Department to maintain the condition level of the roads and bridges at a level equal to, or greater than, the goals established by the Department. In addition, not only are adjustments made during the life of the Program, circumstances may require that refinements to the individual components of the Program be made during the fiscal year. In comparing Estimated to Actual Expenditures in the tables that follow, significant variances can occur. These variances are primarily due to the methodology used in the preparation of the Program. In this Program, the Estimated Expenditures for the current year is based on “programmed” projects which may or may not be spent in the current year of the Program. “Programmed” expenditures consist of those items that are planned for the future, with contracts that have not yet been awarded. Furthermore, the Actual Expenditures will include projects that were “programmed” for a prior year’s Estimated Expenditures, but which did not occur, or were not completed, in the prior year. The following information pertains to the condition assessment and maintenance of infrastructure assets and reflects the Department’s success in achieving condition levels that exceed the established levels. Roads The mission of the Department’s Pavement Management Section (PMS) is to develop and provide a cost effective pavement rehabilitation construction program that preserves the State’s investment in its highway system and enhances public transportation and safety. The requirements of GASB 34 and the PMS both work toward the same basic goal, the efficient, effective management of the Department’s assets to produce long term benefits while minimizing expenditures. The PMS has developed performance goals for the condition level of the pavement in the State highway system. These goals require periodic assessment of pavement conditions and the budget level needed to meet that goal. The goal is expressed as a measure called “Serviceability” which can be defined as the ability of a pavement to serve the traveling public (as documented in 1961 after American Association of State Highway and Transportation Officials (AASHTO) Road Test, 1956-1961). Serviceability is based on detailed measurements of objective features of the pavement. Many surveys since the original road test have shown that these measurements closely track the subjective opinion of the traveling public. Most commonly, this number is called Present Serviceability Rating and abbreviated as PSR. PSR is a five-point scale (5 excellent, 0 impassable), similar to the Weaver/AASHTO Scale shown as follows: 2009 Comprehensive Annual Financial Report 57 Arizona Department of Transportation Required Supplementary Information (continued) June 30, 2009 Information About Infrastructure Assets Reported Using the Modified Approach - continued Numerical Rating 5 4 3 2 1 0 PSR Excellent Good Fair Poor Very Poor Impassable Weaver/AASHTO Scale Perfect Very Good Good Fair Poor Very Poor The goal of the Department is to maintain a condition level (PSR) rating of 3.23 or better for all roads in the State highway system. Annually, Transportation Material Technicians drive over the system with inertial profiling equipment and measure the roughness of the pavement. This process is continuous throughout the year in order to assess the condition level of all pavement on an annual basis. As of the end of fiscal year 2009, an overall rating of 3.74 was achieved, as shown in the following graph: Condition Level--Roads 5 PSR 4 3 Actual Level 2 Desired Level 1 0 2005 2006 2007 2008 2009 Fiscal Year Figure 1 Preservation of the roads is accomplished through programs managed primarily by the Department’s PMS, as well as other units within the Department. The estimated (as specified in the Program as programmed amounts) and actual expenditures for fiscal years 2005 through 2009 were as follows: Fiscal Year 2005 2006 2007 2008 2009 Estimated Expenditures (in millions) $235.7 218.5 216.4 260.7 264.4 Actual Expenditures (in millions) $195.0 211.5 196.5 247.9 236.0 2009 Comprehensive Annual Financial Report 58 Arizona Department of Transportation Required Supplementary Information (continued) June 30, 2009 Information About Infrastructure Assets Reported Using the Modified Approach – continued Bridges The Department’s bridge assets constitute a significant portion of all infrastructure assets in Arizona. As of June 30, 2009, the Department owns and maintains 4,648 bridges with an approximate total deck area of 44,441,921 square feet. Bridges, for purposes of this report, include all structures erected over an opening or depression with a centerline of 20 feet or more. Information related to these bridges is stored and updated in the Arizona Bridge Information and Storage System (ABISS). This system is used to efficiently manage the bridge inventory through storing all bridge related data and assisting bridge engineers in arriving at appropriate bridge preservation decisions. Also, ABISS is used for reporting bridge inventory and condition, on a biennial basis, to the Federal Highway Administration (FHWA). A Condition Rating Index (CRI) is used to track the condition of the bridge network. The CRI is based on four selected bridge inspection condition ratings, which in turn are based on standards established in the FHWA’s “Recording and Coding Guide for the Structural Inventory of the Nation’s Bridges.” The four selected condition ratings that are included in the CRI computation are: the bridge joints condition, the deck condition, the super-structure condition, and the sub-structure condition. The bridge joints condition rating is an Arizona specific rating item not included in the FHWA condition rating guidelines, whereas the three other condition ratings are federally mandated condition ratings. The CRI is computed by subtracting from one the ratio of the sum of the deck areas of all bridges with a condition rating of four or less (see table below), which indicates that the rated element is at best in a poor condition, to the total sum of the deck areas. The rating system in this guide is as follows: Numerical Rating 9 8 7 6 5 4 3 2 1 Condition Rating Excellent Very Good Good Satisfactory Fair Poor Serious Critical Imminent Failure Management of the bridge inventory is a major function of the Department’s Bridge Group and regularly scheduled biennial inspections are made of all bridges. A civil or structural engineer, licensed to practice in Arizona, performs these inspections. It is the policy of the Department to maintain State highway bridges so that the CRI exceeds 92.5%. In fiscal year 2009, the CRI was computed at 93.4%. 2009 Comprehensive Annual Financial Report 59 Arizona Department of Transportation Required Supplementary Information (continued) June 30, 2009 Information About Infrastructure Assets Reported Using the Modified Approach – continued Condition Levels-Bridges 95% CRI 94% 93% Actual Level 92% Desired Level 91% 90% 2005 2006 2007 2008 2009 Fiscal Year Figure 2 Bridges represent a major public investment, and their inspection and maintenance is an essential function of the Department in its mission of providing products and services for a safe, efficient, and cost effective transportation system. Figure 3 indicates that approximately 59% of the bridges in the state were constructed prior to the 1970s while only 21% have been constructed in the last two decades. Age of Department's Bridge Population 35% % of bridges built in corresponding decade 30% 25% 20% 15% 10% 5% 0% < 1930 30s 40s 50s 60s 70s 80s Figure 3 2009 Comprehensive Annual Financial Report 60 90s 2000s Arizona Department of Transportation Required Supplementary Information (continued) June 30, 2009 Information About Infrastructure Assets Reported Using the Modified Approach – continued Preservation of the bridges is accomplished through programs managed by the Bridge Group. The estimated (as specified in the Program as programmed amounts) and actual expenditures for fiscal years 2005 through 2009 were as follows: Fiscal Year 2005 2006 2007 2008 2009 Estimated Expenditures (in millions) $7.4 10.6 17.1 13.4 14.3 Actual Expenditures (in millions) $11.0 11.3 22.5 18.1 17.3 2009 Comprehensive Annual Financial Report 61 fiscal yearComprehensive Annual Financial Report Non-Major Governmental Funds Financial Statements Special Revenue Funds Special revenue funds are used to account for specific revenues that are legally restricted to expenditures for particular purposes. The State Aviation Fund is appropriated by the legislature and receives monies from aviation gasoline taxes, sale of abandoned and seized aircraft, flight property taxes, and the operation of the Grand Canyon National Park Airport. The Aviation Fund monies are used to build and maintain airport facilities throughout Arizona. The Safety Enforcement and Transportation Infrastructure Fund is appropriated by the legislature and receives monies from the registration of vehicles of non-residents for enforcement of vehicle safety requirements, maintenance of transportation facilities, and upgrades of transportation facilities, including roads, streets, and highways, approved by the Transportation Board within twenty-five miles of the border between Arizona and Mexico. The Motor Vehicle Liability Insurance Enforcement Fund receives fees and interest to administer the State’s Mandatory Liability Insurance Program. The Motor Vehicle Inspection and Title Enforcement Fund receives monies from a continuing appropriation to be used to defray the cost of investigations involving certificates of title, licensing fraud, registration enforcement, and other enforcement related issues. The Motor Carrier Safety Revolving Fund receives fees to administer and enforce the rules governing the safety operations of motor carriers, shippers, and vehicles transporting hazardous materials, substances, or waste. The Underground Storage Tank Fund receives certain Motor Vehicle Division revenues for distribution to the Department of Environmental Quality. The Economic Strength Project Fund receives monies from the Highway User Revenue Fund for use on approved economic strength projects recommended by the Department of Commerce and Economic Development Commission. The Grant Anticipation Notes Fund receives revenues from the Federal Highway Administration under various grant agreements for the repayment of Grant Anticipation Notes (GARVEE bonds). The Local Agency Deposits Fund receives monies from the U.S. Government and local agencies for the payment of local agency sponsored city streets and county secondary road construction projects. Arizona Department of Transportation Combining Balance Sheet Non-Major Governmental Funds June 30, 2009 State Aviation Fund ASSETS Unrestricted cash on deposit with the State Treasurer Receivables: Accrued interest Interfund Notes and loans Other (net) Amounts due from U.S. Government Restricted cash on deposit with the State Treasurer Total assets LIABILITIES Accounts payable Accrued payroll and other accrued expenditures Contracts and retainage payable Interfund payables Amounts due to: Other state agencies Arizona counties and cities Deferred revenue (Note 5C) Total liabilities FUND BALANCES Reserved for: Debt service Capital projects Unreserved special revenue funds Total fund balances Total liabilities and fund balances $ Safety Enforcement Motor Vehicle Motor Vehicle and Liability Inspection Transportation Insurance and Title Infrastructure Enforcement Enforcement Fund Fund Fund 788,343 $ 1,576,657 23,663 92,996 7,695,059 605,591 - 4,999 43,678 - $ 9,205,652 $ 1,625,334 $ 347,005 $ 308,973 $ $ $ - $ - 30,777 176 $ 337,755 $ 9,250 - 296,813 12,160 - 69,029 - 47,332 - 60,476 - 52,742 - 7,695,059 7,794,865 47,508 60,476 52,742 1,410,787 1,410,787 $ 9,205,652 1,577,826 1,577,826 $ 1,625,334 286,529 286,529 347,005 256,231 256,231 308,973 $ 2009 Comprehensive Annual Financial Report 62 $ Exhibit 9 Motor Carrier Safety Revolving Fund $ Underground Storage Tank Fund 42,342 $ - Economic Strength Project Fund $ Grant Anticipation Notes Fund 296,725 - 3,468 2,635,196 - $ 42,342 15,717 $ 2,654,381 $ 300,035 $ - $ $ - $ - $ - 3,310 - Local Agency Deposits Fund $ Total Non-Major Governmental Funds - $ 3,338,635 - 407,100 2,385,604 6,260,408 35,440 3,200,380 7,695,059 2,991,195 6,260,408 $ 94 94 16,792,116 $ 25,845,228 16,807,927 $ 40,329,044 $ - $ $ - 30,953 - - - - 14,209,391 380,435 229,579 14,209,391 380,435 - 2,654,381 2,654,381 300,035 300,035 - 14,589,826 2,654,381 300,035 7,695,059 25,499,833 42,342 42,342 42,342 $ 2,654,381 300,035 94 94 94 11,255,402 11,255,402 $ 25,845,228 94 11,255,402 3,573,715 14,829,211 $ 40,329,044 $ $ 2009 Comprehensive Annual Financial Report 63 Arizona Department of Transportation Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Non-Major Governmental Funds for the fiscal year ended June 30, 2009 State Aviation Fund Revenues: Vehicle registration, title, license, and related taxes and fees Fuel and motor carrier taxes and fees Flight property taxes Reimbursement of construction expenditures - federal aid Other federal grants and reimbursements Reimbursements from Arizona counties and cities Interest on loans receivable Income from investments Grand Canyon National Park Airport Other Total revenues Expenditures: Current: Aeronautics Highway Motor Vehicle Total current expenditures Intergovernmental: Distributions to other state agencies Distributions to Arizona counties and cities Total expenditures Excess of revenues over expenditures Other financing sources : Transfers in Transfers out for debt service Total other financing sources Net change in fund balances Fund balances - July 1 Fund balances - June 30 $ 6,977,027 408,576 11,975,326 Safety Enforcement and Transportation Infrastructure Fund Motor Vehicle Liability Insurance Enforcement Fund Motor Vehicle Inspection and Title Enforcement Fund $ $ $ 3,286,442 - 2,696,708 - 1,543,990 - 3,901,863 272,561 325,550 936,211 84,361 24,881,475 41,055 15,444 3,342,941 2,696,708 1,543,990 10,470,525 10,470,525 2,122,493 2,122,493 1,793,797 1,793,797 1,453,888 1,453,888 22,479,400 8,444,238 41,394,163 2,230,000 4,352,493 4,478,300 6,272,097 2,247,300 3,701,188 <16,512,688> <1,009,552> <3,575,389> <2,157,198> 1,464,100 1,464,100 - - - <15,048,588> <1,009,552> <3,575,389> <2,157,198> 16,459,375 2,587,378 3,861,918 2,413,429 $ 1,410,787 $ 1,577,826 $ 286,529 $ 256,231 2009 Comprehensive Annual Financial Report 64 Exhibit 10 Motor Carrier Safety Revolving Fund $ $ Underground Storage Tank Fund - $ 28,875,427 - Economic Strength Project Fund $ Grant Anticipation Notes Fund 1,000,000 - $ - Local Agency Deposits Fund $ Total Non-Major Governmental Funds - $ 10,263,469 34,524,701 11,975,326 5,000 5,000 26,488 28,901,915 40,308 1,040,308 38,540,432 1 38,540,433 31,775,544 9,788,749 41,564,293 38,540,432 35,677,407 9,788,749 272,561 433,402 936,211 104,805 142,517,063 - 237,396 237,396 1,349 1,349 - 48,571,041 48,571,041 10,470,525 48,571,041 5,608,923 64,650,489 - 28,664,519 28,901,915 - 48,571,041 62,368,919 7,213,797 134,233,205 5,000 - - 38,540,433 - - - <38,540,432> <38,540,432> 5,000 37,342 42,342 - - $ 2,269,400 <1,230,441> 1,040,308 $ 1 93 94 $ <7,006,748> - 1,464,100 <38,540,432> <37,076,332> <7,006,748> <28,792,474> 18,262,150 43,621,685 $ 11,255,402 $ 14,829,211 2009 Comprehensive Annual Financial Report 65 8,283,858 fiscal yearComprehensive Annual Financial Report Fiduciary Funds Financial Statements Combining Statement of Net Assets Statement of Changes in Assets and Liabilities Agency Funds Highway Properties - Privilege Tax Fund collects monies from renters of properties previously acquired by the Department for use in future highway development. Monies collected are distributed to the Department of Revenue. Highway Properties - 24 Percent Fund collects 24 percent of the Department’s rental income from properties for use in future highway development. Monies collected are distributed to the local counties. Exhibit 11 Arizona Department of Transportation Combining Statement of Net Assets Agency Funds June 30, 2009 Highway Highway Properties Properties - 24 -Privilege Tax Fund Percent Fund Total ASSETS Restricted cash on deposit with the State Treasurer Total assets $ $ - $ $ 229,560 229,560 $ 229,560 $ 229,560 LIABILITIES Due to Arizona counties Total liabilities $ $ - $ $ 229,560 229,560 $ 229,560 $ 229,560 2009 Comprehensive Annual Financial Report 66 Exhibit 12 Arizona Department of Transportation Statement of Changes in Assets and Liabilities Agency Funds for the fiscal year ended June 30, 2009 Balance July 1, 2008 Additions Deductions Balance June 30, 2009 Highway Properties - Privilege Tax Fund ASSETS Restricted cash on deposit with the State Treasurer Total assets $ $ - $ $ 3,565 3,565 $ $ <3,565> $ <3,565> $ - LIABILITIES Due to Department of Revenue Total liabilities $ $ - $ $ 3,565 3,565 $ $ <3,565> $ <3,565> $ - ASSETS Restricted cash on deposit with the State Treasurer Total assets $ $ 136,434 136,434 $ $ 231,895 231,895 $ <138,769> $ $ <138,769> $ 229,560 229,560 LIABILITIES Due to Arizona counties Total liabilities $ $ 136,434 136,434 $ $ 231,895 231,895 $ <138,769> $ $ <138,769> $ 229,560 229,560 $ $ 136,434 136,434 $ $ 235,460 235,460 $ <142,334> $ $ <142,334> $ 229,560 229,560 $ 136,434 136,434 $ 231,895 3,565 235,460 $ <138,769> $ <3,565> $ <142,334> $ 229,560 229,560 Highway Properties - 24 Percent Fund Total ASSETS Restricted cash on deposit with the State Treasurer Total assets LIABILITIES Due to Arizona counties Due to Department of Revenue Total liabilities $ $ 2009 Comprehensive Annual Financial Report 67 fiscal yearComprehensive Annual Financial Report Statistical Section Arizona Department of Transportation Overview – Statistical Section for the fiscal year ended June 30, 2009 This part of the Arizona Department of Transportation’s (Department) Comprehensive Annual Financial Report provides detail in the form of graphs and tables intended to assist the reader of the report with understanding the information presented in the financial statements, note disclosures, and required supplementary information regarding the overall financial health of the department. Financial Trends These schedules show trend information that gives an insight into the Department’s financial well-being and performance over time. Revenue Capacity Information about the Motor Vehicle Fuel Tax and the Highway User Revenue Fund, the Department’s most significant own-source revenues, is presented in these tables. Debt Capacity These tables present information to help the reader assess the affordability of the Department’s current levels of outstanding debt as well as the Department’s ability to issue additional debt in the future. Demographic and Economic Information The demographic and economic indicators presented in this section offer an understanding of the environment in which the Department’s financial activities take place. Operating Information The Department’s relationship of the financial report to the services provided as well as its activities is illustrated in these tables depicting service and infrastructure information. Sources: Unless otherwise stated, all information in the following tables is derived from the comprehensive annual financial reports for the years shown. 2009 Comprehensive Annual Financial Report 68 Arizona Department of Transportation Index – Statistical Section for the fiscal year ended June 30, 2009 Page Financial Trends Table A-1 – Change in Net Assets ........................................................................................................................70-73 Table A-2 – Statement of Revenues, Expenditures, and Changes in Fund Balances ............................................74-77 Table A-3 – Fund Balances of Governmental Funds..................................................................................................78 Table A-4 – Expenditures of Federal Awards ............................................................................................................79 Table A-5 – Government-wide Expenses by Function...............................................................................................80 Table A-6 – Government-wide Revenues ..................................................................................................................81 Table A-7 – Net Assets by Component ......................................................................................................................82 Revenue Capacity Table B-1 – Highway User Revenue Fund Collections..............................................................................................83 Table B-2 – Highway User Revenue Fund Distributions ...........................................................................................84 Table B-3 – Fuel Tax Rates ........................................................................................................................................85 Table B-4 – Motor Vehicle Fuel Tax – Top Ten Suppliers ........................................................................................86 Table B-5 – Gasoline Volume Sold – Top Twenty-Five Suppliers .......................................................................87-88 Debt Capacity Table C-1 – Highway User Revenue Fund – Legal Debt Margin...............................................................................89 Table C-2 – Highway Revenue Bonds – Bond Coverage...........................................................................................90 Table C-3 – Transportation Excise Tax Revenue Bonds – Bond Coverage ...............................................................91 Table C-4 – Transportation Excise Tax Revenue Bonds – Debt Service Revenue and Cost Per Capita....................92 Table C-5 – Ratios of Outstanding Debt by Type ......................................................................................................93 Demographic and Economic Information Table D-1 – Number of Vehicle Registrations Per Year ............................................................................................94 Table D-2 – Vehicle Registrations Per Year Compared to Fuel Sales........................................................................95 Table D-3 – Demographic and Economic Statistics ...................................................................................................96 Table D-4 – Principal Employers ...............................................................................................................................97 Operating Information Table E-1 – Appropriated Full Time Equivalents (FTEs) .....................................................................................98-99 Table E-2 – Capital Assets – Schedule by Function and Activity ............................................................................100 Table E-3 – Capital Assets – Schedule of Changes by Function and Activity .........................................................101 Table E-4 – Total Public Road Mileage by Highway Class and Governmental Ownership ....................................102 Table E-5 – Daily Vehicle Miles Traveled with Population Data ............................................................................103 2009 Comprehensive Annual Financial Report 69 Arizona Department of Transportation Change in Net Assets for fiscal year ended June 30 (Thousands of Dollars) Expenses: Governmental activities: Administration Aeronautics 2003 2002 $ Highway1 Highway maintenance Motor Vehicle Other Non-capital, including asset preservation1 Distributions to other state agencies Distributions to Arizona counties and cities Local governmental assistance Interest on long-term debt Total governmental activities expenses Business-type activities: Arizona Highways Magazine Highway Expansion and Extension Loan Program Total business-type activities expenses Total primary government expenses $ Program Revenues: Governmental activities: Charges for services: Administration Aeronautics Highway Highway maintenance Motor Vehicle Other Local governmental assistance Operating grants and contributions Capital grants and contributions Total governmental activities program revenues Business-type activities: Charges for services: Arizona Highways Magazine Highway Expansion and Extension Loan Program Total business-type activities program revenues Total primary governmental program revenues Net /revenues: Governmental activities Business-type activities Total primary government net expense $ $ $ $ 57,864 3,751 $ 52,533 3,848 2004 $ 57,703 7,512 46,543 91,570 82,904 6,844 96,629 149,341 915,219 24,791 89,605 1,565,061 45,644 96,353 83,090 8,460 277,975 192,536 957,057 30,235 84,084 1,831,815 93,656 95,642 86,845 9,815 333,930 161,029 1,022,768 39,205 89,431 1,997,536 10,710 5,265 15,975 1,581,036 11,118 26,349 37,467 $ 1,869,282 $ 10,007 4,414 14,421 2,011,957 $ $ 974 104,298 3,341 4,111 56,481 470,772 639,977 9,614 2,227 11,841 651,818 $ 717 107,395 4,220 5,080 34,160 453,758 605,330 9,596 3,881 13,477 618,807 $ 902 108,346 4,848 4,129 44,008 418,174 580,407 9,271 3,529 12,800 593,207 <925,084> $ <1,226,485> $ <1,417,129> <4,134> <23,989> <1,621> <929,218> $ <1,250,474> $ <1,418,750> NOTE: 1Adjustments were made to Highway and Non-capital, including asset preservation, for the years 2004 - 2007 to conform to the current year's presentation. 70 Table A-1 2005 $ 42,298 9,804 2006 $ 125,889 105,037 91,676 6,871 156,678 306,853 1,086,955 42,440 86,870 2,061,371 45,002 10,705 2007 $ 118,147 114,119 96,937 9,394 <53,981> 206,903 1,095,671 36,771 88,279 1,767,947 51,667 5,418 2008 $ 54,918 4,373 2009 $ 56,066 10,993 138,788 120,163 105,961 113,569 114,795 1,219,208 48,760 82,450 2,000,779 132,874 137,100 112,880 187,004 176,692 1,238,383 37,285 92,295 2,173,804 116,742 110,963 133,415 216,198 413,940 1,091,893 48,571 114,683 2,313,464 10,270 4,360 14,630 $ 2,076,001 8,175 4,273 12,448 $ 1,780,395 8,072 4,355 12,427 $ 2,013,206 7,712 4,053 11,765 $ 2,185,569 7,410 2,112 9,522 $ 2,322,986 $ $ $ $ $ $ 919 1,518 113,506 5,564 4,760 58,948 484,276 669,491 8,443 3,009 11,452 680,943 $ 1,214 537 121,179 7,099 4,040 67,241 387,614 588,924 8,012 3,281 11,293 600,217 $ 8,843 1,133 2,953 577 132,274 12,239 72,679 354,024 584,722 8,060 2,909 10,969 595,691 $ 9,706 940 1,451 1,765 127,900 8,263 79,747 523,728 753,500 7,624 1,755 9,379 762,879 $ 8,752 936 1,765 887 117,267 9,789 90,619 552,488 782,503 6,291 1,128 7,419 789,922 $ <1,391,880> $ <1,179,023> $ <1,416,057> $ <1,420,304> $ <1,530,961> <3,178> <1,155> <1,458> <2,386> <2,103> $ <1,395,058> $ <1,180,178> $ <1,417,515> $ <1,422,690> $ <1,533,064> (continued) 71 Arizona Department of Transportation Change in Net Assets for fiscal year ended June 30 (continued) (Thousands of Dollars) General Revenues and Other Changes in Net Assets: Governmental activities: Transportation excise taxes Vehicle, registration, title, license, and related taxes and fees Fuel and motor carrier taxes and fees Flight property taxes Income from investments Other Transfers Governmental activities before accounting change Cumulative effect of accounting change Special Item - State appropriation for Statewide Transportation Acceleration Needs (STAN) Total governmental activities Business-type activities: Income from investments Other Transfers Total business-type activities Total primary government Change in Net Assets: Governmental activities Business-type activities Total primary government 2002 $ $ $ $ 72 267,563 899,092 547,129 6,528 29,863 26,484 1,776,659 - 2003 $ 268,721 832,492 691,003 6,026 19,803 21,304 1,839,349 40,399 2004 $ 288,600 914,657 698,406 6,321 8,352 24,775 1,941,111 - 1,776,659 1,879,748 1,941,111 5,625 381 6,006 1,782,665 2,440 426 2,866 $ 1,882,614 $ 1,588 505 2,093 1,943,204 653,263 $ <21,123> 632,140 $ 523,982 472 524,454 851,575 1,872 853,447 $ $ Table A-1 2005 $ 316,806 966,885 759,633 13,180 19,245 27,120 2,102,869 - 2006 $ 316,491 994,052 770,596 13,686 28,538 11,026 2,134,389 - 2,102,869 2,134,389 2,764 380 3,144 $ 2,106,013 3,518 3,518 $ 2,137,907 $ $ 710,989 $ <34> 710,955 $ 955,366 2,363 957,729 2007 $ 262,264 1,029,001 790,909 15,303 55,760 9,998 2,163,235 - 2008 $ 245,000 2,408,235 253,742 1,033,505 766,394 13,822 59,528 38,772 2,165,763 - 2009 $ 2,165,763 219,165 976,075 667,200 11,975 33,588 22,831 <500> 1,930,334 1,930,334 5,563 4,788 1,612 <3> <17> <1> 500 5,560 4,771 2,111 $ 2,413,795 $ 2,170,534 $ 1,932,445 $ $ 992,178 4,102 996,280 $ $ 745,459 2,385 747,844 73 $ $ 399,373 8 399,381 Arizona Department of Transportation Statement of Revenues, Expenditures, and Changes in Fund Balances for fiscal year ended June 30 (Thousands of Dollars) Revenues: Transportation excise taxes Vehicle registration, title, license, and related taxes and fees Fuel and motor carrier taxes and fees Flight property taxes Reimbursement of construction expenditures - federal aid Other federal grants and reimbursements Reimbursements from Arizona counties and cities Distributions from other state agencies Interest on loans receivable Income from investments Grand Canyon National Park Airport Rental income Other Total revenues Expenditures: Current: Transportation: Administration Aeronautics Highway Highway maintenance Motor Vehicle Other Total Transportation Transportation not appropriated by State legislature: Intergovernmental: Distributions to other state agencies Distributions to Arizona counties and cities Debt service: Principal Interest Bond issuance costs Non-capital, including asset preservation Capital outlay Total expenditures Excess of revenues over expenditures 2002 2003 2004 $ 267,563 1,003,499 547,129 6,528 516,647 5,389 12,346 318 1,899 29,697 941 25,037 2,416,993 $ 268,721 940,022 690,869 6,026 459,458 6,896 24,818 1,284 2,486 19,702 717 1,632 6,021 2,428,652 $ 288,600 1,023,004 698,406 6,321 421,220 6,146 38,012 933 1,880 8,333 902 1,635 5,161 2,500,553 56,230 3,491 68,369 89,314 81,012 2,369 300,785 51,485 74,244 94,978 81,517 3,579 2,304 308,107 56,484 7,228 130,117 95,144 84,921 2,940 376,834 7,480 9,594 28,880 1,038,314 189,784 957,057 160,029 1,022,768 208,820 85,387 1,049 248,055 84,928 2,424 284,815 92,371 2,546 89,147 1,009,290 146,168 833,731 333,929 599,819 2,769,152 2,779,848 2,873,111 - $ <352,159> $ <351,196> $ <372,558> 74 Table A-2 2005 2006 2007 2008 2009 $ 316,806 1,080,391 759,633 13,180 503,646 9,078 32,186 2,349 945 19,162 919 1,596 6,216 2,746,107 $ 316,491 1,207,265 770,596 13,686 407,891 32,044 13,566 1,490 739 28,351 1,214 1,702 6,490 2,801,525 $ 262,264 1,159,379 792,717 15,303 334,376 72,548 34,971 1,799 928 55,393 1,133 1,434 7,088 2,739,333 $ 253,742 1,159,474 768,046 13,822 494,584 79,747 38,609 463 697 59,197 940 1,367 6,206 2,876,894 $ 219,165 1,064,147 696,075 11,975 531,981 94,521 27,498 876 427 33,221 936 1,788 21,579 2,704,189 40,599 9,517 159,408 105,887 90,208 1,802 407,421 43,372 10,470 161,496 111,378 95,198 2,309 424,223 44,875 3,876 184,240 118,940 103,801 455,732 44,322 4,089 171,134 135,629 110,982 466,156 46,056 10,471 163,570 111,346 131,665 463,108 - - - - - 306,852 1,086,955 206,903 1,190,962 114,795 1,217,883 173,405 1,241,110 404,569 1,100,959 302,202 94,344 1,996 173,745 83,017 1,252 100,395 90,836 1,592 192,663 102,583 3,447 199,687 126,932 3,967 156,678 623,829 250,736 663,316 63,273 741,506 158,991 989,882 142,604 1,077,835 2,980,277 2,994,154 2,786,012 3,328,237 3,519,661 $<234,170> $ <192,629> $ <46,679> $ <451,343> $ <815,472> (continued) 75 Arizona Department of Transportation Statement of Revenues, Expenditures, and Changes in Fund Balances for fiscal year ended June 30 (continued) (Thousands of Dollars) 2002 Other financing sources : Transfers in Transfers out for debt service Transfers out other Capital leases Sale of capital assets Insurance recovery Debt issuance Debt issuance - refunding bond Premium from debt issuance Payment to refunded bond escrow agent Total other financing sources 2003 2004 $ 300,563 $ 383,136 $ 449,100 <291,854> <321,327> <374,852> <8,709> <61,809> <74,249> 7,229 16,023 1,082 1,407 142,000 331,475 319,942 74,250 90,530 130,573 10,142 28,147 31,647 <107,735> <145,965> <77,135> 149,257 350,728 353,626 Net change in fund balances before accounting change <202,902> Cumulative effect of accounting change for year 2003 Special item - State appropriation for Statewide Transportation Acceleration Needs (STAN) Net change in fund balances Fund balances - July 1 Fund balances - June 30 - <468> 40,399 <202,902> 39,931 421,954 615,856 $ 412,954 $ 461,885 Debt service as a percentage of non-capital expenditures Debt service as a percentage of total revenues 16.8% 12.2% 76 17.2% 13.8% <18,932> <18,932> 452,884 $ 433,952 16.7% 15.2% Table A-2 2005 2006 2007 2008 2009 $ 388,046 $ 262,216 $ 225,499 $ 303,513 $ 239,447 <374,162> <251,891> <186,856> <231,563> <221,232> <13,885> <10,325> <38,643> <71,950> <17,252> 2,129 18,392 11,118 10,162 28,233 2,127 1,518 537 577 1,765 887 292,645 118,250 325,000 711,479 796,819 147,400 24,726 22,407 26,201 31,862 58,123 <161,726> 337,280 137,986 364,069 773,339 858,919 103,110 103,110 433,952 $ 537,062 16.9% 14.5% <54,643> - 317,390 - 245,000 <54,643> 562,390 537,062 482,419 $ 482,419 $1,044,809 11.1% 9.2% 9.4% 7.0% 321,996 43,447 321,996 1,044,809 $1,366,805 43,447 1,366,805 $ 1,410,252 12.8% 10.4% 13.5% 12.2% 77 Table A-3 Arizona Department of Transportation Fund Balances of Governmental Funds for fiscal year ended June 30 (Thousands of Dollars) 2003 2002 General Fund (State Highway Fund): Reserved Unreserved Total General Fund All other governmental funds Reserved: Debt service Capital projects Unreserved, reported in: Non-major special revenue funds Total all other governmental funds $ $ $ 121,075 67,253 188,328 24,986 176,245 $ 412,954 134,938 48,696 183,634 $ $ 20,786 232,079 $ $ $ 2005 2006 155,755 48,619 204,374 $ 166,420 57,123 $ 223,543 $ 172,784 9,342 $ 182,126 $ 18,592 190,640 $ $ $ 33,348 $ 313,520 39,898 $ 300,293 $ $ 537,063 $ 482,419 $ 1,044,809 $ 16,386 269,251 $ 20,346 229,578 $ 452,885 $ 433,952 2,288 277,884 2,159 258,236 $ 2007 2008 507,723 $ <10,032> 497,691 $ 505,691 57,899 563,590 $ 230,885 94,686 $ 325,571 2,688 495,428 3,212 774,644 $ 2,629 1,078,478 25,359 803,215 3,574 $1,084,681 $ 1,366,805 $1,410,252 49,002 547,118 $ $ 2009 78 $ 23,395 224,626 $ 2004 Total general and other governmental funds Fund Balances of Governmental Funds Thousands of Dollars $1,600,000 $1,400,000 $1,200,000 $1,000,000 Unreserved $800,000 Reserved $600,000 $400,000 $200,000 $0 2002 2003 2004 2005 2006 Fiscal Year 2007 2008 2009 Table A-4 Arizona Department of Transportation 1 Expenditures of Federal Awards for the fiscal year ended June 30 (Thousands of Dollars) Fiscal Year FAA 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 $ 3,902 715 610 4,338 4,203 480 242 6 FRA $ 3 14 2 FTA NHTSA FHWA FMCSA $13,853 15,530 10,169 8,837 8,466 5,549 6,618 5,264 4,746 3,717 $ 101 106 101 69 96 84 87 83 65 65 $ 571,867 523,810 353,192 389,575 456,924 384,416 433,472 496,509 390,204 393,958 $ 4,734 2,642 1,769 2,231 282 434 466 282 - BLM $ 268 57 544 162 152 79 30 47 - BIA Sub-total $ - $ 594,725 542,860 <21> 366,364 405,212 278 470,401 391,042 440,915 502,188 395,029 1,048 398,796 FHWA $ Total 31,776 31,472 40,559 33,268 42,323 36,324 25,439 19,848 33,261 15,219 $ 626,501 574,332 406,923 438,480 512,724 427,366 466,354 522,036 428,290 414,015 2008 2009 SOURCE: Single Audit Reports - fiscal years 2000 through 2009 1 NOTES: Federal Aviation Administration (FAA); Federal Railroad Administration (FRA Federal Transit Administration (FTA) - previously Urban Mass Transit Administration (UMTA); National Highway Transportation Safety Administration (NHTSA); Federal Highway Administration (FHWA); Federal Motor Carrier Safety Administration (FMCSA); Bureau of Land Management (BLM); and Bureau of Indian Affairs (BIA) Total Expenditures of Federal Awards $700,000 Thousand of Dollars $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 2000 2001 2002 2003 2004 2005 Fiscal Year 79 2006 2007 Table A-5 Arizona Department of Transportation Government-wide Expenses by Function for the fiscal year ended June 30 (Thousands of Dollars) Fiscal Year Administration $ 56,066 54,918 51,667 45,002 42,298 57,703 52,533 57,864 Aeronautics $ 10,993 4,373 5,418 10,705 9,804 7,512 3,848 3,751 Highway $ 116,742 132,874 138,788 118,147 125,889 93,656 45,644 46,543 Maintenance $ 1 327,161 324,104 233,732 60,138 261,714 429,571 374,328 188,198 Motor Vehicle $ 133,415 112,880 105,961 96,937 91,676 86,845 83,090 82,904 $ 1,505,835 1,415,075 1,334,003 1,394,609 1,393,808 1,183,797 1,149,593 1,064,560 $ 48,571 37,285 48,760 36,771 42,440 39,205 30,235 24,791 $ 114,683 92,295 82,450 88,278 86,870 89,431 84,084 89,605 Other $ 9,394 6,871 9,815 8,460 6,844 Highway Expansion and Arizona Extension Highways Loan Magazine Program $ 7,410 7,712 8,072 8,175 10,270 10,007 11,118 10,711 $ 2,110 4,053 4,355 4,273 4,360 4,414 26,349 5,265 Total $ 2,322,986 2,185,569 2,013,206 1,872,429 2,076,000 2,011,956 1,869,282 1,581,036 NOTE: 1 Includes Non-capital, including asset preservation. Government-wide Expenses by Function $2,500,000 Thousands of Dollars 80 2009 2008 2007 2006 2005 2004 2003 2002 Highway Distributions to Arizona Local Interest on Counties, Cities and Other State Governmental Long-Term Assistance Debt Agencies $2,000,000 $1,500,000 Total Expenses $1,000,000 $500,000 $0 2002 2003 2004 2005 2006 Fiscal Year 2007 2008 2009 Table A-6 Arizona Department of Transportation Government-wide Revenues for the fiscal year ended June 30 (Thousands of Dollars) Fiscal Year $ 139,396 150,024 158,019 134,068 126,267 118,225 117,412 112,724 $ 90,619 79,747 72,679 67,241 58,948 44,008 34,160 56,481 $ 552,488 523,728 354,024 387,614 484,276 418,174 453,758 470,772 $ 7,418 9,379 10,969 11,293 11,452 12,800 13,477 11,841 General Revenues Governmental Other $ 1,874,415 2,067,464 2,097,476 2,186,859 2,056,503 1,907,984 1,798,243 1,720,313 Other Revenues Income from Investments Revenues $ $ $ 1 Taxes Total Business-Type 22,331 38,772 9,998 11,026 27,120 24,775 21,304 26,484 33,588 59,528 55,760 28,538 19,245 8,352 19,803 29,863 1 Income from Investments 500 $ <18> <3> 381 505 425 381 1,612 4,788 5,563 3,518 2,764 1,588 2,440 5,625 Government-wide Revenues $ 2,722,367 2,933,412 2,764,485 2,830,157 2,786,956 2,536,411 2,461,022 2,434,484 NOTE: 1 Includes transfers for 2009. Government-wide Revenues $3,500,000 Thousands of Dollars 81 2009 2008 2007 2006 2005 2004 2003 2002 Charges for Services Program Revenues Governmental Business-Type Operating Capital Grants Charges for Grants and and Services Contributions Contributions $3,000,000 $2,500,000 $2,000,000 Total Revenues $1,500,000 $1,000,000 $500,000 $0 2002 2003 2004 2005 2006 Fiscal Year 2007 2008 2009 Table A-7 Arizona Department of Transportation Net Assets by Component for fiscal year ended June 30 (Thousands of Dollars) Governmental Activities Fiscal Year Invested in Capital Assets, Net of Related Debt $ 534,535 704,929 1,006,512 466,337 491,995 408,410 439,045 400,315 Unrestricted Total $ 113,053 209,650 236,186 189,669 234,548 208,032 211,796 219,726 $ 14,599,390 14,200,017 13,454,559 12,462,382 11,507,017 10,796,027 10,272,045 9,618,783 $ 131 173 225 249 499 810 1,126 1,439 Restricted Unrestricted $ 74,703 74,115 71,708 67,713 65,273 63,900 63,225 83,293 $ Primary Government Total <406> $ 74,428 132 74,420 102 72,035 <30> 67,932 <204> 65,568 892 65,602 780 65,131 1,522 86,254 Invested in Capital Assets, Net of Related Debt Restricted Unrestricted Total $ 13,951,934 13,285,611 12,212,086 11,806,625 10,780,973 10,180,395 9,622,330 9,000,181 $ 609,238 779,044 1,078,220 534,050 557,268 472,310 502,270 483,608 $ 112,647 209,782 236,288 189,639 234,344 208,924 212,576 221,248 $ 14,673,819 14,274,437 13,526,594 12,530,314 11,572,585 10,861,629 10,337,176 9,705,037 Primary Government Net Assets By Component $16,000,000 $14,000,000 Thousands of Dollars 82 2009 $ 13,951,802 2008 13,285,438 2007 12,211,861 2006 11,806,376 2005 10,780,474 2004 10,179,585 2003 9,621,204 2002 8,998,742 Restricted Business-type Activities Invested in Capital Assets, Net of Related Debt Unrestricted $12,000,000 $10,000,000 Restricted $8,000,000 $6,000,000 $4,000,000 Invested in Capital Assets, net of related debt $2,000,000 $0 2002 2003 2004 2005 2006 Fiscal Year 2007 2008 2009 Table B-1 Arizona Department of Transportation Highway User Revenue Fund Collections for the fiscal year ended June 30 (Thousands of Dollars) 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 Motor Vehicle Fuel Tax Revenue Motor Vehicle License (In Lieu) Tax Revenues $ $ $ 637,054 697,771 725,787 710,115 701,965 656,881 633,826 629,360 566,115 545,901 178,953 196,151 194,308 178,112 163,463 163,689 158,726 151,437 148,336 158,424 $ 18,930 21,758 22,473 20,824 18,573 16,623 23,302 11,896 15,094 15,040 $ 58,500 60,630 57,085 56,495 50,789 42,829 39,906 40,122 43,248 43,508 349,399 400,787 389,503 372,168 318,689 309,688 276,279 259,308 251,496 235,287 Total Deposited to Arizona Hwy. User Rev. Fund $ 1,242,836 1,377,097 1,389,156 1,337,714 1,253,479 1,189,710 1,132,039 1,092,123 1,024,289 998,160 SOURCES: Basic Financial Statements - fiscal years 2002 through 2009; General Purpose Financial Statements - fiscal years 2000 through 2001 Highway User Revenue Fund Collections $1,500,000 $1,350,000 $1,200,000 Thousands of Dollars Fiscal Year Motor Vehicle Operators' Motor Vehicle Motor License Reg. Fee Carrier Tax Fees and Revenues Revenues Other Fees $1,050,000 $900,000 $750,000 $600,000 $450,000 $300,000 $150,000 $0 2000 2001 2002 2003 2004 2005 Fiscal Year 83 2006 2007 2008 2009 Table B-2 Arizona Department of Transportation Highway User Revenue Fund Distributions for the fiscal year ended June 30 (Thousands of Dollars) Fiscal State Highway Cities and Year Fund Towns Counties 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 $ 513,379 680,530 688,451 636,094 483,047 570,801 537,668 519,837 503,611 493,697 $ 346,443 415,556 417,541 385,759 362,965 344,699 324,431 312,252 305,009 323,798 $ 215,817 258,871 260,107 240,309 226,110 214,731 202,105 195,530 188,982 157,594 Department of Public Economic Strength Safety Project Fund $ 84,950 10,000 10,000 63,999 52,216 48,698 54,416 37,066 10,937 13,622 $ 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1 Other Total $ 81,247 11,140 12,057 10,553 128,141 9,781 12,419 26,438 14,750 8,449 $ 1,242,836 1,377,097 1,389,156 1,337,714 1,253,479 1,189,710 1,132,039 1,092,123 1,024,289 998,160 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: Basic Financial Statements - fiscal years 2002 through 2009; General Purpose Financial Statements - fiscal years 2000 through 2001 1 NOTE: An appropriation for Arizona State Parks is included. Fiscal years 2002, 2005, and 2009 include distributions to State General Fund. 84 Table B-3 Arizona Department of Transportation Fuel Tax Rates for the fiscal year ended June 30 (Cents per Gallon) Fiscal Effective Gasoline Year Date Tax 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 07/01/2000 - $ 0.18 0.18 0.18 0.18 0.18 0.18 0.18 0.18 0.18 0.18 Use Fuel Tax $ 1 0.26 0.26 0.26 0.26 0.26 0.26 0.26 0.26 0.26 0.27 SOURCE: Arizona Revised Statutes §28-5606 NOTE: Gasohol is currently taxed at the same rate as gasoline and use fuel. Use fuel is primarily diesel. 1 Lightweight motor vehicles under 26,000 pounds pay $.18 per gallon. 85 Table B-4 Arizona Department of Transportation Motor Vehicle Fuel Tax - Top Ten Suppliers for fiscal year ended June 30 (Thousands) Fiscal Year Gallons from Top Ten Suppliers 2009 2008 2007 2006 2005 2004 2003 2002 1,826,994 1,883,959 1,915,247 1,679,379 1,691,572 1,848,459 1,884,644 1,788,066 Revenue from Top Ten Suppliers All Motor Vehicle Fuel Tax Revenue $ $ 328,859 339,113 344,744 302,288 304,483 332,723 339,236 321,852 Revenue Percentage from Top Ten Suppliers 637,054 697,771 725,787 710,115 701,965 656,881 633,826 629,360 51.6% 48.6% 47.5% 42.6% 43.4% 50.7% 53.5% 51.1% SOURCE: Highway User Revenue Fund distribution schedule, based on gallonage data reported by fuel suppliers Motor Vehicle Fuel Tax Sources $800,000 Thousands of Dollars $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 2002 2003 2004 2005 2006 2007 2008 Fiscal Year All Fuel Tax Revenue 86 Top Ten Suppliers 2009 Arizona Department of Transportation Gasoline Volume Sold - Top Twenty-Five Suppliers for fiscal year ended June 30 2001 2000 Range - in Millions of Gallons 2002 Table B-5 2004 2003 Suppliers Percentage of Suppliers Percentage of Suppliers Percentage of Suppliers Percentage of Suppliers Percentage of within Total Gallons within Total Gallons within Total Gallons within Total Gallons within Total Gallons Range Sold Range Sold Range Sold Range Sold Range Sold < 25 26 - 50 51 - 100 101 - 200 201 - 300 > 300 8 6 3 3 3 2 5.6% 8.3% 8.7% 14.8% 32.1% 24.4% 11 4 2 3 3 2 8.4% 5.5% 4.6% 18.0% 30.7% 24.8% 8 6 2 5 3 1 6.1% 9.4% 4.5% 29.3% 29.6% 13.2% 7 5 6 2 4 1 5.5% 6.9% 14.1% 11.9% 39.4% 11.8% 7 4 6 4 3 1 5.9% 4.9% 15.5% 24.8% 25.3% 12.7% 25 93.9% 25 92.0% 25 92.1% 25 89.6% 25 89.1% 87 NOTE: Above data reflects gasoline gallons reported at time of data compilation each individual year. Total Gallons of Gasoline (Millions) 2,477,709 2,500,073 2,557,684 2,631,280 2,678,174 Gasoline % of Total 87.0% 84.9% 79.7% 81.0% 79.9% Total Gallons of Use Fuel (Diesel) (Millions) 624,396 657,627 687,591 707,808 750,962 Diesel % of Total 20.1% 20.8% 21.2% 21.2% 21.9% NOTE: Above data is updated each year to reflect actual Gas and Use Fuel Gallons that may have changed over the prior 24 months. (continued) Arizona Department of Transportation Gasoline Volume Sold - Top Twenty-Five Suppliers for fiscal year ended June 30 (continued) 2005 Range - in Millions of Gallons 2006 2007 Table B-5 2008 2009 Suppliers Percentage of Suppliers Percentage of Suppliers Percentage of Suppliers Percentage of Suppliers Percentage of within Total Gallons within Total Gallons within Total Gallons within Total Gallons within Total Gallons Range Sold Range Sold Range Sold Range Sold Range Sold < 25 26 - 50 51 - 100 101 - 200 201 - 300 > 300 2 9 6 3 4 1 1.5% 11.0% 15.6% 14.9% 31.8% 14.2% 0 13 5 3 3 1 0.0% 16.8% 14.4% 16.0% 25.3% 17.0% 2 10 6 3 3 1 1.6% 11.8% 16.7% 14.3% 25.6% 17.4% 2 11 5 4 2 1 1.8% 13.5% 14.5% 21.5% 19.0% 16.5% 2 12 3 5 2 1 1.7% 15.8% 8.8% 27.7% 19.6% 15.2% 25 89.0% 25 89.5% 25 87.4% 25 86.8% 25 88.8% 88 NOTE: Above data reflects gasoline gallons reported at time of data compilation each individual year. Total Gallons of Gasoline (Millions) 2,728,016 2,746,195 2,870,635 2,851,049 2,663,305 Gasoline % of Total 77.4% 76.4% 77.7% 76.4% 78.1% Total Gallons of Use Fuel (Diesel) (Millions) 814,615 890,000 888,831 882,391 747,345 Diesel % of Total 23.0% 24.5% 23.6% 23.6% 21.9% NOTE: Above data is updated each year to reflect actual Gas and Use Fuel Gallons that may have changed over the prior 24 months. Table C-1 Arizona Department of Transportation Highway User Revenue Fund Legal Debt Margin for the fiscal year ended June 30 (Thousands of Dollars) Fiscal Year Debt Limit 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 N/A N/A N/A $ 1,300,000 1,300,000 1,300,000 1,300,000 1,000,000 800,000 800,000 Total Principal Applicable to Limit 1 2 $ 1,740,765 1,623,905 1,490,600 1,223,425 1,161,355 1,017,360 932,700 734,155 700,280 608,500 Legal Debt Margin $ N/A N/A N/A 76,575 138,645 282,640 367,300 265,845 99,720 191,500 Total Principal Applicable to the Limit as a Percentage of Debt Limit N/A N/A N/A 94.11% 89.34% 78.26% 71.75% 73.42% 87.54% 76.06% NOTES: 1 The statutory limitation on the issuance of bonds, as outlined in ARS §28-7510, applies only to the Highway User Revenue Fund (HURF). The only limitation on Maricopa County Regional Area Road Fund (RARF) and Grant Anticipation Notes (GANS) is the ability to secure the debts with available excise tax monies and available grant revenues, respectively, pursuant to the applicable bond resolutions. 2 As stated in House Bill 2206 of the Second Regular Session of the Fortyseventh Legislature, the $1.3 billion debt limit is eliminated from ARS §28-7510. The general effective date of this change was September 21, 2006. 89 Table C-2 Arizona Department of Transportation Highway Revenue Bonds Bond Coverage for the fiscal year ended June 30 (Thousands of Dollars) Fiscal Pledged Year Principal 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 $ 64,190 60,645 57,825 54,830 44,265 51,155 44,490 45,365 52,055 46,270 Interest Total $ 89,825 75,538 73,785 62,222 60,459 53,149 41,932 38,534 36,581 33,994 $ 154,015 136,183 131,610 117,052 104,724 104,304 86,422 83,899 88,636 80,264 Revenues 1,2 Coverage $ 509,183 658,616 635,140 624,408 461,763 557,854 540,540 523,326 513,890 528,721 3.3 4.8 4.8 5.3 4.4 5.3 6.3 6.2 5.8 6.6 SOURCES: Highway User Revenue Fund Schedule fiscal years 2000 through 2009; Debt Service Funds - fiscal years 2000 through 2009 1 NOTES: Includes vehicle license tax revenues distributed directly to the State Highway Fund. Fiscal year 2005 is net of a $118 million distribution to the State General Fund. Fiscal year 2009 is net of $66 million distribution to the State General Fund. 2 The Highway Revenue Bonds are secured by a prior lien on and pledge of motor vehicle and related fuel fees and taxes. Highway Revenue Bonds - Bond Coverage $700,000 Thousands of Dollars $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 2000 2001 2002 2003 2004 2005 2006 2007 Fiscal Year Revenue Debt Service 90 2008 2009 Table C-3 Arizona Department of Transportation Transportation Excise Tax Revenue Bonds Bond Coverage for the fiscal year ended June 30 (Thousands of Dollars) Fiscal Pledged 1 Year Principal Interest Total Revenues 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 $ 13,825 19,045 80,375 208,625 199,400 190,415 163,455 156,865 128,805 $ 17,193 10,673 1,566 14,318 23,553 31,533 35,445 40,035 42,609 $ 31,018 29,718 81,941 222,943 222,953 221,948 198,900 196,900 171,414 $ 219,165 253,742 262,264 316,491 316,806 288,600 268,721 267,563 264,722 248,596 Coverage 7.1 8.5 N/A 3.9 1.4 1.3 1.2 1.3 1.3 1.5 SOURCE: Maricopa County Regional Area Road Fund Report NOTE: Bond coverage ratio is based upon total Maricopa County Transportation Excise Tax collections. 1 The Transportation Excise Tax Revenue Bonds are secured by transportation excise taxes collected by the Department of Revenue on behalf of Maricopa County. Transportation Excise Tax Revenue Bonds - Bond Coverage $350,000 Thousands of Dollars $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 2000 2001 2002 2003 2004 2005 2006 Fiscal Year Revenue 91 Debt Service 2007 2008 2009 Table C-4 Arizona Department of Transportation Transportation Excise Tax Revenue Bonds Debt Service Revenue and Cost Per Capita for the fiscal year ended June 30 (Thousands) Fiscal Year Principal 2008 2007 2006 2005 2004 2003 $ 19,045 80,375 208,625 199,400 190,415 Interest Total Cost Revenue Maricopa County Population $ 10,673 1,567 14,318 23,553 31,533 $ 29,718 81,942 222,943 222,953 221,948 $ 253,742 262,264 316,491 316,806 288,600 268,721 3,955 3,907 3,793 3,649 3,538 3,406 Cost per capita Revenue per capita $ $ 8 22 61 63 65 64 67 83 87 82 79 SOURCES: Maricopa County Regional Area Road Fund Report; population data from the Department of Commerce available only through July 2008 NOTE: Based upon total Maricopa County Transportation Excise Tax collections. Thousands of Dollars Transportation Excise Tax Revenue and Cost Per Capita $100 $80 $60 Cost $40 Revenue $20 $0 2003 2004 2005 2006 Fiscal Year 92 2007 2008 Table C-5 Arizona Department of Transportation Ratios of Outstanding Debt by Type for the fiscal year ended June 30 (Thousands of Dollars) 2002 Governmental Activities: Highway Revenue Bonds Transportation Excise Tax Revenue Bonds Grant Anticipation Notes (GARVEE Bonds) Premium on bonds Capital leases Advances and notes payable Total Governmental activities 2003 2004 2005 2006 2007 2008 734,155 602,890 182,295 9,358 1,557 192,849 1,723,104 $ 932,700 488,400 169,145 34,423 916 180,438 1,806,022 $ 1,017,360 289,000 308,585 60,481 1,121 165,305 1,841,852 $ 1,161,355 80,375 363,970 76,721 5,910 169,473 1,857,804 $ 1,223,425 325,430 90,852 11,130 195,018 1,845,855 $ 1,490,600 282,860 108,034 10,601 168,287 2,060,382 $ 1,623,905 350,955 298,280 128,586 7,535 56,739 2,466,000 145,536 145,536 151,545 151,545 142,414 142,414 146,454 146,454 150,494 150,494 154,534 154,534 2,170 2,170 $ 1,868,640 $ 1,957,567 $ 1,984,266 $ 2,004,258 $ 1,996,349 $ 2,214,916 $ 2,468,170 $ Business-Type Activities: Notes payable Total Business-type Activities 93 Total Primary Government Debt as a Percentage of Personal Income Amount of Debt per Capita 1.30% $ 343 1.30% $ 350 1.20% $ 345 1.10% $ 336 1.00% $ 323 SOURCES: U.S. Bureau of Economic Analysis (for population, personal income, and per capita personal income figures); U.S. Bureau of the Census (also for population) NOTE: The Arizona population data are midyear population estimates of the U.S. Bureau of the Census. Years 2002 through 2007 have been revised to reflect revisions made by the U.S. Bureau of the Census. 1.06% $ 349 1.15% $ 380 Table D-1 Arizona Department of Transportation Number of Vehicle Registrations Per Year for fiscal year ended June 30 (Thousands) Change in Number of Registered Fiscal Year Total Vehicles Vehicles 2008 2007 2006 2005 2004 2003 2002 6,734 6,609 6,318 5,945 5,639 5,312 5,118 125 290 373 306 327 193 479 Arizona Population Change in 1 Population 6,500 6,353 6,178 5,961 5,750 5,586 5,449 147 175 217 211 165 136 146 SOURCE: Vehicle registrations from Motor Vehicle Division's annual reports NOTE: 1 The Arizona population data are midyear population estimates of the U.S. Bureau of the Census. Years 2002 through 2007 have been revised to reflect revisions made by the U.S. Bureau of the Census. Population data available only though fiscal year 2008. Change in Vehicles Registered Compared to Population Change 600,000 Change 500,000 400,000 300,000 200,000 100,000 0 2002 2003 2004 2005 2006 Fiscal Year Vehicles 94 Population 2007 2008 Table D-2 Arizona Department of Transportation Vehicle Registrations Per Year Compared to Fuel Sales for fiscal year ended June 30 (Thousands) Fiscal Year Vehicle Registrations Percentage Change Fuel Sales 2009 2008 2007 2006 2005 2004 2003 2002 6,693 6,734 6,609 6,318 5,945 5,639 5,312 5,118 <0.6%> 1.9% 4.6% 6.3% 5.4% 6.2% 3.8% 10.3% 3,410,650 3,733,440 3,759,465 3,636,195 3,542,631 3,429,136 3,339,089 3,245,274 1 Percentage Change <8.6%> <0.7%> 3.4% 2.6% 3.3% 2.7% 2.9% 2.8% SOURCES: Vehicle registrations from Motor Vehicle Division's annual reports; fuel sales from Motor Vehicle Division data reported by fuel suppliers NOTE: 1 Fuel sales include both gasoline and use fuel (primarily diesel) sales. Fuel Sales numbers for 2007 and 2008 have been revised to relfect revisions made to the Motor Vehicle Division data. Percentage Change in Vehicle Registrations Compared to Fuel Sales 15.0% Percentage Change 10.0% 5.0% 0.0% <5.0%> <10.0%> 2002 2003 2004 2005 2006 Fiscal Year Vehicle Registrations 95 2007 2008 2009 Fuel Sales Table D-3 Arizona Department of Transportation Demographic and Economic Statistics for the Last Ten Calendar Years Calendar Personal Per Capita Year Ended Income 2 Personal December 31 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 Population 6,500,180 6,353,421 6,178,251 5,961,239 5,750,475 5,585,512 5,449,195 5,303,632 5,166,810 5,023,823 1 (in thousands) $ 214,003,500 208,603,000 199,465,000 182,564,435 164,922,611 150,582,313 144,150,287 138,853,800 132,557,859 120,857,125 Income $ 3 32,953 32,833 32,285 30,620 28,680 26,956 26,474 26,193 25,653 24,057 Unemployment Rate 4 5.5% 3.8% 4.1% 4.6% 5.0% 5.7% 6.0% 4.7% 4.0% 4.5% SOURCES: U.S. Bureau of Economic Analysis (for population, personal income, and per capita personal income figures); U.S. Bureau of the Census (also for population); Arizona Department of Economic Security's website, www.workforce.az.gov (for unemployment rates) NOTES: 1 The Arizona population data are midyear population estimates of the U.S. Bureau of the Census. Years 2000 through 2007 have been revised to reflect revisions made by the U.S. Bureau of the Census. 2 Personal income estimates for years 2006 through 2007 were revised to reflect revisions made by the U.S. Bureau of the Census. 3 Per capita personal income is total personal income divided by total midyear population estimates of the U.S. Bureau of the Census. Years 2003 through 2007 have been revised to reflect revisions in personal income and population estimates. 4 The unemployment rates were revised to reflect a revision made by the Arizona Department of Economic Security website, www.workforce.az.gov. 96 Table D-4 Arizona Department of Transportation Principal Employers Current and Nine Years Ago Calendar Year Ended December 31, 2008 Full-Time Percentage Equivalent of Total State Employees Rank Employment Employer State of Arizona 50,936 1 1.72% Wal-Mart Stores Inc. 32,814 2 1.11% Banner Health (1) 23,100 3 0.78% City of Phoenix 17,068 4 0.58% Maricopa County 14,014 5 0.47% Wells Fargo & Co. 14,000 6 0.47% Arizona State University 13,005 7 0.44% Honeywell Aerospace 12,600 8 0.43% Raytheon Missile Systems 11,539 9 0.39% University of Arizona 10,575 10 0.36% U.S. Postal Service 10,545 10 0.36% Motorola 0.00% 0.00% The Kroger Co. Total 210,196 7.11% Calendar Year Ended December 31, 1999 Full-Time Percentage Equivalent of Total State Employees Rank Employment 59,348 1 2.44% 13,800 6 0.57% 13,973 4 0.58% 12,917 7 0.53% 13,860 5 0.57% 17,500 2 0.72% 9,700 10 0.40% 9,756 9 0.40% 15,500 3 0.64% 9,837 8 0.40% 176,191 7.25% (1) Formerly known as Samaritan Health Systems SOURCES: Business Journal, Book of Lists 2008 and 1999 for employers; Arizona Daily Star's Star 200 report for 2008 for Pima County Employers; Arizona Department of Economic Security's website, www.workforce.az.gov (for annual State employment) 97 Arizona Department of Transportation Appropriated Full-Time Equivalents (FTEs) for fiscal year ended June 30 Operating: Administration-State Highway Fund Administration-Air Quality Fund Highways Development and Administration Construction Operating Budget Maintenance-State Highway Fund Maintenance-Safety Enforcement and Traffic Infrastructure Transportation Planning Public Transit-State General Fund Public Transit-State Highway Fund Equipment Services Aeronautics Motor Vehicle Division (MVD) State Highway Fund Safety Enforcement and Traffic Infrastructure Fund Mandatory Insurance Vehicle Inspections and Title Enforcement Fund Air Quality Fund Highway User Revenue Fund (HURF) Driving Under the Influence Fund (DUI) Third Party-Special Line Item Abandoned Vehicle Fraud Investigation Total Operating 2002 2003 2004 465.5 1.5 740.0 959.0 8.0 48.0 2.0 247.0 33.0 425.5 1.5 712.0 912.0 8.0 46.0 2.0 247.0 33.0 405.0 684.0 619.0 912.0 8.0 46.0 2.0 247.0 33.0 1,587.0 29.0 16.0 17.0 4,153.0 1,534.0 29.0 16.0 17.0 3,983.0 1,585.5 29.0 16.0 17.0 1.5 4,605.0 72.0 619.0 2.0 - 72.0 619.0 2.0 - 72.0 2.0 - 4.0 4.0 1.0 3.0 705.0 4.0 4.0 1.0 3.0 705.0 2.0 4.0 4.0 1.0 3.0 88.0 4,858.0 4,688.0 4,693.0 Other Programs: Arizona Highways Magazine Highway Construction Federal Fatality File (MVD from FY05) Motor Vehicle Division (Federal) NAFTA Border Projects Motor Vehicle Division (Federal) NAFTA Grant FundingInternational Registration Plan/International Fuel Tax Agreement Motor Vehicle Division (Federal) Fuel Tax Evasion Public Transportation Division (Federal) Underground Storage-MVD Underground Storage-Transportation Services Group (TSG) Maricopa Regional Area Road Fund Highway Expansion and Extension Loan Program (HELP) Total Other Programs Total All Programs SOURCE: Arizona Department of Transportation 10-Year FTE History Report 98 Table E-1 2005 2006 2007 2008 406.0 683.0 619.0 925.0 46.0 2.0 247.0 33.0 412.0 682.0 616.0 925.0 44.0 2.0 247.0 33.0 412.0 682.0 616.0 925.0 43.0 2.0 1.0 247.0 33.0 412.0 707.0 616.0 932.0 44.0 2.0 247.0 33.0 412.0 707.0 616.0 932.0 44.0 2.0 247.0 33.0 1,598.5 31.0 17.0 17.0 1.5 4,626.0 1,606.5 22.0 29.0 21.0 1.5 5.0 3.0 4,649.0 1,638.5 50.0 21.0 1.5 3.0 16.0 4,691.0 1,620.5 22.0 28.0 24.0 1.5 3.0 18.0 23.0 11.0 4,744.0 1,620.5 22.0 33.0 26.0 1.5 5.0 3.0 10.0 23.0 11.0 4,748.0 72.0 2.0 21.0 72.0 2.0 19.0 60.0 2.0 16.0 28.0 7.0 - 26.0 - 5.0 4.0 1.0 3.0 108.0 8.0 4.0 3.0 1.0 1.0 3.0 113.0 11.0 8.0 7.0 3.0 1.0 1.0 3.0 112.0 17.0 52.0 26.0 4,734.0 4,762.0 4,803.0 4,796.0 4,774.0 2009 99 Table E-2 Arizona Department of Transportation Capital Assets Used in the Operation of Governmental Funds Schedule by Function and Activity1 June 30, 2009 Function and Activity Land Administration Aeronautics Highway: Administrative and other services Highway construction Highway development Materials engineering Traffic engineering Transportation planning and research Highway maintenance Motor Vehicle $ 879,017 - Total governmental funds capital assets $ 2,384,913,372 Improvements other than Buildings Buildings and Improvements $ 935,955 2,365,839,831 710,073 4,907,328 11,641,168 23,656,178 6,410,738 $ 37,855,484 10,567,194 98,846 4,894,955 356,896 152,944 42,745,122 47,201,914 1,117,828 411,347 Machinery and Equipment Airport Facilities $ Construction in Progress Infrastructure $ 12,789,265 $ Total $ 16,360,739 2,774,872 - $ 42,013,762 29,536,496 1,798,104 384,415 350 7,077 21,667 122,946 8,984,545 3,571,783 - 3,887,608 3,844,604 2,788,433 3,771,908 1,299,524 330,538 9,049,696 7,184,374 10,618,999,819 - 3,030,486,000 - 44,477,151 16,030,121,863 3,597,702 8,673,940 1,678,087 606,428 65,686,691 69,599,239 16,420,062 $ 7,150,274 $ 51,292,296 $ 10,631,789,084 $ 3,030,486,000 $ 16,295,991,359 100 7,150,274 $ 173,940,271 $ NOTE: 1 This schedule presents only the cost of the capital asset balances related to governmental funds. Accordingly, the cost of the capital assets reported in the internal service fund are excluded from the above amounts. Generally, the capital assets of the internal service fund are included as governmental activities in the statement of net assets. Table E-3 Arizona Department of Transportation Capital Assets Used in the Operation of Governmental Funds Schedule of Changes by Function and Activity1 for the fiscal year ended June 30, 2009 Governmental Funds Capital Assets July 1, 2008 Function and Activity Administration Aeronautics Governmental Funds Capital Assets $ 40,154,365 22,107,576 Additions $ 3,281,691 Deductions $ 7,462,253 June 30, 2009 <1,422,294> $ 42,013,762 <33,333> 29,536,496 Highway: Administrative and other services Highway construction Highway development Materials engineering Traffic engineering Transportation planning and research Highway maintenance Motor Vehicle 45,220,426 12,435,696,730 3,532,531 8,668,972 1,654,027 601,038 63,738,622 69,655,288 <571,871> 615,680,654 89,916 66,784 24,060 40,668 2,034,817 110,663 <171,404> <51,741,521> <24,745> <61,816> <35,278> <86,748> <166,712> 44,477,151 12,999,635,863 3,597,702 8,673,940 1,678,087 606,428 65,686,691 69,599,239 Functional sub-total 12,691,029,575 628,219,635 <53,743,851> 13,265,505,359 Construction in progress 2,607,927,197 970,940,620 <548,381,817> 3,030,486,000 $ 15,298,956,772 $ 1,599,160,255 Total governmental funds capital assets $ <602,125,668> $ 16,295,991,359 1 NOTE: This schedule presents only the capital asset balances related to governmental funds. Accordingly, the capital assets reported in the internal service fund are excluded from the above amounts. Generally, the capital assets of the internal service fund are included as governmental activities in the statement of net assets. 101 Table E-4 Arizona Department of Transportation Total Public Road Mileage by Highway Class and Governmental Ownership for the calendar year ended December 31 (In Center Lane Miles) 2002 2003 2004 2005 2006 2007 2008 Rural: Interstate freeway Principal arterial Minor arterial Major collector Minor collector Local Total rural 996 1,187 1,274 4,473 2,289 27,450 37,669 980 1,141 1,276 4,233 2,117 26,004 35,751 980 1,187 1,343 4,301 2,210 26,016 36,037 981 1,167 1,363 4,332 2,188 27,015 37,046 981 1,168 1,359 4,303 2,186 27,819 37,816 980 1,167 1,357 4,301 2,185 27,685 37,675 980 1,167 1,358 4,302 2,191 27,525 37,523 Urban: Interstate freeway Urban expressway Principal arterial Minor arterial Urban collector Local Total urban 172 153 1,000 1,274 1,732 15,188 19,519 187 145 1,087 1,189 2,200 16,969 21,777 188 150 1,156 1,279 2,161 17,142 22,076 188 156 1,400 1,790 1,645 17,564 22,743 188 168 1,400 1,791 1,632 17,380 22,559 188 171 1,400 1,792 1,632 17,735 22,918 188 176 1,399 1,807 1,632 17,735 22,937 Statewide composite: Freeways and expressways Arterials Collectors Locals Total statewide composite 1,321 4,735 8,494 42,638 57,188 1,312 4,693 8,550 42,973 57,528 1,318 4,965 8,672 43,158 58,113 1,325 5,720 8,165 44,579 59,789 1,337 5,718 8,121 45,199 60,375 1,339 5,716 8,118 45,420 60,593 1,344 5,731 8,125 45,260 60,460 Functional Classification SOURCE: Arizona's Highway Performance Monitoring System (HPMS) Total Public Road Mileage 70,000 60,000 Miles 50,000 40,000 Urban 30,000 Rural 20,000 10,000 0 2002 2003 2004 2005 Calendar Year 102 2006 2007 2008 Table E-5 Arizona Department of Transportation Daily Vehicle Miles Traveled with Population Data for calendar year ended December 31 (Thousands) Calendar Year Ended December 31 Non-State Highways State Highways All Public Highways Arizona Population Daily Miles per capita 2008 2007 2006 2005 2004 2003 86,886 89,293 87,212 80,400 75,070 75,396 81,496 83,228 83,934 83,425 81,808 72,258 168,382 172,521 171,146 163,825 156,878 147,654 6,500 6,353 6,178 5,961 5,750 5,586 25.9 27.2 27.7 27.5 27.3 26.4 SOURCES: Arizona's Highway Performance Monitoring System (HPMS); ADOT Multimodal Planning Division office records NOTE: The Arizona population data are midyear population estimates of the U.S. Bureau of the Census. Years 2003 through 2006 have been revised to reflect revisions made by the U.S. Bureau of the Census. Daily Vehicle Miles Traveled 200,000 180,000 Thousands of Miles 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 2003 2004 2005 2006 Calendar Year State Highways 103 Non-State Highways 2007 2008 ACKNOWLEDGMENTS The Comprehensive Annual Financial Report was prepared by Financial Management Services, Fiscal Operations: Craig Rudolphy, CPA, CPFO, CGFM Sheryl Bodmer, CPA Diane Wascher, CPA Lawrence H. Ehrke, Jr. Jennifer Crummey Joel Konopken Winifred Gettings Ted Henricks 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 Creative Services of Communication and Community Partnerships for their graphic design. 2009 Comprehensive Annual Financial Report 104 State of Arizona Department of Transportation 206 South 17th Avenue Phoenix, Arizona 85007 www.azdot.gov